Under what circumstances might a government price ceiling lead to the development of a black market?
What will be an ideal response?
ANS:
A so-called black market is one in which goods are being bought in violation of a government law or regulation. If the government establishes a maximum price below the free market equilibrium price, a shortage may occur at the ceiling price. Moreover, some individuals will be willing to pay a price higher than the ceiling price, so certain suppliers will violate the ceiling price and sell their products at a higher price, risking criminal prosecution in order to make more profit.
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An example of how GNP accounts for services provided by foreign-owned capital (and GDP does not) is
A) earnings of a Spanish factory with British owners counts only in Spain's GDP. B) earnings of a Spanish factory with British owners counts only in Britain's GNP. C) earnings of a Spanish factory counts in Spain's GNP but are part of Britain's GDP. D) earnings of a Spanish factory counts in Spain's GDP but are part of Britain's GNP. E) earnings of a Spanish factory counts in Spain's GNP but not in Britain's GDP or GNP.
The costs of changing price tags and price listings are known as
a. inflation-induced tax distortions. b. relative-price variability costs. c. shoeleather costs. d. menu costs.
Suppose you plan to go to school this summer. The cost of tuition and textbooks is $1,400 and housing, board, and entertainment will cost you $500
If you didn't go to school, you'd live in your parents' house for free, but your other living expenses would be about the same. Also, if you didn't go to school you'd work full time and could earn $8,000. You can still work part time while attending the summer school, but you will earn only $3,000. a) What will the summer school cost you in terms of money explicitly paid? b) What are the opportunity costs of going to summer school that you don't pay explicitly? Explain. c) What is your total opportunity costs of going to school this summer? Explain your answer.
A perfectly competitive firm is producing more than the profit-maximizing amount of its product. You can conclude that its
A) total cost exceeds its total revenue. B) average total cost exceeds the price of the product. C) marginal revenue is less than the price of the product. D) marginal cost exceeds the price of the product.