If both supply and demand decrease and the shift in supply dominates, which of the following happens?
a. The equilibrium quantity increases.
b. The equilibrium price and the equilibrium quantity decrease.
c. The equilibrium price decreases and equilibrium quantity increases.
d. The equilibrium quantity increases and the equilibrium price change is indeterminate
e. The equilibrium price increases and the equilibrium quantity decreases.
E
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The purpose of making assumptions in economic model building is to
A) force the model to yield the correct answer. B) minimize the amount of work an economist must do. C) simplify the model while keeping important details. D) express the relationship mathematically.
Which of the following is true from the perspective of the New Keynesian school of thought?
a. Fluctuations in private spending does not affect aggregate demand in an economy. b. Investment spending remains relatively constant irrespective of the supply shocks. c. Fluctuations in aggregate demand are not the primary source of problem for policymakers. d. The government should limit its role to administrative functions. e. Monetary and fiscal policies often fail to restore macroeconomic equilibrium.
Which of the following is true of exchange?
a. The value of a good is determined by the cost of the resources required to produce the good. b. Exchange makes it possible for trading partners to produce more goods through division of labor and adoption of mass production methods. c. Nothing new is created by exchange; if one party to an exchange gains, the other must lose an equal amount. d. Both a and b are true.
Whenever firms in a perfectly competitive market produce the output level where marginal revenue equals marginal cost, we know that the firm is earning an economic profit
a. True b. False Indicate whether the statement is true or false