The graphs below show an economy of two people with identical incomes in two years. They have different preference patterns as shown. 
What will happen in the market to bring about equilibrium?
What will be an ideal response?
The interest rate will fall rotating the budget line counterclockwise around the bundle of money each person has until the person on the left borrows the exact amount that the person on the right chooses to save. This will require slight adjustments of the indifferences curves as well.
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A market economy allocates resources primarily in accordance with orders from government bureaucrats.
Answer the following statement true (T) or false (F)
The Public Service Company of Colorado is a natural monopoly in the transmission and distribution of electric power. As such, it will incur an economic loss if it
A) goes out of business. B) prices its services at average total cost. C) prices its services at marginal cost. D) all of the above
The market demand function for wheat is Qd = 10 - 2P and the market supply function is Qs = 4P - 2, both measured in billions of bushels per year. Suppose the government wants to increase the price of wheat to $3/bushel and they impose a price floor to achieve their goal. What is the size of the consumer surplus?
A. $4 billion B. $8 billion C. $10 billion D. $6 billion
Which is not true regarding a delayed-compensation contract?
A. It discourages workers from shirking. B. An effective one requires a mandatory retirement age. C. It necessarily costs more in labor costs than a time rate system. D. It is associated with an upward-sloping age-earnings profile. E. It decreases employee turnover within the firm.