Suppose you sell surfboards for a living, and you expect the price of surfboards to increase at the same rate as inflation; you adjust your prices accordingly. If this does not occur, then it must be true that:
A. the inflation rate is different from what was expected.
B. the relative price of surfboards is changing.
C. the price of surfboards is changing at a rate that is different from what was expected.
D. both the price of surfboards and the inflation rate are different from what was expected.
Answer: B
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Neither the demand for gasoline nor the supply of gasoline is perfectly elastic or inelastic. If the federal government eliminated the 18.4 cents per gallon gasoline tax, the price paid by buyers would
A) decrease by less than 18.4 cents. B) decrease by 18.4 cents. C) decrease by more than 18.4 cents. D) stay the same. E) increase by 18.4 cents.
The market labor-supply curve is:
A. downward sloping. B. perfectly inelastic. C. perfectly elastic. D. upward sloping.
Which statement best describes social surplus?
a. the sum of consumer surplus and producer surplus b. the amount that a seller is paid for a good minus the seller’s actual cost c. the amount that individuals would have been willing to pay, minus the amount that they actually paid d. when it is impossible to improve the situation of one party without imposing a cost on another
One reason we need government, even in a market economy, is that
a. there is insufficient market power in the absence of government. b. property rights are too strong in the absence of government. c. the invisible hand is not perfect. d. Both a and b are correct.