Say the supply of a product falls while the demand stays the same. This causes the free market ________
a. price to increase and equilibrium quantity to increase
b. price to increase and equilibrium quantity to decrease
c. price to decrease and equilibrium quantity to increase
d. price to decrease and equilibrium quantity to decrease
Answer: b. price to increase and equilibrium quantity to decrease
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The economy pictured in the figure has a(n) ________ gap with a short-run equilibrium combination of inflation and output indicated by point ________. 
A. recessionary; A B. recessionary; C C. recessionary; B D. expansionary; A
What do economists mean when they say that a firm's plant is fixed?
What will be an ideal response?
The substitution effect of an increase in the price of Raisin Bran refers to
A) the decrease in the demand for Raisin Bran when its price rises. B) the result that consumers will now switch to a substitute good such as Cheerios, and the demand curve for Raisin Bran shifts to the left. C) the fact that the higher price of Raisin Bran relative to its substitutes, such as Cheerios, causes consumers to buy less Raisin Bran. D) the fact that the higher price of Raisin Bran lowers consumer's purchasing power, holding money income constant.
The production possibilities curve demonstrate which of the following concepts?
A) scarcity B) choice C) trade-offs D) all of the above