The intention of a price floor is to help producers by setting a higher than equilibrium price. What is one unintended consequence of this policy?
A. There is more scarcity in the economy.
B. Economic surplus decreases.
C. Consumer surplus increases.
D. Producer surplus increases.
Answer: B
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Villagers in Xiaogang, China, produced more rice than those in surrounding villages because:
a. they had better farmland. b. they were given better seeds. c. they were able to keep the output they produced individually. d. they made each family responsible for a certain, higher quota of rice production. e. they had common ownership over the rice produced.
If the CPI in City A is 150 and the CPI in City B is 135,
a. the dollar has greater purchasing power in City B. b. prices are higher in City A than they are in City B. c. City B must be using a different base year. d. None of these.
An airline industry study recently reported, "Evidence is abundant that larger firms are not more efficient or less costly simply because they are larger. In fact, other things equal, the largest carriers tend to have a higher level of unit costs, possibly caused by the difficulties of managing an airline of large size." This means that
a. there are increasing returns to scale in the airline industry. b. the airline industry has constant returns to scale. c. the larger airlines are not profitable. d. airlines are experiencing decreasing returns to scale.
In Graph D, which of the following would cause the market curve to shift to the left?
a. a change from Q1 to P2 in Graph C
b. a change from P1 to Q2 in Graph C
c. a change from P1 to P2 in Graph C
d. a change from Q2 to Q1 in Graph C