Assume that a decline in consumer demand occurs in a purely competitive industry that is initially in long-run equilibrium. We can:
A. predict that the new price will be greater than the original price.
B. predict that the new price will be less than the original price.
C. predict that the new price will be the same as the original price.
D. not compare the original and the new prices without knowing what cost conditions exist in
the industry.
Answer: D
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If demand for clean water is specified as P = 140 – 2Q, and the market price is $40, then consumer surplus at that price level is
a. $2500 b. $3000 c. $1600 d. $50
If a monopolist lowers its price from $45 to $42 in order to increase its sales volume, marginal revenue
a. equals $45. b. equals $42. c. is less than $42. d. is between $45 and $42.
Which of the following is an argument against free trade?
A) protecting infant industries B) protecting against dumping C) protecting domestic jobs D) all of the above
Market failure can result from market outcomes that:
a. result in too few resources devoted to a good. b. result in too many resources devoted to a good. c. may justify government intervention. d. all of these.