Having seen the quantity of drugs supplied by pharmaceutical companies in a competitive market, a government decides to force companies to sell exactly the same quantity of drugs at prevailing market prices
The government then forbids additional drug sales and allows doctors to prescribe the drugs at no cost to patients in need. This government scheme is A) efficient as the quantity of drugs traded is the same as under a free market.
B) efficient as the price of drugs paid by the government is the same as under a free market.
C) efficient as consumer surplus is maximized.
D) likely to be inefficient as doctors are unlikely to prescribe drugs to the consumers who are willing to pay the most for the drugs.
E) likely to be inefficient as drug producers have a captive buyer.
D
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Which of the following is the most likely to cause the price of air travel to rise?
a. Lower prices and improved service in Amtrak (the nation's passenger railroad). b. Improved productive efficiency resulting from airline mergers. c. Higher airplane fuel costs. d. Reports that air travel safety is deteriorating.
Assume the market is in equilibrium in the graph shown at demand D and supply S1 (at a quantity of 5). If the supply curve shifts to S2, and a new equilibrium is reached (at a quantity of 7), which of the following is true?
A. Total surplus increases by $12.50.
B. Total surplus decreases by $12.50.
C. Total surplus increases by $15.50.
D. Total surplus decreases by $15.50.
When the Russian government defaulted on its bonds in August 1998:
A. risk spreads did not change. B. risk spreads decreased significantly. C. yields on U.S. Treasury securities fell while yields on corporate bonds rose. D. yields on U.S. Treasury securities rose while prices of corporate bonds rose.
The competitive firm's supply curve is equal to
A) its marginal cost curve. B) the portion of its marginal cost curve that lies above AC. C) the portion of its marginal cost curve that lies above AVC. D) the portion of its marginal cost curve that lies above AFC.