Suppose there is a tornado that levels a city. As rebuilding begins, how might you analyze this effect in the market for lumber?
A. The demand for lumber would increase, increasing both the equilibrium price and quantity.
B. The demand for lumber would increase, decreasing the equilibrium price and increasing the equilibrium quantity.
C. The supply of lumber would decrease, increasing the equilibrium price and decreasing the equilibrium quantity.
D. The supply of lumber would increase, decreasing the equilibrium price and increasing the equilibrium quantity.
Answer: A
You might also like to view...
How does a Pigou tax work? Why might a Pigou tax fail to achieve an efficient outcome?
What will be an ideal response?
In the long run, a reduction in productivity will cause
A) an increase in the capital—labor ratio and an increase in consumption per worker. B) an increase in the capital—labor ratio and a decrease in consumption per worker. C) a decrease in the capital—labor ratio and a decrease in consumption per worker. D) a decrease in the capital—labor ratio and an increase in consumption per worker.
We don't typically see wages __________ in response to an economic downturn because ____________.
A. rise; they are "sticky," and are slow to respond to shifts in the economy B. rise; they cannot rise above the equilibrium in any circumstance C. fall; they are "sticky" and are slow to respond to shifts in the economy D. fall; they cannot fall below where they were previously set due to inflation
What is the drawback of analyzing only one round of effects and leaving the feedback effects unobserved?
a. Not all three markets will be analyzed. b. The qualitative effect might be offset by feedback effects. c. The quantitative effect might be overestimated or underestimated. d. All of the above