Suppose the market for potatoes can be expressed as follows: Supply: QS = -20 + 10p Demand: QD = 400 – 20p Suppose the government restricts the quantity to 100 units. What will be the price of potatoes? What will be an ideal response? ANSWER (1 ) Find the inverse supply curve: p = […]
Date: September 9th, 2020
It is appropriate to use the supply-and demand-model if, in a market, A) everyone is a price taker with full information about the price and quality of the good. B) firms sell identical products. C) costs of trading are low. D) All of the above. ANSWER D
Date: September 9th, 2020
Explain why the supply-and-demand model should not be used to analyze the market for jeans. What will be an ideal response? ANSWER Products in the jeans market are not identical (at least not in the consumers’ eyes). The fact that there is only one manufacturer per brand gives that particular firm (limited) power over […]
Date: September 9th, 2020
The supply-and-demand model may not be appropriate in markets with large transaction costs. Indicate whether the statement is true or false ANSWER True . If the costs of finding a trading partner are high, no trades may occur, or trades may occur at a variety of prices.
Date: September 9th, 2020
A price restriction that tells suppliers the minimum price they can sell their goods for is also known as A) a price ceiling. B) a quota. C) a price floor. D) deadweight loss. ANSWER A
Date: September 9th, 2020
Repealing a tariff will likely A) increase the quantity produced domestically, increase the quantity purchased domestically, and reduce the price charged domestically. B) reduce the quantity produced domestically, increase the quantity purchased domestically, and reduce the price charged domestically. C) reduce the amount produced abroad, reduce the price domestically, and reduce the quantity purchased domestically. […]
Date: September 9th, 2020
If the demand curve is horizontal and the supply curve is vertical, shifts of the supply curve will lead to A) changes in the equilibrium quantity only. B) changes in the equilibrium price only. C) changes in both the equilibrium price and quantity. D) changes in the quantity demanded only. ANSWER A
Date: September 9th, 2020
Suppose a market is currently at equilibrium. A leftward shift of the demand curve would cause A) an increase in price but a decrease in quantity. B) a decrease in price but an increase in quantity. C) an increase in both price and quantity. D) a decrease in both price and quantity. ANSWER D […]
Date: September 9th, 2020
When “rent controls” result in a shortage of housing, landlords A) use criteria other than price to allocate housing. B) lower the price to allocate the housing. C) attempt to attract renters. D) None of the above. ANSWER A
Date: September 9th, 2020
When two goods are complements, a shock that lowers the price of one good causes the price of the other good to A) remain unchanged. B) decrease. C) increase. D) change in an unpredictable manner. ANSWER C
Date: September 9th, 2020
