Question

A binding price floor exists when the price is not allowed to increase above a certain level.

True

False

Effective and binding price floors will NOT lead to a social surplus "dead-weight-loss."

True

False Inferior goods are negatively correlated to changes in income, i.e., as income increases the demand for inferior goods decreases. True False A primary condition for "free market laissez-faire capitalism" to function is that the "individual" would have property rights and be able to choose their deployment (use) in pursuit of their own 'rational self-interest' to produce value and earn an income, according to their own moral judgment, up to the point that their choices would directly interfere with the rights and liberties of other individuals in their person and property. True False If the price of tennis rackets increases and causes the demand for tennis balls to shift to the left, Tennis rackets and tennis balls are complements. Tennis rackets and tennis balls are too expensive. Tennis rackets and tennis balls are substitutes. Tennis rackets and tennis balls are price neutral. According to the law of supply, if the price of the electric ranges increased, everything else held constant then, The demand for gas ranges would decrease. The quantity supplied of electric ranges would increase. The demand for electric ranges would increase. The supply of electric ranges would decrease. If price is below equilibrium Demand is too low for equilibrium. Quantity supplied exceeds quantity demanded, and a shortage exists. The income and substitution effects will cause the price to rise. Demand will increase. Quantity demanded exceeds quantity supplied, and a shortage exists. The "area of exchange" (total social surplus or welfare) in our model of supply and demand Is not related to the issue of marginal cost and/ or marginal benefit analysis. Is to the right of equilibrium where the marginal cost are greater than the marginal benefit. Is to the left of equilibrium where the marginal benefit is less than the marginal cost. Is to the left of equilibrium where the marginal benefit is greater than the marginal cost. If demand decreases but supply increases at the same time, we can conclude that Equilibrium quantity will rise, but equilibrium price is indeterminate. We require more information to determine the movement in market price and market quantity equilibriums. Equilibrium quantity will decrease, but equilibrium quantity is indeterminate. Equilibrium price will decrease, but equilibrium quantity is indeterminate. Equilibrium price will rise, but equilibrium quantity is indeterminate. Medical research from South Africa indicates that vitamin A may be useful in treating measles. If the research can be substantiated and communicated to the markets, The demand for vitamin A will increase, causing equilibrium price to rise and quantity to fall. The supply of vitamin A will increase, causing equilibrium price to fall and quantity to increase. The supply of vitamin A will increase, causing equilibrium price and quantity to increase. The supply of vitamin A will increase, causing equilibrium price to rise and quantity to fall. The demand for vitamin A will increase, causing equilibrium price and quantity to increase. Price floors, if they are to be binding and effective in achieving the normative intention of the governments' market intervention must be either above or below the equilibrium price. be below the equilibrium price. be equal to the equilibrium price. be above the equilibrium price.

Answer 1

False

(Price floors are set above the equilibrium price)

False.

(Effective binding price floors cause a deadweight loss. There will be loss in consumers surplus and producer surplus)

True.

(Inferior goods have a negative income elasticity of demand)

(i) Tennis rackets and tennis balls are complements.

(A complelmentary good is a good with negative cross-elasticity of demand. If the price of one good increases, the demand for the other good decreases)

(ii) The quantity supplied of electric ranges would increase)

(i) Demand is too low for equilibrium.

(i) Is not related to the issue of marginal cost and/or marginal benefit analysis>

(iv) Equilibrium price will increase but equilibrium quantity is indeterminate.

(Price is sure to rise, but the change in quantity depends on the size of the shift of the curves)

(v) The demand for vitamin A will increase, causing equilibrium price and quantity to increase.

(iv) Be above the equilibrium price.

(Price floors set below the equilibrium price is of no use and its purpose itself will be defeated).

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