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

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.

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

1. This is False. The price is not allowed to fall below a particular level.

2. This is False.

3. This is True.

4. The correct answer is A.

5. The correct answer is B.

6. The correct answer is B.

The others are unclear as the questions are lumped together.