Income on the horizontal axis at which the vertical distance to the 45-degree line is less than the vertical distance to the Ep line gives rise to a ________ amount of unplanned inventory investment, and thus ________ pressure on output

If demand for a seller's product is perfectly elastic, which of the following is true?

i. The firm will sell no output if it sets the price its product above the market price. ii. There are many perfect substitutes for the seller's product. iii. The firm will sell no output if it sets the price its product below the market price. A) i only B) ii only C) iii only D) i and ii E) ii and iii

Explain why an equilibrium point in a free market is considered to be the socially efficient point. Sketch graph a situation where a government price ceiling below equilibrium leads to inefficiency. Explain in words why the inefficiency exists and shade in on your graph the lost benefit that creates the inefficiency.

What will be an ideal response?