If producers incorrectly set the price of their product too high:
A. a surplus will result.
B. equilibrium will result.
C. a shortage will result.
D. the industry will die out soon.
Answer: A
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Refer to Figure 26-11. In the dynamic model of AD-AS in the figure above, the economy is at point A in year 1 and is expected to go to point B in year 2, and the Federal Reserve pursues policy. This will result in
A) real GDP lower than what would occur if no policy had been pursued. B) short-term interest rates higher than what would occur if no policy had been pursued. C) unemployment rates higher than what would occur if no policy had been pursued. D) inflation higher than what would occur if no policy had been pursued.
As a result of trade, specialization in the Ricardian model tends to be
A) complete with constant costs and with increasing costs. B) complete with constant costs and incomplete with increasing costs. C) incomplete with constant costs and complete with increasing costs. D) incomplete with constant costs and incomplete with increasing costs. E) dependent on the specific opportunity costs involved in production.