The price of apples falls. What happens in the market for apple pies?
A) The equilibrium price falls, and the equilibrium quantity rises.
B) The equilibrium price rises, and the equilibrium quantity falls.
C) The equilibrium price and quantity rise.
D) The equilibrium price and quantity fall.
Ans: A) The equilibrium price falls, and the equilibrium quantity rises.
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Which of the following does NOT contain an externality?
A) I sell you an ice cream and you drip it all over the person sitting next to you. B) I sell you an ice cream and it gives you a headache. C) I sell you an ice cream and you share it with your friend. D) I give you an ice cream and you share it with a friend.
For a closed economy, which of the following conditions must be satisfied for equilibrium to be maintained?
A) G = T B) X = IM = 0 C) C = S D) none of the above