Suppose that Paola Flygare, producer of the Flygare fiberglass bass boat, produces 8,000 bass boats, but consumers want 13,000 bass boats. Assuming other producers have also underproduced for the market, the most plausible consequence is
a. an increase in overall production and an increase in the economy's is unemployment
b. a cutback in overall production and an increase in the economy's unemployment
c. an increase in real GDP and a decrease in the economy's unemployment
d. an increase in real GDP and an increase in the economy's unemployment
e. no change, because Flygare will not alter its production plans due to short-run market changes
C
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A local transit authority charges $1 for a bus ride. An economics study suggests that in the price range from $0.50 to $1.50, the elasticity of demand for bus trips is 1.2. To increase its revenue, the transit authority should
A) leave the fare as it is. B) raise the fare. C) lower the fare. D) charge $1.20.
When producing a good generates negative externalities, the private market for that good tends to produce too:
A. little of the product at too low a price. B. little of the product at too high a price. C. much of the product at too low a price. D. much of the product at too high a price.