Suppose that a specific tax of $3 is imposed on producers of bread. The bread market supply is Qs = 10 + 0.5P and the bread market demand is Qd = 100-P. What is the change in the equilibrium quantity of bread induced by the tax incidence?
A) Equilibrium quantity decreased by three units.
B) Equilibrium quantity increased by two units.
C) Equilibrium quantity decreased by one unit.
D) Equilibrium quantity increased by one unit.
C
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The economy is in the horizontal portion of the AS curve, there is no liquidity trap and investment is sensitive to changes in the interest rate. According to the Keynesian transmission mechanism, if the money supply increases the interest rate will __________, investment spending will __________, the AD curve will shift to the __________, and Real GDP will __________
A) fall; rise; right; not change B) fall; rise; left; rise C) rise; rise; right; rise D) fall; rise; right; fall E) fall; fall; left; fall
In moving along a supply curve, which of the following is not held constant?
A. The number of firms producing this good. B. Expectations about the future price of the product. C. Techniques used in producing this product. D. The price of the product for which the supply curve is relevant.