After a price ceiling of $8 is placed on the market in the graph shown:
A. producers lose because they sell at a lower price.
B. the quantity traded in the market falls.
C. some consumers benefit because they pay a lower price.
D. All of these are true.
Answer: D
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Refer to Figure 7.1. Suppose the city passes an ordinance banning loud music, and this directly impacts Angus's legal ability to play his bagpipes. The benevolent social planner would choose an outcome where Angus ________ and Dudley ________
A) plays the bagpipes; does nothing B) plays the bagpipes; calls the police C) mops floors; does nothing D) mops floors; calls the police
Which of the following reasons helps explain why the aggregate demand curve is downward sloping?
a. The real balances effect or wealth effect: Consumers spend more on goods and services when the price level falls because lower prices increase consumer purchasing power. b. The producer-push effect: At less than full employment, increases in quantity demanded will raise price, and thus will motivate sellers to produce more. c. The hidden inflation effect: As the price level rises, consumers fail to recognize that prices are higher, and consequently they fail to reduce expenditures on goods and services. d. None of the above.