Say the supply of a product falls while the demand stays the same. This causes the free market ________
a. price to increase and equilibrium quantity to increase
b. price to increase and equilibrium quantity to decrease
c. price to decrease and equilibrium quantity to increase
d. price to decrease and equilibrium quantity to decrease
Answer: b. price to increase and equilibrium quantity to decrease
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Refer to Figure 5-8. Suppose the emissions reduction target is currently established at 8 million tons. Should society undertake to reduce an additional 1 million tons so that the total reduction is 9 million tons?
A) No, because there is a net cost represented by the area B + C. B) Yes, because toxic fumes are dangerous and must be eliminated at any cost. C) No, because the firms will pass the additional cost on to consumers. D) Yes, because the marginal benefit exceeds the marginal cost at 8 million tons.
The recession of 2007-2009 was the most severe economic downturn in the U.S. since the
a. 1930s. b. 1950s. c. 1970s. d. 1980s.