Suppose a binding price floor on sparkling wine is proposed by the Health Minister of the country of Vinyardia. What will be the likely effect on the market for sparkling wine in Vinyardia?
A) Consumer surplus will increase.
B) Producer surplus will increase.
C) Deadweight loss will increase.
D) Market efficiency will increase.
Answer: C
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Which of the following statements is correct?
A) PPP is a theory of exchange rate determination. B) Inflation differentials cause changes in exchange rates. C) PPP is an equilibrium relationship between two endogenous variables. D) PPP, or the law of one price, should hold well for individual goods.
If the price of a textbook rises and then students purchase fewer textbooks, an economic model can show a cause-and-effect relationship only if which of the following conditions holds:
a. students' incomes fall. b. tuition decreases. c. the number of students increases. d. everything else is constant. e. the bookstore no longer accepts used book trade-ins.