1. The former Soviet Union was known for black markets. An explanation for the e
ID: 1166169 • Letter: 1
Question
1. The former Soviet Union was known for black markets. An explanation for the existence of these illegal markets is that:
goods were not subject to price controls.
the government imposed a price ceiling below the equilibrium price.
the government imposed a price ceiling above the equilibrium price.
all of the above.
2. Which of the following statements is not true?
When goods have very low prices, the elasticity of demand is usually quite low.
Elasticities increase as the price of the good increases.
The availability and price of substitutes affect the elasticity of demand for a good or service.
When price elasticity of demand is very high, we say there is brand loyalty.
Price elasticity of demand for basic foods is low.
3. American Airlines makes numerous nonstop flights from Chicago's O'Hare Airport to the airport at Dallas-Fort Worth. The distance between those two cities is 1,000 miles. The only variable cost, fuel, costs $.06 for each passenger-mile it flies. Bob, on his way to an emergency business meeting, buys a ticket in coach class for $1,300 at the very last minute. The marginal cost of flying Bob from Chicago to Dallas-Fort Worth is:
b and e.
higher than the average cost of previous passengers.
$600.
$160.
$60.
4. At the point where marginal cost equals average variable cost,
b and c.
marginal cost is rising.
average total cost is at its minimum.
average variable cost is falling.
there is no total cost.
a.goods were not subject to price controls.
b.the government imposed a price ceiling below the equilibrium price.
c.the government imposed a price ceiling above the equilibrium price.
d.all of the above.
Explanation / Answer
Ans:
1) Option B
the government imposed a price ceiling below the equilibrium price.
Price ceiling is the maximum price that can be charged for the product.If price ceiling is set below the equilibrium price it creates shortage in the market.This means demand is higher than supply.This shortage leads to the existence of illegal markets.
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