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1 Econ 102 Review 10/01/2013 Inferior Good: is a good that decreases in demand when consumer income rises, unlike normal goods, for which the opposite is observed. Normal goods are those for which consumers' demand increases when their income increases... The going rent in the market for I bedroom apartments in your neighborhood is $800. If the government imposes a price ceiling of $400 in the market: A) More people will be willing to rent apartments at every price B) Less people will rent apartments. C) The same number of apartments will be rented D) More people will rent apartments Answer is B. Less people will supply apartments at this price Equilibrium in the market for peanut butter is disturbed by an increase in the price of peanuts. Producer surplus in the peanut butter market: A) will decrease B) will increase C) May change, but we cannot determine the change without more information D) Will not change Prices increase because either demand increases (which would increase producer surplus) or supply decreases (which would raise price but lower overall surplus) What determines whether there is an increase in total surplus is if the sales increase. The more quantity the more surplus If total surplus falls, which of the following must have occurred? A) There was an increase in demand and an increase in supply B) There was an increase in demand or a decrease in supply C) There was a decrease in demand or a decrease in supply D) There was a decrease in demand and an increase in supply

2 If both supply and demand decrease, quantity decreases, thus C is correct answer! 1.Mountain River Adventures offers whitewater rafting trips down the Colorado River. IT costs the firm $100 for the first raft trip per day, $120 for the second, $140 for the third, and $160 for the fourth. If the market price for a raft trop was $120 but has now increased to $150, the gain in producer surplus is equal to answer is 70 The market for apples in in equilibrium at a price of $.50 per pound. If the government imposes a price ceiling in the market at a price of $.80 per pound then: A) quantity supplied will increase. B) the price ceiling will not affect the market price or output C) There will be a shortage of the good D) quantity demanded will decrease Answer is B. when ceiling is above equilibrium or floor below equilibrium, there is no effect. Sellers already charging at equilibrium price. If the price is above the equilibrium price in the market for grapefruit, total surplus: A) Will increase B) May change, but we cannot determine the change without more information C) Will decrease D) Will not change A lot of people who can t buy good and a suppliers have a larger inventory that they can t sell. Answer is C because suppliers will be sitting on less goods. Inefficient market. The current price in the market for milk is $2.00. If the government imposed a price floor of $4.00 in this market total surplus would: A) decrease first, and then increase B) increase C) decrease D) not change The student center on campus has burritos, bagels, or burgers for lunch, and they all cost the same. You decide to have a burger today, but if they were out of burgers, you would have bought a bagel. Your opportunity cost is:

3 A) Your enjoyment of the bagel and burrito B) Your enjoyment of the bagel C) Your enjoyment of the burger D) Your enjoyment of the burrito Next best alternative is opportunity cost. Alex is willing to buy the last ticket to the Billy Bragg concert for $15, while Jake is willing to pay $25. Alex is first in line and buys a ticket for $15. He then resells his ticket to Jake for $20. By reselling the ticket instead of going to the concert himself, Alex caused: A) total surplus to increase. B) a deadweight loss of $5 C) Total surplus to decrease D) Consumer surplus to decrease and producer surplus to increase Answer is C. Alex makes money by selling ticket, Jake buys ticket for $5 less than he would have paid. Say Sarah was choosing between three alternatives: working on her job that pays her $50; writing a term paper which she values at $40; or going out with a friend, which she values at $20. The opportunity cost of writing the term paper is: a. $30 b. $70 c. $20 d. $50 Lena and Jess are roommates. Lena hates to clean the bathroom. Jess will agree to clean the bathroom only if Lena vacuums the living room. This statement best represents this economic concept:

4 a. There are gains from trade. b. The real cost of something is what you must give up to get it. c. "How much" is a decision at the margin. d. People usually exploit opportunities to make themselves better off. Say Sarah was choosing between 3 alternatives: working on her job that pays her $50; writing a term paper which she values at $60; or going out with a friend, which she values at $80. The opportunity cost of writing the term paper is: a. $80 b. $50 c. $130 d. $30 Specialization and trade usually lead to: a. higher prices. b. lower living standards. c. lower economic growth. d. the exchange of goods and services in markets. Say you took an average of 5 minutes to answer an ECON problem, and 2 minutes to answer a MATH problem. If you had a limited time left to study, your best strategy would be to solve:

5 a. only ECON problems b. It depends c. only MATH problems Margo spends $10,000 on one year's college tuition. The opportunity cost of spending one year in college for Margo is: a. whatever she would have purchased with the $10,000 instead. b. whatever she would have earned had she not been in college. c. $10,000. d. whatever she would have purchased with the $10,000 and whatever she would have earned had she not been in college. The local Taco Hut charges the same price for everything on its menu: $3 will buy a taco, a burrito, or nachos. You buy the taco and think that if you had not purchased the taco, you would have purchased the burrito. The opportunity cost of the taco is: a. the $3. b. the $3, your enjoyment of the burrito, and your enjoyment of the nachos. c. the $3 and your enjoyment of the burrito. d. your enjoyment of the burrito. When the United States and Mexico trade:

6 a. both Mexico and the United States will be better off. b. the United States will be worse off because wages in Mexico are so low. c. both Mexico and the United States will be worse off. d. Mexico will be worse off because the United States is a stronger economic power. The student center on campus has burritos, bagels, or burgers for lunch, and they all cost the same. You decide to have a burger today, but if they were out of burgers, you would have bought a bagel. Your opportunity cost is: a. your enjoyment of the burrito. b. your enjoyment of the bagel. c. your enjoyment of the bagel and burrito. d. your enjoyment of the burger. Suppose you and your roommate have the following agreement when it comes to cleaning your apartment: each person washes her or his own dishes after each meal. The principle of trade you just learned tells you that it would be more efficient if: a. each of you wash half of all the dirty dishes. b. one of you wash all the dishes while the other did a different chore. c. both of you wash your own dishes after each meal. d. none of you wash the dishes after eating. If the state government allocates additional spending on education, the opportunity cost is:

7 a. measured in terms of the best alternative uses for that money. b. zero c. the dollar amount of the additional spending. d. considered only if additional taxes need to be raised to fund the spending. The University recently inherited a large mansion from a wealthy alumnus. The University plans to use the mansion to host faculty parties and to house distinguished guests. The opportunity cost of the mansion to the University is: a. the amount the university would receive if it sold the mansion. b. zero, because it was a gift. c. the original cost of building the mansion d. the cost of catering the parties at the mansion As long as people have different, everyone has a comparative advantage in something. A. utility B. opportunity costs C. benefits D. direct costs A decrease in the price of gasoline will cause the demand for cars, a complement of gasoline, to:

8 a. Shift to the left b. Not change c. We can t say d. Shift to the right A decrease in buyers income will cause the demand for public transportation, an inferior good, to: a. Not change b. Shift to the left c. Shift to the right d. We can t say A decrease in the price of butter will cause the demand for margarine, a substitute for butter, to: a. We can t say b. Shift to the left c. Shift to the right d. Not change A binding price floor causes:

9 a. a shortage in the market. b. a surplus in the market. c. wasted resources. d. a surplus in the market and wasted resources. Each of the following is a source of inefficiency from a rent control price ceiling except: a. inefficiently low quantity of the good exchanged. b. wasted resources of consumers searching for the good. c. inefficient allocation of the good to consumers. d. inefficiently high quality of the good being sold. Suppliers have power because more demand then supply In Europe the minimum wage has led to: a. lower unemployment, especially among young workers. b. a proliferation of large companies in Italy. c. widespread evasion of the minimum wage law in the black market for labor. d. European governments hiring the surplus of workers. In Europe, the minimum wage has led to all of the following except:

10 a. high unemployment, especially among young workers. b. a proliferation of tiny companies in Italy. c. widespread evasion of the minimum wage law in the black market for labor. d. European governments hiring the surplus of workers. If a frost destroys much of the grapefruit crop, total surplus: a. will increase. b. may change, but we cannot determine the change without more information. c. will not change. d. will decrease. Producer surplus for an individual seller is equal to: a. the marginal cost of the good minus the price of the good. b. the willingness to pay for the good minus the price of the good. c. the marginal cost of the good minus the willingness to pay for the good. d. the price of the good minus the marginal cost of producing the good. Economists in general agree that rent controls are: a. an efficient and equitable way to help low income families. b. an inefficient and ineffective way to help low income families. c. an efficient method of dealing with the shortages created during price ceilings. d. the only way to solve the problem of poverty. Suppose Sarah was considering between buying a burger or a pizza. She would be willing to pay $10 for the pizza, which costs around $5. The opportunity costs of buying a burger would be: a. $10 b. $0 c. $15 d. $5

11 If countries engage in international trade: a. they will be consuming inside their production possibility frontiers. b. they give up the ability to specialize in production. c. they will be consuming outside their production possibility frontiers. d. worldwide levels of production are lower. The U.S. production possibility frontier will if there is a large influx of immigrants. a. cannot be determined from the information provided b. not change c. shift in d. shift out The production possibility frontier is bowed out from the origin because: a. economic growth leads to inefficiency. b. resources are inefficiently used. c. resources are not equally suited for the production of both goods. d. resources are scarce. Which of the following best describes the law of demand? A. As income taxes rise, fewer new cars are purchased. B. As the population rises, more electricity is consumed. C. As the price of a DVD rental rises, fewer DVDs are rented. D. As the price of corn rises, more acres of corn are planted. Say the following two events occur at the same time: 1) an increase in the price of milk of cheese; 2) a decrease in the price of bagels, a complement of cheese. The following two events would lead to a(n) in the market price and a(n) in the market quantity of cheese. a. indefinite change; increase b. decrease; indefinite change

12 c. indefinite change; indefinite change d. indefinite change; decrease e. increase; indefinite change A decrease in the price of bagels will the market price and the market quantity of cream cheese, a complement of bagels. a. Increase; decrease b. None of the other choices is correct. c. Decrease; increase d. Increase; increase e. Decrease; decrease If the government imposes rent control: a. rent will be set at a price above the equilibrium price. b. it may result in some landlords leaving the business because they cannot cover costs. c. it will lead to rental units being higher in quality because landlords are guaranteed a high price. d. it will create a surplus of housing. If the minimum wage is a binding price floor, then: a. the number of workers who want to work will be greater than the number of jobs available. b. the equilibrium wage will increase. c. there will be a job for everyone who is willing to work. d. business owners will hire more workers. Say the following two events occur at the same time: 1) a decrease in the price of milk, an input in the production of cheese; 2) a decrease in the price of bagels, a complement of cheese. The following two events would lead to a(n) in the market price and a(n) in the market quantity of cheese. a. indefinite change; increase

13 b. increase; indefinite change c. indefinite change; indefinite change d. decrease; indefinite change An increase in the price of bagels will the market price and the market quantity of cream cheese, a complement of bagels. a. None of the other choices is correct. b. Increase; increase c. Decrease; decrease d. Increase; decrease e. Decrease; increase -Market price is where supply and demand meet. Supply stays same but demand shifts left, thus decrease in market price. The cost of sensors used in making digital cameras falls, while a successful ad campaign makes digital cameras more fashionable. As a result, the equilibrium relative price of digital cameras and the equilibrium quantity. A. increases; may increase, decrease, or stay the same B. increases; increases C. decreases; increases D. may increase, decrease, or stay the same; increases Suppose the market for gasoline is in equilibrium. You have heard that the price of crude oil is falling because of new oil discoveries. You are also aware that the number of car and truck drivers is steadily rising. Knowing this, you predict that the price of gasoline will and the quantity of gasoline bought and sold will. A. rise; fall B. rise; rise C. rise or fall; rise D. rise or fall; fall Say the following two events occur at the same time: 1) an increase in the price of steel, an input in the production of cars; 2) a decrease in the price of gasoline, a complement of cars. The following two events would lead to a(n) in the market price and a(n)

14 in the market quantity of cars. a. indefinite change; decrease b. indefinite change; increase c. decrease; indefinite change d. increase; indefinite change e. indefinite change; indefinite change -supply decreases because of price of steel, demand increases because of gasoline In the market for local coffee, the price will and the quantity will if new coffee shops open and consumers' incomes decrease due to a recession. A. be indeterminate; increase B. decrease; be indeterminate C. increase; be indeterminate D. be indeterminate; decrease A shift of a demand curve to the right, all other things unchanged, will: A. decrease equilibrium quantity and increase equilibrium price. B. increase equilibrium price and quantity. C. decrease equilibrium price and quantity. D. increase equilibrium quantity and decrease equilibrium price. Government intervention in the form of price floors or price ceilings will: a. always enhance the efficiency of the market. b. result in either surpluses or shortages. c. move the market toward its equilibrium quantity more quickly. d. often be seen as necessary to decrease the existence of black markets. The persistent unwanted surplus that results from a price floor creates inefficiencies that include all of the following except: a. inefficiently low quality. b. inefficient allocation of sales among sellers.

15 c. wasted resources. d. the temptation to break the law by selling below the legal price. If the price of a good rises, then producer surplus: a. will decrease. b. will remain the same. c. will increase. d. may change, but we can't tell how. The market demand for singing dolls is initially made up of 50 buyers. Suppose there is a decrease in the number of buyers by 10. Holding everything else constant, one would expect: A. the supply curve to shift right. B. the quantity supplied to decrease. C. the quantity supplied to increase. D. the supply curve to shift left. The market for lemonade is in equilibrium and the price of lemons rises. How will this affect the lemonade market? A. Demand will decrease, increasing the price and decreasing the quantity. B. Demand will decrease, decreasing the price and decreasing the quantity. C. Supply will increase, decreasing the price and increasing the quantity. D. Supply will decrease, increasing the price and decreasing the quantity. The equilibrium price is also known as a. the market-clearing price. b. the common price. c. the fair price.

16 d. the average price. CoreMicroeconomics: Exploring Economics pgs: 1 17 Benefit: a sense of accomplishment Cost: Monetary and Physical risks Economics: The study of how individuals, firms, and society make decisions to allocate limited resources to many competing wants. Scarcity: Our unlimited wants clash with limited resources. Incentives: The factors that motivate individuals and firms to make decisions in their best interest. Microeconomics: The decision making by individuals, businesses, industries, and governments. Macroeconomics: The broader issues in the economy such as inflation, unemployment and national output of goods and services Ceteris Paribus: Assumption used in economics where other relevant factors or variables are held constant Efficiency: How well resources are used and allocated. Do people get the goods and services they want at the lowest possible resource cost? Production efficiency: When goods are produced at the lowest possible cost Allocative efficiency: When individuals who desire a product the most get those goods and services Equity: The fairness of various issues and policies. Positive Question: A question that can be answered using available information or facts Normative Question: A question that is based on societal beliefs on what should or should not take place Opportunity cost: The value of the next best alternative; what you give up to do something or purchase something Key Principles of Economics: Economics is concerned with making choices with limited resources. Economics involves making decisions to maximize one s well being, which can come from many sources, including money, time, happiness, or a fortuitous event. When making decisions, one must take into account tradeoffs and opportunity costs Specialization leads to gains for all involved People respond to incentives, both good and bad Rational behavior requires thinking on the margin. One should continue to consume or produce as long as the marginal benefit exceeds the marginal cost. Markets are generally efficient; when they aren t government can sometimes correct the failure Institutions and human creativity help explain the wealth of nations CoreMicroeconomics: Exploring Economics pgs: 28 50

17 Capitalist/Market Economies: Private individuals and firms own most of the resources. Decisions determined by individual desires for products and profit making decisions by firms. Planned (socialist/communist) economies, resources are owned by the state and most economic decisions are made by central government Production: The process of converting resources into goods and services Resources: Productive resources include land, labor, capital, and entrepreneurial ability Land: Includes natural resources such as mineral deposits, oil, natural gas, water, and land in the usual sense of the word. Rent refers to the payment to land as a resource. Labor: Includes the mental and physical talents of individuals who produce products and services. The payment to labor is called wages Capital: Includes manufactured products such as tractors, welding equipment, and computers that are used to produce other goods and services. Capital earns interest. Entrepreneurs: Combine land, labor, and capital to produce goods and services. Absorb the risk of being in business. Receive profits for effort. Production Efficiency: Goods and services are produced at their lowest resource (opportunity cost) Allocative Efficiency: The mix of goods and services produced is just what the society desires. The right mix of goods will be produced at the lowest cost. Production possibilities frontier: Shows the combinations of two goods that are possible for a society to produce at full employment. Points on or inside the PPF are attainable, and those outside of the frontier are unattainable. Opportunity Cost: The cost paid for one product in terms of the output (or consumption) of another product that must be forgone Absolute Advantage: One country can produce more of a good than another country Comparative Advantage: One country has a lower opportunity cost of producing a good than another country CoreMicroeconomics: Supply and Demand pgs:78 Markets: Institutions that bring buyers and sellers together so they can interact and transact with each other Price system/market economy: A name given to the market economy because prices provide considerable information to both buyers and sellers Markets differ in geographical location, products offered, and size

18 Willingness to pay: An individual s valuation of a good or service equal to the most an individual is willing and able to play Demand: The maximum amount of a product that buyers are willing and able to purchase over some time period at various prices, holding all other relevant factors constant (the ceteris paribus condition) Law of demand: Holding all other relevant factors constant, as price increases, quantity demanded falls, and as price decreases, quantity demanded rises Demand curve: A graphical illustration of the law of demand, which shows the relationship between the price of a good and the quantity demanded Demand schedule: A table that shows the quantity of a good a consumer purchases at each price Horizontal summation: Market demand and supply curves are found by adding together how many units of the product will be purchased or supplied at each price Determinants of demand: Nonprice factors that affect demand, including tastes and preferences, income, prices of related goods, number of buyers, and expectations Normal good: A good for which an increase in income results in rising demand Inferior good: A good for which an increase in income results in declining demand Substitute goods: Goods consumers will substitute for one another depending on their relative prices. When the price of one good rises and the demand for another good increases, they are substitute goods, and vise versa Complementary goods: Goods that are typically consumed together. When the price of a complementary good rises, the demand for the other good declines, and vice versa Change in demand: Occurs when one or more of the determinants of demand changes, shown as a shift in the entire demand curve Change in quantity demanded: Occurs when the price of the product changes, show as a movement along an existing demand curve Supply: The maximum amount of a product that sellers are willing and able to provide for sale over some time period at various prices, holding all other relevant factors constant (the ceteris paribus condition) Law of supply: Holding all other relevant factors constant, as price increases, quantity supplied will rise, and as price declines, quantity supplied will fall Supply curve: A graphical illustration of the law of supply, which shows the relationship between the price of a good and the quantity supplied Determinants of supply: Nonprice factors that affect supply, including production technology, costs of resources, prices of other commodities, expectations, number of sellers, and taxes and subsidies

19 Change in supply: Occurs when one or more of the determinants of supply change, shown as a shift in the entire supply curve Change in quantity supplied: Occurs when the price of the product changes, shown as a movement along an existing supply curve Equilibrium: Market forces are in balance when the quantities demanded by consumers just equal the quantities supplied by producers Equilibrium price: The price that results when quantity demanded is just equal to quantity supplied Equilibrium quantity: The output that results when quantity demanded is equal to quantity supplied Surplus: Occurs when the price is above market equilibrium and quantity supplied exceeds quantity demanded Shortage: Occurs when the price is below market equilibrium, and quantity demanded exceeds quantity supplied

20 Consumer Surplus: The difference between market price and what consumers (as individuals or the market) would be willing to pay Equal to the area above market price and below the demand curve Producer Surplus: The difference between market price and the price at which firms are willing to supply the product Equal to the area below market price and above supply curve Total Surplus: Sum of consumer and producer surplus. A measure of the overall net benefit gained from a market Deadweight loss: The reduction in total surplus that results from the inefficiency of a market not in equilibrium Market failure: Occurs when a free market does not lead to a socially desirable outcome Reasons why markets fail: Lack of competition: firm can raise its price in the market without worrying it will be undercut Information is not shared by all parties: One party knows more about a product. Leads to prices being set too high or too low External Benefits or costs: don t think about costs and benefits you impose on others Existence of public goods: public goods are difficult to provide in the private market because just because you watch pbs, it doesn t change how much pbs I can watch Asymmetric information: Occurs when one party to a transaction has significantly better information than the other party Laissez faire: A market that is allowed to function without any government intervention Price ceiling: A government set maximum price that can be charged for a product or service. When the price ceiling is set below equilibrium, it leads to shortages Misallocation of resources: Occurs when a good or service is not consumed by the person who typically values it the most, and typically results when a price ceiling creates an artificial shortage in the market. Price Floor: A government mandated minimum price that can be charged for a product or service The opportunity cost of engaging in an activity is the value of the next best alternative you must sacrifice to engage in it. Opportunity cost of attending this lecture is the value of your next best alternative Opportunity cost of going to college is the salary lost. If you could find a job paying you $18,000, then the opportunity cost would be $18,000. Econ 102 Second Class: Key Principles:

21 The opportunity cost principle: The value of the lesser alternative Nothing is free in life, everything has a cost Sarah was choosing between three alternatives: working on her job that pays her $60; writing a term paper which she values at $40; or going out with a friend, which she values at $80. The opportunity cost of writing the term is: $80 Giving up going out with her friends (which has higher value than writing a term paper). Can only do one thing at a time Net Marginal Benefits Principle: Only make an action when the marginal benefits exceed the marginal cost Make decisions based on current situation; not on averages The Trade Principle: Trade makes people better off Trade creates value The Invisible Hand Principle: You are an energy conservation minded consumer whose only goal in choosing a car is to minimize the depletion of the planet s store of fossil fuels. You usually drive an average of 7,000 miles every year. If gasoline is $1 per gallon, and if you can t afford to buy a new car. Should you lease a new car that costs more but will help save the environment or a old car that s cheaper but will hurt the environment more? The good of one is the good of the many Production Possibilities Frontier: Day 3 9/3/13:

22 Tradeoff between being safer and spending more time in security line As you increase the hours you study for an Econ exam, the opportunity costs of studying for the exam will increase. Going to be less productive at the end. As number of planes increased, cost increased As number of planes increased, increasing amount of plates lost Paper was either specialized for plates or planes Had to use two plate papers to make one airplane As you clean more plates, forced to use airplane paper which makes planes well As we do more of one product, forced to use products that are meant/better utilized for another product In PPF, slope is the cost Efficiency means using all the resources you have Reasons why we trade: Trade creates value Have different preferences Don t choose who does things by who is better at them, judge by who is cheaper. Ex. Mary may be a heart surgeon so shouldn t be a typist Can specialization and trade increase production? Yes, U.S. gives apps to China, while China makes IPhones for U.S.

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24 North South #s mean minutes to produce Cars Apps Cars 0.5 apps 0.25 apps Apps 2 cars 4 cars Opp. Cost North South

25 South should specialize in cars, North should specialize in apps. The following would be a trade beneficial to both regions: A. 3 cars for 3 apps= 1 car/1 app B. 12 cars for 4 apps= 3 car/1 app C. 6 cars for 4 apps= 1.5 car/1 app D. 15 cars for 3 apps= 5 car/1 app North specializes in apps rather than giving up 0.5 apps per car South specializes in cars, giving up 4 cars per app.

26 North gets more cars per app from trade and south gives up less cars now per app 2cars/1app>P<4cars/1app Once the two regions trade, which one of these would you rather be? A. Car manufacturer in south More business following trade B. Car manufacturer in North Will go out of business C. Consumer of apps in North What/who determines market prices? Markets are determined by both buyers and sellers When the price falls, consumer surplus increases Every time you buy anything, if what you are willing to pay for it is equal to or more what you pay you get a surplus. Willing to pay more than what you actually pay Producer Surplus: Positive difference between cost and how much you sell for Producer surplus was the same because sold dogs for same price Utility: Satisfaction you get from consuming Opportunity Cost: The highest valued forgone alternative Willingness to pay: Maximum you would be willing to pay for a good

27 Diminishing Marginal Utility: Each additional unit of a good is not as satisfying as the previous unit The supply curve is upward sloping because at higher prices: Firms perceive that the marginal benefit of producing the good has increased Ceteris parabus: assuming all other things stay the same Market supply: What determines market supply? How/why market supply changes? The cost of production determines the supply for the product Any change in the cost of production would cause a change in supply A change in the price changes quantity supplied, not supply What determines prices in an economy? Pickup line s quality is determined by number of girls Price is just a signal for buyers and sellers Be able to predict what happens to price Every time a car is sold, benefit for consumer and producer Free Markets encourage transactions Every time there is a trade there is a surplus Give good to the people who value the good the most Cabs in Chicago: How hard is it to find a cab in Chicago? What determines where a cab is going to be and why its going to be there Cab drivers determine where to be based on crime rates in certain areas The regulate fare prevents cab drivers to go to bad parts of the city because no incentive to go into bad neighborhoods Regulated fare=price control Suppose the government sets the maximum price for a normal doctor s visit at $20, but the current market price is $40. As a result of this government action doctors will see: Less patients. As price decreases, supply decreases. As the price control is put in place, when control price falls below market price, supply goes down.

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EC 201 Lecture Notes 1 Page 1 of 1

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