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Testanswers - If the demand curve is downward sloping then...

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If the demand curve is downward sloping, then when the supply curve shifts down, the competitive equilibrium price falls and the equilibrium quantity rises. 0% 0% 1. True 2. False All 91% Top 1/5 of class 97% Bottom 1/5 of class 79% Pct getting this right.
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Competitive equilibrium theory predicts that the number of transactions and the amount of profits for buyers and for sellers would be the same if a sales tax of \$20 per unit were collected from buyers as they would be if a sales tax of \$20 per unit were collected from sellers. 1. True 2. False All 69% Top 1/5 of class 82% Bottom 1/5 of class 28%
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Sales tax After tax Buyers’ profits After tax Sellers profits in Blue Now Buyers pay tax.
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We can expect there to be excess demand in a market where a legal price ceiling is set lower than the competitive equilibrium price. 1. True 2. False All 85% Top 1/5 of class 99% Bottom 1/5 of class 69%
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Price ceiling Excess Demand in Pink.
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A profit-maximizing firm will always want to hire an additional worker if the value of the average product of labor is greater than the wage. 1. True 2. False All 76% Top 1/5 of class 97% Bottom 1/5 of class 45%
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Remember the marginal principle? An example. Wage is $4 # workers Value of output Value of Average product Profit 1 $30 $30 $26 2 $35 $17.50 $27 3 $36 $12 $24
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wage that is set higher than the equilibrium wage will decrease total labor income.
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This note was uploaded on 12/25/2011 for the course ECON 1 taught by Professor Bergstrom during the Fall '07 term at UCSB.

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Testanswers - If the demand curve is downward sloping then...

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