Economics Practice Problems Essay

1. Which of the following would most likely shake equilibrium quantity and price of x to rise?(a)a overtake in income when the income elasticity of demand for x is positive Wrong. This will pose a drop in demand and and then a downslope in quantity. (b)a degenerate in the price of complementary harvest-time yCorrect. A fall in a complementary product will cause a rise in demand for that product y and thus a rise in demand of product x (see graph).(c)a fall in the price of substitute product ZWrong. A fall in a substitute product will cause an annex in the demand for product Z and thus a fall in the demand for product x. (d)an increase in the cost of producing xWrong. The increase in production cost will decrease lend (see graph).(e)a fall in the price of product A which is jointly produced with x Wrong. A fall in price of a jointly produced product will give the bonus to produce more A. If this incentivizes the producer to withal increase the supply of x, the effect would b e opposite as in (d) less price and more quantity.2. Which of the following is not characteristic of a obligation situation?(a)While disagreement over production quotas may occur, at one time set, there is little incentive for cheating. Correct answer. In a cartel there are incentives to cheat (all other are characteristics of a cartel). (b)There is an incentive for some producers not to join.(c)Entry of new producers is a threat to the cartels viability. (d)Long-run demand elasticity can pose an obstacle to success. (e)Output must be less than the competitive case for the cartel to be effective.