Question

True/False ....answer following Questions......11-. In a free market equilibrium, the gains from trade are always greater for consumers than for producers. 12- When the demand curve shifts, equilibrium price and quantity exchanged move in opposite directions. 13- Lead, an input in the production of ammunition, increased in price from $0.60/lb in 2006 to over $1.50/lb in 2007. A possible explanation for this is that demand has increased faster than supply has increased. 14- An increase in the price of granite would result in a decrease in the DEMAND for granite countertops. 15- The elasticity of demand for cigarettes is more inelastic in the long run than in the short run because it takes a long time for some people to quit smoking.

Answer 1

11) False. Gains for trade are actually maximised for both consumers and producers in free market equilibrium.

12) False. When demand curve shifts, price and output both move in same direction.

13) True. If demand increases more than supply, price increases. It is a possible explanation.

14) False. Increase in price of granite will result in decrease in supply of granite countertops.

15) False.The demand for cigarettes is actually more elastic in the long run. This because due to increase in price more people will be willing to leave cigarettes in the long run than in short run as it takes people a long time to quit.