Question

1. A subsidy to producers will usually: A. Reduce the equilibrium price and decrease the output...

1. A subsidy to producers will usually:

A. Reduce the equilibrium price and decrease the output

B. Reduce the equilibrium price and increase the output

C. Increase the equilibrium price and increase the output

D. Increase the equilibrium price and decrease the output

2. An increase in demand, assuming an upward sloping supply curve, will:

A. Reduce the equilibrium price and decrease the output

B. Reduce the equilibrium price and increase the output

C. Increase the equilibrium price and increase the output

D. Increase the equilibrium price and decrease the output

3. A decrease in demand, assuming a downward sloping demand curve, will:

A. Reduce the equilibrium price and decrease the output

B. Reduce the equilibrium price and increase the output

C. Increase the equilibrium price and increase the output

D. Increase the equilibrium price and decrease the output

4. What is the demand for labor derived from?

A. The supply of labor

B. The supply of the product

C. The demand for the final product

D. The demand for capital

Homework Answers

Answer #1

1) A subsidy to producers will reduce the equilibrium price and increase the output in the market. This is because due to subsidy, the cost of production decreases.

2) An increase in demand shifts the demand curve towards right. Assuming an upward sloping supply curve, an increase in demand will lead to increase in both the equilibrium price and the output.

3) A decrease in demand shifts the demand curve towards left. Assuming a downward sloping demand curve and an upward sloping supply curve, a decrease in demand will lead to decrease in both equilibrium price and the output.

4) The demand for labor is derived from the demand for final product. An increase in demand for final product will lead to increase in production and this requires more labor, so labor demand also increases.

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