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DQuestion 1 2 pts The dynamic laws of supply and demand tell us that: prices have a natural tendency to rise or increase even when the quantity supplied equals the quantities demanded. excess demand leads to a tendency of prices to fall or decrease. the greater the excess supply, the greater the tendency of prices to fall or decrease. excess supply leads to a tendency of prices to rise or increase.D Question 2 2 pts Simple Supply and Demand models are not appropriate when analyzing markets which comprise a large percentage of the economy because: the market will no longer equilibrate. interdependencies exist and the other things constant qualification no longer holds. those markets are not important. a relative price cannot be measuredQuestion 3 2 pts Tariffs and quotas increase equilibrium price and reduce equilibrium quantity. True FalseQuestion 4 2 pts Based upon what we have learned in this course, tariffs typically allow: domestic producers to decrease their prices. O foreign producers to decrease their prices. domestic producers to raise their prices. foreign producers to raise their prices.DQuestion 5 2 pts When an effective price floor is removed, we would expect the price of the good in question to quantity demanded to O decrease; decrease increase; decrease decrease; increase increase; increase

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Answer #1

(Question 1) Option (3)

Excess supply exists when quantity supplied is higher than quantity demanded, at a price higher than equilibrium price. This will exert a downward pressure on prices until new price equals the equilibrium price.

(Question 2) Option (2)

Ceteris paribus assumption may not hold with very large markets.

(Question 3) True

Tariff or quotas increase domestic price, at which domestic demand falls and imports decrease.

(Question 4) Option (3)

Tariffs increase domestic price, at which domestic supply is increased by domestic producers.

(Question 5) Option (3)

A price floor is imposed higher than equilibrium price, at which quantity demanded is lower than quantity supply. Removal of price floor will decrease price to its equilibrium level and increase quantity demanded.

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