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Which of the following is generally true of a competitive free market economy?

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1 point
It depends on government intervention to run effectively.
It can run itself without the intervention of government.
It requires a planning commission to set prices.
Price ceilings are implemented when governments attempt to lower the price of a good below the market equilibrium price.
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1 point
True
False
Movie tickets and popcorn are complementary goods. The price of corn, a good used in the production of popcorn, has fallen in price. Simultaneously, the rise of at-home streaming services have led movie theaters to decrease the amount of movies they offer. What is the result of these two events on the market for movie tickets?
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1 point
The market equilibrium price of movie tickets will definitely rise.
The market equilibrium price of movie tickets will definitely fall.
The market equilibrium quantity of movie tickets will definitely rise.
The market equilibrium quantity of movie tickets will definitely fall.
As the price of a good or service increases, consumers will purchase a lower quantity of that good or service due, in part, to the fact that consumers cannot afford the same quantity of a good or service at a higher price. This concept is known as the _____.
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1 point
income effect
substitution effect
ceteris paribus effect
inflation

1 answer

  1. Which of the following is generally true of a competitive free market economy?

    • It can run itself without the intervention of government.

  2. Price ceilings are implemented when governments attempt to lower the price of a good below the market equilibrium price.

    • True

  3. What is the result of these two events on the market for movie tickets?

    • The market equilibrium quantity of movie tickets will definitely fall. (The fall in the price of corn may lower the cost of popcorn, potentially keeping some consumers in movie theaters, but the decrease in the number of movies offered may deter attendance overall.)

  4. As the price of a good or service increases, consumers will purchase a lower quantity of that good or service due, in part, to the fact that consumers cannot afford the same quantity of a good or service at a higher price. This concept is known as the _____.

    • income effect