Author Question: At prices above the equilibrium price, what occurs? What will be an ideal ... (Read 56 times)

tiffannnnyyyyyy

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At prices above the equilibrium price, what occurs?
 
  What will be an ideal response?

Question 2

The efficient quantity of a public good is the quantity that has the highest possible marginal social benefit.
 
  Indicate whether the statement is true or false


shoemake

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Answer to Question 1

If the price exceeds the equilibrium price, there is a surplus because the quantity supplied exceeds the quantity demanded. With a surplus, the law of markets points out that the price will fall. As the price falls, the quantity supplied decreases and the quantity demanded increases, thus decreasing the size of the surplus. The price will continue to fall as long as there is a surplus, that is, as long as the price exceeds the equilibrium price. Ultimately the price will fall to equal the equilibrium price, at which time the surplus will be eliminated and the price will no longer change.

Answer to Question 2

FALSE



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