Author Question: Suppose the United States steps up efforts to combat drug trafficking and, with the aid of the ... (Read 53 times)

altibaby · **on:** Jun 30, 2018

Suppose the United States steps up efforts to combat drug trafficking and, with the aid of the Colombian military, destroys a significant percentage of cocaine crops. Predict the impact of increased drug interdiction on the market for cocaine in Los Angeles.
a. The supply of cocaine will increase causing the price of cocaine to increase.
b. The demand for cocaine will increase causing the price of cocaine to increase.
c. The supply of cocaine will decrease causing the price of cocaine to increase.
d. There will be a movement up along the supply curve of cocaine.

Question 2

If MPC = 0.75, a 40 billion decrease in government purchases would have what size effect on the first round of induced added consumption?
a. 30 billion
b. 40 billion
c. 120 billion
d. 160 billion