True or False: The market price of a good reflects its highest-valued alternative use. True False Evaluate the following statement. True or False: Suppose widespread forest fires destroy a large number of trees, resulting in a reduced supply of lumber to build homes. The higher price of lumber that results is the signal sent to builders that causes them to turn to substitute building materials (such as bricks) that are now relatively less expensive.

True or False: The market price of a good reflects its highest-valued alternative use. True False Evaluate the following statement. True or False: Suppose widespread forest fires destroy a large number of trees, resulting in a reduced supply of lumber to build homes. The higher price of lumber that results is the signal sent to builders that causes them to turn to substitute building materials (such as bricks) that are now relatively less expensive.

Microeconomics: Principles & Policy

14th Edition

ISBN:9781337794992

Author:William J. Baumol, Alan S. Blinder, John L. Solow

Publisher:William J. Baumol, Alan S. Blinder, John L. Solow

Chapter6: Demand And Elasticity

Section: Chapter Questions

Problem 2TY

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After the COVID-19 outbreak, a steep (very high) increase in demand for varlous products is reported as well as increases in retail prices. a. Could you explain why retail prices increase and justify your answer? b. Could you suggest a way for companies to increase or keep their profits unchanged without increasing the retail price of their products? Please justify your answer.
Which of the following graphs best describes the expected changes in the market for flights from Oakland to Mauai if consumers' airlines cut back the number of daily flights while at the same time the state of Hawaii does not allow tourists from leaving their hotel rooms for the first two weeks of their stay due to concerns over COVID-19?
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Consider the market for a bond which has a face value of $2,000, pays a coupon of $100, and matures in 1 year (that is, you will get the face value and one coupon payment next year). Suppose the demand for such bonds is given by P=4,000-2Q, and that the supply of such bonds is given by P=1,000+Q. What is the equilibrium price and quantity of bonds sold? P*=$1,000, Q*=2,000 P*=$1,000, Q*=1,000 P*=$2,000, Q*=1,000 P*=$2,000, Q*=2,000
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