ANSWERS TO CHAPTER 8

Part 1

1.

    a. Point a is where LONG-RUN DEMAND and OLD SUPPLY cross.

    b. #1 passes through Point a and is steeper than LONG-RUN DEMAND.

    c. NEW SUPPLY is to the right of OLD SUPPLY.

    d. Point b is where #1 and NEW SUPPLY cross.

    e. Point c is where LONG-RUN DEMAND and NEW SUPPLY cross.

    f. #2 passes through Point c, is to the right of #1, and is steeper than LONG-RUN DEMAND.

2.

    a. X

    b. 2, $8

    c. Z

    d. 4, $4

    e. 6, $6

    f. Y


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