Chapter 3 Questions Microeconomics

The buyer's reservation price for a particular good or service is the:

largest price the buyer would be willing to pay for it

A market equilibrium:

leave no unexploited opportunities for individuals.

What might cause a decrease in current supply of a product?

New information that leads sellers to believe that the product's price will rise in the future.

Suppose quantity demanded is given by Qd = 100 - P, and quantity supplied is given by Qs = 20 + 3P. In this case, equilibrium price, P*, and equilibrium quantity, Q*, are as follows:

P* = 20, Q*= 80

Assume both the demand for beef and the supply of beef decrease. Which of the following outcomes is certain to occur?

The equilibrium quantity of beef will fall.

A decrease in both the equilibrium price and the equilibrium quantity of rice is best explained by:

a decrease in the demand for rice.

Suppose that the technology used to manufacture laptops has improved. The likely result would be:

an increase in supply of laptops

The market equilibrium quantity:

is sometimes the socially optimal quantity.

Suppose that when the price of oranges is $3 per pound, the quantity demanded is 4.7 tons per day and the quantity supplied is 3.9 tons. In this case:

excess demand will lead the price of oranges to rise.

If price is above the equilibrium price, then there will be:

excess supply.

At the beginning of the fall semester, college towns experience large increases in their populations, causing a(n):

increase in the demand for apartments.

Suppose the price of a Snickers candy bar is $2.00 at both the airport and the grocery store. The price elasticity of demand for a Snickers candy bar at an airport is likely to be ______ the price elasticity of demand for a Snickers candy bar at the grocery store.

less than

If the demand for a good decreases as income decreases, then the good is a(n):

normal good.

Suppose rice is a normal good. If consumers' incomes fall, and a new technology is introduced that lowers the marginal cost of producing rice, then the equilibrium:

price of rice will fall, but we cannot say for sure what will happen to the equilibrium quantity.

Jessica's marginal cost for producing a pitcher of lemonade is $0.25. Therefore, $0.25 is her:

reservation price

A seller's reservation price is generally equal to:

the seller's opportunity cost of producing an additional unit.

A price ceiling that is set above the equilibrium price:

will have no effect on the market.

Which of the following factors will lead to a decrease in the current supply of a good?

A belief that the price of a good or service will go up in the future.

If the demand for gadgets increases as a result of a decrease in the price of widgets, the widgets and gadgets are:

complementary goods

One reason the demand curve slopes ______ is that as prices fall ______.

downward; more people find that the price is now less than their reservation price.

When a market is in equilibrium:

there is neither excess demand nor excess supply