Chapter 4 ECON
Suppose that when good X is free, buyers will demand 200 units of it, but the quantity demanded falls by 5 units for every $2 increase in the price. If the price is $30 and the quantity supplied is 125 units:
there is no pressure for the price to change.
Suppose that when good X is free, buyers will demand 200 units of it, but the quantity demanded falls by 5 units for every $2 increase in the price. If the price is $30 and the quantity supplied is 125 units:
this market is in equilibrium.
Which would happen if the demand for oil increased in the United States?
The demand curve would shift to the right.
A decrease in supply along a fixed demand curve will result in:
a higher equilibrium price.
Lower production costs result in:
a lower equilibrium price.
Vernon Smith's experimental approach to economics:
led to his 2002 Nobel Memorial Prize in Economic Sciences.
A decrease in supply along a fixed demand curve results in:
lower equilibrium quantity.
A(n) ______ occurs when the quantity demanded is greater than the quantity supplied.
shortage
When the free market maximizes the total gains from trade, there may be:
unsatisfied wants.
In the late 1990s, Beanie Babies became very popular collectible toys. Many buyers spent a great deal of time visiting multiple retail locations to find specific Beanie Babies that retailers had a very hard time keeping in stock. What probably describes the eBay prices for Beanie Babies during that time?
The eBay prices were higher than the retail prices because the retail prices led to shortages of Beanie Babies.
The financial crisis of 2007-2010 had a huge impact on the U.S. housing market, causing the number of uninhabited houses to be far greater than the number of people able and willing to buy a house. What probably happened in the housing market?
Housing prices fell.
Suppose that when good M is free, sellers will not supply any, but quantity supplied rises by 20 units for every $6 increase in the price. If the quantity demanded is fixed at 150 units, the equilibrium price will be:
$45
What happened to the demand for oil from the early twentieth century to the 1970s?
It increased steadily.
Fred participates in a supply and demand experiment in his managerial economics course. What can he expect the laboratory experiment to reveal about the supply and demand model?
It successfully predicts real-life behavior.
Which statement about a market at equilibrium price and quantity is false?
The market could not have achieved equilibrium without government interference.
What would happen if the demand for oil increased?
The market price would rise.
What would happen if the supply of oil decreased?
The market price would rise.
What happened to oil prices from the early twentieth century to the 1970s?
There were modest declines in oil price.
As consumer income decreases, the equilibrium price of a normal good _____ and the equilibrium quantity of a normal good decreases.
decreases
Jean is a seller in Vernon Smith's classroom experiment of the market model. Which does she know?
her own willingness to sell
Bobby is a buyer in Vernon Smith's classroom experiment of the market model. Which does he know?
his own willingness to buy
Which illustrates an increase in quantity supplied?
a movement up along a fixed supply curve
