Supply and Demand: Theory: End of Chapter

The price of a bushel of wheat, which was $3.00 last month, is $3.70 today. True or False: The demand curve for wheat must have shifted rightward between last month and today. True False

False

True or False: Consumers' surplus must equal producers' surplus at the equilibrium price. True False

False

True or False: As the price of oranges rises, the demand for oranges falls, ceteris paribus. False. It should be "quantity demanded" instead of "demand." True. Price and demand are inversely related. False. Price and demand are directly related. There is not enough information to answer the question.

False. It should be "quantity demanded" instead of "demand."

Suppose the demand curve for a good is downward-sloping and the supply curve is upward-sloping. Now suppose demand rises. Producers' surplus will ____

rise

A Dell computer is a substitute for a HP computer. As the price of a Dell falls, the demand for HP computers _____ and the quantity demanded of Dell computers _____

falls, rises

What is wrong with this statement: As the price of a good falls, the supply of that good falls, ceteris paribus. "Supply" should be "quantity supplied." "Supply" should be "quantity demanded." "Price" should be "total expenditures." None of the above

"Supply" should be "quantity supplied."

A lower expected price for computers in the future Increase Demand Decrease Demand

Decrease Demand

A tax placed on the production of computers Increase Supply Decrease Supply

Decrease Supply

A rise in wage rates Increase Supply Decrease Supply

Decrease Suppy

Why might a movie theater charge a lower admission price for the first show on weekday afternoons than they do for a weeknight or weekend show? The supply of seats in the theater is greater on a weekday afternoon. The supply of seats in the theater is greater on a weekday afternoon and the demand to see the movie is lower for the weekday afternoon showing. Demand is lower for the weekday afternoon showing of the movie than for the weeknight or weekend showing. Theaters like to show with the lower prices that they want every income group to attend their movies.

Demand is lower for the weekday afternoon showing of the movie than for the weeknight or weekend showing.

What is wrong with the statement: Demand refers to the willingness of buyers to purchase different quantities of a good at different prices during a specific time period. Demand refers to the willingness and ability of buyers, not just willingness. Instead of "demand," it should be "quantity demanded." Instead of "willingness," it should be "ability." Instead of "demand," it should be "demand and supply." There is nothing with the statement.

Demand refers to the willingness and ability of buyers, not just willingness.

______ refers to the willingness and ability of buyers to purchase different quantities of a good at different prices during a specific time period whereas ________ ________ refers to a specific number of units buyers want to buy at a specific price.

Demand, Quantity Demanded

What does the law of increasing opportunity costs have to do with an upward-sloping supply curve? The law of increasing opportunity costs has nothing to do with an upward-sloping supply curve. If opportunity costs weren't increasing, the supply curve wouldn't slope upward. If opportunity costs weren't increasing, the supply curve would necessarily be horizontal and parallel to the horizontal axis (on a two-dimensional diagram). If opportunity costs weren't increasing, the supply curve wouldn't lie to the right of the demand curve (on a two-dimensional diagram). If opportunity costs weren't increasing, the supply curve would not exist.

If opportunity costs weren't increasing, the supply curve wouldn't slope upward.

Identify the error in the following statement: "The price of T-shirts keeps rising and people keep buying more and more. T-shirts must have an upward-sloping demand curve." There is nothing that explains the phenomenon other than an upward-sloping demand curve. If the demand for T-shirts increases while the supply decreases by more, then the price of T-shirts will rise and more T-shirts will be bought and sold. If the demand for T-shirts keeps increasing, the price will rise, and more shirts will be bought at the higher price than the lower price (assuming the supply curve of T-shirts is upward sloping). If the supply of T-shirts keeps decreasing, the price will rise, and people will buy more T-shirts.

If the demand for T-shirts keeps increasing, the price will rise, and more shirts will be bought at the higher price than the lower price (assuming the supply curve of T-shirts is upward sloping).

A rise in income (assuming that computers are a normal good) Increase Demand Decrease Demand

Increase Demand

Cheaper software Increase Demand Decrease Demand

Increase Demand

Computers that are simpler to operate Increase Demand Decrease Demand

Increase Demand

A subsidy placed on the production of computers Increase Supply Decrease Supply

Increase Supply

An increase in the number of sellers of computers Increase Supply Decrease Supply

Increase Supply

Demand Curve Will Shift... Leftward/Rightward A fall in the number of buyers

Leftward

________ ________ is a number of units supplied at a particular price whereas ______ refers to a relationship between various prices and various quantities supplied.

Quantity supplied, supply

Demand Curve Will Shift... Leftward/Rightward A fall in the price of a complementary good

Rightward

Demand Curve Will Shift... Leftward/Rightward A rise in the price of a substitute good

Rightward

Demand Curve Will Shift... Leftward/Rightward An increase in income (the good under consideration is a normal good)

Rightward

When speeding tickets were $100, usually 500 speeders on the roads each month in a given city; when ticket prices were raised to $250, usually 215 speeders were on the roads in the city each month. Which of the following statements captures the economics in this observation? Check all that apply. The law of demand holds for speeding. This observation is consistent with decreasing opportunity costs. The law of supply holds for speeders.

The law of demand holds for speeding.

True or False: At equilibrium in a market, the maximum price buyers would be willing to pay for the good is equal to the minimum price sellers need to receive before they are willing to sell the good. True False

True

When there is a shortage in a market, price will tend to ____ ; and when there is a surplus in a market, price will tend to ____ . Equilibrium exists in a market when the maximum buying price is _____ __the minimum selling price.

rise, fall, equal to

Suppose that the purchase and sale of marijuana is decriminalized. It follows that the price of marijuana will ____ and the quantity of marijuana bought and sold will ____ if the demand for marijuana increases by more than the supply of marijuana increases.

rise, rise

Store X is running a sale on shirts on Friday through Sunday. A sale on shirts allows us to see that the law of demand holds; that is, when the price of shirts falls, the quantity demanded of shirts _____

rises