Chapter 3 - Supply & Demand

Refer to the figure below. Which is producer surplus?

$180

Refer to the figure below. Consumer surplus is:

$30

An increase in consumer surplus is caused by:

a price ceiling

After widespread press reports about the dangers of contracting "mad cow disease" by consuming beef from Canada, the likely economic effect on the U.S. demand curve for beef from Canada is:

a shift of the demand curve for beef to the left.

A price ceiling causes consumer surplus to

increase

The demand schedule for a good:

indicates the quantities that will be purchased at alternative market

If an increase in the price of Good X causes a decrease in the price of Good Y, we can conclude that:

Goods X and Y are complement goods

If a decrease in the price of MP3 players decreases the demand for CD players it means that

MP3 players and CD players are substitutes

_____ are generally the result of price ceilings.

Shortages

A government decides to set a price ceiling on bread of $2.40 so that bread is affordable for the poor. The conditions of demand and supply are given in the table below. What will be the price and quantity of bread purchased?

$2.40; 6,400

Economists refer to the relationship that a higher price leads to a higher quantity supplied as the _____.

law of supply

According to the law of supply

there is a direct relationship between price and quantity supplied

Consider the market for purple potatoes below and assume that a price ceiling of $30 is imposed by the government. Calculate the dead-weight loss:

The deadweight loss is $5000

When economists talk about supply, they are referring to a relationship between the price in a market and the

amount that producers collectively make available for sale

How would you need to shift the supply and demand curves in a market to result in a situation where equilibrium quantity increases while the equilibrium price change is indeterminate?

both supply and demand must increase

When ____, a firm will supply a higher quantity at any given price for its output, and the supply curve will shift to the right.

costs of production fall

In a market with an upward sloping supply curve and a downward sloping demand curve, a price floor

creates deadweight loss

Complete the following sentence: If people think that the price of televisions will decrease in the near future , that belief may cause a(n)

decrease in the demand for televisions today

What is the second step of the four-step process?

determine whether the economic changes affect demand or supply

Social Surplus is

the sum of consumer surplus and producer surplus

Silicon is used for the manufacturing of semiconductor chips. At the end of last year a large new source of silicon has been discovered this year and the price of silicon has decreased by 15%. Semiconductor chips are used in devices, cell phones, gaming systems, and this year many new devices are selling chips. If you were drawing a supply and demand graph to illustrate the changes to the semiconductor market since last year, what would you say has happened to the supply and demand curves and the equilibrium price and quantity this year?

Both the demand and supply of semiconductor chips will increase shifting the curves to the right with equilibrium quantity increasing but it is impossible to pinpoint the equilibrium price change.

The law of demand states that as the price of a good decreases,

buyers desire to purchase more of it

the downward slope of a demand curve illustrates the pattern that as _____ decreases, ________ increases.

prices; quantity demanded

A demand curve shows the graphical relationship between price and

quantity demanded

______ refers to the total number of units that are purchased at that price.

quantity demanded

Refer to the figure below. If the government sets a price ceiling there would be a(n)

shortage of 4 units

A severe freeze has once again damaged the Florida orange crop. The impact on the market for orange juice will be a leftward shift of:

the supply curve

When quantity increases in response to a change in price

there is a movement from one point to another along the demand line

The main reason that price ceilings are set is so that consumer prices

will be lower

Analyze the following diagram: The price at which quantity demanded equals quantity supplied is_____. The corresponding quantity is ____.

$14; 31

Refer to the figure below. If the government set a price ceiling of $80, the amount bought and sold will be?

12

Which of the following will shift the supply curve to the right?

A decrease in the price of inputs to production

Which of the following statements are true if you are comparing a market that is operating at a quantity lower than equilibrium (ie; a price floor) with the same market operating at the equilibrium quantity?

A market operating below equilibrium will transfer some consumer surplus to producers

Marcus is the chief data analyst of the US Fish and Wildlife Service for the west coast. There is a growing concern about over fishing in the Pacific fisheries, and Marcus needs to estimate the demand curve for salmon as part of the agency's mitigation efforts. From data already collected he sees that when the price of freshly caught salmon is $400 the public will demand a quantity of 1 million fish. If the price is $215 then the public will demand 4 million fish. If the price is $50 consumers will demand a quantity of 8 million fish. Which curve below is the correct demand curve for Pacific salmon given the 3 data points?

The orange curve

Suppose the local government is concerned about the health of local school children, and for that reason imposes a price ceiling of $3 on yogurt. Based on the graph below, which of the following is true?

The quantity supplied will be 3 yogurts.

When economists talk about supply, they are referring to a relationship between the price in a market and the _____?

amount that producers collectively make available for sale.

Supply and demand for bushels of wheat (millions) are shown in the following table. A $10 price floor would result in

an excess supply of 4 million bushels and a price of $10

Decreased competition because of fewer producers in the market will cause

higher prices due to a decrease in the quantity supplied at every price.

If the price is below the equilibrium level, then the quantity demanded will exceed the quantity supplied. This is known as ___________________

excess demand

If the consumer surplus is $1000 and the producer surplus is $300 the social surplus is _____?

$1300

A government decides to set a price ceiling on break so that bread is affordable to the poor. The condition of demand and supply are given in the table below. What is the equilibrium price before the price ceiling? What will the excess supply or the shortage be if the price ceiling is set at $2.40?

$2.40; 1,600 shortage

Refer to the figure below. If the government set a price ceiling of $40, there would be:

28 units sold

At a price of $16, quantity demanded is _____, quantity supplied is ______; therefore excess ________ has occurred.

5,35; supply

Looking at the graph, if price was $1.60 per gallon and increased to $2.20 per gallon, how does quantity supplied of gasoline change?

640 million gallons to 720 million gallons

Andy views beer and pizza as complements to one another. If the price of pizza decreases, economists would expect:

Andy's demand for beer to increase.

Which area represents producer surplus when the price is P1?

Area A

In 2016, after a hundred years of unsuccessful attempts, the Chicago Cubs finally won the baseball World Series. There was a surge in demand for Cubs baseball caps and T-Shirts as more people became fans that year. At about the same time there was blight in the cotton fields that reduced the quantity of cotton to make the caps and T-shirts. Describe what the new equilibrium price and quantity is like compared with the prior year's Cubs caps and T-Shirt before the win and the reduced supply of cotton?

The demand curve shifted to the right, the supply curve shifted to the left, the equilibrium price for Cubs caps and T-Shirts increased from 2015 and it is impossible to determine the effect on the quantity.

During the 1960's many high-profile studies purported to show a direct link between cigarette consumption and heart disease. In response to these studies the government began to implement high cigarette taxes, as well as other restrictions that increased the cost of doing business for major cigarette manufacturers. How would you expect supply, demand, and the equilibrium price and quantity to change?

The demand for cigarettes would decrease while supply shifts leftwards. As a result, the equilibrium quantity decreases while equilibrium price is impossible to determine with the given information.

Interpret the following statement: "An increase in the price of wheat will encourage farmers to increase the quantity of wheat supplied to the market."

The statement is correct.

I December there is a large demand for evergreen trees. They are sold on city corners and parking lots for Christmas. According to the law of supply, what scenario would you expect to see with the Christmas trees?

The supply and prices of the trees have increased since October.

Cocoa nibs from Nigeria last year was supplied at $9 for 10 pounds. This year the demand has increased and that same supply of Nigerian cocoa nibs is priced at $12 per 10 pounds. What will most likely happen to the supply of Nigerian cocoa nibs this year?

The supply curve will shift to the left