EC 2113 Principles of Macroeconomics Chapter 3 Practice Answer

Consider the market for LCD TVs. The market equilibrium is where In this​ example, the equilibrium price is $_________ and the equilibrium quantity is _______ LCD TVs. ​(Enter your responses as whole​ numbers.) Suppose instead that the price of LCD TVs is $2,000This will result in a _____ , which will place _________ pressure on the price.

1400 5000 surplus downward

According to the law of​ supply,

A and C only

In the table​ below, fill in the missing blanks to complete the summary of the effects of changes in demand and supply on equilibrium price and quantity.

Supply Curve Unchanged: increase Supply Curve Shifts to the Right: increases, indeterminate Supply Curve Shifts to the Left: decreases

Suppose the equilibrium price and equilibrium quantity of gold both decrease. Which of the following would produce such a​ change?

The market demand curve for gold could have decreased.

Prices . dollars per player 300 250 200 150 100 Quantity 30 35 40 45 50 The diagram in panel aa is an example of

a demand schedule

Oscar mayer hot dogs and wonder hot do bus ar econsidered to be complementary goods, definitions: substitute goods, complementary good show how a decrease in the prices of oscar mayer hot dogs affects the demand for wonder hot dog buns. When the price of a related good​ changes, this will result in __________- In​ particular, when the price of Oscar Mayer hot dogs decreases​, the demand curve for Wonder hot dog buns will shift to the

a shift in the demand curve right

The diagram in panel A is an example of

a supply schedule

On the diagram to the​ right, a movement from A to B represents a

change in quantity demand

Market price is determined by

both supply and demand

Consider the market for PlayStation 4 sPlayStation 4s. Suppose household income decreases. Assume PlayStation 4 sPlayStation 4s are a normal good. When income decrease the demand for PlayStation 4 sPlayStation 4s __________ ​Instead, consider an inferior good. If income decreases, then the demand for an inferior good __________

decreases. increases

The recession that began in December 2007 resulted in declining incomes as some people lost their jobs and others were forced to work fewer hours or have their wages reduced. How did this affect the market for casual dining​? A decrease in income as people lose their jobs will shift the market _______ curve for casual dining. In​ particular, the demand curve will shift to the

demand left, if casual dining is a normal good

Consider the supply of crude oil on the world market. In August​ 2011, the price of oil was roughly​ $80 per barrel. Which of the following changes would increase the supply of​ oil? The oil supply curve would shift to the right if

future oil prices were expected to be lower.

Consider the market for Ping golf clubs. Suppose the price of memberships at local golf courses increases. Assume memberships at local golf courses and Ping golf clubs are complements. The demand curve for Ping golf clubs will shift to the ________ ​Instead, suppose the price of tennis rackets decreases. If tennis rackets and golf clubs are​ substitutes, then the demand for Ping golf clubs will ________-

left decrease

The recent recession that began in December 2007 resulted in declining incomes as some people lost their jobs and others were forced to work fewer hours or have their wages reduced. How did this affect the market for casual diningcasual dining​? In the figure to the​ right, show how the recent recession likely affected the market for casual diningcasual dining. Using the line drawing tool​, draw either a new supply curve ​(Upper S 2S2​) or a new demand curve ​(Upper D 2D2​). Properly label your line. Carefully follow the instructions​ above, and only draw the required object.

make another line below D1 and dont make it to x line or the y line

Consider the market for LCD​ TVs, illustrated in the figure to the right. Use the point drawing tool to identify the market equilibrium. Properly label this point. Carefully follow the instructions​ above, and only draw the required objects. Suppose instead that the price of LCD TVs is ​$800.00. This will result in a ______ which will place ______ pressure on the prices

shortage upward

In the diagram to the​ right, when the price is $45 per​ player, the amount of the __________is ____ million players per month.

shortage 14

Suppose supply shifts to the leftleft. The new supply curve should be _________ Furthermore, the new supply curve should______ the original supply curve. With this​ shift, equilibrium price will________and equilibrium quantity will ________

upward sloping not intersect supply increase decrease

A perfectly competitive market is a market that meets the conditions of

​(1) many buyers and​ sellers, (2) all firms selling identical​ products, and​ (3) no barriers to new firms entering the market.

Suppose the price of a substitute to LCD televisions falls. What effect will this have on the market equilibrium for LCD​ TVs? The equilibrium price of LCD TVs will

decrease and the equilibrium quality will decrease.

According to an article in the Wall Street Journal​, a decline in demand for​ ethanol, which is made from​ corn, has reduced the demand for corn. Many U.S. farmers can use the same acreage to grow either corn or soybeans. ​Source: Jesse​ Newman, "Soybeans and Corn Locked in Food​ Fight," Wall Street Journal​, March​ 29, 2015. A decline in the demand for corn will This will result in the equilibrium price of soybeans ______ and the equilibrium quantity

shift the soybean supply curve to the right. decreasing increasing

According to the law of​ demand,

there is an inverse relationship between price and quantity demanded.

The distinction between a normal and an inferior good is

when income​ increases, demand for a normal good increases while demand for an inferior good falls.

In​ general, the term ​"ceteris paribus​" means

all else equal.

Consider the market for the Nissan Xterra. Suppose the price of​ metal, which is an input in automobile​ production, decreases. When the price of an input​ changes, this results in a __________ the supply curve In​ particular, if the price of metal​ decreases, then the Nissan Xterra supply curve will shift to the _____ When the price of metal​ decreases, the quantity of Nissan Xterras supplied at any particular Xterra price ___________ Instead, consider the future price of Xterras. If Nissan believes the future price of Xterras will be higherbe higher​, then Nissan may ______ supply today

shift in right increases reduce

The effect of an increase in demand is a _____ the demand curve

shift of

chicken noodle soup is considered to be an inferior good. definition: an inferior good show how a decrease in consumer income affects the demand for chicken noodles soup. A change in consumer income will result in ____________. in particular, if consumer income decreases, then the demand for chicken noddle soup will shift to the ________.

a shift in the deman curve right

The figure to the right illustrates the U.S. market for rugs made in a particular foreign country. Suppose the market price of rugs is ​$1,250. At a price of ​$1,250​, there will be _______ of rugs To reach equilibrium, the prices of rugs in this market must ________

a shortage rise

In the diagram to the​ right, when demand increases _________ develops at the original prices Equilibrium price will _______ and equilibrium quantity will _______ as a new equilibrium is established.

a shortage rise rise

Consider the market for​ Hewlett-Packard (HP)​ printers, depicted in the figure to the​ right, where the supply of HP printers has increased from S1 to S2. What would cause the supply curve for HP printers to shift to the​ right?

both a and b a postive technological change a decrease in the prices of a substitute in production

On the diagram to the​ right, a movement from B to C represents a

change in supply

Suppose there is a postive change in technology Use the line drawing tool to show how this affects the MP3 market by adding either a new supply curve or a new demand curve. Carefully follow the instructions​ above, and only draw the required objects. As a result of the positive change in technology the positive change in technology​, the new equilibrium price will be _________, and the new equilibrium quantity will be ______. Suppose instead that the demand curve shifts to the right. ​ Then, relative to the initial market​ equilibrium,

lower higher the new equilibrium price would be higher and the new equilibrium quantity would be higher.

Consider the following​ statement: ​"An increase in supply decreases the equilibrium price. The decrease in price increases​ demand." The statement is

​false: decreases in price affect the quantity​ demanded, not demand.

Consider the market for college textbooks. Suppose a recent economic recession has resulted in significantly higher tuition costs for college. Significantly higher tuition costs for collegeSignificantly higher tuition costs for college will shift The new equilibrium will be where In​ particular, the equilibrium price will ______ and the equilibrium quantity will _________.

the demand curve for textbooks to the left. the new demand curve intersects the supply curve. decrease decrease

After World War II in​ 1945, the United States experienced a​ "baby boom" as birthrates rose and remained high through the early 1960s. In​ 2011, the first members of the baby boom generation became older than 65. What effect will this have on the market for hospital facilities? As the first baby boomers become older than​ 65, the

demand curve for hospital facilities will shift to the right.

Assume the figure to the right illustrates the market for houses for sale in a small city. Suppose the market price of houses is ​$200,000. How large will the resulting surplus​ be? At a price of ​$200,000​, there will be _________ surplus houses. ​ (Enter your response as a whole​ number.) What is the equilibrium price of​ houses? The equilibrium price is ​$_______

400 150000

Consider the market for​ gasoline, illustrated in the figure to the right. The equilibrium quantity of gasoline is ______ million gallons ​(enter a numeric response using a real number rounded to two decimal​ places) and the equilibrium price is ​$_____ per gallon. If instead the market price were ​$3.25, then there would be a _____ of _______ million gallons.

5.00 2.50 surplus 3

Which of the following events would cause the supply curve to increase from S1 to S3​?

A decrease in the price of inputs

The distinction between substitutes and complements is

substitute goods are used for the same purposes while complementary goods are used together.

According to the law of demandLOADING...​, there is an inverse relationship between price and quantity demanded. That​ is, the demand curve for goods and services slopes downward.​ Why?

When the price of a good​ increases, consumers' purchasing power​ falls, and they cannot buy as much of the good as they did prior to the price change.

According to the law of demandLOADING...​, there is an inverse relationship between price and quantity demanded. That​ is, the demand curve for goods and services slopes downward.​ Why?

When the price of a good​ increases, consumers' purchasing power​ decreases, and they cannot buy as much of the good as they did prior to the price change.

According to an article in the Wall Street Journal​, the demand for orange juice is declining in the United States​ "as newer entrants in the beverage​ aisle, including​ more-exotic fruit​ juices, such as​ pomegranate, energy drinks and​ ready-to-drink coffee, have grabbed a greater share of the​ market." At the same​ time, orange juice production has been declining as bacterial infections reduce the quantity of fruit that orange trees can produce. The article notes that despite the decline in the demand for orange​ juice, the price of orange juice might increase. ​Source: Alexandra​ Wexler, "U.S.​ Orange-Juice Sales Fall to Record​ Low," Wall Street Journal​, August​ 18, 2014. On the graph to the​ right, assuming that the initial point is​ 'A', move the cursor to illustrate how the price of orange juice might also increase as a result of these events. Given the scenario described in the​ article, the price of orange juice could increase if

demand decreased less than the supply decreased.

Suppose the demand curve shifts to the right. The new demand curve should be ______ ​Furthermore, the new demand curve should _____ the original demand curve with this shift, equilibrium prices will _____ and equilibrium quantity will . ______.

downward sloping not intersect increase increase

Suppose the demand curve shifts to the right and the supply curve shifts to the right by more than the demand curve. The new demand curve will be ______ and the new supply curve will be ________ The new market equilibrium will be where With these​ shifts, the equilibrium price will _______

downward sloping upward sloping the new demand curve intersects the new supply curve. decrease

Consider the market for PlayStation 4 sPlayStation 4s. Suppose household income decreases. Use the line drawing tool to show how this affects the demand for PlayStation 4 sPlayStation 4s by drawing a new demand curve. Assume PlayStation 4 sPlayStation 4s are a normal good. Properly label this line. Carefully follow the instructions​ above, and only draw the required objects. According to the​ graph, when income decreases​, the demand for PlayStation 4 sPlayStation 4s _________ ​Instead, consider an inferior good. If income decreases​, then the demand for an inferior good_______.

draw a line and label it D2 decreases increases

Consider the market for Ping golf clubs. Suppose the price of memberships at local golf courses increases. Use the line drawing tool to show how this affects the demand for Ping golf clubs by drawing a new demand curve. Assume memberships at local golf courses and Ping golf clubs are complements. Properly label this line. Carefully follow the instructions​ above, and only draw the required objects. ​Instead, suppose the price of tennis rackets increase. If tennis rackets and golf clubs are​ substitutes, then the demand for Ping golf clubs will ___________

draw a line under d1 and label it d2 increases

Suppose recent changes to immigration laws have increased the supply of immigrant​ labor, decreasing wages in manual labor occupations. How might this affect the market for​ construction? In the figure to the​ right, show how the wage changes have likely affected the market for construction. Using the line drawing tool​, draw either a new supply curve ​(Upper S 2S2​) or a new demand curve ​(Upper D 2D2​). Properly label your line. Carefully follow the instructions​ above, and only draw the required object.

draw another s2 line below the red line

Consider the market for​ chicken, illustrated in the figure to the right. The market is initially in equilibrium at a price of Upper P 1P1 and at a quantity of Upper Q 1Q1. Suppose the supply curve shifts to the right from Upper S 1S1 to Upper S 2S2 and the demand curve shifts to the right from D1 to D2. Note that in the figure the shift in demand is larger than the shift in supply. As a result of these​ changes, the new equilibrium price will be ____________ and the new equilibrium quantity will be _________-

higher, higher

Consider the demand for smaller homes illustrated in the figure to the right. What demographic change would likely result in the demand curve for smaller homes shifting to the right? The demand curve for smaller homes would likely shift to the right if the

portion of the population that is elderly increases.

According to one observer of the lobster​ market: ​"After Labor​ Day, when the vacationers have gone​ home, the lobstermen usually have a month or more of improved fishing​ conditions, except for the occasional​ hurricane." Use demand and supply analysis to explain whether lobster prices are likely to be higher or lower during the fall than during the summer. ​Source: Jay​ Harlow, "Lobster: An Affordable​ Luxury," Sallybernstein.com. The supply curve for lobster in the fall is likely to be to the _____ of the supply curve for lobster in the summer. The demand curve for lobster in the fall is likely to be to the____of the demand curve for lobster in the summer. The result of this is that the equilibrium price of lobster in the fall is ______ than the equilibrium price of lobster in the summer.

right left lower

An article discusses the market for autographs by Mickey​ Mantle, the superstar centerfielder for the New York Yankees during the 1950s and​ 1960s: ​"At card​ shows, golf​ outings, charity​ dinners, Mr. Mantle signed his name over and​ over." One expert on sport autographs is quoted as​ saying: ​"He was a real good signer ... He is not​ rare." Yet the article quotes another expert as​ saying: ​"Mr. Mantle's autograph ranks No. 3 of​ most-popular autographs, behind Babe Ruth and Muhammad​ Ali." A baseball signed by Mantle is likely to sell for the relatively high price of​ $250 to​ $400. By​ contrast, baseballs signed by Whitey​ Ford, a teammate of​ Mantle's on the​ Yankees, typically sell for less than​ $150. ​Source: Beth​ DeCarbo, "Mantle Autographs Not​ Rare, but Collectors​ Don't Care," Wall Street Journal​, August​ 4, 2008. Explain how the price of baseballs signed by Mantle could be higher than the price of baseballs signed by Ford. The supply curve for baseballs signed by Mantle should be an​ upward-sloping line that is to the __________ of the supply curve for baseballs signed by Ford. In order for the price of baseballs signed by Mantle to be higher than the price of baseballs signed by​ Ford, the demand curve for baseballs signed by Mantle must be a​ downward-sloping line that is

right significantly to the right of the demand curve for baseballs signed by Ford.'

Comic book fans eagerly compete to buy copies of Amazing Fantasy No.​ 15, which contains the first appearance of the superhero​ Spider-Man. At the same time the publisher printed copies of the comic for the U.S.​ market, with the price printed on the cover in​ cents, it printed copies for the U.K.​ market, with the price printed on the cover in British pence. About 10 times as many U.S. copies of Amazing Fantasy No. 15 have survived as U.K. copies. Yet in auctions that occurred at about the same time in​ 2013, a U.S. copy sold for​ $29,000, while a U.K. copy in the same condition sold for only​ $10,755. ​Source: Auction price date​ from: GPA Analysis for CGC Comics​, www.comics.gpanalysis.com. The market supply curve for Amazing Fantasy No. 15 in the U.S. is to the ______ of the supply curve in the U.K. The market demand curve for Amazing Fantasy No. 15 in the U.S. is to the ____ of the demand curve in the u.k. In both​ countries, the market equilibrium is where

right right the demand curve intersects the supply curve.

In early​ 2017, an article in the Financial Times about the oil market quoted the chief economist of oil company BP as​ saying: "Pricing pressure is likely to come from the supply​ side, because of strong growth in US shale oil​ (crude oil found within shale​ formations), and the demand side as the rise of renewable​ energy, including electric​ vehicles, gradually slows growth in oil​ consumption." After reading this​ article, a student​ argues: "From this​ information, we would expect that the price of oil will​ fall, but we​ don't know whether the equilibrium quantity of oil will increase or​ decrease." ​Source: Andrew​ Ward, "BP Warns of Price Pressures from​ Long-Term Oil​ Glut," Financial Times​, January​ 25, 2017. Is the​ student's analysis​ correct? In the market for​ oil, the effect of the increasing use of electric vehicles is the demand curve will _________ In the market for​ oil, the effect of growth in U.S. shale oil is the supply curve will ______ The new market equilibrium will be where The​ student's analysis is

shift left shift right the new demand curve intersects the new supply curve. correct

According to a news article on​ bloomberg.com, the demand for coffee is increasing as​ "millennials' seemingly unquenchable thirst for coffee is helping to push global demand to a​ record." At the same​ time, coffee crops in Brazil and Asia have been hampered by dry weather and droughts. The article notes that​ "consumption is rising as supplies are getting​ tighter." ​Source: Marvin G.​ Perez, "Coffee-Loving Millennials Push Demand to a​ Record," bloomberg.com, October​ 30, 2016. In the market for​ coffee, the effect of the growth in millennial demand for coffee is the demand curve will_______. In the market for​ coffee, the effect of dry weather and droughts on coffee crops is the supply curve will ____________. The new market equilibrium will be where The article contains a chart showing changes in worldwide sales of coffee from 2006 through 2016. The chart is​ labeled, "World demand has expanded in the past​ decade." Data on the quantity of coffee sold and data on the demand for coffee ______ the same things

shift right shift left the new demand curve intersects the new supply curve are not

Suppose that many cities begin to pass taxes on carbonated​ sodas, while at the same time scientists discover a cure for citrus​ greening, which is reducing orange crops in Florida and Brazil. Can we use this information to be certain whether the equilibrium price of orange juice will increase or​ decrease? Can we use this information to be certain whether the equilibrium quantity of orange juice will increase or​ decrease? In the market for orange​ juice, the effect of a tax on carbonated sodas is the demand curve will ________- In the market for orange​ juice, the effect of a cure for citrus greening is the supply curve will ________ The new market equilibrium will be where The equilibrium quantity of orange juice ______ and the equilibrium price of orange juice ________

shift right shift right the new demand curve intersects the new supply curve. will increase may increase or decrease

The equilibrium price and quantity of a product was​ $100 and​ 1,000 units per month in 2015 and is​ $150 and 800 units per month in 2016. Assume that relative to demand in​ 2015, the market demand curve shifts to the right. Relative to supply in​ 2015, the market supply curve ____ The new market equilibrium is where From 2015 to​ 2016,

shift to the left the new demand curve intersects the new supply curve. supply decreased more than demand increased.

Proposals have been made to increase government regulation of childcare businesses​ by, for​ instance, setting education requirements for childcare workers. Suppose that these regulations increase the quality of childcare and cause the demand for childcare services to increase. At the same​ time, assume that complying with the new government regulations increases the costs of childcare businesses. Given these​ developments, the demand curve will ​Additionally, the supply curve will Given these​ changes, the net effect on equilibrium price is _____, and the effect on equilibrium quantity is _____-

shift to the​ right, because the quality of childcare increases. shift to the​ left, because supplying childcare becomes more expensive. an increase, uncertain

Years​ ago, an apple producer argued that the United States should enact a​ tariff, or a​ tax, on imports of bananas. His reasoning was​ that: ​"the enormous imports of cheap bananas into the United States tend to curtail the domestic consumption of fresh fruits produced in the United​ States." ​Source: Quoted in Douglas A.​ Irwin, Peddling​ Protectionism: Smoot-Hawley and the Great​ Depression, Princeton,​ NJ: Princeton University​ Press, 2011, p. 22. This producer apparently assumed apples and bananas to be __________ In a graph​ (not shown) of the banana market in the United​ States, the imposition of a tariff on banana imports would ......... The supply curve for apples is _______ The demand curve for apples with the tariff on bananas is farther to the ________ than the demand curve without the tariff on bananas. With the​ tariff, the market equilibrium for apples is where

substitues shift supply​ leftward, increasing equilibrium price and decreasing equilibrium quantity. upward sloping right the demand curve with the banana tariff intersects the supply curve.

Consider the market for MP3 players. Suppose there is a positive change in technology A change in technology will shift the ______ curve In​ particular, if there is a positive change in technology, then the supply curve will shift to the _____ As a result of the positive change in technology, the new equilibrium price will be ______, and the new equilibrium quantity will be _________ Suppose instead that the demand curve shifts to the right.​ Then, relative to the initial market​ equilibrium,

supply right lower higher the new equilibrium price would be higher and the new equilibrium quantity would be higher.

Suppose recent changes to immigration laws have increased the supply of immigrant​ labor, decreasing wages in manual labor occupations. How might this affect the market for​ construction? A change in worker wages would shift the_______ curve. In​ particular, a decrease in wages in manual labor occupations would shift the supply curve to the _____

supply right

According to an article in the Wall Street Journal​, the demand for orange juice is declining in the United States​ "as newer entrants in the beverage​ aisle, including​ more-exotic fruit​ juices, such as​ pomegranate, energy drinks and​ ready-to-drink coffee, have grabbed a greater share of the​ market." At the same​ time, orange juice production has been declining as bacterial infections reduce the quantity of fruit that orange trees can produce. The article notes that despite the decline in the demand for orange​ juice, the price of orange juice might increase. ​Source: Alexandra​ Wexler, "U.S.​ Orange-Juice Sales Fall to Record​ Low," Wall Street Journal​, August​ 18, 2014. As a result of these​ events, the new equilibrium quantity of orange juice As a result of these​ events, the new equilibrium price of orange juice Given the scenario described in the​ article, the price of orange juice could increase if

will decrease could increase, decrease, or remain unchanged demand decreased less than the supply decreased.