ECO110 Chapter 3 and 4

In the town of​ Hurley, Wisconsin, an unseasonably warm summer saw temperatures rising into the​ mid-90s for a weeklong stretch in July. This was almost 20 degrees above the average high temperature of 77 degrees for this hottest month of the year. This unexpected heat wave resulted in a significant increase in household purchases of central air conditioning​ systems, which are uncommon in this part of the country. Which determinants of demand are likely factors in this change in demand for air conditioning​ systems? Please select all the apply. These purchases would affect the demand curve for central air conditioning systems by shifting it to the _________.

-a preference for feeling cool when it is hot outside -right

The graph to the right represents the market for DVDs. The value of consumer surplus is ​$_____ million. ​(Enter your response as an integer.​) The value of producer surplus is $______ million. ​(Enter your response as an integer.​) If overproduction occurs in this​ market, and 30 million DVDs are​ produced, consumer surplus is $______ million and producer surplus is ​$_____ million. (Enter your responses as integers.​) The deadweight loss with overproduction is $_____ million. (Enter your response as an integer.​)

1. 40mil 2. 20mil 3. 30 mil 4. 15 mil 5. 15 mil

The table below depicts​ Harry's demand for hot dogs. If equilibrium price is $1.00 per​ dozen, Harry is willing to buy _____ dozen hot dogs. ​(Enter your response as a whole number​.) The total amount of consumer surplus that Harry receives if equilibrium price is $1.00 per dozen is defined as the area _______ and _______. ​Harry's consumer surplus from consuming the optimal quantity of hot dogs per month is ​$____ per month.​(Round your response to two decimal places.​)

1. 50 2.above equilibrium price 3. below the demand curve 4. $25

Suppose that the world price of oil is​ $70 per barrel and that the United States can buy all the oil it wants at this price. Suppose also that the demand and supply schedules for oil in the United States are as​ follows: Now suppose that the United States allows no oil imports. The equilibrium price in the United states is ​$_____ per barrel and the equilibrium quantity is _____ million barrels. If the United States imposed a price ceiling of $65 per barrel on the oil market and prohibited​ imports, there would be an _____ of ____ million barrels of oil. If the price ceiling is below​ $70, quantity supplied and quantity demanded differ. ________ will determine how much oil is purchased.

1. 70 2. 20 3. excess demand 4. 4 mil 5. quantity supplied

The choice of how much to produce depends on a variety of factors. One of the most important factors is the cost of production. Two very important components of the cost of production are resource ​(input) prices and technology. What happens to the supply curve if the costs of production fall because resource prices have decreased and available technology has made production less expensive​? This change in costs causes supply to ______. This is seen graphically as _______ shift in the supply curve.

1. Increase 2. A rightward

The supply curve is determined by choices made by _______. There is a ______ relationship between price and the quantity of a good​ supplied: An increase in market​ price, ceteris paribus​, will lead to ______ in quantity supplied.

1. firms 2.positive 3.an increase

A natural disaster that destroys a crucial input for a good will cause the __________ to shift left. This will result in _____ in production of that good and _______ pressure on the price per unit.

1. supply of that good 2.a decrease 3.upward

The data in the table below represent different demand and supply curves. According to the data in the​ table, the supply curve is _______ and the demand curve is ________ . Now consider the equilibrium point. Equilibrium price is ​$ ______ and equilibrium quantity is ______ units.

1. upward sloping 2. downward sloping 3.$6 4.20

Anna is separated from her​ boyfriend, John, while she studies economics and he goes to art school. The government thinks that Flash​ Telecommunications, Anna's phone​ company, needs​ subsidization, so a price floor is instituted at​ $14 per minute. According to the table​ above, the equilibrium price is _____ per minute and the equilibrium quantity is _____ minutes. ​(Enter your responses as a whole number​.) If a price floor is instituted at​ $14 per​ minute, quantity demanded at this price floor is ______ and quantity supplied at this price floor is _______. (Enter your responses as a whole number​.) The amount of the surplus is equal to the quantity supplied at a price of​ $14 minus the quantity demanded at​ $14. The amount of excess supply is _____. ​(Enter your response as a whole number​.)

1.$6 2. 20 3. 12 4.28 5.16

Consider a basic supply and demand schedule. Economists use it to analyze equilibrium price and quantity in a market. When price equals ​$2​,a shortage occurs. At a price of $2​, quantity supplied is ______and quantity demanded is _______. (Enter your responses as a whole number​.) The amount of the shortage is _____ units. (Enter your responses as a whole number​.) This shortage will cause price to ______ to the equilibrium level.

1.20 2.80 3.60 4. rise

Suppose the United States imposes a tax of $5 per barrel on imported oil. What quantity would Americans​ buy? At this​ price, Americans will buy _____ million barrels per day and U.S. producers would supply _____million barrels. The remaining demand will be met by importing ____million barrels from foreign sources. How much tax would the government​ collect? The government would collect $______ million tax per day.

1.22 2.18 3.4 4.20

A supply curve shows the relationship between quantity supplied and the price of a good. Which of the following are held constant when constructing a​ good's supply​ curve?​ (Check all that apply.​) If any of these variables that are held constant​ change, it is viewed as a _______.

1.Costs 2.The price of inputs 3.Production technology 1.Shift of the supply curve.

A demand curve shows the relationship between quantity demanded and the price of a good. Which of the following are held constant when constructing a​ good's demand​ curve?​ (Check all that apply.​) If any of these variables that are held constant​ change, it is viewed as a ______.

1.Income 2.Other prices 3.Tastes 1. shift of the demand curve.

Using the graph​ provided, which of the following are true if there is a​ $15 price ceiling in the​ market? ​(Check all that apply.​)

1.The quantity supplied with the price ceiling equals 30 units. 2. The quantity demanded with the price ceiling equals 70 units.

The graph to the right represents the market for wheat. The equilibrium price is​ $4 per bushel and the equilibrium quantity is 20 million bushels. If the government establishes a price ceiling of ​$2 per bushel of wheat in this​ market, there would​ be: If a price floor was set at $2​, there would​ be:

1.a shortage of 24 million bushels 2.no impact on the​ market, since equilibrium price is already above the price floor.

According to the table​ above, when the price per minute​ increases, the quantity supplied _______​, resulting in an ______ supply curve. When the price per minute​ increases, the quantity demanded ______​, resulting in a _______ demand curve. Using the table​ above, the intersection of the demand and supply curves occurs when price is ​$______ per minute and quantity is _______ ​(Enter your responses as a whole number​.)

1.increases 2.upward-sloping 3.decreases 4.downward-sloping 1.$6 2.20

A natural disaster that destroys a crucial input for a good will cause the ________ to shift left. This will result in ________in production of that good and ________ pressure on the price per unit.

1.supply of that good 2. a decrease 3.upward

Some examples of entrepreneurs in the tech industry and the firms they created are Bill Gates and Paul Allen with​ Microsoft, Mark Zuckerberg with​ Facebook, Caterina Fake and Stewart Butterfield with​ Flickr, and Kevin Systrom with Instagram. Which of the following qualities do these entrepreneurs​ possess? Please select all that apply.

1.they turned their ideas and products into successful businesses 2.they managed their firms 3.they organized their firms

Suppose that the world price of oil is ​$60 per barrel and that the United States can buy all the oil it wants at this price. Suppose also that the demand and supply schedules for oil in the United States are as​ follows: Using the table​ above, the U.S. supply curve for oil is _______. The U.S. demand curve for oil is _______. The supply curve intersects the demand curve at a price of ​$ _____ and a quantity of _______ million barrels per day. With free trade in​ oil, what price will Americans pay for their​ oil? Americans will pay $_____ per barrel. At this​ price, the U.S. demand schedule shows that Americans will buy ______ million barrels per day and U.S. producers will supply ______ million barrels per day. The remaining demand will be met by importing ______ million barrels from foreign sources.

1.upward sloping 2.downward sloping 3. $70 4.20 5.$60 6.24 7.16 8.8

The rent for​ 2-bedroom apartments in Detroit has fallen from an average of​ $796 in September 2014 to​ $717 in March 2015. Demand for​ 2-bedroom apartments in Detroit was falling during this period as well. This is hard to explain because the law of demand says that lower prices should lead to higher demand. Do you agree or disagree with this​ statement?

Disagree. A leftward shift of the demand curve would result in a lower price and a lower quantity demanded.

As a result of the oil import​ tax, who is harmed among the following​ groups?

Domestic oil consumers and foreign oil producers

Consumer surplus is the difference between the minimum amount a person is willing to pay for a good and its current market price. (T/F)

False

How is the market demand curve​ constructed?

It is the horizontal sum of every​ individual's quantity demanded at each price level.

Which of the following best describes the concept of deadweight​ loss?

It is the loss of consumer and producer surplus from underproduction or overproduction.

The circular flow diagram shows that households _______ firms for which they _______. The circular flow diagram also shows that firms __________ households for which they ___________.

The circular flow diagram shows that households supply labor to firms for which they receive payment. The circular flow diagram also shows that firms demand labor from households for which they must send out payment.

Explain whether each of the following statements describes a change in demand or a change in quantity​ demanded, and specify whether each change represents an increase or a decrease. After an article is published asserting that eating kale causes hair loss, sales of kale drop by 75 percent.

The demand for kale decreases.

A change in quantity demanded is caused by a change in the price of the product. (T/F)

True

A change in quantity demanded is reflected by a movement along an existing demand curve. (T/F)

True

Firms are the producing units in an economy and households are the consuming units in an economy. (T/F)

True

In a black​ market, illegal trading takes place at​ market-determined prices.(T/F)

True

In any​ market, profit attracts capital and losses lead to disinvestment.(T/F)

True

Producer surplus is the difference between the current market price and the cost of production for the firm.(T/F)

True

The total loss of consumer and producer surplus from underproduction or overproduction is called deadweight loss.(T/F)

True

On a​ graph, consumer surplus is represented by the area

above the price and below the demand curve.

On a​ graph, producer surplus is represented by the area

below the price and above the supply curve.

Households​ ________ in output markets and​ ________ in input markets.

demand; supply

Suppose that households in Hawaii begin to buy more pineapples. This change will ________ the supply of pineapples.

have no direct affect on

If Anderson works 37 hours each week as a clerk at the county​ courthouse, he is supplying labor in an ______ market. Anderson is considered a ______.

input ; household

For a normal​ good, a decrease in demand is represented as a

leftward shift of the demand curve.

Firms​ ________ in output markets and​ ________ in input markets.

supply; demand

For a firm that wishes to maximize​ profits, its decision about what quantity of output to supply depends on all of the following except

the demand for the product.

The supply of pineapples in Hawaii​ increases, causing pineapple prices to fall. Lower prices mean that Hawaiian households will increase​ what?

the quantity of pineapples demanded.

An effective price ceiling is set​ ________ the market equilibrium price and results in a​ ________.

​below; shortage