econ 1a ch4 and 5

An increase in the demand for pork is most likely due to: A. an increase in the price of pork relative to the price of other meats. B. an increase in the price of other meats relative to the price of pork. C. an increase in the price of pork, assuming all other prices remain the same. D. a decrease in the price of pork, assuming all other prices remain the same.

B A change in the demand for a good refers to the effect of anything on demand, other than price of that particular good. As such, we are looking for the statement that is consistent with a shift in the demand curve, not a movement along it. The incorrect options all refer to changes in the price of pork, which will change quantity demanded, not demand.

Assume that the equilibrium wage for unskilled labor is equal to $6.00 per hour. If the government established a minimum wage of $11.00 per hour: A. employers will be unable to find enough qualified applicants to fill the available positions. B. the number of job seekers will exceed the number of job vacancies, resulting in some unemployment. C. employers will be forced to hire additional workers, resulting in reduced profits. D. there will be a shortage of workers in the labor market.

B At a wage of $11.00 per hour, the quantity supplied exceeds the quantity demanded, resulting in a surplus of labor. In other words, the minimum wage acts as an effective price floor for labor in the labor market. Therefore, there will likely be some unemployment as a result of the minimum wage being imposed by government (i.e., excess supply). By the way, the minimum wage does not force firms to hire more workers. On the contrary. Firms will likely hire fewer workers as a result of the minimum wage being established above equilibrium.

Suppose a scientific report states that fish contain dangerously high levels of mercury (toxic to humans). At the same time, the price of diesel fuel, used by fisherman to fuel their boats, falls. Based on this information, what is the effect on the market for fish? A. The demand curve shifts to the left and the supply curve remains stationary, causing a fall in both equilibrium price and quantity. B. The demand curve shifts to the left and the supply curve shifts to the right, causing a fall in equilibrium price. C. The demand curve shifts to the left and the supply curve shifts to the left, causing equilibrium quantity to fall. D. The demand curve shifts to the left and the supply curve shifts to the left, causing both equilibrium price and quantity to rise.

B The report decreases demand while the decline in the price of fuel (input price declines) shifts supply out to the right. Therefore, with a decrease in demand and an increase in supply, equilibrium price for fish will fall.

A decrease in equilibrium price and an indeterminate change in equilibrium quantity (i.e., remain about the same) is most likely caused by a(n): A. decrease in demand and no shift in supply. B. decrease in supply and no shift in demand. C. increase in supply and a decrease in demand. D. increase in demand and an increase in supply.

C Only a decrease in demand along with an increase in supply will cause a decrease in equilibrium price and an indeterminate change in equilibrium quantity. The other solutions given may cause price to move in a similar direction, but also change quantity too. We are seeking the solution where price will fall but quantity will remain about the same.

The Law of Supply states that, other things constant, there is a(n) ________________ relation between price and the ____________________. A. inverse; quantity supplied B. inverse; supply C. direct; quantity supplied D. direct; supply

C The Law of Supply states that more of a good will be supplied the higher its price, other things constant, and less of a good will be supplied the lower its price, other things constant. That is, there is a direct relationship between price and quantity supplied.

Suppose that college tuition is higher this year than last year, and that fewer students are enrolled in college this year than last year. Based on this information, we can best conclude that: A. the Law of Demand is invalid. B. going to college is a really dumb thing to do. C. supply has increased, thereby causing tuition fees to rise. D. quantity demanded has likely fallen as a result of the higher tuition fees.

D The Law of Demand states that a higher price causes a lower quantity demanded, other things constant. As such, the higher tuition fees has likely negatively affected the amount of college students and willing and able to consume. Oh, by the way, if you believe going to college is a dumb thing to do, I have a very handsome looking bridge I would like to sell to you.

Suppose a recent and widely circulated medical article reports new benefits of exercise. Simultaneously, the price of the parts needed to make exercise bikes increases. What is the likely effect on the equilibrium price and quantity of exercise bikes sold, assuming that the magnitude of the shifts are the same? A. Price of exercise bikes decreases and quantity sold remains about the same. B. Price of exercise bikes decreases and quantity sold decreases. C. Price of exercise bikes increases and quantity sold decreases. D. Price of exercise bikes increases and quantity sold remains about the same.

D The report causes demand for exercise bikes to increase, shifting the demand curve out to the right, and the increase in the price of inputs causes the supply of exercise bikes to decrease, shifting the supply curve in to the left. Assuming that the magnitude of the shifts in both curves is equal, then we would see equilibrium price increase and quantity to remain about the same.

In the 1990's, helped by desktop publishing software that proliferated during that time, the number of vintage baseball card forgeries flooded the market for vintage baseball cards. Dealers left the market for fear of purchasing a phony. What was the effect on the market for vintage baseball cards, assuming both real and phony vintage cards are included? A. Demand shifted to the left, supply did not change, price declined, and quantity rose. B. Supply shifted to the right, demand did not change, price declined, and quantity rose. C. Supply shifted to the right, demand shifted to the left, and price rose. D. Supply shifted to the right, demand shifted to the left, and price declined.

D The surge of forgeries, to the extent that they be distinguished from the real thing, shifted the supply of vintage cards to the right. When dealers left the market for fear of purchasing phonies, the demand for vintage cards shifted to the left. Both shifts caused the price for vintage cards to decline/fall.

The Law of Supply states that more of a good will be supplied the lower its price, other things constant. True False

False The Law of Supply states that more of a good will be supplied the higher, not lower, the price, other things constant.

A market demand curve is constructed by summing the quantities demanded of all individuals at each price. true false

true A market demand curve is built by simply summing the quantities demanded of each consumer at different prices.