Econ Chapter 3

How do you derive a market supply curve from individual supply curves?

Add up quantities supplied by all individual producers for each price

Which statement is consistent with the law of supply?

An increase in market price will lead to an increase in quantity supplied.

What are the determinants of demand?

Consumers' tastes, the number of buyers in the market, consumers' incomes, the prices of related goods, and consumer expectations.

Which of the following characteristics lead to a downward-sloping demand curve?

Diminishing marginal utility, An increase in purchasing power as market price decreases

Which of the following characteristics leads to a upward-sloping supply curve?.

Increasing opportunity costs Increasing marginal costs

a price ceiling will result in a shortage only if the ceiling price is (greater than/less than) the equilibrium price

Less than

For each stock in the stock market, the number of shares sold daily equals the number of shares purchased. That is, the quantity of each firm's shares demanded equals the quantity supplied. So, if this equality always occurs, why do the prices of stock shares ever change?

Prices change due to the whims of those selling shares.

In which of these two statements are the terms "supply" and "demand" used correctly? A. "In the corn market, demand often exceeds supply and supply sometimes exceeds demand." B. "The price of corn rises and falls in response to changes in supply and demand."

Statement B

Suppose that in the market for computer memory chips, the equilibrium price is $50 per chip. If the current price is $55 per chip, then there will be of memory chips

Surplus

What effect will each of the following have on the demand for small automobiles such as the Mini-Cooper and Fiat 500? a. Small automobiles become more fashionable: b. The price of large automobiles rises (with the price of small autos remaining the same): c. Income declines and small autos are an inferior good: d. Consumers anticipate that the price of small autos will greatly come down in the near future: e. The price of gasoline substantially drops:

a. Small automobiles become more fashionable: Increase. b. The price of large automobiles rises (with the price of small autos remaining the same): Increase. c. Income declines and small autos are an inferior good: Increase. d. Consumers anticipate that the price of small autos will greatly come down in the near future: Decrease. e. The price of gasoline substantially drops: Cannot be determined.

How will each of the following changes in demand and/or supply affect equilibrium price and equilibrium quantity in a competitive market; that is, do price and quantity increase or decrease, or are the answers indeterminate because they depend on the magnitudes of the shifts? a. Supply decreases and demand is constant. Price: Quantity b. Demand decreases and supply is constant. Price: Quantity: c. Supply increases and demand is constant. Price: Quantity: d. Demand increases and supply increases. Price: Quantity: e. Demand increases and supply is constant. Price: Quantity: f. Supply increases and demand decreases. Price: Quantity: g. Demand increases and supply decreases. Price: Quantity: h. Demand decreases and supply decreases. Price: Quantity:

(a) Supply decreases and demand is constant Prices increase, quantity decreases (b) Demand decreases and supply is constant Prices decrease, quantity decreases (c) Supply increases and demand is constant prices decrease, quantity increases (d) Demand increases and supply increases Prices indeterminate, quantity increases (e) Demand increases and supply is constant Prices increase, quantity increases (f) Supply increases and demand decreases Prices decrease, quantity indeterminate (g) Demand increases and supply decreases Prices increase, quantity indeterminate (h) demand decreases and supply decreases Quantity decreases, supply indeterminate

Which statement is consistent with the law of demand?

A reduction in market price will lead to an increase in quantity demanded.

A.Change in market price: B Change in income: C. Change in consumer expectations: D. Change in the price of a related good: E. Change in the price of an unrelated good: F. Change in preferences for this good:

A.Movement along the demand curve B.shift in demand curve C.shift in demand curve D.shift in demand curve E.no change F.shift in demand curve

What effect will each of the following have on the supply of auto tires? (Keeping all else constant) a. A technological advance in the methods of producing tires: b. A decline in the number of firms in the tire industry: c. An increase in the prices of rubber used in the production of tires: d. The expectation that the equilibrium price of auto tires will be lower in the future than currently: e. A decline in the price of large tires used for semi trucks and earth-hauling rigs, a substitute in production. (with no change in the price of auto tires): f. The levying of a per-unit tax on each auto tire sold: g. The granting of a 50-cent-per-unit subsidy for each auto tire produced:

a. A technological advance in the methods of producing tires: Increase b. A decline in the number of firms in the tire industry: Decrease c. An increase in the prices of rubber used in the production of tires: Decrease d. The expectation that the equilibrium price of auto tires will be lower in the future than currently: Increase e. A decline in the price of large tires used for semi trucks and earth-hauling rigs, a substitute in production. (with no change in the price of auto tires): Increase f. The levying of a per-unit tax on each auto tire sold: Decrease g. The granting of a 50-cent-per-unit subsidy for each auto tire produced: Increase

a. On a hot day, both the demand for lemonade and the supply of lemonade increase. b. On a cold day, both the demand for ice cream and the supply of ice cream decrease. c. When Hawaii's Mt. Kilauea erupts violently, the demand on the part of tourists for sightseeing flights increases but the supply of pilots willing to provide these dangerous flights decreases. d. In a hot area of Arizona where they generate a lot of their electricity with wind turbines, the demand for electricity falls on windy days as people switch off their air conditioners and enjoy the breeze. But at the same time, the amount of electricity supplied increases as the wind turbines spin faster.

a. P ?; Q Inc. b. P ?; Q Dec. c. P Inc.; Q? d. P Dec.; Q?

In 2001 an outbreak of hoof-and-mouth disease in Europe led to the burning of millions of cattle carcasses. What impact do you think this had on the following? a. The supply of cattle hides: b. Hide prices: c. The supply of leather goods: d. The price of leather goods:

a. decrease b. increase c. decrease d. increase

How is a market demand curve derived from individual demand curves

Add up quantities demanded by all individual consumers for each price