econ hw3

Assume that Qd = 80-2P and Qs = 2P-20. Equilibrium price and quantity are respectively

$25, 30

Assume that the market for Good X is defined as follows: QD = 64 - 16P and QS = 16P. What is producer surplus in this market?

$32

Suppose the income of buyers in a market for an inferior good decreases and a technological advancement occurs also. What would we expect to happen in the market?

Equilibrium quantity would increase, but the impact on equilibrium price would be ambiguous.

During the last few decades in the United States, health officials have argued that eating too much beef might be harmful to human health. As a result, there has been a significant decrease in the amount of beef produced. Which of the following best explains the decrease in production?

Individual consumers, concerned about their own health, decreased their demand for beef, which lowered the equilibrium price of beef, making it less attractive to produce.

Pens are normal goods. What will happen to the equilibrium price of pens if the price of pencils rises, consumers experience an increase in income, writing in ink becomes fashionable, people expect the price of pens to rise in the near future, the population increases, fewer firms manufacture pens, and the wages of pen-makers increase?

Price will rise.

If a surplus exists in a market, then we know that the actual price is

above the equilibrium price, and quantity supplied is greater than quantity demanded.

Saddle shoes are not popular right now, so very few are being produced. If saddle shoes become popular, then how will this affect the market for saddle shoes?

The demand curve for saddle shoes will shift right, which will create a shortage at the current price. Price will increase, which will decrease quantity demanded and increase quantity supplied. The new market equilibrium will be at a higher price and higher quantity.

Which of the following would cause price to increase?

a shortage of the good

Suppose buyers of computers and printers regard the two goods as complements. Then an increase in the price of computers will cause a(n)

decrease in the demand for printers and a decrease in the quantity supplied of printers.

Equilibrium quantity must decrease when demand

decreases and supply does not change, when demand does not change and supply decreases, and when both demand and supply decrease.

Which of the following events must cause equilibrium quantity to fall?

demand and supply both decrease

Suppose roses are currently selling for $40 per dozen, but the equilibrium price of roses is $30 per dozen. We would expect a

surplus to exist and the market price of roses to decrease.