Macroeconomics-Chapter 4

Which of the following is not one of the four major factors that shifts the supply curve when it​ changes?

The price of the good itself.

As a firm produces more of a​ good, the cost of producing each additional unit _________. This implies that the marginal cost of producing a good _________ as you make more of that good.

increases; increases

Suppose the price of oranges increases and the demand for apples increases. You determine that these goods must be _________.

substitutes.

Coffee and tea are likely _________ because an increase in the price of coffee _________ the demand for tea.

substitutes; increases

The supply curve represents​ ___________.

the minimum price sellers are willing to accept to sell an extra unit of a good.

Does the shape of the market demand curve differ from the shape of an individual demand​ curve?

​No, they both tend to be​ downward-sloping curves.

Land in​ Sonoma, California, can be used to either grow grapes for pinot noir wine or to grow Gravenstein apples. Given this​ information, what is the relationship between pinot noir wine and Gravenstein​ apples? If the demand for pinot noir suddenly shifts sharply to the​ right, we would expect to see __________ in the demand for land in​ Sonoma, which would __________ the equilibrium price of land. Since both pinot noir wine and Gravenstein apples use the same land in​ Sonoma, California, a sharp increase in demand for pinot noir wine will result in a _________ price for Gravenstein apples and a _________ equilibrium quantity.

They share a common input. an increase; increase higher; lower

Lobsters are plentiful and easy to catch in August but scarce and difficult to catch in November. In​ addition, vacationers shift the demand for lobsters further to the right in August than in any other month. Given this​ information, we know that​ _________ is/are higher in August than in other months. When comparing the equilibriums in the lobster market for August and​ November, the equilibrium quantity is​ ______ in November than in​ August, while the equilibrium price is​ ______.

both supply and demand. ​lower; higher,​ lower, or unchanged.

In a perfectly competitive​ market, sellers​ _________ and buyers​ _________.

cannot charge more than the market​ price; cannot pay less than the market price.

Given the supply and demand curves on the​ right, when the price of the good is​ $20, we say that the market is in _________. At this​ price, we know that the quantity supplied is ___________ the quantity demanded. If the only change in the market was that the price increased to​ $30, then we know that the quantity supplied will be _________ the quantity​ demanded, resulting in _________​, which is also known as _________. Suppose instead that the price of the good dropped below the competitive equilibrium price to a price of​ $15 per unit. If this were to​ occur, then the quantity supplied would be _________ the quantity​ demanded, resulting in _________​, which is also known as _________.

competitive equilibrium; equal to greater than; an excess supply; a surplus. less than; an excess demand; a shortage.

As part of U.S. sugar​ policy, the government offers to buy raw sugar from domestic sugarcane mills at a price of 18.75 cents per pound. This government offer is made for as much raw sugar as the sugarcane mills produce. Any raw sugar purchased by the government is not sold in the domestic​ market, as this might cause raw sugar prices to fall. Suppose conditions arise in the sugar market that would lead to a competitive equilibrium price that is below 18.75 cents per pound. In this​ situation, sugar mills will​ __________.

not sell to private buyers at this lower price and will sell to the government​ instead, which will drive up the domestic price until it reaches 18.75 cents per pound.

Suppose a new​ off-campus university apartment complex could rent its rooms on the open market for​ $900 a month. ​If, instead, the university chooses to cap the price of rooms to​ $500 a month for​ students, the result would be that​ ____________. Suppose the university is trying to determine the most efficient way to allocate the rooms such that those who value the rooms the most get them. Which of the following would you suggest as the most​ efficient?

quantity demanded would exceed the quantity​ supplied, resulting in a shortage. Auctioning the rooms to the highest bidders.

The Law of Demand states that as the price of a good​ increases, ceteris paribus​, the _________ decreases. This can be shown graphically with _________ demand curve or numerically in a table using a_________. The relationship that exists between these two variables can be described as _________.

quantity demanded; a downward-sloping; demand schedule. negatively related.

The Law of Supply states that as the price of a good​ increases, ceteris paribus​, the _________ of that good increases. This can be shown graphically with _________ supply curve or numerically in a table using a _________.

quantity supplied; an upward-sloping; supply schedule.

When one of the five major factors​ changes, causing an increase in​ demand, the demand curve shifts _________.

rightward.

When one of the four major factors​ changes, causing an increase in​ supply, the supply curve shifts _________.

rightward.

Which of the following is not one of the five major factors that shifts the demand curve when it​ changes?

The price of the good itself.

Market demand is derived by​ __________.

fixing the price and adding up the quantities that each buyer demands.

In a perfectly competitive​ market, if one seller chooses to charge a price for its good that is slightly higher than the market​ price, then it will​ _________.

lose all or almost all of its customers.

The relationship that exists between these two variables can be described as _________.

positively related.