NHM 373 Chap 2 test review questions

Suppose the demand for cigarettes was P = 100 - 5Q, and the supply for cigarettes was P = 5Q. The market equilibrium price in this market would be:

$10

Which is not true of market equilibrium?

It is the most desirable outcome that a social order could have.

If the number of suppliers in the microcomputer industry increases, what would we expect to happen?

Movement along the demand curve will occur

Let supply be given by P = 5Q and demand by P = 19 - 2Q. Suppose we now place a tax of 5 per unit of output on the seller. The new supply curve is:

P = 5 + 5Q

Which of the following represents a change in the quantity demanded?

People buy more computers as prices fall.

Which of the following statements would most economists agree with?

Rent controls decrease overall societal welfare

A war in the Middle East causes the price of oil to rise. What would we expect to happen to the demand for automobile tires?

The demand for automobile tires will shift left.

If the State of California decides to raise the drinking age to 25, what would happen to the demand for beer?

The demand for beer will shift left.

If climate change were to reduce the output per acre of wheat but not the output of other crops, what effect this would have on the soybean market?

The demand for soybeans would shift right and the price and quantity would rise.

Suppose the football team at your university wins 10 games in a row. The following will be a possible outcome of this event in the market for football tickets:

The equilibrium price and the equilibrium quantity will increase

If a price above equilibrium is imposed on a market, welfare will increase when the price control is lifted. If a price control is below equilibrium and then is repealed and allowed to rise to equilibrium, welfare in the system will increase.

The first statement is false and the second statement is true

Estate sales often involve an auctioneer rattling off prices in an effort to get the highest price possible. Which of the following is true?

The sale does reach equilibrium because the only person desiring the item at the last price called gets it so no other trades could add to welfare.

A new technology is announced which allows manufacturers to produce widgets for less. Widgets are a key input in the production of whatchamacallits. What would we expect to happen to the market for whatchamacallits?

The supply curve would shift right.

My income rose and the price of good Y rose also. That means that my demand curve for good X shifted right.

This statement will always be true if good Y is a substitute for X and X is a normal good.

Which statement is true?

You can have scarcity without a shortage

Suppose the government imposed a binding price ceiling in the market for housing. Other things equal, the effect of this price ceiling will be to:

all of the choices are correct

In a market economy price serves to

allocate goods.

The equilibrium price is the price

at which quantity supplied equals quantity demanded.

Say at the current price there is an excess supply in the market for bicycles. In the future the price for bicycles will:

decrease

A price support system that raises price above the normal equilibrium will cause a

decrease in the quantity demanded.

As the demand curve becomes steeper, the proportion of a sales tax paid by the seller

decreases

If the price of roses increases the

demand curve for carnations will shift to the right.

Most economists are against rent control because it

discourages the building of new apartments.

The price in the market has fallen and so has the quantity. This could be happening because

income has fallen for a normal good.

Say the market for cereal is initially in equilibrium when all the major newspaper published the findings from study that say that eating 2 cups of cereal each day significantly reduces the risk for a heart attack. Other things equal, the publication of these findings will:

increase the quantity supplied of cereal.

As the supply curve becomes steeper, the proportion of a sales tax paid by the seller

increases

If price and quantity are not at their equilibrium positions, then

it is possible to reallocate so that some people are better off without harming others.

A tax of 10 units on the seller can be shown graphically as a

leftward shift of supply

If the government wishes to raise revenue by taxing cigarettes, it

makes no difference whether the consumer or the producer actually transfers the money to the government since the market effects are the same.

If the government decides to set the price of widgets below the equilibrium price

most economists would argue that one could reallocate resources and improve total welfare in the system.

If income rises

one cannot tell which way demand shifts with the information given.

The real price of a product is its

price relative to the price of other goods and services.

Say the price of MP3 songs increases. Other things equal the:

quantity demanded for MP3 songs will decreases.

If there is a technological advance that lowers the cost of producing x-ray machines, then we can say that the

quantity demanded for those machines will increase.

If the current price of pizzas is above the equilibrium price of pizzas then

sellers of pizzas have an incentive to decrease the price.

If a good is inferior, then an increase in income will cause the demand curve to

shift left

If the supply curve is S, at a price of $2 there will be a

shortage of 2

A horizontal interpretation of the demand curve for a product

stipulates price as the independent variable in the price quantity relationship

If the supply curve is S, at a price of $4 there will be a

surplus of 2

If the Surgeon General announces that colas cause cancer then we would expect

the demand for cola will shift left

If a 20 unit tax is placed on a seller, then

the distribution of the tax burden cannot be determined from the information given.

If an airline overbooks it pays people who volunteer to leave the overbooked flight. This system is better than drawing randomly from a hat the people who should miss the flight because

those with the least to lose are the ones who miss the flight.

The law of demand states that

when the price of a product falls, people buy more of it.

A good that is not scarce

would have zero price

Suppose that the supply curve for a good is vertical. In this case we would expect

. a tax placed on the buyer to be borne entirely by the seller.

According to the model of supply and demand, an increase in the price of milk will cause a

. leftward shift in the supply for cheese.

Let supply be given by P = 5Q and demand by P = 19 - 2Q. Suppose we now place a tax of 5 per unit of output on the seller. The new equilibrium price is:

15

Let supply be given by P = 5Q and demand by P = 19 - 2Q. Suppose we now place a tax of 5 per unit of output on the seller. The new equilibrium quantity is:

2

Let supply be given by Q = -7.5 + 0.5P and demand by Q = 10 - 0.2P. What will be the equilibrium price in this market?

25

In the diagram if the supply curve is S, the equilibrium price is:

3

Let demand be given by P = 20 - 3Q and supply by P = 5 + 2Q. Equilibrium quantity will be:

3

Let supply be given by Q = -7.5 + 0.5P and demand by Q = 10 - 0.2P. Suppose we now place a tax of $7 per unit of output on the seller. The new equilibrium price will be:

30

Let demand be given by P = 10 - Q; let supply be given by P = Q. What is the equilibrium price?

5

Let demand be given by P = 10 - Q; let supply be given by P = Q. What is the equilibrium quantity?

5

Which is true?

A per unit tax levied in an industry with a horizontal demand curve will be all paid by the producer.

The price of peanut butter rises due to a blight on the peanut crop; peanut butter and jelly are complements. What happens to the equilibrium quantity and price of jelly?

Equilibrium price falls, equilibrium quantity falls.

Pizza and beer are complements. The price of beer increases. What happens to the market for pizza?

Equilibrium price falls; equilibrium quantity falls.

A hailstorm kills all of the wheat in Minnesota. What will happen to the price and quantity of wheat sold in the U.S.?

Equilibrium price rises, equilibrium quantity falls.

A long hot summer has increased the demand for beer; at the same time a tax is placed on alcohol. What can we say about the equilibrium price and quantity of alcohol?

Equilibrium price rises; equilibrium quantity is unknown.

A new discovery makes ink jet computer printers less expensive to produce. At the same time another type of computer printer, the laser printer, also becomes less expensive. What would you expect to happen to the equilibrium price and quantity of ink jet printers?

Equilibrium price will fall, but the effect on quantity is uncertain

Two factors are affecting the domestic auto industry: (1) an increase in cheap Korean imports (2) an increase in the cost of materials. What can we say about equilibrium price and quantity of domestic autos?

Equilibrium quantity will fall.