Chapter 3

t a price of $25, how many units will be sold?

500

The table above shows the demand schedules for Kona coffee of two individuals (Luke and Ravi) and the rest of the market. At a price of $6, the quantity demanded in the market would be

89 Lb

Hurricane Katrina damaged a large portion of refining and pipeline capacity when it swept through the Gulf coast states in August 2005. As a result of this, many gasoline distributors were not able to maintain normal deliveries. At the pre-hurricane equilibrium price (i.e., at the initial equilibrium price), we would expect to see

A storage of gasoline

________ means the supply curve has shifted to the right, while ________ refers to a movement along a given supply curve in response to an increase in price.

An increase in supply; an increase in quantity supplied

An increase in the price of the product would be represented by a movement from

B to A.

If the product represented is a normal good, an increase in income would be represented by a movement from

D1 to D2

An increase in the price of a complement would be represented by a movement from

D2 to D1.

Assume that the graphs in this figure represent the demand and supply curves for tuna. Which panel best describes what happens in this market when there is a decrease in the productivity of commercial fishermen?

Panel (b)

Assume that the graphs in this figure represent the demand and supply curves for mustard and that bratwurst and mustard are complements. What panel describes what happens in this market when the price of bratwurst falls?

Panel (c)

Assume that the graphs in this figure represent the demand and supply curves for blu-ray discs. Which panel best describes what happens in this market if there is a substantial increase in the price of blu-ray players?

Panel (d)

Assume that the graphs in this figure represent the demand and supply curves for ramen noodles, an inferior good. Which panel describes what happens in this market as a result of an increase in income?

Panel (d)

Let D = demand, S = supply, P = equilibrium price, Q = equilibrium quantity. What happens in the market for solar panels if the government offers tax breaks to encourage manufacturers to produce more solar panels?

S increases, D no change, P decreases, Q increases

A decrease in the price of inputs would be represented by a movement from

S1 to S2

A technological advancement would be represented by a movement from

S1 to S2

Prices of commercial airline tickets (assume that this is a normal good) have fallen in recent months. Over this same period, the price of jet fuel has risen and consumer incomes have fallen. Which of the following best explains the falling prices of airline tickets?

The demand curve for airline tickets has shifted to the left more than the supply curve has shifted to the left.

Technological advancements have led to lower prices and an increase in the sale of color laser printers. How does this affect the market for laser printer ink cartridges?

The demand curve for laser printer ink cartridges shifts to the right.

In September, buyers of silver expect that the price of silver will rise in October. What happens in the silver market in September, holding all else constant?

The demand curve shifts to the right.

Assume there is a surplus in the market for hybrid automobiles. Which of the following statements correctly describes this situation?

The price of hybrid automobiles will fall in response to the surplus; as the price falls the quantity demanded will increase and the quantity supplied will decrease

Which of the following is evidence of a shortage of chocolate?

The quantity of chocolate demanded is greater than the quantity supplied.

If the United States lifted the embargo on Cuban products, what would happen in the U.S. market for Cuban cigars?

The supply curve would shift to the right

If the demand for letters written by Abraham Lincoln is higher than the demand for letters written by John Wilkes Booth, what would have to be true for the market equilibrium prices for these letters to be equal?

The supply of Booth letters would have to be less than the supply of Lincoln letters.

According to a recent study, "Stricter college alcohol policies, such as raising the price of alcohol, or banning alcohol on campus, decrease the number of students who use marijuana." On the basis of this information, how would you describe alcohol and marijuana?

The two goods are complements in consumption.

Which of the following describes a characteristic of a perfectly competitive market?

There are many buyers and sellers.

The figure above represents the market for coffee grinders. Assume that the market price is $21. Which of the following statement is true?

There is a shortage that will cause the price to increase; quantity demanded will then decrease and quantity supplied will increase until the price equals $25.

A supply curve

is a curve that shows the relationship between the price of a product and the quantity of the product supplied.

A decrease in the demand for eggs due to changes in consumer tastes, accompanied by a decrease in the supply of eggs as a result of an outbreak of Avian flu, will result in

a decrease in the equilibrium quantity of eggs; the equilibrium price may increase or decrease.

Farmers can plant either corn or soybeans in their fields. Which of the following would cause the supply of soybeans to increase?

a decrease in the price of corn

An increase in the price of MP3 players will result in

a larger quantity of MP3 players supplied.

If, in response to a decrease in the price of coffee, the quantity demanded of coffee increases, economists would describe this as

an increase in quantity demanded.

Last month, the Tecumseh Corporation supplied 400 units of three-ring binders at $6 per unit. This month, the company supplied the same quantity of binders at $4 per unit. Based on this evidence, Tecumseh has experienced

an increase in supply.

Which of the following would cause an increase in the supply of cheese?

an increase in the number of firms that produce cheese

Electric car enthusiasts want to buy more electric cars at a lower price. All of the following events would have this effect except

an increase in the price of gasoline.

If a decrease in income leads to an increase in the demand for macaroni, then macaroni is

an inferior good.

At market equilibrium,

demand equals supply.

An ________ is represented by a rightward shift of the demand curve while an ________ is represented by a movement along a given demand curve.

increase in demand; increase in quantity demanded

The law of demand implies, holding everything else constant, that as the price of yogurt

increases, the quantity of yogurt demanded will decrease.

If a firm expects that the price of its product will be lower in the future than it is today

the firm has an incentive to increase supply now and decrease supply in the future

If you are considering buying either an Apple iPad or a Samsung Galaxy Tab, and you choose the Samsung only because the price is lower, then you consider

the iPad and the Galaxy Tab to be substitutes.

A demand curve shows the relationship between

the price of a product and the quantity of the product demanded.

The figure above represents the market for coffee grinders. Assume that the price is $50. At this price:

there is a surplus equal to 90 coffee grinders that will be eliminated when the price falls to $25 until quantity demanded equals quantity supplied

If the price is $25,

there would be a surplus of 300 units

An increase in the equilibrium price for a product will result

when there is a decrease in supply and an increase in demand for the product.