Chapter 4 Microeconomics

An early frost in the vineyards of Napa Valley would cause a(n):

decrease in the supply of wine, increasing the price

In a free market setting where the quantity supplied is 50 units and quantity demanded is 40 units, price will:

fall

If demand increases, ceteris paribus, market price will be _______ at the new equilibrium point.

higher

Economic growth in China has led to more Chinese people owning cars, which:

increased demand for oil, causing oil prices to rise

Refer to the figure. If the price of the product is $14, there is a:

shortage of 50 units of the product, and the price will rise to $16

A technological innovation in the production of golf balls increases ______, causing the price _________ and _________.

supply; fall; quantity demanded to increase

An increase in demand causes a:

temporary shortage at the old equilibrium price and a higher new equilibrium price and quantity

Laboratory experiments by Vernon Smith support:

the supply and demand model's usefulness in predicting changes in a free market

Refer to the figure. At the equilibrium quantity, total surplus is:

$480

Refer to the figure. Which statement is TRUE? -The gains from trade are maximized at 20 units of output. -At 16 units of output, there are unexploited gains from trade. -Buyers are willing to pay $20 for the 16th unit of output and is costs sellers $60 to produce that output. -A free market is likely to produce less than 12 units of output.

Buyers are willing to pay $20 for the 16th unit of output and is costs sellers $60 to produce that output

In the figure, the initial demand curve is D1 and the initial supply curve is S1. If this depicts the equilibrium in the market for computer printers, what will happen when the price of computers increases?

D1 will shift to D2

Suppose that there is an increase in demand in a market and no change in supply. What will happen to the market equilibrium price and quantity?

Equilibrium price will rise; equilibrium quantity will rise

Brazilian rosewood is renowned for its tonal qualities and gorgeous figuring on acustic guitars. However, Brazilian rosewood is now banned from use in the construction of new guitars. What will likely happen to the price of used Brazilian rosewood guitars over time?

The price for used Brazilian rosewood guitars will increase because there will be a smaller supply of those guitars on the used market

Refer to the figure. At a price of $3, quantity supplied is ______ and quantity demanded is _______, leading to a ___________.

6; 2; surplus pf 4 units

What is the difference between a change in the demand and a change in quantity demanded?

A change in demand shifts the entire curve,a change in quantity demanded means price changed

According to the figure, the equilibrium price and quantity are:

$2 and 4 units

Which choice explains how the OPEC crisis of 1972 affect oil prices? -The demand for oil decreased, leading to a fall in oil prices -The demand for oil increased, leading to a rise in oil prices -The supply of oil was reduced, leading to a rise in oil prices -The supply of oil was increased, leading to a fall in oil prices

The supply of oil was reduced, leading to a rise in oil prices

Tim values treats for his dog at $10 per box, and John values them at $6 per box. If the price of dog treats is $3 per box but only one is available between these two buyers, then gains from trade would maximize when:

Tim buys the treats