ECON 102 CHAPTER 3

How do you derive a market supply curve from individual supply curves?

Add up quantities supplied by all individual producers for each price

Which statement is consistent with the law of supply?

An increase in market price will lead to an increase in quantity supplied.

Which of the following characteristics lead to a downward-sloping demand curve?

*An increase in purchasing power as market price decreases *Diminishing marginal utility

What are the determinants of demand?

*Income *Price of related goods *Tastes and preferences *Number of consumers

Which of the following characteristics leads to a upward-sloping supply curve?.

*Increasing opportunity costs *Increasing marginal costs

What are the determinants of supply?

*Price of other goods *Technology *Resource prices *Number of producers

Which statement is consistent with the law of demand?

A reduction in market price will lead to an increase in quantity demanded.

How is a market demand curve derived from individual demand curves?

Add up quantities demanded by all individual consumers for each price

True or False: A "change in quantity demanded" is a shift of the entire demand curve to the right or to the left.

False

In which of these two statements are the terms "supply" and "demand" used correctly? A. "In the corn market, demand often exceeds supply and supply sometimes exceeds demand." B. "The price of corn rises and falls in response to changes in supply and demand."

Statement B

What effect will each of the following have on the supply of auto tires? (Keeping all else constant)

a. A technological advance in the methods of producing tires: Increase. b. A decline in the number of firms in the tire industry: Decrease. c. An increase in the prices of rubber used in the production of tires: Decrease. d. The expectation that the equilibrium price of auto tires will be lower in the future than currently: Increase. e. A decline in the price of large tires used for semi trucks and earth-hauling rigs, a substitute in production. (with no change in the price of auto tires): Increase. f. The levying of a per-unit tax on each auto tire sold: Decrease. g. The granting of a 50-cent-per-unit subsidy for each auto tire produced: Increase.

What effect will each of the following have on the demand for small automobiles such as the Mini-Cooper and Fiat 500?

a. Small automobiles become more fashionable: Increase. b. The price of large automobiles rises (with the price of small autos remaining the same): Increase. c. Income declines and small autos are an inferior good: Increase. d. Consumers anticipate that the price of small autos will greatly come down in the near future: Decrease. e. The price of gasoline substantially drops: Cannot be determined.

In 2001 an outbreak of hoof-and-mouth disease in Europe led to the burning of millions of cattle carcasses. What impact do you think this had on the following?

a. The supply of cattle hides: decrease b. Hide prices: increase c. The supply of leather goods: decrease d. The price of leather goods: increase

Indicate whether a change in the value of each of the following determinants of supply leads to a movement along the supply curve or a shift in the supply curve.

i. Change in market price: Movement along the supply curve ii. Change in factor productivity: A shift in the supply curve iii. Change in producer expectations: A shift in the supply curve iv. Change in the price of other goods: A shift in the supply curve v. Change in technology: A shift in the supply curve vi. Change in resource prices: A shift in the supply curve vii. Change in taxes: A shift in the supply curve

Indicate whether a change in the value of each of the following determinants of demand leads to a movement along the demand curve or a shift in the demand curve.

i. Change in market price: movement along demand curve ii. Change in income: shift in demand curve iii. Change in consumer expectations: shift in demand curve iv. Change in the price of a related good: shift in demand curve v. Change in the price of an unrelated good: no change vi. Change in preferences for this good: shift in demand curve

A price ceiling will result in a shortage only if the ceiling price is BLANK the equilibrium price.

less than