econ 202- assignment 3

Refer to the diagram. The equilibrium price and quantity in this market will be

$1.00 and 200.

If an economy produces its most wanted goods but uses outdated production methods, it is

not achieving productive efficiency

What are the determinants of supply?

prices of other goods technology resource prices number of producers

Allocative efficiency is concerned with

producing the combination of goods most desired by society.

An effective price floor will

result in a product surplus.

Refer to the diagram. A decrease in demand is depicted by a

shift from D2 to D1.

c. Given the following diagram, indicate whether the specified changes below represent a change in supply or a change in the quantity supplied: A change from point A to point B: A change from point A to point C:

A change in the quantity supplied A change in supply

Which statement is consistent with the law of supply?

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

Refer to the diagram, which shows demand and supply conditions in the competitive market for product X. If the initial demand and supply curves are D0 and S0, equilibrium price and quantity will be

F and C, respectively.

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

Refer to the diagram. A price of $60 in this market will result in

a surplus of 100 units.

Label each of the following scenarios with the correct combination of price change and quantity change. In some scenarios, it may not be possible from the information given to determine the direction of a particular price change or a particular quantity change. We will symbolize those cases as, respectively, "P?" and "Q?". a. On a hot day, both the demand for lemonade and the supply of lemonade increase. Price: Quantity: b. On a cold day, both the demand for ice cream and the supply of ice cream decrease. Price: Quantity: c. When Hawaii's Mt. Kilauea erupts violently, tourists' demand for sightseeing flights increases but the supply of pilots willing to provide these dangerous flights decreases. Price: Quantity: d. In a hot area of Arizona where a lot of electricity is generated with wind turbines, the demand for electricity falls on windy days as people switch off their air conditioners and enjoy the breeze. But at the same time, the amount of electricity supplied increases as the wind turbines spin faster. Price: Quantity:

a. Price: P? Correct Quantity: Increases Correct b. Price: P? Correct Quantity: Decreases c. Price: Increases Quantity: Q? d. Price: Decreases Quantity: Q?

What effect will each of the following have on the demand for small cars such as the Mini Cooper and Fiat 500? a. Small cars become more fashionable: b. The price of large cars rises (with the price of small cars remaining the same): c. Income declines and small cars are an inferior good: d. Consumers anticipate that the price of small cars will decrease substantially in the near future: e. The price of gasoline substantially drops:

a. Demand increases b. Demand increases c. Demand increases d. Demand decreases e. Cannot be determined

How will an increase in state subsidies to public colleges affect the market for public and private colleges? a. In the market for public colleges: b. In the market for private colleges:

a. supply will shift to the right b. demand will shift to the left

Critically evaluate: "In comparing the two equilibrium positions in the figure below, I note that a smaller amount is actually demanded at a lower price. This observation refutes the law of demand." a. A decrease in demand from D1 to D2 results in a _______ b. This causes the price to _____ c. This change in price results in ______ quantity demanded along demand curve D2. d. This change in price results in _______ quantity supplied. e. The new equilibrium has a _______ and ________ when compared to the original equilibrium. f. Does this refute the law of demand: g. Why:

a. surplus b. fall c. increase d. decrease e. lower price and lower quantity f. no g. because there was a change in demmand

Refer to the diagram, in which S1 and D1 represent the original supply and demand curves and S2 and D2 the new curves. In this market

demand has increased and equilibrium price has decreased.

b. What happens to the supply curve when any of the following determinants change? Indicate whether each of these determinants causes a shift of the supply curve or a movement along the curve: i. Change in market price: ii. Change in factor productivity: iii. Change in producer expectations: iv. Change in the price of other goods: v. Change in technology: vi. Change in resource prices: vii. Change in taxes:

i. movement along the supply curve ii. shift of the supply curve iii. shift of the supply curve iv. shift of supply curve v. shift of supply curve vi. shift of the supply curve viii. shift of the supply curve

How will each of the following changes in demand and/or supply affect equilibrium price and equilibrium quantity in a competitive market? That is, do price and quantity rise, fall, or remain unchanged, or are the answers indeterminate because they depend on the magnitudes of the shifts?

id dd di in i ii d in i in in d

Why does the supply curve slope upward? To answer this question, use the choices below to identify the characteristics of an upward-sloping supply curve

increasing opportunity costs increasing marginal costs

Steve went to his favorite hamburger restaurant with $3, expecting to buy a $2 hamburger and a $1 soda. When he arrived, he discovered that hamburgers were on sale for $1 each, so Steve bought two hamburgers and a soda. Steve's response to the decrease in the price of hamburgers is best explained by

the income effect.