Econ 202 Chapter 3 Cary Heath

In which of these two statements are the terms "supply" and "demand" used correctly?

"The price of corn rises and falls in response to changes in supply and demand."

Which statement is consistent with the law of supply?

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

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

Less than

Suppose that in the market for computer memory chips, the equilibrium price is $50 per chip. If the current price is $55 per chip, then there will be _____________ of memory chips

a surplus

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

Add up quantities supplied by all individual producers for each price

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

- A decline in price of a related good - An increase in purchasing power as market price decreases -Increasing marginal benefit - Diminishing marginal utility

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

Add up quantities demanded by all individual consumers for each price

What are the determinants of demand?

- Price of related goods - Taste and preferences - Number of consumers - Income

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

-Increasing opportunity costs -Increasing marginal costs

Which statement is consistent with the law of demand?

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

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

False

For each stock in the stock market, the number of shares sold daily equals the number of shares purchased. That is, the quantity of each firm's shares demanded equals the quantity supplied. So, if this equality always occurs, why do the prices of stock shares ever change?

Prices change in reaction to a mismatch between Qd and Qs

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: b. A decline in the number of firms in the tire industry: c. An increase in the prices of rubber used in the production of tires: d. The expectation that the equilibrium price of auto tires will be lower in the future than currently: 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): f. The levying of a per-unit tax on each auto tire sold: g. The granting of a 50-cent-per-unit subsidy for each auto tire produced:

a. Increase b. Decrease c. Decrease d. Increase e. Increase f. Decrease g. 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: b. The price of large automobiles rises (with the price of small autos remaining the same): c. Income declines and small autos are an inferior good: d. Consumers anticipate that the price of small autos will greatly come down in the near future: e. The price of gasoline substantially drops:

a. Increase b. Increase c. Increase d. Decrease e. 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: b. Hide prices: c. The supply of leather goods: d. The price of leather goods:

a. decrease b. increase c. decrease d. increase