ECON CH 3 QUIZ

(Table: The Market for Chocolate-Covered Peanuts) Look at the table The Market for Chocolate-Covered Peanuts. A shortage of 210 bags of chocolate-covered peanuts exists if the price is _____ per bag.

$0.30

Consider the market for iPods. What happens if a fantastic new alternative MP3 player is developed and at the same time a boat carrying a large shipment of iPods is attacked by pirates and sunk?

The change in price is indeterminate and quantity decreases.

(Figure: Shifts in Demand and Supply IV) Look at the figure Shifts in Demand and Supply IV. The figure shows how supply and demand might shift in response to specific events. Suppose half of the people in San Diego move to Colorado Springs. Which panel BEST describes how this will affect the market for houses in Colorado Springs?

panel B

In the local market for coffee, if Joyce's Java and Everyday Joe's coffee shops go out of business, the _____ curve shifts to the _____.

supply; left

Market equilibrium occurs when:

there is no incentive for prices to change in the market, quantity demanded equals quantity supplied, and the market clears.

(Table: The Market for Chocolate-Covered Peanuts) Look at the table The Market for Chocolate-Covered Peanuts. A surplus of 210 bags of chocolate-covered peanuts exists if the price is _____ per bag

$0.90

(Figure: Demand and Supply of Gasoline) Look at the figure Demand and Supply of Gasoline. The initial equilibrium price and quantity (at intersection of S1 and D) of gasoline are:

$2.50 and 300 gallons.

(Figure: The Demand and Supply of Wheat) Look at the figure The Demand and Supply of Wheat. If there is a decrease in supply of 2,000 bushels at each price, the equilibrium price and quantity will be _____ and _____ bushels, respectively.

$7; 5,000

(Figure: The Demand and Supply of Wheat) Look at the figure The Demand and Supply of Wheat. If there is an increase in demand of 2,000 bushels at each price, the equilibrium price and quantity will be _____ and _____ bushels, respectively.

$7; 7,000

(Table: The Lemonade Market) Look at the table The Lemonade Market. If the price of lemonade is $1.25 per cup, we expect to see:

a market in equilibrium

(Figure: The Demand and Supply of Wheat) Look at the figure The Demand and Supply of Wheat. A temporary price of $4 in this market would result in a _____ of _____ bushels.

shortage; 4,000

(Figure: The Demand and Supply of Wheat) Look at the figure The Demand and Supply of Wheat. What is the equilibrium price in this wheat market?

$6

A decrease in supply is caused by:

an increase in the price of goods that are used in production.

Good X and good Y are related goods. Holding everything else constant, if the price of X decreases and the demand for Y increases, X and Y are probably:

complements.

(Figure: Demand for Coconuts) Look at the figure Demand for Coconuts. If coconuts are a normal good and the income level of consumers falls, it will be represented in the figure as a movement from:

C to A

(Figure: Supply of Coconuts) Look at the figure Supply of Coconuts. If the prices of inputs (e.g., labor, fertilizer, and fuel) used to produce and transport coconuts increased, it would be represented in the figure as a movement from:

C to A

Which of the following is TRUE of a normal good? A) Income and the demand are unrelated. B) When income increases, the demand for the good remains unchanged. C) When income increases, the demand for the good increases. D) When income increases, the demand for the good decreases.

C) When income increases, the demand for the good increases.

(Figure: Supply of Coconuts) Look at the figure Supply of Coconuts. If the prices of inputs (e.g., labor, fertilizer, and fuel) used to produce and transport coconuts decreased, it would be represented in the figure as a movement from:

E to B

An increase in demand for good X can be caused by a decrease in the price of X.

False

If there is an excess supply of a good, the problem of scarcity does not apply to that good.

False

_____ manifests when the price of a good increases and the quantity demanded decreases

The law of demand

A negative relationship between quantity demanded and price is called the law of:

demand.

When a market is in equilibrium, the quantity:

demanded is equal to quantity supplied.

If in a competitive market the quantity supplied exceeds the quantity demanded, we expect prices to

fall

If the quantity of housing supplied in a community is greater than the quantity of houses demanded, the existing price:

is above the market equilibrium price.

(Figure: Demand for DVDs) Look at the figure Demand for DVDs. A decrease in the rental price of DVD would result in a change illustrated by the move from:

j to k in panel C.

(Figure: The Supply of DVD Rentals) Look at the figure The Supply of DVD Rentals. A decrease in the price of DVDs sold by movie producers to rental stores would result in a change illustrated by the move from:

n to o in panel A.

(Figure: Shifts in Demand and Supply II) Look at the figure Shifts in Demand and Supply II. The figure shows how supply and demand might shift in response to specific events. Suppose the technology for producing ethanol fuel improves. Which panel BEST describes how this will affect the market for ethanol?

panel D

(Figure: Demand and Supply of Gasoline) Look at the figure Demand and Supply of Gasoline. When the supply curve shifted from the initial equilibrium, the new intersection of supply and demand has a price of _____ and quantity of 400. This supply shift could have resulted from _____.

$1.50; an improvement in refining technology

What is the difference between a shortage and scarcity?

Scarcity will almost always exist, but a shortage will exist only if the price is kept below the equilibrium level.