Homework 3

The smallest amount you would have to pay Bronx Pizza to get them sell an additional cheese pizza is $8.84. Thus, $8.84 is

Bronx Pizza's reservation price.

A shift of the entire supply curve is considered ______.

a change in supply

A movement along the demand curve is considered ______.

a change in the quantity demanded

If the price of cheese increases, then this should lead to _____ in the supply of pizza.

a decrease

If Jason's reservation price for a pound of apples is $1.40, and the market price for a pound of apples is $1.52, then Jason

will not buy a pound of apples.

When a new technology reduces the cost of production, supply ______.

will shift to the right (increase)

Which of the following factors will lead to a decrease in demand?

A decrease in the population of potential buyers. A decrease in the price of a substitute.

Which of the following factors will lead to an increase in the demand for a good?

An expectation of higher prices in the future A decrease in the price of a complement

Which of the following factors will lead to a decrease in supply?

An expectation of higher prices in the future.

Which of the following is likely to lead to an increase in the demand for cell phones?

An increase in income (assuming cell phones are a normal good). A decrease in the price of cell phone apps (a complement to cell phones).

A movement along the supply curve is considered ______.

a change in the quantity supplied

If bagels and cereal are substitutes, then a decrease in the price of bagels will lead to _____ in the demand for cereal.

a decrease

If butter and popcorn are complements, then an increase in the price of butter will lead to _____ in the demand for popcorn.

a decrease

f iPads are a normal good, then a fall in consumer income should lead to _____ in the demand for iPads.

a decrease

Given that hops are an important input to the production of beer, a sharp increase in the price of hops should lead to:

a decrease in the amount of beer bought and sold in the market. an increase in the price of beer.

If Red Bull and Coke are substitutes, then a decrease in the price of Red Bull should lead to:

a decrease in the price of Coke. a decrease in the amount of Coke bought and sold in the market.

If a government announcement leads home buyers to believe that house prices will go up in the future, then this should lead to _____ in the current demand for houses.

an increase

If bread and peanut butter are complements, then a decrease in the price of peanut butter will lead to:

an increase in the amount of bread that people buy. an increase the price of bread.

The largest dollar amount that a buyer is willing to pay for a good is the

buyer's reservation price.

If the demand for ketchup decreases when the price of hot dogs increases, then this suggests that ketchup and hot dogs are _____.

complements

Suppose that as the price of coffee increases, consumers purchase less coffee in part because they can no longer afford to buy as much coffee as they used to. This reduction in the quantity of coffee demanded is known as the _____ of a price change.

income effect

The change in the quantity demanded of a good that results because a change in the price of a good changes the buyer's purchasing power is known as the _____ of a price change.

income effect

Along a supply curve, if the price of butter increases, the quantity of butter supplied will _____.

increase

Given that college professors are an important input to the production of a college education, a decrease in the salaries of college professors would:

increase the number of students attending college. decrease college tuition.

The change in the quantity demanded of a good that results because buyers switch to or from substitutes when the price of the good changes is known as the _____ of a price change.

substitution effect

A schedule or graph showing the quantity of a good that sellers wish to sell at each price is known as a _____.

supply curve

Relative to the summer months, people have less exposure to the sun during the winter. Thus, relative to the summer, we can expect _____

the amount of sunscreen bought and sold in the market to be lower in the winter the price of sunscreen to be lower in the winter the demand for sunscreen to be lower in the winter

An increase in the price of cotton is likely to shift the supply curve for clothing (that uses cotton as an input) to

the left.

If people tend to go swimming more in the summer than in the winter, then we would expect _____.

the quantity of swimsuits bought and sold to be higher in the summer the price of swimsuits to be higher in the summer the demand for swimsuits to be higher in the summer

If Zach's reservation price for a gallon of milk is $5.53, and the market price for milk is $4.90, then Zach

will buy a gallon of milk.

If the price of butter increases, the quantity of butter demanded will ______.

decrease

If your cousin gets a big raise at work, and as a result, goes out to eat more often, then this suggests that for your cousin restaurant meals are _____.

normal good

A change in demand is represented by a ______.

shift in the entire demand curve

If butter and popcorn are complements, then an increase in the price of popcorn will lead to:

a decrease in the equilibrium price of butter. a decrease in the equilibrium quantity of butter.

If hot dogs and ketchup are complements, then an increase in the price of ketchup will lead to:

a decrease in the number of hot dogs bought and sold in the market. a decrease in the price of hot dogs.

The smallest dollar amount for which a seller would be willing to sell an additional unit of a good is the _____.

seller's reservation price