HW Chap 3

Which statement best illustrates the concept of diminishing marginal utility?

A typical consumer will receive less satisfaction from consuming the fourth hamburger than from the third hamburger in a week.

a market is in equilibrium

if the amount producers want to sell is equal to the amount consumers want to buy.

In a market with supply and demand curves as shown above, a price ceiling of $2.50 will result in

no shortage or surplus

Refer to the diagram. An effective government-set price ceiling is best illustrated by

price A

An increase in the quantity demanded means that:

price has declined and consumers therefore want to purchase more of the product.

The idea of the Law of Demand, as applied to electric cars, assumes which of the following to be constant?

price of gasoline cars

Productive efficiency refers to:

the use of the least-cost method of production.

at the equilibrium price,

there are no pressures on price to either rise or fall.

Refer to the above table. If demand decreased by 4 units at each price, what would the new equilibrium price and quantity be?

$3 and 5 units

Refer to the above graph, which shows the market for bicycles. S1 and D1 are the original supply and demand curves. D2 and D3 and S2 and S3 are possible new demand and supply curves. Starting from the initial equilibrium (point 1), what point on the graph is most likely to be the new equilibrium after a sharp increase in traffic accidents involving cyclists and the payment of subsidies to bicycle producers?

6

In competitive markets, a surplus or shortage will

Cause changes in the quantities demanded and supplied that tend to eliminate the surplus or shortage

Which of the following will not cause the supply curve to shift?

a change in the price of the good

Over a period of time, the equilibrium price of a good increases and the quantity decreases. All of the following could account for this situation, except

a decrease in the price of an alternative good or service that producers could also produce.

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

a surplus of 100 units

The rationing function of prices refers to the

capacity of a competitive market to equalize quantity demanded and quantity supplied.

If X is a normal good, a rise in money income will shift the

demand curve for X to the right

A decrease in supply, holding demand constant, will cause

higher prices and a smaller quantity sold.

Suppose that a more efficient way to produce a good is discovered, thus lowering production costs for the good. This will cause a(n)

increase in supply

If the supply and demand curves for a product both decrease, then equilibrium

quantity must decline, but equilibrium price may rise, fall, or remain unchanged.

Plastics manufacturers can make either toys or plastic containers. If the prices and profitability of plastic toys increase, then the

supply of plastic containers will decrease

Refer to the above diagram of the market for corn. If the price in this market is at $4 per bushel, then there will be a

surplus and the price will tend to fall

Graphically, the market demand curve is:

the horizontal sum of individual demand curves.

A black market could arise as a result of

the imposition of a legal price ceiling below the equilibrium price.