Lecture 4-Supply and Equilibrium

Which of the following is true of supply?

After a point the marginal cost of producing a good rises as output rises.

Which of the following is true of the equilibrium price of a good service?

All of the above are true. (*There is no incentive for the price to change at that point; It occurs where the market demand and supply curves intersect; It will change when consumer preferences change.*)

Suppose that we discover that eating apples reduces the chance of getting cancer, and at the same time the Department of Agriculture discovers a way to get apple trees to produce 20% more apples. The result of this will likely be which of the following?

An increase in the number of apples produced, but we won't be able to tell what will happen to the price of apples.

Which of the following will NOT shift the supply curve for peanut butter?

An increase in the price of peanut butter.

True or False: If incomes rise, and hot dogs are an inferior good, then we would expect the price of hot dogs to rise.

False

True or False: If the market price of apples increases, we would expect the market price of oranges to decrease.

False

Which of the following is true?

Producers can't pay labor more than the value of the added product of the labor.

Suppose the equilibrium wage for low-skilled workers is $7.00, then the federal government then sets a minimum wage of $9.00. Which of the following will result?

There will be increased unemployment among high-skill workers.

True or False: A "price-gouging" law that doesn't allow gas stations to increase the price of gasoline in the event of a natural disaster, such as a hurricane, will create a shortage of gasoline if there is a hurricane that disrupts the supply of gasoline.

True

True or False: If the price of oil rises, the supply curve for gasoline should shift to the left.

True