Managerial Economics - Chapter 2

Which of the following events show an increase in supply?

A rightward shift of the supply curve

Consider the following demand function: Qd = 900 - 15P. Solve for the inverse demand function.

P = 60 - 1/15Qd

Consider the following demand function: Qd = 210 - 3P. Solve for the inverse demand function.

P= 70 - 1/3 Qd

Consider the following function: Qxs = 15Px - 300. Determine the inverse supply function.

Px = 20 + 1/15Qx5

Solve for the inverse supply function: Qx5 = 5Px - 200

Px = 40 + 1/5Qx5

Graphically, what area represents producer surplus?

The area above the supply curve and below the price.

Which of the following does a market supply curve show?

The quantity that all producers are willing and able to produce at all prices.

True or False: Supply and demand analysis enables managers to see the "big picture."

True

True or False: The law of demand analyzes the relationship between price and quantity demanded holding everything else constant that influences buyers decisions.

True

Which of the following shows a decrease in the quantity supplied?

a movement down along the supply curve

The following function, Qxs = f (Px, Pr, W, H), shows that the quantity produced in a market depends on the price of the good, Px, and a. the value of other variables that affect supply such as taxes. b. the price of inputs such as labor costs. c. the price of technologically related goods. d. the number of buyers in the market.

a, b, c

Which of the following will cause a decrease in the supply of "farm-to-fork" vegetables Select all that apply. a. an increase in government regulations on agriculture b. a reduction in the number of "farm-to-fork" vegetable producers c. an increase in the price of fertilizer used on these farms d. a decrease in the price of "farm-to-fork" vegetables

a, b, c

The law of demand analyzes the relationship between price and quantity demanded holding which of the following variables constant? Select all that apply. a. prices of related goods b. taxes and subsidies c. income d. prices of inputs

a, c

Which of the following describes supply and demand analysis? a. a forecasting tool b. mostly quantitative c. use to predict pricing trends d. a qualitative tool

a, c

Select all that apply. The demand function indicates that the quantity of a good consumed depends on: a. the price of the good b. the price of inputs c. the income of the buyers d. the effect of the demand shifters

a, c, d

Which if the following is true according to the law of demand? Select all that apply. a. as market price increases, quantity demanded decreases b. as market price decreases, quantity demanded also decreases c. as market price increases, quantity demanded also increases d. as market price decreases, quantity demanded increases

a, d

If the price of a good rises, this will cause

an upward movement along the demand curve

If price of good A increases and, as a result, the demand for good B decreases, then good A and B are considered to be

complements

The difference between what consumers are willing to pay for a good or service and the market price is known as ________.

consumer surplus

An increase in demand is best characterized by which of the following?

demand curve shifts to the right

If chicken and pork are substitutes, what happens to the demand for pork if the price of chicken increases substantially?

demand for pork increases

What do economists use to describe the amount of good X that will be purchased at different prices of good X, at different prices of related goods, and at alternative income levels?

demand function

What is the economic condition where there is neither a surplus nor a shortage?

equilibrium

When a surplus exists, there is a tendency for price to _________ in order to equate quantity demanded and quantity supplied.

fall

According to the law of demand, as market price decreases, quantity demanded _________.

increases

Consider the following linear demand function where Py is the price of related goods, M is income, and H is other factors: Qxd = α0 + αxPx + αyPy + αMM + αHH According to the law of demand, the value of αx is _____.

negative

In the following linear demand function, Qxd = α0 + αxPx + αyPy + αMM + αHH where Py is the price of related goods, M is income, and H is other factors, the value of αM is: a. negative if good X is inferior positive if X and Y are complements b. positive if X and Y are complements c. positive if good X is normal d. negative if X and Y are substitutes

negative if good X is inferior, positive if good X is normal

In the following linear demand function, Qxd = α0 + αxPx + αyPy + αMM + αHH where Py is the price of related goods, M is income, and H is other factors, the value of αM is:

positive if good X is normal

In the following linear demand function, Qxd = α0 + αxPx + αyPy + αMM + αHH where Py is the price of related goods, M is income, and H is other factors, the value of αy is

positive if goods X and Y are substitutes, negative if good X and Y are complements

The difference between the market price and the amount at which producers are willing and able to sell a good is called _______ surplus.

producer

According to the law of supply, as the price of a good decreases,

quantity supplied decreases

If the price of a good or service is less than the equilibrium price, a _____ exists. As a result, the price tends to _____.

shortage; rise

What happens to the supply of canned craft beer if brewers adopt a new technology that allows them to can more craft beer at a lower cost?

supply increases

What is the effect of a decrease in an ad valorem tax?

supply increases

Which area forms consumer surplus?

the area below the demand curve and above the price

A function that describes the relationship between output and various prices of that output, prices of inputs, and values of other variables is called

the supply function