chapter 3

As a result of a decrease in the price of online streaming movies, consumers download more movies online and buy fewer DVDs. This is an illustration of Multiple Choice consumer sovereignty. the income effect. diminishing marginal utility. the substitution effect.

the substitution effect.

Increasing marginal cost of production explains Multiple Choice the law of demand. the income effect. why the supply curve is upsloping. why the demand curve is downsloping.

why the supply curve is upsloping.

If the equilibrium price in a market is $15, and there is a price floor imposed at $10, what will be the resulting market condition?

Equilibrium

If the income of buyers decreases and good A is a normal good, the demand for good A will decrease. This will cause the equilibrium price to decrease and the equilibrium quantity to decrease.

demand for good A; decrease; decrease; decrease

Suppose that corn prices rise significantly. If farmers expect the price of corn to continue rising relative to other crops, then we would expect Multiple Choice the supply to fall as farmers plant more of other crops. the supply to increase as farmers plant more corn. consumer demand for wheat to fall. the supply of ethanol, a corn-based product, to increase.

the supply to increase as farmers plant more corn.

Answer the question on the basis of the given supply and demand data for wheat. Bushels Demanded Per Month Price Per Bushel Bushels Supplied Per Month 45 $5 77 50 4 73 56 3 68 61 2 61 67 1 57 If price was initially $4 and free to fluctuate, we would expect the Multiple Choice quantity of wheat demanded to fall as a result of the subsequent price change. quantity of wheat supplied to decline as a result of the subsequent price change. price of wheat to rise. quantity supplied to continue to exceed the quantity demanded.

.quantity of wheat supplied to decline as a result of the subsequent price change.

If the demand curve for product B shifts to the right as the price of product A declines, then Multiple Choice A and B are complementary goods. A is an inferior good and B is a superior good. A is a superior good and B is an inferior good. both A and B are inferior goods.

A and B are complementary goods.

Assume that the graphs show a competitive market for the product stated in the question. Select the graph above that best shows the change in the market specified in the following situation: the market for houses, when consumers experience a substantial fall in income due to a serious economic recession. Multiple Choice Graph A Graph D Graph B Correct Graph C

Graph B

If producers must obtain higher prices than before to produce a given level of output, then the following has occurred. Multiple Choice a decrease in demand an increase in demand a decrease in supply an increase in supply

a decrease in supply

An increase in the equilibrium quantity of hybrid cars would be caused by which of the following? Multiple Choice an increase in the demand for hybrid cars a decrease in the demand for hybrid cars higher prices of car batteries lower prices for gasoline

an increase in the demand for hybrid cars

There is a shortage in a market for a product when Multiple Choice quantity demanded is greater than quantity supplied. quantity demanded is less than quantity supplied. supply is less than demand. the current price is higher than the equilibrium price.

quantity demanded is greater than quantity supplied.

Refer to the four graphs above. Select the graph that best shows the changes in demand and supply in the market specified in the following situation: the market for corn, if gasoline producers use more ethanol from corn and good weather during the growing season yields a bumper harvest. Multiple Choice Graph A Correct Graph B Graph C Graph D

Graph A

Use the supply and demand schedule below to answer the following questions: Instructions: Enter your answers as whole numbers. a. What is the market equilibrium price and quantity? Market equilibrium price: Market equilibrium quantity: units b. If there is a shortage of 30 units, what is the market price? c. At a price of $20, the market experiences a surplus of 30 units.

a. $ 15; 70 b. $ 10 c. surplus; 30

a. Which statement is consistent with the law of demand? At a zero price, quantity demanded will be equal to zero. A reduction in market price will lead to an increase in quantity demanded. An increase in market price will lead to an increase in quantity demanded. A reduction in market price will lead to a decrease in quantity demanded. b. Which of the following characteristics lead to a downward-sloping demand curve?Instructions: Click the box with a check mark for correct or click a second time to clear the box for incorrect. A decline in the price of a related good Increasing marginal benefit Diminishing preferences for a particular good An increase in purchasing power as market price decreases Diminishing marginal utility Increasing opportunity costs c. How is a market demand curve derived from individual demand curves? Calculate the average quantity demanded among all consumers. Add up prices paid for each unit demanded by individuals. Use the largest quantity demanded among all consumers for each price. Add up quantities demanded by all individual consumers for each price.

a. A reduction in market price will lead to an increase in quantity demanded. b. An increase in purchasing power as market price decreases; Diminishing marginal utility c. Add up quantities demanded by all individual consumers for each price.

Suppose there are three buyers of candy in a market: Tex, Dex, and Rex. The market demand and the individual demands of Tex, Dex, and Rex are shown in the table below. a. Fill in the table (gray-shaded cells) for the missing values. b. Which buyer demands the least at a price of $5? The most at a price of $7? c. Which buyer's quantity demanded increases the most when the price is lowered from $7 to $6? d. Which direction would the market demand curve shift if Tex withdrew from the market? What if Dex doubled his purchases at each possible price? e. Suppose that at a price of $6, the total quantity demanded increases from 19 to 29 . Is this a "change in the quantity demanded" or a "change in demand"?

a. row 1: 5; row 2: 6; row 3: 6: row 4 :4 ; row 5: 33 b. Dex; Rex c. Rex d. To the left; To the right e. Change in demand

When economists speak of "demand" in a particular market, they refer to Multiple Choice one price-quantity combination on the demand schedule. how much of an item buyers want to buy at a given price. the whole demand curve or schedule. one point on the demand curve.

the whole demand curve or schedule.

"In the corn market, demand often exceeds supply and supply sometimes exceeds demand." "The price of corn rises and falls in response to changes in supply and demand." In which of these two statements are the terms demand and supply being used correctly? Multiple Choice In the first statement. In neither statement. In the second statement. In both statements.

In the second statement.

Suppose that the demand and supply schedules for rental apartments in the city of Gotham are as given in the table below. a. What is the market equilibrium rental price per month and the market equilibrium number of apartments demanded and supplied? Market equilibrium rental price is: Market equilibrium quantity is: b. If the local government can enforce a rent-control law that sets the maximum monthly rent at $2,250, will there be a surplus or a shortage? Of how many units? How many units will actually be rented each month? c. Suppose that a new government is elected that wants to keep out the poor. It declares that the minimum rent that can be charged is $3,250 per month. If the government can enforce that price floor, will there be a surplus or a shortage? Of how many units? How many units will actually be rented each month?

a. 2,750; 12,500 b. Shortage; 5,000; 10,000 c. Surplus; 5,000; 10,000

Use the demand and supply schedule below to answer the following questions. Price of Garlic (per pound) Quantity of Garlic Demanded Quantity of Garlic Supplied $10 100 20 30 80 40 50 60 60 70 40 80 90 20 100 a. Graph the demand for garlic and the supply of garlic, and then indicate equilibrium in the garlic market. b. If the number of buyers increases, the demand for garlic increase. This will cause the equilibrium price to increase and the equilibrium quantity to increase.

b. demand for garlic; increase; increase; increase

In 2001 an outbreak of hoof-and-mouth disease in Europe led to the burning of millions of cattle carcasses. What impact do you think this had on the following? a. The supply of cattle hides: Decrease. b. Hide prices: Increase. c. The supply of leather goods: Decrease. d. The price of leather goods:

a. Decrease b. Increase c. Decrease d. Increase

Suppose there are three buyers of candy in a market: Tex, Dex, and Rex. The market demand and the individual demands of Tex, Dex, and Rex are shown in the table below. a. Fill in the table (gray-shaded cells) for the missing values. b. Which buyer demands the least at a price of $5? The most at a price of $7? c. Which buyer's quantity demanded increases the most when the price is lowered from $7 to $6? d. Which direction would the market demand curve shift if Tex withdrew from the market? What if Dex doubled his purchases at each possible price? e. Suppose that at a price of $6, the total quantity demanded increases from 22 to 32 . Is this a "change in the quantity demanded" or a "change in demand"?

a. row 1: 8; row 2: 7; row 3: 8; row 4; row 5: 36 b. Dex; Rex c. Rex d. To the left; To the right e. Change in demand

If products C and D are close substitutes, an increase in the price of C will Multiple Choice shift the demand curve for C to the left and the demand curve for D to the right. shift the demand curves of both products to the right. shift the demand curve for D to the right. tend to cause the price of D to fall.

shift the demand curve for D to the right.

Refer to the above diagram for the milk market. If the price were $2 per gallon, then there would be a Multiple Choice shortage of 20 million gallons. shortage of 10 million gallons. surplus of 10 million gallons. surplus of 30 million gallons.

surplus of 10 million gallons.

When a fruit or vegetable (such as strawberries or lentils) is in season, the demand for it will increase as it becomes cheaper.

False

The graph below depicts the market for pretzels. a. Use the diagram below to illustrate an increase in the price of potato chips. b. If the price of potato chips increases, the demand for pretzels will increase. This will cause the equilibrium price to increase and the equilibrium quantity to increase.

b. demand for; increase; increase; increase

Assume in a competitive market that price is initially above the equilibrium level. We can predict that price will Multiple Choice decrease, quantity demanded will decrease, and quantity supplied will increase. decrease and quantity demanded and quantity supplied will both decrease. decrease, quantity demanded will increase, and quantity supplied will decrease. increase, quantity demanded will decrease, and quantity supplied will increase.

decrease, quantity demanded will increase, and quantity supplied will decrease.

If the income of buyers increases and good A is a normal good, the demand for good A will increase. This will cause the equilibrium price to increase and the equilibrium quantity to increase.

demand for good A; increase; increase; increase

One reason that the quantity demanded of a good increases when its price falls is that the Multiple Choice lower price shifts the demand curve to the left. lower price increases the real incomes of buyers, enabling them to buy more. lower price shifts the demand curve to the right. price decline shifts the supply curve to the left.

lower price increases the real incomes of buyers, enabling them to buy more.

Refer to the diagram, which shows demand and supply conditions in the competitive market for product X. Given D0, if the supply curve moved from S0 to S1, then Multiple Choice there has been an increase in the quantity supplied. supply has decreased and equilibrium quantity has decreased. supply has increased and equilibrium quantity has decreased. supply has increased and price has risen to 0G.

supply has decreased and equilibrium quantity has decreased.

Suppose that the demand and supply schedules for rental apartments in the city of Gotham are as given in the table below. Instructions: Enter your answers as whole numbers. a. What is the market equilibrium rental price per month and the market equilibrium number of apartments demanded and supplied? Market equilibrium rental price is: Market equilibrium quantity is: b. If the local government can enforce a rent-control law that sets the maximum monthly rent at $2,250, will there be a surplus or a shortage? Of how many units? How many units will actually be rented each month?c. Suppose that a new government is elected that wants to keep out the poor. It declares that the minimum rent that can be charged is $3,250 per month. If the government can enforce that price floor, will there be a surplus or a shortage? Of how many units? How many units will actually be rented each month?

a. 2,750; 12,500 b. Shortage; 5,000; 10,000; c. Surplus; 5,000; 10,000

Use the supply and demand schedule below to answer the following questions: Price Quantity Demanded Quantity Supplied $5 100 60 15 90 70 25 80 80 35 70 90 45 60 100 a. What is the market equilibrium price and quantity? Market equilibrium price: Market equilibrium quantity: units b. If there is a shortage of 20 units, what is the market price? c. At a price of $35, the market experiences a of units.

a. 25; 80 b. 15 c. surplus; 20

(Consider This) Suppose that coffee growers sell 200 million pounds of coffee beans at $2 per pound in 2015 and 240 million pounds for $3 per pound in 2016. Based on this information, we can conclude that the Multiple Choice law of supply has been violated. supply of coffee beans has increased. demand for coffee beans has increased. law of demand has been violated.

demand for coffee beans has increased.

Use the demand and supply schedule below to answer the following questions. Price of Garlic (per pound) Quantity of Garlic Demanded Quantity of Garlic Supplied $10 100 20 30 80 40 50 60 60 70 40 80 90 20 100 a. Graph the demand for garlic and the supply of garlic, and then indicate equilibrium in the garlic market. b. If the number of buyers decreases, the demand for garlic will decrease. This will cause the equilibrium price to decrease and the equilibrium quantity to decrease.

demand for garlic; decrease; decrease; decrease

Data from the registrar's office at Gigantic State University indicate that over the past 20 years tuition and enrollment have both increased. From this information we can conclude that Multiple Choice the supply of education provided by GSU has also increased over the 20-year period. GSU's supply curve of education is downsloping. higher education is an exception to the law of demand. factors such as school-age population, incomes, and preferences for education have increased over the 20-year period.

factors such as school-age population, incomes, and preferences for education have increased over the 20-year period.

Refer to the diagram. The highest price that buyers will be willing and able to pay for 100 units of this product is Multiple Choice $30. $60. $40. $20.

$60.

Refer to the table below. Fill in the surplus-shortage column (gray-shaded cells). a. What is the equilibrium price in this market? At what price is there neither a shortage nor a surplus? b. Graph the demand for wheat and the supply of wheat. Be sure to locate the equilibrium price and quantity. c. How big is the surplus or shortage at $3.40? There is a of How big is the surplus or shortage at $4.90? There is a of d. How big a surplus or shortage results if the price is 60 cents higher than the equilibrium price? e. How big a surplus or shortage results if the price is 30 cents lower than the equilibrium price?

-23; -10; 0; 8; 14; 18 a. 4.00; 4.00 b. c. shortage ;23; surplus; 18 d. 14 e. 10

ADVANCED ANALYSIS Assume that demand for a commodity is represented by the equation P=22−4Qd.Supply is represented by the equation P=−2+2Qs,where Qd and Qs are quantity demanded and quantity supplied, respectively, and P is price. Instructions: Round your answer for price to 2 decimal places and enter your quantity as a whole number. a. Using the equilibrium condition Qs = Qd, determine equilibrium price. b. Now determine equilibrium quantity.

a. 6.00 b. 4

a. What are the determinants of demand? Instructions: Click the box with a check mark for correct or click a second time to clear the box for incorrect. Income Price of related goods A good's own price Technology Tastes and preferences Resource prices Number of consumers b. Indicate whether a change in the value of each of the following determinants of demand leads to a movement along the demand curve or a shift in the demand curve. i. Change in market price: Movement along demand curve. ii. Change in income: Shift in demand curve. iii. Change in consumer expectations: Shift in demand curve. iv. Change in the price of a related good: Shift in demand curve. v. Change in the price of an unrelated good: No change. vi. Change in preferences for this good: Shift in demand curve. A change from point A to point B = A change in quantity demanded. A change from point A to point C = A change in demand.

a. Income; Price of related goods; Tastes and preferences; Number of consumers b. i. Movement along demand curve; ii. Shift in demand curve; iii.Shift in demand curve; iv. Shift in demand curve; v. No change; vi. Shift in demand curve c. A change in quantity demanded; A change in demand

A price floor means that Multiple Choice inflation is severe in this particular market. sellers are artificially restricting supply to raise price. government is imposing a maximum legal price that is typically below the equilibrium price. government is imposing a minimum legal price that is typically above the equilibrium price.

government is imposing a minimum legal price that is typically above the equilibrium price.

Refer to the figure above, which shows three supply curves for corn. Which of the following would cause the supply of corn to shift from S1 to S2? Multiple Choice a decrease in consumer incomes, assuming corn is a normal good a change in consumer tastes away from cornbread the development of a more effective insecticide against corn rootworm an increase in the price of fertilizer

the development of a more effective insecticide against corn rootworm

ADVANCED ANALYSIS Assume that demand for a commodity is represented by the equation P=20−2Qd.Supply is represented by the equation P=−5+3Qs,where Qd and Qs are quantity demanded and quantity supplied, respectively, and P is price. Instructions: Round your answer for price to 2 decimal places and enter your quantity as a whole number. a. Using the equilibrium condition Qs = Qd, determine equilibrium price. b. Now determine equilibrium quantity.

a. 10.00 b. 5