ECON Ch 4

An early frost in the vineyards of Napa Valley would cause a(n):

decrease in the supply of wine, increasing price.

In a free market setting where quantity supplied is 50 units and quantity demanded is 40 units, price will:

fall

If demand increases, ceteris paribus, market price will be ______ at the new equilibrium point.

higher

Economic growth in China has led to more Chinese people owning cars, which:

increased demand for oil, causing oil prices to rise.

Refer to the figure. If the price of the product is $14, there is a:

shortage of 50 units of the product, and the price will rise to $16.

A technological innovation in the production of golf balls increases ______, causing the price to ______ and the ______.

supply; fall; quantity demanded to increase

An increase in demand causes a:

temporary shortage at the old equilibrium price and a higher new equilibrium price and quantity.

Laboratory experiments by Vernon Smith support:

the supply and demand model's usefulness in predicting changes in a free market.

Refer to the figure. Which statement is TRUE?

Buyers are willing to pay $20 for the 16th unit of output and it costs sellers $60 to produce that unit.

In the figure, the initial demand curve is D1 and the initial supply curve is S1. If this depicts the equilibrium in the market for computer printers, what will happen when the price of computers increases?

D1 will shift to D2.

Suppose there is an increase in demand in a market and no change in the supply. What will happen to the market equilibrium price and quantity?

Equilibrium price will rise; equilibrium quantity will rise.

Brazilian rosewood is renowned for its tonal qualities and gorgeous figuring on acoustic guitars. However, Brazilian rosewood is now banned from use in the construction of new guitars. What will likely happen to the price of used Brazilian rosewood guitars over time?

The price for used Brazilian rosewood guitars will increase because there will be a smaller supply of those guitars on the used market.

Refer to the figure. At the equilibrium quantity, total surplus is:

480

Refer to the figure. At a price of $3, quantity supplied is ______ and quantity demanded is ______, leading to a _______.

6; 2; surplus of 4 units

What is the difference between a change in the demand and a change in quantity demanded?

A change in demand shifts the entire curve, a change in quantity demanded means price changed.

According to the figure, the equilibrium price and quantity are:

$2 and 4 units.

Which choice explains how the OPEC crisis of 1973 affected oil prices?

The supply of oil was reduced, leading to a rise in oil prices.

Tim values treats for his dog at $10 per box, and John values them at $6 per box. If the price of dog treats is $3 per box but only one box is available between these two buyers, then gains from trade will be maximized when:

Tim buys the treats.