ECON Chapter 4
What is the equilibrium price in this market?
$9
The United Kingdom plans to end the use of gas-powered and diesel-powered cars by the year 2040. At the same time, car manufacturers, such as General Motors and Nissan, are increasing the number of electric car models they produce. Based on this information, which of the following statements is/are correct? (i) If the supply of new electric cars is greater than the demand for new electric cars, then the price of electric cars will fall in the future. (ii) The demand for gasoline will fall in the future. (iii) The demand for electricity will rise in the future. (iv) The demand for diesel will rise in the future.
(i), (ii), and (iii)
Which of the following five scenarios illustrate markets in action?
(i), (ii), and (iv)
What is the equilibrium quantity in this market?
300 units
How do you summarize the behavior of many individual buyers?
A downward-sloping demand curve
Imani collects Air Jordan sneakers. Sometimes, Imani will sell lower quality Jordans, or ones that are easier to find, on collectors' website in order to purchase a more rare pair. Imani is participating in:
A secondary market
What is the "effective price"?
Anything that adds on to the nominal price of a good
Why is it that water is so cheap when it's essential to life?
Because although the benefit is great, the cost of production is low.
Recall that the demand curve presents your marginal benefit curve. With this in mind, and with no change in the availability of water, why is it that your willingness to pay for water is relatively small compared to other, nonessential to life, goods?
Because your water consumption is based on marginal benefit, not total benefit
What role do you play in the market when purchasing a slice of pizza?
Buyer
A dust storm destroys the majority of a farmer's peanut crop, causing him to raise the price of his peanut butter. What kind of shift does this create in the market for jelly, a complement to peanut butter?
Decrease in demand
Dr. Larson is a professor at a state university. He is known for being tough but fair in his grading, and rarely gives out A's on his assignments. Considering that Dr. Larson is on the supply side and his students are on the demand side, why is it so difficult to attain an A?
Demand is high, so price is high.
Malik is a local politician running for governor in his state. What role does Malik play in the market for votes?
Demander
Which of these LEAST describes an example of bundling?
Going out to dinner and ordering an appetizer
Krishan goes to a local bank to make a deposit in his savings account. While there, he considers the principles of economics that he has been learning at the university. He concludes that in this situation he is a supplier of credit. How is this so?
He is supplying the bank with his savings, which the bank will in turn lend out to other borrowers.
A wildly popular but aging rock band announces that their upcoming tour will be the last one before they retire. What effect will this likely have in the market for this band's concert tickets?
Increase in demand
A taxi company finds success in its city of operation. Due to this success, a new company comes into town to try and compete with the original company. What has the inclusion of this new company created, and what shift will it cause in the market?
Increased number of sellers; increase in supply
How does "queuing" raise the effective price of a good?
It costs time in addition to the actual nominal price of the good.
Mr. Lu decides that he is going to create his own country. He determines that production matters will be determined by the individuals in the market as far as all production and consumption decisions go. What kind of economy has Mr. Lu effectively created?
Market
Mrs. Johnson decides that she is going to create her own country. She determines that she will be in charge of all production matters because she knows how to do things more efficiently than anybody else. What kind of economy has Mrs. Johnson effectively created?
Planned
Lisa has a stand at the local farmer's market where she sells honey from her farm. Every week, Lisa sells out of honey while still having people waiting in line to buy some. What is happening in the market for Lisa's honey?
Quantity demanded exceeds quantity supplied, creating a shortage.
Suppose you are a manager at a local coffee shop. You notice that every day by 8AM you are entirely sold out of bagels, but have at least 20 people ask for bagels later in the day. Which of the following decisions would result in the best outcome for your shop?
Raise the price of bagels.
Suppose the equilibrium price for a glass of lemonade is $3.At a price of $2, the market would experience a:
Shortage
A clothing manufacturer finds a cheaper supplier of wool for their winter coats. During this time, an unexpected cold front moves across the country. What effect will this have on price and quantity?
The effect on price is unknown; quantity rises.
Why did the advent of e-books cause an increase in supply in the publishing industry?
The marginal cost of producing e-books is lower than that of physical books.
You eat M&Ms every day. When you go to the store to buy some, you find that M&Ms are more expensive than they were last month. Which of the following could explain why M&Ms are more expensive?
The supply of cacao beans, used to produce chocolate, has fallen around the world.
You're shopping online, and you place an item in your virtual cart. Two days later, you return to the virtual cart to check out and find that the item is now more expensive. Assuming that the market is competitive, what could explain the price increase?
There is a shortage of the item.
Suppose that you have a pumpkin stall at a farmer's market, and the Halloween season arrives. You know that your customers will want to buy many pumpkins to decorate their houses and make pumpkin pies. Which of the following is a likely result of this scenario?
You can charge a higher price per pumpkin.
Any change that leads consumers to buy a smaller quantity at each price is considered:
a decrease in demand.
A seller at a farmer's market wants $10 for a bag of 10 apples. You think his price is too high, so you counter with an offer of $6 for the bag. The seller then offers you a much smaller bag of five apples for $6. You bargain again, and the seller lets you buy the 10 apples for $8. This scenario is an example of:
a market in action.
Marco owns a shoe store. He recently got an exclusive pair of shoes that he decides to sell for $300 when all other vendors are selling them for $250. Marco is surprised when nobody comes to buy the shoes from him. What situation has Marco created?
a surplus
Any change that leads consumers to buy a larger quantity at each price is considered:
an increase in demand.
Graphically, shortages will always occur:
at prices below the equilibrium price.
If McDonald's lowers the price of its Big Mac, it will _____ the demand for Burger King's Whopper because the two products are _____ of one another.
decrease; substitutes
When there is a shortage of highly skilled workers in a particular region, the:
demand for skills education increases.
Julie's family is preparing for their Fourth of July cookout, so they head to the local grocery store. Among the pandemonium they are able to obtain everything on their shopping list, including hot dogs and hamburgers. In the market for hamburgers, the Fourth of July creates an increase in the _____ for hamburger and a(n) _____ in the equilibrium price and quantity of hamburgers.
demand; increase
An equilibrium price is:
determined by the intersection of the demand and supply curves.
Aika owns a flower shop. She finds that on Valentine 's Day, she sells out of every kind of flower and has no customers left waiting at the end of the day. This is an example of a market in:
equilibrium.
As a result of technological innovation, automated water pumps are being installed on the farms of Kenyan tomato farmers. As a result of the increased use of automated water pumps, the equilibrium price of tomatoes will:
fall, due to a rise in supply.
When there is a shortage of highly skilled workers in a particular region:
highly skilled workers can negotiate higher salaries.
All of these factors shift the demand curve EXCEPT:
productivity
Graphically, the equilibrium quantity can be identified as the:
quantity corresponding to the intersection of the demand and supply curves.
A shortage occurs when:
quantity demanded exceeds quantity supplied
Jamal is an engineer working at a large lithium-ion battery producer. He recently made a breakthrough causing the production cost of lithium-ion batteries used in smartphones to go down. In the market for smartphones, this innovation will cause the equilibrium quantity to _____ and the equilibrium price to _____.
rise; fall
James goes to a concert at the amphitheater by his house. During the encore, the drummer throws one of his drum sticks into the crowd and James catches it. James doesn't have much interest in memorabilia, so he decides to list the drumstick on eBay. In the market for this band's memorabilia, James is a:
seller.
Stella owns a gas station that Ezekiel frequents. In terms of the market for gasoline, Stella is the _____ and Ezekiel is the _____.
supplier; demander
If prices and quantity move in opposite directions, then the _____ curve has definitely shifted.
supply
Price is determined by the forces of _____ and _____.
supply; demand
Which of the following events would lead to a shift of the supply curve from Old supply to New supply?
technological advance in production techniques
The quantity supplied and demanded in equilibrium is:
the equilibrium quantity.
If a store runs a sale on a product to clear out its stock, we can conclude that:
there was a surplus of the product in the store.
Auction houses, coffee shops, and the New York Stock Exchange are different, and yet they are all considered markets because:
they bring buyers and sellers together.
An equilibrium in a market occurs:
when quantity supplied equals quantity demanded
At what point is a market in equilibrium?
when quantity supplied equals quantity demanded