Econ chapter 4

Suppose that when good M is free, sellers will not supply any, but quantity supplied rises by 20 units for every $6 increase in the price. If the quantity demanded is fixed at 150 units, the equilibrium price will be:

$45

A(n) ______ occurs when the quantity demanded is equal to the quantity supplied.

equilibrium

A shortage occurs when the quantity demanded is _____ the quantity supplied.

greater than

Jean is a seller in Vernon Smith's classroom experiment of the market model. Which does she know?

her own willingness to sell

If the demand for oil decreased:

market price would fall.

A shortage occurs when the _____ is greater than the quantity supplied.

quantity demanded

A surplus occurs when the _____ is greater than the quantity demanded.

quantity supplied

If the demand for oil increased:

quantity supplied would increase.

Imagine that a major car company is producing fuel-efficient hybrid cars during a period of rising gas prices. As a result, dealerships are depleted of inventory, and customers remain on a waiting list. How can we best describe this phenomenon?

shortage

A surplus occurs when the quantity:

supplied is greater than the quantity demanded.

If country A's supply of oil decreased, the _____ curve in country _____ would shift to the _____.

supply; A; left

If the supply of oil decreased, the _____ curve would shift to the _____.

supply; left

When a product is sold for $15, buyers demand 24 units, but sellers are willing to supply 51 units. This leads to a(n):

surplus of 27 units.

When the free market maximizes the total gains from trade, there are no:

unexploited gains from trade or wasted resources.

When the free market maximizes the total gains from trade, there may be:

unsatisfied wants.

Suppose that when good K is free, sellers will not supply any, but the quantity supplied rises by 10 units for every $5 increase in the price. If the quantity demanded of good K is fixed at 75 units, the equilibrium price in this market will be:

37.5

An undergraduate student participates in a supply and demand experiment in his managerial economics course. What can he expect the laboratory experiment to reveal about the supply and demand model?

It successfully predicts real-life behavior.

Carla participates in a supply and demand experiment in her economics course. What can she expect the laboratory experiment to reveal about the supply and demand model?

It successfully predicts real-life behavior.

Fred participates in a supply and demand experiment in his managerial economics course. What can he expect the laboratory experiment to reveal about the supply and demand model?

It successfully predicts real-life behavior.

Who competes with whom to determine the price of a good?

Sellers compete with sellers, and buyers compete with buyers.

A decrease in demand _____ the equilibrium price and _____ the equilibrium quantity.

decreases; decreases

A shortage occurs when the quantity:

demanded is greater than the quantity supplied.

In the late 1990s, Beanie Babies became very popular collectible toys. Many buyers spent a great deal of time visiting multiple retail locations to find specific Beanie Babies that retailers had a very hard time keeping in stock. What probably describes the eBay prices for Beanie Babies during that time?

The eBay prices were higher than the retail prices because the retail prices led to shortages of Beanie Babies.

Which would happen if the demand for oil increased in the United States?

The market price would rise in the United States.

What would happen if the demand for oil increased?

The market price would rise.

Which statement about Vernon Smith's laboratory experiments is correct?

The participants were undergraduate students.

What does a decrease in supply result in?

a lower equilibrium quantity

A decrease in demand along a fixed supply curve results in:

a lower equilibrium quantity.