Economics Chapter 5

If the supply of aisle seats and middle seats on an airplane is the same, but the demand for aisle seats is greater than the demand for middle seats, then the equilibrium price of aisle seats will be less than the equilibrium price of middle seats.

False

People who buy houses in good-weather locations receive this benefit absolutely for free.

False

The actions of speculators make the speculators better off, but they necessarily make the rest of society worse off.

False

The existence of a third party in the medical care market separates the buying of medical care from the paying for medical care.

True

If the government sets out to make home buying easier for more people by forcing lenders to accept ____________ down payments and ______________ interest rates, the result will likely be a(n) _______________ in housing prices.

lower; lower; increase

The supply curve for seats in a traditional college classroom is horizontal.

False

A subsidy placed on the consumption of good A will likely raise the demand for good A by the amount of the subsidy.

True

Economists perceive a college applicant's grade point average and standardized test scores (such as SAT and ACT scores) to be rationing devices

True

Since most colleges and universities do not charge students different tuition based on the time or day a student takes classes, there will likely be a shortage of seats in some classes and a surplus of seats in other classes.

True

The supply curve for space on a freeway is perfectly vertical at any given point in time.

True

When universities charge students less than the equilibrium tuition for admission, they have to impose some nonprice-rationing device.

True

Since most colleges and universities charge the same tuition to every student regardless of what time students choose to take their classes,

a and d

Refer to Exhibit 5-5. If the airline charges price P1 for both aisle seats and middle seats, the result will be

a shortage of aisle seats and the equilibrium quantity of middle seats.

The demand to attend a certain college is represented by a downward-sloping demand curve. The supply of spots at the college is represented by a vertical supply curve. At the tuition that students are charged, there is a shortage of spots at the college. If the demand to attend the college rises, but the tuition stays constant, it follows that the

a) GPA required to attend the college will probably rise.

Refer to Exhibit 5-1, which shows supply and demand for freeway space at both 8 a.m. and 11 p.m. Which toll creates equilibrium at 8 a.m.?

a) P2

Refer to Exhibit 5-2. If the tuition is set at $60 there will be

a) a shortage at 10 a.m. and a surplus at 8 a.m.

Refer to Exhibit 5-1, which shows supply and demand for freeway space at both 8 a.m. and 11 p.m. A toll of P1 creates __________ at 8 a.m. and __________ at 11 p.m.

a) a shortage; a surplus

Refer to Exhibit 5-5. If the airline charges a price that is between P1 and P2 for both aisle seats and middle seats, the result will be

a) a surplus of middle seats and a shortage of aisle seats.

If there is typically bumper-to-bumper traffic on a freeway at 5 p.m., we can reduce (or eliminate) the traffic congestion by

a) building more freeways, which would shift the supply curve of freeway space rightward.

Refer to Exhibit 5-5. Based upon the information provided in this graph, the supply of aisle seats is __________ the supply of middle seats, and the demand for aisle seats is _______________ the demand for middle seats.

a) equal to; greater than

If the supply of aisle seats equals the supply of middle seats on an airplane, and the demand for aisle seats is _____________ than the demand for middle seats, then the equilibrium price of aisle seats will be ______________ the equilibrium price of middle seats

a) greater; higher than

The lower the price of medical care in general, the higher the ____________________________ medical care and the ______________________ specific items that make up medical care (such as x-rays).

a) quantity demanded of; higher the demand for

The lower the price of medical care in general, the higher the _________________ medical care and the _______________ specific items that make up medical care (such as x-rays). The result will be a _______________ price for the specific items that make up medical care.

a) quantity demanded of; higher the demand for; higher

Refer to Exhibit 5-1, which shows supply and demand for freeway space at both 8 a.m. and 11 p.m. Suppose that the government decides to set the money price of driving on the freeway at zero, but builds more freeways to eliminate the shortage of freeway space at 8 a.m. Graphically, the result of the increase in freeway space would be shown by

a) shifting the supply of freeway space curve rightward.

A toll of $1 per car is imposed on a road regardless of time of day. If the toll creates equilibrium travel flows at the busiest time of day, it will create a __________ at all other times.

a) surplus of space

Colleges and universities use such things as grade point averages and standardized test scores as

b) non-price rationing devices.

Refer to Exhibit 5-5. If the airline charges a price that is higher than P2 , the result will be a ________________ of middle seats and a ____________ of aisle seats.

b) surplus; surplus

If a college sets its tuition __________ the equilibrium tuition, then it will have to use some form of nonprice-rationing device to determine who will be accepted for admission to the college.

below

Suppose that a toll of $15 is charged to drive on a road, regardless of the time of day. If this toll brings about equilibrium travel flows at the busiest time of day, it will create __________ at all other times of day.

c) a surplus of toll road space

The price of good X has a pattern such that P = $3 on Monday through Thursday of every week, and P = $2 on Fridays. If speculators begin participating in the market for good X, their actions will likely lead to a(n) ______________ in the price of good X on Monday through Thursday and a(n) _______________ in the price of good X on Friday.

c) decrease; increase

Refer to Exhibit 5-2. If the tuition is set at $70 there will be

c) equilibrium at 10 a.m. and a surplus of seats at 8 a.m.

Refer to Exhibit 5-1, which shows supply and demand for freeway space at both 8 a.m. and 11 p.m. A toll of P2 creates __________ at 8 a.m. and __________ at 11 p.m.

c) equilibrium; a surplus

The supply of seats for a psychology class at 10 a.m. is the same as the supply of seats for the same class at 2 p.m.. There is a surplus of seats for the class at 2 p.m. and there is a shortage of seats in the 10 a.m. class. If tuition does not vary by time of day, it follows that the demand for the 10 a.m. class is __________ the demand for the 2 p.m. class, ceteris paribus.

c) greater than

The supply of seats for an economics class at 10 a.m. is the same as the supply of seats for the same class at noon. Every student who wants to attend this class at noon can, but there is a shortage of seats in the 10 a.m. class. If tuition does not vary by time of day, it follows that the demand for the 10 a.m. class is __________ the demand for the noon class.

c) greater than

The higher the price of medical care in general, the lower the __________________ medical care and the ________________ specific items that make up medical care (such as, x-rays)

c) quantity demanded of; lower the demand for

Suppose that the government provides a subsidy for the consumption of good X. The demand curve with the subsidy will lie to the ______________ of the demand curve without the subsidy, and the equilibrium price of good X will be __________ with the subsidy than without.

c) right; higher

Refer to Exhibit 5-3 which shows the demand and supply of a college athlete. Suppose that NCAA rules limit the amount that the college can pay this athlete, such that their payment can not exceed the cost of attending the college (currently, $8,000). What is the consumers' surplus for the college (with respect to this one athlete)?

d) area 1 + 2

The space on the freeway is fixed at any instant of time. A supply curve that shows this is

d) perfectly vertical.

Suppose that a subsidy is provided for the consumption of good ABC, and the subsidy is different for different units of good ABC (e.g., $10 subsidy on the first unit of good ABC and $7 on the second unit of good ABC, etc.). The demand curve with such a subsidy will lie to the ______________ of the demand curve without a subsidy, __________ parallel to the demand curve without any subsidy.

d) right; but will not be

Refer to Exhibit 5-1, which shows supply and demand for freeway space at both 8 a.m. and 11 p.m. At P = $0, there is a ________ of freeway space at 8 a.m. and ________ at 11 p.m.

d) shortage; equilibrium

When the government _____________ mortgage lending standards, the indirect result is likely to be _____________ home prices.

e) a and b

If there is freeway congestion at 8 a.m., we can reduce (or eliminate) the congestion by

e) a, b, and c

Refer to Exhibit 5-2. If the tuition is set at $40, there will need to be some kind of non-price rationing device used for

increase; decrease

The price of good B has a pattern such that P = $20 on Monday through Thursday of every week, and P = $25 on Fridays. If speculators begin participating in the market for good B, their actions will likely lead to a(n) ______________ in the price of good B on Monday through Thursday and a(n) _______________ in the price of good B on Friday.

increase; decrease

If the government enacts legislation which allows lenders to lower lending standards, the government indirectly___________ the demand for which leads to _________ house prices.

increased; higher

Profit can be earned by buying _____________ and selling ____________________.

low; high

Suppose that more people want to move from Miami to Phoenix than want to move from Phoenix to Miami. It is likely that U-Haul rates will be relatively ______________from Phoenix to Miami since the ___________________.

lower; demand for moving to Phoenix is greater than demand for moving to Miami

If more people join carpools and travel to work together

the demand curve for freeway space shifts leftward.

When congestion occurs on the freeway (because of a shortage of freeway space), an economist would most likely explain this by saying that it is because

the price of driving on the freeway is below the equilibrium price.

Residents of cities with a reputation for good weather, ceteris paribus,

á) pay a higher price for housing because the demand for housing is higher.