Quiz #2

True or False: A "change in quantity demanded" is a shift of the entire demand curve to the right or to the left.

False

How will an increase in state subsidies to public colleges affect the market for public and private colleges?

In public colleges: Supply will shift to the right (down) In private colleges: Demand will shift to the left (down)

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. 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: ii. Change in income: iii. Change in consumer expectations: iv. Change in the price of a related good: v. Change in the price of an unrelated good: vi. Change in preferences for this good: A change from point A to point B = A change from point A to point C =

Income ( checked ) Price of related goods ( checked ) A good's own price ( unchecked ) Technology ( unchecked ) Tastes and preferences ( checked ) Resource prices ( unchecked ) Number of consumers ( checked ) 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 . A change in quantity demanded A change in demand

In which of these two statements are the terms "supply" and "demand" used correctly? A. "In the corn market, demand often exceeds supply and supply sometimes exceeds demand." B. "The price of corn rises and falls in response to changes in supply and demand."

Statement B

Suppose that in the market for computer memory chips, the equilibrium price is $50 per chip. If the current price is $55 per chip, then there will be ________________ of memory chips.

a surplus

a. Use the figure to fill in the quantity supplied given the supply curve S1 for each price in the table below (second column, gray-shaded cells). Instructions: If you are entering any negative numbers be sure to include a negative sign (-) in front of those numbers. Price S1 Quantity Supplied S2 Quantity Supplied Change in Quantity Supplied $3 15 4 -11 $2 10 2 -8 $1 5 0 -5 b. Use those data to draw supply curve S2 on the graph below. c. In the fourth column (gray-shaded cells) of the table in part a, enter the amount by which the quantity supplied at each price changes due to the increase in product costs. (Use positive numbers for increases and negative numbers for decreases.) d. Did the increase in production costs cause a "decrease in supply" or a "decrease in quantity supplied"?

a. 15, 10, 5 http://imagizer.imageshack.com/a/img921/1041/CjRchQ.png b. (0,1) , (2,2) , (4,3) http://imagizer.imageshack.com/a/img921/1041/CjRchQ.png c. -11, -8, -5 d. decrease in supply

a. Which statement is consistent with the law of demand? 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. c. How is a market demand curve derived from individual demand curves?

a. A reduction in market price will lead to an increase in quantity demanded. b. Diminishing preferences for a particular good ( unchecked ) Increasing marginal benefit ( unchecked ) An increase in purchasing power as market price decreases ( checked ) A decline in the price of a related good ( unchecked ) Diminishing marginal utility ( checked ) Increasing opportunity costs ( unchecked ) c. Add up quantities demanded by all individual consumers for each price.

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: b. Hide prices: c. The supply of leather goods: d. The price of leather goods:

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

a. What are the determinants of supply? Instructions: Click the box with a check mark for correct or click a second time to clear the box for incorrect. b. Indicate whether a change in the value of each of the following determinants of supply leads to a movement along the supply curve or a shift in the supply curve. i. Change in market price: ii. Change in factor productivity: iii. Change in producer expectations: iv. Change in the price of other goods: v. Change in technology: vi. Change in resource prices: vii. Change in taxes: c. Given the following diagram, indicate whether these changes represent a change in supply or a change in quantity supplied.

a. Income ( unchecked ) Price of other goods ( checked ) Technology ( checked ) Tastes and preferences ( unchecked ) Resource prices ( checked ) Number of producers ( checked ) b. i. Movement along the supply curve ii. A shift in the supply curve iii. A shift in the supply curve iv. A shift in the supply curve v. A shift in the supply curve vi. A shift in the supply curve vii. A shift in the supply curve A change from point A to point B = A change in quantity supplied A change from point A to point C = A change in supply

What effect will each of the following have on the demand for small automobiles such as the Mini-Cooper and Fiat 500? a. Small automobiles become more fashionable: b. The price of large automobiles rises (with the price of small autos remaining the same): c. Income declines and small autos are an inferior good: d. Consumers anticipate that the price of small autos will greatly come down in the near future: e. The price of gasoline substantially drops:

a. Increase b. Increase c. Increase d. Decrease e. Cannot be determined

Suppose the total demand for wheat and the total supply of wheat per month in the Kansas City grain market are as shown in the table below. Suppose that the government establishes a price ceiling of $3.70 for wheat. a. What might prompt the government to establish this price ceiling? b. In the diagram below, demonstrate this price ceiling of $3.70. c. Next, suppose that the government establishes a price floor of $4.60 for wheat. What will be the main effect of this price floor?

a. To control food prices b. Demand : (60,4.9) , (65,4.6) , (70,4.3) , (75,4.0) , (80,3.7) , (85,3.4) Supply : (71,3.4) , (73,3.7) , (75,4.0) , (77,4.3) , (79,4.6) , (81,4.9) c. It will create a surplus.

A price ceiling will result in a shortage only if the ceiling price is _____________ the equilibrium price.

less than

Label each of the following scenarios with the correct combination of price change and quantity change. In some scenarios, it may not be possible from the information given to determine the direction of a particular price change or a particular quantity change. We will symbolize those cases as, respectively, "P?" and "Q?". Scenario a. On a hot day, both the demand for lemonade and the supply of lemonade increase. b. On a cold day, both the demand for ice cream and the supply of ice cream decrease. c. When Hawaii's Mt. Kilauea erupts violently, the demand on the part of tourists for sightseeing flights increases but the supply of pilots willing to provide these dangerous flights decreases. d. In a hot area of Arizona where they generate a lot of their electricity with wind turbines, the demand for electricity falls on windy days as people switch off their air conditioners and enjoy the breeze. But at the same time, the amount of electricity supplied increases as the wind turbines spin faster.

Price Quantity a. P? Increase b. P? Decrease c. Increase Q? d. Decrease Q?

a. Which statement is consistent with the law of supply? b. Which of the following characteristics leads to an upward-sloping supply curve? Instructions: Click the box with a check mark for correct or click a second time to clear the box for incorrect. c. How do you derive a market supply curve from individual supply curves?

a. An increase in market price will lead to an increase in quantity supplied. b. Increasing opportunity costs ( checked ) Increasing marginal costs ( checked ) Diminishing marginal utility ( unchecked ) A decrease in resource prices ( unchecked ) An increase in resource prices ( unchecked ) Increasing labor productivity ( unchecked ) c. Add up quantities supplied by all individual producers for each price

Critically evaluate: "In comparing the two equilibrium positions in the diagram below, I note that a smaller amount is actually demanded at a lower price. This refutes the law of demand." a. A decrease in demand from D1 to D2 results in _______ . b. This causes the price to __________ . c. This change in price results in _____________ in quantity demanded along the D2 demand curve. d. This change in price results in a __________ in quantity supplied. e. The new equilibrium has a __________ and a ______________ when compared to the original equilibrium. f. Does this refute the law of demand: _____________ g. Why: __________________________

a. surplus b. fall . c. an increase d. a decrease e. lower price / lower quantity f. No g. Because there was a change in demand