Assignment 2 (Unit 2)

Refer to Figure 4-27. Which of the four panels illustrates a decrease in quantity supplied?

Panel (b)

Refer to Figure 4-27. Which of the four panels illustrates an increase in quantity demanded?

Panel (c)

Figure 4-6 Refer to Figure 4-6. Suppose that the federal government is concerned about obesity in the United States. Congress is considering two plans. One would require "junk food" producers to include warning labels on all junk food. The other would impose a tax on all products considered to be junk food (tax on the producers). We could illustrate the tax as producing a movement from

Point A to Point C in Panel 2.

Refer to Figure 4-26. Which of the following movements would illustrate the effect in the market for wedding cakes resulting from a decrease in the number of pastry chefs?

Point C to Point D

A movement along the demand curve for Aquafresh toothpaste is caused by

a change in the price of Aquafresh toothpaste.

Refer to Figure 4-27. Panel (d) shows which of the following?

a decrease in quantity demanded and a decrease in supply

If toast and butter are complements, then which of the following would increase the demand for toast?

a decrease in the price of butter

An decrease in the price of oranges would lead to a(n)

a movement down and to the left along the supply curve for oranges.

Figure 4-8 Refer to Figure 4-8. Suppose the figure shows the market demand for coffee. Suppose the price of tea, a substitute good, increases. Which of the following changes would occur?

a shift from D2 to D1

A surplus of a product will arise when price is:

above equilibrium with the result that quantity supplied exceeds quantity demanded.

Lead is an important input in the production of crystal. If the price of lead decreases, then we would expect the supply of

crystal to increase.

Suppose you like to make, from scratch, pies filled with banana cream and vanilla pudding. You notice that the price of bananas has increased. As a result, your demand for vanilla pudding would

decrease.

Suppose that coffee growers sell 200 million pounds of coffee beans at $2 per pound in 2007, and sell 240 million pounds for $3 per pound in 2008. Based on this information we can conclude that the:

demand for coffee beans has increased.

Refer to Figure 4-19. If price in this market is currently $14, then there would be a(n)

excess supply of 40 units. The law of supply and demand predicts that the price will fall from $14 to a lower price.

A price floor means that:

government is imposing a minimum legal price that is typically above the equilibrium price.

Refer to Figure 4-22. At a price of $12, there is a

shortage of 4 units.

Suppose that a decrease in the price of good X results in fewer units of good Y being demanded. This implies that X and Y are

substitute goods.

A improvement in production technology will shift the

supply curve to the right.

Refer to the below diagram, which shows demand and supply conditions in the competitive market for product X. Given D0, if the supply curve moved from S0 to S1, then:

supply has decreased and equilibrium quantity has decreased.

Suppose that when income rises, the demand curve for doctor's visits shifts to the right. In this case, we know doctor's visits are

normal goods.

Refer to the below diagram. A binding rent controls are best illustrated by:

price A.

Refer to the below diagram. A government-set binding price ceiling is best illustrated by:

price A.

Refer to the below diagram. A government minimal price support program to aid farmers is best illustrated by:

price C.

Refer to the below diagram. A government-set binding price floor is best illustrated by:

price C.

A market supply curve shows how the total quantity supplied of a good varies as

price varies.

Suppose that salsa manufacturers sell 2 million bottles at $3.50 in one year, and 3 million bottles at $3 in the next year. Based on this information we can conclude that the:

supply of salsa has increased

Suppose chocolate-dipped strawberries are currently selling for $30 per dozen, but the equilibrium price of chocolate-dipped strawberries is $20 per dozen. We would expect a

surplus to exist and the market price of chocolate-dipped strawberries to decrease.

A decrease in the number of sellers in the market causes

the supply curve to shift to the left.

If the supply of a product increases, then we would expect equilibrium price

to decrease and equilibrium quantity to increase.

Figure 4-25 The graph below pertains to the supply of paper to colleges and universities Refer to Figure 4-25. All else equal, the return of college students to campus in the fall would cause a move from

x to y

Price floors and price ceilings:

interfere with the rationing function of prices.

Refer to Figure 4-18. At what price would there be an excess demand of 200 units of the good?

$20

Refer to the below diagram, which shows demand and supply conditions in the competitive market for product X. If the initial demand and supply curves are D0 and S0, equilibrium price and quantity will be:

0F and 0C respectively.

Refer to the below diagram, which shows demand and supply conditions in the competitive market for product X. If supply is S1and demand D0, then

0F represents a price that would result in a shortage of AC

The current price of blue jeans is $30 per pair, but the equilibrium price of blue jeans is $25 per pair. As a result,

All of the above are correct.

Suppose the income of buyers in a market for an inferior good decreases and a technological advancement occurs also. What would we expect to happen in the market?

Equilibrium quantity would increase, but the impact on equilibrium price would be ambiguous.

Figure 4-25 The graph below pertains to the supply of paper to colleges and universities. Refer to Figure 4-25. All else equal, an increase in the price of the pulp used in the paper production process would cause a move from

SB to SA

Figure 4-25 The graph below pertains to the supply of paper to colleges and universities. Refer to Figure 4-25. All else equal, a major paper manufacturer filing for bankruptcy and shutting down as a result of an IRS tax evasion investigation would cause a move from

SB to SA.

In January, buyers of gold expect that the price of gold will fall by February. What happens in the gold market in January, holding all else constant?

The demand curve shifts to the left.

several studies have shown promising links between green tea consumption and cancerprevention. How does this affect the market for green tea?

The demand for green tea curve shifts to the right because of a change in tastes and preferences in favor of green tea.

Farmers can plant either corn or soybeans in their fields. Suppose that a new technology for converting corn into liquid fuel increases the demand for corn. Which of the following is most likely to occur?

The supply of soybeans will decrease.

If mayonnaise and Miracle Whip are substitutes, then which of the following would increase the demand for Miracle Whip?

an increase in the price of mayonnaise

Figure 4-11 Refer to Figure 4-11. The movement from point A to point B on the graph is caused by

an increase in the price of the good.

A likely example of substitute goods for most people would be

apple juice and orange juice.

Figure 4-1 Refer to Figure 4-1. The movement from point A to point B on the graph shows a(n)

increase in quantity demanded.

Refer to the below diagram, which shows demand and supply conditions in the competitive market for product X. A shift in the demand curve from D0to D1 might be caused by a(n):

increase in the price of complementary good Y.

Refer to the below diagram, which shows demand and supply conditions in the competitive market for product X. Other things equal, a shift of the supply curve from S0 to S1 might be caused by a(n):

increase in the wage rates paid to laborers employed in the production of X.

Funsters, Inc., the largest toy company in the country, sells its most popular doll for $15. It has just learned that its leading competitor, Toysorama, is mass-producing an excellent copy and plans to flood the market with their $5 doll in six weeks. Funsters should

increase the supply of its doll now before the other doll hits the market.

If the price of SUVs increases, we would expect

the demand for gasoline to decrease.

If, at the current price, there is a shortage of a good, then

the price is below the equilibrium price.