Chapter 3

Which of the quantity (Q) and price (P) combinations in the accompanying figure represents the market at competitive equilibrium?

(22, $8)

Assume that the market for nachos has only two suppliers: Firm 1 and Firm 2. According to this table, if the price of nachos is $6, the market will supply:

10 nachos.

Refer to the above diagram. A shortage of 160 units would be encountered if price was:

$0.50

Refer to the above diagram. If this is a competitive market, price and quantity will move toward:

$1.00 and 200, respectively.

Refer to the above diagram. The equilibrium price and quantity in this market will be:

$1.00 and 200.

Refer to the above diagram. The highest price that buyers will be willing and able to pay for 130 units of this product is:

$1.60

Refer to the table below. The equilibrium price and quantity in this market is:

$4.00 and 40 units.

The law of demand states that an increase in the price of a good decreases the demand for that good.

False

A decrease in the price of pizza will shift the supply curve for pizza to the left.

False.

What event would cause the supply curve to shift out?

Firms entered the market.

Flour is a factor of production of cupcakes. How will an increase in the price of flour affect the market for cupcakes?

Overall supply will decrease.

Which of the four panels represents the market for winter coats as we progress from winter to spring?

Panel (b).

Which of the four panels represents the market for peanut butter after a major hurricane hits the peanut-growth south?

Panel (d).

Panel (b) shows which of the following?

A decrease in demand and a decrease in quantity supplied.

Which of the following could cause the supply curve for the market for oranges to shift to the left?

A severe hurricane in Florida.

Which of the following will cause the demand curve for burgers to shift to the right?

A study is published by the National Association for Burger Research that says eating burgers can reduce the risk for bad acne.

In the market for desk lamps, which of the following will increase demand? Select all the answer options that apply.

An increase in income if the good is a normal good. If the price of floor lamps increases and floor lamps are a substitute good.

Panel (c) shows which of the following?

An increase in quantity demanded and an increase in supply.

As the owner of a hotel, you have decided to lower the price for all rooms in the month of October. What should you expect to happen?

As the price is lowered, the quantity demanded of rooms will increase.

Turkey in the US: All else equal, the approach of Thanksgiving would cause a move from

Db to Da

Refer to the accompanying figure. When the price changes from P1 to P2, we will see a(n):

Decrease in quantity supplied from Q1 to Q2.

According to the law of supply, what is the relationship between price and quantity supplied?

Direct.

Chuck drives past the same gas station every day. He realizes that the gas station always changes its prices on Tuesdays but keeps the price steady the rest of the week. On Saturday, Chuck turns on the news and hears a report projecting that the price of gasoline is going to increase. Holding all else constant, what do you think would happen to Chuck's demand for gasoline on Monday?

His demand would shift to the right.

What must happen to the market price in order for a shortage to be eliminated?

Price must rise.

When a market is in equilibrium, which of the following is true?

Quantity supplied is equal to quantity demanded.

The graph below pertains to the supply of paper to colleges and universities. Refer to above graph. 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

If a tax is placed on a good and all else is held constant, we would assume that the supply curve would:

Shift from S1 to S2.

Which of the following is NOT characteristic of a market economy?

Significant government intervention.

As more people migrated West during the gold rush, what do you think happened to the demand curve in most Western markets, holding all else constant?

The demand curve shifted to the right.

A change in which of the following will cause a change in the quantity demanded of coffee?

The price of coffee.

The equilibrium price of peanut butter is $5. A study comes out that says the fat in peanut butter is good for your heart. Holding all other factors constant, which of the following scenarios could happen?

The price of peanut butter increases to $7 because of a demand shift.

Smoke detectors have been shown to effectively reduce the death rate due to fires. In order to ensure that as many individuals as possible install a smoke detector, the government recently decided to subsidize the production of smoke detectors. Which of the following will be the consequences of this subsidy? Select all that apply.

The supply curve shifts to the right. The demand curve is unaffected.

On January 30, 2012, Starbucks India announced plans to open 50 cafés. What would you expect to happen to the market for coffee in India, assuming all other factors are held constant?

The supply for coffee will increase in India.

Which following change in the coffee market would shift the supply curve to the right?

The wage for employees in the coffee business decreases.

In this market, at a price of $15,

There would be an excess demand and the law of supply and demand predicts that the price will rise from $15 to a higher price.

As the life expectancy in the United States increases, which of the following could likely happen to the demand curve for items such as health care, cancer treatments, and nursing facilities, holding all else constant, and why?

There would be an increase because there will be more buyers in these markets.

During the winter months, many elderly persons leave their homes in northern New York and travel south to Florida or Arizona. What would you expect to happen to the equilibrium price and quantity of items most used by the elderly in northern New York?

They would both decrease.

If all else is held constant, what would happen to the equilibrium price and quantity of iPhones if the price of an Android phone decreased?

They would both decrease.

Which of the following scenarios would explain the change in equilibrium shown in the accompanying figure?

a decrease in the number of buyers in a market.

Which of the following would cause the supply curve to shift from Supply A to Supply C in the market for beach towels?

a decrease in the price of cotton.

Which of the following would NOT shift the demand curve for beef?

a reduction in the price of cattle feed.

At a price of $5, this market is experiencing

a shortage.

Suppose that Coca Cola and Pepsi are substitutes in consumption. If the price of Coca Cola decreases, then

both the equilibrium price and the quantity of Pepsi demanded will decrease.

Digital cameras and memory cards are:

complementary goods.

If the demand for steak (a normal good) shifts to the left, the most likely reason is that:

consumer incomes have fallen.

The demand curve shift shown in the figure was caused by a(n):

decrease in the number of buyers in the market for the good.

The movement from point A to Point B represents a(n)

decrease in the quantity supplied.

In the first few months of 2012, the price of gasoline increased by approximately 15%. Because of this increase, we would expect the _________ curve in the market for hybrid cars to _________.

demand; shift to the right.

For a market to be competitive.

each buyer and seller is small, relative to the whole market; no single decision-maker has any influence over the market price.

Which of the following scenarios best describes the change in the equilibrium shown in the accompanying graph?

firms leaving the market.

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

in the second statement.

The movement from point A to point B on the graph shows a(n)

increase in quantity demanded.

A decrease in the price of a good will

increase quantity demanded.

Taxes cause the equilibrium price of a good to:

increase.

A subsidy:

is a payment made by the government to encourage consumption or production of a good or service.

A change in quantity supplied:

is represented by a movement along the supply curve.

Imperfect markets:

occur when the buyer or seller has an influence on the price.

The demand curve slopes downward because

prices and quantity demanded move in opposite directions.

Inputs are:

resources that firms use in the production of final goods and services.

The market for footballs is perfectly competitive. If all else is held constant and the price of leather decreases, we would expect that the equilibrium quantity of footballs would:

rise and the equilibrium price would fall.

Refer to the accompanying graph. If a tax is placed on a good and all else is held constant, we would assume that the supply curve would:

shift from S1 to S2

A decrease in demand is represented by a:

shift of the demand curve to the left.

If the cost of flour increases from $3 to $5 a bag, you could predict the supply curve for bagels to:

shift to the left.

If the price is $10, then there would be a

shortage of 600 units, and price would rise.

Refer to the table below. If the price of this good is $2.00, there would be a ____ of ____ units.

shortage; 30

The two words most often used by economists are

supply and demand

When a hurricane rips through Florida, the price of oranges rises because the:

supply curve shifts to the left.

If the price is $25, then there would be an excess

supply of 300 units, and price would fall.

In the 1970s, the Organization of Petroleum-Exporting Countries (OPEC) drastically cut back the supply of crude oil to the world market. This caused the

supply of gasoline to decrease. quantity of gasoline demanded to decrease. equilibrium price of gasoline to increase. All of the above are correct.

A technological advancement for Good A will shift the _________ curve of Good A to the _________, making the equilibrium price _________.

supply; right; decrease.

According to the accompanying figure, if the price is $10, there is a:

surplus of 15 units.

If the price were $8, a

surplus of 25 units would exist and price would tend to fall.

At a price of $15, this market is experiencing a(n)

surplus.

When the demand curve shifts to the right and the supply curve is held constant,

the equilibrium price and quantity increase.

When the price of an hour of tutoring increases,

the quantity demanded for tutoring decreases.

According to the figure below, at the price of $5:

the quantity of demanded is 500.

When the government places a tax on the producer of a good or service:

the supply curve for the good or service shifts to the left.

When the number of firms in a market decreases,

the supply curve shifts to the left.

In 1993, the government increased the tax on gasoline producers from 14.1 cents per gallon to 18.4 cents per gallon. Our model of supply and demand predicts that:

the supply for gasoline decreased.

Which of the following is most likely to be an inferior good?

used clothing.