Chapter 3 Test Demand and Supply

What would happen to the equilibrium price and quantity of moisturizers if a new formula is developed that makes production cheaper, and consumers are told that moisturizers causes cancer?

The equilibrium price would decrease, and the effect on equilibrium quantity would be ambiguous.

The local government is concerned about poverty so it institutes a minimum wage of $9 per hour. If the demand and supply for labor are given in the graph, there will be

a surplus of 6 workers.

Complete the following by selecting the term that matches the definition. A table showing the relationship between the price of a good and the amount that buyers are willing and able to purchase at various prices

Demand schedule

Coffee are normal goods. What will happen to the equilibrium price and quantity of coffee if the price of coffee beans falls, and coffee lovers experience an increase in income?

Quantity will rise, and the effect on price is ambiguous.

Refer to the figure below. Which of the following would cause the demand curve to shift from Demand B to Demand A in the market for iPhones, a normal good?

an expectation that prices of iPhones would decrease in the very near future

Refer to the graph. Which of the following would cause the supply curve to shift from Supply A to Supply B?

an improvement in production technology.

Wheat is an important input in the production of bread. If the price of wheat increases, then we would expect the supply of

bread to decrease

The ___________ is the only price where quantity demanded is equal to quantity supplied.

equilibrium price

Refer to the graph. Which of the following would cause the supply curve to shift from Supply A to Supply B in the market for ice cream?

the price of milk, a key ingredient for ice cream, decreases

If the producer surplus is $1000 and the consumer surplus is $300, social surplus is ________.

$1300

Refer to the figure below (remember to use the formula for a triangle to find the amount of surplus). What is the producer surplus?

$180

A government decides to set a price ceiling on milk of $2.00 so that milk is affordable to the poor. The conditions of demand and supply are given in the table below. What will be the price and quantity of milk purchased?

$2.00; 5,500

The conditions of demand and supply are given in the table below. What is the equilibrium price?

$20

Refer to the table below. When the price decreases from $8 to $4, the quantity supplied decreases by

2 units

There would be a shortage of

10 units if the price is $4

A government decides to set a price ceiling on eggs so that eggs are affordable to the poor. The conditions of demand and supply are given in the table below. What will the excess supply or the shortage be if the price ceiling is set at $2.00?

3,000 shortage

Look at the graph provided. What area on the graph represents consumer surplus?

A

Which of the following demonstrates a shift in the demand curve?

After Alexandra got a pay raise at work, she bought more Italian food at $10.50 per lunch than she did before her raise.

Which of the following demonstrates a shift in the demand curve?

After Terri got a pay raise at work, she bought more tickets to the movies at $15.00 per ticket than she did before her raise.

In 2000, the demand for audio CDs was increasing as more people purchased them to listen to during commute time. Later in the year the price of aluminium (a material used in CDs) decreased. In 2001 the iPod was launched. The new technology began shifting the market and downloading digital audio became a viable substitute for CDs. As digital technology has improved since 2001, downloading audio files continued to increase with the demand for CDs dropping. If you were drawing a supply and demand graph to illustrate the changes to the CD market between 2001 and 2011, what would you say has happened to the market and the equilibrium price and quantity of the CD market since 2001?

In 2000, the demand for audio CDs was increasing as more people purchased them to listen to during commute time. Later in the year the price of aluminium (a material used in CDs) decreased. In 2001 the iPod was launched. The new technology began shifting the market and downloading digital audio became a viable substitute for CDs. As digital technology has improved since 2001, downloading audio files continued to increase with the demand for CDs dropping. If you were drawing a supply and demand graph to illustrate the changes to the CD market between 2001 and 2011, what would you say has happened to the market and the equilibrium price and quantity of the CD market since 2001?

The claim that, other things being equal, the quantity supplied of a good increases when the price of that good rises. Select the term that matches the definition.

Law of supply

Analyze the following diagram:

Pe = $14, Qe = 31

During the 1960s many high-profile studies purported to show a direct link between cigarette consumption and heart disease. In response to these studies the government began to implement higher cigarette taxes as well as other restrictions that increased the cost of doing business for major cigarette manufacturers. How would you expect supply, demand, and the equilibrium price and quantity to change?

The demand for cigarettes would decrease while supply shifts leftwards. As a result the equilibrium quantity decreases while equilibrium price is impossible to determine with the given information.

Refer to the figure below. Which of the following would cause the demand curve to shift from Demand A to Demand B in the market for DVD players, a normal good?

a increase in the price of online movie streaming

An increase in consumer surplus is caused by

a price ceiling.

Supply and demand for bushels of wheat (millions) are shown in the following table. A $9.00 government mandated price floor would result in

an excess supply of 2 million bushels of wheat.

Refer to the figure below. If the government sets a price ceiling of $6,

consumers would demand 14 units.

The ________ is where quantity demanded and quantity supplied are equal at a certain price.

equilibrium

A price ceiling causes consumer surplus to

increase

Matt buys either Coke or Pepsi. If the price of Coke increases, then we would expect Matt's demand for Pepsi to

increase

If Brooke's experiences an increase in her income, then we would expect Brooke's demand for

inferior goods to decrease.

The current potato price is $50/ton. If quantity demanded is at 220 million tons, how much must prices change before the market is in equilibrium?

price must increase by $60

If sellers expect lower prices in the near future, the current

supply will increase.

Refer to the figure below. If the government set a price floor of $30, there would be

zero excess supply.