Chapter 5
If there is freeway congestion at 8 a.m., we can reduce (or eliminate) the congestion by
building more freeways.
If more people join carpools and travel to work together the
demand curve for freeway space shifts leftward.
Refer to Exhibit 5-2. There will need to be some kind of non-price rationing device used for both 8 a.m. classes and 10 a.m. classes if the tuition is set
greater than $50 and less than $70.
Good weather in cities such as San Diego
imposes indirect payments for the residents of that city.
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 11 p.m.?
0
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). The impact of this ruling would be a loss of income to the athlete of __________ and an equal gain in consumers' surplus to the college represented by ________________
2,000; area 2
Suppose that in an economy the structural unemployment rate is 3.1 percent, the frictional unemployment rate is 1.7 percent, and the unemployment rate is 8.1 percent. The natural unemployment rate is _________ percent and the cyclical unemployment rate is ___________ percent.
4.8; 3.3
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.?
P2
Which of the following statements is false?
People who live in cities with good weather receive that benefit for free.
Suppose that there are two laws proposed for eviction notices: Plan A requires landlords to give a renter 30 days to vacate an apartment once he has been served an eviction notice and Plan B requires landlords to give a renter 60 days to vacate an apartment once he has been served an eviction notice. It follows that landlords will find
Plan B more expensive than Plan A.
Refer to Exhibit 5-2. If the tuition is set at $60 there will be
a shortage at 10 a.m. and a surplus at 8 a.m.
If there is typically bumper-to-bumper traffic on a freeway at 5 p.m., we can reduce (or eliminate) the traffic congestion by
building more freeways, which would shift the supply curve of freeway space rightward.
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.
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.
greater; higher than
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
When the government _____________ mortgage lending standards, the indirect result is likely to be _____________ home prices.
increases; lower
Profit can be earned by buying _____________ and selling ____________________.
low; high
Colleges and universities use such things as grade point averages and standardized test scores as
non-price rationing devices.
Residents of cities with a reputation for good weather, ceteris paribus,
pay a higher price for housing because the demand for housing is higher.
The space on the freeway is fixed at any instant of time. A supply curve that shows this is
perfectly vertical.
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).
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.
quantity demanded of; higher the demand for; higher
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).
quantity demanded of; lower the demand for
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.
shortage; equilibrium
Refer to Exhibit 5-2. If the tuition is set at $70 there will be
equilibrium at 10 a.m. and a surplus of seats at 8 a.m.
Refer to Exhibit 5-2. If the tuition is set at $50 there will be
equilibrium at 8 a.m. and a shortage of seats at 10 a.m.
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
GPA required to attend the college will probably rise.
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.
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 shortage; a surplus
The demand for seats in 10 a.m. classes at the university is higher than the demand for seats in 8 a.m. classes. The supply of seats is fixed. If the university prices classes at the price required to achieve equilibrium at 10 a.m., there will be
a surplus at 8 a.m
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 surplus of middle seats and a shortage of aisle seats.
Refer to Exhibit 5-5. If the airline charges price P2 for both aisle seats and middle seats, the result will be
a surplus of middle seats and the equilibrium quantity of aisle seats.
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.
a surplus of toll road space
Refer to Exhibit 5-3 which shows the demand and supply of a college athlete. If the college is allowed to pay this student athlete its market equilibrium wage of $10,000, what is the consumers' surplus for the college that buys this one athlete's services at this wage?
area 1
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)?
area 1 + 2
The demand for seats in 10 a.m. classes at the university is higher than the demand for seats in 8 a.m. classes. The supply of seats is fixed. If the university can only charge a single price and wishes to maximize the total number of seats purchased during the day, it should set the price
at equilibrium for 8 a.m. classes.
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
To an economist, freeway congestion is a sign that the price to drive on the freeway is
below its equilibrium level
University A sets tuition at the equilibrium level based on price and then imposes entrance requirements in the form of minimum high school GPA and standardized test scores. Enrollment at this school will likely be
below the equilibrium level because of the use of non-price rationing devices.
At college ABC and at college XYZ, students pay $15,000 less than the equilibrium tuition. If the supply of openings is the same at both colleges, it follows that a shortage of openings will be greater at
college ABC than college XYZ, if the demand is greater at college ABC.
At college X and at college Y, students pay $3,000 less than the equilibrium tuition. If the supply of openings is the same at both colleges, it follows that a shortage of openings will be greater at
college X than college Y if the demand is greater at college X
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.
decrease; increase
The price of good XYZ has a pricing pattern such that P = $50 on Monday through Thursday of every week, and P = $65 on Fridays. If speculators begin participating in the market for good XYZ, their actions will likely lead to a(n) ______________ in the price of good XYZ on Monday through Thursday and a(n) _______________ in the price of good XYZ on Friday
decrease; increase
As the price of good Z falls, the quantity demanded of good Z rises, but the quantity supplied of good Z does not change. Based upon this information we can conclude that the demand curve for good Z is ________________ and the supply curve for good Z is ________________.
downward sloping; vertical
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.
equal to; greater than
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.
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.
greater than
Refer to Exhibit 5-6. Under law 1 a renter has 30 days to vacate an apartment after being served with an eviction notice. Under law 2, the renter has 90 days to vacate after being served with an eviction notice. This graph shows that the supply of apartments is____________ under law 1 than under law 2, and thus apartment rent is _______________ under law 1 than under law 2.
greater; lower
Suppose that the government provides a subsidy for the consumption of higher education. The equilibrium price of higher education will be ___________ with the subsidy than without because the demand curve with the subsidy will lie to the ______________ of the demand curve without the subsidy.
higher; right
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 creates programs that encourage drivers to carpool. If the carpooling program is sufficiently successful to eliminate the shortage of freeway space at 8 a.m., graphically the result of the increase in carpooling would be a
leftward shift of the demand for freeway space curve from D8a.m. to D11p.m.
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 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
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.
right; but will not be
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.
right; 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
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.
surplus of space
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.
surplus; surplus
There is no toll charge to drive on freeway A. If there is freeway congestion at 9 a.m., there will be greater freeway congestion at 11 a.m. if
the demand to drive on the freeway at 11 a.m. is greater than the demand to drive on the freeway at 9 a.m.
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.
the demand to drive on the freeway at 11 a.m. is greater than the demand to drive on the freeway at 9 a.m.
the schools must develop some type of non-price rationing device.
