Econ 202M - Quiz 3 (Incomplete)

A small private college increases tuition while a large public university in the same state does not. What will happen to the demand (enrollment) for both schools?

"put in your own answer"

Reference: Ref 3-19 (Table: Competitive Market for Good Z) Look at the table Competitive Market for Good Z. The equilibrium price and quantity in this market are, respectively:

$10 and 30 units.

Figure: The Demand and Supply of Wheat Reference: Ref 3-6 (Figure: The Demand and Supply of Wheat) Look at the figure The Demand and Supply of Wheat. If there is a decrease in supply of 2,000 bushels at each price, the equilibrium price and quantity will be _____ and _____ bushels, respectively.

$7; 5,000

1 answer is incorrect (will edit later)

1 answer is incorrect (will edit later)

Reference: Ref 3-16 (Table: The Demand for Chocolate-Covered Peanuts) Look at the table The Demand for Chocolate-Covered Peanuts. If George, Barbara, and Dan are the only three buyers in the market and the price of a bag of chocolate-covered peanuts is $0.50, the total market quantity demanded is _____ bags per month.

210

Figure: Four Markets for DVDs Reference: Ref 3-9 (Figure: Four Markets for DVDs) Look at the figure Four Markets for DVDs. If D1 or S1 is the original curve and D2 or S2 is the new curve, which of the graphs illustrates what may happen in the market for DVDs if there is an increase in the cost of a movie ticket at the local theater?

A

_____ illustrates an inverse relationship between price and quantity.

A demand curve

_____ illustrates a positive relationship between price and quantity.

A supply curve

(Figure: Demand for Coconuts) Look at the figure Demand for Coconuts. If fish is a substitute good for coconuts and the price of fish increases, it will be represented in the figure as a movement from:

A to C.

Figure: Demand for Coconuts Reference: Ref 3-15 (Figure: Demand for Coconuts) Look at the figure Demand for Coconuts. If there is an increase in preference for coconuts, it will be represented in the figure as a movement from:

A to C.

According to the law of demand, if the price of steak increases in Rhode Island, the demand for steak will decrease in Rhode Island.

False

After graduation many students' demand for used cars decreases. This may be because used cars are considered a normal good to college graduates.

False

An increase in the price of contact lenses will increase the supply of contact lenses.

False

Higher spending on pets means fewer veterinarians are available to tend to farm animals.

False

If there is an excess supply of a good, the problem of scarcity does not apply to that good.

False

n the following situation, the market is initially in equilibrium. Explain the change in either supply or demand that result from the event. After the event described below, does a surplus or shortage exist at the original equilibrium price? What will happen to the equilibrium price as a result? After a hurricane, Florida hoteliers often find that many people cancel their upcoming vacations, leaving them with empty hotel rooms.

The demand curve shifts leftward. At the original equilibrium price, the quantity of hotel rooms supplied exceeds the quantity demanded. This is a case of surplus. The rates for hotel rooms will fall.

In the following situation, the market is initially in equilibrium. Explain the change in either supply or demand that result from the event. After the event described below, does a surplus or shortage exist at the original equilibrium price? What will happen to the equilibrium price as a result? As technological innovation has lowered the cost of recycling used paper, fresh paper made from recycled stock is used more frequently.

The market for fresh paper made from recycled stock: this is a rightward shift in supply due to a technological innovation. As a result of this shift, the equilibrium price of fresh paper made from recycled stock will fall and the equilibrium quantity bought and sold will rise.

In the of the following example, determine (i) the market in question; (ii) whether a shift in demand or supply occurred, the direction of the shift, and what induced the shift; and (iii) the effect of the shift on the equilibrium price and the equilibrium quantity. As the price of gasoline fell in the United States during the 1990s, more people bought large cars.

The market for large cars: this is a rightward shift in demand caused by a decrease in the price of a complement, gasoline. As a result of the shift, the equilibrium price of large cars will rise and the equilibrium quantity of large cars bought and sold will also rise.

In the following situation, the market is initially in equilibrium. Explain the change in either supply or demand that result from the event. After the event described below, does a surplus or shortage exist at the original equilibrium price? What will happen to the equilibrium price as a result? When a local cable company offers cheaper on-demand films, local movie theaters have more unfilled seats.

The market for movies at a local movie theater: this is a leftward shift in demand caused by a fall in the price of a substitute, on-demand films. As a result of this shift, the equilibrium price of movie tickets will fall and the equilibrium number of people who go to the movies will also fall.

In the following situation, the market is initially in equilibrium. Explain the change in either supply or demand that result from the event. After the event described below, does a surplus or shortage exist at the original equilibrium price? What will happen to the equilibrium price as a result? 2013 was a very good year for California wine-grape growers, who produced a bumper crop.

The supply curve shifts rightward. At the original equilibrium price of the year before, the quantity of grapes supplied exceeds the quantity demanded. This is a case of surplus. The price of grapes will fall.

The competitive market model determines the price you pay for concert tickets.

True

The supply curve for apartments in Oregon reflects how many apartments landlords are willing and able to offer for rent at a specific price.

True

Which of the following is TRUE of an inferior good?

When income increases, demand decreases.

Which of the following is TRUE of a normal good?

When income increases, the demand for the good increases.

Which of the following would NOT cause the supply curve to shift?

a change in the price of the good

A newspaper story recently reported that the price of new cars, a normal good, has decreased and the quantity of new cars sold has dropped. The new price and quantity could have been caused by:

a decrease in buyers' incomes.

Which of the following will NOT cause an increase in demand for good X?

a decrease in the price of good X

A decrease in demand with no change in supply will lead to _____ in equilibrium quantity and _____ in equilibrium price.

a decrease; a decrease

Explain whether each of the following events represents (i) a shift of the demand curve or (ii) a movement along the demand curve. A sharp rise in the price of gasoline leads many commuters to join carpools in order to reduce their gasoline purchases.

a movement along the demand curve.

Explain whether each of the following events represents (i) a shift of the demand curve or (ii) a movement along the demand curve. When Circus Cruise Lines offered reduced prices for summer cruises in the Caribbean, their number of bookings increased sharply.

a movement along the demand curve.

Explain whether each of the following events represents (i) a shift of the supply curve or (ii) a movement along the supply curve. More homeowners put their houses up for sale during a real estate boom that causes house prices to rise.

a movement along the supply

Explain whether each of the following events represents (i) a shift of the supply curve or (ii) a movement along the supply curve. Many construction workers temporarily move to areas that have suffered hurricane damage, lured by higher wages.

a movement along the supply curve.

For consumers, pizza and hamburgers are substitutes. A rise in the price of a pizza causes _____ in the equilibrium price of a hamburger and _____ in the equilibrium quantity of hamburgers.

a rise; an increase

Explain whether each of the following events represents (i) a shift of the demand curve or (ii) a movement along the demand curve. A store owner finds that customers are willing to pay more for umbrellas on rainy days.

a shift of the demand curve

Explain whether each of the following events represents (i) a shift of the demand curve or (ii) a movement along the demand curve. People buy more long-stem roses the week of Valentine's Day, even though the prices are higher than at other times during the year.

a shift of the demand curve

Explain whether each of the following events represents (i) a shift of the supply curve or (ii) a movement along the supply curve. Immediately after the school year begins, fast-food chains must raise wages, which represent the price of labor, to attract workers.

a shift of the supply curve

Explain whether each of the following events represents (i) a shift of the supply curve or (ii) a movement along the supply curve. Many strawberry farmers open temporary roadside stands during harvest season, even though prices are usually low at that time.

a shift of the supply curve

Explain whether each of the following events represents (i) a shift of the supply curve or (ii) a movement along the supply curve. Since new technologies have made it possible to build larger cruise ships (which are cheaper to run per passenger), Caribbean cruise lines offer more cabins, at lower prices, than before.

a shift of the supply curve

Which of the following would shift the demand curve for new textbooks to the right?

an increase in college enrollment

Given a supply curve that is positively sloped and a demand curve for a normal good that is negatively sloped, an increase in income will most likely result in:

an increase in equilibrium price and quantity.

The demand curve for running shoes has shifted to the right. What could have caused it?

an increase in the income of buyers of running shoes

A decrease in supply is caused by:

an increase in the price of goods that are used in production

A decrease in the price of a good will result in:an increase in the quantity demanded.

an increase in the quantity demanded.

Figure: Demand and Supply of Gasoline Reference: Ref 3-4 (Figure: Demand and Supply of Gasoline) Look at the figure Demand and Supply of Gasoline. Given the equilibrium after a change in supply from S1 to S2:

at the old price of $2.50, there will be pressure for the price to fall.

Consider the supply curve for cotton shirts. An increase in the price of cotton will:

decrease the supply of cotton shirts.

The market price of airline flights increased recently. Some economists suggest that the price increased because of an increase in the number of business travelers. They believe that in the market for flights:

demand increased.

A negative relationship between the quantity demanded and price is called the law of:

demand.

In the market for canned pinto beans, _____ will increase if income increases and if pinto beans are a(n) _____ good.

demand; normal

Because of an increase in the price of wheat, an important ingredient in the production of bread, combined with an increase in the number of people consuming bread:

equilibrium price will increase, but equilibrium quantity may decrease, increase, or stay the same.

Figure: Demand for DVDs Reference: Ref 3-17 (Figure: Demand for DVDs) Look at the figure Demand for DVDs. A decrease in the price of movie tickets (a substitute) would result in a change illustrated by the move from:

f to g in Panel A.

If in a competitive market the quantity supplied exceeds the quantity demanded, we expect prices to:

fall.

Figure: Demand for DVDs Reference: Ref 3-17 (Figure: Demand for DVDs) Look at the figure Demand for DVDs. A decrease in the price of DVD players (a complement) would result in a change illustrated by the move from:

h to i in panel B.

If tortilla chips are a normal good, when there is an increase in income, equilibrium price _____ and equilibrium quantity _____.

increases; increases.

After graduation from college, you might have an increase in your income from a new job. If as a result you decide that you will purchase more T-bone steak and less hamburger, then for you hamburger is a(n) _____ good.

inferior

The market for corn in Kansas is considered to be competitive. This means there are _____ buyers and _____ sellers of corn in Kansas.

many; many

When milk prices increased in 2008, one milk consumer stated that the reason he cut down on milk consumption was so that he could drive his car. This action represents a:

movement along the demand curve for milk.

Figure: Shifts in Demand and Supply II Reference: Ref 3-11 (Figure: Shifts in Demand and Supply II) Look at the figure Shifts in Demand and Supply II. The graph shows how supply and demand might shift in response to specific events. Suppose a fall frost destroys one-third of the nation's grapefruit crop. Which panel BEST describes how this will affect the market for vitamin B12 tablets, which are a substitute in consumption for grapefruit?

panel A

Figure: Shifts in Demand and Supply II Reference: Ref 3-11 (Figure: Shifts in Demand and Supply II) Look at the figure Shifts in Demand and Supply II. The graph shows how supply and demand might shift in response to specific events. Suppose consumer incomes decrease. Which panel BEST describes how this will affect the market for used clothing, an inferior good?

panel A

Figure: Shifts in Demand and Supply III Reference: Ref 3-12 (Figure: Shifts in Demand and Supply III) Look at the figure Shifts in Demand and Supply III. The figure shows how supply and demand might shift in response to specific events. Suppose consumer incomes increase. Which panel BEST describes how this will affect the market for designer boots, a normal good?

panel A

Figure: Shifts in Demand and Supply III Reference: Ref 3-12 (Figure: Shifts in Demand and Supply III) Look at the figure Shifts in Demand and Supply III. The figure shows how supply and demand might shift in response to specific events. Suppose the technology for producing snowboards improves. Which panel BEST describes how this will affect the market for winter parkas, a complement in consumption of snowboards?

panel A

Figure: Shifts in Demand and Supply II Reference: Ref 3-11 (Figure: Shifts in Demand and Supply II) Look at the figure Shifts in Demand and Supply II. The graph shows how supply and demand might shift in response to specific events. Suppose a drought destroys one-third of the nation's peanut crop. Which panel BEST describes how this will affect the market for peanuts?

panel C

Suppose that more police and security workers become aware that wearing bulletproof vests can protect them from injury and decide to start wearing bulletproof vests. At the same time, the price of ceramics used to produce the vests falls. The equilibrium price of bulletproof vests _____ and the equilibrium quantity produced _____.

probably changes, but in an ambiguous direction; increases

Rice and potatoes are substitutes in consumption. If the price of rice rises and there is a bumper crop of potatoes, in the market for potatoes one would expect the equilibrium price to _____ and the equilibrium quantity to _____.

rise, fall, or stay the same; rise

Figure: The Demand and Supply of Wheat Reference: Ref 3-6 (Figure: The Demand and Supply of Wheat) Look at the figure The Demand and Supply of Wheat. If a price of $8 temporarily exists in this market, a _____ of _____ bushels will result.

surplus; 4,000

The market for soybeans is initially in equilibrium. Because of mad cow disease, producers decide to replace bone meal with soybeans in cattle feed. The likely effect is that:

the equilibrium price and quantity of soybeans will rise.

The market for milk is initially in equilibrium. Milk producers successfully advertise to encourage milk drinking. At the same time, more milk producers enter the market. Standard demand and supply analysis tells us that:

the equilibrium quantity of milk will rise, but we can't determine how the equilibrium price will be affected.

It is certain that the equilibrium quantity will rise when:

the supply curve and the demand curve both shift to the right.

High-fructose corn syrup, which is derived from corn, is an important ingredient in the production of many soft drinks. If the price of corn increases, one would expect:

the supply curve for soft drinks to shift left.

Market equilibrium occurs when:

there is no incentive for prices to change in the market, quantity demanded equals quantity supplied, and the market clears.

Figure: The Supply of DVD Rentals Reference: Ref 3-2 (Figure: The Supply of DVD Rentals) Look at the figure The Supply of DVD Rentals. A decrease in the price of DVD rentals would result in a change illustrated by the move from:

u to v in panel D.

How would each of the following events affect the demand for new textbooks? I. The price of a used textbook rises. II. The price of college tuition rises. III. More high school graduates decide to attend college.

My answer: "Use your own words to describe" 1. The used textbooks will substitute commodities of new textbooks, this will cause a rise in the price of used textbooks which will lead to an increase in the demand for new textbooks. 2. With the increase of college tuition this will affect the rising price of used text books and as a result complement new textbooks. Since student purchase textbooks as a direct result of being enrolled in classes and they purchase text books that will help them with their studies, in increase in college tuition will lead to a fall in the demand for student enrolling in college. So overall the demand for next textbooks will fall in price. 3. An increase in the demand for college education will lead to an increase in the demand for new textbooks since they are complementary commodities.

In the following situation, the market is initially in equilibrium. Explain the change in either supply or demand that result from the event. After the event described below, does a surplus or shortage exist at the original equilibrium price? What will happen to the equilibrium price as a result? After a heavy snowfall, many people want to buy second-hand snowblowers at the local tool shop.

Not (incorrect) - The demand curve for second-hand snowblowers shifts leftward. At the original equilibrium price, the quantity of second-hand snowblowers demanded exceeds the quantity supplied. This is a case of shortage. The equilibrium price of second-hand snowblowers will rise.

Figure: The Market for Candy Reference: Ref 3-20 (Figure: The Market for Candy) Look at the figure The Market for Candy. A surplus of the good will exist at a price of:

P1.

Figure: Shifts in Demand and Supply Reference: Ref 3-10 (Figure: Shifts in Demand and Supply) Look at the figure Shifts in Demand and Supply. The figure shows how supply and demand might shift in response to specific events. Suppose a fall frost destroys one-third of the nation's orange crop. Which panel BEST describes how this will affect the market for oranges?

Panel B

Figure: Shifts in Demand and Supply IV Reference: Ref 3-13 (Figure: Shifts in Demand and Supply IV) Look at the figure Shifts in Demand and Supply IV. The figure shows how supply and demand might shift in response to specific events. Suppose half of the people in San Diego move to Colorado Springs. Which panel BEST describes how this will affect the market for houses in Colorado Springs?

Panel B

Figure: Shifts in Demand and Supply Reference: Ref 3-10 (Figure: Shifts in Demand and Supply) Look at the figure Shifts in Demand and Supply. The figure shows how supply and demand might shift in response to specific events. Suppose scientists discover that eating a tomato a day prevents aging. Which panel BEST describes how this will affect the market for tomatoes?

Panel C

Reference: Ref 3-19 (Table: Competitive Market for Good Z) Look at the table Competitive Market for Good Z. If the demand curve for good Z is linear, it can be expressed as:

Qd = 50 - 2P.

Consider the market for iPods. What happens if a fantastic new alternative MP3 player is developed and at the same time a boat carrying a large shipment of iPods is attacked by pirates and sunk?

The change in price is indeterminate and quantity decreases.

Consider the market for corn. What happens if there is an increased demand for corn tortillas and at the same time a new corn seed becomes available that dramatically increases the yield per acre?

The change in price is indeterminate; quantity increases.