Economics Homework 2

Refer to Figure 4-4. What is the value of consumer surplus at a price of $18? A) $60 B) $120 C) $180 D) $240

A

Refer to Figure 3-4. At a price of $10, how many units will be sold? A) 200 B) 400 C) 600 D) 800

A

Refer to Figure 3-8. The graph in this figure illustrates an initial competitive equilibrium in the market for apples at the intersection of D1 and S1 (point A). If the price of oranges, a substitute for apples, decreases and the wages of apple workers increase, how will the equilibrium point change? A) The equilibrium point will move from A to E. B) The equilibrium point will move from A to B. C) The equilibrium point will move from A to C. D) The equilibrium will first move from A to B, then return to A.

A

Refer to Figure 4-1. If the market price is $1.00, what is the consumer surplus on the third burrito? A) $0.50 B) $1.00 C) $1.50 D) $7.50

A

Refer to Figure 4-4. What is the value of producer surplus at a price of $18? A) $240 B) $300 C) $340 D) $720

A

Refer to Figure 4-4. What is the value of the deadweight loss at a price of $18? A) $100 B) $180 C) $660 D) $1,040

A

Prices of California Merlot wine (assume that this is a normal good) have risen steadily in recent years. Over this same period, prices for French oak barrels used for wine storage have dropped and consumer incomes have risen. Which of the following best explains the rising prices of California Merlots? A) The supply curve for Merlot has shifted to the right while the demand curve for Merlot has shifted to the left. B) The demand curve for Merlot has shifted to the right more than the supply curve has shifted to the right. C) The demand curve and the supply curve for Merlot have both shifted to the left. D) The supply curve for Merlot has shifted to the right more than the demand curve has shifted to the right.

B

Refer to Figure 3-2. A decrease in the price of the product would be represented by a movement from A) A to B. B) B to A. C) S1 to S2. D) S2 to S1.

B

Refer to Figure 3-4. If the price is $10 A) there would be a surplus of 600 units. B) there would be a shortage of 600 units. C) there would be a surplus of 200 units. D) there would be a shortage of 200 units.

B

Refer to Figure 3-7. Assume that the graphs in this figure represent the demand and supply curves for women's clothing. Which panel best describes what happens in this market when the wages of seamstresses rise? A) Panel (a) B) Panel (b) C) Panel (c) D) Panel (d)

B

Refer to Figure 3-8. The graph in this figure illustrates an initial competitive equilibrium in the market for apples at the intersection of D2 and S1 (point C). Which of the following changes would cause the equilibrium to change to point B? A) a positive change in the technology used to produce apples and decrease in the price of oranges, a substitute for apples B) an increase in the wages of apple workers and an increase in the price of oranges, a substitute for apples C) an increase in the number of apple producers and a decrease in the number of apple trees as a result of disease D) a decrease in the wages of apple workers and an increase in the price of oranges, a substitute for apples

B

Refer to Table 4-3. The table above lists the marginal cost of cowboy hats by The Waco Kid, a firm that specializes in producing western wear. If the market price of cowboy hats is $35, The Waco Kid will produce A) 1 hat. B) 2 hats. C) 3 hats. D) 4 hats.

B

An article in the Wall Street Journal in early 2001 noted two developments in the market for laser eye surgery. The first development concerned side effects from the surgery, including blurred vision. The second development was that the companies renting eye-surgery machinery to doctors had reduced their charges. In the market for laser eye surgeries, these two developments A) decreased demand and decreased supply, resulting in a decrease in the equilibrium quantity and an increase in the equilibrium price of laser eye surgeries. B) decreased demand and increased supply resulting in an increase in both the equilibrium quantity and the equilibrium price of laser eye surgeries. C) decreased demand and increased supply, resulting in a decrease in the equilibrium price and an uncertain effect on the equilibrium quantity of laser eye surgeries. D) decreased demand and increased supply, resulting in a decrease in both the equilibrium price and the equilibrium quantity of laser eye surgeries.

C

Hurricane Katrina damaged a large portion of refining and pipeline capacity when it swept through the Gulf coast states in August 2005. As a result of this, many gasoline distributors were not able to maintain normal deliveries. At the pre-hurricane equilibrium price (i.e., at the initial equilibrium price), we would expect to see A) a surplus of gasoline. B) the quantity demanded equal to the quantity supplied. C) a shortage of gasoline. D) an increase in the demand for gasoline.

C

Refer to Figure 4-1. If the market price is $1.00, what is Arnold's consumer surplus? A) $1.00 B) $2.00 C) $3.00 D) $7.00

C

Refer to Table 4-3. The table above lists the marginal cost of cowboy hats by The Waco Kid, a firm that specializes in producing western wear. If the market price of The Waco Kid's cowboy hats is $40 A) The Waco Kid will produce four hats. B) producer surplus from the first hat is $40. C) producer surplus will equal $28. D) there will be a surplus; as a result, the price will fall to $24.

C

Studies have shown that smoking cigarettes can cause heart disease. Assume this is new information recently shared with the public, and favorable weather has increased the tobacco harvest in North Carolina. In the market for cigarettes, these two developments would A) decrease demand and decrease supply, resulting in an increase in the equilibrium quantity and a decrease in the equilibrium price of cigarettes. B) increase demand and increase supply resulting in an increase in the equilibrium quantity and an uncertain effect on the equilibrium price of cigarettes. C) decrease demand and increase supply, resulting in a decrease in the equilibrium price and an uncertain effect on the equilibrium quantity of cigarettes. D) decrease demand and increase supply, resulting in an increase in both the equilibrium price and the equilibrium quantity of cigarettes.

C

Lucinda buys a new GPS system for $250. She receives consumer surplus of $75 from the purchase. What value does Lucinda place on her GPS system? A) $75 B) $175 C) $250 D) $325

D

Olive oil producers want to sell more olive oil at a higher price. Which of the following events would have this effect? A) an increase in the price of olive oil presses B) a decrease in the cost of transporting olive oil to markets C) an increase in the price of land used to plant olive trees D) research finds that consumption of olive oil reduces the risk of heart disease

D

Refer to Figure 3-2. An increase in the price of substitutes in production would be represented by a movement from A) A to B. B) B to A. C) S1 to S2. D) S2 to S1.

D

Refer to Figure 3-7. Assume that the graphs in this figure represent the demand and supply curves for Fruitopia, a soft drink. Which panel describes what happens in the market for Fruitopia when the price of Snapple, a substitute product, decreases? A) Panel (a) B) Panel (b) C) Panel (c) D) Panel (d)

D

Refer to Figure 3-7. Assume that the graphs in this figure represent the demand and supply curves for ramen noodles, an inferior good. Which panel describes what happens in this market as a result of an increase in income? A) Panel (a) B) Panel (b) C) Panel (c) D) Panel (d)

D

Refer to Figure 4-2. What area represents the increase in producer surplus when the market price rises from P1 to P2? A) B+D B) A + C + E C) C + E D) A + B

D

What is the difference between an "increase in supply" and an "increase in quantity supplied"? A) There is no difference between the two terms; they both refer to a shift of the supply curve. B) There is no difference between the two terms; they both refer to a movement along a given supply curve. C) An "increase in supply" means the supply curve has shifted to the right while an "increase in quantity supplied" means at any given price supply has increased. D) An "increase in supply" means the supply curve has shifted to the right while an "increase in quantity supplied" refers to a movement along a given supply curve in response to an increase in price.

D

Which of the following statements is true? A) If demand decreases and supply increases one cannot determine if equilibrium price will increase or decrease without knowing which change is greater. B) A decrease in supply causes equilibrium price to rise; the increase in price then results in a decrease in demand. C) If both demand and supply increase there must be an increase in equilibrium price; equilibrium quantity may either increase or decrease. D) An increase in supply causes a change in equilibrium price; the change in price does not cause a further change in demand or supply.

D