Problem Set 5

Suppose the demand for smartwatches increases rapidly during​ 2016. At the same​ time, six more firms begin producing smartwatches. A student remarks​ that, because of these​ events, we​ can't know for certain whether the price of smartwatches will rise or fall. The​ student's remarks​ (that, because of these​ events, we​ can't know for certain whether the price of smartwatches will rise or​ fall) is ...

Correct. When there is an increase in supply and an increase in​ demand, the new equilibrium quantity increases but whether the equilibrium price increases or decreases is unknown.

Let D​= ​demand, S​ = supply, P​ = equilibrium​ price, and Q​= equilibrium quantity. What happens in the market for walnuts if the Centers for Disease Control and Prevention announces that consuming a half cup of walnuts each week helps to lower bad levels of​ cholesterol?

D​ increases, S no​ change, P and Q increase

Let​ D= demand, S​ = supply, P​ = equilibrium​ price, and​ Q= equilibrium quantity. What happens in the market for tropical hardwood trees if the governments restrict the amount of forest lands that can be​ logged?

S​ decreases, D no​ change, P​ increases, Q decreases.

Positive technological change in the production of LCD televisions caused the price of LCD televisions to fall. Holding everything else​ constant, how would this affect the market for Blu−ray players​ (a complement to LCD​ televisions)?

The demand for Blu−ray players would increase and the equilibrium price of Blu−ray players would increase.

An increase in input costs in the production of electric automobiles caused the price of electric automobiles to rise. Holding everything else​ constant, how would this affect the market for gasoline−powered automobiles​ (a substitute for electric​ automobiles)?

The demand for gasoline−powered automobiles would increase and the equilibrium price of gasoline−powered automobiles would increase.

The demand for grapes is highest during summer and lowest during winter. Yet grape prices are normally lower in summer than in winter. What must be happening to the supply of grapes​, from winter to​ summer, for the equilibrium price to​ fall?

The supply increases more than the demand increases.

Which of the following would cause both the equilibrium price and equilibrium quantity of cotton​ (assume that cotton is a normal​ good) to​ increase?

an increase in consumer income

Complete the following​ statement: "When there is a shortage of a good

consumers compete against one another by bidding the price upward.

When economists speak of a shortage​, they mean a situation in which... a. the market price is below the equilibrium price. b. the quantity demanded exceeds quantity supplied. c. some consumers are unable to make a purchase at the current price. d. all of the above

d. all of the above

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

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.

According to an article in the Wall Street Journal​, the demand for orange juice is declining in the United States​ "as newer entrants in the beverage​ aisle, including​ more-exotic fruit​ juices, such as​ pomegranate, energy drinks and​ ready-to-drink coffee, have grabbed a greater share of the​ market." At the same​ time, orange juice production has been declining as bacterial infections reduce the quantity of fruit that orange trees can produce. The article notes that despite the decline in the demand for orange​ juice, the price of orange juice might increase. Given the scenario described in the​ article, the price of orange juice could increase if...

demand decreased less than the supply decreased.

Suppose that oil prices sharply​ increase, while more cities pass laws banning the use of plastic bags at stores.​ (Oil is an input into the production of plastic​ bags.) The new equilibrium price of plastic bags will... The new equilibrium quantity of plastic bags will ...

depend on the relative shifts of demand and supply; be lower than the initial equilibrium quantity of plastic bags.

If the market price ​'Pmkt​' is above the price ​'P0​', then quantity supplied is _____ quantity demanded and the market is in _____.

greater than; surplus

A news story from 2015 about the oil market​ stated, "the global glut of crude that has hit​ [oil] prices is starting to​ shrink." In referring to a​ "global glut of​ crude," the article describes the result of a significant... This change resulted in a... In response to the global glut of​ oil, the market price will... The glut will start to shrink when crude oil producers...

increase in supply​ of, relative to the demand​ for, crude oil; a surplus of oil such that there is a greater quantity supplied than quantity demanded for crude oil; fall to a​ new, lower equilibrium price at which the quantity demanded would equal the quantity supplied; reduce the amount that they offer for​ sale, and buyers increase the amount they buy.

If a market is in equilibrium​, is it necessarily true that all potential buyers and sellers are satisfied with the market​ price?

no

Assume that the hourly price for the services of tarot card readers has risen and sales of these services have also risen. One can conclude that

the demand for tarot card readers has increased

In​ 2004, hurricanes destroyed a large portion of​ Florida's orange and grapefruit crops. In the market for citrus​ fruit,

the supply curve shifted to the left resulting in an increase in the equilibrium price.