Chapter 4 homework
In the last month, the price of gasoline increased substantially and your job is to determine whether the increase is due to a change in demand or a change in supply. a. Which of the following questions would you ask to make your determination? b. A demand-driven increase in the price of gasoline occurs when demand ___________, which shifts the demand curve to the ____________. c. A supply-driven increase in the price of gasoline occurs when supply __________________ , which shifts the supply curve to the _____________
a. ALL OF THESE:. Did wages paid to oil refinery workers increase? Did the equilibrium quantity increase or decrease? Did the price of cars fall substantially? b. increases; right c. decreases; left
Which of the following statements is true?
If the equilibrium price and quantity move in the same direction, the changes were caused by a change in demand.
Over the past few years, the price of used organs (livers, kidneys, and hearts) in the United States has increased dramatically. Which of the following is a possible explanation for the price increase?
The U.S. government banned imported organs AND demand for used organs is increasing.`
When the price of a standard urban loft increases from $160,000 to $175,000, a building company increases its production of lofts from 20 lofts per year to 21 lofts per year. What does this increase in the price of housing reveal about the cost of producing housing?
The building company will only produce the 21st loft if the marginal benefit from producing it exceeds the marginal cost.
Which of the following statements is true?
When demand and supply both increase, the equilibrium quantity will increase.
Consider the market for used cars. In 2008, the price of gas rose while the price of used full-size SUVs dropped. The effect of a higher gasoline price on the market for used full size SUVs would be ________________
a decrease in the demand for the SUVs
In 2007, the price of milk increased by roughly 10 percent while the quantity consumed decreased. These changes in price and quantity can be explained by
a decrease in the supply of milk.
Suppose that in initial equilibrium in the soybean market, each of the 1,000 farmers produces 50 units, for a total of 50,000 units of soybeans. Suppose the price of soybeans increases, and everyone expects the price to stay at the higher level for many years. a. Over a period of several years, we expect the quantity of soybeans supplied to ________ as the number of soybean farmers __________ and the output per farmer ______ b. A farmer who enters the market is likely to have a _____ marginal cost of production than an original firm.
a. ↑; ↑; ↑ b. higher
Consider the effects of relaxing a minimum-price policy by allowing the price to decrease and narrow the gap between the controlled price and the equilibrium price . The controlled price before relaxing a minimum-price policy is set ______ the equilibrium price The new price after relaxing a minimum-price policy is set __________the initial controlled price. Relaxing a minimum-price policy by allowing the price to decrease will _________________
above, below, reduce the excess supply.
As summer approaches, the equilibrium price of rental cabins increases and the equilibrium quantity of cabins rented increases. This is possible due to __________________________ for cabin rentals during the summer.
an increase in demand
The quantity of the product purchased _____________ as we draw the market demand curve
changed
The price of a product __________ as we draw the market demand curve
changes
The harmattan (dry wind) _____________ the supply of cocoa from West Africa and ___________ the world price of cocoa
decreases, increases
The law of ________ says there is a negative relationship between price and quantity demanded, ceteris paribus.
demand
Taxes paid by producers are _____________ when drawing a market supply curve
held fixed
The price of materials used in production is __________ when drawing a market supply curve
held fixed
Wages paid to workers are ___________ when drawing a market supply curve
held fixed
The market demand curve is the ____________ sum of the individual demand curves
horizontal
Consumer income _______ as we draw the market demand curve
is held fixed
A change in quantity demanded causes a ___________ the demand curve
movement along
The price of the product is __________ when drawing a market supply curve
not held fixed
The quantity of the good produced is ____________ when drawing a market supply curve
not held fixed
Consider the market for flashlights from the Atlantic Company. If the price of materials used to make flashlights drops, the supply curve for flashlights will shift to the ______________
right
An increase in the supply of a product shifts the supply curve to the __________________. At the initial price, there will be an excess ______________. Producers are willing to sell ___________ than consumers are willing to buy and there is ________ pressure on the price. The new equilibrium price is ________________ the initial price and the new equilibrium quantity is ______________ the initial quantity.
right; supply; more; downward; below; above
Consider the market for fast food restaurant meals. If consumer income decreases, and fast food restaurant meals are inferior goods, then the demand curve for fast food restaurant meals will shift to the _____________ As a result of the change in consumer income, the equilibrium price of fast food meals will __________ and the equilibrium quantity of fast food meals will ___________________
right; increase; increase
Consider the market for pecans. Assume that the initial equilibrium price is $6 per pound. The increase in demand for pecans from Chinese consumers will shift the market demand curve for pecans to the ________________ As Chinese consumers demand more pecans, ________________
right; the price and quantity of pecans rises.
A change in demand causes a _____________ the demand curve
shift of
The law of ________ says there is a positive relationship between price and quantity demanded, ceteris paribus.
supply
Consider the market for fish. If a $1.00 per pound tax is levied on fish producers, the ________ for fish will shift to the ________ If the demand curve for fish is negatively sloped, then such a change will __________the equilibrium price, and the equilibrium quantity will ____________
supply curve; fall; increase; fall
Suppose an unusually long harmattan (dry wind) increases cocoa prices, increasing the cost of producing chocolate ice cream by 10 percent. a. An increase in the cost of producing chocolate ice cream shifts the ______________ for chocolate ice cream to the ________ b. The equilibrium price of chocolate ice cream__________ and the equilibrium quantity _____________
supply curve; left; increases; decreases
The Happy Corn Company produces canned corn grown in its fresh fields. The government has recently announced a higher subsidy to corn producers. The effect of a higher subsidy to corn producers will shift the Happy Corn Company's ____________ to the _________ In this case, the equilibrium price will __________
supply curve; right; fall
A change in price causes movement along a supply curve and a change in
the quantity supplied
A decrease in supply occurs when
the supply curve shifts left because a variable other than the price of the product changed.
An increase in supply occurs when
the supply curve shifts right because a variable other than the price of the product changed.
The market supply curve is positively sloped because a higher price
will encourage firms with higher costs to enter the market.
A shift of the demand curve, also called a change in
demand, will occur when a variable other than the price of the product changes.
Consider the market for new full-size SUVs. An increase in gas prices will shift the market __________ curve for new full-size SUVs to the _____________ If the supply curve for full-size SUVs is positively sloped, the equilibrium price of a full-size SUV will _____________ and the equilibrium quantity will ______________
demand; left; fall; fall
Consider the market for private college education. If tuition at public colleges increases., what will happen in the market for private college education? The market ____________ curve of private colleges will shift to the _________ As a result, the equilibrium price of private colleges will _________ and the equilibrium quantity of private education will _____________
demand; right; increase; increase
Consider the market for tickets to a Major League Baseball franchise. The supply curve for tickets is positively sloped and the demand curve for tickets is negatively sloped. To boost attendance, the franchise signed the game's biggest star to a multi-year contract. As a result of signing the game's biggest star, the _________ curve for tickets shifts to the ___________, ____________ the equilibrium price of tickets
demand; right; increasing
When the quantity demanded exceeds the quantity supplied, there is excess ___________ causing a ___________ that will drive __________ the price
demand; shortage; up
The individual supply curve is positively sloped because a higher price
encourages a firm to increase its output by purchasing more materials and hiring more workers.
Suppose the equilibrium price of housing recently increased and the equilibrium quantity increased as well. These changes were caused by a(n) _______ in ________
increase; demand
The market demand curve for a normal good will shift to the right when the price of a substitute good _______, the price of a complementary good _________, consumer income ___________, and population ________________
increases; decreases; increases; increases
Assume that in Canada the initial price of a cigarette is $6 and the initial quantity is 100 units. As a result of a change in cigarette taxes in Canada, the price of cigarettes in the provinces decreased by 50 percent and this lower price increased the smoking rate by 17 percent. The decrease in price results in a new equilibrium point on the ______________ The new equilibrium price is ____________ and the new equilibrium quantity is ___________ units.
initial demand curve; $3, 117
Assume that the initial price of wool in New Zealand is $20 per unit and the initial quantity is 100 units. In the 1990s, the world price of wool decreased by 30 percent. Assume that for each 1 percent decrease in price, the quantity supplied decreases by 1 percent. In the 1990s, the 30 percent decrease in the price of wool results in a new equilibrium point on the __________________ The new equilibrium price is ____________ per unit and the new equilibrium quantity supplied is __________ units.
initial supply curve; $14. 70
Consumer income _________ in drawing a market demand curve
is held fixed
The price of other related goods _________ as we draw the market demand curve
is held fixed
The price of other related goods ____________ in drawing a market demand curve
is held fixed
The price of a product _______________ in drawing a market demand curve
is not held fixed
The quantity of the product purchased ______________ in drawing a market demand curve
is not held fixed
A decrease in the supply of a product shifts the supply curve to the ________. At the initial price, there will be an excess ______. Producers are willing to sell _______ than consumers are willing to buy and there is _________ pressure on the price. The new equilibrium price is ________ the initial price and the new equilibrium quantity is __________ the initial quantity.
left; demand; less; upward; above; below
A decrease in the demand for a product shifts the demand curve to the __________. At the initial price, there will be an excess ________. Producers are willing to sell _________ than consumers are willing to buy and there is a _____________ pressure on the price. The new equilibrium price is _____ the initial price and the new equilibrium quantity is _______ the initial quantity
left; supply; more; downwards; below; below
Excess demand occurs when the price is ______ the equilibrium price; excess supply occurs when the price is ______ the equilibrium price.
less than; greater than
The minimum supply price is the_______ price at which a product is supplied. For a positively sloped supply curve, the minimum supply price is the price at which the supply curve intersects the _______ axis.
lowest; vertical
Suppose that the initial equilibrium price of a pizza is $9 and that the initial quantity exchanged is 30 thousand pizzas per month. A technological improvement that decreases the cost of producing pizza will shift the ____________ to the ____________ Consider a negatively sloped demand curve for pizza. As a result of the technological improvement, the price of pizza will be ___________ the original price of $9, and the quantity exchanged will be __________________ the original equilibrium quantity of 30 thousand pizzas per month.
supply curve; right; less than; greater than
Suppose that the initial price of a mobile phone is $100 and that the initial quantity exchanged is 500 phones per day.. A technological improvement that decreases the cost of producing mobile phones will shift the ____________ to the ___________. Consider a negatively sloped demand curve for mobile phones. As a result of the technological improvement, the price of mobile phones will be ______________ he original price of $100, and the quantity of phones exchanged will be ________________ the original equilibrium quantity of 500 phones per day.
supply curve; right; less than; greater than
A shift of the supply curve, also called a change in
supply, will occur when a variable other than the price of the product changes.
Consider the market for shoes in a nation that initially imports half of the shoes it consumes. A ban on shoe imports will shift the market ____ curve to the ______ As a result of the change, the equilibrium price will ____________ and the equilibrium quantity exchanged will ___________
supply; left; increase; decrease
Suppose a freeze in Florida destroys 20% of the orange crop. The freeze in florida will shift the market _______ curve for oranges to the ______. As a result of the change, the equilibrium price ___________ and the equilibrium quantity of Florida oranges ___________________
supply; left; increased; decreased
Suppose there is an increase in the wage paid to pizza workers. The increase in the wage will shift the market ___________ curve for pizza to the _________ As a result of the change, the equilibrium price ________ and the equilibrium quantity of pizza ____________
supply; left; increased; decreased
Consider the market for raspberries. Suppose a new law outlaws the use of foreign farm workers on raspberry farms, and the wages paid to farm workers increase as a result. The higher wages paid to farm workers will shift the market ________ curve for raspberries to the _________ The equilibrium price of raspberries will ________ and the equilibrium quantity of raspberries will ___________
supply; left; increase; decrease
When the quantity supplied exceeds the quantity demanded, there is excess ___________ causing a _________ that will drive _________ the priceq
supply; surplus; down
A decrease in demand occurs when
the demand curve shifts left because a variable other than the price of the product changed.
An increase in demand occurs when
the demand curve shifts right because a variable other than the price of the product changed.
The market demand curve is
the horizontal sum of the individual demand curves.
Between 1990 and 2003, the price of heroin decreased from $235 per gram to $76 per gram. Over the same period, the quantity of heroin consumed increased from 376 metric tons to 482 metric tons. The effect of this price change on the quantity of heroin consumed is likely the result of
an increase in the supply of heroin
Two nations supply sugar to the world market. Lowland has a minimum supply price of 45 cents per pound. Highland has a minimum supply price of 40 cents per pound. For each nation, the slope of the supply curve is one cent per million pounds Both the nations have ______________ sloping supply curve When the price of sugar in Lowland is 50 cents, the quantity of sugar supplied by Lowland is ___________ million pounds. When the price of sugar in Highland is 46 cents, the quantity of sugar supplied by Highland is ______ million pounds.
an upward; 5; 6
Consumer expectations about future prices ________ as we draw the market demand curve
are held fixed
Consumer expectations about future prices ___________ in drawing a market demand curve
are held fixed