chapter 4
In the market for TVs, the equilibrium price is $500 and the equilibrium quantity is 10,000. What would occur at a price of $600 per TV, assuming nothing in the market changes? A surplus would be created, and quantity supplied would exceed quantity demanded. A surplus would be created, and quantity demanded would exceed quantity supplied. A shortage would be created, and quantity demanded would exceed quantity supplied. A shortage would be created, and quantity supplied would exceed quantity demanded.
A surplus would be created, and quantity supplied would exceed quantity demanded.
Dr. Larson is a professor at a state university. He is known for being tough but fair in his grading, and rarely gives out A's on his assignments. Considering that Dr. Larson is on the supply side and his students are on the demand side, why is it so difficult to attain an A? Demand is high, so price is low. Demand is low, so price is high. Demand is high, so price is high. Price stays stagnant regardless of demand.
Demand is high, so price is high.
A guitar manufacturer finds a cheaper source for wood in the production of their electric guitars. During this time, a sharp decrease occurs in the popularity of rock music in favor of electronic dance music created using computers. What effect will this have on price and quantity? Price falls; the change in quantity is unknown. Price rises; quantity rises. Price falls; quantity falls. Price rises; the change in quantity is unknown.
Price falls; the change in quantity is unknown.
Both of these shifts lower the equilibrium quantity
The effect on the price is a bit trickier: While the first shift (the decrease in demand) suggests the price will fall, the second shift (the decrease in supply) suggests it will rise.
If prices are rising, what can be stated about the observed market? The quantity supplied is equal to the quantity demanded. The quantity demanded is not affecting the quantity supplied. The quantity supplied exceeds the quantity demanded. The quantity demanded exceeds the quantity supplied.
The quantity demanded exceeds the quantity supplied.
Marco owns a shoe store. He recently stocked a style of shoe that he decides to sell for $200 when all other vendors are selling them for $250. Marco is surprised when he quickly sells his entire stock of the shoe. What situation has Marco created? a secondary market a bundle a surplus a shortage
a shortage
A market is any setting that brings together potential _____ and _____. planners; couriers sellers; equilibrium buyers; sellers buyers; equilibrium
buyers; sellers
A dust storm destroys the majority of a farmer's peanut crop, causing him to raise the price of his peanut butter. What kind of shift does this create in the market for bread, a complement to peanut butter? decrease in supply increase in demand increase in supply decrease in demand
decrease in demand
If McDonald's lowers the price of its Big Mac, it will _____ the demand for Burger King's Whopper because the two products are _____ of one another. decrease; substitutes increase; complements increase; substitutes decrease; complements
decrease; substitutes
Which of these LEAST describes an example of bundling? - paying for valet parking at a restaurant instead of waiting for an open spot - getting a discounted price on the newest iPhone, only by purchasing a second charger and a case - going out to dinner and eating the complimentary bread - paying for premier parking at Disney world
going out to dinner and eating the complimentary bread
Mrs. Johnson decides that she is going to create her own country. She determines that she will be in charge of all production matters because she knows how to do things more efficiently than anybody else. What kind of economy has Mrs. Johnson effectively created? planned auction market stock
planned
A setting bringing together potential buyers (demanders) and sellers (suppliers)
market
In the market for TVs, the equilibrium price is $500 and the equilibrium quantity is 10,000. What would occur at a price of $400 per TV assuming nothing in the market changes? A surplus would be created, and quantity demanded would exceed quantity supplied. A shortage would be created, and quantity supplied would exceed quantity demanded. A surplus would be created, and quantity supplied would exceed quantity demanded. A shortage would be created, and quantity demanded would exceed quantity supplied.
A shortage would be created, and quantity demanded would exceed quantity supplied.
In the market for grades, the professor is on the _____ side. supply market auction demand
supply
Three symptoms of a market in disequilibrium: Queuing Bundling of extras A secondary market
Queuing Bundling of extras A secondary market
Deja is in the market for a new computer. She decides to buy an imported one from a Japanese company. What market has Deja just been involved with? the stock market the foreign exchange market the banking market the auction market
the foreign exchange market
Recall that the demand curve presents your marginal benefit curve. With this in mind, and with no change in the availability of water, why is it that your willingness to pay for water is relatively small compared to other, nonessential goods? Because your water consumption is based on marginal benefit, not total benefit. Because most people prefer other alternatives. Because consumption has no effect on price. Because your water consumption is based on total benefit, not marginal benefit.
Because your water consumption is based on marginal benefit, not total benefit.
Krishan goes to a local bank to make a deposit in his savings account. While there, he considers the principles of economics that he has been learning at the university. He concludes that in this situation he is a supplier of credit. How is this so? The bank is now more trusting of him, because he has more money stored with them. He is now able to apply for a credit card, which means he is supplying credit. He can now link his savings and checking accounts to start building credit. He is supplying the bank with his savings, which the bank will in turn lend out to other borrowers.
He is supplying the bank with his savings, which the bank will in turn lend out to other borrowers.
Which of these is correct about the market for red delicious apples? It is perfectly competitive, because there are few buyers of identical goods. It is perfectly competitive, because an identical good is being sold. It is a planned economy, because a centralized power is dictating all production factors. It is perfectly competitive, because different goods are being sold.
It is perfectly competitive, because an identical good is being sold.
three-step recipe that will help you predict real-world market outcomes.
Step 1: Determine which curve is shifting (supply, demand, or both). - Remember that any change affecting buyers or their marginal benefits will shift the demand curve, - while any change affecting sellers or their marginal costs will shift the supply curve. Step 2: Determine if it's an increase, shifting the curve to the right, or a decrease, shifting the curve to the left. - An increase in marginal benefit is an increase in demand, - while an increase in marginal cost creates a decrease in supply. Step 3: Determine how prices and quantities will change in the new equilibrium. Compare the old equilibrium with the new equilibrium.
A clothing manufacturer finds a cheaper supplier of wool for their winter coats. At the same time, the winter months are coming up. What effect will this have on price and quantity? Price rises; the effect on quantity is unknown. The effect on price is unknown; quantity rises. Price falls; quantity falls. The effect on price is unknown; quantity falls.
The effect on price is unknown; quantity rises.
If prices are falling, what can be stated about the observed market? The quantity supplied exceeds the quantity demanded. The quantity demanded is not affecting the quantity supplied. The quantity supplied is equal to the quantity demanded. The quantity demanded exceeds the quantity supplied.
The quantity supplied exceeds the quantity demanded.
Jose works at a cellular service provider. He often offers people discounts if they also agree to buy a case and an extra charger from him. Given that Jose had to do this to sell phones, what can be said about the market? Please choose the correct answer from the following choices, and then select the submit answer button. It is in equilibrium. Quantity demanded exceeds quantity supplied. There is a shortage. There is a surplus.
There is a surplus.
If the equilibrium price is $20 for a flu shot, what will happen if pharmacies try to sell it at $100 per flu shot when nothing else has changed in the market? There will be a surplus. A new equilibrium price will be established. There will be a shortage. Nothing as the market is still in equilibrium.
There will be a surplus.
Julie's family is preparing for their Fourth of July cookout, so they head to the local grocery store. Among the pandemonium they are able to obtain everything on their shopping list, including hot dogs and hamburgers. In the market for hamburgers, the Fourth of July creates an increase in the _____ for hamburgers and a(n) _____ in the equilibrium price and quantity of hamburgers. supply; increase demand; decrease demand; increase supply; decrease
demand; increase
The equilibrium quantity occurs when the quantity _____ and quantity _____ are equal. shorted; supplied demanded; found hidden; found demanded; supplied
demanded; supplied
Malik is a local politician running for governor in his state. What role does Malik play in the market for votes? market demander borrower organizer
demander
A taxi company finds success in its city of operation. Due to this success, a new company comes into town to try and compete with the original company. What has the inclusion of this new company created, and what shift will it cause in the market? increased number of sellers; increase in supply decreased input price; increase in supply increased number of consumers; increase in demand decreased price of complement goods; decrease in demand
increased number of sellers; increase in supply
planned economies
like Cuba and the former Soviet Union (and, to a lesser degree, China). Centralized decisions are made about what is produced, how, by whom, and who gets what.
Mr. Lu decides that he is going to create his own country. He determines that production matters will be determined by the individuals in the market as far as all production and consumption decisions go. What kind of economy has Mr. Lu effectively created? auction planned stock market
market
market economies
of North America, Europe, and Australia are organized around markets. Each individual makes their own production and consumption decisions, buying and selling in markets.
Jamal is an engineer working at a large lithium-ion battery production facility. He recently made a breakthrough causing the production cost of lithium-ion batteries used in smartphones to go down. In the market for smartphones, this innovation will cause the equilibrium quantity to _____ and the equilibrium price to _____. rise; rise fall; fall fall; rise rise; fall
rise; fall
You might end up with the answer "it depends" for either price or quantity when there is a: leftward shift in the supply curve only in a market. rightward shift in the demand curve only in a market. shift in both the supply and demand curves with a larger rightward shift in supply. shift in both the supply and demand curves and you don't know which shift is bigger.
shift in both the supply and demand curves and you don't know which shift is bigger.
