ECOM exam 3
what is the difference between an "increase in demand" and an "increase in quantity demanded"?
an "increase in demand" is represented by a rightward shift of the demand curve while an "increase in quantity demanded" is represented by a movement along a given demand curve
What is the difference between an "increase in supply ' and an "increase in quantity supplied"?
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
suppose that when the price of raspberries increases, Lonnie increases his purchases of papayas. To Lonnie,
raspberries and papayas are substitutes
The law of demand implies, holding everything else constant, that as the price of bagels increases,
the quantity of bagels demanded will decrease
The figure to the right represents the market for pecans. Assume that this is a competitive market. If the price of pecans is $9
the quantity suppled is greater than the economically efficient quantity
The income elasticity of demand measures
the responsiveness of quantity demanded to changes in income
The figure shows Arnold's demand curve for burritos. If the market price is $1.50, what is the consumer surplus on the second burrito?
$0.50
The figure shows Arnold's demand curve for burritos. If the market price is $1.50, what is the consumer surplus on the first burrito?
$1.00
The figure shows Arnold's demand curve for burritos. Arnold's marginal benefit from consuming the third burrito is
$1.50
The figure shows Arnold's demand curve for burritos. If the market price is $1.50, what is the consumer surplus?
$1.50
The figure shows the market for apartments in Springfield. Recently, the government imposed a rent ceiling of $1,000 per month. What is the value of the portion of producer surplus transferred to consumers as a result of the rent ceiling?
$100,000
The figure shows Arnold's demand curve for burritos. Arnold's marginal benefit from consuming the second burrito is
$2.00
Government intervention in agricultural markets in the U.S. began in the
1930s
Refer to the diagram to the right which shows the demand and supply curves for the almond market. The government believes that the equilibrium price is too low and tries to help almond growers by setting a price floor at Pf. What area represents the portion of consumer surplus that has been transferred to producer surplus as a result of the price floor?
B
Refer to the diagram to the right which shows the demand and supply curves for the almond market. The government believes that the equilibrium price is too low and tries to help almond growers by setting a price floor at Pf. What area represents producer surplus after the imposition of the prices floor?
B + E
A decrease in the price of the product would be represented by a change from
B to A
The figure to the right represents the market for pecans. Assume that this is a competitive market. If the price of pecans is $3
The quantity supplied is less than the economically efficient quantity
if the cross - price elasticity of demand for goods X and Y is negative, this means the two goods are
complements
---- is maximized in a competitive market when marginal benefit equals marginal cost
economic surplus
if the price is $10
there would be a shortage of 600 units
The graph at the right shows the market for tiger shrimp. The market is initially in equilibrium at a price of $15 and a quantity of 80. Now suppose producers decide to cut output to 40 in order to raise the price to $18. What is the value of producer surplus at the equilibrium price of $15?
$160
The figure shows the market for apartments in Springfield. Recently, the government imposed a rent ceiling of $1,000 per month. With rent control, the quantity supplied is 200 apartments. suppose apartment owners ignore the law and rent this quantity for the highest rent they can get. What is the highest rent they can get per month?
$2,000
The graph at the right shows the market for tiger shrimp. The market is initially in equilibrium at a price of $15 and a quantity of 80. Now suppose producers decide to cut output to 40 in order to raise the price to $18. What is the value of consumer surplus at the equilibrium price of $15?
$240
The graph at the right shows the market for tiger shrimp. The market is initially in equilibrium at a price of $15 and a quantity of 80. Now suppose producers decide to cut output to 40 in order to raise the price to $18. What is the value of producer surplus at a price of $18?
$240
The figure shows the market for apartments in Springfield. Recently, the government imposed a rent ceiling of $1,000 per month. Suppose that instead of a rent ceiling, the government imposed a price floor of $2,000 per month for apartments. What is the value of producer surplus after the imposition of the price floor?
$250,000
The figure shows the market for apartments in Springfield. Recently, the government imposed a rent ceiling of $1,000 per month. What is the value of consumer surplus after the imposition of the ceiling?
$250,000
The figure shows the market for apartments in Springfield. Recently, the government imposed a rent ceiling of $1,000 per month. Suppose that instead of a rent ceiling, the government imposed a price floor of $2,000 per month for apartments. What is the value of consumer surplus after the imposition of the price floor?
$50,000
in October, the market analysis predicts that the price of platinum will fall in November. What happens in the platinum market in October, holding everything else constant?
The supply curve shifts to the right
if the quantity demanded for a good rise as income rises then the income elasticity of demand for this good is ---- that 0, and the good is ---- good.
greater; a normal
A demand curve that is horizontal indicates that the commodity
has a larger number of substitutes
Which of the following could explain why the demand for table salt is inelastic?
households devote a very small portion of their income to salt purchases
price elasticity of demand measures
how responsive quantity demanded is to a change in price.
The demand for gasoline in the short run is
inelastic because there are no good substitutes for gasoline
If a good has a negative income elasticity of demand, this indicates that the good is
inferior
Economic surplus
is equal to the sum of consumer surplus and producer surplus.
The figure shows the market for apartments in Springfield. Recently, the government imposed a rent ceiling of $1,000 per month. What is the value of producer surplus after the imposition of the ceiling?
$50,000
The graph at the right shows the market for tiger shrimp. The market is initially in equilibrium at a price of $15 and a quantity of 80. Now suppose producers decide to cut output to 40 in order to raise the price to $18. What is the value of consumer surplus at a price of $18?
$60
Calculate the income elasticity if an 8 percent increase in income leads to a 4 percent increase in quantity demanded for organic produce.
0.5
if 50 units are sold at a price of $20 and 80 units are sold at a price of $15, what is the absolute value of the price elasticity of demand? use the midpoint formula.
1.62
suppose a hurricane decreases the supply of oranges roses from $120 a ton to $180 a ton and the quality sold decreased from 800 tons to 240 tons. What is the absolute value of the price elasticity of demand?
2..69
The figure shows the market for apartments in Springfield. Recently, the government imposed a rent ceiling of $1,000 per month. Suppose that instead of a rent ceiling, the government imposed a price floor of $2,000 per month for apartments. What is the quantity of apartments demanded at the new price?
200
at a price of $10, how many units will be sold
200
Refer to the diagram to the right which shows the demand and supply curves for the almond market. The government believes that the equilibrium price is too low and tries to help almond growers by setting a price floor at Pf. What area represents consumer surplus after the imposition of the prices floor?
A
Studies show that the income elasticity of demand for wine is approximately five. What does this mean?
A one percent increase in income leads to five percent increase in wine consumption
Refer to the diagram to the right. what area represents the increase in producer surplus when the market price rises from P1 to P2?
A+B
Refer to the diagram to the right. what area represents producer surplus at a price of P2?
A+B+C
Which of the following statements is true?
An increase in demand causes a change in equilibrium price; the change in price does not cause a further change in demand or supply
which of the following statement is true?
An increase in supply causes a change in equilibrium price; the change in price does not cause a further change in demand or supply
Let D= demand, S = supply, P = equilibrium price, and Q= equilibrium quantity. What happens in the market for walnuts if the center 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
Technological advances have resulted in lower prices for smartwatches. What is the impact of this on the market for traditional watches?
The demand curve for traditional watches shifts to the left
Assume that the demand curve for MP3 players shifts to the right and the supply curve for MP3 players shifts to the left, but the supply curve shifts less than the demand curve. As a result
The equilibrium price of MP3 and the quantity of MP3 Players will increase.
Economists refer a to a market where buying and selling take place at prices that violate government price regulations as
a black market
Which of the following will shift the demand curve for a good?
a decrease in the price of a complementary good
Which of the following would shift the supply curve from MP3 players to the right?
a decrease in the price of an input used to produce MPS players
rent control is an example of
a price ceiling
Which term refers to legally established minimum prices that firms may charge?
a price floor
if the current market price is $10, the market will achieve equilibrium through
a price increase, increasing the quantity supplied and decreasing the quantity demanded
Economists estimated that the price elasticity of beer is -0.30 and the income elasticity of beer is 0.09. This means that
an increase in the price of beer will lead to an increase in revenue for beer sellers and beer is a normal good
Which of the following would shift the supply curve for MP3 players to the left?
an increase in the price of input used to produce MP3 players
If a 5 percent increase in income leads to a 10 percent decrease in quantity demanded for a product, this product is
an inferior good
if an increase in income leads to a decrease in the demand for popcorn, then popcorn is
an inferior good
Assume that the demand curve for MP3 players shifts to the right and the supply curve shifts less than the demand curve. As a result
both the equilibrium price and quantity of MP3 players will increase
Assume that both the demand curve and the supply curve for MP3 players shift to the right but the demand curve shifts more than the supply curve. As a result
both the equilibrium price price and quantity of MP3 players will increase
The difference between the highest price a consumer is willing to pay for a good and the price the consumer actually pays is called
consumer surplus
An ---- is represented by a leftward shift of the demand curve while a(n) --- is represented by a movement along demand curve
decrease in demand; increase in quantity demanded
If there is a market outcome in which the marginal benefit to consumers of the last unit produced is equal to its marginal cost of production and consumer surplus plus producer surplus is maximized, then
economic efficiency is achieved
If the demand in inelastic, the absolute value of the price elasticity of demand is
less than one
The inelastic segment of curve
lies below the midpoint of the curve
The difference between the ---- and the ---- from the sale of a product is called producer surplus.
lowest price a firm would have been willing to accept; price it actually receives
In a competitive market, the demand curve shows the ---- received by consumers and the supply curve shows the -----
marginal benefit; marginal cost
to affect the market outcome a price ceiling
must be set below the equilibrium Price
in order to be binding, a price ceiling
must lie below the free market equilibrium price.
cross-price elasticity of demand is calculated as the
percentage change in quantity demanded of one good divided by percentage change in price of a different good
An increase in the number of firms in the market would be represented by a movement from
s1 to s2
A decrease in productivity would be represented y a change from
s2 to s1
An increase in price of inputs would be represented by a change from
s2 to s1
An increase in the price of substitutes in production would be represented by a movement from
s2 to s1
Marginal cost is
the additional cost to a firm of producing one more unit of a good or service
The total amount of producer surplus in a market is equal to
the are above the market supply curve and below the market price
Consumer surplus in a market for a product would be equal to --- if the market price was zero
the area under the demand curve
Suppose a decrease in the supply of bottled water resulted in a decrease in revenue. This indicates that
the demand for bottled water is price elastic in the price range considered
Assume that both curve the demand and the supply curve for MP3 players shift to the right but the supply curve shifts more that the demand curve. As a result
the equilibrium price of MP3 players will decrease; the equilibrium quantity will increase
Willingness to pay measures
the maximum price that a buyer is willing to pay for a good
At the midpoint of the demand curve, in absolute value.
the price elasticity coefficient in one
Total revenue is equal to
the price of a product multiplied by the number of units of the product sold.
Suppliers will be willing to supply a product only if
the price received is at least equal to the additional cost of producing the product
At a products's equilibrium price
the product's demand curve crosses the product's supply curve
Economy efficiency is defined as a market outcome in which the marginal benefit to consumers of the last unit produces is equal to the marginal cost of production, and in which
the sum of consumer surplus and producer surplus is a at a maximum
If the market for a product is broadly defined, then
there are few substitutes for the product and the demand for the product is relatively inelactic
When the price of a pistachio nut is $7.50 per lb. the quantity demanded is 48 lbs. When the price of pistachio nuts os $9.00 per lb. the quantity demanded is 40 lbs. When the midpoint formula is used to measure the price elasticity of demand we can say that the demand for pistachio nuts is.
unit elastic
A demand curve which s ---- represents perfectly inelastic demand, and a demand curve which is ---- represents inelastic demand
vertical; downward sloping
Along a downward-sloping, linear demand curve, total revenue is the greatest
where demand is unit elastic
if demand is perfectly inelastic, the absolute value of the price elasticity of demand is
zero
