ECOM exam 3

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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


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