Macroeconomics-Chapter 4
Which of the following is not one of the four major factors that shifts the supply curve when it changes?
The price of the good itself.
As a firm produces more of a good, the cost of producing each additional unit _________. This implies that the marginal cost of producing a good _________ as you make more of that good.
increases; increases
Suppose the price of oranges increases and the demand for apples increases. You determine that these goods must be _________.
substitutes.
Coffee and tea are likely _________ because an increase in the price of coffee _________ the demand for tea.
substitutes; increases
The supply curve represents ___________.
the minimum price sellers are willing to accept to sell an extra unit of a good.
Does the shape of the market demand curve differ from the shape of an individual demand curve?
No, they both tend to be downward-sloping curves.
Land in Sonoma, California, can be used to either grow grapes for pinot noir wine or to grow Gravenstein apples. Given this information, what is the relationship between pinot noir wine and Gravenstein apples? If the demand for pinot noir suddenly shifts sharply to the right, we would expect to see __________ in the demand for land in Sonoma, which would __________ the equilibrium price of land. Since both pinot noir wine and Gravenstein apples use the same land in Sonoma, California, a sharp increase in demand for pinot noir wine will result in a _________ price for Gravenstein apples and a _________ equilibrium quantity.
They share a common input. an increase; increase higher; lower
Lobsters are plentiful and easy to catch in August but scarce and difficult to catch in November. In addition, vacationers shift the demand for lobsters further to the right in August than in any other month. Given this information, we know that _________ is/are higher in August than in other months. When comparing the equilibriums in the lobster market for August and November, the equilibrium quantity is ______ in November than in August, while the equilibrium price is ______.
both supply and demand. lower; higher, lower, or unchanged.
In a perfectly competitive market, sellers _________ and buyers _________.
cannot charge more than the market price; cannot pay less than the market price.
Given the supply and demand curves on the right, when the price of the good is $20, we say that the market is in _________. At this price, we know that the quantity supplied is ___________ the quantity demanded. If the only change in the market was that the price increased to $30, then we know that the quantity supplied will be _________ the quantity demanded, resulting in _________, which is also known as _________. Suppose instead that the price of the good dropped below the competitive equilibrium price to a price of $15 per unit. If this were to occur, then the quantity supplied would be _________ the quantity demanded, resulting in _________, which is also known as _________.
competitive equilibrium; equal to greater than; an excess supply; a surplus. less than; an excess demand; a shortage.
As part of U.S. sugar policy, the government offers to buy raw sugar from domestic sugarcane mills at a price of 18.75 cents per pound. This government offer is made for as much raw sugar as the sugarcane mills produce. Any raw sugar purchased by the government is not sold in the domestic market, as this might cause raw sugar prices to fall. Suppose conditions arise in the sugar market that would lead to a competitive equilibrium price that is below 18.75 cents per pound. In this situation, sugar mills will __________.
not sell to private buyers at this lower price and will sell to the government instead, which will drive up the domestic price until it reaches 18.75 cents per pound.
Suppose a new off-campus university apartment complex could rent its rooms on the open market for $900 a month. If, instead, the university chooses to cap the price of rooms to $500 a month for students, the result would be that ____________. Suppose the university is trying to determine the most efficient way to allocate the rooms such that those who value the rooms the most get them. Which of the following would you suggest as the most efficient?
quantity demanded would exceed the quantity supplied, resulting in a shortage. Auctioning the rooms to the highest bidders.
The Law of Demand states that as the price of a good increases, ceteris paribus, the _________ decreases. This can be shown graphically with _________ demand curve or numerically in a table using a_________. The relationship that exists between these two variables can be described as _________.
quantity demanded; a downward-sloping; demand schedule. negatively related.
The Law of Supply states that as the price of a good increases, ceteris paribus, the _________ of that good increases. This can be shown graphically with _________ supply curve or numerically in a table using a _________.
quantity supplied; an upward-sloping; supply schedule.
When one of the five major factors changes, causing an increase in demand, the demand curve shifts _________.
rightward.
When one of the four major factors changes, causing an increase in supply, the supply curve shifts _________.
rightward.
Market demand is derived by __________.
fixing the price and adding up the quantities that each buyer demands.
Which of the following is not one of the five major factors that shifts the demand curve when it changes?
The price of the good itself.
In a perfectly competitive market, if one seller chooses to charge a price for its good that is slightly higher than the market price, then it will _________.
lose all or almost all of its customers.
The relationship that exists between these two variables can be described as _________.
positively related.
