Micro Study guide

3. When price ceiling for a good is set below the free market equilibrium the result is a(n): A.supply. B.equilibrium. C.surplus. D.shortage.

D.shortage.

In the market for Chinese take-out, suppose that the price of Sushi take-out, a substitute, decreases in price. What will happen to the demand for Chinese take-out?

Demand for Chinese take-out will decrease.

If theres a Surplus, prices will eventually

Fall

Producer surplus

Whole Bottom right triangle

Consumer surplus

Whole Top left triangle

The fundamental reason why supply curves slope upward is:

increasing costs. (Thinking of vertical price column increasing)

Diego is deciding which brand of energy drink to buy. According to market economics, he would benefit MOST from basing his decision on which brand has the most: A) lower; lower B) higher; higher C) lower; higher D) higher; lower

lower; higher

If there is a lack of competition in a market, a market failure results because the quantity of goods sold is ___ than the optimal level while prices are ___ than the optimal level.

lower; higher

implementing a price floor can cause:

surplus (If it goes above equilibrium)

Which of these is BOTH a Determinant of Demand and a Determinant of Supply?

-Price of related goods -Expectations

Determinants of Supply

-Production in technology -Cost of resources -price of related goods -Expectations -Number of sellers -Taxes and Subsidies

Determinants of Demand

-Tastes and Preferences -Income -Price of related goods -Number of buyers -Expectation of future prices

Which is a CORRECT description of the Law of Demand?

-The law of demand states that the lower a product's price, the more of that product consumers will purchase during a given time period. -As price increases, Demand decreases-As P decreases, Demand increases

Which is true when a market is in equilibrium?

-When a market is in equilibrium there is no shortages or surpluses.

Which would NOT cause the demand curve to shift to the right?

2. As income increases, the demand curve for an inferior good shifts to the left. (Basically anything that makes price increase)

Suppose there are a group of massage therapists, with a supply schedule that indicates their willingness to supply massages at various prices. What is the market quantity of massages supplied, at a given price, and does this supply schedule follow the law of supply?

29; Yes https://www.chegg.com/homework-help/questions-and-answers/suppose-three-massage-therapists-supply-schedule-indicates-willingness-supply-massages-var-q30110058

Implementing a price ceiling can cause:

A shortage (if its under equilibrium)

Equilibrium is at $40, if price ceiling is set at $30, what will occur?

A shortage.

Nash lists his faulty treadmill for sale on craigslist but does not disclose the problems with it. If Victor buys the treadmill believing that it's problem-free, this is an example of market failure due to:

Asymmetric information

Consumer Surplus

CS= WTP-P

The supply curve for potato chips is: a) a vertical line. b) a horizontal line. c) an upward-sloping line. d) a downward-sloping line. You've reached the maximum n

D.) a downward-sloping line.

Note: When income rises what happens to demand on normal goods?

It increases -ex.) If your income increase you can afford to eat at a specific restaurant more often, versus inferior good which would be crappy noodles≥

Producer surplus

PS=P-WTS

A legal maximum price that can be charged for a product or service is known as a(n):

Price Ceiling

A(n) _____ is the minimum legal price that can be charged for a product.

Price Floor

The development of solar panels for home installation has improved due to technological advances and subsidies. These factors shift the supply curve to the _____ and result in the equilibrium price of solar panel installations to _____.

Right; fall (New technology improvements will decrease price and increase supply)

If theres a shortage, prices will eventually

Rise

Another way of referring to a market economy is:

Solution: price system. Explanation: A price system refers to the prices in several markets within an economy as a whole. Any price change in one market usually affects prices in other markets. A market economy is an economy where the decisions regarding production, investment, and distribution are guided by the price signals created by the forces of demand and supply.

If price floor goes above equilibrium it creates a ...

Surplus

If price floor is above equilibrium

Surplus

What has led to the rising popularity of plug-in cars?

The ability to avoid high gas prices, an increase in environmental consciousness, incentives such as preferred parking and tolls, an increase in parking spots, an increase in charging stations, and an increase in improvement of quality have all lead to an increase in demand for plug-in cars.

Is this an increase in demand or an increase in quantity demanded? (Answer: Chapter 3, page 81)

These factors have led to a change in demand because other factors other than the price of the car itself have led to an increase in demand for these cars, however, as the costs of production eventually fall, prices will decrease, which will lead to an increase in quantity demanded.

1) The consumer surplus attained from the 20th unit of quantity demanaded in this figure is (assuming the consumer buys at the equilibrium price): a) $2. b) $4. c) $6. d) $8.

a) $2. -Study this , its flip it chapter 4, fourth problem from bottom

The demand for guitars increases but supply stays the same. What would happen to the equilibrium price in this situation? a) The equilibrium price would increase. b) The equilibrium price would decrease. c) The equilibrium price would stay the same. d) The equilibrium price would either increase or decrease depending on other factors.

a) The equilibrium price would increase.

1) A _____ is set below the equilibrium price for a good. a) binding price ceiling b) nonbinding price ceiling c) binding price floor d) fair price

a) binding price ceiling

All else equal, when market price falls, consumer surplus: a) increases. b) decreases. c) stays the same. d) equals producer surplus.

a) increases.

Suppose the equilibrium price in a market is $10. If the government sets a maximum price of $7, this is an example of a(n): a) equilibrium price. b) binding price ceiling. c) binding price floor. d) fair price.

b) binding price ceiling.

Suppose the equilibrium price in a market is $11. If the government sets a maximum price of $13, this is an example of a(n): a) equilibrium price. b) nonbinding price ceiling. c) binding price floor. d) fair price.

b) nonbinding price ceiling.

The market price would likely fall when: a) quantity supplied and quantity demanded are equal. b) quantity supplied is greater than quantity demanded. c) quantity supplied is less than quantity demanded. d) market equilibrium occurs.

b) quantity supplied is greater than quantity demanded.

The market price would likely rise when: a) quantity supplied and quantity demanded are equal. b) quantity supplied is greater than quantity demanded. c) quantity supplied is less than quantity demanded. d) market equilibrium occurs.

b) quantity supplied is greater than quantity demanded.

The market price would likely fall when: a) quantity supplied and quantity demanded are equal. b) quantity supplied is greater than quantity demanded. c) quantity supplied is less than quantity demanded. d) market equilibrium occurs.

b.) quantity supplied is greater than quantity demanded. -When quantity supplied is greater than quantity demanded, a surplus exists, and the market price will fall until equilibrium is reached.

) Suppose the equilibrium price in a market is $10. If the government sets a minimum price of $12, this is an example of a(n): a) equilibrium price. b) nonbinding price floor. c) binding price floor. d) fair price.

binding price floor.

1) Suppose the price of a tablet is $200. Dana is willing to pay $200, Brit is willing to pay $210, and Jonah is willing to pay $300. How much consumer surplus is there in this market? a) $0 b) $100 c) $110 d) $310

c) $110 (200-200)+(210-200)+(300-200) =110

Suppose the price of a tablet is $200. Dana is willing to pay $190, Brit is willing to pay $210, and Jonah is willing to pay $300. How much consumer surplus is there in this market? a) $0 b) $100 c) $110 d) $120

c) $110 -exclude 190 because its under the price -DO (210-200)+(300-200)

Suppose Marco is willing to tutor for $15 an hour. On Tuesday, he will tutor Kelly for 1 hour and Mike for 3 hours. Kelly will pay $30 an hour, but Mike will only pay $20 an hour, since he has a longer tutoring session. How much producer surplus will Marco gain? a) $10 b) $20 c) $30 d) $90

c) $30 (30-15)+ (20-15)x3

At the end of the term, Chelsea desires to sell her textbook for at least $40, while Mike is looking to pay no more than $75 for the same textbook. How much total surplus can be achieved if Chelsea sells her book to Mike for $50? a) $10 b) $25 c) $35 d) $50

c) $35 CS =WTP-P (CS=(75-50=25)) PS= P-WTS ((PS=(50-40=10)) Now do 25+10 =35

Consumer surplus is represented by the area: a) above the market price and above the demand curve. b) below the market price and below the demand curve c) above the market price and below the demand curve. d) below the market price and above the demand curve.

c) above the market price and below the demand curve. -Draw it out

The supply curve slopes up and to the right because: a) producers feel that people will buy more if they charge a higher price because they will think the product is more valuable. b) producers feel that people will buy more if they charge a higher price to avoid the possibility of a shortage. c) due to increasing opportunity costs, producers must charge more to produce more in order to cover their costs. d) the opportunity cost of producing a product usually decreases as more is produced.

c) due to increasing opportunity costs, producers must charge more to produce more in order to cover their costs.

Total surplus is a measure of the net benefits _____ achieve(s) when both consumers and producers are valued components of an economy. a) consumers b) government c) society d) producers

c) society

1) Which of the following is an example of a price floor? a) A job that pays below the minimum wage. b) A job position that does not get filled because its salary is too low. c) A maximum wage limit on corporate executives. d) A legally mandated minimum wage for food-service workers.

d) A legally mandated minimum wage for food-service workers. -Correct. A price floor is a government-set minimum price that can be charged for a product or service.

If the equilibrium price for a bushel of wheat is $6.50, what will be the effect of the government imposing an $8 price ceiling? a) Consumers will benefit. b) Producers will benefit. c) Both consumers and producers will benefit. d) There will be no effect.

d) There will be no effect.

Asymmetric information

happens when one party to a contract or transaction is fully aware about the material facts of the product that he intends to sell.

If the price of used plug-in electric cars is expected to rise in six months, the reaction in the supply of those cars in the market today would likely be:

shift of the supply curve to the left -The expectation of the increase in price decreases today's supply and the supply curve shifts to the right.

Dead weight-loss

small inner, top left triangle and small inner bottom left triangle.

Which is a CORRECT description of the Law of Supply?

states that higher prices will lead producers to offer more of their products for sale during a given period. EXAMPLE:) AS DEMAND FOR ETHANOL PUSHES THE PRICE OF CORN HIGHER, PRODUCTION OF CORN INCREASES.