Supply And Demand An Initial Look Full Test Bank Ch.4 - Microeconomics Principles and Policy 14e | Test Bank by Baumol by William J. Baumol. DOCX document preview.
Indicate whether the statement is true or false. |
1. The unemployment of some groups, such as low-skill workers, may increase as a result of the imposition of a minimum wage.
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2. A shortage occurs when price is higher than the market equilibrium.
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3. Black-market prices are below equilibrium prices because sellers want to sell large quantities.
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4. Changes in the size of an industry may cause supply to shift.
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5. Cost-reducing technological advancements allow suppliers to earn more profits but have no noticeable effect on the supply curve.
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6. Demand and quantity demanded are the same thing.
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7. Very few societies have used price controls.
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8. Sugar price supports ensure an abundance of sugar, and hence reasonable prices for consumers.
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9. A black market develops only when quantity demanded exceeds quantity supplied.
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10. At equilibrium, the market will clear, with no surpluses or shortages occurring.
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11. During the Revolutionary War, the Pennsylvania legislature attempted to aid the Continental Army by setting wage floors for soldiers in the army.
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12. Advertising has no effect on the demand schedule for a good.
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13. Consumer income changes can shift market demand.
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14. A change in the income of buyers will normally change demand.
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15. Price ceilings are designed to protect sellers, while price floors are designed to protect buyers.
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16. Price floors are only effective below the market equilibrium.
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17. Sugar price supports primarily benefit consumers.
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18. A price ceiling is only effective if it is above the market equilibrium.
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19. Supply can shift due to changes in price.
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20. Any change that shifts the supply curve outward to the right and does not affect the demand curve will lower the equilibrium price and raise the equilibrium.
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21. “Equilibrium” is a situation in which there are no inherent forces to produce change.
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22. When price is above the equilibrium level, competitive price cutting will continue as long as quantity supplied exceeds quantity demanded.
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23. An increase in consumer income will shift both the supply and demand curves.
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24. Rent controls are most often designed to protect the investment made by apartment building owners.
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25. If the demand curve shifts outward and the supply curve remains the same, price will fall.
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26. Shortages normally accompany an effective price floor.
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27. The position of a demand curve is unaffected by changes in the price of the good.
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28. Drawing the supply curve and the demand curve on the same graph helps show how price is determined.
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29. As price increases, additional suppliers are willing to produce a commodity.
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30. While demand shifts have an effect on equilibrium price and quantity, supply shifts have no such effect.
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31. As more firms are attracted to an industry, the supply curve can be expected to shift to the right.
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32. Equilibrium is reached where there is no inherent force causing quantity supplied or quantity demanded to change.
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33. A change in the price of a good has no effect on the supply schedule.
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34. Rent controls and controls on other prices often aggravate the very problem they are intended to solve.
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35. Price floors lead to market surpluses.
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36. Price supports are a form of price ceiling for agricultural products that lowers prices for consumers and enhances market efficiency.
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37. A shift of the demand curve for a good occurs whenever new technologies make inputs used in producing that good available at lower prices.
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38. A cold winter will increase the quantity of heating fuel demanded at every price.
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39. A supply schedule can be plotted on a graph to yield a supply curve.
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40. A decrease in the price of VCRs will increase demand for video cassettes.
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41. When price is above the equilibrium level, suppliers offer more than demanders wish to buy.
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42. An increase in price will decrease demand.
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43. Black markets can generally be eliminated when price ceilings are enacted.
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44. A change in the price of important inputs will change the quantity supplied but will not shift the supply curve.
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45. If supply increases, the equilibrium price will rise and the equilibrium quantity will fall.
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46. Demand shifts due to changes in price.
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47. The minimum wage is an example of a government price ceiling and results in a reduction in unemployment.
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48. Technological advances shift the supply curve rightward.
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49. Price ceilings set a legal maximum price on a product or commodity.
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50. One effect of market intervention is resource misallocation.
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51. Governments can eliminate market surpluses through the imposition of price floors.
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52. Since rent controls have been in effect in New York City, apartments have been more plentiful.
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53. “Demand” is a series of quantities demanded, one for each person in the market.
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54. When price is below the equilibrium level, there is a shortage of the commodity being sold.
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55. Demand curves can be affected by the prices of related goods.
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56. The laws of supply and demand force prices to an equilibrium.
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57. Price controls usually enhance efficiency in the allocation of resources.
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58. Price ceilings lead to market surpluses.
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59. If the price of hamburger rises, we would expect the demand for steak to shift to the right.
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60. When people suddenly want to buy something, supply increases.
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61. A change in the price of hamburgers will change the supply of hot dogs.
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62. Both demand and supply curves usually have positive slopes.
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63. A surplus occurs when price is higher than the market equilibrium.
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64. Even though prices may change frequently, they can be expected to gravitate toward equilibrium.
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65. Price floors set a legal minimum price on a product or commodity.
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66. Governments of market-oriented economies never tamper with the price mechanism.
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67. A price above equilibrium always yields a surplus.
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68. At equilibrium, quantity demanded equals quantity supplied.
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69. Change in the price of a good causes the demand schedule for that good to shift.
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70. Any factor that shifts the supply curve inward and to the left and does not affect the demand curve will raise the equilibrium price and reduce the equilibrium quantity.
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71. A supply curve slopes upward because quantity supplied is higher when price is higher.
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72. Price supports increase the supply of affordable milk for U.S. families.
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73. The laws of supply and demand did not apply to elephant tusks.
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74. A demand schedule’s position is determined partly by the supply of a good.
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75. A demand curve shows the relationship between price and quantity demanded only so long as all other things are held constant.
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76. Black markets are frequent occurrence in markets with price ceilings.
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77. Any event that causes either the demand curve or the supply curve to shift will also change the equilibrium price and quantity.
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78. Rent controls are designed to protect consumers from high rents.
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79. A demand schedule shows the time over which different quantities will be demanded.
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80. A report on the dangers of cholesterol would likely shift the demand curve for beef downward and to the left.
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81. If demand increases, the equilibrium price and equilibrium quantity will both fall, everything else being equal.
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82. Rent controls encourage investment in housing because they bring stability to the market.
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83. The more firms that are attracted to an industry, the greater will be the quantity of product supplied at any given price.
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84. George Washington’s troops at Valley Forge were almost destroyed by price controls.
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85. Equilibrium price and quantity are determined by the intersection of the demand and supply curves.
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86. Technological advances that allow a good to be produced at a lower cost will shift the demand curve rightward.
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87. Any factor that shifts the demand curve to the left but does not affect the supply curve will lower the equilibrium price and raise the equilibrium quantity.
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88. Enacting a law controlling rents near a major university will increase the affordable housing for college students.
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89. A demand schedule relates prices of a particular good to quantities demanded.
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90. An economist would predict that if the government imposes price controls on medical care, the result will be an increase in the supply of affordable care in the United States.
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91. An increase in price will increase supply.
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92. Scarcity and choice are the basic problems of economics; the supply and demand mechanism is the basic investigative tool of economics.
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Indicate the answer choice that best completes the statement or answers the question. |
93. Price ceilings frequently lead to
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94. The price of coal fell and the quantity sold also fell. Everything else being equal, it is consistent that
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95. The demand curve is constructed with a
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96. If the price of chicken rises from $1.25 per pound to $1.75 per pound, and the quantity demanded goes from 250 pounds per day to 175 pounds per day, this illustrates
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97. A key assumption made when a supply schedule is constructed is that
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98. One motive for “battling the invisible hand” is
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99. A decrease in the price of gasoline shifts the demand for auto batteries to the
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100. The demand for computers has risen dramatically at the same time that the unit cost of production has decreased. As a result, we can expect
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101. A demand curve can be thought of as
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Figure 4-4
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102. In Figure 4-4, an increase in population will change demand from
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103. In the late 1980s, some medical authorities announced that an acne medication named Retin-A had previously unknown wrinkle-reducing properties. An economist would predict that, following this announcement, the price of Retin-A ____ and the quantity sold__.
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104. A government policy that prevents the price of a good or service from falling below a specified level is called a price floor and usually results in
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105. Legal limits on prices will tend to cause misallocation of resources because
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106. The wage rate is the price of a unit of labor. What happens to the quantity of labor supplied if the wage rate increases?
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107. Assume that Figure 4-4 shows demand for soda. An increase in the price of bottled water will change demand from
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108. The government of Economica announces that it will purchase its farmers’ surplus of milk. From this announcement, you can infer that Economica has a
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109. Scalpers (people selling tickets at a price above the stated price, P*) were spotted at this year’s Super Bowl game. This suggest that
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110. Falling oil prices meant that consumers in Libya could afford fewer imported goods. The Libyan government imposed controls to limit imports of cigarettes. At one point, the market price of a carton of cigarettes rose to $70. Which graph in Figure 4-22 best depicts this situation?
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111. In 1966, the Catholic Church eliminated the centuries-old requirement that members abstain from eating meat on Fridays. Catholics customarily ate fish on Friday. Following the removal of this requirement, it was found that the
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112. A common misconception about supply is that
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113. The quantity of newspapers sold will decline if
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114. Lines, ration coupons, and black markets are byproducts of a
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115. If the price of chicken rises from $1.25 per pound to $1.75 per pound, if the demand curve is consistent with the law of demand, then the quantity of chicken demanded would be predicted to go from
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116. Air fares are generally lower on Tuesdays and Wednesdays each week. What is a likely explanation for this occurrence?
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117. The demand curve shows graphically how much consumers
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118. The Snowshoe Inn in Vermont charges $259 per room during the winter ski season and $149 during the summer months. The number of rooms available and the operating costs for the inn remain constant throughout the year. What is indicated by these prices?
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119. In 1966, the Catholic Church eliminated the centuries-old requirement that members abstain from eating meat on Fridays. Catholics customarily ate fish on Friday. Following this removal, there was a 12.5 percent fall in prices of fresh fish. From this, it can be deduced that the
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120. Are markets always in equilibrium?
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121. How does rent control tend to cause persistent imbalances in the market for housing?
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122. Which of the following is an example of the effect of a price floor?
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123. The interest rate is the price borrowers pay to borrow money.Key interest rates are controlled by the Federal Reserve System.If the Federal Reserve acts to reduce interest rates, economists would expect the quantity of money demanded to
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124. Professional baseball teams in the United States use only wooden bats. If aluminum bats were permitted, the impact on the wooden bat market would be
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125. Which of the following can occur if price controls are imposed on a product?
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126. Computer processors and memory costs have decreased dramatically in the past 25 years. As a result, in the computer market, we have seen
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127. At price P3 in Figure 4-21, what will tend to happen?
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128. Assume that Figure 4-4 shows demand for new houses. A decrease in income of buyers will change demand from
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129. What are the major problems that will tend to arise if there are legal limits on the movement of prices?
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130. If price of a good rises, what happens to the demand for that good, all other things held constant?
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131. Which of the following events would result in an increase in the demand for natural gas, causing the demand curve to shift outward?
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Table 4-1
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132. Refer to Table 4-1. What is the equilibrium price in the example above?
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133. When there is a decrease in demand,
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134. Over the previous year, 2,000 boxes of antihistamine tablets were sold at a price of $20 per box, and during the current year, 2,500 boxes of tablets were sold at $25 a box. The most likely interpretation of these data is that the
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135. Price controls date back to
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136. To have an effect on the market, a price floor should be set at a price
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137. An individual’s demand schedule
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138. If the price of oil, a close substitute for coal, increases then the
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139. All other factors held constant, if the price of game consoles rise, the demand for gaming titles will
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140. The quantity of goods exchanged in a market will be below the equilibrium quantity
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141. Which of the following would cause a movement up (or leftward) along the demand curve for European autos in the United States?
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142. As the general population has aged, there has been an increase in the number of nursing homes, community health facilities along with the development of home care facilities. All of these factors have produced an increase in the demand for nurses. Simultaneously, improved job opportunities for women other fields have reduced the supply of nurses. Despite these factors, hospitals, the major employers of nurses, have resisted wage increases. The resulting situation can be described as
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143. On a traditional supply and demand diagram,
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144. Tampering with the price mechanism
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145. If new firms enter the computer manufacturing industry, then, holding all other things constant,
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146. University studies have shown that that chickens grow 2 percent larger when a red mitten is placed in their cage and Vivaldi is played in the coop. This leads to a reduction in feed costs of $60 million a year. In the chicken market, the
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147. When there is an increase in demand,
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148. Last year, 1,000 cases of cough syrup were sold at $10; this year, 1,200 cases were sold at $12. The most probable interpretation of these data is that the
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149. Firms often seek to borrow money to expand their capital stock, and the price they pay for that money is the interest rate. What happens to the demand for money if the interest rate increases?
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150. The invention of new technology that can double the amount of gold extracted from raw ore will lead to a
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151. Assume that Figure 4-4 shows demand for MP3 players. An increase in the price of music downloads changes demand from
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152. In an attempt to limit the supply of illegal liquor, the Russian government has restricted sugar availability (sugar is used to increase alcohol content). Russians also like to sweeten their tea with jam, another product made using sugar. Which graph in Figure 4-11 depicts the impact of sugar rationing on the Russian tea market?
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153. “Moonshine” is illegally produced liquor and the production process adds sugar to accelerate corn fermentation. Ten pounds of sugar are necessary to make a gallon of moonshine. When the price of sugar tripled, the price of moonshine skyrocketed from $6 to $15 a gallon. Which graph in Figure 4-9 best illustrates this?
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154. During the American Revolution, the Pennsylvania legislature enacted price controls on essential commodities. The result of this legislation was
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155. Suppose that in a free market, 2,000 patients purchase an operation to receive an artificial heart at a price of $500,000 per operation. Without the heart, each patient will die. The government decides this price is too high and imposes a maximum price of $200,000. Everything else equal,
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156. A demand schedule is a table showing how the ____ of some product during a specified period of time changes as ____ changes, holding all other determinants of quantity demanded constant.
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157. If the supply curve for housing has the usual positive slope, rent controls are likely to
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158. When a demand schedule is drawn as a graph,
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159. A decrease in price of a certain good most likely will lead to
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160. Which of the following will tend to occur if price floors are imposed on a product?
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161. Sugarcane can be used to produce both granulated sugar and ethanol. Recent regulations in certain countries now permit a higher amount of ethanol to be added to gasoline. As a result of these changes, an economist would expect granulated sugar prices to ____, and quantity sold to ____.
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Figure 4-23
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162. In Figure 4-23, which of the following movements would be caused by a change in income?
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163. When the price per ticket is P*, there are empty seats at a university’s basketball arena. From this, we can conclude that
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164. The interest rate is the price borrowers pay to borrow money. Key interest rates are controlled by the Federal Reserve System. If the Federal Reserve acts to reduce interest rates, economists would expect the demand for money to
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165. An increase in price is likely to affect demand in what way?
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166. If the price of coal, a close substitute for oil, decreases, then the
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167. Normally, when a governmental price control affects the price, it can be expected to result in a
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168. The development of new technology reduces the cost of producing calculators. In addition, assume that consumers have cut back on their scheduled purchases in anticipation of further cost-saving developments. As a result, we can expect
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169. Refer to Table 4-1. At $10, what is the surplus?
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170. The interest rate is the price borrowers pay to borrow money. Key interest rates are controlled by the Federal Reserve System. If the Federal Reserve acts to reduce interest rates, economists would expect the quantity of money supplied to
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171. Which price in Figure 4-21 is equilibrium?
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172. Higher steel prices will result in a shift in the supply curve of bicycles, and this will lead to
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173. Which of the following is an example of a price floor?
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174. When a supply curve is constructed, data are required for price and quantity. Each point on the supply curve is
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175. The United States typically experiences a large surplus of milk annually. This is caused by
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176. Which of the following suggests that the “laws” of supply and demand are being disobeyed?
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177. Equilibrium in a market is
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178. If we observe a market where the quantity supplied exceeds the quantity demanded, but the market price does not fall, then one explanation for this observation is
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179. The supply curve of books (which are produced using paper made from trees) will shift to the right in response to
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180. A decrease in supply will have what effect on equilibrium price and quantity?
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181. The most basic investigative tool of economics is the
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182. If a price floor is removed, which of the following would be a result?
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The following are the equations for the supply and demand curves in the market for weezils:
where Qd is the quantity demanded, Qs is the quantity supplied, and P is the price per weezil in dollars. |
183. Refer to Exhibit 4-1. According to the data given, the equilibrium price of a weezil is
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184. We observed that the price of a good rises and the quantity purchased also rises. Everything else being equal, it is consistent that
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185. An important assumption made when constructing a demand curve is that
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186. A common misperception about consumer demand is that
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187. The rising minimum wage allegedly has reduced the quantity demanded of teenage labor. However, demographics slightly reduced the supply of teenage labor. The U.S. Department of Labor reported that teenage unemployment is an increasing problem. Which graph in Figure 4-10 is consistent with these facts?
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188. Which of the following changes would not result in a shift in the demand curve for milk?
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189. Economists emphasize the importance of ____ in analyzing demand.
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190. The law of increasing relative costs, depicted by the concavity of the production possibilities frontier, is most closely related to the
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191. The mechanism of supply and demand is
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192. Two studies published in the New England Journal of Medicine link the risk of breast cancer to alcohol consumption. Young women who have nine drinks per week were reportedly 150 percent more likely to develop breast cancer. Considering the market for alcohol, an economist would predict a movement
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193. In an attempt to reduce poaching of elephant tusks for ivory, officials in Kenya burned illegally gathered ivory. Economists tend to point out that
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194. In Figure 4-18, there would be a surplus of T-shirts if the price were
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195. Which of the following would result in a decrease in demand for BMW automobiles?
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196. An increase in the price of poultry would lead to
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197. An increase in the price of gasoline shifts the demand for tires to the
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198. The interest rate is the price borrowers pay to borrow money. Key interest rates are controlled by the Federal Reserve System. If the Federal Reserve acts to reduce interest rates, economists would expect the demand for money to
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199. Which of the following is a characteristic of a market where a price floor is in place?
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200. At an equilibrium price for gasoline,
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201. There is general agreement among economists that rent controls cause shortages of housing, but despite this rent controls continue to persist. Why does this occur?
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202. The imposition of price ceilings on a market often results in
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203. American consumers learn that grape consumption can reduce the incidence of heart disease. Everything else being equal, this will cause the
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204. Grapes can be used to produce wine or raisins. Which graph in Figure 4-6 best depicts the effects on the U.S. raisin market of a decline in purchases of domestic wine?
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205. Families are having more children than families did 15 years earlier. As a result, families have more trouble finding baby-sitters and are shocked at the cost of child care. Which graph in Figure 4-8 best illustrates how the situation has changed?
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206. If both the supply and demand curves shift to the left, then we can conclude that there will be
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207. Assume that Figure 4-4 shows demand for steak. An increase in income of buyers will change demand from
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208. The wage rate. is the price of a unit of labor. What happens to the supply of labor if the wage rate increases?
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209. What group tends to benefit from the sugar price supports?
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210. The following price-quantity coordinates for gold used by U.S. dentists were observed: P = $875/ounce, Q = 342,000; P = $200/ounce, Q = 706,000. These points most likely lie along the
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211. In a move to free the economy from unnecessary regulation, Congress passes legislation to remove sugar price supports. What would most likely happen to the number of producers of sugar?
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212. Why do price ceilings tend to cause persistent imbalances in the market?
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213. When the market price is above equilibrium then ____ and when the market price is below equilibrium, then ____.
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214. When the price of a good is below the equilibrium price,
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215. A supply schedule shows
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216. If the demand for steak shifts to the right, a likely reason is that
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217. African governments wish to reduce the poaching of elephants, which is done to harvest the elephant’s ivory from its tusks. If this is the goal, economists would suggest that
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The following are the equations for the supply and demand curves in the market for weezils:
where Qd is the quantity demanded, Qs is the quantity supplied, and P is the price per weezil in dollars. |
218. Refer to Exhibit 4-1. If consumers decide that they want 20 percent fewer weezils at every price, the equation for the new demand curve for weezils will be
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219. A decrease in demand will have what effect on equilibrium price and quantity?
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220. Use of bovine growth hormone (BGH) on cattle dramatically increases the milk output of dairy cows. Dairy farmers in Wisconsin vigorously oppose permitting the drug’s use over concerns of an excess supply and a consumer reaction on the purity of food issue that could put many of them out of business. Which of the graphs in Figure 4-13 is consistent with these concerns?
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221. Refer to Table 4-1. At $4, what is the shortage?
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222. In the 1990s, Congress considered an agriculture bill that would gradually reduce price supports for many agricultural products. If the bill were to be approved, what would most likely happen to the number of families employed in agriculture?
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223. When used in a professional or technical sense, the law of supply and demand refers to
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224. A severe freeze has damaged the Florida orange crop. The effect on the market for oranges will be a left shift of
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225. If an increase in income leads to an increase in the demand curve for sailboats, this will lead to
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226. A shift in the demand curve will occur when
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227. The price of natural gas fell and the quantity sold also fell. Everything else being equal, it is consistent that
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228. The U.S. government restricts the production of peanuts by limiting production licenses. By also prohibiting imports, the government maintains prices well above levels peanut farmers would obtain if supply were not restricted. This program has the same effect as a
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229. Firms often seek to borrow money to expand their capital stock, and the price they pay for that money is the interest rate. What happens to the quantity of money supplied if the interest rate increases?
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230. Which of the following would result in an increase in the demand for Toyota automobiles?
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231. Assume that Figure 4-16 shows the supply of orange juice. A decrease in the wage rate paid to workers in the orange juice industry will shift supply from
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232. We observe that the price of food rises and the quantity purchased also rises. This means the
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233. Which of the following factors are held constant for a given demand curve for a good?
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234. Assuming that resources are specialized, the opportunity cost of an item increases as the production of it rises. This implies that firms will produce more as
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235. A major university hired an economist to forecast enrollment to produce a prediction of “head count.” One variable that she would probably emphasize more than any other in trying to make the forecast
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236. What is the economic reasoning behind the proposal to legalize drugs?
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237. The supply curve shows
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238. Which of the following events would result in an increase in the demand for electricity, causing the demand curve to shift outward?
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239. Firms often seek to borrow money to expand their capital stock, and the price they pay for that money is the interest rate. What happens to the supply of money (to lend) if the interest rate increases?
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240. Which of the following is not a characteristic of a market with a price floor?
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241. The price for a unit of labor is the wage rate. What happens to the quantity of labor demanded if the wage rate increases?
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242. If the price of a good rises, supply will
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243. In 1971, the U.S. government banned cigarette advertising on radio and television. After the ban was imposed, an economist would predict that the price of magazine ads would
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244. Imagine that the state legislature raises the tax on gasoline by 10 cents/gallon. What most likely happens next?
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245. The quantity of DVD players purchased declined in spite of a decline in price. This implies that the
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246. A shortage will tend to occur at which price in Figure 4-21?
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247. If the U.S. government starts to sell off its stockpile of cheese,
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248. At price P1 in Figure 4-21, what will tend to happen?
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249. Assume that Figure 4-16 shows the supply of steak. An increase in the price of cattle feed will change the supply from
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250. The supply curve of books (which are produced using paper made from trees) will shift to the left in response to
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251. When the price of a good increases, it
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252. The supply curve for a good can be thought of as
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253. Newspaper recycling has been highly successful—perhaps too successful, given that many households gather and return their newspapers to recycling centers. The amount of newspapers recycled has dramatically increased, along with the number of recycling plants. Yet newspapers prefer regular newsprint over recycled newsprint, so the demand for recycled newsprint has remained essentially unchanged. The result of this for the recycled newsprint market is
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254. If orange juice prices double next year, there will be a
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255. Firms often seek to borrow money to expand their capital stock, and the price they pay for that money is the interest rate. What happens to quantity of money demanded if the interest rate increases?
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256. An increase in demand will have what effect on equilibrium price and quantity?
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The following are the equations for the supply and demand curves in the market for weezils:
where Qd is the quantity demanded, Qs is the quantity supplied, and P is the price per weezil in dollars. |
257. Refer to Exhibit 4-1. According to the data given, when the market is in Equilibrium, how many weezils are sold?
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258. The amount of a good sold in a market at a particular price cannot exceed the quantity
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259. A strike at the Financial News in London shut down its production, and the sales of a competing newspaper, the Broad Street Journal, increased dramatically, with no increase in price. Based upon this, what can you say about the Broad Street Journal’s supply curve?
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260. A surplus will tend to occur at which price in Figure 4-21?
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261. Following the devastation of Hurricane Hugo, Charleston, South Carolina was cut off from the outside world and without electricity. Prices for bagged ice rose by 1,000 percent and electric generators by 300 percent and at least one tree removal firm charged $4,000 to cut up a tree. City government responded by passing an emergency law prohibiting price “gouging.” This law is an example of
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262. At an equilibrium price, quantity demanded
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263. During the American Revolution, Washington’s army nearly starved to death after price controls were enacted to “help” buy food for the army at affordable prices. The Continental Congress later passed a law that
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264. A typical supply curve has
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265. Ticket “scalping” is an example of
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The following are the equations for the supply and demand curves in the market for weezils:
where Qd is the quantity demanded, Qs is the quantity supplied, and P is the price per weezil in dollars. |
266. Refer to Exhibit 4-1. If the government imposes a price floor of $4 a weezil, how many weezils will be sold?
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267. The demand by sterile couples for babies to adopt has grown rapidly, while the supply has dwindled because of improved contraception, liberal abortion laws, and an increase in the probability that unwed mothers will keep their children. It violates the law to sell human beings at any age, but for every 20 legal adoptions, there seemingly is one baby sale at a price up to $50,000. The generic term economists apply to the market produced by this type of shortage is
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268. Which of the following will shift the demand curve for milk?
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269. The change in the amount of a good purchased after a shift of the supply curve depends on
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270. If both the supply and demand curves shift to the right, then we can conclude that there will be
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271. Assume that Figure 4-16 shows the supply of soda. An increase in the price of syrup used in the production of soda will shift supply from
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272. An increase in supply will have what effect on equilibrium price and quantity?
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273. When GM advertises its cars, the company is trying to cause a
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274. Assuming that the demand curve for cookies is downward sloping, if the price of cookies falls from $1.50 to $1.25 per dozen,
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275. A market will experience a ____ when the price is above equilibrium and a ____ when the price is below equilibrium.
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276. How do legal controls on prices lead to corruption?
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277. Relative to the prices that would be observed in an uncontrolled market, prices charged in a black market are generally
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278. Normally an increase in the supply of a good will cause
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279. Economists use the mechanism of supply and demand to study
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280. The wage rate is the price of a unit of labor. What happens to the demand for labor if the wage rate increases?
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281. Price ceilings generally do not lead to which of the following?
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282. Assume that Figure 4-4 shows demand for orange juice. A decrease in the price of apple juice will change demand from
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283. Pork can be used to produce bacon or sausage, but not both. If the price of bacon rises for some reason, then, everything else equal,
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284. Sugarcane can be used to produce both granulated sugar and ethanol. Recent regulations in certain countries now permit a higher amount of ethanol to be added to gasoline. An economist would expect sugarcane prices to ____, and quantity sold to ____.
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285. If the price of a good increases, the quantity supplied will
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286. In January, 2,500 quarts of ice cream are sold in Boston at $2.50 a quart. In February, 3,000 quarts are sold at $2.00 a quart. This change in quantity sold and price may have been caused by
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287. The silverware industry has been in serious decline since the 1980s. Family dining habits are less formal so people purchase less silverware. More recently, the price of silver jumped from $5 to $20 per ounce. Which graph in Figure 4-12 best illustrates these developments?
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288. In Figure 4-16, an increase in the number of producers will shift supply from
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289. Which of the following is the correct way to describe equilibrium in a market?
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290. When a demand curve is constructed, each point that demand curve represents
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291. If an increase in income results in higher prices for yachts, we can conclude
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292. An upward-sloping supply curve shows that
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293. The major drawback of a price ceiling is
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294. In Figure 4-18, there would be a shortage of T-shirts if the price were
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295. Quantity supplied increases when the price of a good increases because
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296. Why do airlines tend to lower ticket prices in the winter?
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297. The price of gasoline has risen and the quantity sold has fallen. This was likely caused by
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298. Assume that Figure 4-4 shows demand for skirt steak, which is used to make fajitas. A decrease in the price of tortillas will change demand from
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299. The demand curve for a typical good has
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300. Professional baseball teams in the United States use only wooden bats. If aluminum bats were permitted, the likely result would be a
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301. How will a decrease in price tend to affect supply?
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302. A demand schedule shows
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303. If oranges and grapefruit are close substitutes, an increase in the price of oranges will shift the demand curve of
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304. If price of a good rises, what happens to quantity demanded for that good?
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305. Assume that Figure 4-16 shows the supply of new houses. An improvement in the technology for building houses will shift supply from
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306. Suppose we are considering the milk market and we have two sets of values, as shown by the numbers in parentheses, which represent two points on a line: (59 billion quarts; $4) and (78 billion quarts; $6). This line is most likely a
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307. If the demand for steak shifts to the left, a likely reason is that
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308. Along a supply curve,
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309. The price of one good produced by a multiproduct industry rises. The effect on a second good produced by that industry will be
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310. Throughout history, governments have used price controls to
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311. Why does the quantity demanded decrease when the price of a good increases?
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312. In 1966, the Catholic Church eliminated the centuries-old requirement that members abstain from eating meat on Fridays. Catholics customarily ate fish on Friday. Given this, economics would predict that
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313. If orange juice prices fall by 25 percent next year, there will be a
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314. The following are common errors students make when discussing supply and demand. What is the mistake in each? a. At equilibrium, demand equals supply. b. The quantity of demand is greater than the quantity of supply. c. They move along the line from both ends to an equilibrium in the middle. d. The increase in demand causes an increase in supply. |
315. After Hurricane Andrew hit Florida and Louisiana, consumers expressed outrage at the high prices being charged for chainsaws, generators, and bottled water. If governments followed the consumers’ demands and imposed price ceilings in these markets, what is the likely result? |
316. Distinguish between scarcity and shortage. |
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317. Producers were accused of price gouging as the price of bottled water soared after Hurricane Andrew. Consumers clamored for price controls to keep bottled water at pre-Andrew levels. Use supply and demand analysis to graphically show the effect of setting a price ceiling on bottled water after Hurricane Andrew at the pre-hurricane equilibrium price. Use your graph to assist in explaining the likely unintended effects of such a price control. Be sure that your graph is completely and correctly labeled. |
318. The demand for home computers has increased, yet the price has fallen. Explain this apparent paradox. |
319. Give an example of a price floor. Draw a corresponding diagram and explain why there is a continuing surplus. |
320. Why are sellers willing to sell more at a higher price? |
321. “The market has failed to provide enough rental housing in New York City. This demonstrates another failure of free markets-they may lead to shortages of necessities.” Explain why you agree or disagree. |
322. Explain the effect of the following changes on equilibrium price and quantity of a commodity:
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323. List some of the problems that may arise when prices are controlled. |
324. Give an example of a price ceiling. Draw a corresponding diagram and explain why there is a continuing shortage. |
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325. Consumers expressed outrage at the high price of chainsaws after Hurricane Andrew hit Florida and Louisiana, with newspaper editorials accusing suppliers of unconscionable price gouging. Use a supply and demand graph to assist in explaining the increase in the price of chain saws after Hurricane Andrew. |
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326. Show graphically the effect of technological advance on the price of music downloads. In a separate graph, show what happens to the price of CDs as a secondary effect of the new download technology. |
327. Define equilibrium as it relates to markets. Describe the process by which a market reaches a new equilibrium. Include an appropriate diagram. |
328. The demand for a textbook written by Schwarz and Mobley is Q = 20,000 − 50P; supply is Q = 2,000 + 100P. Students complain about the high price of textbooks, so a price ceiling is imposed, which unfortunately leads to a shortage of texts. Below what price will shortages occur? |
329. Suppose demand can be described with the equation Q = 900 − 5P and supply with the equation Q = 100 + 5P.
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330. Draw a graph of a market in equilibrium. Describe what might cause a change in demand or supply and how this would affect the diagram. Indicate how the equilibrium price and quantity will change. |
331. Distinguish between demand and quantity demanded. Do the same for supply and quantity supplied. |
332. Distinguish the terms price ceiling and price floor. |
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333. Some hotels in Myrtle Beach, South Carolina charge over $200 a night in the summer but sometimes as little as $99 a night in the winter. Use supply and demand analysis, including graphical and verbal explanation, for these winter “sales.” |
334. In some markets, demand can be approximated by
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335. Define the following terms and explain their importance to the study of economics.
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336. Suppose demand can be described with the equation Q = 900 − 5P and supply with the equation Q = 100 + 5P. Complete the following table. Determine the equilibrium price and quantity.
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337. Price floors are typically accompanied by a standard series of symptoms. What are they? |
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Connected Book
Microeconomics Principles and Policy 14e | Test Bank by Baumol
By William J. Baumol