Exam 2: The Basics of Supply and Demand

Which of the following would shift the demand curve for new textbooks to the right?

Which of the following pairs of goods are most likely to have a negative cross-price elasticity of demand?

Use the following two statements to answer this question: I. The supply of newly mined copper is more elastic in the long run than in the short run. II. The supply of scrap copper is more elastic in the short run than in the long run.

The U.S. Department of Agriculture is interested in analyzing the domestic market for corn. The USDA's staff economists estimate the following equations for the demand and supply curves: Q_d = 1,600 - 125P Q_s = 440 + 165P Quantities are measured in millions of bushels; prices are measured in dollars per bushel. a. Calculate the equilibrium price and quantity that will prevail under a completely free market. b. Calculate the price elasticities of supply and demand at the equilibrium values. c. The government currently has a $4.50 bushel support price in place. What impact will this support price have on the market? Will the government be forced to purchase corn under a program that requires them to buy up any surpluses? If so, how much?

A price floor policy establishes a minimum price for a market. Which of the following results from a binding price floor?

Coffee and cream:

Consider a linear, upward sloping supply curve. If the supply curve shifts upward, then:

Rare earth metals are used to manufacture some important electronic components in popular products like cell phones. These metals are not really rare, but they are expensive to extract from the ground. What happens to the market for the rare earth metals if these extraction costs increase?

The demand for packs of Pokemon cards is given by the equation Q_D = 500,000 - 45,000P. At a price of $2.50 per pack, what is the quantity demanded? At $5.00 per pack, what is the price elasticity of demand?

Suppose the US demand curve for gasoline shifts rightward, and the U.S. supply curve for gasoline remains unchanged. As a result, the price of gasoline increases by 9 percent, and the equilibrium quantity increases by 3 percent. Which of the following statements is true based on this information?

Historically, investors have considered gold commodities to be a good investment to preserve wealth in times of inflation. If investors are no longer worried about inflation and gold demand decreases, what do you expect will happen to gold prices? How would your answer change if you learn that a recent gold mine discovery will increase the supply of gold?

Suppose there is currently a surplus of wheat on the world market. The problem of excess supply may be removed from the market by:

The current price charged by a local movie theater is $8 per ticket. The concession stand at the theater averages $5 in revenue for each ticket sold. At the current ticket price, the theater typically sells 300 tickets per showing. If the theater raises ticket prices to $9, the theater will sell 270 tickets. What is the price elasticity of demand at $8? What happens to ticket revenue if the theater increases ticket prices to $9 from $8? What happens to concession revenue if the theater increases ticket prices? If the theater wants to maximize the sum of ticket and concession revenue, should they raise ticket prices to $9?

Other things being equal, the increase in rents that occurs after rent controls are abolished is smaller when

The currency used by the Confederate States of America during its brief existence from 1861 to 1865 has become a collector's item today. The Confederate Currency supply is perfectly inelastic. As the demand for the collectible increases and some of the old currency is destroyed or no longer of value as a collectible, what happens to the market price?

Scenario 2.1: The demand for books is: Q_d = 120 - P The supply of books is: Q_s = 5P -Refer to Scenario 2.1. What is the equilibrium quantity of books sold?

Scenario 2.1: The demand for books is: Q_d = 120 - P The supply of books is: Q_s = 5P -Refer to Scenario 2.1. What is the equilibrium price of books?

The introduction of refrigerators into American homes:

Figure 2.1 -Refer to Figure 2.1. At point B, demand is:

After the September 11, 2001 attacks on the World Trade Center, the supply of downtown office space in Manhattan was dramatically reduced. Forecasters predicted that the equilibrium price would rise, but in fact the price fell. What are some factors that could explain the fall in the equilibrium price, which the forecasters failed to take into account?