Question 1

The cross-price elasticity of demand refers to:

Accepted Answer

A)  a change in the demanded for two goods, following a change in the price of one good. 
B)  the substitution of one good for another as the prices of two goods change. 
C)  the value of price elasticity at which supply crosses demand. 
D)  the percentage change in the quantity demanded of one good resulting from a 1-percent increase in the price of another good. 
A)  a change in the demanded for two goods, following a change in the price of one good. 
B)  the substitution of one good for another as the prices of two goods change. 
C)  the value of price elasticity at which supply crosses demand. 
D)  the percentage change in the quantity demanded of one good resulting from a 1-percent increase in the price of another good.

Question 2

Assume that the current market price is below the market clearing level. We would expect:

Accepted Answer

A)  a surplus to accumulate. 
B)  downward pressure on the current market price. 
C)  upward pressure on the current market price. 
D)  lower production during the next time period. 
A)  a surplus to accumulate. 
B)  downward pressure on the current market price. 
C)  upward pressure on the current market price. 
D)  lower production during the next time period.

Question 3

Suppose that due to more stringent environmental regulation it becomes more expensive for steel production firms to operate. Also, recent technological advances in plastics has reduced the demand for steel products. Use Supply and Demand analysis to predict how these shocks will affect equilibrium price and quantity of steel. Can we say with certainty that the market price for steel will fall? Why?

Accepted Answer

The increase in the cost of production o

Question 4

Suppose the observed annual quantity of steel exchanged in the European market is 30 million metric tons, and the observed market price is 90 euros per ton. If the linear demand function for steel takes the form Q = a - 0.9P, what is an appropriate value for the intercept coefficient a?

Accepted Answer

A)  a = -51 
B)  a = 51 
C)  a = 111 
D)  a = -111 
A)  a = -51 
B)  a = 51 
C)  a = 111 
D)  a = -111

Question 5

What happens if price falls below the market clearing price?

Accepted Answer

A)  Demand shifts out. 
B)  Supply shifts in. 
C)  Quantity demanded decreases, quantity supplied increases, and a surplus results. 
D)  Quantity demanded increases, quantity supplied decreases, and a shortage results. 
A)  Demand shifts out. 
B)  Supply shifts in. 
C)  Quantity demanded decreases, quantity supplied increases, and a surplus results. 
D)  Quantity demanded increases, quantity supplied decreases, and a shortage results.

Question 6

Suppose that the long-run world demand and supply elasticities of crude oil are -0.906 and 0.515, respectively. The current long-run equilibrium price is $30 per barrel and the equilibrium quantity is 16.88 billion barrels per year. Derive the linear long-run demand and supply equations. Next, suppose the long-run supply curve you derived above consists of competitive supply and OPEC supply. If the long-run competitive supply equation is:   what must be OPEC's level of production in this long-run equilibrium?

Accepted Answer

If the demand curve is linear, it is in

Question 7

When the current price is above the market-clearing level we would expect:

Accepted Answer

A)  quantity demanded to exceed quantity supplied. 
B)  quantity supplied to exceed quantity demanded. 
C)  a shortage. 
D)  greater production to occur during the next period. 
A)  quantity demanded to exceed quantity supplied. 
B)  quantity supplied to exceed quantity demanded. 
C)  a shortage. 
D)  greater production to occur during the next period.

Question 8

Scenario 2.1:
The demand for books is: QS1U1B1dS1U1B0 = 120 - P
The supply of books is: QS1U1B1sS1U1B0 = 5P
-Refer to Scenario 2.1. What is the equilibrium quantity of books sold?

Accepted Answer

A)  25 
B)  50 
C)  75 
D)  100 
E)  none of the above 
A)  25 
B)  50 
C)  75 
D)  100 
E)  none of the above

Question 9

Figure 2.2.2
-Refer to Figure 2.2.2 above. If the price of $2.25 is an artificial price imposed by the government, and the government is expected to remove it, what will happen in this market?

Accepted Answer

A)  There will a tendency for the price to be higher than the imposed price. 
B)  There will a tendency for the new price to be lower than the imposed price. 
C)  The new price would not be expected to by any different than the already imposed price. 
D)  The new price will tend to fluctuate above and below the equilibrium price of $2.00. 
A)  There will a tendency for the price to be higher than the imposed price. 
B)  There will a tendency for the new price to be lower than the imposed price. 
C)  The new price would not be expected to by any different than the already imposed price. 
D)  The new price will tend to fluctuate above and below the equilibrium price of $2.00.

Question 10

Which of the following events will cause a leftward shift in the supply curve of gasoline?

Accepted Answer

A)  A decrease in the price of gasoline 
B)  An increase in the wage rate of refinery workers 
C)  Decrease in the price of crude oil 
D)  An improvement in oil refining technology 
E)  all of the above 
A)  A decrease in the price of gasoline 
B)  An increase in the wage rate of refinery workers 
C)  Decrease in the price of crude oil 
D)  An improvement in oil refining technology 
E)  all of the above

Question 11

Figure 2.3.1
-The effect of the September 11 attacks on the World Trade Center on the market for office space in downtown Manhattan was that both the equilibrium price and the equilibrium quantity fell. What is the most likely explanation for this?

Accepted Answer

A)  Supply and demand both shifted left, and the magnitude of the demand shift was greater. 
B)  Supply and demand both shifted left, and the magnitude of the supply shift was greater. 
C)  Supply shifted left, demand shifted right, and the magnitude of the demand shift was greater. 
D)  Supply shifted left, demand shifted right, and the magnitude of the supply shift was greater. 
A)  Supply and demand both shifted left, and the magnitude of the demand shift was greater. 
B)  Supply and demand both shifted left, and the magnitude of the supply shift was greater. 
C)  Supply shifted left, demand shifted right, and the magnitude of the demand shift was greater. 
D)  Supply shifted left, demand shifted right, and the magnitude of the supply shift was greater.

Question 12

Scenario 2.1:
The demand for books is: QS1U1B1dS1U1B0 = 120 - P
The supply of books is: QS1U1B1sS1U1B0 = 5P
-Refer to Scenario 2.1. If P = $15, which of the following is true?

Accepted Answer

A)  There is a surplus equal to 30. 
B)  There is a shortage equal to 30. 
C)  There is a surplus, but it is impossible to determine how large. 
D)  There is a shortage, but it is impossible to determine how large. 
A)  There is a surplus equal to 30. 
B)  There is a shortage equal to 30. 
C)  There is a surplus, but it is impossible to determine how large. 
D)  There is a shortage, but it is impossible to determine how large.

Question 13

Figure 2.5.6
-Refer to Figure 2.5.6. Which of the following best represents the market for coffee in the long run?

Accepted Answer

A)  A 
B)  B 
C)  C 
D)  None of the above. 
A)  A 
B)  B 
C)  C 
D)  None of the above.

Question 14

Due to the recent increase in the price of natural gas, the quantity of coal demanded by electric power generation plants has increased. Based on this information, coal and natural gas are:

Accepted Answer

A)  complements. 
B)  substitutes. 
C)  independent goods. 
D)  none of the above 
A)  complements. 
B)  substitutes. 
C)  independent goods. 
D)  none of the above

Question 15

A freeze in Florida's orange growing regions will:

Accepted Answer

A)  result in a sharp increase in the price of oranges in the short run because demand and supply are highly inelastic. 
B)  result in a sharp increase in the price of oranges in the short run because demand and supply are highly elastic. 
C)  result in a sharp decrease in the price of oranges in the short run because demand is highly inelastic and supply is highly elastic. 
D)  result in little change in the price of oranges in the short run because supply is infinitely elastic. 
A)  result in a sharp increase in the price of oranges in the short run because demand and supply are highly inelastic. 
B)  result in a sharp increase in the price of oranges in the short run because demand and supply are highly elastic. 
C)  result in a sharp decrease in the price of oranges in the short run because demand is highly inelastic and supply is highly elastic. 
D)  result in little change in the price of oranges in the short run because supply is infinitely elastic.

Question 16

The cross-price elasticity of demand for peanut butter with respect to the price of jelly is -0.3. If we expect the price of jelly to decline by 15%, what is the expected change in the quantity demanded for peanut butter?

Accepted Answer

A)  +15% 
B)  +45% 
C)  +4.5% 
D)  -4.5% 
A)  +15% 
B)  +45% 
C)  +4.5% 
D)  -4.5%

Question 17

For U.S. consumers, the income elasticity of demand for fruit juice is 1.1. If the economy enters a recession next year and consumer income declines by 2.5%, what is the expected change in the quantity of fruit juice demanded next year?

Accepted Answer

A)  -2.75% 
B)  +2.75% 
C)  -27.5% 
D)  +27.5% 
A)  -2.75% 
B)  +2.75% 
C)  -27.5% 
D)  +27.5%

Question 18

Figure 2.5.4
-Refer to Figure 2.5.4 above. The figure depicts the supply curves in the short run (SR) and long run (LR) for two types of copper: primary and secondary. Which panel best resembles the supply curves for primary copper?

Accepted Answer

A)  A 
B)  B 
C)  Both. There are no differences. 
D)  Neither. The supply curves in that industry are downward sloping. 
A)  A 
B)  B 
C)  Both. There are no differences. 
D)  Neither. The supply curves in that industry are downward sloping.

Question 19

Suppose that a small market Major League Baseball team currently charges $12 for a ticket. At this price, they are able to sell 12,000 tickets to each game. If they raise ticket prices to $15, they would sell 11,053 tickets to each game. What is the price elasticity of demand at $12? If the demand curve is linear, what is the algebraic expression for demand?

Accepted Answer

The price elasticity of demand is @#IMG-DLM& If th

Question 20

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:
Qd = 1,600 - 125P
Qs = 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?

Accepted Answer

a.Set Q_d = Q_s to determine price.1600 - 12

The cross-price elasticity of demand refers to:

Assume that the current market price is below the market clearing level. We would expect:

Suppose the observed annual quantity of steel exchanged in the European market is 30 million metric tons, and the observed market price is 90 euros per ton. If the linear demand function for steel takes the form Q = a - 0.9P, what is an appropriate value for the intercept coefficient a?

What happens if price falls below the market clearing price?

When the current price is above the market-clearing level we would expect:

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?

Figure 2.2.2 -Refer to Figure 2.2.2 above. If the price of $2.25 is an artificial price imposed by the government, and the government is expected to remove it, what will happen in this market?

Which of the following events will cause a leftward shift in the supply curve of gasoline?

Figure 2.3.1 -The effect of the September 11 attacks on the World Trade Center on the market for office space in downtown Manhattan was that both the equilibrium price and the equilibrium quantity fell. What is the most likely explanation for this?

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. If P = $15, which of the following is true?

Figure 2.5.6 -Refer to Figure 2.5.6. Which of the following best represents the market for coffee in the long run?

Due to the recent increase in the price of natural gas, the quantity of coal demanded by electric power generation plants has increased. Based on this information, coal and natural gas are:

A freeze in Florida's orange growing regions will:

The cross-price elasticity of demand for peanut butter with respect to the price of jelly is -0.3. If we expect the price of jelly to decline by 15%, what is the expected change in the quantity demanded for peanut butter?

For U.S. consumers, the income elasticity of demand for fruit juice is 1.1. If the economy enters a recession next year and consumer income declines by 2.5%, what is the expected change in the quantity of fruit juice demanded next year?

Figure 2.5.4 -Refer to Figure 2.5.4 above. The figure depicts the supply curves in the short run (SR) and long run (LR) for two types of copper: primary and secondary. Which panel best resembles the supply curves for primary copper?

Preliminaries

Consumer Behavior

Individual and Market Demand

Uncertainty and Consumer Behavior

Production

The Cost of Production

Profit Maximization and Competitive Supply

The Analysis of Competitive Markets

Market Power: Monopoly and Monopsony

Pricing With Market Power

Monopolistic Competition and Oligopoly

Game Theory and Competitive Strategy

Markets for Factor Inputs

Investment, Time, and Capital Markets

General Equilibrium and Economic Efficiency

Markets With Asymmetric Information

Externalities and Public Goods

Behavioral Economics

Filters

Exam 2: The Basics of Supply and Demand

The cross-price elasticity of demand refers to:

Assume that the current market price is below the market clearing level. We would expect:

Suppose the observed annual quantity of steel exchanged in the European market is 30 million metric tons, and the observed market price is 90 euros per ton. If the linear demand function for steel takes the form Q = a - 0.9P, what is an appropriate value for the intercept coefficient a?

What happens if price falls below the market clearing price?

When the current price is above the market-clearing level we would expect:

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

Figure 2.2.2 -Refer to Figure 2.2.2 above. If the price of $2.25 is an artificial price imposed by the government, and the government is expected to remove it, what will happen in this market?

Which of the following events will cause a leftward shift in the supply curve of gasoline?

Figure 2.3.1 -The effect of the September 11 attacks on the World Trade Center on the market for office space in downtown Manhattan was that both the equilibrium price and the equilibrium quantity fell. What is the most likely explanation for this?

Scenario 2.1: The demand for books is: Qd = 120 - P The supply of books is: Qs = 5P -Refer to Scenario 2.1. If P = $15, which of the following is true?

Figure 2.5.6 -Refer to Figure 2.5.6. Which of the following best represents the market for coffee in the long run?

Due to the recent increase in the price of natural gas, the quantity of coal demanded by electric power generation plants has increased. Based on this information, coal and natural gas are:

A freeze in Florida's orange growing regions will:

The cross-price elasticity of demand for peanut butter with respect to the price of jelly is -0.3. If we expect the price of jelly to decline by 15%, what is the expected change in the quantity demanded for peanut butter?

For U.S. consumers, the income elasticity of demand for fruit juice is 1.1. If the economy enters a recession next year and consumer income declines by 2.5%, what is the expected change in the quantity of fruit juice demanded next year?

Figure 2.5.4 -Refer to Figure 2.5.4 above. The figure depicts the supply curves in the short run (SR) and long run (LR) for two types of copper: primary and secondary. Which panel best resembles the supply curves for primary copper?

Preliminaries

Consumer Behavior

Individual and Market Demand

Uncertainty and Consumer Behavior

Production

The Cost of Production

Profit Maximization and Competitive Supply

The Analysis of Competitive Markets

Market Power: Monopoly and Monopsony

Pricing With Market Power

Monopolistic Competition and Oligopoly

Game Theory and Competitive Strategy

Markets for Factor Inputs

Investment, Time, and Capital Markets

General Equilibrium and Economic Efficiency

Markets With Asymmetric Information

Externalities and Public Goods

Behavioral Economics

Filters

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. If P = $15, which of the following is true?