Exam 4: Supply and Demand An Initial Look

Figure 4-3 -A 1985 Harvard study showed that the price of cigarettes does not affect how much an individual smokes but whether he smokes.If this is correct,which graph in Figure 4-3 shows the typical individual's demand curve for cigarettes?

Change in the price of a good causes the demand schedule for that good to shift.

Figure 4-13 -The drug BGH (bovine growth hormone)dramatically increases the milk output of dairy cows.Farmers in Wisconsin,a big dairy state,vigorously oppose licensing the drug,fearing that excess supply and a consumer reaction on the purity of food issue will put many of them out of business.Which graph in Figure 4-13 best illustrates the farmers' fears?

The law of increasing relative costs,depicted by the concavity of the production opportunities frontier,is most closely related to the

Rent controls are designed to protect consumers from high rents.

Why does quantity demanded decrease when price increases?

Refer to Exhibit 4-1.If the government imposes a price floor of $4 a weezil,how many weezils will be sold?

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.

We observe that the price of food rises and the quantity purchased also rises.This means the

Are markets always in equilibrium?

The amount of a good sold in a market at a particular price cannot exceed the quantity

In 1989,Hurricane Hugo devastated Charleston,South Carolina,leaving residents with no electricity for light or refrigeration,and completely cut off from the outside world by fallen trees and washed-out roads.Consequently,the price of ice rose 1,000 percent and generators 300 percent.Tree removal firms were charging $4,000 to cut up a single tree.Outraged,the city government enacted an emergency law prohibiting price "gouging." This law is an example of

Figure 4-12 -Studies at Cornell University revealed that chickens grow 2 percent larger when a red mitten is placed in their cage and Vivaldi is played in the coop.Resultant feed savings are estimated at $60 million a year.In the chicken market,the

One motive for "battling the invisible hand" is

A price ceiling is only effective if it is above the market equilibrium.

Figure 4-21 -Which price in Figure 4-21 is equilibrium?

A change in the price of hamburgers will change the supply of hot dogs.

Price ceilings set a legal maximum price on a product or commodity.

How do legal controls on prices lead to corruption?

In early 1996,Congress proposed 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?