Exam 5: Supply Demand and Price Applications

A toll of $1 per car is imposed on a road regardless of time of day. If the toll creates equilibrium travel flows at the busiest time of day, it will create a __________ at all other times.

When universities charge students less than the equilibrium tuition for admission, they have to impose some nonprice-rationing device.

When congestion occurs on the freeway (because of a shortage of freeway space), an economist would most likely explain this by saying that it is because

A subsidy placed on the consumption of good A will likely raise the demand for good A by the amount of the subsidy.

Discuss three possible solutions for reducing traffic congestion on freeways. Be sure to explain what effect each would have on the supply and/or demand for freeway space.

Since most colleges and universities do not charge students different tuition based on the time or day a student takes classes, there will likely be a shortage of seats in some classes and a surplus of seats in other classes.

At college ABC and at college XYZ, students pay $15,000 less than the equilibrium tuition. If the supply of openings is the same at both colleges, it follows that a shortage of openings will be greater at

The lower the price of medical care in general, the higher the ____________________________ medical care and the ______________________ specific items that make up medical care (such as x-rays).

Suppose that the government provides a subsidy for the consumption of good X. The demand curve with the subsidy will lie to the ______________ of the demand curve without the subsidy, and the equilibrium price of good X will be __________ with the subsidy than without.

Suppose that there are two laws proposed for eviction notices. Plan A requires landlords to give a renter 30 days to vacate an apartment once he has been served an eviction notice. Under Plan B, he has 60 days to vacate an apartment once he has been served an eviction notice. It follows that landlords will find

As discussed in the textbook, describe some policy changes the government could make in order to make it easier for people to buy houses. Using supply and demand analysis, explain how these policy changes could indirectly lead to fewer people being able to afford to purchase a home.

Colleges and universities use such things as grade point averages and standardized test scores as

People who buy houses in good-weather locations receive this benefit absolutely for free.

Exhibit 5-2 -Refer to Exhibit 5-2. If the tuition is set at $50 there will be

If the quantity demanded of medical care is higher at a zero price than at some positive price, then it follows that the demand for those specific items that make up health care will be higher (than it would be if the quantity demanded of health care were lower).

In a given community, if the government builds more freeways, then the supply curve for freeway space shifts rightward and the demand curve for freeway space shifts leftward.

Exhibit 5-1 -Refer to Exhibit 5-1, which shows supply and demand for freeway space at both 8 a.m. and 11 p.m. Suppose that the government decides to set the money price of driving on the freeway at zero, but creates programs that encourage drivers to carpool. If the carpooling program is sufficiently successful to eliminate the shortage of freeway space at 8 a.m., graphically the result of the increase in carpooling would be a

Exhibit 5-1 -Refer to Exhibit 5-1, which shows supply and demand for freeway space at both 8 a.m. and 11 p.m. Which toll creates equilibrium at 11 p.m.?

When the government enacts policies that lead to lower mortgage lending standards and lower interest rates, their actions can indirectly lead to higher home prices.

Exhibit 5-5 -Refer to Exhibit 5-5. If the airline charges price P₁ for both aisle seats and middle seats, the result will be