Question 1

Which of the following would cause an unambiguous decrease in the equilibrium quantity in a market?

Accepted Answer

A) A rightward shift in supply and a rightward shift in demand. 
B) A rightward shift in supply and a leftward shift in demand. 
C) A leftward shift in supply and a rightward shift in demand. 
D) A leftward shift in supply and a leftward shift in demand. 
A) A rightward shift in supply and a rightward shift in demand. 
B) A rightward shift in supply and a leftward shift in demand. 
C) A leftward shift in supply and a rightward shift in demand. 
D) A leftward shift in supply and a leftward shift in demand. D

Question 2

Indicate whether each of the following events will shift the monthly demand curve for the Ford F-150 (a midsize truck)to the right, to the left, or not at all: (a)GM introduces a new line of small, fuel-efficient trucks; (b)Following an agreement between the US and Japan, Japanese car manufacturers will ''voluntarily'' reduce their exports of medium sized cars to the US; (c)The cost of steel increases.

Accepted Answer

(a)Shifts demand to the left: at a given price for the Ford Taurus, some of its potential buyers will now purchase the new model.
(b)Shifts demand to the right: as the price of Japanese imports increases more people are willing to purchase US-made cars.
(c)Does not affect the demand curve.
Response
A demand shift to the left means that, at the same price, people would want to purchase fewer units or, equivalently, they would require a lower price to purchase at the level they were purchasing before. Factors affecting supply conditions (such as cost conditions)do not affect the desirability of the product (at the same price). Notice that the price of steel is something that would affect the cost of producing a Taurus. This would affect the conditions of supply, but do not in themselves affect the desirability of the Taurus. You may think that an increase in cost may affect the price of the Taurus, which will change the amount demanded in the market price. This is a possible equilibrium outcome: as the supply conditions change, the supply curve shifts, changing the equilibrium price and, hence, the equilibrium number of cars traded.

Question 3

Suppose that demand and supply for cookies can be written as: $$\mathrm { Q } ^ { \mathrm { d } } = 50 - \mathrm { P } ; \mathrm { Q } ^ { \mathrm { s } } = \mathrm { P }$$ Compute the equilibrium price and quantity.
Now, suppose that a change in the price of cake causes demand for cookies to become: $$Q ^ { d } = 100 - P$$ Compute the new equilibrium price and quantity. What has changed?

Accepted Answer

The equilibrium price and quantity at the original levels of demand and supply can be computed as: $50 - \mathrm { P } = \mathrm { P }$ (setting quantity demanded equal to quantity supplied) so that $\mathrm { P } ^ { * } = 25$. Turning now to equilibrium quantity: $Q = 50 - 25$ (Substituting $P ^ { * }$ into the equation of demand), or $Q ^ { * } =$ 25 (solving for equilibrium quantity, $Q ^ { * }$ ). With the new equation for demand, we can compute the new equilibrium price and quantity as follows: $100 - \mathrm { P } = \mathrm { P }$ (setting quantity demanded equal to quantity supplied) so that $\mathrm { P } ^ { * * } = 50$ (solving for the new equilibrium price, $\mathrm { P } ^ { * * }$ ) and $\mathrm { Q } = 100 -$ 50 (substituting the new equilibrium price into the new demand), or $\mathrm { Q } ^ { * * } = 50$ (solving for the new equilibrium quantity, $\mathrm { Q } ^ { * * }$ ). There has been an outward shift in demand that has caused equilibrium price and quantity to rise as demand intersects supply farther to the north-east. Response
Set demand equal to supply to get the equilibrium price and quantity in the two cases. Now, graph the problem. When demand shifts out, equilibrium price and quantity must rise (except if the Supply Curve is perfectly inelastic (i.e., vertical), in which case only the equilibrium price would increase, but the equilibrium quantity would remain unchanged.). You can check that you have computed the equilibrium correctly by checking that the price and quantity you obtain satisfy both the demand and the supply equations.

Question 4

Suppose demand is given by $\mathrm { Q } ^ { \mathrm { d } } = 400 - 15 \mathrm { P } + \mathrm { I }$, where $\mathrm { Q } ^ { \mathrm { d } }$ is quantity demanded, $\mathrm { P }$ is price and $\mathrm { I }$ is income. Supply is given by $Q ^ { s } = 5 P$, where $Q ^ { s }$ is quantity supplied. When $I = 200$, equilibrium price is

Accepted Answer

A)  15 
B)  20 
C)  25 
D)  30 
A)  15 
B)  20 
C)  25 
D)  30

Question 5

$$\text { Leftward shift in supply } + \text { unchanged demand curve } =$$ higher equilibrium price and smaller equilibrium quantity.

Accepted Answer

A) True 
 B)False

Question 6

To identify a demand curve we must observe:

Accepted Answer

A) many years of data. 
B) shifts in the demand curve. 
C) shifts in the supply curve. 
D) many different markets simultaneously. 
A) many years of data. 
B) shifts in the demand curve. 
C) shifts in the supply curve. 
D) many different markets simultaneously.

Question 7

A cross price elasticity of demand for product with respect to the price of product of 0.3 means that an increase in the price of A by 10 percent gives rise to a decrease in the quantity demanded of B by 3 percent.

Accepted Answer

A) True 
 B)False

Question 8

Eggs would typically have a

Accepted Answer

A)  low elasticity of demand, probably between $- 1$ and $- 2$ 
B)  low elasticity of demand, probably between 0 and $- 1$ 
C)  high elasticity of demand, probably between $- 2$ and $- 3$ 
D)  low elasticity of demand, probably between $- 2$ and $- 3$ 
A)  low elasticity of demand, probably between $- 1$ and $- 2$ 
B)  low elasticity of demand, probably between 0 and $- 1$ 
C)  high elasticity of demand, probably between $- 2$ and $- 3$ 
D)  low elasticity of demand, probably between $- 2$ and $- 3$

Question 9

Suppose demand is given by $Q ^ { d } = 500 - 15 P$ and supply is given by $Q ^ { s } = 5 P$. If the government imposes a $\$ 15$ price ceiling, the excess demand will be

Accepted Answer

A)  200 
B)  225 
C)  250 
D)  275 
A)  200 
B)  225 
C)  250 
D)  275

Question 10

The choke price is the price at which quantity demanded falls to zero.

Accepted Answer

A) True 
 B)False

Question 11

A relationship that shows the quantity of goods that consumers are willing to buy at different prices is the:

Accepted Answer

A) elasticity 
B) market demand curve 
C) market supply curve 
D) market equilibrium 
A) elasticity 
B) market demand curve 
C) market supply curve 
D) market equilibrium

Question 12

Suppose demand is given by $Q ^ { d } = 1,000 - 25 P$ and supply is given by $Q ^ { s } = 75 P$. At the equilibrium price and quantity, the price elasticity of demand is

Accepted Answer

A)  $- 3$ 
B)  $- 25$ 
C)  $- 1 / 3$ 
D)  $- 10$ 
A)  $- 3$ 
B)  $- 25$ 
C)  $- 1 / 3$ 
D)  $- 10$

Question 13

What is the elasticity of the following demand curve? $\mathrm { QP } ^ { 2 } = 100$

Accepted Answer

@#LAT-DLM& Response
This is a constant e

Question 14

Price elasticity of demand measures:

Accepted Answer

A) the shift in demand as price changes. 
B) the sensitivity of quantity demanded to price. 
C) the slope of the demand curve. 
D) the relationship of percentages to price. 
A) the shift in demand as price changes. 
B) the sensitivity of quantity demanded to price. 
C) the slope of the demand curve. 
D) the relationship of percentages to price.

Question 15

Which of the following statements best illustrates the law of demand?

Accepted Answer

A) When the price of pepperoni rises, the demand for pizza falls. 
B) When the weather gets hotter, the quantity demanded of ice cream rises. 
C) When the price of lemons falls, the demand for lemonade rises. 
D) When the price of eggs rises, the quantity demanded of eggs falls. 
A) When the price of pepperoni rises, the demand for pizza falls. 
B) When the weather gets hotter, the quantity demanded of ice cream rises. 
C) When the price of lemons falls, the demand for lemonade rises. 
D) When the price of eggs rises, the quantity demanded of eggs falls.

Question 16

The law of demand says that when the price of pepperoni rises, the demand for pizza falls.

Accepted Answer

A) True 
 B)False

Question 17

Suppose that the market for soybeans is initially in equilibrium. Further suppose that there is a decrease in the price of fertilizer. Which of the following accurately describes the new equilibrium?

Accepted Answer

A) The equilibrium price will rise; the equilibrium quantity will fall. 
B) The equilibrium price will rise; the equilibrium quantity will rise. 
C) The equilibrium price will fall; the equilibrium quantity will fall. 
D) The equilibrium price will fall; the equilibrium quantity will rise. 
A) The equilibrium price will rise; the equilibrium quantity will fall. 
B) The equilibrium price will rise; the equilibrium quantity will rise. 
C) The equilibrium price will fall; the equilibrium quantity will fall. 
D) The equilibrium price will fall; the equilibrium quantity will rise.

Question 18

Demand tends to be more price inelastic when few substitutes for a product exist.

Accepted Answer

A) True 
 B)False

Question 19

A rightward shift in supply and a leftward shift in demand would cause an unambiguous decrease in the equilibrium quantity in a market.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following statements is true?

Accepted Answer

A) The price elasticity of demand is positive when there is an inverse relationship between price and quantity demanded. 
B) A positive income elasticity indicates that demand for a good rises as consumer income falls. 
C) A positive cross-price elasticity for two goods and would arise if and were demand complements. 
D) A negative cross-price elasticity for two goods and would arise if and were demand complements. 
A) The price elasticity of demand is positive when there is an inverse relationship between price and quantity demanded. 
B) A positive income elasticity indicates that demand for a good rises as consumer income falls. 
C) A positive cross-price elasticity for two goods and would arise if and were demand complements. 
D) A negative cross-price elasticity for two goods and would arise if and were demand complements.

Which of the following would cause an unambiguous decrease in the equilibrium quantity in a market?

$\text { Leftward shift in supply } + \text { unchanged demand curve } =$ higher equilibrium price and smaller equilibrium quantity.

To identify a demand curve we must observe:

A cross price elasticity of demand for product with respect to the price of product of 0.3 means that an increase in the price of A by 10 percent gives rise to a decrease in the quantity demanded of B by 3 percent.

Eggs would typically have a

Suppose demand is given by $Q ^ { d } = 500 - 15 P$ and supply is given by $Q ^ { s } = 5 P$ . If the government imposes a $\$ 15$ price ceiling, the excess demand will be

The choke price is the price at which quantity demanded falls to zero.

A relationship that shows the quantity of goods that consumers are willing to buy at different prices is the:

Suppose demand is given by $Q ^ { d } = 1,000 - 25 P$ and supply is given by $Q ^ { s } = 75 P$ . At the equilibrium price and quantity, the price elasticity of demand is

What is the elasticity of the following demand curve? $\mathrm { QP } ^ { 2 } = 100$

Price elasticity of demand measures:

Which of the following statements best illustrates the law of demand?

The law of demand says that when the price of pepperoni rises, the demand for pizza falls.

Suppose that the market for soybeans is initially in equilibrium. Further suppose that there is a decrease in the price of fertilizer. Which of the following accurately describes the new equilibrium?

Demand tends to be more price inelastic when few substitutes for a product exist.

A rightward shift in supply and a leftward shift in demand would cause an unambiguous decrease in the equilibrium quantity in a market.

Which of the following statements is true?

Analyzing Economic Problems

Consumer Preferences and the Concept of Utility

Consumer Choice

The Theory of Demand

Inputs and Production Functions

Costs and Cost Minimization

Cost Curves

Perfectly Competitive Markets

Competitive Markets: Applications

Monopoly and Monopsony

Capturing Surplus

Market Structure and Competition

Game Theory and Strategic Behavior

Risk and Information

General Equilibrium Theory

Externalities and Public Goods

Filters

Exam 2: Demand and Supply Analysis

Which of the following would cause an unambiguous decrease in the equilibrium quantity in a market?

Leftward shift in supply + unchanged demand curve =\text { Leftward shift in supply } + \text { unchanged demand curve } = Leftward shift in supply + unchanged demand curve = higher equilibrium price and smaller equilibrium quantity.

To identify a demand curve we must observe:

A cross price elasticity of demand for product with respect to the price of product of 0.3 means that an increase in the price of A by 10 percent gives rise to a decrease in the quantity demanded of B by 3 percent.

Eggs would typically have a

Suppose demand is given by Qd=500−15PQ ^ { d } = 500 - 15 PQd=500−15P and supply is given by Qs=5PQ ^ { s } = 5 PQs=5P . If the government imposes a $15\$ 15$15 price ceiling, the excess demand will be

The choke price is the price at which quantity demanded falls to zero.

A relationship that shows the quantity of goods that consumers are willing to buy at different prices is the:

Suppose demand is given by Qd=1,000−25PQ ^ { d } = 1,000 - 25 PQd=1,000−25P and supply is given by Qs=75PQ ^ { s } = 75 PQs=75P . At the equilibrium price and quantity, the price elasticity of demand is

What is the elasticity of the following demand curve? QP2=100\mathrm { QP } ^ { 2 } = 100QP2=100

Price elasticity of demand measures:

Which of the following statements best illustrates the law of demand?

The law of demand says that when the price of pepperoni rises, the demand for pizza falls.

Suppose that the market for soybeans is initially in equilibrium. Further suppose that there is a decrease in the price of fertilizer. Which of the following accurately describes the new equilibrium?

Demand tends to be more price inelastic when few substitutes for a product exist.

A rightward shift in supply and a leftward shift in demand would cause an unambiguous decrease in the equilibrium quantity in a market.

Which of the following statements is true?

Analyzing Economic Problems

Consumer Preferences and the Concept of Utility

Consumer Choice

The Theory of Demand

Inputs and Production Functions

Costs and Cost Minimization

Cost Curves

Perfectly Competitive Markets

Competitive Markets: Applications

Monopoly and Monopsony

Capturing Surplus

Market Structure and Competition

Game Theory and Strategic Behavior

Risk and Information

General Equilibrium Theory

Externalities and Public Goods

Filters

$\text { Leftward shift in supply } + \text { unchanged demand curve } =$ higher equilibrium price and smaller equilibrium quantity.

Suppose demand is given by $Q ^ { d } = 500 - 15 P$ and supply is given by $Q ^ { s } = 5 P$ . If the government imposes a $\$ 15$ price ceiling, the excess demand will be

Suppose demand is given by $Q ^ { d } = 1,000 - 25 P$ and supply is given by $Q ^ { s } = 75 P$ . At the equilibrium price and quantity, the price elasticity of demand is

What is the elasticity of the following demand curve? $\mathrm { QP } ^ { 2 } = 100$