Exam 4: Coordinating Smart Choices: Demand and Supply

If the price of corn rises we expect a rise in the price of wheat because these crops are related products for farmers.

Voluntary exchange

If enrollment at your school increases even though tuition fees rise, it is likely that

Union leaders who want to avoid layoffs for their members sometimes negotiate lower wages during recessions. If the wages for unionized workers at bakeries fall, the price of bread falls because

We observe a rise in the price of serivce A and a decrease in the quantity of serivce A bought and sold. Which is a likely explanation?

When concert tickets go on sale, potential buyers compete on a first-come, first-get basis.

When wages are above equilibrium levels, there is an excess supply of workers in the form of unemployment.

Figure 4.5.3. -Look at Figure 4.5.3. If quantity is 150, producer surplus is area

Long lineups to buy a coffee on campus are a signal that the coffee price is too low.

In markets with shortages, businesses have incentives to increase quantity supplied as long as price exceeds marginal costs.

Figure 4.5.3 -Look at Figure 4.5.3. If If quantity is 150, consumer surplus is area

At the equilibrium price, business inventories do not grow or shrink.

When Ophelia voluntarily buys a cup of tea from Tim Horton's for $1.25,

Figure 4.5.1 -Look at the demand curve in Figure 4.5.1. What is the maximum someone is willing to pay for the first unit of the product?

Which statement about markets is true?

Property rights are legally enforceable guarantees of ownership.

At the equilibrium price,

Market-clearing prices scare away all consumers and businesses from the market.

Consumer surplus is the area under the market price but above the marginal benefit curve.

Producer surplus is the difference between the amount a producer is willing to accept, and the price actually received.