Deck 5: Supply,demand,and Price: Applications

Question 1

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

Answer 1

True

Question 2

The actions of speculators make the speculators better off,but they necessarily make the rest of society worse off.

Answer 2

False

Question 3

If the supply of aisle seats and middle seats on an airplane is the same,but the demand for aisle seats is greater than the demand for middle seats,then the equilibrium price of aisle seats will be less than the equilibrium price of middle seats.

Answer 3

False

Question 4

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).

Question 5

The objective of speculators is to buy at one price and sell at a lower price.

Question 6

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.

Question 7

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

Question 8

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.

Question 9

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.

Question 10

High demand for a product does not necessarily mean a high quantity demanded for that product if the price is high enough.

Question 11

The price of a given good is likely to be less variable with speculators than it would be without speculators.

Question 12

Since most colleges and universities charge the same tuition to every student regardless of what time students choose to take their classes,

A) the schools must develop some type of non-price rationing device.
B) it follows that all classes will have a shortage of seats.
C) it follows that all classes will have a surplus of seats.
D) it follows that some classes will likely have a shortage of seats while other classes may have a surplus of seats.
E) a and d

Question 13

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

A) a measure of consumer utility.
B) non-price rationing devices.
C) a means to shift the supply curve for a college education.
D) solely to frustrate prospective students.

Question 14

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

Question 15

The supply curve for space on a freeway is perfectly vertical at any given point in time.

Question 16

If a change of law allows renters the right to vacate a property 90 days after receiving an eviction notice rather than 30 days after the eviction notice,the supply curve of apartments will shift upward and to the left once the law is enacted.

Question 17

Economists perceive a college applicant's grade point average and standardized test scores (such as SAT and ACT scores)to be rationing devices.

Question 18

The existence of a third party in the medical care market separates the buying of medical care from the paying for medical care.

Question 19

The supply curve for seats in a traditional college classroom is horizontal.

Question 20

The NCAA rule governing the limits on the amount of a scholarship a college can offer an athlete is an effective price floor.

Question 21

When the government _____________ mortgage lending standards,the indirect result is likely to be _____________ home prices.

A) lowers; higher
B) increases; lower
C) lowers; lower
D) increases; higher
E) a and b

Question 22

Refer to Exhibit 5-3 which shows the demand and supply of a college athlete.If the college is allowed to pay this student athlete its market equilibrium wage of $10,000,what is the consumers' surplus for the college that buys this one athlete's services at this wage?

A) area 1
B) area 2
C) area 3
D) area 1 + 2

Question 23

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.?

A) P₂
B) P₁
C) 0
D) It is not constant.

Question 24

At college X and at college Y,students pay $3,000 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

A) college X than college Y.
B) college X than the surplus at college Y.
C) college Y than the surplus at college X.
D) college X than college Y if the demand is greater at college X.
E) ​college X than college Y if the demand is less at college X.

Question 25

Refer to Exhibit 5-3 which shows the demand and supply of a college athlete.Suppose that NCAA rules limit the amount that the college can pay this athlete,such that their payment can not exceed the cost of attending the college (currently,$8,000).What is the consumers' surplus for the college (with respect to this one athlete)?

A) area 1
B) area 2
C) area 1 + 2 + 3
D) area 1 + 2

Question 26

Which of the following statements is false?

A) People who live in cities with good weather receive that benefit for free.
B) People who own property in cities with good weather receive higher rents,ceteris paribus.
C) Housing prices are higher in cities with better weather,ceteris paribus.
D) The demand for housing is higher in cities with good weather,ceteris paribus.

Question 27

If a college sets its tuition __________ the equilibrium tuition,then it will have to use some form of nonprice-rationing device to determine who will be accepted for admission to the college.

A) above
B) below
C) equal to
D) all of the above

Question 28

To an economist,freeway congestion is a sign that the price to drive on the freeway is

A) below its equilibrium level.
B) at its equilibrium level.
C) above its equilibrium level.
D) either a or c
E) none of the above

Question 29

If the supply of aisle seats equals the supply of middle seats on an airplane,and the demand for aisle seats is _____________ than the demand for middle seats,then the equilibrium price of aisle seats will be ______________ the equilibrium price of middle seats.

A) greater; higher than
B) less; higher than
C) greater; lower than
D) less; the same as

Question 30

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) the freeway has too few miles of roadway.
B) there are too many cars.
C) the price of driving on the freeway is below the equilibrium price.
D) a and c

Question 31

If the government sets out to make home buying easier for more people by forcing lenders to accept ____________ down payments and ______________ interest rates,the result will likely be a(n)_______________ in housing prices.

A) lower; lower; increase
B) higher; higher; increase
C) lower; higher; decrease
D) higher; lower; decrease

Question 32

Refer to Exhibit 5-3 which shows the demand and supply of a college athlete.Suppose that NCAA rules limit the amount that the college can pay this athlete,such that their payment can not exceed the cost of attending the college (currently $8,000).The impact of this ruling would be a loss of income to the athlete of __________ and an equal gain in consumers' surplus to the college represented by ________________.

A) $2,000; area 2
B) $8,000; area 3
C) $10,000; area 2 + 3
D) $2,000; area 1 + 2

Question 33

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.

A) surplus of space
B) shortage of space
C) zero money price for space
D) zero opportunity cost for space

Question 34

University A sets tuition at the equilibrium level based on price and then imposes entrance requirements in the form of minimum high school GPA and SAT scores.Enrollment at this school will likely be

A) at the equilibrium level.
B) below the equilibrium level because of the use of non-price rationing devices.
C) above the equilibrium level because of the combination of price and the use of non-price rationing devices.
D) none of the above

Question 35

If more people join carpools and travel to work together

A) the demand curve for freeway space shifts leftward.
B) the supply curve for freeway space shifts rightward.
C) the supply curve for freeway space shifts leftward.
D) a and b
E) none of the above

Question 36

The space on the freeway is fixed at any instant of time.A supply curve that shows this is

A) perfectly horizontal.
B) upward sloping.
C) downward sloping.
D) perfectly vertical.

Question 37

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

A) Plan A more expensive than Plan B.
B) Plan B more expensive than Plan A.
C) both plans to be equally expensive.
D) none of the above

Question 38

The demand to attend a certain college is represented by a downward-sloping demand curve.The supply of spots at the college is represented by a vertical supply curve.At the tuition that students are charged,there is a shortage of spots at the college.If the demand to attend the college rises,but the tuition stays constant,it follows that the

A) GPA required to attend the college will probably rise.
B) GPA required to attend the college will probably fall.
C) SAT score required to attend the college will probably not change.
D) a and c
E) There is not enough information to answer this question.

Question 39

Residents of cities with a reputation for good weather,ceteris paribus,

A) pay a higher price for housing because the demand for housing is higher.
B) pay a higher price for housing because the supply of housing is higher.
C) pay a higher price for housing because the supply and demand for housing is higher.
D) pay the same for housing as they would in cities with a reputation for bad weather.

Question 40

Good weather in cities such as San Diego

A) is absolutely free for the residents of that city.
B) is allocated using a weather market.
C) imposes indirect payments for the residents of that city.
D) b and c
E) none of the above

Question 41

The price of good X has a pattern such that P = $3 on Monday through Thursday of every week,and P = $2 on Fridays.If speculators begin participating in the market for good X,their actions will likely lead to a(n)______________ in the price of good X on Monday through Thursday and a(n)_______________ in the price of good X on Friday.

A) increase; increase
B) increase; decrease
C) decrease; increase
D) decrease; decrease

Question 42

Profit can be earned by buying _____________ and selling ____________________.

A) at one price; at the same price
B) low; high
C) high: low
D) none of the above

Question 43

Refer to Exhibit 5-5.If the airline charges price P₂ for both aisle seats and middle seats,the result will be

A) a surplus of middle seats and the equilibrium quantity of aisle seats.
B) a surplus of aisle seats and the equilibrium quantity of middle seats.
C) a shortage of middle seats and the equilibrium quantity of aisle seats.
D) a shortage of aisle seats and the equilibrium quantity of middle seats.

Question 44

Refer to Exhibit 5-5.If the airline charges a price that is higher than P₂,the result will be a ________________ of middle seats and a ____________ of aisle seats.

A) shortage; shortage
B) surplus; surplus
C) surplus; shortage
D) shortage; surplus

Question 45

Suppose that more people want to move from Miami to Phoenix than want to move from Phoenix to Miami.It is likely that U-Haul rates will be relatively ______________from Phoenix to Miami since the ___________________.

A) lower; demand for moving to Phoenix is greater than demand for moving to Miami
B) higher; demand for moving to Phoenix is greater than the demand for moving to Miami
C) higher; supply of moving trucks is greater in Phoenix than in Miami
D) lower; supply of moving trucks is lower in Phoenix than in Miami

Question 46

The price of good B has a pattern such that P = $20 on Monday through Thursday of every week,and P = $25 on Fridays.If speculators begin participating in the market for good B,their actions will likely lead to a(n)______________ in the price of good B on Monday through Thursday and a(n)_______________ in the price of good B on Friday.

A) increase; increase
B) increase; decrease
C) decrease; increase
D) decrease; decrease

Question 47

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.

A) left;lower
B) left; higher
C) right; higher
D) right;lower

Question 48

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

A) quantity demanded of; higher the demand for
B) demand for; higher the demand for
C) quantity demanded of; lower the demand for
D) demand for; higher the quantity demanded of

Question 49

As the price of good Z falls,the quantity demanded of good Z rises,but the quantity supplied of good Z does not change.Based upon this information we can conclude that the demand curve for good Z is ________________ and the supply curve for good Z is ________________.

A) downward sloping; upward sloping
B) upward sloping; downward sloping
C) upward sloping; vertical
D) downward sloping; vertical
E) vertical; downward sloping

Question 50

Refer to Exhibit 5-6.Under law 1 a renter has 30 days to vacate an apartment after being served with an eviction notice.Under law 2,the renter has 90 days to vacate after being served with an eviction notice.This graph shows that the supply of apartments is____________ under law 1 than under law 2,and thus apartment rent is _______________ under law 1 than under law 2.

A) less; lower
B) less; higher
C) greater; lower
D) greater; higher

Question 51

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).The result will be a _______________ price for the specific items that make up medical care.

A) quantity demanded of; higher the demand for; higher
B) demand for; higher the demand for; higher
C) quantity demanded of; lower the demand for; lower
D) demand for; higher the quantity demanded of; higher

Question 52

Refer to Exhibit 5-5.If the airline charges a price that is between P₁ and P₂ for both aisle seats and middle seats,the result will be

A) a surplus of middle seats and a shortage of aisle seats.
B) a surplus of aisle seats and a shortage of middle seats.
C) a shortage of middle seats and the equilibrium quantity of aisle seats.
D) a shortage of aisle seats and the equilibrium quantity of middle seats.

Question 53

Suppose that a subsidy is provided for the consumption of good ABC,and the subsidy is different for different units of good ABC (e.g.,$10 subsidy on the first unit of good ABC and $7 on the second unit of good ABC,etc.).The demand curve with such a subsidy will lie to the ______________ of the demand curve without a subsidy,__________ parallel to the demand curve without any subsidy.

A) left; but will not be
B) left; and will be
C) right; and will be
D) right; but will not be

Question 54

Refer to Exhibit 5-5.Based upon the information provided in this graph,the supply of aisle seats is __________ the supply of middle seats,and the demand for aisle seats is _______________ the demand for middle seats.

A) equal to; greater than
B) equal to; less than
C) greater than; greater than
D) less than; less than
E) greater than; equal to

Question 55

If the government enacts legislation which allows lenders to lower lending standards,the government indirectly___________ the demand for which leads to _________ house prices.

A) decreased; higher
B) decreased; lower
C) increased; higher
D) increased; lower

Question 56

Suppose that a toll of $15 is charged to drive on a road,regardless of the time of day.If this toll brings about equilibrium travel flows at the busiest time of day,it will create __________ at all other times of day.

A) equilibrium
B) a shortage of toll road space
C) a surplus of toll road space
D) b or c

Question 57

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

A) a surplus of middle seats and the equilibrium quantity of aisle seats.
B) a surplus of aisle seats and the equilibrium quantity of middle seats.
C) a shortage of middle seats and the equilibrium quantity of aisle seats.
D) a shortage of aisle seats and the equilibrium quantity of middle seats.

Question 58

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).

A) quantity demanded of; higher the demand for
B) demand for; higher the demand for
C) quantity demanded of; lower the demand for
D) demand for; higher the quantity demanded of

Question 59

Suppose that the government provides a subsidy for the consumption of higher education.The equilibrium price of higher education will be ___________ with the subsidy than without because the demand curve with the subsidy will lie to the ______________ of the demand curve without the subsidy.

A) lower; left
B) lower; right
C) higher; right
D) higher; left

Question 60

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

A) college ABC than college XYZ.
B) college ABC than the surplus at college XYZ.
C) college XYZ than the surplus at college ABC.
D) college ABC than college XYZ,if the demand is greater at college ABC.
E) college ABC than college XYZ,if the demand is less at college ABC.

Question 61

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.

Question 62

The price of good XYZ has a pricing pattern such that P = $50 on Monday through Thursday of every week,and P = $65 on Fridays.If speculators begin participating in the market for good XYZ,their actions will likely lead to a(n)______________ in the price of good XYZ on Monday through Thursday and a(n)_______________ in the price of good XYZ on Friday.

A) increase; increase
B) increase; decrease
C) decrease; increase
D) decrease; decrease

Question 63

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.

Question 64

If there is typically bumper-to-bumper traffic on a freeway at 5 p.m.,we can reduce (or eliminate)the traffic congestion by

A) building more freeways,which would shift the supply curve of freeway space rightward.
B) building more freeways,which would shift the supply curve of freeway space leftward.
C) encouraging workers to carpool,which would shift the demand curve for freeway space rightward.
D) a and b
E) b and c