Deck 5: Supply,demand,and Price: Applications

Question 1

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.

Answer 1

A

Question 2

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.

Answer 2

A

Question 3

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

Answer 3

A

Question 4

Exhibit 5-3
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 5

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 6

Exhibit 5-3
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 7

If the government legalizes the purchase and sale of marijuana,the equilibrium quantity would then _________ and the price would then ________ if the supply of marijuana increased by _______ than the demand for marijuana increased.

A)fall;fall;more
B)fall;rise;more
C)rise;fall;more
D)rise;fall;less
E)fall;fall;less

Question 8

Exhibit 5-3
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 9

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 10

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 11

When congestion occurs on the freeway (because of a shortage of freeway space),the 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 12

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 13

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 14

If the purchase and sale of marijuana becomes legalized

A)the equilibrium price and quantity will both rise.
B)the equilibrium price will fall,but the change in equilibrium quantity depends upon whether the demand curve shifts rightward more or the supply curve shifts rightward more.
C)the equilibrium quantity will rise,but the change in equilibrium price depends upon whether the demand curve shifts rightward more or the supply curve shifts rightward more.
D)the equilibrium price and quantity will both fall.

Question 15

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.?

A)P₂
B)P₁
C)0
D)It is not constant.

Question 16

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 17

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 18

If the purchase and sale of a currently illegal drug (for example,marijuana)were decriminalized,economists would expect

A)an increase in demand and supply of this drug.
B)an increase in demand and a decrease in supply of this drug.
C)a decrease in demand and an increase in supply of this drug.
D)a decrease in demand and supply of this drug.

Question 19

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 20

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 21

Suppose that a television studio has two shows,X and Z,and that tickets for viewing the taping of each show is free.The equilibrium price for a ticket to view the taping of show X is $25 and the equilibrium price for a ticket to view the taping of show B is -$20.It is likely that tickets to show ________ will need to be rationed on a first-come-first-served basis,while the producers of show ________ will have a much more difficult time filling the seats in the studio since the equilibrium price for tickets to that show is a __________ dollar amount.

A)Z;X;positive
B)Z;X;negative
C)X;Z;positive
D)X;Z;negative

Question 22

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 23

Exhibit 5-6
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 24

Exhibit 5-4
Refer to Exhibit 5-4.If tickets for viewing television show tapings are free,for which show will fans most likely have the longest wait to get tickets?

A)A
B)B
C)C
D)Wait times for tickets to all shows are equally long.

Question 25

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 26

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 27

Exhibit 5-6
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 28

If the government legalizes the purchase and sale of marijuana,the equilibrium quantity would _________ and the price would ________ if the supply of marijuana increased by _______ than the demand for marijuana increased as a result of the legalization.

A)rise;rise;more
B)fall;rise;more
C)rise;fall;more
D)rise;rise;less
E)none of the above

Question 29

Exhibit 5-5
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 30

Exhibit 5-6
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 31

Exhibit 5-4
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

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 33

Exhibit 5-6
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 34

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 35

Exhibit 5-4
Refer to Exhibit 5-4.If television studio executives choose to charge a price of P_B to view the taping of all shows,they will find that there is a shortage of tickets to view the taping of show ___________ and a surplus of tickets to view the taping of show ______________.

A)A;C
B)C;A
C)B;A
D)B;C

Question 36

Exhibit 5-5
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 37

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

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 38

If patients were allowed to sue their HMO,we would expect

A)the demand curve for health care services provided by the HMO to shift to the left and the price of HMO-provided health care coverage to fall.
B)the supply curve for health care services provided by the HMO to shift to the left and the price of HMO-provided health care coverage to rise.
C)the supply curve for health care services provided by the HMO to shift to the right and the price of HMO-provided health care coverage to fall.
D)a and b
E)none of the above

Question 39

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 40

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 41

If the price of a good ____________,the demand for its complements will __________.

A)rises;fall
B)falls;rise
C)falls;fall
D)rises;rise
E)a and b

Question 42

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 43

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 44

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

Question 45

Which of the following statements is false?

A)If Mexican restaurant owners provide free chips and salsa to their customers,the quantity demanded of chips and salsa will be greater than if customers had to pay for them.
B)If the price of a good falls,then the demand for its complements will increase.
C)If the price of a good rises,then the price of its complements will rise.
D)If chips and salsa are offered for free to Mexican restaurant customers,then restaurants can charge a higher price for products that are complements to chips and salsa (such as beer).

Question 46

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

Question 47

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

Question 48

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

Question 49

If the demand curve for tickets to a taping of a television show intersects the supply curve for tickets to that show at a negative price,then in order to put that market in equilibrium the producers would need to pay people to view the show being taped.

Question 50

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

Question 51

If new legislation allowed patients to sue their health-maintenance organization (HMO),we would expect the supply curve for HMO-provided health care to shift to the left and the price of such coverage to rise.

Question 52

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

Question 53

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.

Question 54

The ticket price of zero for the viewing of a television show taping often results in a shortage of tickets which are frequently rationed on a first-come-first-served basis.

Question 55

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

Question 56

If new legislation allowed patients to sue their health-maintenance organization (HMO),we would expect the supply curve for HMO-provided health care to shift to the right and the price of such coverage to fall.

Question 57

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

Question 58

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

Question 59

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 60

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

Question 61

Using supply and demand analysis,explain why there is sometimes a surplus of seats to watch a television show being taped and other times there is a shortage of such seats.Assume that tickets to view the taping of a television show are free of charge.

Question 62

Explain in detail how the legalization of marijuana would be expected to impact the supply,demand,equilibrium price and quantity for marijuana.

Question 63

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 64

Using proper economic terminology,describe why Mexican restaurants often provide chips and salsa for free to their customers.

Question 65

When the price of a good rises,the demand for its complements will tend to rise.

Question 66

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.