Deck 4: Demand Supply and Market Equilibrium

Question 1

A downward-sloping demand curve shows:

A)the direct relationship between price and quantity supplied; as price increases, the quantity supplied increases.
B)the inverse relationship between price and quantity supplied; as price increases, the quantity supplied decreases.
C)the direct relationship between price and quantity demanded; as price increases, the quantity demanded increases.
D)the inverse relationship between price and quantity demanded; as price increases, the quantity demanded decreases.

Answer 1

the inverse relationship between price and quantity demanded; as price increases, the quantity demanded decreases.

Question 2

Exhibit 4-1
$\begin{array}{|c|c|c|c|c|}\hline \begin{array}{c} \text{Price per lb.} \\\text{of ice cream}\end{array} & \text{Sven }&\text{ Larry} & \begin{array}{c} \text{Rest of} \\\text{Market}\end{array}&\text{ Market} \\\hline \$ 8 & 5 & 0 & 7 & \\\hline\$ 6 & 8 & 5 & 9 & \\\hline \$ 5 & 11 & 9 & 11 & \\\hline \$ 4 & 14 & 11 & 14 & \\\hline\$ 3 & 17 & 14 & 20 & \\\hline\end{array}$

-Refer to Exhibit. Shown are the demand schedules for gourmet ice cream of two individuals and the rest of the market. At a price of $8, the quantity demanded in the market would be:

A)12
B)22
C)31
D)39

Answer 2

12

Question 3

The difference between a change in quantity demanded and a change in demand is that a change in:

A)quantity demanded is caused by a change in a good's own current price, while a change in demand is caused by a change in some other variable, such as income, tastes, or expectations.
B)demand is caused by a change in a good's own current price, while a change in quantity demanded is caused by a change in some other variable, such as income, tastes, or expectations.
C)quantity demanded is a change in the amount people actually buy, while a change in demand is a change in the amount they want to buy.
D)A change in demand and a change in quantity demanded are the same thing.

Answer 3

quantity demanded is caused by a change in a good's own current price, while a change in demand is caused by a change in some other variable, such as income, tastes, or expectations.

Question 4

Exhibit


-Refer to Exhibit. The University Theater faces market demand curve D₀ and has begun charging $10, up from $5, for tickets for Friday and Saturday night shows. As a result, students have:

A)increased their demand for tickets to Q₄.
B)increased their quantity of tickets demanded to Q₄.
C)decreased their demand for tickets to Q₁.
D)decreased their quantity of tickets demanded to Q₁.

Question 5

Skippy loves peanut butter. Skippy reads on the internet that 75 percent of the peanut crop in the South has been wiped out by drought, and that this will cause the price of peanuts to more than double by the end of the year. As a result,

A)Skippy's demand for peanut butter will increase, but not until the end of the year.
B)Skippy's demand for peanut butter increases today.
C)Skippy's demand for peanut butter decreases as he considers buying almond butter.
D)Skippy's demand for peanut butter shifts left today.

Question 6

Refer to the table below. If these three firms represented the entire market, how many mid-sized autos would be supplied at a price of $30,000?? $\begin{array}{|c|c|c|c|c|}\hline \begin{array}{c} \text{Price for} \\\text{Mid-Sized Auto}\end{array} &\text{ GM} &\text{ Ford} &\text{ Chrysler} & \text{Market} \\\hline \$ 22,000 & 10,000 & 8,000 & 4,000 & \\\hline\$ 24,000 & 12,000 & 10,000 & 5,000 & \\\hline\$ 26,000& 15,000 & 12,000 & 7,000 & \\\hline \$ 28,000 & 19,000 & 14,000 & 10,000 & \\\hline \$ 30,000 & 24,000 & 16,000 & 14,000 & \\\hline\end{array}$

A)43,000
B)54,000
C)126,000
D)158,000

Question 7

Exhibit
?


-Refer to Exhibit. What is the equilibrium price in the example?

A)$0.80
B)$1.00
C)$1.20
D)$1.40

Question 8

Exhibit
?


-Refer to Exhibit. At $0.40 there is a ____ of ____ downloads.

A)surplus; 10,500,000
B)surplus; 7,500,000
C)shortage; 7,500,000
D)shortage; 10,500,000

Question 9

Exhibit
?


-Refer to Exhibit. At $1.80 there is a ____ of ____ downloads.

A)shortage; 3,000,000
B)shortage; 7,000,000
C)surplus; 7,000,000
D)surplus; 3,000,000

Question 10

Exhibit
The diagram below represents the market for butter.

-Refer to Exhibit. The equilibrium price of butter is:

A)$5
B)$3
C)$2
D)none of the above

Question 11

Exhibit
The diagram below represents the market for butter.

-Refer to Exhibit. If the current price of butter equals $5, you would expect to find:

A)the market in equilibrium at 2,000 pounds per year.
B)the market in equilibrium at 8,000 pounds per year.
C)that the market is not in equilibrium, and that the quantity supplied is greater than the quantity demanded.
D)that the market is not in equilibrium, and that the quantity demanded is greater than the quantity supplied.

Question 12

Exhibit
The diagram below represents the market for butter.

-Refer to Exhibit. If the current price of butter equals $2, you would expect to find:

A)the market in equilibrium at 3,000 pounds per year.
B)the market in equilibrium at 8,000 pounds per year.
C)that the market is not in equilibrium, and that the quantity supplied is greater than the quantity demanded.
D)that the market is not in equilibrium, and that the quantity demanded is greater than the quantity supplied.

Question 13

Exhibit
The diagram below represents the market for butter.

-Refer to Exhibit. At a market price of $4, there exists a:

A)shortage equal to 4,000 pounds of butter.
B)surplus equal to 4,000 pounds of butter.
C)shortage equal to 7,000 pounds of butter.
D)surplus equal to 7,000 pounds of butter.

Question 14

Exhibit
The diagram below represents the market for butter.

-Refer to Exhibit. At a market price of $1, there exists a:

A)shortage equal to 5,000 pounds of butter.
B)surplus equal to 5,000 pounds of butter.
C)shortage equal to 11,000 pounds of butter.
D)surplus equal to 11,000 pounds of butter.

Question 15

?Exhibit


-Refer to Exhibit. Assuming that the production possibilities curve extends out farther as indicated above due to technological change, which of the following observations is correct?

A)There is a technological advance in food production but not in housing production.
B)There is a technological advance in housing production but not in food production.
C)There is a technological advance in both housing and food production.
D)none of the above