Question 1

An increase in the price of computer chips causes a decrease in the total revenue of computer chip manufacturers. The price elasticity of demand for computer chips is:

Accepted Answer

The price elasticity of demand is considered elastic when the percentage change in quantity demanded is greater than the percentage change in price, leading to a decrease in total revenue when prices increase.

Question 2

The price of baseball tickets increased by 5%, leading to a 3% decrease in the number of tickets sold. Given this specific situation, total expenditures on baseball tickets:

Accepted Answer

The total expenditure on baseball tickets increased because the price increase of 5% outweighed the 3% decrease in the number of tickets sold, leading to higher overall revenue.

Question 3

(Figure: Price Elasticity of Demand II) Which of the following statements is TRUE regarding the figure?  ​
​
I. The price elasticity of demand is 
)
II. The demand curve is perfectly inelastic.
III. An increase in price has no effect on quantity demanded.

Accepted Answer

C

Question 4

The supply curve of rubber balls is given by Q = 100P - 10. Which of the following is the equation for the inverse supply curve?

Accepted Answer

The inverse supply curve is found by solving the supply equation for P. Starting with Q = 100P - 10, adding 10 to both sides gives Q + 10 = 100P. Dividing both sides by 100 gives (Q + 10)/100 = P, which simplifies to P = 0.1 + 0.01Q, matching option B.

Question 5

Suppose that the demand curve for a new product can be expressed as Q^D = 900 - 3P. At what price is total expenditure maximized?

Accepted Answer

Total expenditure (TE) is maximized where the price elasticity of demand is unitary (elasticity = -1). The demand curve is given as Q = 900 - 3P. To find the price where TE is maximized, we first find the marginal revenue (MR) by differentiating the total revenue (TR = P*Q) with respect to Q and setting MR to zero. However, a quicker approach in this case, given the linear demand curve, is to recognize that TE is maximized at the midpoint of the demand curve. The intercepts are at P = 0, Q = 900 (vertical intercept) and Q = 0, P = 300 (horizontal intercept by solving 900 - 3P = 0). The midpoint price is thus P = 300 / 2 = $150.

Question 6

Suppose that the market demand curve for sunflowers is a function of the price of sunflowers, the price of roses, and income. If the partial derivative of quantity demanded of sunflowers with respect to the price of roses is negative, sunflowers and roses are:

Accepted Answer

If the partial derivative of the quantity demanded of sunflowers with respect to the price of roses is negative, it means that as the price of roses increases, the demand for sunflowers decreases, indicating that sunflowers and roses are complements.

Question 7

Genetically modified soybean seed is an example of a new technology that has increased productivity. As a result, this new technology _____ production costs and _____ the supply of soybeans.

Accepted Answer

Genetically modified soybean seeds increase productivity by making plants more resistant to pests and diseases, which lowers production costs and increases the supply of soybeans.

Question 8

The Internet has made learning to play a musical instrument easier than ever, with thousands of websites offering free music lessons. What happens in the market for musical instruments as a result of the availability of these free lessons?

Accepted Answer

The availability of free music lessons online increases the interest in learning to play musical instruments, which in turn increases the demand for these instruments. As demand increases, the price is pushed up due to higher demand for musical instruments.

Question 9

Suppose that the demand for a product is given by Q = 25 - 0.25P. If the product's price is $128 per unit, how many units will consumers be willing to buy?

Accepted Answer

The answer of Suppose that the demand for a product...

Question 10

(Figure: The Market for Asparagus II) An excess supply of 3,000 pounds occurs at a price of:

Accepted Answer

The answer of (Figure: The Market for Asparagus II) An...

Question 11

Suppose that the inverse demand curve for energy drinks can be expressed as  . The price elasticity of demand at a quantity of 25 is:

Accepted Answer

The answer of Suppose that the inverse demand curve for...

Question 12

(Figure: Total Expenditures) As the price of the product rises from $0 to $40, what happens to total expenditures?

Accepted Answer

The answer of (Figure: Total Expenditures) As the price of...

Question 13

Suppose a fall in consumer income drives down the demand for lobster while a record harvest increases supply. How would these changes affect the equilibrium price and quantity of lobsters?

Accepted Answer

A decrease in demand lowers price and quantity, while an increase in supply lowers price and increases quantity. The price will definitely fall, but the change in quantity depends on the relative shifts in demand and supply.

Question 14

(Figure: Market Shifts) Suppose that the demand curve in both markets shifts out by the same distance. The change in price will be larger in _____, and the change in quantity will be larger in _____.

Accepted Answer

The answer of (Figure: Market Shifts) Suppose that the demand...

Question 15

The income elasticity of demand for dental services is 2.40, and the income elasticity of demand for nursing homes is 0.90. Based on these estimates, dental services are a(n) _____ and nursing home care is a(n) _____.

Accepted Answer

The income elasticity of demand for a good indicates how the demand for that good changes as consumer income changes. A value greater than 1 indicates a luxury good (demand increases more than proportionally with income), while a value between 0 and 1 indicates a normal good (demand increases with income but less than proportionally). Therefore, dental services with an elasticity of 2.40 are a luxury good, and nursing home care with an elasticity of 0.90 is a normal good.

Question 16

Suppose that the demand and supply curves for a good are given by Q^D = 1,000/P and Q^S = 10P. What is happening in the market at a price of $2?

Accepted Answer

At a price of $2, the quantity demanded Q^D = 1,000/2 = 500 units, and the quantity supplied Q^S = 10*2 = 20 units. Therefore, there is an excess demand of 480 units (500 - 20 = 480).

Question 17

(Figure: Market for Rubber Balls) According to the figure, what is the equation for the normal supply curve?

Accepted Answer

The answer of (Figure: Market for Rubber Balls) According to...

Question 18

Suppose that the market demand curve for cauliflower is a function of the price of cauliflower, the price of broccoli, and income. If the partial derivative of quantity demanded of cauliflower with respect to income is positive,:

Accepted Answer

The positive partial derivative of quantity demanded of cauliflower with respect to income indicates that as income increases, the demand for cauliflower also increases. This characteristic defines cauliflower as a normal good, as demand for normal goods increases with an increase in income. The information provided does not specify the relationship between broccoli's demand and income, so no conclusion can be drawn about whether broccoli is a normal good.

Question 19

The inverse supply equation for clay pots is P = 0.5Q ^S + 1; the inverse demand equation is P = -2Q^D + 15. Quantity is in thousands of units. What is the equilibrium quantity?

Accepted Answer

The answer of The inverse supply equation for clay pots...

Question 20

If the price of crude oil increases and the number of people who own cars falls:

Accepted Answer

An increase in crude oil prices raises production costs, shifting the supply curve left, increasing price. Fewer car owners reduce demand, shifting the demand curve left, decreasing price. The net effect on price is uncertain, but quantity decreases.

Quiz 2: Supply and Demand

An increase in the price of computer chips causes a decrease in the total revenue of computer chip manufacturers. The price elasticity of demand for computer chips is:

The price of baseball tickets increased by 5%, leading to a 3% decrease in the number of tickets sold. Given this specific situation, total expenditures on baseball tickets:

(Figure: Price Elasticity of Demand II) Which of the following statements is TRUE regarding the figure? I. The price elasticity of demand is ) II. The demand curve is perfectly inelastic. III. An increase in price has no effect on quantity demanded.

The supply curve of rubber balls is given by Q = 100P - 10. Which of the following is the equation for the inverse supply curve?

Suppose that the demand curve for a new product can be expressed as Q^D = 900 - 3P. At what price is total expenditure maximized?

Suppose that the market demand curve for sunflowers is a function of the price of sunflowers, the price of roses, and income. If the partial derivative of quantity demanded of sunflowers with respect to the price of roses is negative, sunflowers and roses are:

Genetically modified soybean seed is an example of a new technology that has increased productivity. As a result, this new technology _ production costs and _ the supply of soybeans.

The Internet has made learning to play a musical instrument easier than ever, with thousands of websites offering free music lessons. What happens in the market for musical instruments as a result of the availability of these free lessons?

Suppose that the demand for a product is given by Q = 25 - 0.25P. If the product's price is $128 per unit, how many units will consumers be willing to buy?

(Figure: The Market for Asparagus II) An excess supply of 3,000 pounds occurs at a price of:

Suppose that the inverse demand curve for energy drinks can be expressed as . The price elasticity of demand at a quantity of 25 is:

(Figure: Total Expenditures) As the price of the product rises from $0 to $40, what happens to total expenditures?

Suppose a fall in consumer income drives down the demand for lobster while a record harvest increases supply. How would these changes affect the equilibrium price and quantity of lobsters?

(Figure: Market Shifts) Suppose that the demand curve in both markets shifts out by the same distance. The change in price will be larger in _, and the change in quantity will be larger in _.

The income elasticity of demand for dental services is 2.40, and the income elasticity of demand for nursing homes is 0.90. Based on these estimates, dental services are a(n) _ and nursing home care is a(n) _.

Suppose that the demand and supply curves for a good are given by Q^D = 1,000/P and Q^S = 10P. What is happening in the market at a price of $2?

(Figure: Market for Rubber Balls) According to the figure, what is the equation for the normal supply curve?

Suppose that the market demand curve for cauliflower is a function of the price of cauliflower, the price of broccoli, and income. If the partial derivative of quantity demanded of cauliflower with respect to income is positive,:

The inverse supply equation for clay pots is P = 0.5Q ^S + 1; the inverse demand equation is P = -2Q^D + 15. Quantity is in thousands of units. What is the equilibrium quantity?

If the price of crude oil increases and the number of people who own cars falls:

Quiz 2: Supply and Demand

An increase in the price of computer chips causes a decrease in the total revenue of computer chip manufacturers. The price elasticity of demand for computer chips is:

The price of baseball tickets increased by 5%, leading to a 3% decrease in the number of tickets sold. Given this specific situation, total expenditures on baseball tickets:

(Figure: Price Elasticity of Demand II) Which of the following statements is TRUE regarding the figure? ​ ​ I. The price elasticity of demand is ) II. The demand curve is perfectly inelastic. III. An increase in price has no effect on quantity demanded.

The supply curve of rubber balls is given by Q = 100P - 10. Which of the following is the equation for the inverse supply curve?

Suppose that the demand curve for a new product can be expressed as QD = 900 - 3P. At what price is total expenditure maximized?

Suppose that the market demand curve for sunflowers is a function of the price of sunflowers, the price of roses, and income. If the partial derivative of quantity demanded of sunflowers with respect to the price of roses is negative, sunflowers and roses are:

Genetically modified soybean seed is an example of a new technology that has increased productivity. As a result, this new technology _____ production costs and _____ the supply of soybeans.

The Internet has made learning to play a musical instrument easier than ever, with thousands of websites offering free music lessons. What happens in the market for musical instruments as a result of the availability of these free lessons?

Suppose that the demand for a product is given by Q = 25 - 0.25P. If the product's price is $128 per unit, how many units will consumers be willing to buy?

(Figure: The Market for Asparagus II) An excess supply of 3,000 pounds occurs at a price of:

Suppose that the inverse demand curve for energy drinks can be expressed as . The price elasticity of demand at a quantity of 25 is:

(Figure: Total Expenditures) As the price of the product rises from $0 to $40, what happens to total expenditures?

Suppose a fall in consumer income drives down the demand for lobster while a record harvest increases supply. How would these changes affect the equilibrium price and quantity of lobsters?

(Figure: Market Shifts) Suppose that the demand curve in both markets shifts out by the same distance. The change in price will be larger in _____, and the change in quantity will be larger in _____.

The income elasticity of demand for dental services is 2.40, and the income elasticity of demand for nursing homes is 0.90. Based on these estimates, dental services are a(n) _____ and nursing home care is a(n) _____.

Suppose that the demand and supply curves for a good are given by QD = 1,000/P and QS = 10P. What is happening in the market at a price of $2?

(Figure: Market for Rubber Balls) According to the figure, what is the equation for the normal supply curve?

Suppose that the market demand curve for cauliflower is a function of the price of cauliflower, the price of broccoli, and income. If the partial derivative of quantity demanded of cauliflower with respect to income is positive,:

The inverse supply equation for clay pots is P = 0.5Q S + 1; the inverse demand equation is P = -2QD + 15. Quantity is in thousands of units. What is the equilibrium quantity?

If the price of crude oil increases and the number of people who own cars falls:

(Figure: Price Elasticity of Demand II) Which of the following statements is TRUE regarding the figure? I. The price elasticity of demand is ) II. The demand curve is perfectly inelastic. III. An increase in price has no effect on quantity demanded.

Suppose that the demand curve for a new product can be expressed as Q^D = 900 - 3P. At what price is total expenditure maximized?

Genetically modified soybean seed is an example of a new technology that has increased productivity. As a result, this new technology _ production costs and _ the supply of soybeans.

(Figure: Market Shifts) Suppose that the demand curve in both markets shifts out by the same distance. The change in price will be larger in _, and the change in quantity will be larger in _.

The income elasticity of demand for dental services is 2.40, and the income elasticity of demand for nursing homes is 0.90. Based on these estimates, dental services are a(n) _ and nursing home care is a(n) _.

Suppose that the demand and supply curves for a good are given by Q^D = 1,000/P and Q^S = 10P. What is happening in the market at a price of $2?

The inverse supply equation for clay pots is P = 0.5Q ^S + 1; the inverse demand equation is P = -2Q^D + 15. Quantity is in thousands of units. What is the equilibrium quantity?