Question 1

Markets that are characterized by many buyers and many sellers are:

Accepted Answer

Markets with many buyers and sellers are competitive because no single buyer or seller has enough market power to influence the market price. This leads to increased efficiency, as prices are determined by market forces rather than individual actors.

Question 2

A small private college increases tuition while a large public university in the same state does not. What will happen to the demand (enrollment) for both schools?

Accepted Answer

The answer of A small private college increases tuition while...

Question 3

You read that college tuition is rising every year, and yet more students attend college every year. Isn't this a violation of the law of demand?

Accepted Answer

The answer of You read that college tuition is rising...

Question 4

If demand decreases and supply increases, the direction of change in the equilibrium quantity is unpredictable unless the relative magnitudes of the demand and supply changes are known.

Accepted Answer

The direction of change in equilibrium quantity will depend on the relative magnitude of the change in demand and supply. If the decrease in demand is greater than the increase in supply, the equilibrium quantity will decrease. If the increase in supply is greater than the decrease in demand, the equilibrium quantity will increase. Therefore, the direction of change is unpredictable without knowing the relative magnitudes of the changes in demand and supply.

Question 5

Why do many clothing stores have big after-Christmas sales on their merchandise?

Accepted Answer

The answer of Why do many clothing stores have big...

Question 6

Alice goes to the local supermarket to purchase one package of her favorite taco shells. She often pays $1.50 for a package, but she finds they are on sale for $1 each. According to the law of demand, one can expect Alice to:

Accepted Answer

The answer of Alice goes to the local supermarket to...

Question 7

How would each of the following events affect the supply of compact cars?
I. The price of steel rises.
II. The production technology for car manufacturing improves.
III. The price of sport utility vehicles falls.

Accepted Answer

The answer of How would each of the following events...

Question 8

Apple and Samsung are large corporations that produce smart phones, the iPhone and the Galaxy, respectively. They are constantly trying through expensive advertising and product innovations to persuade customers to buy their brand. Is the smart phone market a competitive in the economic sense defined in Chapter 3? Why or why not?

Accepted Answer

The answer of Apple and Samsung are large corporations that...

Question 9

In August 2005, Hurricane Katrina damaged or destroyed oil platforms in the Gulf of Mexico, refineries along the Gulf coast, and the pipeline infrastructure that transports oil and gas to customers across the eastern United States. The winter of 2006 was unusually cold in many parts of the country. How did these events affect the market for natural gas?

Accepted Answer

The answer of In August 2005, Hurricane Katrina damaged or...

Question 10

Suppose oranges and clementines are considered to be substitutes. Holding everything else constant, if the price of oranges increases, then the demand for _____ will _____.

Accepted Answer

The answer of Suppose oranges and clementines are considered to...

Question 11

In the Midwestern United States, the price of an ear of corn is always lowest in the summer. This seems odd, because consumers really enjoy eating ears of corn in the summer. Can you explain this?

Accepted Answer

The answer of In the Midwestern United States, the price...

Question 12

Recent research suggests that certain plastic containers may have cancer-causing elements in them. As a result of this research, one would expect:

Accepted Answer

The research suggests that the plastic containers may have cancer-causing elements in them. This negative news is likely to decrease the demand for such containers as consumers become more aware and concerned about their health.

Question 13

Why are economists so particular about the difference between an increase in quantity demanded and an increase in demand? Aren't they the same thing?

Accepted Answer

The answer of Why are economists so particular about the...

Question 14

Suppose the supply curve for soap bubbles has a slope of +1 and intersects the vertical axis at a price of $2 per bottle. Interpret the meaning of both the y-intercept and the slope.

Accepted Answer

The answer of Suppose the supply curve for soap bubbles...

Question 15

How would each of the following events affect the demand for new textbooks?
I. The price of a used textbook rises.
II. The price of college tuition rises.
III. More high school graduates decide to attend college.

Accepted Answer

The answer of How would each of the following events...

Question 16

"In 2008, air travel decreased substantially despite significant reductions in ticket prices." If this information is correct, it indicates that the law of demand did not apply to air travel in 2008.

Accepted Answer

The statement contradicts the law of demand, which states that as the price of a good decreases, the demand for it should increase. Therefore, if ticket prices decreased but air travel still decreased, it suggests that other factors, such as economic conditions, may have influenced demand.

Question 17

_____ manifests when the price of a good increases and the quantity demanded decreases

Accepted Answer

The law of demand states that when the price of a good increases, the quantity demanded decreases. This inverse relationship between price and quantity demanded is the manifestation of the law of demand.

Question 18

Good X and good Y are related. If the price of good X increases and the demand for good Y shifts left, these goods are:

Accepted Answer

Good X and good Y are complements if the price of one good affects the demand for the other in the opposite direction. In this case, if the price of good X increases and the demand for good Y shifts left, it is an indication that they are complements.

Question 19

In the following cases, explain what happens to demand or quantity demanded and how the change would be shown on a graph of the demand schedule.
I. Assuming that tickets to an NFL game are normal goods, what is the effect of an increase in the incomes of NFL fans?
II. Assuming that Direct TV and Dish satellite are substitutes, what happens if the price of a Direct TV subscription increases?
III. Assuming that data plans and cell phones are complements, what happens if the price of data plans decreases?

Accepted Answer

The answer of In the following cases, explain what happens...

Question 20

Explain the law of demand. What does it tell us about the shape of a demand curve?

Accepted Answer

The answer of Explain the law of demand. What does...

Quiz 3: Supply and Demand