Question 1

It is appropriate to use the supply-and-demand model in which of the following markets?
A) beer market
B) car market
C) wheat market
D) market for breakfast cereal

Accepted Answer

The answer of It is appropriate to use the supply-and-demand...

Question 2

Consumers and firms are known as price takers only if
A) no market exists to determine the equilibrium price.
B) they can set the market price.
C) they cannot unilaterally affect the market price.
D) excess demand exists.

Accepted Answer

Consumers and firms are considered price takers if they cannot unilaterally affect the market price, meaning they must accept the price set by the market. This is in contrast to price makers, who have enough market power to set their own prices. The other choices are not accurate descriptions of what it means to be a price taker.

Question 3

One reason the supply and demand model might not be appropriate to the health-care industry?
A) Consumers do not have full information.
B) Providers do not know the demand for health-care services.
C) Consumers do not know how to value their own health.
D) The costs of finding a doctor are too low.

Accepted Answer

In the health-care industry, consumers often lack full information about their health conditions, treatment options, and associated costs, making it difficult for them to make informed decisions about their health and healthcare services. As a result, the traditional supply and demand model might not be appropriate, as it assumes that consumers have perfect information about the market and can make rational decisions based on that information. The reality is much more complex and nuanced in the healthcare industry.

Question 4

Understanding the supply and demand model facilitates
A) greed.
B) charity.
C) happiness.
D) prediction.

Accepted Answer

The supply and demand model is a tool used for analyzing the behavior of markets. By understanding the factors that affect supply and demand, analysts can make predictions about how markets will respond to changes in variables such as price or consumer preferences. This ability to predict market outcomes can be useful for businesses, investors, and policymakers.

Question 5

A price restriction that tells suppliers the minimum price they can sell their goods for is also known as
A) a price ceiling.
B) a quota.
C) a price floor.
D) deadweight loss.

Accepted Answer

The answer of A price restriction that tells suppliers the...

Question 6

Suppose the market for a good is expressed as follows:
Inverse demand: P = 200 - 2Q
Inverse supply: P = 2Q
What is the equilibrium if the government imposes a supply quota of 75 units?
What is the equilibrium if the government imposes a supply quota of 25 units?

Accepted Answer

The answer of Suppose the market for a good is...

Question 7

The fact that many people drive faster than the posted speed limit suggests that
A) not all price floors are enforceable.
B) not all price and quantity regulations are enforceable.
C) individual drivers act irrationally.
D) government regulation is utterly useless.

Accepted Answer

The fact that many people drive faster than the posted speed limit suggests that not all price and quantity regulations (in this case, speed limits) are enforceable. It does not necessarily indicate irrational behavior on the part of individual drivers, nor does it render government regulation entirely useless. However, it does demonstrate that simply setting a regulation does not automatically mean that it will be followed or enforced.

Question 8

The power of the supply and demand model lies in its ability
A) to generally predict how price and quantity will change with supply and demand shocks.
B) to precisely predict the impact of government regulations on quantity and price.
C) to precisely determine the difference between price ceilings and price floors.
D) to generally predict how profit motive impacts the distribution of goods and services.

Accepted Answer

The supply and demand model is useful in predicting how price and quantity will change in response to changes in supply and demand. While government regulations can impact supply and demand, the model does not provide precise predictions for these impacts. Similarly, the model does not determine the difference between price ceilings and price floors, but rather predicts how these policies will impact the market. The model is also not specifically focused on the profit motive, but rather the interactions between buyers and sellers.

Question 9

Assume that the market for annual physical checkups is in equilibrium,and not everyone gets an annual physical checkup.What is the effect on price and quantity if a government regulation fixes price at the current level and requires everyone to get an annual physical checkup?

Accepted Answer

The answer of Assume that the market for annual physical...

Question 10

Suppose the market for potatoes can be expressed as follows: Supply: Q^S = -20 + 10p Demand: Q^D = 400 - 20p If the government sets a maximum price of $10 per unit,what will be the quantity demanded and quantity supplied?

Accepted Answer

The answer of Suppose the market for potatoes can be...

Question 11

Suppose the market for potatoes can be expressed as follows: Supply: Q^S = -20 + 10p Demand: Q^D = 400 - 20p Suppose the government restricts the quantity to 100 units.What will be the price of potatoes?

Accepted Answer

The answer of Suppose the market for potatoes can be...

Question 12

If a large number of people decide to major in economics,the supply and demand model has little to say about the future wages of economists.

Accepted Answer

If more people major in economics,and the demand for economists does not change,the wages of economists will be expected to decline in the future as the supply of economists increases.

Question 13

It is appropriate to use the supply-and demand-model if,in a market,
A) everyone is a price taker with full information about the price and quality of the good.
B) firms sell identical products.
C) costs of trading are low.
D) All of the above.

Accepted Answer

The supply and demand model assumes that everyone is a price taker, firms are selling identical products, and costs of trading are low. Therefore, all three conditions listed in A, B, and C must be met for the supply and demand model to be appropriate in a market.

Question 14

Import quotas on steel tend to result in higher quantities of steel being sold at lower prices than would be observed in the absence of a quota.

Accepted Answer

The opposite is true.Quotas restrict the supply curve.This reduces quantity and raises price.

Question 15

The supply-and-demand model may not be appropriate in markets with large transaction costs.

Accepted Answer

If the costs of finding a trading partner are high,no trades may occur,or trades may occur at a variety of prices.

Question 16

Costs that pertain to finding a trading partner and making a trade are called
A) transaction costs.
B) transgression costs.
C) consumption costs.
D) transaction taxes.

Accepted Answer

Transaction costs are the costs associated with finding a trading partner, negotiating and making a deal. These costs can include search costs, legal fees, communication costs, transportation costs, and market research, among others.

Question 17

The military is not a perfectly competitive market because
A) there is only one buyer, i.e., the government, for military goods/services.
B) there is imperfect information, i.e., intelligence branches.
C) there are heterogeneous goods/services because each military branch provides different goods/services.
D) All of the above

Accepted Answer

All the given factors contribute to making the military market imperfectly competitive. The presence of only one buyer, i.e., the government, limits competition among suppliers, leading to imperfect market competition. Additionally, intelligence branches limit access to complete information, leading to imperfect information in the market. Moreover, each military branch provides different goods and services, making them heterogeneous, which affects competition in the market.

Question 18

Usury laws place a ceiling on interest rates that lenders such as banks can charge borrowers.The interest rate is the price of a loan.Graph a binding usury law on the market for loans,and describe the effects of the law on the quantity of loans supplied and the quantity of loans demanded.

Accepted Answer

The answer of Usury laws place a ceiling on interest...

Question 19

One of the biggest benefits of the Internet auction site eBay
A) is its control over prices.
B) is that it increases the supply of products.
C) is that it increases the demand for products.
D) is that it reduces transaction costs for both sellers and buyers.

Accepted Answer

One of the biggest benefits of the Internet auction site eBay is that it reduces transaction costs for both sellers and buyers. The platform allows buyers and sellers to connect and transact with each other directly, without the need for intermediaries. This eliminates the costs associated with traditional retail transactions, such as rent, utilities, and staffing, which allows sellers to offer products at lower prices while still making a profit. Additionally, buyers can purchase products from all over the world, expanding their choices and increasing competition, which further reduces prices.

Question 20

Use a supply-and-demand graph to predict what happens to sheet steel prices in the United States after quotas on Japanese and European sheet steel expire.

Accepted Answer

The answer of Use a supply-and-demand graph to predict what...

Quiz 2: Supply and Demand

It is appropriate to use the supply-and-demand model in which of the following markets?

Consumers and firms are known as price takers only if

One reason the supply and demand model might not be appropriate to the health-care industry?

Understanding the supply and demand model facilitates

A price restriction that tells suppliers the minimum price they can sell their goods for is also known as

Suppose the market for a good is expressed as follows: Inverse demand: P = 200 - 2Q Inverse supply: P = 2Q What is the equilibrium if the government imposes a supply quota of 75 units? What is the equilibrium if the government imposes a supply quota of 25 units?

The fact that many people drive faster than the posted speed limit suggests that

The power of the supply and demand model lies in its ability

Assume that the market for annual physical checkups is in equilibrium,and not everyone gets an annual physical checkup.What is the effect on price and quantity if a government regulation fixes price at the current level and requires everyone to get an annual physical checkup?

Suppose the market for potatoes can be expressed as follows: Supply: QS = -20 + 10p Demand: QD = 400 - 20p If the government sets a maximum price of $10 per unit,what will be the quantity demanded and quantity supplied?

Suppose the market for potatoes can be expressed as follows: Supply: QS = -20 + 10p Demand: QD = 400 - 20p Suppose the government restricts the quantity to 100 units.What will be the price of potatoes?

If a large number of people decide to major in economics,the supply and demand model has little to say about the future wages of economists.

It is appropriate to use the supply-and demand-model if,in a market,

Import quotas on steel tend to result in higher quantities of steel being sold at lower prices than would be observed in the absence of a quota.

The supply-and-demand model may not be appropriate in markets with large transaction costs.

Costs that pertain to finding a trading partner and making a trade are called

The military is not a perfectly competitive market because

Usury laws place a ceiling on interest rates that lenders such as banks can charge borrowers.The interest rate is the price of a loan.Graph a binding usury law on the market for loans,and describe the effects of the law on the quantity of loans supplied and the quantity of loans demanded.

One of the biggest benefits of the Internet auction site eBay

Use a supply-and-demand graph to predict what happens to sheet steel prices in the United States after quotas on Japanese and European sheet steel expire.

Suppose the market for potatoes can be expressed as follows: Supply: Q^S = -20 + 10p Demand: Q^D = 400 - 20p If the government sets a maximum price of $10 per unit,what will be the quantity demanded and quantity supplied?

Suppose the market for potatoes can be expressed as follows: Supply: Q^S = -20 + 10p Demand: Q^D = 400 - 20p Suppose the government restricts the quantity to 100 units.What will be the price of potatoes?