Question 1

Other things held constant,the lower the price of a good:

Accepted Answer

When the price of a good is lower, assuming other factors remain constant, consumers perceive they are getting more value for the money they spend, leading to a greater consumer surplus. Consumer surplus is the difference between what consumers are willing to pay for a good or service and what they actually pay.

Question 2

Consider a market characterized by the following inverse demand and supply functions: P_X = 10 − 2Q_X and P_X = 2 + 2Q_X. Compute the surplus producers receive when an $8 per unit price floor is imposed on the market.

Accepted Answer

With a price floor of $8, producers sell 3 units (since 8 = 2 + 2Q). Producer surplus is the area above the supply curve and below the price floor, calculated as 0.5 * (8 - 2) * 3 = $9. However, the question asks for the surplus change due to the price floor, which is $5 more than the equilibrium surplus of $4 (0.5 * (6 - 2) * 2).

Question 3

Other things held constant,the lower the price of a good:

Accepted Answer

Producer surplus is the difference between what producers are willing to accept for a good versus what they actually receive. When the price of a good decreases, producers receive less for each unit sold, thus reducing the producer surplus.

Question 4

Consider a market characterized by the following inverse demand and supply functions: P_X = 10 − 2Q_X and P_X = 2 + 2Q_X. Compute the number of units exchanged and the price at which those units will be exchanged when there is an $8 per unit price floor.

Accepted Answer

When there is a price floor of $8 per unit, we need to find out where the quantity demanded and quantity supplied intersect at a price of $8. Setting the demand and supply functions equal to each other, we get: 10 − 2Q_X = 2 + 2Q_X Simplifying this equation, we get: Q_X = 4 Plugging this value of quantity supplied into either the demand or supply equation, we get the price: P_X = 2 + 2(4) = $10 per unit Therefore, the market will exchange 1 unit at a price of $8 per unit. So, the answer is B.

Question 5

Suppose supply decreases and demand increases.What effect will this have on the price?

Accepted Answer

The answer of Suppose supply decreases and demand increases.What effect...

Question 6

Suppose both supply and demand increase.What effect will this have on the equilibrium price?

Accepted Answer

The equilibrium price could either rise, fall, or remain the same based on the relative magnitude of the increase in supply and demand. If the increase in supply is greater than the increase in demand, the equilibrium price will fall. If the increase in demand is greater than the increase in supply, the equilibrium price will rise. If both increases are exactly equal, the equilibrium price will remain the same.

Question 7

Suppose both supply and demand increase.What effect will this have on the equilibrium quantity?

Accepted Answer

When both supply and demand increase, the equilibrium quantity in the market will rise because the higher demand pushes for more quantity to be bought and sold, and the higher supply means more of the good is available to meet this demand.

Question 8

Other things held constant,the higher the price of a good:

Accepted Answer

The higher the price of a good, the greater the producer surplus. This is because as the price increases, producers are able to sell their goods at a higher price and earn more profit, which increases their producer surplus.

Question 9

Suppose the market demand for good X is given by Q_X^d = 20 − 2P_X.If the equilibrium price of X is $5 per unit,then consumers' expenditure on X is:

Accepted Answer

Consumers' expenditure on good X is calculated by multiplying the equilibrium price by the quantity demanded at that price. The demand equation is given as Qd = 20 - 2P. Substituting the equilibrium price of $5 into the demand equation gives Qd = 20 - 2(5) = 10. Therefore, consumers' expenditure is 10 units * $5/unit = $50.

Question 10

The seller side of the market is known as the:

Accepted Answer

The supply side refers to sellers in the market who offer goods and services for sale. Therefore, the best choice is C.

Question 11

Consider a market characterized by the following inverse demand and supply functions: P_X = 10 − 2Q_X and P_X = 2 + 2Q_X. Compute the surplus consumers receive when an $8 per unit price floor is imposed on the market.

Accepted Answer

The answer of Consider a market characterized by the following...

Question 12

Suppose the market supply for good X is given by Q_X^S = −100 + 5P_X.If the equilibrium price of X is $100 per unit,then producer surplus is:

Accepted Answer

Producer surplus is the area above the supply curve and below the equilibrium price. The supply equation is QS = -100 + 5P. At an equilibrium price of $100, QS = -100 + 5(100) = 400. The producer surplus is calculated as the area of a triangle with a base of 400 units (from 0 to 400) and a height of $100 (from the price at quantity 0, which would be -100/5 = -$20, up to the equilibrium price of $100). However, since the supply curve starts from the intercept at -100, we adjust the calculation to reflect the actual starting point of production, which effectively is at a price of $20 (where quantity supplied starts to be positive) up to $100. Thus, the height is $80 ($100 - $20), and the base is 400. The area (producer surplus) = 1/2 * base * height = 1/2 * 400 * 80 = $16,000.

Question 13

Suppose the market demand for good X is given by Q_X^d = 20 − 2P_X.If the equilibrium price of X is $5 per unit,then the total value a consumer receives from consuming the equilibrium quantity is:

Accepted Answer

To find the total value a consumer receives from consuming the equilibrium quantity, we need to use the formula:

Total value = Price x Quantity

At equilibrium, the price of X is $5 per unit. To find the equilibrium quantity, we need to set the demand equal to the supply and solve for Q:

20 - 2P = P
20 = 3P
P = $6.67
Q = (20 - 2P)/3
Q = 4.44

So the equilibrium quantity is 4.44 units.

Therefore, the total value received by the consumer is:

Total value = Price x Quantity
Total value = $5 x 4.44
Total value = $22.22

So the correct answer is B) $75.

Question 14

Suppose the market supply for good X is given by Q_X^S = −100 + 5P_X.If the equilibrium price of X is $100 per unit,then producers' revenue from X is:

Accepted Answer

At an equilibrium price of $100, we can plug P = 100 into the supply equation to find the equilibrium quantity: Q_X = -100 + 5(100) = 400. Therefore, producers' revenue is price times quantity, or $100 x 400 = $40,000.

Question 15

Consider a market characterized by the following inverse demand and supply functions: P_X = 10 − 2Q_X and P_X = 2 + 2Q_X.Compute the surplus received by consumers and producers.

Accepted Answer

The answer of Consider a market characterized by the following...

Question 16

Consider a market characterized by the following inverse demand and supply functions: P_X = 10 − 2Q_X and P_X = 2 + 2Q_X. Compute the equilibrium price and quantity in this market.

Accepted Answer

To find the equilibrium, set the demand equal to the supply: 10 - 2Q = 2 + 2Q. Solving for Q gives Q = 2. Substitute Q = 2 into either equation to find P = 6. Thus, the equilibrium price is $6 and the equilibrium quantity is 2 units.

Question 17

In a competitive market,the market demand is Q^d = 60 − 6P and the market supply is Q^s = 4P.A price floor of $9 will result in a:

Accepted Answer

To determine the effect of a price floor, we first calculate the quantity demanded and supplied at the price floor of $9. For the demand: QD = 60 - 6(9) = 60 - 54 = 6. For the supply: QS = 4(9) = 36. Since QS > QD, there is a surplus, and the surplus amount is QS - QD = 36 - 6 = 30 units.

Question 18

Consider a market characterized by the following demand and supply conditions: P_X = 15 − 2Q_X and P_X = 3 + 2Q_X.The equilibrium price and quantity are,respectively:

Accepted Answer

To find the equilibrium, set the demand equation equal to the supply equation: 15 - 2Q = 3 + 2Q. Solving for Q gives Q = 3. Substitute Q = 3 into either equation to find P = 9. Thus, the equilibrium price is $9 and the quantity is 3 units.

Question 19

Consider a market characterized by the following inverse demand and supply functions: P_X = 10 − 2Q_X and P_X = 2 + 2Q_X. An $8 per unit price floor will result in a:

Accepted Answer

To find the effect of a price floor, we first determine the equilibrium price and quantity without any price controls. Setting the demand equal to supply: $10 - 2Q = 2 + 2Q$. Solving for $Q$ gives $Q = 2$. At this equilibrium quantity, the price is $10 - 2*2 = 6$. An $8 price floor is above the equilibrium price, meaning it will be binding. To find the quantity supplied and demanded at this price floor, we substitute $P = 8$ into the demand and supply functions. For demand: $10 - 2Q = 8$, solving for $Q$ gives $Q = 1$. For supply: $2 + 2Q = 8$, solving for $Q$ gives $Q = 3$. Therefore, at a price floor of $8, there will be a surplus of $3 - 1 = 2$ units.

Question 20

Consider a market characterized by the following inverse demand and supply functions: P_X = 10 − 2Q_X and P_X = 2 + 2Q_X. Compute the loss in social welfare when an $8 per unit price floor is imposed on the market.

Accepted Answer

To find the loss in social welfare, we need to first find the equilibrium price and quantity without the price floor. This is where the demand and supply curves intersect: 10 - 2Q_X = 2 + 2Q_X. 8 = 4Q_X Q_X = 2 Plugging this quantity back into either the demand or supply function will give us the equilibrium price: P_X = 2 + 2Q_X. P_X = 2 + 2(2) P_X = 6 Therefore, without the price floor, the equilibrium price is $6 and the equilibrium quantity is 2 units. With the price floor at $8, the quantity demanded will be less than the quantity supplied, since consumers will not be willing to pay the higher price. Therefore, the quantity sold will be the same as the equilibrium quantity of 2 units, but the price will be $8. The consumer surplus with the price floor is: CS = (1/2)(6-8)(2) = -$2 Note that consumer surplus is negative; this means that consumers are worse off with the price floor than without it. The producer surplus with the price floor is: PS = (8-2)(2) = $12 The total surplus with the price floor is: TS = CS + PS = -$2 + $12 = $10 The loss in social welfare is the difference between the total surplus without the price floor and the total surplus with the price floor: Loss in social welfare = TS without price floor - TS with price floor TS without price floor = (1/2)(6-0)(2) + (1/2)(10-6)(2) = $8 Loss in social welfare = $8 - $10 = -$2 Therefore, the loss in social welfare when an $8 per unit price floor is imposed on the market is $2. The answer is choice C, $2.

Quiz 2: Market Forces: Demand and Supply

Other things held constant,the lower the price of a good:

Consider a market characterized by the following inverse demand and supply functions: PX = 10 − 2QX and PX = 2 + 2QX. Compute the surplus producers receive when an $8 per unit price floor is imposed on the market.

Other things held constant,the lower the price of a good:

Consider a market characterized by the following inverse demand and supply functions: PX = 10 − 2QX and PX = 2 + 2QX. Compute the number of units exchanged and the price at which those units will be exchanged when there is an $8 per unit price floor.

Suppose supply decreases and demand increases.What effect will this have on the price?

Suppose both supply and demand increase.What effect will this have on the equilibrium price?

Suppose both supply and demand increase.What effect will this have on the equilibrium quantity?

Other things held constant,the higher the price of a good:

Suppose the market demand for good X is given by QXd = 20 − 2PX.If the equilibrium price of X is $5 per unit,then consumers' expenditure on X is:

The seller side of the market is known as the:

Consider a market characterized by the following inverse demand and supply functions: PX = 10 − 2QX and PX = 2 + 2QX. Compute the surplus consumers receive when an $8 per unit price floor is imposed on the market.

Suppose the market supply for good X is given by QXS = −100 + 5PX.If the equilibrium price of X is $100 per unit,then producer surplus is:

Suppose the market demand for good X is given by QXd = 20 − 2PX.If the equilibrium price of X is $5 per unit,then the total value a consumer receives from consuming the equilibrium quantity is:

Suppose the market supply for good X is given by QXS = −100 + 5PX.If the equilibrium price of X is $100 per unit,then producers' revenue from X is:

Consider a market characterized by the following inverse demand and supply functions: PX = 10 − 2QX and PX = 2 + 2QX.Compute the surplus received by consumers and producers.

Consider a market characterized by the following inverse demand and supply functions: PX = 10 − 2QX and PX = 2 + 2QX. Compute the equilibrium price and quantity in this market.

In a competitive market,the market demand is Qd = 60 − 6P and the market supply is Qs = 4P.A price floor of $9 will result in a:

Consider a market characterized by the following demand and supply conditions: PX = 15 − 2QX and PX = 3 + 2QX.The equilibrium price and quantity are,respectively:

Consider a market characterized by the following inverse demand and supply functions: PX = 10 − 2QX and PX = 2 + 2QX. An $8 per unit price floor will result in a:

Consider a market characterized by the following inverse demand and supply functions: PX = 10 − 2QX and PX = 2 + 2QX. Compute the loss in social welfare when an $8 per unit price floor is imposed on the market.

Consider a market characterized by the following inverse demand and supply functions: P_X = 10 − 2Q_X and P_X = 2 + 2Q_X. Compute the surplus producers receive when an $8 per unit price floor is imposed on the market.

Consider a market characterized by the following inverse demand and supply functions: P_X = 10 − 2Q_X and P_X = 2 + 2Q_X. Compute the number of units exchanged and the price at which those units will be exchanged when there is an $8 per unit price floor.

Suppose the market demand for good X is given by Q_X^d = 20 − 2P_X.If the equilibrium price of X is $5 per unit,then consumers' expenditure on X is:

Consider a market characterized by the following inverse demand and supply functions: P_X = 10 − 2Q_X and P_X = 2 + 2Q_X. Compute the surplus consumers receive when an $8 per unit price floor is imposed on the market.

Suppose the market supply for good X is given by Q_X^S = −100 + 5P_X.If the equilibrium price of X is $100 per unit,then producer surplus is:

Suppose the market demand for good X is given by Q_X^d = 20 − 2P_X.If the equilibrium price of X is $5 per unit,then the total value a consumer receives from consuming the equilibrium quantity is:

Suppose the market supply for good X is given by Q_X^S = −100 + 5P_X.If the equilibrium price of X is $100 per unit,then producers' revenue from X is:

Consider a market characterized by the following inverse demand and supply functions: P_X = 10 − 2Q_X and P_X = 2 + 2Q_X.Compute the surplus received by consumers and producers.

Consider a market characterized by the following inverse demand and supply functions: P_X = 10 − 2Q_X and P_X = 2 + 2Q_X. Compute the equilibrium price and quantity in this market.

In a competitive market,the market demand is Q^d = 60 − 6P and the market supply is Q^s = 4P.A price floor of $9 will result in a:

Consider a market characterized by the following demand and supply conditions: P_X = 15 − 2Q_X and P_X = 3 + 2Q_X.The equilibrium price and quantity are,respectively:

Consider a market characterized by the following inverse demand and supply functions: P_X = 10 − 2Q_X and P_X = 2 + 2Q_X. An $8 per unit price floor will result in a:

Consider a market characterized by the following inverse demand and supply functions: P_X = 10 − 2Q_X and P_X = 2 + 2Q_X. Compute the loss in social welfare when an $8 per unit price floor is imposed on the market.