Question 1

When universities charge students less than the equilibrium tuition for admission,they have to impose some nonprice-rationing device.

Accepted Answer

If universities charge less than the equilibrium tuition, the demand for admission will exceed the supply of available spots. This leads to the need for nonprice-rationing devices such as a lottery system, merit-based selection criteria, or other qualification-based criteria to determine which students are accepted into the university.

Question 2

The actions of speculators make the speculators better off,but they necessarily make the rest of society worse off.

Accepted Answer

This statement is false. While the actions of speculators may lead to volatility in the market, they can also provide liquidity and price discovery. In some cases, speculation can actually benefit society by allocating resources more efficiently. Additionally, not all members of society are necessarily worse off as a result of speculators' actions.

Question 3

If the supply of aisle seats and middle seats on an airplane is the same,but the demand for aisle seats is greater than the demand for middle seats,then the equilibrium price of aisle seats will be less than the equilibrium price of middle seats.

Accepted Answer

Given the higher demand for aisle seats with equal supply, the equilibrium price for aisle seats would be higher than that for middle seats due to the principles of supply and demand.

Question 4

If the quantity demanded of medical care is higher at a zero price than at some positive price,then it follows that the demand for those specific items that make up health care will be higher (than it would be if the quantity demanded of health care were lower).

Accepted Answer

If the quantity demanded of medical care is higher at a zero price, it means that the demand for health care is highly elastic. Therefore, consumers would demand more of those specific items that make up healthcare than they would if the price were higher. This is because a change in the price of healthcare will have a greater impact on the demand for healthcare as a whole, and hence the demand for the individual components of healthcare.

Question 5

The objective of speculators is to buy at one price and sell at a lower price.

Accepted Answer

The objective of speculators is to buy low and sell high, making a profit on the difference between the purchase and sale price.

Question 6

Since most colleges and universities do not charge students different tuition based on the time or day a student takes classes,there will likely be a shortage of seats in some classes and a surplus of seats in other classes.

Accepted Answer

Since tuition is not based on the time or day a student takes a class, there is no financial incentive for students to choose certain classes over others based on schedule. This could lead to imbalances in seat availability across different classes.

Question 7

People who buy houses in good-weather locations receive this benefit absolutely for free.

Accepted Answer

While the good weather itself does not have a direct cost, the demand for houses in locations with desirable weather often leads to higher property prices, making the benefit of good weather indirectly costly.

Question 8

When the government enacts policies that lead to lower mortgage lending standards and lower interest rates,their actions can indirectly lead to higher home prices.

Accepted Answer

When mortgage lending standards are lowered and interest rates are decreased, it often increases demand for homes as more people can afford to buy them. This increase in demand for homes can drive up prices due to the limited supply available. Therefore, the government's policies can indirectly lead to higher home prices.

Question 9

In a given community,if the government builds more freeways,then the supply curve for freeway space shifts rightward and the demand curve for freeway space shifts leftward.

Accepted Answer

Building more freeways would increase the supply of freeway space, which would lead to a decrease in the market price for freeway space. This means that the quantity demanded for freeway space would increase and the quantity supplied would decrease. Therefore, the demand curve would shift rightward and the supply curve would shift leftward, not the other way around.

Question 10

High demand for a product does not necessarily mean a high quantity demanded for that product if the price is high enough.

Accepted Answer

This is because as the price of a product increases, consumers may not be willing to pay that higher price, leading to a decrease in the quantity demanded despite high demand for the product. Therefore, high demand and high quantity demanded are not always directly proportional.

Question 11

The price of a given good is likely to be less variable with speculators than it would be without speculators.

Accepted Answer

Speculators provide liquidity in the market by buying and selling the good at different prices, which can help smooth out price fluctuations. This can make the price of the good less variable than it would be without speculators.

Question 12

Since most colleges and universities charge the same tuition to every student regardless of what time students choose to take their classes,

Accepted Answer

A) Non-price rationing devices are necessary because when price does not vary to balance supply and demand, other methods must be used to allocate resources (in this case, seats in classes). D) It's logical that some classes (likely those in high demand or at more convenient times) will have too many students wanting to enroll (a shortage of seats), while less popular classes or those at less convenient times may not fill up (a surplus of seats).

Question 13

Colleges and universities use such things as grade point averages and standardized test scores as

Accepted Answer

Colleges and universities use grade point averages and standardized test scores as non-price rationing devices to narrow down the pool of prospective students and ensure they are admitting students who are academically prepared to succeed at their institution. It helps them manage the supply and demand for their programs and maintain academic standards. The other options are not accurate.

Question 14

A subsidy placed on the consumption of good A will likely raise the demand for good A by the amount of the subsidy.

Accepted Answer

By placing a subsidy on the consumption of a good, the price for the consumer decreases, making the good more affordable and attractive. This will lead to an increase in demand for the good, potentially by the amount of the subsidy.

Question 15

The supply curve for space on a freeway is perfectly vertical at any given point in time.

Accepted Answer

The supply of space on a freeway, which refers to the quantity of space available for vehicles to travel on the road, is fixed and cannot be adjusted in the short run. Therefore, the supply curve for space on a freeway, in the short run, is perfectly vertical at any given point in time.

Question 16

If a change of law allows renters the right to vacate a property 90 days after receiving an eviction notice rather than 30 days after the eviction notice,the supply curve of apartments will shift upward and to the left once the law is enacted.

Accepted Answer

When renters have the right to vacate a property 90 days after receiving an eviction notice rather than 30 days, it reduces the urgency of finding a new place to live. As a result, the demand for rental properties will decrease, causing the supply curve of apartments to shift upwards and to the left due to a decrease in demand.

Question 17

Economists perceive a college applicant's grade point average and standardized test scores (such as SAT and ACT scores)to be rationing devices.

Accepted Answer

Economists consider grade point averages and standardized test scores to be rationing devices because they serve as a way to allocate limited spots in selective colleges and universities. Higher GPAs and test scores are often seen as indicators of academic excellence and potential success in college, making them important criteria for admission decisions.

Question 18

The existence of a third party in the medical care market separates the buying of medical care from the paying for medical care.

Accepted Answer

When a third party such as an insurance company is involved in the medical care market, they act as the payer and separate the buying of medical care from the paying for medical care. This means that patients do not have to directly pay for the full cost of their medical care, but rather pay a portion of it through their insurance premiums or co-pays. This can lead to issues with rising healthcare costs and a lack of transparency in pricing.

Question 19

The supply curve for seats in a traditional college classroom is horizontal.

Accepted Answer

The supply of seats in a traditional college classroom is limited by the physical capacity of the room, so the supply curve is upward sloping. As the price of seats increases, more seats are supplied to the market.

Question 20

The NCAA rule governing the limits on the amount of a scholarship a college can offer an athlete is an effective price floor.

Accepted Answer

The NCAA rule governing scholarship limits is actually a form of price ceiling, as it caps the amount a college can offer an athlete, not a floor that would set a minimum amount.

Quiz 5: Supply,demand,and Price: Applications