Indicate whether the statement is true or false 1 The market demand curve for a given product may be downward sloping even if no person in that market has a downward sloping demand curve a True b False 2 Another term for excess supply is shortage a True b False 3 As long as the maximum buying price of a good is less than the minimum selling price of that good, an exchange will occur a True b False 4 In general, all markets equilibrate at the same speed a True b False 5 Supply curves are usually upward sloping a True b False 6 The terms scarcity and shortage are synonyms a True b False 7 Consumers' surplus is the difference between the maximum price the buyer is willing and able to pay for a good and the actual price paid a True b False 8 To an economist, an increase in demand means the same thing as an increase in quantity demanded a True b False 9 If the government increased licensing requirements for beauty salons, the supply curve for salon services would shift to the left a True b False 10 On the basis of the law of demand, it is more likely that a person will lose his temper when the price of losing his temper is low than when it is high a True b False Indicate the answer choice that best completes the statement or answers the question Exhibit 3 3 Good Y 11 Refer to Exhibit 3 3 A movement from point W to point Z would have been the result of a a reduction in the price of good Y b an increase in the number of buyers in the area where good Y is being sold c a decrease in business taxes paid by the producers of good Y d a decrease in the number of buyers in the area where good Y is being sold e an increase in the price of good Y Exhibit 3 10 12 Refer to Exhibit 3 10 A price of $20 is a the equilibrium price of good X b a price at which there is a surplus of good X c a price at which there is a shortage of good X d not a possible price for good X Exhibit 3 8 13 Refer to Exhibit 3 8 A surplus exists at any price above a $2 00 b $4 50 c $4 00 d $3 50 e $3 00 14 One reason that helps to explain the law of demand is the law of a diminishing marginal utility b diminishing marginal returns c increasing opportunity costs d supply 15 Which of the following statements is false a An upward sloping supply curve graphically represents the law of supply b A vertical supply curve graphically represents the law of supply c If income rises and good X is a normal good, then the demand for good X will rise d If income falls and good Y is an inferior good, then the demand for good Y will rise 16 Suppose the government decides that every family should own its own home To bring this about, the government decides to subsidize the home construction industry by giving the home construction companies $10,000 for every house that they build As a result of this, a the supply curve of new houses would shift leftward, since it now costs $10,000 more for builders to produce a house b the demand curve for new houses would shift rightward, since now every family would want to buy a house c the demand curve for new houses would shift leftward d the supply curve of new houses would shift rightward, since builders would be willing to produce and sell more houses at each given price Exhibit 3 5 17 Refer to Exhibit 3 5 In the market shown, if equilibrium was originally at point V and is now at point Z, the new equilibrium price is it was originally and the new equilibrium quantity is it was originally a greater than greater than b less than greater than c greater than less than d less than less than 18 If the workers of a firm successfully negotiate an increase in wages, which of the following is most likely to happen a The demand curve for the product the firm produces shifts rightward b The demand curve for the product the firm produces shifts leftward c The supply curve of the product the firm produces shifts rightward d The supply curve of the product the firm produces shifts leftward Exhibit 3 4 19 Refer to Exhibit 3 4 If this is a competitive market, price and quantity will gravitate toward a $6 and 10 units, respectively b $6 and 20 units, respectively c $4 and 15 units, respectively d $2 and 15 units, respectively Exhibit 3 12 Quantity Supplied Price Aline Bentley Calvin Daniel Market $6 22 20 6 0 (A) 7 24 22 10 5 (B) 8 26 24 13 10 (C) 9 30 26 17 15 (D) 10 35 28 22 20 (E) 11 50 30 32 30 (F) Assume that Aline, Bentley, Calvin, and Daniel are the only sellers in this market 20 Refer to Exhibit 3 12 Fill in blanks (A) and (B) respectively with the market quantity supplied at each given price a 12 25 14 75 b 49 59 c 48 61 d 8 00 8 71 Exhibit 3 16 21 Refer to Exhibit 3 16 If there are empty seats for a basketball game at the price P , the situation is best depicted on graph a (1), with P P 1 b (2), with P P 3 c (3), with P P 2 d (3), with P P 3 e (4), with P P 1 22 Suppose that good X is one of the more heavily subsidized industries in the United States Suppose further that as a result of intense lobbying from health related concerns, Congress repeals the subsidies on good X Which of the following scenarios would likely occur a The supply curve for good X would shift rightward, as it would now be cheaper to produce each level of output b The supply curve for good X would shift leftward, since it would now cost more to produce each level of output c There would be no shift in the supply curve for good X subsidies don't affect output d There would be a movement along the supply curve for good X, but the supply curve would not shift 23 On a supply and demand diagram, equilibrium is found a where the supply curve intercepts the vertical axis b where the demand curve intercepts the horizontal axis c where the demand and supply curves intersect d at every point on either curve Exhibit 3 9 24 Refer to Exhibit 3 9 Consumers view X and Y as substitutes If the price of Y increases as a result of a decrease in the supply of Y, an economist would expect a movement in the market for X from a F to E b A to B c E to F d B to A 25 If the supply curve and the demand curve for lettuce both shift to the left by an equal amount, what can we say about the resulting changes in equilibrium price and quantity a The price will increase, but the quantity may increase or decrease b The price will increase, and the quantity will increase c The price will decrease, and the quantity will increase d The price will stay the same, but the quantity will increase e The price will stay the same, but the quantity will decrease 1 Define or explain the following terms with examples and graphs elastic demand, inelastic demand, unit elastic demand, perfectly elastic, and perfectly inelastic Use a graph to show and explain the relationship between elasticity and total revenue 2If your income is $50, and the prices of A, B, and C are $4, $3, and $2 respectively, what quantities of each product will you purchase to maximize utility MU (A)MU(B)MU (C) 1454025 2402421 3321515 4241210 5666

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Indicate whether the statement is true or false. 1.The market demand curve for a given product may be downward sloping even if no person in

Indicate whether the statement is true or false.

1.The market demand curve for a given product may be downward sloping even if no person in that market has a downward sloping demand curve.

True

False

2.Another term forexcess supplyisshortage.

True

False

3.As long as the maximum buying price of a good is less than the minimum selling price of that good, an exchange will occur.

True

False

4.In general, all markets equilibrate at the same speed.

True

False

5.Supply curves are usually upward sloping.

True

False

6.The termsscarcityandshortageare synonyms.

True

False

7.Consumers' surplus is the difference between the maximum price the buyer is willing and able to pay for a good and the actual price paid.

True

False

8.To an economist, an increase in demand means the same thing as an increase in quantity demanded.

True

False

9.If the government increased licensing requirements for beauty salons, the supply curve for salon services would shift to the left.

True

False

10.On the basis of the law of demand, it is more likely that a person will lose his temper when the price of losing his temper is low than when it is high.

True

False

Indicate the answer choice that best completes the statement or answers the question.

Exhibit 3-3

Good Y

11.Refer to Exhibit 3-3. A movement from point W to point Z would have been the result of

a reduction in the price of good Y.

an increase in the number of buyers in the area where good Y is being sold.

a decrease in business taxes paid by the producers of good Y.

a decrease in the number of buyers in the area where good Y is being sold.

an increase in the price of good Y.

Exhibit 3-10

12.Refer to Exhibit 3-10. A price of $20 is

the equilibrium price of good X.

a price at which there is a surplus of good X.

a price at which there is a shortage of good X.

not a possible price for good X.

Exhibit 3-8

13.Refer to Exhibit 3-8. A surplus exists at any price above

$2.00.

$4.50.

$4.00.

$3.50.

$3.00.

14.One reason that helps to explain the law of demand is the law of

diminishing marginal utility.

diminishing marginal returns.

increasing opportunity costs.

supply.

15.Which of the following statements isfalse?

An upward-sloping supply curve graphically represents the law of supply.

A vertical supply curve graphically represents the law of supply.

If income rises and good X is a normal good, then the demand for good X will rise.

If income falls and good Y is an inferior good, then the demand for good Y will rise.

16.Suppose the government decides that every family should own its own home. To bring this about, the government decides to subsidize the home-construction industry by giving the home-construction companies $10,000 for every house that they build. As a result of this,

the supply curve of new houses would shift leftward, since it now costs $10,000 more for builders to produce a house.

the demand curve for new houses would shift rightward, since now every family would want to buy a house.

the demand curve for new houses would shift leftward.

the supply curve of new houses would shift rightward, since builders would be willing to produce and sell more houses at each given price.

Exhibit 3-5

17.Refer to Exhibit 3-5.In the market shown, if equilibrium was originally at point V and is now at point Z, the new equilibrium price is __________ it was originally and the new equilibrium quantity is ____________ it was originally.

greater than; greater than

less than; greater than

greater than; less than

less than; less than

18.If the workers of a firm successfully negotiate an increase in wages, which of the following is most likely to happen?

The demand curve for the product the firm produces shifts rightward.

The demand curve for the product the firm produces shifts leftward.

The supply curve of the product the firm produces shifts rightward.

The supply curve of the product the firm produces shifts leftward.

Exhibit 3-4

19.Refer to Exhibit 3-4. If this is a competitive market, price and quantity will gravitate toward

$6 and 10 units, respectively.

$6 and 20 units, respectively.

$4 and 15 units, respectively.

$2 and 15 units, respectively.

Exhibit 3-12

---------------------------------------------------Quantity Supplied --------------------------------------------

Price

Aline

Bentley

Calvin

Daniel

Market

(A)

(B)

(C)

(D)

(E)

(F)

Assume that Aline, Bentley, Calvin, and Daniel are the only sellers in this market.

20.Refer to Exhibit 3-12.Fill in blanks (A) and (B) respectively with the market quantity supplied at each given price.

12.25; 14.75

49; 59

48; 61

8.00; 8.71

Exhibit 3-16

21.Refer to Exhibit 3-16. If there are empty seats for a basketball game at the price P*, the situation is best depicted on graph

(1), with P* = P₁.

(2), with P* = P₃.

(3), with P* = P₂.

(3), with P* = P₃.

(4), with P* = P₁.

22.Suppose that good X is one of the more heavily subsidized industries in the United States. Suppose further that as a result of intense lobbying from health-related concerns, Congress repeals the subsidies on good X. Which of the following scenarios would likely occur?

The supply curve for good X would shift rightward, as it would now be cheaper to produce each level of output.

The supply curve for good X would shift leftward, since it would now cost more to produce each level of output.

There would be no shift in the supply curve for good X; subsidies don't affect output.

There would be a movement along the supply curve for good X, but the supply curve would not shift.

23.On a supply-and-demand diagram, equilibrium is found

where the supply curve intercepts the vertical axis.

where the demand curve intercepts the horizontal axis.

where the demand and supply curves intersect.

at every point on either curve

Exhibit 3-9

24.Refer to Exhibit 3-9. Consumers view X and Y as substitutes. If the price of Y increases as a result of a decrease in the supply of Y, an economist would expect a movement in the market for X from

F to E.

A to B.

E to F.

B to A.

25.If the supply curve and the demand curve for lettuce both shift to the left by an equal amount, what can we say about the resulting changes in equilibrium price and quantity?

The price will increase, but the quantity may increase or decrease.

The price will increase, and the quantity will increase.

The price will decrease, and the quantity will increase.

The price will stay the same, but the quantity will increase.

The price will stay the same, but the quantity will decrease.

1.Define or explain the following terms with examples and graphs:elastic demand, inelastic demand, unit elastic demand, perfectly elastic, and perfectly inelastic. Use a graph to show and explain the relationship between elasticity and total revenue.

2If your income is $50, and the prices of A, B, and C are $4, $3, and $2 respectively, what quantities of each product will you purchase to maximize utility?

MU (A)MU(B)MU (C)

1454025

2402421

3321515

4241210

5666