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Exam 3: Where Prices Come From: the Interaction of Demand and Supply

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Question 51

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Table 3.1 $\begin{array}{|c|c|c|c|c|}\hline \begin{array}{c}\text { Loose Leaf Tea } \\\text { Price per kg. } \\\text { (dollars) }\end{array} & \begin{array}{c}\text { Sunil's } \\\text { Quantity } \\\text { Demanded } \\\text { (kgs) }\end{array} & \begin{array}{c}\text { Mia's } \\\text { Quantity } \\\text { Demanded } \\\text { (kgs) }\end{array} & \begin{array}{c}\text { Rest of Market } \\\text { Quantity } \\\text { Demanded } \\\text { (kgs) }\end{array} & \begin{array}{c}\text { Market } \\\text { Quantity } \\\text { Demanded } \\\text { (kgs) }\end{array} \\\hline \$ 8 & 4 & 0 & 30 & \\\hline 6 & 7 & 2 & 40 & \\\hline 5 & 9 & 3 & 51 & \\\hline 4 & 12 & 5 & 64 & \\\hline 3 & 15 & 8 & 90 & \\\hline\end{array}$ -Refer to Table 3.1.The table above shows the demand schedules for loose-leaf tea of two individuals (Sunil and Mia) and the rest of the market.If the price of loose-leaf tea rises from $3 to $4, the market quantity demanded would

A) decrease by 32 kgs.
B) increase by 64 kgs.
C) increase by 32 kgs.
D) decrease by 64 kgs.

E) B) and C)
F) A) and B)

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Question 52

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At a product's equilibrium price

A) the product's demand curve is the same as the product's supply curve.
B) the quantity of the product demanded is greater than the quantity of the product supplied.
C) the quantity of the product demanded is less than the quantity of the product supplied.
D) the product's demand curve crosses the product's supply curve.

E) B) and C)
F) None of the above

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Question 53

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In June, buyers of titanium expect that the price of titanium will fall in July.What happens in the titanium market in June, holding everything else constant?

Table 3.2 $\begin{array}{|c|c|c|}\hline \begin{array}{c}\text { Price per } \\\text { Bushel }\end{array} & \begin{array}{c}\text { Quantity } \\\text { Demanded } \\\text { (bushels) }\end{array} & \begin{array}{c}\text { Quantity } \\\text { Supplied } \\\text { (bushels) }\end{array} \\\hline \$ 3 & 30,000 & 0 \\\hline 6 & 26,000 & 4,000 \\\hline 9 & 22,000 & 9,000 \\\hline 12 & 18,000 & 12,000 \\\hline 15 & 15,000 & 15,000 \\\hline 18 & 12,000 & 22,000 \\\hline 21 & 8,000 & 28,000 \\\hline 24 & 4,000 & 36,000 \\\hline\end{array}$ -Refer to Table 3.2.The table contains information about the corn market.Use the table to answer the following questions. a.What are the equilibrium price and quantity of corn? b.Suppose the prevailing price is $9 per bushel.Is there a shortage or a surplus in the market? c.What is the quantity of the shortage or surplus? d.How many bushels will be sold if the market price is $9 per bushel? e.If the market price is $9 per bushel, what must happen to restore equilibrium in the market? f.At what price will suppliers be able to sell 22,000 bushels of corn? g.Suppose the market price is $21 per bushel.Is there a shortage or a surplus in the market? h.What is the quantity of the shortage or surplus? i.How many bushels will be sold if the market price is $21 per bushel? j.If the market price is $21 per bushel, what must happen to restore equilibrium in the market?

Figure 3.8 -Refer to Figure 3.8.The graph in this figure illustrates an initial competitive equilibrium in the market for apples at the intersection of D₁ and S₁ (point A) . If worms eat half the apple crop how will the market equilibrium point change?

At the end of the recession in 2009, as incomes recovered, sales of Alcool NB Liquor's own brand of low-priced beer were low.At the same time sales of premium products rose.The decrease in demand for Alcool NB Liquor's low-priced beer despite the increase in incomes indicates that this brand of beer is considered a(n)

The income effect explains why there is an inverse relationship between the price of a product and the quantity of the product demanded.

If the price of automobiles was to increase, then

Figure 3.7 -Refer to Figure 3.7.Assume that the graphs in this figure represent the demand and supply curves for almonds.Which panel best describes what happens in this market when there is an increase in the productivity of almond harvesters?

Let D = demand, S = supply, P = equilibrium price, Q = equilibrium quantity.What happens in the market for tropical hardwood trees if the governments restrict the amount of forest lands that can be logged?

Assume there is a shortage in the market for digital music players.Which of the following statements correctly describes this situation?

Assume that both the demand curve and the supply curve for MP3 players shift to the right but the demand curve shifts more than the supply curve.As a result

Figure 3.5 -Refer to Figure 3.5.At a price of $5, the quantity sold

As the number of firms in a market decreases, the supply curve will shift to the left and the equilibrium price will rise.

Scarcity is defined as the situation that exists when the quantity demanded for a good is greater than the quantity supplied.

During the recession of 2008-2009

Figure 3.1 -Refer to Figure 3.1.A case in which consumers no longer cared for a product would be represented by a movement from

Table 3.3 $\begin{array}{|l|c|}\hline \text { Demand } & \text { Supply } \\\hline P=80-Q D & P=50+1 / 2 Q S \\\hline Q D=80-P & Q S=2 P-100\\\hline\end{array}$ -Refer to Table 3.3.The equations above describe the demand and supply for Chef Ernie's Sushi-on-a-Stick.The equilibrium price and quantity for Chef Ernie's sushi are $60 and 20 thousand units.What is the value of consumer surplus?

Explain how it would be possible for the equilibrium price and equilibrium quantity to both increase in the market for motorcycles if consumer preference for motorcycles increases and the number of motorcycle manufacturers decreases.

If the price of hairspray is represented by equation P = 10 - 0.2 QD, then the corresponding quantity of hairspray demanded is represented by the equation