Question 1

Exhibit 5-3
 
-Refer to Exhibit 5-3 which shows the demand and supply of a college athlete. Suppose that NCAA rules limit the amount that the college can pay this athlete,such that their payment can not exceed the cost of attending the college (currently,$8,000). What is the consumers' surplus for the college (with respect to this one athlete)?

Accepted Answer

Consumer surplus is the difference between what consumers are willing to pay and what they actually pay. In this scenario, the college is willing to pay up to the value represented by the demand curve, but due to NCAA rules, they can only pay up to $8,000, which is less than the maximum they would be willing to pay. Therefore, the consumer surplus for the college includes areas 1 and 2, which are above the actual payment made but below the demand curve.

Question 2

If the government legalized the purchase and sale of marijuana,the equilibrium quantity would _________ and the price would ________ if the supply of marijuana increased by _______ than the demand for marijuana increased.

Accepted Answer

The answer of If the government legalized the purchase and...

Question 3

Exhibit 5-3
 
-Refer to Exhibit 5-3 which shows the demand and supply of a college athlete. Suppose that NCAA rules limit the amount that the college can pay this athlete,such that their payment can not exceed the cost of attending the college (currently $8,000). The impact of this ruling would be a loss of income to the athlete of __________ and an equal gain in consumers' surplus to the college represented by ________________.

Accepted Answer

The limit on payment to the athlete means that the price of the athlete's services is capped at $8,000. This reduces the equilibrium quantity from 1,500 to 1,300. The athlete's original income was $10,000 (area 1+2), but with the price restriction, their income is reduced to $8,000 (area 1). The reduction in income for the athlete is equal to the gain in the consumers' surplus of the college, which is represented by area 2 ($2,000). Therefore, the answer is A.

Question 4

At college X,students pay $3,000 less than the equilibrium tuition.At college Y,students also pay $3,000 less than the equilibrium tuition.If the supply is the same at both colleges,it follows that the shortage will be greater at

Accepted Answer

The shortage will be greater at college X if the demand is greater there, given that both colleges have the same supply and both charge $3,000 less than the equilibrium tuition.

Question 5

Which of the following statements is false?

Accepted Answer

While people who live in cities with good weather do benefit from it, they typically have to pay more in housing costs to live in those desirable locations. Therefore, they are not receiving this benefit "for free."

Question 6

Suppose that television show A is much more popular than television show B. The equilibrium price for a ticket to view the taping of show A is $40 and the equilibrium price for a ticket to view the taping of show B is -$30. If free tickets are offered for the taping of both shows,it is likely that

Accepted Answer

The equilibrium price for show A is positive, indicating high demand, so free tickets will likely cause a shortage. Show B has a negative equilibrium price, indicating low demand, so free tickets will likely cause a surplus.

Question 7

Exhibit 5-2
 
-Refer to Exhibit 5-2.If the tuition is set at $70 there will be

Accepted Answer

At $70, the quantity demanded at 8 a.m. will increase to 225, which is greater than the initial quantity supplied of 200, resulting in a surplus. However, at 10 a.m., the quantity demanded will decrease to 175, which is equal to the initial quantity supplied, resulting in an equilibrium. Therefore, there is a surplus of seats at 8 a.m. and an equilibrium at 10 a.m.

Question 8

Exhibit 5-3
 
-Refer to Exhibit 5-3 which shows the demand and supply of a college athlete. If the college is allowed to pay this student athlete its market equilibrium wage of $10,000,what is the consumers' surplus for the college that buys this one athlete's services at this wage?

Accepted Answer

The answer of Exhibit 5-3
 
-Refer to Exhibit 5-3 which...

Question 9

To an economist,freeway congestion is a sign that the price to drive on the freeway is

Accepted Answer

Freeway congestion indicates that the demand to drive on the freeway exceeds the supply at the current price (which is often zero or very low), suggesting the price to drive is below the level that would balance supply and demand (equilibrium level).

Question 10

Good weather in cities such as San Diego

Accepted Answer

While good weather is technically free for the residents of a city like San Diego, there are indirect payments that must be made in order to enjoy it. For example, the cost of living in a desirable location with good weather is often higher, and tourists may drive up prices for local goods and services. Therefore, the residents of the city are indirectly paying for the good weather even though they are not directly charged for it.

Question 11

If there is freeway congestion at 8a.m.,we can reduce (or eliminate)the congestion by

Accepted Answer

Building more freeways, raising the price to drive, and encouraging carpooling can all help reduce or eliminate congestion by increasing capacity, managing demand, and reducing the number of vehicles on the road, respectively.

Question 12

If patients were allowed to sue their HMO,we would expect

Accepted Answer

If patients were allowed to sue their HMO, this would increase the potential costs and liabilities of the HMO, leading to increased risk for the HMO and reduced profitability. In response to this, the HMO may decrease the supply of healthcare services provided or increase the price of their healthcare coverage, leading to a leftward shift of the supply curve and an increase in the price of HMO-provided health care coverage.

Question 13

The supply of seats for an economics class at 10 a.m.is the same as the supply of seats for the same class at 12 noon,but while every student who wants to attend this class at 12 noon can,not every student who wants to attend the 10 a.m.class can.Tuition does not vary by time.It follows that the demand for the 10 a.m.class is __________ the demand for the 12 noon class.

Accepted Answer

The demand for the 10 a.m. class is greater than the demand for the 12 noon class because not every student who wants to attend the 10 a.m. class can, indicating higher demand relative to the available supply.

Question 14

The demand to attend a certain college is represented by a downward-sloping demand curve.The supply of spots at the college is represented by a vertical supply curve.At the tuition that students are charged,there is a shortage of spots at the college.If the demand to attend the college rises,but the tuition stays constant,it follows that the

Accepted Answer

If the demand to attend the college rises but the tuition stays constant, there will be an even greater shortage of spots at the college. In order to allocate spots, the college may increase the GPA required to attend. This will reduce the number of students who qualify to attend and help alleviate the shortage. Therefore, the GPA required to attend the college will probably rise. The SAT score may or may not change, depending on the college's admissions policies.

Question 15

If the supply of aisle seats equals the supply of middle seats on an airplane,and the demand for aisle seats is _____________ than the demand for middle seats,then the equilibrium price of aisle seats will be ______________ the equilibrium price of middle seats.

Accepted Answer

If the demand for aisle seats is greater than the demand for middle seats, then there will be more competition for aisle seats and thus a higher equilibrium price. This also means that the equilibrium price of aisle seats will be higher than the equilibrium price of middle seats, as there is equal supply for both.

Question 16

Residents of cities with a reputation for good weather,ceteris paribus,

Accepted Answer

Cities with good weather have a higher demand for housing due to the desirable living environment they provide. This increased demand pushes up the price of housing, making it more expensive for residents.

Question 17

Suppose that there are two laws proposed for eviction notices.Plan A requires landlords to give a renter 30 days to vacate an apartment once he has been served an eviction notice.Under Plan B,he has 60 days to vacate an apartment once he has been served an eviction notice.It follows that landlords will find

Accepted Answer

Plan B requires landlords to give renters 60 days to vacate, which means they have more time to find a new place to live. This could potentially be more expensive for landlords if they are unable to rent out the unit for those extra 30 days, but it also gives them more time to find a new tenant. Therefore, Plan A would require more effort and resources to find a new tenant quickly, making Plan A more expensive.

Question 18

There is no toll charge to drive on freeway A.If there is freeway congestion at 9 a.m.,there will be greater freeway congestion at 11 a.m.if

Accepted Answer

If the demand to drive on the freeway at 11 a.m. is greater than the demand at 9 a.m., it logically follows that there would be greater congestion at 11 a.m., assuming all other factors remain constant.

Question 19

Exhibit 5-2
 
-Refer to Exhibit 5-2.If the tuition is set at $50 there will be

Accepted Answer

The answer of Exhibit 5-2
 
-Refer to Exhibit 5-2.If the...

Question 20

University A sets tuition at the equilibrium level based on price and then imposes entrance requirements in the form of minimum high school GPA and SAT scores.Enrollment at this school will likely be

Accepted Answer

The entrance requirements act as a non-price rationing mechanism, limiting the number of students who can enroll, thus likely keeping enrollment below the equilibrium level.

Quiz 5: Supply, Demand, and Price: Applications

If the government legalized the purchase and sale of marijuana,the equilibrium quantity would ___ and the price would if the supply of marijuana increased by _ than the demand for marijuana increased.

At college X,students pay $3,000 less than the equilibrium tuition.At college Y,students also pay $3,000 less than the equilibrium tuition.If the supply is the same at both colleges,it follows that the shortage will be greater at

Which of the following statements is false?

Suppose that television show A is much more popular than television show B. The equilibrium price for a ticket to view the taping of show A is $40 and the equilibrium price for a ticket to view the taping of show B is -$30. If free tickets are offered for the taping of both shows,it is likely that

Exhibit 5-2 -Refer to Exhibit 5-2.If the tuition is set at $70 there will be

Exhibit 5-3 -Refer to Exhibit 5-3 which shows the demand and supply of a college athlete. If the college is allowed to pay this student athlete its market equilibrium wage of $10,000,what is the consumers' surplus for the college that buys this one athlete's services at this wage?

To an economist,freeway congestion is a sign that the price to drive on the freeway is

Good weather in cities such as San Diego

If there is freeway congestion at 8a.m.,we can reduce (or eliminate) the congestion by

If patients were allowed to sue their HMO,we would expect

If the supply of aisle seats equals the supply of middle seats on an airplane,and the demand for aisle seats is _ than the demand for middle seats,then the equilibrium price of aisle seats will be __ the equilibrium price of middle seats.

Residents of cities with a reputation for good weather,ceteris paribus,

There is no toll charge to drive on freeway A.If there is freeway congestion at 9 a.m.,there will be greater freeway congestion at 11 a.m.if

Exhibit 5-2 -Refer to Exhibit 5-2.If the tuition is set at $50 there will be

University A sets tuition at the equilibrium level based on price and then imposes entrance requirements in the form of minimum high school GPA and SAT scores.Enrollment at this school will likely be