Question 1

Aeronautical engineers are a factor of production for airplanes. What will happen in the world market for airplanes when there is a worldwide shortage of aeronautical engineers?

Accepted Answer

With a worldwide shortage of aeronautical engineers, the supply of airplanes would decrease. As a result, the price of airplanes would increase due to the decreased supply but increased demand. Furthermore, with fewer engineers, there would be fewer airplanes produced, leading to a decrease in the quantity of airplanes exchanged. Thus, the correct answer is E.

Question 2

A demand curve represents graphically

Accepted Answer

A demand curve represents the quantity of a product or service that consumers are willing and able to buy at different prices, so it shows the quantity demanded per unit time at certain prices.

Question 3

Good X has a substitute if there exists another good

Accepted Answer

A substitute good is one where the demand increases when the price of the other good (Good X) increases, indicating a direct relationship between the price of Good X and the demand for the substitute.

Question 4

If a change in tastes has raised the price of tomatoes by 5 percent when the general price level increased by 2 percent, the price of tomatoes

Accepted Answer

The price of tomatoes increased by 5 percent, but the general price level increased by 2 percent. Therefore, the relative increase in the price of tomatoes compared to the average of all prices is 5% - 2% = 3%.

Question 5

Given a positively sloped supply curve, a rise in the demand for that commodity causes

Accepted Answer

A positively sloped supply curve means that as the quantity demanded increases, the price of the commodity also increases. If there is a rise in demand, then the equilibrium point will shift to a higher quantity and a higher price, resulting in both the equilibrium price and equilibrium quantity exchanged increasing.

Question 6

Ceteris paribus, the position of the demand curve for apples will remain unchanged if there is a change in the

Accepted Answer

The demand curve for apples will remain unchanged if there is a change in the price of apples because price changes result in movement along the demand curve, not a shift of the curve itself.

Question 7

The quantity exchanged in the market will be below the equilibrium quantity

Accepted Answer

The answer of The quantity exchanged in the market will...

Question 8

A variable that is a "stock"

Accepted Answer

A stock variable represents a quantity that exists at a specific point in time, such as the amount of inventory at the end of a given day or the level of capital in a company's balance sheet. It does not have a "flow" or rate associated with it, like income or expenses, and is not necessarily related to products with inventory.

Question 9

Suppose that the price of good X increases from $3.00 to $4.00 while the price of good Y increases from $150 to $200. The relative price of X (in terms of Y)

Accepted Answer

The answer of Suppose that the price of good X...

Question 10

Suppose we observe that movie theatre prices are less during the daytime than in the evening. If the supply of movies does not change between daytime and evening, then the most likely explanation for this difference in price is

Accepted Answer

The price difference suggests that the demand for movie theatres is higher in the evening than during daytime. Therefore, the evening demand curve is likely to be to the right of the daytime demand curve.

Question 11

Steel is an important input to the production of cars. Tires and cars are used together by consumers. What will occur in the market for tires when there is an increase in the price of steel?

Accepted Answer

An increase in the price of steel raises the cost of producing cars, leading to a decrease in the supply of cars. This results in a decrease in the demand for tires, as fewer cars are being produced and sold, causing both the price and quantity of tires to fall.

Question 12

Suppose that the demand and supply curves for green tea are stated functionally as QS1U1B1DS1U1B0= 700 - P and QS1U1B1SS1U1B0= 400 + 2P. Suppose also that a study is released proving that the regular consumption of green tea prolongs life by at least a decade, and the result is that the quantity demanded of green tea doubles at the initial price. The equilibrium price in this case will increase by

Accepted Answer

Initially, the demand curve is QS1U1B1DS1U1B0S1U1B1 = 700 - P and the supply curve is QS1U1B1SS1U1B0S1U1B1 = 400 + 2P. Equilibrium is reached when quantity demanded equals quantity supplied, i.e. QS1U1B1DS1U1B0S1U1B1 = QS1U1B1SS1U1B0S1U1B1. Solving for P, we get P = 150.

After the study is released, with the price still at P=150, the quantity demanded doubles from 700 - 150 = 550 to 2(550) = 1100. This creates excess demand in the market, which will cause the price to rise. As the price rises, the quantity demanded will decrease and the quantity supplied will increase, until a new equilibrium is reached.

To find the new equilibrium price, we can set the new quantity demanded (1100) equal to the original quantity supplied (400 + 2P). Solving for P, we get P = 350. Therefore, the new equilibrium price is $350.

The percent increase in price is (350-150)/150 * 100% = 133.3%, which is closest to answer C) 200%.

Question 13

The term "comparative statics" describes the

Accepted Answer

Comparative statics involves comparing one equilibrium point with another, analyzing how changes in exogenous variables affect equilibrium outcomes. It is not concerned with the process of adjustment that leads to an equilibrium, but rather with the characteristics of the equilibrium itself. Therefore, option E is the best choice.

Question 14

"Demand" in a particular market refers to

Accepted Answer

"Demand" in a particular market refers to the entire relationship between quantity demanded and price. It is not just the quantity demanded by households at current market prices (B) or the quantity purchased at the current market price (C). It also includes the quantity that is desired but not satisfied by current supply (E) and the relationship between demand and supply (A), but D is the most complete answer.

Question 15

Suppose that the demand and supply curves in the market for carrots have the following functional form: Q_D= 250 - 4p and Q_S= 10 + p. If the prevailing price on the market is 50, then

Accepted Answer

The answer of Suppose that the demand and supply curves...

Question 16

An improvement in the technology used to produce solar panels will

Accepted Answer

An improvement in the technology used to produce solar panels will increase the efficiency of production, reduce costs, and increase the supply of solar panels in the market, leading to a rightward shift in the supply curve. As a result, the equilibrium price will decrease, and the equilibrium quantity will increase.

Question 17

The time period to which quantity demanded refers when constructing demand curves is

Accepted Answer

The answer of The time period to which quantity demanded...

Question 18

A demand schedule is

Accepted Answer

A demand schedule is a numerical tabulation showing the quantities demanded at certain prices. It is a way to organize and present data on the relationship between price and quantity demanded.

Quiz 3: Demand, Supply, and Price