ECON 1050 Chapter 12: Economics-1 (1) (dragged) 8

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17 Sep 2016

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A consumer"s demand curve shows how the best budget allocation changes as the price of a good changes. So all the points along their demand curves, consumers get the most value out of their resources. If the people who consume the good are the only ones who benefit from the good, the market demand curve is the marginal social benefit curve. A competitive firm"s supply curve shows how the profit-maximizing quantity changes as the price of a good changes. So all the points along their supply curves, firms get the most value out of their resources. If the firms that produce the good bear all the cost of producing it, then the market supply curve is the marginal social cost curve. In a competitive equilibrium, resources are used efficiently the quantity demanded equals the quantity supplied, so marginal social benefit equals marginal social cost. The gain from trade for consumers is measured by consumer surplus.

Related Questions

Any point along the market demand curve shows

1. the quantity of the good that firms would be willing and able to supply at a specific price

2. the relationship between the price of the good and total quantity demanded at a series of prices

3. the opportunity cost of supplying a given quantity of goods to the market

4. the quantity of the good that consumers would be willing and able to purchase at a specific price

5. how population changes affect the quantity demanded at a specific price

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Considering the demand side of a market for a good, it is reasonable to expect that:
i. demand curves for a given good are identical between consumers
ii. demand curves for a given good differ between consumers
iii. an individual has identical demand curves for different goods
iv. an individual has different demand curves for different goods

iii

i and iii

ii and iv

Suppose the market demand curve for a good is represented by the linear equation Q = 60 - 0.75P. If the market price were to increase from P = $20 to P = $40, then holding all other factors constant:

the quantity demanded would decrease by 10 units and total expenditures on the good would decrease by $400

the quantity demanded would decrease by 15 units and total expenditures on the good would increase by $300

the quantity demanded would decrease by 30 units and total expenditures on the good would increase by $1200

the quantity demanded would increase by 20 units and total expenditures on the good would decrease by $800

the quantity demanded would increase by 10 units and total expenditures on the good would increase by $100

the quantity demanded would increase by 25 units and total expenditures on the good would increase by $1000

A perfectly competitive firms supply curve for a good identifies the:
i. minimum quantity supplied at each price, holding all other factors constant
ii. firms minimum willingness to accept for each incremental unit of the good (e.g., the first unit, second unit, etc.), holding all other factors constant
iii. maximum quantity supplied at each price, holding all other factors constant
iv. firms maximum willingness to accept for each incremental unit of the good (e.g., the first unit, second unit, etc.), holding all other factors constant

Considering the supply side of a market for a good, if a firms supply curve were vertical, then:

the law of supply holds, and quantity supplied is completely insensitive to changes in price

the law of supply holds, and quantity supplied is highly sensitive to changes in price

the law of supply fails to hold, and quantity supplied is completely insensitive to changes in price

the law of supply fails to hold, and quantity supplied is highly sensitive to changes in price

none of the above

The determinants of supply are:
i. factors other than price that will affect the quantity of a good or service a firm is willing and able to purchase
ii. factors that affect a producers maximum willingness-to-accept to produce various quantities of a good
iii. factors that affect a producers minimum willingness-to-accept to produce various quantities of a good

iii

i and ii

i and iii

The market supply curve for a good is derived by:
i. horizontally summing the supply curves of the individual firms in the market
ii. vertically summing the supply curves of the individual firms in the market
iii. summing the quantity supplied by each firm at a given price and then repeating this over the range of prices

iii

i and ii

i and iii

If the level of technology used in the production of a good improves, and assuming the quality of the good does not change, then:
i. more output may be obtained with a given amount of inputs compared to before the technological improvement
ii. a given amount of output may be obtained with fewer inputs compared to before the technological improvement
iii. the firm will increase its use of other inputs, such as the number of workers it employs
iv. market demand for the good will increase

Considering the market for gasoline, which of the following would result in an increase in market supply?
i. a decrease in the price of gasoline
ii. an improvement in oil extraction and refining technologies
iii. an increase in the wage rates paid to gasoline refinery workers
iv. a decrease in the price of crude oil, a key input used to produce gasoline
v. the imposition of a federal gasoline tax aimed a decreasing the emission of greenhouse gases

Suppose a market has two identical sellers. If each sellers supply function is given by P = 20 + Q, then the market supply function is:

From the market framework discussed in class and the readings, it may be concluded that in order for a good to be exchanged between a seller and a buyer, it must be that:

buyer maximum willingness-to-pay is greater than seller minimum willingness-to-accept

buyer maximum willingness-to-pay is greater than or equal to seller minimum willingness-to-accept

buyer minimum willingness-to-pay is greater than or equal to seller maximum willingness-to-accept

buyer minimum willingness-to-pay is greater than seller maximum willingness-to-accept

If the market demand function is given by P = 80 - 0.3Q and the market supply is given by P = 20 + 0.1Q, then the equilibrium price and quantity are:

Of concern are the affects of sustained summer droughts on the domestic supply of wheat. Noting that wheat is a primary ingredient in the production of bread and that potatoes are a substitute for bread, if the supply of wheat declines then it is reasonable to expect:

the price of wheat to fall, the supply of bread to increase, and the demand for potatoes to increase

the price of wheat to fall, the supply of bread to increase, and the demand for potatoes to decrease

the price of wheat to rise, the supply of bread to decrease, and the demand for potatoes to decrease

the price of wheat to rise, the supply of bread to decrease, and the demand for potatoes to increase

the price of wheat to rise, the supply of bread to increase, and the demand for potatoes to increase

the price of wheat to rise, the supply of bread to increase, and the demand for potatoes to decrease

Suppose a perfectly competitive market is initially in equilibrium. If market demand and supply decrease simultaneously, then equilibrium:

price will rise, but the equilibrium quantity may either rise, fall, or remain unchanged

quantity will rise, but the equilibrium price may either rise, fall, or remain unchanged

price will fall, but the equilibrium quantity may either rise, fall, or remain unchanged

quantity will fall, but the equilibrium price may either rise, fall, or remain unchanged

Considering the demand side of a market for a good, the consumer surplus derived by an individual:
i. is the difference between the maximum amount the consumer is willing to pay on each unit and the minimum prices that producers are willing to accept
ii. is the difference between the minimum amount the consumer is willing to pay on each unit and the price he/she
actually pays
iii. is the difference between the maximum amount the consumer is willing to pay on each unit and the price he/she actually pays
iv. will decrease if price increases

Suppose the market demand for a good is described by the equation P = 120 - 2Q. If a change in market supply results in price decreasing from P0 = $80 to P1 = $70, then the resulting change in consumer surplus is:

17. Which of the following is a determinant of supply?

A. Tastes and preferences

B. Price of a complementary good

C. Consumer income

D. Technology

18. A market is in equilibrium:

A. provided there is no surplus of the product

B. at all prices above that shown by the intersection of the supply and demand curves

C. if the amount producers want to sell is equal to the amount consumers want to buy

D. whenever the demand curve is downsloping and the supply curve is upsloping.

19. If the market price is above the equilibrium price:

A. A shortage will occur and producers will produce more and lower prices

B. A surplus will occur and producers will produce less and lower prices

C. A surplus will result and consumers will bid prices up

D. Producers will make extremely high profits

20. The market system automatically corrects a surplus condition in a competitive market by:

A. Raising the price of the commodity in question while increasing the quantity demanded

B. Raising the price of the commodity in question while decreasing the quantity demanded

C. Reducing the price of the commodity in question while increasing the quantity demanded

D. Reducing the price of the commodity in question while decreasing the quantity demanded

21. The price elasticity of demand measures:

A. buyer responsiveness to price changes.

B. the extent to which demand curve shifts as incomes change.

C. the slope of the demand curve.

D. how far business executives can stretch their fixed costs

22. The elasticity of demand for a product is likely to be greater:

A. if the product is a necessity, rather than a luxury good.

B. the greater the amount of time over which buyers adjust to a price change

C. the smaller the proportion of one's income spent on the product.

D. the smaller the number of substitute products available.

23. Market failure is said to occur whenever:

A. private markets do not allocate resources in the most economically desirable way

B. prices rise

C. some consumers who want a good do not obtain it because the price is higher than they are willing to pay

D. government intervenes in the functioning of private markets.

24. A negative externality or spillover cost occurs when:

A. firms fail to achieve allocative efficiency.

B. firms fail to achieve productive efficiency.

C. the price of the good exceeds the marginal cost of producing it.

D. the total cost of producing a good exceeds the costs borne by the producer

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ECON 1050 Chapter 12: Economics-1 (1) (dragged) 8

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