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Exam 4: The Market Forces of Supply and Demand (PART 2)

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Question 21

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The quantity demanded of a product is the amount that buyers are willing and able to purchase at a particular price.

A) True
B) False

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Question 22

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A shortage will occur at any price below equilibrium price and a surplus will occur at any price above equilibrium price.

A) True
B) False

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Question 23

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A market is a group of buyers and sellers of a particular product.

A dress manufacturer is expecting higher prices for dresses in the near future.What would we expect?

Whenever a determinant of demand other than price changes,the demand curve shifts.

Surpluses drive price up while shortages drive price down.

Which of the following cause and effect events are in order for a seller?

A local cable TV company might be a monopolist.

Suppose you make jewellery.If the price of gold falls,what would we expect you to do?

A reduction in an input price will cause a change in quantity supplied,but not a change in supply.

Figure 4-10 -Refer to the Figure 4-10.What is the movement from point A to point B on the graph called?

What is the relationship between price and quantity supplied?

Figure 4-10 -Refer to the Figure 4-10.What would cause the movement from point B to point A on the graph?

Assume the following demand and supply equations: Qd=900-20P,and Qs=150+10P. a)Graph the two curves. b)Calculate the slopes of the two curves. c)Calculate the equilibrium price and quantity. d)If the price was $30,how much would the quantity demanded be? (Show it on the graph) e)If the price was $30,how much would the quantity supplied be? (Show it on the graph)

Ad Venture is a company that produces advertising video clips.Their supply curve is Qs=-2W+6P,where W (in 10s)is the hourly wage that the company pays their workers and P (in 1000s)is the ongoing market price for a 1-minute commercial. a)If the current wage in the video industry is $35 (W=3.5),what is the minimum price that allows Ad Venture to remain in the industry (i.e.,to supply a positive number of videos)? Draw the supply curve. b)If the wage is $35,how much should the market price be so that Ad Venture produces 8 videos? c)At the price you have determined at point b.,how does the number of videos supplied change if the wage decreases to $30? Show this situation in your graph.

What might cause a movement along the supply curve?

In a perfectly competitive market,buyers and sellers are price setters.

What relationship is shown by the supply schedule?

In the aftermath of hurricane Sandy,parts of New Jersey have been isolated so that the transportation of gasoline to consumers has become very difficult.Local authorities in various locations have tried various ways to address the situation. a)Using a supply and demand model,analyze the effect of the hurricane on the market for gasoline. b)In some places,local authorities have decided to distribute a certain amount of gasoline for free,so that every consumer had the right to a fixed allowance.Show and discuss the effects of this decision on the market. c)In other places,local authorities have imposed a price cap on gas.Show this in a supply and demand diagram and explain the consequences.

What is one reason that government taxes on cigarettes reduce smoking?