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Exam 4: Equilibrium: How Supply and Demand Determine Prices

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Question 41

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Reference: Ref 4-5 (Figure: Demand and Supply) Refer to the figure. At the equilibrium quantity, total surplus is:

A) $960.
B) $480.
C) $320.
D) $240

E) All of the above
F) A) and C)

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Question 42

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Which choice explains how the OPEC crisis of 1973 affected oil prices?

A) The supply of oil was reduced, leading to a rise in oil prices.
B) The supply of oil was increased, leading to a fall in oil prices.
C) The demand for oil increased, leading to a rise in oil prices.
D) The demand for oil decreased, leading to a fall in oil prices.

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

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Question 43

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What would you expect to happen to the price of oranges, cucumbers, and tropical fish as a result of this freezing weather? Is this price change a result of a change in supply or demand for these goods? Explain.

Reference: Ref 4-8 (Figure: Demand, Supply Shifts) In the figure, the initial demand curve is D1 and the initial supply curve is S1. Resource prices in this market increase; at the same time, the consumer population declines as migration causes an outflow of population to other regions. What happens to the supply curve and/or demand curve?

The price of professional sports tickets is high; therefore, you should blame the owners for taking advantage of the fans, not the other buyers for outbidding you.

Reference: Ref 4-3 (Table: Equilibrium Price, Quantity) Refer to the table. If the price in the market was $16, there would be a:

Reference: Ref 4-2 (Figure: Market Equilibrium) According to the figure, the equilibrium price and quantity are:

Figure: Demand, Supply Shifts Reference: Ref 4-8 (Figure: Demand, Supply Shifts) In the figure, the initial demand curve is D1 and the initial supply curve is S1. If technological innovations lower the costs of production, what will happen?

In a free market in which an equilibrium price and quantity prevails:

Figure: Demand and Supply Reference: Ref 4-5 (Figure: Demand and Supply) Refer to the figure. Which of the following statements is TRUE? I. Buyers are willing to pay $20 for the 16th unit of output and it costs sellers $60 to produce that unit. II. The gains from trade are maximized at 20 units of output. III. At four units of output, there are unexploited gains from trade. IV. A free market is likely to produce less than 12 units of output.

Reference: Ref 4-7 (Figure: Market Changes) Refer to the figures. If the figures represent the market for a popular soda, which figure shows the effect of an increase in the price of a competing energy drink?

If a frost destroys half of the orange crop in Florida, the equilibrium price of oranges will rise.

When there is a shortage of 1,000 units of a particular good:

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

Brazilian rosewood is renowned for its tonal qualities and gorgeous figuring on acoustic guitars. However, Brazilian rosewood is now banned from use in the construction of new guitars. What will likely happen to the price of used Brazilian rosewood guitars over time?

Draw a market demand curve and market supply curve for automobiles and label these curves D1 and S1, respectively. (Be sure to label all axes!) On the same graph, show what would happen if the auto workers union required all manufacturers of automobiles to now provide health insurance for ALL workers and their dependents. (Note: Assume that prior to this change, manufacturers of automobiles do NOT provide health insurance coverage to 100 percent of their employees and/or dependents.) What do you expect to happen to the price of automobiles as a result of this change in union policy?

Which of the following would NOT lead to a decrease in the price of domestic automobiles?

When you move along a demand curve: