Question
6 [16 pts.] Below are the supply and demand schedules for the bo
staff market. In the space provided, graph supply and demand.Econ 101 Section 3 Principles of Microeconomics
Instructor: C. Burkart
Questions 1 to 5 are worth 2 points each. Clearly circle the one best answer to each question. You will not receive credit if your answer choice is unclear or ambiguous.
1. How would an increase in the price of cotton affect the market for cotton T-shirts at your university bookstore?
(a) The supply of T-shirts will decrease.
(b) The demand for T-shirts will decrease.
(c) The demand for T-shirts will increase.
(d) The supply of T-shirts will increase.
2. Federal Express and UPS are two firms that compete in providing overnight delivery services. How is the market for UPS affected by an increase in the rates charged by Federal Express?
(a) UPS will increase the supply of its services.
(b) UPS will decrease the supply of its services.
(c) The demand for UPS services will decrease.
(d) The demand for UPS services will increase.
3. A surplus arises when
(a) demand for a good increases, causing an increase in the equilibrium price.
(b) the price of a good is held below the equilibrium price.
(c) demand for a good decreases, causing a decrease in the equilibrium price.
(d) the price of a good is held above the equilibrium price.
4. If the quantity supplied in a market exceeds the quantity demanded, we would expect price to:
(a) stay the same.
(b) increase.
(c) decrease.
(d) rise in order to clear the market.
5. Suppose that over time, you have observed an increase in the number of people owning digital cameras and a decrease in the price of these cameras. Which of the following would account for this?
(a) The supply has increased and demand has remained constant.
(b) The demand has increased and supply has remained constant.
(c) The demand has decreased and supply has remained constant.
(d) The supply has decreased and demand has remained constant.
Question
6 [16 pts.] Below are the supply and demand schedules for the bo
staff market. In the space provided, graph supply and demand.
|
Price ($) |
Quantity Supplied (x1,000 units) |
Quantity Demanded (x1,000 units) |
|
1 |
40 |
100 |
|
2 |
50 |
90 |
|
3 |
60 |
80 |
|
4 |
70 |
70 |
|
5 |
80 |
60 |
|
6 |
90 |
50 |
|
7 |
100 |
40 |
|
8 |
110 |
30 |
| 9 | 120 | 120 |
|
10 |
130 |
10 |
Label your supply curve S1 and your demand curve D1. What are the equilibrium price and quantity in this market?
Price: $4/unit, Quantity: 70,000 units
Due to a forest fire, the quantity supplied is decreased by 40,000 units at every price level. At the same time, bo staffs become more popular due to exposure in a hit movie, and demand increases by 20,000 at every price. Graph the new supply and demand curves and label them S2 and D2. What are the new equilibrium price and quantity?
Price: $7/unit, Quantity: 60,000
Question 7 [14 pts.] Computer chip makers periodically introduce new chips that are faster than previous versions. When this happens, demand for computers using the older chip decreases as customers anticipate the new models. At the same time, computer manufacturers increase production of computers with the older chip in order to clear out their stock of those chips. Draw two diagrams of the market for computers using the older chip: (1) One in which the equilibrium quantity falls in response to these events and (2) one in which the equilibrium quantity rises in response. Show what happens to the equilibrium price in each diagram.
This is a question directly from Check Your Understanding 3-4 on page 77 of the text. A solution showing the relevant graphs can be found on page S-3 in the back of your textbook.