question
The buyer's reservation price for a particular good or service is the:
answer
largest price the buyer would be willing to pay for it
question
One reason the demand curve slopes ______ is that as prices fall ______.
answer
downward; more people find that the price is now less than their reservation price.
question
Jessica's marginal cost for producing a pitcher of lemonade is $0.25. Therefore, $0.25 is her:
answer
reservation price
question
When a market is in equilibrium:
answer
there is neither excess demand nor excess supply
question
A seller's reservation price is generally equal to:
answer
the seller's opportunity cost of producing an additional unit.
question
Suppose that when the price of oranges is $3 per pound, the quantity demanded is 4.7 tons per day and the quantity supplied is 3.9 tons. In this case:
answer
excess demand will lead the price of oranges to rise.
question
A price ceiling that is set above the equilibrium price:
answer
will have no effect on the market.
question
If the demand for a good decreases as income decreases, then the good is a(n):
answer
normal good.
question
If the demand for gadgets increases as a result of a decrease in the price of widgets, the widgets and gadgets are:
answer
complementary goods
question
At the beginning of the fall semester, college towns experience large increases in their populations, causing a(n):
answer
increase in the demand for apartments.
question
Which of the following factors will lead to a decrease in the current supply of a good?
answer
A belief that the price of a good or service will go up in the future.
question
Suppose that the technology used to manufacture laptops has improved. The likely result would be:
answer
an increase in supply of laptops
question
Suppose rice is a normal good. If consumers' incomes fall, and a new technology is introduced that lowers the marginal cost of producing rice, then the equilibrium:
answer
price of rice will fall, but we cannot say for sure what will happen to the equilibrium quantity.
question
Suppose quantity demanded is given by Qd = 100 - P, and quantity supplied is given by Qs = 20 + 3P. In this case, equilibrium price, P, and equilibrium quantity, Q, are as follows:
answer
P = 20, Q= 80
question
What might cause a decrease in current supply of a product?
answer
New information that leads sellers to believe that the product's price will rise in the future.
question
A decrease in both the equilibrium price and the equilibrium quantity of rice is best explained by:
answer
a decrease in the demand for rice.
question
Assume both the demand for beef and the supply of beef decrease. Which of the following outcomes is certain to occur?
answer
The equilibrium quantity of beef will fall.
question
A market equilibrium:
answer
leave no unexploited opportunities for individuals.
question
The market equilibrium quantity:
answer
is sometimes the socially optimal quantity.
question
If price is above the equilibrium price, then there will be:
answer
excess supply.
question
Suppose the price of a Snickers candy bar is $2.00 at both the airport and the grocery store. The price elasticity of demand for a Snickers candy bar at an airport is likely to be ______ the price elasticity of demand for a Snickers candy bar at the grocery store.
answer
less than
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