question
True or False: Supply and demand analysis enables managers to see the "big picture."
answer
True
question
Which if the following is true according to the law of demand? Select all that apply.
a. as market price increases, quantity demanded decreases
b. as market price decreases, quantity demanded also decreases
c. as market price increases, quantity demanded also increases
d. as market price decreases, quantity demanded increases
a. as market price increases, quantity demanded decreases
b. as market price decreases, quantity demanded also decreases
c. as market price increases, quantity demanded also increases
d. as market price decreases, quantity demanded increases
answer
a, d
question
True or False: The law of demand analyzes the relationship between price and quantity demanded holding everything else constant that influences buyers decisions.
answer
True
question
An increase in demand is best characterized by which of the following?
answer
demand curve shifts to the right
question
If chicken and pork are substitutes, what happens to the demand for pork if the price of chicken increases substantially?
answer
demand for pork increases
question
Which of the following describes supply and demand analysis?
a. a forecasting tool
b. mostly quantitative
c. use to predict pricing trends
d. a qualitative tool
a. a forecasting tool
b. mostly quantitative
c. use to predict pricing trends
d. a qualitative tool
answer
a, c
question
According to the law of demand, as market price decreases, quantity demanded _________.
answer
increases
question
What do economists use to describe the amount of good X that will be purchased at different prices of good X, at different prices of related goods, and at alternative income levels?
answer
demand function
question
The law of demand analyzes the relationship between price and quantity demanded holding which of the following variables constant? Select all that apply.
a. prices of related goods
b. taxes and subsidies
c. income
d. prices of inputs
a. prices of related goods
b. taxes and subsidies
c. income
d. prices of inputs
answer
a, c
question
If the price of a good rises, this will cause
answer
an upward movement along the demand curve
question
If price of good A increases and, as a result, the demand for good B decreases, then good A and B are considered to be
answer
complements
question
In the following linear demand function,
Qxd = α0 + αxPx + αyPy + αMM + αHH
where Py is the price of related goods, M is income, and H is other factors, the value of αM is:
Qxd = α0 + αxPx + αyPy + αMM + αHH
where Py is the price of related goods, M is income, and H is other factors, the value of αM is:
answer
positive if good X is normal
question
Select all that apply. The demand function indicates that the quantity of a good consumed depends on:
a. the price of the good
b. the price of inputs
c. the income of the buyers
d. the effect of the demand shifters
a. the price of the good
b. the price of inputs
c. the income of the buyers
d. the effect of the demand shifters
answer
a, c, d
question
Consider the following demand function:
Qd = 210 - 3P.
Solve for the inverse demand function.
Qd = 210 - 3P.
Solve for the inverse demand function.
answer
P= 70 - 1/3 Qd
question
Which area forms consumer surplus?
answer
the area below the demand curve and above the price
question
Which of the following does a market supply curve show?
answer
The quantity that all producers are willing and able to produce at all prices.
question
In the following linear demand function,
Qxd = α0 + αxPx + αyPy + αMM + αHH
where Py is the price of related goods, M is income, and H is other factors, the value of αy is
Qxd = α0 + αxPx + αyPy + αMM + αHH
where Py is the price of related goods, M is income, and H is other factors, the value of αy is
answer
positive if goods X and Y are substitutes, negative if good X and Y are complements
question
Consider the following demand function:
Qd = 900 - 15P.
Solve for the inverse demand function.
Qd = 900 - 15P.
Solve for the inverse demand function.
answer
P = 60 - 1/15Qd
question
Which of the following shows a decrease in the quantity supplied?
answer
a movement down along the supply curve
question
The difference between what consumers are willing to pay for a good or service and the market price is known as ________.
answer
consumer surplus
question
According to the law of supply, as the price of a good decreases,
answer
quantity supplied decreases
question
What happens to the supply of canned craft beer if brewers adopt a new technology that allows them to can more craft beer at a lower cost?
answer
supply increases
question
Which of the following events show an increase in supply?
answer
A rightward shift of the supply curve
question
A function that describes the relationship between output and various prices of that output, prices of inputs, and values of other variables is called
answer
the supply function
question
Which of the following will cause a decrease in the supply of "farm-to-fork" vegetables Select all that apply.
a. an increase in government regulations on agriculture
b. a reduction in the number of "farm-to-fork" vegetable producers
c. an increase in the price of fertilizer used on these farms
d. a decrease in the price of "farm-to-fork" vegetables
a. an increase in government regulations on agriculture
b. a reduction in the number of "farm-to-fork" vegetable producers
c. an increase in the price of fertilizer used on these farms
d. a decrease in the price of "farm-to-fork" vegetables
answer
a, b, c
question
The following function, Qxs = f (Px, Pr, W, H), shows that the quantity produced in a market depends on the price of the good, Px, and
a. the value of other variables that affect supply such as taxes.
b. the price of inputs such as labor costs.
c. the price of technologically related goods.
d. the number of buyers in the market.
a. the value of other variables that affect supply such as taxes.
b. the price of inputs such as labor costs.
c. the price of technologically related goods.
d. the number of buyers in the market.
answer
a, b, c
question
Consider the following linear demand function where Py is the price of related goods, M is income, and H is other factors:
Qxd = α0 + αxPx + αyPy + αMM + αHH
According to the law of demand, the value of αx is _____.
Qxd = α0 + αxPx + αyPy + αMM + αHH
According to the law of demand, the value of αx is _____.
answer
negative
question
What is the effect of a decrease in an ad valorem tax?
answer
supply increases
question
The difference between the market price and the amount at which producers are willing and able to sell a good is called _______ surplus.
answer
producer
question
What is the economic condition where there is neither a surplus nor a shortage?
answer
equilibrium
question
Solve for the inverse supply function: Qx5 = 5Px - 200
answer
Px = 40 + 1/5Qx5
question
Consider the following function:
Qxs = 15Px - 300.
Determine the inverse supply function.
Qxs = 15Px - 300.
Determine the inverse supply function.
answer
Px = 20 + 1/15Qx5
question
If the price of a good or service is less than the equilibrium price, a _____ exists. As a result, the price tends to _____.
answer
shortage; rise
question
In the following linear demand function,
Qxd = α0 + αxPx + αyPy + αMM + αHH
where Py is the price of related goods, M is income, and H is other factors, the value of αM is:
a. negative if good X is inferior
positive if X and Y are complements
b. positive if X and Y are complements
c. positive if good X is normal
d. negative if X and Y are substitutes
Qxd = α0 + αxPx + αyPy + αMM + αHH
where Py is the price of related goods, M is income, and H is other factors, the value of αM is:
a. negative if good X is inferior
positive if X and Y are complements
b. positive if X and Y are complements
c. positive if good X is normal
d. negative if X and Y are substitutes
answer
negative if good X is inferior,
positive if good X is normal
positive if good X is normal
question
Graphically, what area represents producer surplus?
answer
The area above the supply curve and below the price.
question
When a surplus exists, there is a tendency for price to _________ in order to equate quantity demanded and quantity supplied.
answer
fall
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