Problem 1
What effect will each of the following have on the demand for small automobiles such as the Mini-Cooper and Fiat \(500 ?\) LO3.2 a. Small automobiles become more fashionable. b. The price of large automobiles rises (with the price of small autos remaining the same). c. Income declines and small autos are an inferior good. d. Consumers anticipate that the price of small autos will greatly come down in the near future. e. The price of gasoline substantially drops.
Problem 2
True or False: \(A\) "change in quantity demanded" is a shift of the entire demand curve to the right or to the left. LO3.2
Problem 3
What effect will each of the following have on the supply of auto tires? \(L O 3.3.\) a. A technological advance in the methods of producing tires. b. A decline in the number of firms in the tire industry. c. An increase in the prices of rubber used in the production of tires. d. The expectation that the equilibrium price of auto tires will be lower in the future than currently. e. A decline in the price of the large tires used for semi trucks and earth- hauling rigs (with no change in the price of auto tires). f. The levying of a per-unit tax on each auto tire sold. g. The granting of a 50 -cent-per-unit subsidy for each auto tire produced.
Problem 4
"In the corn market, demand often exceeds supply and supply sometimes exceeds demand." "The price of corn rises and falls in response to changes in supply and demand." In which of these two statements are the terms "supply" and "demand" used correctly? Explain. LO3.3
Problem 5
Suppose that in the market for computer memory chips, the equilibrium price is \(\$ 50\) per chip. If the current price is \(\$ 55\) per chip, then there will be ________ of memory chips. LO3.4 a. A shortage. b. A surplus. c. An equilibrium quantity. d None of the above.
Problem 7
Label each of the following scenarios with the set of symbols that best indicates the price change and quantity change that occur in the scenario. In some scenarios, it may not be possible from the information given to determine the direction of a particular price change or a particular quantity change. We will symbolize those cases as, respectively, "P?" and "Q?" The four possible combinations of price and quantity changes are: \(L O 3.5.\) $$\begin{array}{ll} \mathrm{P} \downarrow \mathrm{Q} ? & \mathrm{P} ? \mathrm{Q} \downarrow \\ \mathrm{P} \uparrow \mathrm{Q} ? & \mathrm{P} ? \mathrm{Q} \uparrow \end{array}$$. a. On a hot day, both the demand for lemonade and the supply of lemonade increase. b. On a cold day, both the demand for ice cream and the supply of ice cream decrease. c. When Hawaii's Mt. Kilauea erupts violently, the demand on the part of tourists for sightseeing flights increases but the supply of pilots willing to provide these dangerous flights decreases. d. In a hot area of Arizona where they generate a lot of their electricity with wind turbines, the demand for electricity falls on windy days as people switch off their air conditioners and enjoy the breeze. But at the same time, the amount of electricity supplied increases as the wind turbines spin faster.
Problem 8
Suppose the total demand for wheat and the total supply of wheat per month in the Kansas City grain market are as shown in the table below. Suppose that the government establishes a price ceiling of \(\$ 3.70\) for wheat. What might prompt the government to establish this price ceiling? Explain carefully the main effects. Demonstrate your answer graphically. Next, suppose that the government establishes a price floor of S4.60 for wheat. What will be the main effects of this price floor? Demonstrate your answer graphically. LO3.6 $$\begin{aligned} &\\\ &\begin{array}{ccc} \begin{array}{c} \text { Thousands of } \\ \text { Bushels } \\ \text { Demanded } \end{array} & \text { Price per Bushel } & \begin{array}{c} \text { Thousands of } \\ \text { Bushels Supplied } \end{array} \\ \hline 85 & \$ 3.40 & 72 \\ 80 & 3.70 & 73 \\ 75 & 4.00 & 75 \\ 70 & 4.30 & 77 \\ 65 & 4.60 & 79 \\ 60 & 4.90 & 81 \\ \hline \end{array} \end{aligned}$$
Problem 9
A price ceiling will result in a shortage only if the ceiling price is _______ the equilibrium price. LO3.6 a. Less than. b. Equal to. c. Greater than. d. Louder than.
