Demand:
Qd=900 –60P
Supply:
Qs= – 200 +50P
If the price is currently $11, there is a
a. surplus of 110 units.
b. shortage of 240 units.
c. surplus of 350 units.
d. shortage of 700 units.
2-32 Use the following demand and supply functions:
Demand:
Qd=900 –60P
Supply:
Qs= – 200 +50P
Let supply remain constant; an increase in income causes consumers to be willing and able to buy
220 more units at each price than they were previously. The new equilibrium price and quantity
are
a. P = $10 and Q = 520.
b. P = $12 and Q = 400.
c. P = $10 and Q = 80.
d. P = $15 and Q = 600.
2-33 A “puppy boom” and an increase in the price of horse meat would cause the market price of dog
food to
a. rise, fall, or remain unchanged depending on the magnitude of the changes, and the
market output to rise.
b. rise and the market output to rise, fall, or remain unchanged depending on the magnitude
of the changes.
c. rise and the market output to rise .
d. fall and the market output to rise, fall, or remain unchanged depending on the magnitude
of the changes.
2-34 With a given supply curve, a decrease in demand leads to
a. a decrease in equilibrium price and an increase in equilibrium quantity.
b. an increase in equilibrium price and a decrease in equilibrium quantity.
c. a decrease in equilibrium price and a decrease in equilibrium quantity.
d. no change in price and a decrease in equilibrium quantity.
2-35 Suppose that more people want Orange Bowl tickets than the number of tickets available. Which
of the following statements is correct?
a. There is a shortage of Orange Bowl tickets at the box office price.
b. The box office price is higher than the equilibrium price for Orange Bowl tickets.
c. If the box office price were raised, the excess demand for Orange Bowl tickets would
decrease.
d. both a and c
e. all of the above
2-36 Use the following general linear demand relation:
Qd=100 –5P+0.004M–5P
R
where P is the price of good X, M is income, and
P
R
is the price of a related good, R. What is the
demand function when M = $50,000 and
P
R
= $10?
a.
Qd=350 –5P
b
Qd=300 –5P
c.
Qd=200 –5P
d.
Qd=100 –5P
e. none of the above
2-37 Use the following general linear demand relation:
Qd=100 –5P+0.004M–5P
R
where P is the price of good X, M is income, and
P
R
is the price of a related good, R. From the
demand function it is apparent that related good R is
a. normal.
b. inferior.
c. a substitute for good X .
d. a complement for good X.
2-38 Use the following general linear demand relation:
Qd=100 –5P+0.004M–5P
R
where P is the price of good X, M is income, and
P
R
is the price of a related good, R. If M =
$50,000 and
P
R
= $10 and the supply function is
Qs=150 +5P
, market price and output are,
respectively,
a. P = $12 and Q = 150.
b. P = $10 and Q = 200.
c. P = $12 and Q = 200.
d. P = $15 and Q = 175.
e. P = $15 and Q = 225.
2-39 Use the following general linear demand relation:
Qd=100 –5P+0.004M–5P
R
where P is the price of good X, M is income, and
P
R
is the price of a related good, R. If income
increases to $100,000 and the price of the related good is now $20, what is the demand function?
a.
Qd=300 –5P
b.
Qd=400 –10P
c.
Qd=100 –10P
d.
Qd=400 –5P
e. none of the above
2-40 Use the following general linear demand relation:
Qd=100 –5P+0.004M–5P
R
where P is the price of good X, M is income, and
P
R
is the price of a related good, R. Income is
$100,000, the price of the related good is $20, and the supply function is Qs = 150 + 5P. What is
the equilibrium price?
a. $30
b. $25
c. $40
d. $35
e. $50
2-41 Use the following general linear demand relation:
Qd=100 –5P+0.004M–5P
R
where P is the price of good X, M is income, and
P
R
is the price of a related good, R. Income is
$80,000, and the price of the related good is $40. Also let consumers’ tastes change so that
consumers now demand 100 more units at each price. When the price of the good is $50, how
many units of the good are demanded?
a. 70
b. 200
c. 220
d. 100
e. none of the above
2-42 If a demand curve goes through the point P = $6 and
Qd
= 400, then
a. $6 is the highest price consumers will pay for 400 units.
b. $6 is the lowest price consumers can be charged to induce them to buy 400 units.
c. 400 units are the most consumers will buy if price is $6.
d. consumers will buy more than 400 if price is $6.
e. both a and c
2-43 If a supply curve goes through the point P = $10 and
Qs
= 320, then
a. $10 is the highest price that will induce firms to supply 320 units.
b. $10 is the lowest price that will induce firms to supply 320 units.
c. at a price higher than $10 there will be a surplus.
d. at a price lower than $10 there will be a shortage.
e. both c and d
2-44 Use the following general linear supply function:
where
Qs
is the quantity supplied of the good, P is the price of the good,
P
I
is the price of an
input, and F is the number of firms producing the good. If
P
I
= $20 and F = 60 what is the
equation of the supply function?
a.
Qs=400 +6P
b.
Qs=40 +8P
c.
P=480 +6Qs
d.
Qs=480 +6P
e. none of the above
2-45 Use the following general linear supply function:
where
Qs
is the quantity supplied of the good, P is the price of the good,
P
I
is the price of an
input, and F is the number of firms producing the good. If
P
I
= $20, F = 60, and the demand
function is
Qd=600 –6P
the equilibrium price and quantity are, respectively,
a. P = $10 and Q = 640.
b. P = $8 and Q = 326.
c. P = $10 and Q = 540.
d. P = $8 and Q = 640.
e. none of the above.
2-46 Use the following general linear supply function:
where
Qs
is the quantity supplied of the good, P is the price of the good,
P
I
is the price of an
input, and F is the number of firms producing the good. Now suppose
P
I
= $40 and F = 50, what
is the largest amount of the good that firms will supply when the price of the good is $20?
a. 340 units
b. 220 units
c. 120 units
d. 80 units
2-47 Use the following general linear supply function:
where
Qs
is the quantity supplied of the good, P is the price of the good,
P
I
is the price of an
input, and F is the number of firms producing the good. When
P
I
= $40 and F = 50, the
INVERSE supply function is
a. P = –36.667 + 0.1667Qs.
b. P = –220 + 6Qs.
c. P = 220 + 0.1667Qs.
d. P = 220 + 6Qs.
2-48 Use the following general linear supply function:
where
Qs
is the quantity supplied of the good, P is the price of the good,
P
I
is the price of an
input, and F is the number of firms producing the good. Suppose
P
I
= $40 and F = 50, what is
the lowest price that will induce firms to supply 400 units of output?
a. $15
b. $20
c. $25
d. $30
e. $35
2-49 Use the following general linear supply function:
where
Qs
is the quantity supplied of the good, P is the price of the good,
P
I
is the price of an
input, and F is the number of firms producing the good. Suppose
P
I
= $40, F = 50, and the
demand function is
Qd=700 –6P
, then if government sets a price of $50 what will be the result?
a. a shortage of 120
b. a surplus of 120
c. a shortage of 160
d. a surplus of 160
2-50 Use the following general linear supply function:
where
Qs
is the quantity supplied of the good, P is the price of the good,
P
I
is the price of an
input, and F is the number of firms producing the good. Suppose
P
I
= $40, F = 50, and the
demand function is
Qd=700 –6P
, then if government sets a price of $30 what will be the result?
a. a shortage of 120
b. a surplus of 120
c. a shortage of 160
d. a surplus of 160
2-51 Use the following general linear demand function below:
Qd=a+bP +cM +dP
R
where Qd = quantity demanded, P = the price of the good, M = income,
P
R
= the price of a good
related in consumption. The law of demand requires that
a. a < 0.
b. b < 0.
c. P < 0.
d. a < 0 and b < 0.
e. b < 0 and P < 0.
2-52 Use the following general linear demand function below:
Qd=a+bP +cM +dP
R
where Qd = quantity demanded, P = the price of the good, M = income,
P
R
= the price of a good
related in consumption. If c = 15 and d = 20, the good is
a. a normal good.
b. an inferior good.
c. a substitute for good R.
d. a complement with good R.
e. both a and c
2-53 Use the following general linear demand function below:
Qd=a+bP +cM +dP
R
where Qd = quantity demanded, P = the price of the good, M = income,
P
R
= the price of a good
related in consumption. For the general linear demand function given above
a.
DQdDM=c.
b. d is the effect on the quantity demanded of the good of a one-dollar change in the price of
the related good, all other things constant.
c. b is the effect on the quantity demanded of the good of a one-dollar change in the price of
the good, all other things constant.
d. all of the above
2-54 If the current price of a good is $10, market demand is
Qd=400 –20P
, and market supply is
Qs= – 50 +10P
, then
a. more of the good is being produced than people want to buy.
b. a lower price will increase the shortage.
c. at the current price there is excess demand, or a shortage, of 150 units.
d. Both b and c
e. All of the above
2-55 Yesterday’s newspaper reported the results of a study indicating that people who eat more
bananas are more attractive to the opposite sex. What do you expect to happen to the market price
and quantity of bananas?
a. price will decrease, quantity will decrease
b. price will decrease, quantity will increase
c. price will increase, quantity will decrease
2-56 If the market price of eggs rises at the same time as the market quantity of eggs purchased
decreases, this could have been caused by
a. an increase in demand with no change in supply.
b. a decrease in supply with no change in demand.
c. an increase in supply and an increase in demand.
d. an increase in supply and a decrease in demand.
2-57 Derrick owns and operates a bakery. Every Saturday he bakes a batch of fresh kolaches, and
every Saturday he sells all the kolaches and has to turn some customers away. Which of the
following statements is correct?
a. At the current price, quantity demanded exceeds quantity supplied.
b. The current price is higher than the equilibrium price.
c. If Derrick lowered the price of kolaches, the shortage would increase.
d. both a and c
e. all of the above
2-58 In which of the following cases must price always fall?
a. Demand increases and supply increases.
b. Demand decreases and supply decreases.
c. Supply increases and demand remains constant.
d. Demand decreases and supply increases.
e. Both c and d
2-59 Consumer surplus
a. is positive for all but the last unit purchased.
b. for a particular unit of consumption is computed by taking the difference between
demand price and market price.
c. is the area below demand and above market price over all the units consumed.
d. added to producer surplus provides a measure of the net gain to society from the
production and consumption of the good.
e. all of the above
2-60 If the demand price for the 2,000th unit of a good is $10, then
a. total consumer surplus for 2,000 units is $10,000.
b. the economic value of the 2,000th unit is $10.
c. consumer surplus for the 2,000th unit can be computed by subtracting the supply price for
the 2,000th unit.
d. the net gain to society from the production and consumption of the 2,000th unit can be
computed by subtracting the supply price from $10.
e. Both b and d
2-61 Suppose an individual buyer values a pound of butter at $10. If the market price of butter is $8,
what is the consumer surplus for this buyer?
a. $0
b. $2
c. $3
d. $4
e. $5
2-62 If the market price of a good is $150 and the supply price of the good is $70, what is the producer
surplus if any?
a. $0
b. $70
c. $80
d. $150
e. $220
2-63 Suppose the demand and supply curves for good X are both linear. The demand price for the first
unit of X is $28, and the supply price for the first unit of X is $6. If the equilibrium price for good
X is $16 and the equilibrium quantity of X is 24,000 units, then total consumer surplus is
$________, total producer surplus is $_________, and total social surplus is $_____________.
a. $28; $6; $16
b. $144,000; $120,000; $264,000
c. $120,000; $144,000; $264,000
d. $672,000; $144,000; $384,000
e. $144,000; $672,000; $384,000
2-64 Suppose there are only three consumers in the market for a good and each consumer will buy
only one unit of the good. Their individual economic values for the good are $6, $8, and $12,
respectively. If the market price for the good is $10, what is the total consumer surplus for the
three buyers?
a. $2
b. $4
c. $6
d. $8
e. $12