Exam 3: Where Prices Come From: the Interaction of Demand and Supply

In each of the following situations,list what will happen to the equilibrium price and the equilibrium quantity for a particular product,which is a normal good. a.The population increases and the price of inputs increase. b.The price of a complement increases and technology advances. c.The number of firms in the market increases and income increases. d.Price is expected to increase in the future. e.Consumer preference increases and the price of a substitute in production decreases.

Most film processing companies have a policy of printing every picture on a roll of film and allowing customers to request a refund for pictures that were not clearly developed.The companies do this knowing that most customers do not ask for refunds.This is an example of consumers

When deciding on which new products to develop,a firm must devote people,time and money to designing a new product.Because any firm has only limited resources,it

An increase in the number of firms in a market will cause the quantity of a good supplied to increase.

Which of the following would shift the supply curve for MP3 players to the right?

All else being equal,the decrease in consumer preference predicted by Apple for its iPhone 5 would be represented by a

Harvey Rabbitt pays for monthly cable TV service.Last week the cable company informed Harvey that his monthly cable price would go down because the city council has granted approval for three new cable companies to service his area.How is the market for cable TV services affected by this?

A shortage occurs when the market price is lower than the equilibrium price.

In June,buyers of titanium expect that the price of titanium will fall in July.What happens in the titanium market in June,holding everything else constant?

Select the phrase that correctly completes the following statement.'An increase in input prices caused a decrease in the supply of baseballs; as a result,________.'

Arnold Kim began blogging about Apple products during his fourth year of medical school.Kim's website,MacRumors.com,became so successful that he decided to give up his medical career and work full time on his website,despite the nearly $200 000 he had invested in his education.In making his decision,Kim decided to ignore the money and time he spent on his education.Economists would say that Kim made a

If the price of petrol decreases,what will be the impact in the market for public transportation?

The market for smart phones has grown rapidly over the past few years,due in part to the overwhelming success of the Apple iPhone.Following the successful launch of the iPhone in 2007,companies such as Samsung,HTC and LG have all introduced products to compete with the iPhone.The smart phones introduced to compete with the iPhone would be considered

Figure 3-4 -Refer to Figure 3-4.If the price is $15,

Wilbur Smith,a financial advisor,recently told one of his clients: 'The biggest mistake you can make is to hold onto shares for too long in order to avoid a loss.Let's say you bought a share for $50 per share but that six months later the price fell to $40 after a poor earnings report.Many of my clients in this situation will keep the shares,hoping the price will later rise above $50.In most cases like this the price does not rise and may even fall.You must know when to cut your losses.' Which of the following is the best explanation for Smith's advice?

Some online penny auctions charge a fee,such as $1,for every bid placed.Why should these costs of $1 per bid be considered sunk costs? Would it be smart for someone who has 'already invested $5 in bidding costs' to keep bidding to 'protect his or her sunk investments'? Why or why not?

A decrease in the demand for soft drinks due to changes in consumer tastes,accompanied by an increase in the supply of soft drinks as a result of reductions in input prices,will result in

Behavioural economics refers to the study of situations

Suppose that when the price of hamburgers decreases,the Ruiz family increases their purchases of ketchup.To the Ruiz family,

A normal good is a good for which the demand increases as income decreases,holding everything else constant.