Exam 4: Equilibrium

Brazilian rosewood is renowned for its tonal qualities and gorgeous figuring on acoustic guitars. However, Brazilian rosewood is now banned from use in the construction of new guitars. What will likely happen to the price of used Brazilian rosewood guitars over time?

If the equilibrium price is achieved, all willing demanders become buyers.

The equilibrium price is:

A free market can be described by the equations Q_d = 180 - 3P and Q_s = -50 + 2P. What are the equilibrium conditions in this market (i.e., find equilibrium P and Q) and what are the maximum gains from trade in this market?

There is a positive relationship between price and quantity demanded.

If equilibrium price increases while equilibrium quantity decreases, then we know that:

If supply increases, ceteris paribus, the quantity exchanged will be ______ at the new market equilibrium point.

An increase in supply raises the equilibrium price and increases the equilibrium quantity.

Use the following to answer questions: Figure: Gains from Trade -(Figure: Gains from Trade) Refer to the figure. What are the unexploited gains from trade at the free market equilibrium?

War in the Middle East tends to cause a decrease in the world supply of oil.

Use the following to answer questions: Figure: Basic Supply and Demand -(Figure: Basic Supply and Demand) In the diagram, if the market price is $2, then there is a:

Use the following to answer questions: Figure: Market Changes -The U.S. government limits the importation of Chinese-made bras. What effect does this trade restriction have on the market for bras?

It costs suppliers $1 to produce each additional widget, and widgets sell for $2. Some consumers are not willing to pay $2 for a widget but are nevertheless willing to pay more than $1. Which of the following statements is TRUE?

An increase in the price of a good will decrease DEMAND for that good.

The Arab Oil Embargo of 1973, the Iranian Revolution of 1979, and the Gulf War of 1991 all affected oil prices by:

A market can be described by the equations Q_d = 60 - 6P and Q_s = 4P. Calculate the equilibrium price and quantity in this market.

A market can be described by the equations Q_d = 100 - P and Q_s = P. What are the equilibrium price and quantity in this market?

A market can be described by the equations Q_d = 100 - P and Q_s = -20 + P. Calculate the equilibrium price and quantity in this market.

In a free market setting where quantity supplied is 40 units and quantity demanded is 50 units, price will:

A free market achieves an equilibrium price and quantity due to: