Exam 4: Equilibrium

Suppose that a market is characterized as follows: consumers are willing and able to purchase 100 units and sellers are willing and able to sell 70 units. Which of the following statements are true?

When a shortage occurs, the market price increases.

In markets for manufactured goods, a new form of 3-D printing that lowers production costs will lead to:

If the demand increases, what happens with the supply curve?

The equilibrium price will increase if demand and supply both increase by equal amounts.

Use the following to answer questions: Figure: Price and Quantity 2 -(Figure: Price and Quantity 2) At a cost of $20 per unit in the diagram, the value of the unexploited gains from trade is represented by areas:

In Vernon Smith's supply and demand lab experiment:

When demand increases there is a ______ at the old equilibrium price, which puts ______ pressure on price until the market reaches the new equilibrium.

A market can be described by the equations Q_d = 100 - P and Q_s = -20 + P. At a price of $40, will this market experience a shortage or a surplus and what is the amount of this shortage or surplus?

Use the following to answer questions: Figure: Demand, Supply Shifts -(Figure: Demand, Supply Shifts) In the figure, the initial demand curve is D₁ and the initial supply curve is S₁. Suppose this depicts the market for corn. How does the market change when flooding in Iowa destroys a significant amount of the corn crop.

Before his pioneering experiments on market equilibrium, Vernon Smith believed that the market equilibrium concept:

The growing economies of China and India have increased the demand for:

When there is a shortage, sellers have an incentive to ______ their price and buyers have an incentive to offer a ______ price.

When you move along a demand curve:

Consumers who traded in a used car for a new vehicle under the Cash-for-Clunkers program received a voucher worth up to $4,500 to offset the price of the consumer's new vehicle. What effect did that program's requirement to destroy all trade-in cars have on the market for used cars?

When the price of a good increases, demand for the good will:

Use the following to answer questions: Figure: Demand, Supply Shifts -(Figure: Demand, Supply Shifts) In the figure, the initial demand curve is D₁ and the initial supply curve is S₁. If technological innovations lower the costs of production, what will happen?

If a frost destroys half of the orange crop in Florida, the equilibrium price of oranges will rise.

A decrease in demand for a good will lead to a decrease in the price of the good, but an increase in the quantity supplied.

For most of human history, salt was a rare and valuable commodity that had to be either mined or extracted from the ocean through evaporation. This changed when modern chemistry allowed humans to produce it in factories. How did this development affect the market for salt?