Question 1

The domestic demand for wheat is QDD = 1000 - 25P, and the export demand is QDE = 500 - 25P. Graph the domestic, export, and total demand curves for wheat.

Accepted Answer

Question 2

Suppose that the demand for artichokes (Qa) is given as:
Qa = 120 - 4P
a. What is the point price elasticity of demand if the price of artichokes is $10?
b. Suppose that the price of artichokes increases to $12. What will happen to the number of artichokes sold and the total expenditure by consumers on artichokes?
c. At what price if any is the demand for artichokes infinitely elastic?

Accepted Answer

a.The inverse of the slope of the demand...

Question 3

The demand for telephone wire can be expressed as:
Q = 6000 - 1,500P,
where Q represents units, in pounds per day, and P represents price, in dollars per pound. Determine the price elasticity of demand at  per pound.

Accepted Answer

We use the point price elastic...

Question 4

When network externalities are present:

Accepted Answer

A)   we can obtain the market demand curve simply by summing individuals' demands.
B)   one person's demand also depends on the demands of other people.
C)   a person's demand cannot be affected by the number of other people who have purchased the good.
D)   the social cost of production is larger than the private cost.

Question 5

When network externalities are present, the market demand for the good in question becomes:

Accepted Answer

A)   less elastic.
B)   more elastic.
C)   unit elastic.
D)   perfectly inelastic. B

Question 6

Through their marketing and advertising efforts, companies try to:

Accepted Answer

A)   minimize the impact of the snob effect.
B)   augment the impact of the snob effect.
C)   increase the elasticity of their demands.
D)   increase price more than quantity sold.

Question 7

The analysis of utility maximization is carried out under the assumption of:

Accepted Answer

A)   increasing marginal utility.
B)   diminishing marginal utility.
C)   diminishing total utility.
D)   a constant rate of marginal utility.

Question 8

The wheat market is perfectly competitive, and the market supply and demand curves are given by the following equations:
QD = 20,000,000 - 4,000,000P
QS = 7,000,000 + 2,500,000P,
where QD and QS are quantity demanded and quantity supplied measured in bushels, and  per bushel.
a. Determine consumer surplus at the equilibrium price and quantity.
b. Assume that the government has imposed a price floor at $2.25 per bushel and agrees to buy any resulting excess supply. How many bushels of wheat will the government be forced to buy? Determine consumer surplus with the price floor.

Accepted Answer

a.The first step is to determine the equ...

Question 9

Assume that beer is an inferior good. If the price of beer falls, then the substitution effect results in the person buying ________ of the good and the income effect results in the person buying ________ of the good.

Accepted Answer

A)   more; more
B)   more; less
C)   less; more
D)   less; less

Question 10

The market supply curve of rubber erasers is given by  The demand for rubber erasers can be segmented into two components. The first component is the demand for rubber erasers by art students. This demand is given by  The second component is the demand for rubber erasers by all others. This demand is given by  Derive the total market demand curve for rubber erasers. Find the equilibrium market price and quantity. Also, determine the consumer surplus for each component of demand.

Accepted Answer

The aggregate market demand is given by ...

Question 11

After a good falls in price, consumers will tend to buy more of the good that has become cheaper and less of those goods that are now relatively more expensive. This fact is called:

Accepted Answer

A)   the income effect.
B)   the substitution effect.
C)   the wealth effect.
D)   the price effect. B

Question 12

In the diagram below, Marvin's optimal consumption bundles are indicated for five different budget constraints. Sketch the Engel curve for Marvin. Next, use the diagram to sketch Marvin's demand curve for the good on the horizontal axis.

Accepted Answer

To construct the Engel curve, the releva...

Question 13

A Giffen good

Accepted Answer

A)   is always the same as an inferior good.
B)   is the special subset of inferior goods in which the substitution effect dominates the income effect.
C)   is the special subset of inferior goods in which the income effect dominates the substitution effect.
D)   must have a downward sloping demand curve.

Question 14

Part of the reason for the success of Facebook is:

Accepted Answer

A)   a strong positive network externality.
B)   a strong negative network externality.
C)   the avoidance of a positive externality.
D)   the avoidance of a negative externality.

Question 15

Figure 4.7.3
-Refer to Figure 4.7.3. According to the Hicksian substitution effect,

Accepted Answer

A)   the decrease in the price of food does not take the consumer to a higher budget line.
B)   without drawing the corresponding indifference curve, it is difficult to tell if the consumer would be equally well off at points A and B.
C)   indifference curves are not required to assert that, in this figure, the consumer is equally well off at points A or B.
D)   the dashed budget line is an improper construct of the traditional substitution effect.

Question 16

Which of the following are examples of situations involving a positive network externality?

Accepted Answer

A)   A social network
B)   The bandwagon effect
C)   Toys and fads
D)   All of the above D

Question 17

If the quantity of a good demanded by a typical consumer increases in response to the growth in purchases of other consumers,

Accepted Answer

A)   a negative network externality is present.
B)   a positive network externality is present.
C)   a network externality is absent.
D)   a network externality can be positive or negative.

Question 18

Some luxury product manufacturers will purposefully raise prices on their goods in order to reduce sales volume. This strategy may successfully increase sales revenue if the luxury goods are subject to the ________ effect and have relatively ________ demand.

Accepted Answer

A)   bandwagon; elastic
B)   bandwagon; inelastic
C)   snob; elastic
D)   snob; inelastic

Question 19

Which of the following is an example of speculative demand?

Accepted Answer

A)   When the actual price of housing increases, the quantity demanded of housing decreases.
B)   When the expected price of housing increases, the demand for housing increases.
C)   When the price of home ownership increases, the demand for rental housing increases.
D)   When the demand for housing increases, the demand for house insurance increases.

Question 20

You have just won a cash award of $500 for academic excellence.

Accepted Answer

A)   The substitution effect of this award will be larger than its income effect.
B)   The income effect of this award will be larger than its substitution effect.
C)   The substitution and income effects will be of identical size.
D)   It is impossible to know whether the substitution effect is larger than the income effect or vice versa.

Exam 4: Individual and Market Demand

The domestic demand for wheat is Q_DD = 1000 - 25P, and the export demand is Q_DE = 500 - 25P. Graph the domestic, export, and total demand curves for wheat.

Correct Answer
verified

Correct Answer
verified
a.The inverse of the slope of the demand...
View Answer

The demand for telephone wire can be expressed as: Q = 6000 - 1,500P, where Q represents units, in pounds per day, and P represents price, in dollars per pound. Determine the price elasticity of demand at per pound.

Correct Answer
verified
We use the point price elastic...
View Answer

When network externalities are present:

Correct Answer
verified

When network externalities are present, the market demand for the good in question becomes:

Correct Answer
verified
B

Through their marketing and advertising efforts, companies try to:

Correct Answer
verified

The analysis of utility maximization is carried out under the assumption of:

Correct Answer
verified

Correct Answer
verified
a.The first step is to determine the equ...
View Answer

Assume that beer is an inferior good. If the price of beer falls, then the substitution effect results in the person buying of the good and the income effect results in the person buying of the good.

Correct Answer
verified

Correct Answer
verified
The aggregate market demand is given by ...
View Answer

After a good falls in price, consumers will tend to buy more of the good that has become cheaper and less of those goods that are now relatively more expensive. This fact is called:

Correct Answer
verified
B

In the diagram below, Marvin's optimal consumption bundles are indicated for five different budget constraints. Sketch the Engel curve for Marvin. Next, use the diagram to sketch Marvin's demand curve for the good on the horizontal axis.

Correct Answer
verified
To construct the Engel curve, the releva...
View Answer

A Giffen good

Correct Answer
verified

Part of the reason for the success of Facebook is:

Correct Answer
verified

Figure 4.7.3 -Refer to Figure 4.7.3. According to the Hicksian substitution effect,

Correct Answer
verified

Which of the following are examples of situations involving a positive network externality?

Correct Answer
verified
D

If the quantity of a good demanded by a typical consumer increases in response to the growth in purchases of other consumers,

Correct Answer
verified

Some luxury product manufacturers will purposefully raise prices on their goods in order to reduce sales volume. This strategy may successfully increase sales revenue if the luxury goods are subject to the effect and have relatively demand.

Correct Answer
verified

Which of the following is an example of speculative demand?

Correct Answer
verified

You have just won a cash award of $500 for academic excellence.

Correct Answer
verified

Exam 4: Individual and Market Demand

The domestic demand for wheat is QDD = 1000 - 25P, and the export demand is QDE = 500 - 25P. Graph the domestic, export, and total demand curves for wheat.

Correct AnswerverifiedShow Answer

Correct Answerverifieda.The inverse of the slope of the demand...View AnswerShow Answer

The demand for telephone wire can be expressed as: Q = 6000 - 1,500P, where Q represents units, in pounds per day, and P represents price, in dollars per pound. Determine the price elasticity of demand at per pound.

Correct AnswerverifiedWe use the point price elastic...View AnswerShow Answer

When network externalities are present:

Correct AnswerverifiedShow Answer

When network externalities are present, the market demand for the good in question becomes:

Correct AnswerverifiedB

Through their marketing and advertising efforts, companies try to:

Correct AnswerverifiedShow Answer

The analysis of utility maximization is carried out under the assumption of:

Correct AnswerverifiedShow Answer

Correct Answerverifieda.The first step is to determine the equ...View AnswerShow Answer

Assume that beer is an inferior good. If the price of beer falls, then the substitution effect results in the person buying ________ of the good and the income effect results in the person buying ________ of the good.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedThe aggregate market demand is given by ...View AnswerShow Answer

After a good falls in price, consumers will tend to buy more of the good that has become cheaper and less of those goods that are now relatively more expensive. This fact is called:

Correct AnswerverifiedB

In the diagram below, Marvin's optimal consumption bundles are indicated for five different budget constraints. Sketch the Engel curve for Marvin. Next, use the diagram to sketch Marvin's demand curve for the good on the horizontal axis.

Correct AnswerverifiedTo construct the Engel curve, the releva...View AnswerShow Answer

A Giffen good

Correct AnswerverifiedShow Answer

Part of the reason for the success of Facebook is:

Correct AnswerverifiedShow Answer

Figure 4.7.3 -Refer to Figure 4.7.3. According to the Hicksian substitution effect,

Correct AnswerverifiedShow Answer

Which of the following are examples of situations involving a positive network externality?

Correct AnswerverifiedD

If the quantity of a good demanded by a typical consumer increases in response to the growth in purchases of other consumers,

Correct AnswerverifiedShow Answer

Some luxury product manufacturers will purposefully raise prices on their goods in order to reduce sales volume. This strategy may successfully increase sales revenue if the luxury goods are subject to the ________ effect and have relatively ________ demand.

Correct AnswerverifiedShow Answer

Which of the following is an example of speculative demand?

Correct AnswerverifiedShow Answer

You have just won a cash award of $500 for academic excellence.

Correct AnswerverifiedShow Answer

The domestic demand for wheat is Q_DD = 1000 - 25P, and the export demand is Q_DE = 500 - 25P. Graph the domestic, export, and total demand curves for wheat.

Correct Answer
verified

Correct Answer
verified
a.The inverse of the slope of the demand...
View Answer

Correct Answer
verified
We use the point price elastic...
View Answer

Correct Answer
verified

Correct Answer
verified
B

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
a.The first step is to determine the equ...
View Answer

Assume that beer is an inferior good. If the price of beer falls, then the substitution effect results in the person buying of the good and the income effect results in the person buying of the good.

Correct Answer
verified

Correct Answer
verified
The aggregate market demand is given by ...
View Answer

Correct Answer
verified
B

Correct Answer
verified
To construct the Engel curve, the releva...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
D

Correct Answer
verified

Some luxury product manufacturers will purposefully raise prices on their goods in order to reduce sales volume. This strategy may successfully increase sales revenue if the luxury goods are subject to the effect and have relatively demand.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified