ECO 6005
Module 2 Homework Exercise
DUE: Wednesday, May 31 at 11:59 pm. Multiple Choice/True-False (45 points)
1. Which one of the following will NOT cause an increase in the demand for Whirlpool dishwashers?
a. A decline in home mortgage interest rates.
b. An increase in real disposable income.
c. General Electric raises the price of its dishwashers.
d. Introduction of new semiconductors reduces the average cost per unit of producing dishwashers.
2. The quantity supplied of coffee beans decreases when
a. average annual rainfall decreases due to a drought in Central and South America.
b. the price of coffee beans falls.
c. the price of tea rises.
d. a labor union for coffee bean pickers forms and wages rise.
3. When the Super Bowl was played in New Orleans, some fans complained that there were not enough
hotel rooms. We can conclude that
a. the game should have been played in a bigger city like Tampa.
b. the market for hotel rooms was in equilibrium.
c. the New Orleans city council should have done a study so that the hotel industry would have
constructed more hotel rooms.
d. the price of hotel rooms in New Orleans failed to rise to the market-clearing price.
4. The supply of coffee beans decreases when
a. average annual rainfall increase and improves growing conditions in Central and South America.
b. the price of tea falls.
c. the price of tea rises.
d. a labor union for coffee bean pickers negotiates higher wages.
5. Which of the following statements does NOT correctly describe market equilibrium?
a. Consumers can buy all of the good they wish at the market price.
b. Producers can sell all of the good they wish at the market price.
c. Neither a surplus nor a shortage exists.
d. Consumers and producers are happy with the price level that establishes equilibrium.
6.
a.
b.
c.
d.
e. When does equilibrium price always rise?
Demand increases and supply remains constant.
Supply decreases and demand remains constant.
Supply increases and demand remains constant.
Both a and b.
Both a and c. a.
b.
c.
d.
e. When does equilibrium quantity always rise?
Demand increases and supply remains constant.
Demand decreases and supply remains constant.
Supply decreases and demand remains constant.
Supply increases and demand remains constant.
Both a and d. 7. 1 Use the figure below to answer questions 8 and 9. 8.
a.
b.
c.
d.
e. If government regulators set a floor of $5 on the price of beef, then
a shortage of hamburger will occur.
there will be a surplus of 50 tons of hamburger.
there will be a surplus of 100 tons of hamburger.
consumers will purchase 250 tons of hamburger at a price of $5.
both b and d a.
b.
c.
d.
e. If government regulators set a floor of $3 on the price of beef, then
there will be a surplus of 75 tons of hamburger.
quantity supplied will exceed quantity demanded.
there will be a shortage of 145 tons of hamburger.
producers will supply 250 tons of hamburger at a price of $3.
both b and d. 9. Use the following supply and demand functions to answer Questions 10:
Qd 75 3P
Qs 20 6.5P 10. What are equilibrium price and quantity? 2 a.
b.
c.
d. P
P
P
P = $10 and
= $20 and
= $25 and
= $30 and Q
Q
Q
Q = 45 = 50
= 40
= 40 11. T F A decrease in supply of gasoline will cause a shortage of gasoline. 12. T F When demand increases, supply constant, equilibrium output falls. 13. T F A rise in the price of aluminum will cause an increase in the demand for steel and plastic. 14. T F Surpluses typically arise when there is a decrease in demand for a product. 15. T F When government regulators resist the urge to impose price floors or price ceilings,
markets will adjust so that prices are at the market-clearing level and there will be no
shortages or surpluses. Fill-in-the-Blank (40 points)
1. What happens to the demand for Sony televisions when each of the following changes occurs? (Answer
“increases”, “decreases”, or “no change”)
_____________ a. The price of Samsung televisions rises.
_____________ b. The price of a Sony television rises.
_____________ c. Personal income falls (televisions are normal goods).
_____________ d. Technological advances result in dramatic price reductions for digital video
recorders (DVRs).
_____________ e. Congress is persuaded to impose tariffs on Japanese televisions starting next
year.
2. What happens to the supply of random access memory (RAM) chips, a component in the manufacture
of personal computers, when each of the following changes occurs? (Answer “increases”, “decreases”,
or “no change”)
_____________ a. Two huge new manufacturing plants begin operation in South Korea.
_____________ b. Scientists discover a new production technology that will lower the cost of
making RAM chips.
_____________ c. The price of silicon, a key ingredient in production of RAM chips, rises sharply.
_____________ d. The price of RAM chips increases.
_____________ e. The market for personal computers turns sour and RAM chip makers now expect
RAM chip prices to fall by 25 percent next quarter.
3. Suppose the quantity demanded of good X (Qd) depends only on the price of good X (P), monthly
income (M), and the price of a related good R (PR):
3 Qd 200 10P 0.2M 10PR
a. On the axes below, sketch the (direct) demand curve for the good when M = $1,000
and PR = $5. Label this demand “D”. The equation for demand is
Qd = _______________________________________________. P
6 .0 0 P r i c e ( d o ll a r s ) 5 .0 0
4 .0 0
3 .0 0
2 .0 0
1 .0 0
Q
0 10 20 30 40 50 60 Q u a n ti ty b.
c. d. Is related good R a substitute or complement for good X?
Let income decrease to $950. Construct the new demand curve in the graph above.
Label the new demand D’. Good X is a(n) _________________ good because demand for X
shifted to the ____________ when income fell.
For the demand curve D’ in part c, derive the equation for the inverse demand function:
_____________________________ e. Suppose supply is Qs 10 10P . Sketch the supply curve on the above axes. For the original demand curve D in part a, find the equilibrium price and quantity.
PE = ________ and QE = __________ Short Answer (15 points) Please answer using reasonably decent grammar and spelling. Avoid using phrases or
“bullets”. Type or write neatly to speed up my grading.
1. The price of silicon wafers falls sharply. Silicon wafers are used to manufacture RAM chips. Using demand
and supply analysis (i.e., draw a graph and label all curves and axes) predict what is likely to happen to the
equilibrium price of RAM chips and the equilibrium quantity of RAM chips.
2. “California is experiencing a long-term water shortage because there is just not enough rain.” Evaluate this
statement using demand and supply reasoning. Be sure to draw a graph. Keep your answer reasonably short
4 and to the point. (HINT: If your answer involves either President Bush or Arnold Schwarzenegger, then you
are on the wrong track.) 5 ANSWER SHEET: Module 2 Homework Exercise
Name: _______________________________________________________
DUE: Wednesday, May 31 at 11:59 pm. Save as a .pdf or .docx and submit your Answer Sheet through
Canvas. Please submit only ONE document (i.e., paste any figures/artwork into your .docx/.pdf file.) Multiple Choice (45 points total)
1. _____
6. _____ 11. _____ 2. _____ 7. _____ 12. _____ 3. _____ 8. _____ 13. _____ 4. _____ 9. _____ 14. _____ 5. _____ 10. _____ 15. _____ Fill-in-the-Blank (40 points total)
1. 3. a. ________________ b. 2. a. ________________ ________________ b. ________________ c. ________________ c. ________________ d. ________________ d. ________________ e. ________________ e. ________________ a. Qd = _______________________________________________. b. __________________________ c. _________________________; __________________________ d. ______________________________________ e. PE = ________; QE = __________ 6 P
6 .0 0 P r i c e ( d o ll a r s ) 5 .0 0
4 .0 0
3 .0 0
2 .0 0
1 .0 0
Q
0 10 20 30 40 50 60 Q u a n ti ty Short Answer (15 points total)
1. 2. 7

• 1496644805-2017 HE MODULE 2.docx

SuperTutor

(15)

Status NEW Posted 05 Jun 2017 06:06 AM My Price 20.00

-----------

Attachments

file 1496644806-Solutions file.docx preview (51 words )

S-----------olu-----------tio-----------ns -----------fil-----------e -----------Hel-----------lo -----------Sir-----------/Ma-----------dam----------- T-----------han-----------k y-----------ou -----------for----------- yo-----------ur -----------int-----------ere-----------st -----------and----------- bu-----------yin-----------g m-----------y p-----------ost-----------ed -----------sol-----------uti-----------on.----------- Pl-----------eas-----------e p-----------ing----------- me----------- on----------- ch-----------at -----------I a-----------m o-----------nli-----------ne -----------or -----------inb-----------ox -----------me -----------a m-----------ess-----------age----------- I -----------wil-----------l b-----------e q-----------uic-----------kly----------- on-----------lin-----------e a-----------nd -----------giv-----------e y-----------ou -----------exa-----------ct -----------fil-----------e a-----------nd -----------the----------- sa-----------me -----------fil-----------e i-----------s a-----------lso----------- se-----------nt -----------to -----------you-----------r e-----------mai-----------l t-----------hat----------- is----------- re-----------gis-----------ter-----------ed -----------on�-----------�th-----------is -----------web-----------sit-----------e -----------Tha-----------nk -----------you----------- -----------

Not Rated(0)

• Buy Answer