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Exam 5: Using Supply and Demand

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Question 61

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The invention of a machine that increases milk production is discovered. If farmers were to decry the effect of this new technology on the price of milk and lobby government to set the price of milk at the price before the invention, what would be the result?

A) Excess demand for milk
B) Excess supply of milk
C) Neither a shortage nor a surplus of milk
D) A decline in the price of milk

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Question 62

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In the late 1990s "mad cow" disease caused people to buy less beef. It also caused the EU to ban imported British beef and the British government to ban the sale of older cattle. What is the effect of the following on price and quantity of British beef sold worldwide?

A) The price of British beef falls and quantity sold also falls
B) The price of British beef rises and quantity sold falls
C) The price of British beef falls initially, but regains some of its losses; quantity sold initially rises, then falls
D) The price of British beef falls initially, but regains some of its losses; quantity sold falls

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Question 63

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Refer to the graph shown that depicts a third-party payer market for prescription drugs. If the co-payment is $2 per pill, what will be the total market expenditures on prescription drugs?

Which of the following pairs of equations describes the supply and demand curves given in the accompanying demand and supply tables? $\begin{array} { | c | c | c | } \hline \text { Price } & \text { Quantity Supplied } & \text { Quantity Demanded } \\\hline \$ 0 & 0 & 3 \\\hline \$ 1 & 0 & 2 \\\hline \$ 2 & 1 & 1 \\\hline \$ 3 & 2 & 0 \\\hline \$ 4 & 3 & 0 \\\hline \$ 5 & 4 & 0 \\\hline\end{array}$

Trade sanctions imposed on Iraq that limited Iraq's production of oil after the 1990 Gulf War on the oil market are best shown graphically with a price ceiling below equilibrium price.

An increase in quantity and an indeterminate change in price are consistent with a:

When the polio vaccine first became available in the United States, the government controlled the price with an effective price ceiling. Production of the vaccine was not sufficient to fill all orders and the government had to regulate its distribution. Had the vaccine been sold without government intervention, the shortage would have been eliminated by price:

Refer to the following graphs. A recent report indicates that the device known as the right heart catheter used to diagnose heart conditions poses more risks than previously thought. The effect of the report on the market for right heart catheters is best shown by which of the graphs?

More and more devices are being introduced into the market that perform tasks similar to that of PCs, such as tablets and smartphones. At the same time, the price of computer chips to make high-end PCs continues to fall. What is the effect of the events on equilibrium price and quantity of high-end PCs?

Start by drawing a supply and demand equilibrium situation.Using your diagram,demonstrate graphically and explain verbally the impact of an increase in demand on equilibrium price and quantity.What could cause this shift?

An increase in price and an indeterminate change in quantity are consistent with a:

When people heard that there was a shortage of specialty dolls, they wanted even more of them. Because of this effect the pressure on the price of these dolls increased. The price of the dolls remained the same however. Thus, the shortage of these dolls:

Suppose that the market labor supply and labor demand equations are given by Qs = 5W and Qd = 30 - 5W. If a minimum wage is set at $4.00 (W = 4) , then:

Refer to the following graph. Which price will create the greatest shortage?

Refer to the graph shown that depicts a third-party payer market for prescription drugs. What is the cost of this program to the third-party if a $2 co-pay is established?

Refer to the following graph. Which of the following pairs of equations describes the supply and demand curves?

After several years of slow economic growth, world demand for petroleum began to rise rapidly in the 1990s. Much of the increase in demand was met by additional supplies from sources outside OPEC. OPEC during this time was unable to restrain output among members in its effort to lift oil prices. What best describes these events?

Consider a market for fish whose market demand and market supply for fish are specified as Qd = 300 − 2.5P and Qs = − 20 + 1.5P, respectively. The government decides to impose a price floor of $50 per ton. What would be the resulting market distortion?

If the government imposes an excise tax on a good equal to $5 per unit and the demand curve for this good is vertical, the supply of this good will shift:

Refer to the following graph. Demand and supply are initially D and S1, respectively. Which of the following best describes the effect of a $0.50 per pound tariff on Danish hams imported into the United States?