ECON 300 EXAM 1 WITH ALL CORRECT & 100%
VERIFIED ANSWERS|LATEST UPDATE|ALREADY GRADED
A+
What would NOT cause the demand for coke to shift? ✔Correct Answer-The cost of producing coke
increases
What would cause the supply curve to shift to the left? ✔Correct Answer-An increase in the cost of
raw materials
If price of beef decreases, then what will happen to the demand for chicken? ✔Correct Answer-
Decrease
(because they are substitutes)
If price of gas decreases, then what will happen to the demand for cars? ✔Correct Answer-
Increase
(because they are complements)
If the price of gas increases, then what will happen to the demand for cars? ✔Correct Answer-
Decrease
(because they are complements)
Hot weather causes the demand curve for ice cream to shift to the right. Why will prices rise to a
new market-clearing level? ✔Correct Answer--Shift demand curve to the right
-Initially creating a shortage
-Price rises to where Qs equals Qd
What would NOT occur if the market price was above the market-clearing price? ✔Correct Answer-
Consumers would bid up the price
(this would NOT happen)
Things that happen if the market price is above market-clearing price: ✔Correct Answer-1.
Producers lower their prices to sell off excess inventory
2. Producers want to produce and sell more than consumers want to buy
3. There is a surplus
A price and quantity consumed both increased from one year to the next. What probably happened?
✔Correct Answer-Demand increased and supply remained constant
***What factors determine the size of a shortage?
The extend of the excess demand implied by the shortages will depend on: ✔Correct Answer-The
elasticities of supply and demand, where the shortages will be larger is both supply and demand are
more elastic
If the prices of beef and chicken are set below market-clearing levels, what will happen to the price
of pork? ✔Correct Answer-Increase
(because they are substitutes)
Since beef and chicken are below market-clearing price, demand will increase resulting in a shortage.
Therefore, the price of pork will go up because it is a substitute (and people will be able to find it
when there is a shortage of the other two meats)
, ***If demand is perfectly inelastic, what happens to price controls? ✔Correct Answer-Not change
the quantity demanded
***If the government placed a price ceiling on milk that is substantially below the equilibrium price,
what would happen? ✔Correct Answer-Shortage of milk
***If the government placed a price floor on sugar that is substantially below the equilibrium price,
what would happen? ✔Correct Answer-Surplus of sugar
The long-run price elasticity of supply is typically larger because ✔Correct Answer-In the short run,
some firms may be constrained by their productive capacity
In most industries, supply is ____ ____ in the short run than in the long run. ✔Correct Answer-Less
elastic
Short run = more or less elastic? ✔Correct Answer-LESS
(Remember: short run = i)
Long run = more or less elastic? ✔Correct Answer-MORE
(Remember: long run = e)
What is Deadweight Loss (DWL)? ✔Correct Answer-A net loss of consumer and producer surplus
A price ceiling results in a DWL when the ceiling price is set _____ the market-clearing price.
✔Correct Answer-BELOW
If the supply curve for a good is perfectly inelastic and there is a price ceiling, would there be a DWL?
✔Correct Answer-NO. Since the supply curve is vertical, the market-clearing quantity supplied and
the price ceiling quantity supplied are the same.
STUDY: A price ceiling set below the equilibrium price in a perfectly competitive market: ✔Correct
Answer-Always reduces producer surplus and may or may not increase consumer surplus.
Long-run equilibrium for day care is $60 per day. Government places price ceiling on day cares at $45
per day. As a result, what will happen? ✔Correct Answer-Parents have a more difficult time finding
day care providers for their children.
(Remember: price ceiling causes shortage of labor so parents have a harder time finding)
Currently, employers must pay the government 6.2% in taxes and same with employees.
If taxes were changed and employers had to pay the full 12.4%, leaving employees nothing to pay,
would employees be better off? ✔Correct Answer-No, as long as the total tax does not change,
there will be no change in the wages employees receive OR THE EQUILIBRIUM QUANTITY OF LABOR
EMPLOYED.
What is quantity demanded? ✔Correct Answer-How much of a good people are willing to buy
during a given time period
(at a given price, holding all else constant)
**Ex.: Qd = D (P) means that quantity demanded is a function of the price**
Factors that determine Qd: ✔Correct Answer--Price
VERIFIED ANSWERS|LATEST UPDATE|ALREADY GRADED
A+
What would NOT cause the demand for coke to shift? ✔Correct Answer-The cost of producing coke
increases
What would cause the supply curve to shift to the left? ✔Correct Answer-An increase in the cost of
raw materials
If price of beef decreases, then what will happen to the demand for chicken? ✔Correct Answer-
Decrease
(because they are substitutes)
If price of gas decreases, then what will happen to the demand for cars? ✔Correct Answer-
Increase
(because they are complements)
If the price of gas increases, then what will happen to the demand for cars? ✔Correct Answer-
Decrease
(because they are complements)
Hot weather causes the demand curve for ice cream to shift to the right. Why will prices rise to a
new market-clearing level? ✔Correct Answer--Shift demand curve to the right
-Initially creating a shortage
-Price rises to where Qs equals Qd
What would NOT occur if the market price was above the market-clearing price? ✔Correct Answer-
Consumers would bid up the price
(this would NOT happen)
Things that happen if the market price is above market-clearing price: ✔Correct Answer-1.
Producers lower their prices to sell off excess inventory
2. Producers want to produce and sell more than consumers want to buy
3. There is a surplus
A price and quantity consumed both increased from one year to the next. What probably happened?
✔Correct Answer-Demand increased and supply remained constant
***What factors determine the size of a shortage?
The extend of the excess demand implied by the shortages will depend on: ✔Correct Answer-The
elasticities of supply and demand, where the shortages will be larger is both supply and demand are
more elastic
If the prices of beef and chicken are set below market-clearing levels, what will happen to the price
of pork? ✔Correct Answer-Increase
(because they are substitutes)
Since beef and chicken are below market-clearing price, demand will increase resulting in a shortage.
Therefore, the price of pork will go up because it is a substitute (and people will be able to find it
when there is a shortage of the other two meats)
, ***If demand is perfectly inelastic, what happens to price controls? ✔Correct Answer-Not change
the quantity demanded
***If the government placed a price ceiling on milk that is substantially below the equilibrium price,
what would happen? ✔Correct Answer-Shortage of milk
***If the government placed a price floor on sugar that is substantially below the equilibrium price,
what would happen? ✔Correct Answer-Surplus of sugar
The long-run price elasticity of supply is typically larger because ✔Correct Answer-In the short run,
some firms may be constrained by their productive capacity
In most industries, supply is ____ ____ in the short run than in the long run. ✔Correct Answer-Less
elastic
Short run = more or less elastic? ✔Correct Answer-LESS
(Remember: short run = i)
Long run = more or less elastic? ✔Correct Answer-MORE
(Remember: long run = e)
What is Deadweight Loss (DWL)? ✔Correct Answer-A net loss of consumer and producer surplus
A price ceiling results in a DWL when the ceiling price is set _____ the market-clearing price.
✔Correct Answer-BELOW
If the supply curve for a good is perfectly inelastic and there is a price ceiling, would there be a DWL?
✔Correct Answer-NO. Since the supply curve is vertical, the market-clearing quantity supplied and
the price ceiling quantity supplied are the same.
STUDY: A price ceiling set below the equilibrium price in a perfectly competitive market: ✔Correct
Answer-Always reduces producer surplus and may or may not increase consumer surplus.
Long-run equilibrium for day care is $60 per day. Government places price ceiling on day cares at $45
per day. As a result, what will happen? ✔Correct Answer-Parents have a more difficult time finding
day care providers for their children.
(Remember: price ceiling causes shortage of labor so parents have a harder time finding)
Currently, employers must pay the government 6.2% in taxes and same with employees.
If taxes were changed and employers had to pay the full 12.4%, leaving employees nothing to pay,
would employees be better off? ✔Correct Answer-No, as long as the total tax does not change,
there will be no change in the wages employees receive OR THE EQUILIBRIUM QUANTITY OF LABOR
EMPLOYED.
What is quantity demanded? ✔Correct Answer-How much of a good people are willing to buy
during a given time period
(at a given price, holding all else constant)
**Ex.: Qd = D (P) means that quantity demanded is a function of the price**
Factors that determine Qd: ✔Correct Answer--Price
