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macroeconomics

Exploring Macroeconomics 5th Edition Robert L. Sexton - Solutions

The price elasticity of supply is defined as the percentage change in the _____________ divided by the percentage change in _____________.
The income elasticity of demand is defined as the percentage change in the _____________ by the percentage change in _____________.
The cross-price elasticity of demand is defined as the percentage change in the _____________ _____________ of good A divided by the percentage change in _____________ of good B.
When demand is price inelastic, total revenues will _____________ as the price declines because the percentage increase in the _____________ is less than the percentage reduction in price.
When demand is price elastic, total revenues will _____________ as the price declines because the percentage increase in the _____________ is greater than the percentage reduction in price.
The more time that people have to adapt to a new price change, the _____________ the elasticity of demand. The more time that passes, the more time consumers have to find or develop suitable _____________ and to plan and implement changes in their patterns of consumption.
The price elasticity of demand is defined as the percentage change in _____________ divided by the percentage change in _____________.
Assume the following information for the demand and supply curves for good Z.a. Draw the corresponding supply and demand curves.b. What are the equilibrium price and quantity traded?c. Would a price of $9 result in a shortage or a surplus? How large?d. Would a price of $3 result in a shortage or a
What would happen to the equilibrium price and quantity exchanged in the following cases?a. an increase in income and a decreasing price of a complement, for a normal goodb. a technological advance and lower input pricesc. an increase in the price of a substitute and an increase in income, for an
Why do price floors and price ceilings both reduce the quantity of goods traded in those markets?
Giving in to pressure from voters who charge that local theater owners are gouging their customers with ticket prices as high as $10 per movie, the city council of a Midwestern city imposes a price ceiling of $2 on all movies. What effect is this likely to have on the market for movies in this
What would be the impact of a rental price ceiling set above the equilibrium rental price for apartments? Below the equilibrium rental price?
Beginning from an initial equilibrium, draw the effects of the changes in the following list in terms of the relevant supply and demand curves.a. an increase in the price of hot dogs on the hamburger marketb. a decrease in the number of taxicab companies in New York City on cab tripsc. effect of El
If a price is above the equilibrium price, explain the forces that bring the market back to the equilibrium price and quantity.If a price is below the equilibrium price, explain the forces that bring the market back to the equilibrium price and quantity.
Using supply and demand curves, show the effect of each of the following events on the market for wheat.a. The midwestern United States (a major wheat-producing area) suffers a flood.b. The price of corn decreases (assume that many farmers can grow either corn or wheat).c. The Midwest has great
When asked about the reason for a lifeguard shortage that threatened to keep one-third of the city’s beaches closed for the summer, the Deputy Parks Commissioner of New York responded that “Kids seem to want to do work that’s more in tune with a career. Maybe they prefer carpal tunnel
The following table shows the hypothetical monthly demand and supply schedules for cans of macadamia nuts in Hawaii.a. What is the equilibrium price of macadamia nuts in Hawaii?b. At a price of $7 per can, is there equilibrium, a surplus, or a shortage? If it is a surplus or shortage, how large is
Which of the following will most likely occur with a 20 percent increase in the minimum wage?a. higher unemployment rates among experienced and skilled workersb. higher unemployment rates among young and low-skilled workersc. lower unemployment rates for young and low-skilled workersd. the price
A current shortage is due to a price ceiling. If the price ceiling is removed,a. price would increase, quantity supplied would increase, and quantity demanded would decrease.b. price would increase, quantity supplied would decrease, and quantity demanded would increase.c. price would decrease,
If a price floor was set at the current equilibrium price, which of the following would cause a surplus as a result?a. an increase in demandb. a decrease in demandc. an increase in supplyd. a decrease in supplye. either b or c
If, in a given market, the price of inputs increases and income increases (assuming it is a normal good), thena. price would increase but the change in quantity exchanged would be indeterminate.b. price would decrease but the change in quantity exchanged would be indeterminate.c. quantity exchanged
If both supply and demand for a good shifted the same amount to the right, then we would expect thata. both the price and quantity exchanged would increase.b. price would not change and quantity exchanged would increase.c. the price would increase and quantity exchanged would not change.d. neither
If the equilibrium price of wheat is $3 per bushel and then a price floor of $2.50 per bushel is imposed by the government,a. there will be no effect on the wheat market.b. there will be a shortage of wheat.c. there will be a surplus of wheat.d. the price of wheat will decrease.
If many cooks consider butter and margarine to be substitutes, and the price of butter rises, then in the market for margarinea. the equilibrium price will rise, while the change to equilibrium quantity is indeterminate.b. the equilibrium price will rise, and the equilibrium quantity will fall.c.
If you observed the price of a good decreasing and the quantity exchanged decreasing, it would be most likely caused bya. an increase in demand.b. a decrease in demand.c. an increase in supply.d. a decrease in supply.
If you observed the price of a good increasing and the quantity exchanged increasing, it would be most likely caused bya. an increase in demand.b. a decrease in demand.c. an increase in supply.d. a decrease in supply.
If you observed the price of a good increasing and the quantity exchanged decreasing, it would be most likely caused bya. an increase in demand.b. a decrease in demand.c. an increase in supply.d. a decrease in supply.
Assume that airline travel is a normal good and intercity bus travel is an inferior good. Higher incomes woulda. increase both the price and the quantity of airline travel.b. decrease both the price and quantity of airline travel.c. increase the price and decrease the quantity of intercity bus
An increase in the expected future price of a good by consumers would, other things equal,a. increase the current price and increase the current quantity exchanged.b. increase the current price and decrease the current quantity exchanged.c. decrease the current price and increase the current
A minimum wage (price floor) is likely to be binding in the market for experienced and skilled workers.
An increase in both demand and supply increases the equilibrium quantity. True or False.
If supply decreases and demand increases, the equilibrium price will _____________ and the equilibrium quantity will be _____________.
At a price greater than the equilibrium price, a(n)_____________, or excess quantity supplied, would exist. Sellers would be willing to sell _____________ than demanders would be willing to buy. Frustrated suppliers would _____________ their price and _____________ on production, and consumers
The price at the intersection of the market demand curve and the market supply curve is called the _____________ price, and the quantity is called the _____________ quantity.
The following graph shows three market supply curves for cantaloupe. Compared to point A, which point representsa. an increase in quantity supplied?b. an increase in supply?c. a decrease in quantity supplied?d. a decrease in supply? Price e a So S Quantity of Cantaloupes per Year
What would be the effects of each of the following on the supply of coffee worldwide? In each case, identify the responsible determinant of supply.a. Freezing temperatures wipe out half of Brazil’s coffee crop.b. Wages of coffee workers in Latin America rise as unionization efforts succeed.c.
What would be the effect of each of the following on the supply of salsa in the United States? In each case, identify the responsible determinant of supply.a. Tomato prices skyrocketb. Congress places a 26 percent tax on salsa.c. Ed Scissorhands introduces a new, faster vegetable chopper.d. J. Lo,
Using the graph below, answer the following questions:a. What is the shift from S1 to S2 called?b. What is the movement from a to b called?c. What is the movement from b to a called?d. What is the shift from S2 to S1 called? P b P2 P a 0 Q Q2 Q3 Q
If the price of corn rose,a. what would be the effect on the supply of corn?b. what would be the effect on the supply of wheat?
The following table shows the supply schedules for Rolling Rock and two other petroleum companies. Armadillo Oil and Pecos Petroleum. Assuming these three companies make up the entire supply side of the oil market, complete the market supply schedule and draw the market supply curve on a graph.
The following table shows the supply schedule for Rolling Rock Oil Co. Plot Rolling Rock’s supply curve on a graph. Price (dollars per barrel) Quantity Supplied (barrels per month) $5 10,000 10 15,000 15 20,000 20 25,000 25 30,000
Show the impact of each of the following events on the oil market.a. OPEC becomes more effective in limiting the supply of oil.b. OPEC becomes less effective in limiting the supply of oil.c. The price for natural gas (a substitute for heating oil) rises.d. New oil discoveries occur in Alaska.e.
Felix is a wheat farmer who has two fields he can use to grow wheat. The first field is right next to his house and the topsoil is rich and thick. The second field is 10 miles away in the mountains and the soil is rocky. At current wheat prices, Felix just produces from the field next to his house
Using the graph below, answer the following questions:a. What is the shift from D1 to D2 called?b. What is the movement from b to a called?c. What is the movement from a to b called?d. What is the shift from D2 to D1 called? P P P2 a b C 0 Q2 Q3 D
If the price of ice cream increased,a. what would be the effect on the demand for ice cream?b. what would be the effect on the demand for frozen yogurt?
Draw the demand curves for the following goods. If the price of the first good listed rises, what will happen to the demand for the second good, and why?a. hamburger and ketchupb. Coca-Cola and Pepsic. camera and filmd. golf clubs and golf ballse. skateboard and razor scooter
Using the demand curve, show the effect of the following events on the market for beef:a. Consumer income increases.b. The price of beef increases.c. An outbreak of “mad cow” disease occurs.d. The price of chicken (a substitute) increases.e. The price of barbecue grills (a complement) increases.
The following graph shows three market demand curves for cantaloupe. Starting at point A,a. which point represents an increase in quantity demanded?b. which point represents an increase in demand?c. which point represents a decrease in demand?d. which point represents a decrease in quantity
What would be the effect of each of the following on the demand for Chevrolets in the United States? In each case, identify the responsible determinant of demand.a. The price of Fords plummets.b. Consumers believe that the price of Chevrolets will rise next year.c. The incomes of Americans rise.d.
What would be the effects of each of the following on the demand for hamburger in Hilo, Hawaii? In each case, identify the responsible determinant of demand.a. The price of chicken falls.b. The price of hamburger buns doubles.c. Scientists find that eating hamburger prolongs life.d. The population
The following table shows Hillary’s demand schedule for Cherry Blossom Makeup. Graph Hillary’s demand curve. Price (dollars per ounce) $15 12 Quantity Demanded (ounces per week) 5 oz. 10 15 9 20 6 3 25
Sid moves from New York City, where he lived in a small condominium, to rural Minnesota, where he buys a big house on five acres of land. Using the law of demand, what do you think is true of land prices in New York City relative to those in rural Minnesota?
A leftward shift in supply could be caused bya. an improvement in productive technology.b. a decrease in income.c. some firms leaving the industry.d. a fall in the price of inputs to the industry.
If a farmer were choosing between growing wheat on his own land and growing soybeans on his own land,a. an increase in the price of soybeans would increase his supply of soybeans.b. an increase in the price of soybeans would increase his supply of wheat.c. an increase in the price of soybeans would
Which of the following is not a determinant of supply?a. input pricesb. technologyc. tastesd. expectationse. the prices of related goods
Antonio’s makes the greatest pizza and delivers it hot to all the dorms around campus. Last week Antonio’s supplier of pepperoni informed him of a 25 percent increase in price. Which variable determining the position of the supply curve has changed, and what effect does it have on supply?a.
The difference between a change in quantity supplied and a change in supply is that a change ina. quantity supplied is caused by a change in a good’s own price, while a change in supply is caused by a change in some other variable, such as input prices, prices of related goods, expectations, or
All of the following factors will affect the supply of shoes except one. Which will not affect the supply of shoes?a. higher wages for shoe factory workersb. higher prices for leatherc. a technological improvement that reduces waste of leather and other raw materials in shoe productiond. an
An upward-sloping supply curve shows thata. buyers are willing to pay more for particularly scarce products.b. suppliers expand production as the product price falls.c. suppliers are willing to increase production of their goods if they receive higher prices for them.d. buyers are willing to buy
Suppose CNN announces that bad weather in Central America has greatly reduced the number of cocoa bean plants and for this reason the price of chocolate is expected to rise soon. As a result,a. the current market demand for chocolate will decrease.b. the current market demand for chocolate will
The difference between a change in quantity demanded and a change in demand is that a change ina. quantity demanded is caused by a change in a good’s own price, while a change in demand is caused by a change in some other variable, such as income, tastes, or expectations.b. demand is caused by a
Whenever the price of Good A increases, the demand for Good B increases as well. Goods A and B appear to bea. complements.b. substitutes.c. inferior goods.d. normal goods.e. inverse goods.
Whenever the price of Good A decreases, the demand for Good B increases. Goods A and B appear to bea. complements.b. substitutes.c. inferior goods.d. normal goods.e. inverse goods.
Ceteris paribus, an increase in the price of DVD players would tend toa. decrease the demand for DVD players.b. increase the price of televisions, a complement to DVD players.c. increase the demand for DVD players.d. decrease the demand for DVDs.
Which of the following would not cause a change in the demand for cheese?a. an increase in the price of crackers, which are consumed with cheeseb. an increase in the income of cheese consumersc. an increase in the population of cheese loversd. an increase in the price of cheese
Which of the following would be most likely to increase the demand for jelly?a. an increase in the price of peanut butter, which is often used with jellyb. an increase in income; jelly is a normal goodc. a decrease in the price of jellyd. medical research that finds that daily consumption of jelly
If the demand for milk is downward sloping, then an increase in the price of milk will result in a(n)a. increase in the demand for milk.b. decrease in the demand for milk.c. increase in the quantity of milk demanded.d. decrease in the quantity of milk demanded.e. decrease in the supply of milk.
In a competitive market,a. there are a number of buyers and sellers.b. no single buyer or seller can appreciably affect the market price.c. sellers offer similar products.d. all of the above are true.
Which of the following is a market?a. a garage saleb. a restaurantc. the New York Stock Exchanged. an eBay auctione. all of the above
Just as demanders will demand more now if the price of a good is expected to rise in the near future, sellers will supply more now if the price of a good is expected to rise in the near future. True or False.
A change in the price of a good leads to a change in the quantity supplied, but not to a change in its supply. True or False.
The market supply curve for a product is the vertical summation of the supply curves for individual firms. True or False.
The law of supply states that, other things being equal, the quantity supplied will vary directly (a positive relationship)with the price of the good. True or False.
A decrease in the price of ice cream would cause an increase in the demand for frozen yogurt, a substitute. True or False.
Either an increase in the number of buyers or an increase in tastes or preferences for a good or service will increase the market demand for a good or service. True or False.
Two goods are complements if an increase in the price of one causes an increase in the demand for the other. True or False.
Because personal tastes differ, substitutes for one person may not be substitutes for another person. True or False.
Differences in the conditions under which the exchange between buyers and sellers occurs make it difficult to precisely define a market. True or False.
The supply of a good _____________ if the price of one of its substitutes in production rises.
The supply of a good _____________ if the price of one of its substitutes in production falls.
A fall in input prices will _____________ the costs of production, causing the supply curve to shift to the _____________.
Possible supply determinants (factors that determine the position of the supply curve) are _____________ prices; _____________; _____________ of suppliers; and _____________, _____________, _____________, and _____________.
The market supply curve is a graphical representation of the amount of goods and services that suppliers are _____________ and _____________ to supply at various prices.
An individual supply curve is a graphical representation that shows the _____________ relationship between the price and the quantity supplied.
The quantity supplied is positively related to the price because firms supplying goods and services want to increase their _____________ and because increasing _____________ costs mean that the suppliers will require _____________ prices to induce them to increase their output.
An increase in the expected future price of a good or an increase in expected future income may _____________ current demand.
Two goods are called _____________ if an increase in the price of one causes the demand curve for another good to shift to the _____________.
An increase in demand is represented by a _____________ shift in the demand curve; a decrease in demand is represented by a _____________ shift in the demand curve.
A change in demand is caused by changes in any of the other factors (besides the good’s own price) that would affect how much of the good is purchased: the _____________, _____________, the _____________ of buyers, _____________, and _____________.
The _____________ curve for a product is the horizontal summing of the demand curves of the individuals in the market.
An individual _____________ curve reveals the different amounts of a particular good a person would be willing and able to buy at various possible prices in a particular time interval, other things being equal.
According to the law of demand, other things being equal, when the price of a good or service falls, the _____________ increases.
A(n) _____________ market consists of many buyers and sellers, no single one of whom can influence the market price.
A(n) _____________ is the process of buyers and sellers _____________ goods and services.
15. A politician running for president of the United States promises to build new schools and new space stations during the next four years without sacrificing any other goods and services. Using a production possibilities curve between schools and space stations, explain under what conditions the
14. How does a technological advance that increases the efficiency of shoe production affect the production possibilities curve between shoes and pizza? Is it possible to produce more shoes and pizza or just more shoes? Explain.
13. How does education add to a nation’s capital stock?
12. Why one nation experiences economic growth and another doesn’t is a question that has intrigued economists since Adam Smith wrote An Inquiry into the Nature and Causes of the Wealth of Nations in 1776. Explain why each of the following would limit economic growth.a. The politically connected
11. Economy A produces more capital goods and fewer consumer goods than Economy B. Which economy will grow more rapidly? Draw two production possibilities curves, one for Economy A and one for Economy B. Demonstrate graphically how one economy can grow more rapidly than the other.
10. Using the following table, answer the questions:a. What are the assumptions for a given production possibilities curve?b. What is the opportunity cost of one gun when moving from point B to point C? When moving from point D to point E?c. Do these combinations demonstrate constant or increasing

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