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Exam 2: Demand, Supply, and Equilibrium Analysis

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Question 41

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eBay shoppers are frequently asked by eBay sellers to pay the cost of shipping the purchased item. Who really pays the shipping cost in eBay transactions?

A) The buyer
B) The seller
C) Both parties are likely to share the cost.
D) eBay corporation

E) B) and C)
F) All of the above

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Question 42

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Assume that the demand and the supply in a market are represented by the following equations: $Q _ { D } = 40 - 2 P$ $Q _ { S } = 4 P - 20$ (i)Compute the market equilibrium in this case. (ii)If the government were to introduce an excise tax of $1.00 per unit of output, what would the new equilibrium be? What would the economic incidence of this tax be?

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Question 43

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Assuming that price is above the equilibrium price, which of the following is correct?

When rent control is imposed above the current market price it will

A downward-sloped demand curve is consistent with the law of demand.

During a recession, economies experience increased unemployment and a reduced level of activity. How would a recession be likely to affect the market demand for new cars?

The market demand curve shows

Assume that the market demand and the market supply are governed by the following equations: $Q _ { D } = 80 - 4 P$ $Q _ { s } = 6 P$ (i)Is the demand consistent with the law of demand? Please justify your answer. (ii)Is the supply consistent with the law of supply? (iii)What would be the equilibrium price and quantity in this market?

Sometimes firms conduct experiments where they temporarily change prices (this may be done with selective coupons and other discounting methods) to see how the consumer responds to a price change. Let's assume that our firm charges $10 per unit of output and on average has 600 units sold per day. However, for the last week the firm offered a $1 discount and charged only $9 per unit of output. During the week of the discount the firm observed that the average daily sales were 700 units. (i)If we operate under the assumption of ceteris paribus, what is the best linear representation of the demand faced by the firm [please provide the equation for the demand in terms of Q = f(P)]. (ii)If we continue to operate under the assumption that the demand is linear, what prediction can you make about the firm's level of sales at the price of $8?

Assume that the demand is governed by the function $Q _ { D } = 30 - 2 P$ Using this demand equation complete the demand schedule table below: $\begin{array} { | c | c | } \hline \text { Price } & \text { Quantity Demanded } \\\hline 5 & \\6 & \\7 & \\8 & \\9 & \\10 & \\\hline\end{array}$

If we assume the following scenario: as the average income of the consumer increases the demand for "fast" food decreases, then we can assume that "fast" food is

If the price of a good increases while the quantity of the good exchanged on markets increases, then the most likely explanation is that there has been

If a computer hardware company introduces a new ultra-thin laptop and finds that orders far exceed the number of units that are being produced,

Which of the following best describes a normal good?

If we assume that the current equilibrium wage for low-skilled labor is $8 per hour and the minimum wage is increased from $5.75 to $7.25 per hour, then

If we observe a rise in the equilibrium price and a decline in the equilibrium quantity, then which of the following must have happened?

Assume that the demand is estimated to be: $Q _ { D } = 100 + 0.01 \text { Income- } 2 P$ (i)Is this demand equation consistent with the law of demand? (ii)Is this a demand for a normal good? (iii)Construct the demand schedule for this demand, evaluated at two different income levels (I = 1000, and I = 2000), using the table below: $\begin{array} { | c | c | c | } \hline \text { Price } & \begin{array} { c } \text { Quantity Demanded } \\\text { Income } = 1000\end{array} & \begin{array} { c } \text { Quantity Demanded } \\\text { Income } = 2000\end{array} \\\hline & & \\10 & & \\20 & & \\30 & & \\40 & & \\50 & & \\\hline\end{array}$

If two goods are complements in consumption, then an increase in the price of one of these goods will cause

What happens if the price ceiling is set above equilibrium price?

If consumers in country A purchase many imported-from-country-B goods, and these imported goods are perceived by country A consumers as normal goods, then a recession accompanied by a decline in consumer incomes in country A can spread into country B.