Liberty University ECON 213 Problem Set chapter 3 complete solutions correct answers updated

Liberty University ECON 213 Problem Set chapter 3 complete solutions correct answers updated

Suppose consumers suddenly start preferring chocolate ice cream over vanilla ice cream. How does this change affect consumer demand for vanilla ice cream?

Drag the appropriate curve to show how this change in consumer preferences affects the market for the good they have come to like less (vanilla ice cream).

Suppose the cost of shipping cars falls. Using the graph below, drag the appropriate curve to show how this change in shipping costs will affect the market.  

How will the drop in the cost of shipping cars affect the equilibrium price and equilibrium quantity of cars?

Which of the following will decrease the supply of laptop computers?

The market for computer operating systems contains only a few major producers. If more computer operating system producers enter the market, what will happen?

Suppose consumers suddenly start preferring soccer over football. How does this change affect consumer demand for football?

Drag the appropriate curve to show how this change in consumer preferences affects the market for the good they have come to like less (football).

As the owner of a movie theater, you have decided to lower the price for all shows before 7:00 p.m. in the month of September. What do you expect to happen?

Suppose the cost of shipping fish falls. Using the graph below, drag the appropriate curve to show how this change in shipping costs will affect the market.  

A new report has shown that seat belts reduce the death rate from auto accidents. To ensure that as many individuals as possible use seat belts, the government recently decided to subsidize the production of seat belts. 

Government officials have hired your consulting firm to encourage more people to use the city's zoo. In the initial meeting, you discussed several options for increasing demand. Three suggestions are listed below.
 

In the market for compound bows, which of the following will increase demand?

If the price of computers goes up and there are no other changes, what is the consequence?

Consider the market for Chipotle burritos, which is depicted in equilibrium in the graph below. Suppose Qdoba, a competing company, decides to drastically increase its prices. Simultaneously, due to increasing public scrutiny of Chipotle's business practices, Chipotle is forced to increase the wages it pays its employees.

If the graph below shows the market for Chipotle burritos in equilibrium, identify the location where we should expect to find the new equilibrium following these simultanous events.

If the price of labor goes up and there are no other changes, what is the consequence?

You are an owner of a bakery, and you meet with other neighborhood bakery owners. Consider that fresh baked goods  and processed baked goods  are substitutes. In an attempt to increase sales, you collectively decide to lower prices by 10%. Which of the following are consequences of this price change?  

When consumers purchase cars, they also often purchase cleaning products to take care of the car. As the price of a car rises, the demand for cleaning products shifts to the left. This means cars and cleaning products are

Suppose that many people who earn a living raising cows decide they can make more money selling honey and switch occupations. How will this change affect the amount of beef supplied by producers?

The market for tablet computers contains only a few major producers. If more tablet computer producers enter the market, what will happen?

The market for streaming-music services contains only a few major producers. If more streaming-music service producers enter the market, what will happen?

Choose one or more: A. Individual sellers will have more control over the market. B. There will be a greater quantity of streaming-music services available in the market. C. The market will become more competitive and the price will fall. D. The market will become more competitive and the price will rise.

Suppose that many people who earn a living catching fish decide they can make more money selling fruit smoothies and switch occupations. How will this change affect the number of fish supplied by producers?

Suppose that many people who earn a living catching fish decide they can make more money selling honey and switch occupations. How will this change affect the number of fish supplied by producers?

When consumers purchase computers, they also often purchase virus protection to take care of the computer. As the price of a computer rises, the demand for virus protection shifts to the left. This means computers and virus protection are

When consumers purchase cars, they also often purchase cleaning products to take care of the car. As the price of a car falls, the demand for cleaning products shifts to the right. This means cars and cleaning products are

Prescription drugs are often available in two versions — a name brand and a generic brand. As the price of the name brand falls, the price change

You are an owner of a restaurant, and you meet with other neighborhood restaurant owners. Consider that restaurant meals and meals at home are substitutes. In an attempt to increase sales, you collectively decide to lower prices by 10%. Which of the following are consequences of this price change?  

Imagine an illness with two cures—drug X and drug Y. Drug X and drug Y are both made by the same firm.

Two events recently happened. First, a study was released showing that drug X is less effective than drug Y. Second, the ingredients used to produce drug X increased in price. What are the consequences of these events?

Choose one:  A.  The demand for drug X shifts to the left, and the supply curve for drug X shifts to the left. The result is a rise in the equilibrium price for drug X and a fall in the equilibrium quantity of drug X.  B.  The demand for drug X shifts to the right, and the supply curve for drug X shifts to the left. The result is an unknown change in the equilibrium price for drug X and a fall in the equilibrium quantity of drug X.  C.  The demand for drug X shifts to the left, and the supply curve for drug X shifts to the left. The result is an unknown change in the equilibrium price for drug X and a fall in the equilibrium quantity of drug X.  D.  The demand for drug X shifts to the right, and the supply of drug X shifts to the left. The result is a rise in the equilibrium price for drug X and a fall in the equilibrium quantity of drug X.

Desktop computers have fallen out of favor because consumers prefer portability. At the same time, the components needed to produce a desktop computer have decreased in price. Given these changes, what will happen to the equilibrium price for desktop computers?

Choose one: A.  We do not have enough information to answer the question given the decrease in both demand and supply. B.  The equilibrium price will rise because of the increase in demand and the decrease in supply. C.  The equilibrium price will fall because of the decrease in demand and a decrease in supply. D.  The equilibrium price will fall because of a decrease in demand and increase in supply.

You publish a magazine for calculator collectors. To produce and distribute this magazine, you use a number of inputs:

•    computers
•    labor
•    paper 
•    postage
•    staplers
 

If the price of postage goes down and there are no other changes, what is the consequence?

If the price of postage goes up and there are no other changes, what is the consequence?

Choose one: A.  The demand for the magazine shifts to the right, and the supply curve shifts to the left. The equilibrium price rises, but there is an unknown change in the equilibrium quantity.  B.  The demand for the magazine does not change, and the supply curve shifts to the right. The equilibrium price falls, but the equilibrium quantity rises.  C.  The demand for the magazine shifts to the left, and the supply curve shifts to the right. The equilibrium price falls, but there is an unknown change in the equilibrium quantity. D.  The demand for the magazine does not change, and the supply curve shifts to the left. The equilibrium price rises, but the equilibrium quantity falls. 

Which of the following will increase the supply of laptop computers?

Choose one or more: A. The cost of plastic (an input for the production of laptop computers) rises. B. The government provides a subsidy for the manufacture of laptop computers. C. A more efficient manufacturing technology for constructing laptop computers is used. D. The number of sellers increases. E. The price of laptop computers rises.

Consider the graph below. Suppose that initially, S₁ is the supply curve for U.S. oil, P₁ is the price of U.S. oil, and Q₁ is the quantity produced of U.S. oil.  

On the graph, label each of the following situations. The first situation you will label is the initial situation just described. Consider how the other events will each individually change the outcome from this initial position.

the initial starting point when the price is P₁ and the quantity is Q1, after Hurricane Ike, after a drop in the price of oil during May, after the invention of a new fracking technology that reduces the cost of extracting oil from the ground (not mentioned in the article)

Sometimes word of mouth and expert recommendations cause a product to become more popular. However, the firm that produces this product may find it difficult to secure parts to increase production, and it might have to pay higher prices to receive an adequate supply of parts. In this case, what will happen to the future price of the product?

Choose one: A.  The equilibrium price should fall as the supply curve shifts to the right and the demand curve shifts to the left. B.  The equilibrium price should rise as the supply curve shifts to the left and the demand curve shifts to the right. C.  The equilibrium price changes in an unknown direction as the supply curve shifts to the left and the demand curve shifts to the right. D.  The equilibrium price does not change as the supply curve shifts to the left and the demand curve shifts to the right.

The market for college textbooks is illustrated in the graph below. In the market for textbooks, the current price of a textbook is $125.

Which of the following statements best describes the current and future market conditions for textbooks?

Choose one: A.  The market for textbooks has a shortage. There will be an upward pressure on price, which will cause quantity demanded to fall and quantity supplied to rise. B.  The market for textbooks has a shortage. There will be an upward pressure on price, which will cause quantity demanded to rise and quantity supplied to fall. C.  The market for textbooks has a surplus. There will be an upward pressure on price, which will cause quantity demanded to fall and quantity supplied to rise. D.  The market is currently in equilibrium and the price quantity demanded and quantity supplied will not change in the near future.  E.  The market for textbooks has a surplus. There will be an upward pressure on price, which will cause quantity demanded to rise and quantity supplied to fall.

For the following questions, you need to determine whether each of the four factors given creates a positive demand shock, a negative demand shock, a positive supply shock, or a negative supply shock for the market in bold. For example, if you are told, “Automobile workers receive higher wages: automobiles,” you would indicate that the supply of automobiles will decrease and the supply curve will shift to the left.

Birth rates in the United States decline: diapers, The government provides subsidies to ethanol producers: ethanol, Starbucks coffee drinkers suffer due to a small coffee harvest: Starbucks coffee, Consumer incomes decrease: public transportation 

The price of beer increases: Solo cups, Henry Ford develops assembly-line production: automobiles, Natural gas producers are making large economic losses: natural gas, The price of PlayStation increases: Xbox 

Consider the market for Nike running shorts, which is depicted in equilibrium in the graph below. Suppose Under Armour, a competing company, decides to drastically increase its prices. Simultaneously, due to increasing public scrutiny of Nike's business practices, Nike is forced to increase the wages it pays its employees.

If the graph below shows the market for Nike running shorts in equilibrium, identify the location where we should expect to find the new equilibrium following these simultanous events.

Consider the market for Uber car service, which is depicted in equilibrium in the graph below. Suppose Lyft, a competing company, decides to drastically increase its prices. Simultaneously, due to increasing public scrutiny of Uber's business practices, Uber is forced to increase the wages it pays its employees.

If the graph below shows the market for Uber car service in equilibrium, identify the location where we should expect to find the new equilibrium following these simultanous events.

In the market for Apple iPhones, which of the following will increase demand?

Choose one or more: A. If Droid phones are substitute goods for Apple iPhones, the price of Droid phones increases. B. If Apple iPhones are normal goods, income increases. C. If Apple iPhones are inferior goods, income increases. D. If an iPad is a complementary good for Apple iPhones, the price of an iPad decreases. E. If an iPad is a complementary good for Apple iPhones, the price of an iPad increases.

Government officials have hired your consulting firm to encourage more people to use the city's museum. In the initial meeting, you discussed several options for increasing demand. Three suggestions are listed below.

Government officials have hired your consulting firm to encourage more people to use public transportation. In the initial meeting, you discussed several options for increasing demand. Three suggestions are listed below.

Based on your knowledge of the law of demand, what is your recommendation for each suggestion?

Suggestion 1: Reduce the price of public transportation tickets.

Suggestion 2: Increase the advertising budget using celebrities.

Suggestion 3: Offer monthly and yearly passes that reduce the price per ride .

A new report has shown that helmets reduce the head injuries from biking accidents. To ensure that as many individuals as possible use helmets, the government recently decided to subsidize the production of helmets. 

A new report has shown that smoke detectors reduce the death rate from fires. To ensure that as many individuals as possible use smoke detectors, the government recently decided to subsidize the production of smoke detectors. 
 
Which of the following will happen as a result of this subsidy?

Choose one or more: A. The demand curve for smoke detectors will remain the same.  B. The supply curve for smoke detectors will shift to the right. C. The demand curve for smoke detectors will shift to the left. D. The demand curve for smoke detectors will increase. E. The supply curve for smoke detectors will shift to the left.

At the beginning of the year, the market for electricity was in equilibrium. In June, a summer heat wave caused people to use more air conditioning. What effect does the heat wave have on the market for electricity?

Drag the appropriate part(s) of the graph to show the effect on the electricity market. 

Suppose the cost of shipping cat calendars falls. Using the graph below, drag the appropriate curve to show how this change in shipping costs will affect the market.  

Suppose the cost of shipping lumber falls. Using the graph below, drag the appropriate curve to show how this change in shipping costs will affect the market.  
 

How will the drop in the cost of shipping lumber affect the equilibrium price and equilibrium quantity of lumber?

Choose one: A.  Equilibrium price and equilibrium quantity both decrease. B.  ​Equilibrium price and equilibrium quantity both increase. C.  Equilibrium price increases, but equilibrium quantity decreases. D.  Equilibrium price decreases, but equilibrium quantity increases.

Suppose the cost of developing apps increases. How will this affect the demand for apps?

Drag the appropriate curve to show how the change in costs will affect the market for apps in the graph below.

Suppose the cost of writing music increases. How will this affect the demand for music?
 

Drag the appropriate curve to show how the change in costs will affect the market for music in the graph below.
 

As the owner of a party store, you have decided to lower the price for all balloons in the month of January. What do you expect to happen?

As the owner of a movie theater, you have decided to lower the price for all shows before 7:00 p.m. in the month of October. What do you expect to happen?

Choose one: A.  The quantity demanded of shows before 7:00 p.m. will increase. B.  The market demand for shows before 7:00 p.m. will decrease. C.  The market demand for shows before 7:00 p.m. will increase. D.  The quantity demanded of shows before 7:00 p.m. will decrease.

Move the point on the graph below to show how your answer from the first part of this question would result in movement along the demand curve.
 

Suppose consumers suddenly start preferring hamburgers over fish. How does this change affect consumer demand for fish?

Drag the appropriate curve to show how this change in consumer preferences affects the market for the good they have come to like less (fish).

Suppose consumers suddenly start preferring country music over western music. How does this change affect consumer demand for western music?

Drag the appropriate curve to show how this change in consumer preferences affects the market for the good they have come to like less (western music).

The graph below shows the supply and demand curves for regular unleaded gasoline in a medium-sized city, with the equilibrium price and quantity indicated. Adjust the price, by dragging the horizontal line up or down, so there is a daily surplus of 40,000 gallons. 

Oliver, a masked crime fighter, and Malcolm, his villainous counterpart, both use arrows on a regular basis. Together, they are the main consumers of arrows in their local market. Their demand schedules for arrows are given below.

Using the point plotting tool, interpret the demand schedule to plot five points on Oliver and Malcolm’s combined demand curve. Then use the straight-line tool to draw the demand curve that connects them. Use a single line, not multiple segments.

What would you expect the market quantity demanded to be at a price of $50?

The market demand would be          arrows per week.

Carl’s Custom Confections and Patricia’s Perfect Pastries, both small businesses, are, together, the main suppliers of party cakes to the local market in a small town. Their supply schedules for cakes are given below.
 
Using the point plotting tool, interpret the supply schedule to plot three points on Carl and Patricia’s combined supply curve. Then use the straight-line tool to draw the supply curve that connects them. (Use no more line segments than necessary.)

What would you expect the market quantity demanded to be at a price of $24?

The quantity demanded would be         cakes per day.