Equilibrium

Assume Danuta buys paper in a competitive market. It follows that

• Danuta has a limited number of sellers from which to buy paper.

• Danuta will negotiate with sellers whenever she buys paper.

• Danuta cannot influence the price of paper even if she buys a large quantity of them.

• Danuta might have trouble finding paper at her local store.

Sophia runs a bakery and decides to bake more cakes. If the supply of cakes increases, then we would expect the equilibrium price

• to increase and equilibrium quantity to decrease.

• to decrease and equilibrium quantity to increase.

• and equilibrium quantity to both increase.

• and equilibrium quantity to both decrease.

Suppose Mason's income decreases and a technological advancement occurs in the production of a generic brand of cereal, which is considered an inferior good. What would we expect to happen in the market for this cereal?

• Equilibrium price would decrease, but the impact on equilibrium quantity would be ambiguous.

• Equilibrium quantity would increase, but the impact on equilibrium price would be ambiguous.

• Equilibrium quantity would decrease, but the impact on equilibrium price would be ambiguous.

• Equilibrium quantity and price would increase.

Refer to Figure 4-10. Which of the following movements would illustrate the effect of an increase in the price of binders on the market for paper?

• Point B to Point C

• Point D to Point C

• Point D to Point A

• Point B to Point A

Abigail owns a coffee shop and is concerned about the rising cost of producing steamed milk, which is used to make lattés. What would happen to the equilibrium price and quantity of lattés at her shop?

• Both the equilibrium price and quantity would increase.

• Both the equilibrium price and quantity would decrease.

• The equilibrium price would increase, and the equilibrium quantity would decrease.

• The equilibrium price would decrease, and the equilibrium quantity would increase.

Grace owns a coffee shop and she began using a machine that reduced the amount of labor necessary to produce lattés. What would happen to the equilibrium price and quantity of lattés?

• Both the equilibrium price and quantity would increase.

• Both the equilibrium price and quantity would decrease.

• The equilibrium price would increase, and the equilibrium quantity would decrease.

• The equilibrium price would decrease, and the equilibrium quantity would increase.

Equilibrium quantity must increase when

• demand increases and supply decreases.

• demand decreases and supply increases.

• demand does not change and supply decreases.

• both demand and supply increase.

Benjamin runs a small grocery store and sells number two grade potatoes, which are considered an inferior good. Which of the following events would cause both the equilibrium price and equilibrium quantity of these potatoes to increase?

• An increase in consumer income

• A decrease in consumer income

• Greater government restrictions on agricultural chemicals

• Fewer government restrictions on agricultural chemicals

Kai is studying the market for new cars. He wants to know what will happen to the equilibrium price and quantity of new cars if the price of gasoline rises, the price of steel rises, public transportation becomes cheaper and more comfortable, and auto-workers negotiate higher wages?

• Price will fall, and the effect on quantity is ambiguous.

• Price will rise, and the effect on quantity is ambiguous.

• Quantity will fall, and the effect on price is ambiguous.

• Quantity will rise, and the effect on price is ambiguous.

William is a restaurant owner who notices that both the equilibrium price and quantity of beef have fallen over time. Beef is a normal good. Which of the following explanations would be most consistent with this observation?

• Consumers have experienced an increase in income, and beef-production technology has improved.

• The price of chicken has risen, and the price of steak sauce has fallen.

• New medical evidence has been released that indicates a negative correlation between a person's beef consumption and life expectancy.

• The demand curve for beef must be positively sloped.