# HW #3

### 20 terms by watchamx

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### Refer to the above diagram. A decrease in supply is depicted by a:

shift from S2 to S1.

### Refer to the above diagram. An increase in quantity supplied is depicted by a:

move from point y to point x.

P = 4 + 1/3Q.

### An improvement in production technology will:

shift the supply curve to the right.

### If producers must obtain higher prices than previously to produce various levels of output, the following has occurred

a decrease in supply.

### Assume a drought in the Great Plains reduces the supply of wheat. Noting that wheat is a basic ingredient in the production of bread and that potatoes are a consumer substitute for bread, we would expect the price of wheat to

rise, the supply of bread to decrease, and the demand for potatoes to increase.

### An increase in the excise tax on cigarettes raises the price of cigarettes by shifting the:

supply curve for cigarettes leftward.

\$2

### Refer to the above data. If the price in this market was \$4:

farmers would not be able to sell all their wheat.

### Refer to the above data. If price was initially \$4 and free to fluctuate, we would expect:

the quantity of wheat supplied to decline as a result of the subsequent price change.

\$1.60.

### At the equilibrium price:

there are no pressures on price to either rise or fall.

### The rationing function of prices refers to the:

capacity of a competitive market to equate the quantity demanded and the quantity supplied

### Assume in a competitive market that price is initially below the equilibrium level. We can predict that price will:

increase, quantity demanded will decrease, and quantity supplied will increase.

### In which of the following instances will the effect on equilibrium price be dependent on the magnitude of the shifts in supply and demand?

demand rises and supply rises.

### Refer to the above diagram, in which S1 and D1 represent the original supply and demand curves and S2 and D2 the new curves. In this market:

demand has increased and equilibrium price has decreased.

### Refer to the above diagram, in which S1 and D1 represent the original supply and demand curves and S2 and

an increase in demand has been more than offset by an increase in supply.

### Data from the registrar's office at Gigantic State University indicate that over the past twenty years tuition and enrollment have both increased. From this information we can conclude that

the supply of education provided by GSU has also increased over the twenty-year period.

### A price floor means that:

government is imposing a minimum legal price that is typically above the equilibrium price.

### An effective ceiling price will:

result in a product shortage

Example: