Economics chapter 5
Terms in this set (40)
Colleges and universities use such things as a grade point averages and standardized test scores as
Non-price rationing devices
If the purchase and sale of currently illegal drug (for example, marijuana) were decriminalized, economists would expect
An increase in demand and supply of this drug
Since most colleges and universities charge the same tuition to every student regardless of what time students choose to take their classes.
"The schools must develop some type of non-stop rationing device" and "it follows that some classes will likely have a shortage of seats while other classes may have a surplus of seats".
The space on the freeway at any instant of time. A supply curve that shows this is
When congestion occurs on the freeway (because of a shortage of freeway space), the economist would most likely explain this by saying that it is because
The price of driving on the freeway is below the equilibrium price.
If more people join carpools and travel to work together
The demand curve for freeway space shifts leftward.
A toll of $1 per car is imposed on a road regardless of time of day. If the toll creates equilibrium travel flows at the busiest time of day, it will create a ____ at all other times.
Surplus of space
The demand for seats in 10 a.m. classes at the university is higher than the demand for seats in 8 a.m. classes. The supply of seats is fixed. If the university prices classes at the price requires to achieve equilibrium at 10 a.m., there will be
A surplus at 8 a.m.
University A sets tuition at the equilibrium level based on price and then imposes entrance requirements in the form of minimum high school GPA and SAT scores. Enrollment at this school will likely be
Below equilibrium because of the non-price rationing.
Suppose that there are two laws proposed for eviction notices. Plan A requires landlords to give a renter 30 days to vacate an apartment once he has been served an eviction notice. Under Plan B, he has 60 days to vacate an apartment once he has been served an eviction notice. It follows that landlords will find
Plan B more expensive than Plan A
Residents of cities with a reputation for good weather, ceteris paribus,
Pay a higher price for housing because the demand for housing is higher.
There is no toll charge to drive on freeway A. If there is freeway congestion at 9 a.m., there will be greater freeway congestion at 11 a.m. if
The demand to drive on the freeway at 11 a.m. is greater than the demand to drive on the freeway at 9 a.m.
If patients were allowed to sue their HMO, we would expect
The supply curve for health care services provided by the HMO to shift to the left and the price of HMO-provided health care coverage to rise.
Suppose that television show A is much more popular than television show B. The equilibrium price for a ticket to view the taping of show A is $40 and the equilibrium price for a ticket to view the taping of show B is $-20. If free tickets are offered for the taping of both shows, it is likely that
There will be shortage of tickets for show A and a surplus of tickets for show B.
If the supply of aisle seats equals the supply of middle seats on an airplane, and the demand for aisle seats is ____ than the demand for middle seats, then the equilibrium price of aisle seats will be ____ the equilibrium price of middle seats.
When the government ___ mortgage lending standards, the indirect result is likely to be ___ home prices.
"Lowers;higher" and "increases;lower"
If a college sets its tuition ___ the equilibrium tuition, then it will have to use some form of nonprice-rationing device to determine who will be accepted for admission to the college.
Refer to Exhibit 5-4. If tickets for viewing television show tapings are free, for which show will fans most likely have the longest wait to get tickets?
Refer to Exhibit 5-5. If the airline charges P2 for both aisle seats and middle seats, the result will be
A surplus of middle seats and the equilibrium quantity of aisle seats.
Refer to Exhibit 5-5. If the airline charges price P1 for both aisle seats and middle seats, the result will be
A shortage of aisle seats and the equilibrium quantity of middle seats.
The lower the price of medical care in general, the higher the ____ medical care and the ___ specific items that make up medical care (such as x-rays)
Quantity demanded of; higher the demand for
The higher the price of medical care in general, the lower the ____ medical care and the ___ specific items that make up medical care (such as, x-rays)
Quantity demanded of; lower the demand for
Profit can be earned by buying ____ and selling ____.
As the price of good Z falls, the quantity demanded of good Z rises, but the quantity supplied of good Z does not change. Based upon this information we can conclude that the demand curve for good Z is _____ and the supply curve for good Z is ____.
Downward sloping; vertical
The price of good B has pattern such that P= $20 on Monday through Thursday of every week, and P=$25 on Fridays. If speculators begin participating in the market for good B, their actions will likely lead to a(n) ____ in the price of good B on Monday through Thursday and a(n) _____ in the price of good B on Friday.
Which of the following is false?
If the price of a good rises, then the price of its complements will rise.
If the price of a good ____, the demand for its complements will ______.
"rises;fall" and "falls;rise"
How can lower lending standards and lower interest rates lead to higher house prices?
Lower lending standards make it easier to get a mortgage loan with a lower down payment; also, people are more likely to take out a mortgage loan at lower than higher interest rates. Both increase the demand for housing, which raises the price of housing.
Suppose instead of buying food directly at the grocery store you bought food insurance. After paying an insurance food premium of $100 each month, you could buy as much food as you want (at the grocery store) for $10 a shopping trip. Any dollar amount (of food you purchased) over $10 would be paid by your food insurance company. In this case, you would probably
Buy more food than you would if you had to buy food directly.
Harvard, Yale, and Princeton all charge tuition and all require high grades and standardized test scores for admission. If the demand to attend these universities were to increase, but tuition remained constant, it would like follow that
The academic admission requirements would become even more rigorous or challenging.
The purchase and sale of marijuana is legalized and the price falls and the quantity bought and sold rises. If the legalization of marijuana affects both the demand for and supply of marijuana, then what is the explanation?
Supply rises more than demand rises.
What do the applications (in the chapter) about freeway congestion and 10 a.m. classes have in common?
Both deal with below-equilibrium prices and resulting shortages.
A seller's minimum price (to sell) falls by a constant amount at each quantity. As a result, the supply curve
shifts upward and to the left.
There are two shop owners, A and B that sell the same goods. Shop owner A is very nice to all customers;shop owner B is sometimes nice to customer and sometimes rude to customers. Most customers do not like buying from B as much as from A. Prices at the shop operated by A are slightly higer (a few cents higher) than at the shop operated by B. This could be because
There is not enough information to answer this question.
A university charges tuition of $20,000 a year and a star athlete who may or may not attend university has an equilibrium wage of $45,000 a year. According to NCAA rules, the university cannot pay the star athlete more than $20,000 in the form of scholarship. As a result,
The university will have to complete with other universities for the star athlete. It's possible that the university will try to lure the athlete to the university by using something other than money and free tution (in the form of a scholarship).
There is a theater in which a play will be performed each night for the next 100 nights. Some seats in the theater are better from which to view the play than other seats. However, there is only one ticket price for all seats. No matter if you choose seat 12 in row M, the price is the same: $40. What might we expect?
"The better seats will be sold before the not-so-good seats" and "Ticket scalping - someone will buy tickets at $40 for good seats and then end up selling them for more ("Get your really good seat tickets for $60")"
The greater the gap between the equilibrium college tuition and the tuition the students pays, the
More likely the college will use non-money rationing devices such as grades for purposes of admission" and "the stiffer the academic admission criteria for admission is likely to be."
Explain how carpooling can eliminate a shortage of freeway space.
Carpooling reduces the demand for freeway space.
Refer to Exhibit 5-1, Which shows supply and demand for freeway space at both 8 a.m. and 11 p.m. At P=$ 0, there is a __ of freeway space at 8 a.m. and ___ at 11 p.m.
Refer to Exhibit 5-1, which shows supply and demand for freeway space at both 8 a.m. and 11 p.m. A toll of P2 creates __ at 8 a.m. and ___ at 11 p.m.
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