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Exam 5: Supply, Demand, and Price: Applications

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Question 1

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When congestion occurs on the freeway (because of a shortage of freeway space) , an economist would most likely explain this by saying that it is because

A) the freeway has too few miles of roadway.
B) there are too many cars.
C) the price of driving on the freeway is below the equilibrium price.
D) the freeway has too many miles of roadway.

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Question 2

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If the supply of aisle seats and middle seats on an airplane is the same, but the demand for aisle seats is greater than the demand for middle seats, then the equilibrium price of aisle seats will be less than the equilibrium price of middle seats.

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Question 3

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Exhibit 5-1 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.

If more people join carpools and travel to work together the

At college ABC and at college XYZ, students pay $15,000 less than the equilibrium tuition. If the supply of openings is the same at both colleges, it follows that a shortage of openings will be greater at

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 and Plan B requires landlords to give a renter 60 days to vacate an apartment once he has been served an eviction notice. It follows that landlords will find

If there is freeway congestion at 8 a.m., we can reduce (or eliminate) the congestion by

Exhibit 5-2 Refer to Exhibit 5-2. There will need to be some kind of non-price rationing device used for both 8 a.m. classes and 10 a.m. classes if the tuition is set

Exhibit 5-1 Refer to Exhibit 5-1, which shows supply and demand for freeway space at both 8 a.m. and 11 p.m. Which toll creates equilibrium at 8 a.m.?

To an economist, freeway congestion is a sign that the price to drive on the freeway is

If the government sets out to make home buying easier for more people by forcing lenders to accept ____________ down payments and ______________ interest rates, the result will likely be a(n) _______________ in housing prices.

The price of a given good is likely to be less variable with speculators than it would be without speculators.

Exhibit 5-1 Refer to Exhibit 5-1, which shows supply and demand for freeway space at both 8 a.m. and 11 p.m. Suppose that the government decides to set the money price of driving on the freeway at zero, but creates programs that encourage drivers to carpool. If the carpooling program is sufficiently successful to eliminate the shortage of freeway space at 8 a.m., graphically the result of the increase in carpooling would be a

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.

Good weather in cities such as San Diego

Exhibit 5-5 Refer to Exhibit 5-5. If the airline charges price P₂ for both aisle seats and middle seats, the result will be

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) .

When universities charge students less than the equilibrium tuition for admission, they have to impose some nonprice-rationing device.

The NCAA rule governing the limits on the amount of a scholarship a college can offer an athlete is an effective price floor.

Exhibit 5-3 Refer to Exhibit 5-3 which shows the demand and supply of a college athlete.  Suppose that NCAA rules limit the amount that the college can pay this athlete, such that their payment can not exceed the cost of attending the college (currently $8,000) .  The impact of this ruling would be a loss of income to the athlete of __________ and an equal gain in consumers' surplus to the college represented by ________________.