Question

6. What will happen in this market if suppliers were charging $50/unit? a. They would all make a large profit because $50 is more than the equilibrium price. b. They would all just break even because $50 is their reservation price. c. They would lower their prices because at $50 there would be excess supply. d. They would lower their prices because at $50 there would be excess demand. 7. Abel owns a nacho stand and is willing and able to make another plate of cheese nachos for $6. Melanie is quite hungry and is willing and able to buy a plate of cheese nachos for $5. If the principle of No Cash on the Table is followed then Abel and Melanie: a will make a trade. b. will only make a trade if Abel can get Melanie to spend more than $5 for the cheese nachos c. will only make a trade if Melanie can get Abel to charge less than $5 for the cheese nachos. d. will never trade; they will look for better deals. 8. Refer to the figure below. At P = 8 and Q = 4, D1 is elastic than D2, which is shown graphically as D1 being D2 a. more; flatter than b. more; steeper than c. less, flatter than d. less steeper than 9. Based on the fact that the market in beanie babies has excess demand, you can infer that: a. supply is greater than demand. b. demand is greater than supply. c. quantity demanded is greater than quantity supplied. d. quantity supplied is greater than quantity demanded.

Answer 1

Ans) 1) When price is more than equilibrium price, there exists surplus i.e quantity supplied exceeds quantity demanded. Since, price will fry to reach equilibrium price, there will be downward pressure on the price.

2) If price is less than willingness to sell, person will not sell the product. If price is more than willingness to pay, person will not buy the product.

3) A more elastic demand has flatter curve while a less elastic demand has steeper curve.

4) When price is less than equilibrium price, there exists shortage or quantity demanded exceeds quantity supplied.

6. What will happen in this market if suppliers were charging $50/unit? surplus 0 5 10 15 20 25 30 35 40 - Quantity a. They would all make a large profit because $50 is more than the equilibrium price. b. They would all just break even because $50 is their reservation price. C. They would lower their prices because at $50 there would be excess supply. d. They would lower their prices because at $50 there would be excess demand 7. Abel owns a nacho stand and is willing and able to make another plate of cheese nachos for $6. Melanie is quite hungry and is willing and able to buy a plate of cheese nachos for $5. If the principle of No Cash on the Table is followed then Abel and Melanie: a will make a trade. b. will only make a trade if Abel can get Melanie to spend more than $5 for the cheese nachos. c. will only make a trade if Melanie can get Abel to charge less than $5 for the cheese nachos. d. will never trade; they will look for better deals. 8. Refer to the figure below. At P = 8 and Q = 4, D1 is elastic than D2, which is shown graphically as D1 being D2 a. more; flatter than b. more; steeper than c. less, flatter than d. less; steeper than 9. Based on the fact that the market in beanie babies has excess demand, you can infer that a. supply is greater than demand. b. demand is greater than supply. c. quantity demanded is greater than quantity supplied. d. quantity supplied is greater than quantity demanded.