ECO/365

PRINCIPLES OF MICROECONOMICS

The Latest Version A+ Study Guide

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ECO 365 Week 2 Apply Market Dynamics and

Efficiency Homework
Review the Week 2 Market Dynamics and
Efficiency Quiz in preparation for this assignment.

Complete the Week 2 Market Dynamics and

Efficiency Homework in McGraw-Hill Connect®.
These are randomized questions.

Note: You have only one attempt available to

complete assignments. Grades must be transferred
manually to eCampus by your instructor. Don't
worry, this might happen after the due date.

The demand and supply schedules for sunscreen at a

small beach are shown below.

Market for Sunscreen

Quantity Quantity
Price of of
(dollars Sunscreen Sunscreen
per Demanded Supplied
bottle) (bottles) (bottles)
$35 1,000 8,500
30 2,000 7,000
25 3,000 5,500
20 4,000 4,000
15 5,000 2,500
10 6,000 1,000

Instructions: Enter your answers as a whole number.

a. If the price is $15 per bottle, how many bottles of
sunscreen are demanded and supplied?

Qd = bottles

Qs = bottles

In this case, there would be upward pressure on the

price.

b. What is the equilibrium price and quantity in the

market for sunscreen?

P=

Q = bottles

The market for ice cream bars on a hot day at the local
beach is summarized in the table below.

Market for Ice Cream Bars

 Quantity of
Quantity of IceIce Cream
Price Cream BarsBars
(dollars) Demanded Supplied
$1.40 310 100
1.60 280 140
1.80 250 180
2.00 220 220
2.20 190 260
2.40 160 300
2.60 130 340

Instructions: Enter your answer as a whole number.

Determine whether there is a surplus or a shortage at a

price of $1.80 per ice cream bar, and determine the size
of the surplus or shortage.
There is a shortage in a market for a product when
Multiple Choice

the current price is lower than the equilibrium price.

quantity demanded is lower than quantity supplied.

demand is less than supply.

supply is less than demand.

Assume that the graphs show a competitive market for

the product stated in the question.
Select the graph above that best shows the change in the
market for leather coats when leather coats
become more fashionable among young consumers.

Multiple Choice
graph (1)

graph (2)

graph (3)

graph (4)

Use the following graph for the milk market to answer

the question below.

There would be excess production of milk whenever the

price is

Multiple Choice
greater than $1.50 per gallon.

greater but not less than $2.00 per gallon.

less but not greater than $2.00 per gallon.

less than $1.50 per gallon.

There is a surplus in a market for a product when

Multiple Choice

quantity demanded is greater than quantity supplied.

demand is less than supply.

quantity demanded is less than quantity supplied.

the current price is lower than the equilibrium price.

Use the following graph for the milk market to answer

the question below.

In this market, the equilibrium price is ____ and

equilibrium quantity is ___

Multiple Choice

$1.50 per gallon; 30 million gallons.

$1.50 per gallon; 28 million gallons.

$1.00 per gallon; 35 million gallons.

$28 per gallon; 150 million gallons.

In competitive markets, a surplus or shortage will

Multiple Choice

cause changes in the quantities demanded and supplied

that tend to intensify the surplus or shortage.

cause changes in the quantities demanded and supplied

that tend to eliminate the surplus or shortage.

cause shifts in the demand and supply curves that tend to

eliminate the surplus or shortage.
never exist because the markets are always at
equilibrium.

Use the following table to answer the question below.

Quantity
Demanded perQuantity Supplied
Price per Unit Year per Year
$5 2,000 0
10 1,800 300
15 1,600 600
20 1,400 900
25 1,200 1,200
30 1,000 1,500

In this competitive market, the price and quantity will

settle at
Multiple Choice

$25 and 1,200 units.

$15 and 1,600 units.

$10 and 1,800 units.

$20 and 900 units.

There is an excess demand in a market for a product

when

Multiple Choice

quantity demanded is greater than quantity supplied.

quantity demanded is less than quantity supplied.

the current price is higher than the equilibrium price.

supply is less than demand.

The marginal benefit of an additional beach towel is $12.

The marginal cost of producing an additional beach
towel is $8. If producers are minimizing the average
costs of production, then we can conclude:

beach towel production is allocatively efficient but not

productively efficient.

beach towel production is neither allocatively nor

productively efficient.

beach towel production is both allocatively and

productively efficient.

beach towel production is not allocatively efficient but is

productively efficient.

The difference between the maximum price a consumer

is willing to pay for a product and the actual price the
consumer pays is called
Multiple Choice

utility.

consumer demand.

consumer surplus.

market failure.

Consumer surplus arises in a market because

Multiple Choice
at the current market price, quantity supplied is greater
than quantity demanded.

at the current market price, quantity demanded is greater

than quantity supplied.

the market price is below what some consumers are

willing to pay for the product.

the market price is higher than what some consumers are

willing to pay for the product.

If the equilibrium wage for fast-food restaurants is $8

and the government enforces a minimum wage of $15

Multiple Choice
overall, society will be better off.

workers will get paid less.

fast-food restaurants will hire fewer workers.

workers will be able to find more jobs.

In the market for a particular pair of shoes, Jena is

willing to pay $75 for a pair while Jane is willing to pay
$85 for a pair. The actual price that each has to pay for a
pair of shoes is $65. What is the combined amount of
consumer surplus for Jena and Jane?

Multiple Choice
$215.

$10.

$130.

$30.

A producer’s minimum acceptable price for a particular

unit of a good

Multiple Choice

will, for most units produced, equal the maximum that

consumers are willing to pay for the good.

must cover the wages, rent, and interest payments

necessary to produce the good but need not include
profit.

is the same for all units of the good.

equals the marginal cost of producing that particular unit.

Charlie is willing to pay $10 for a T-shirt that is priced at

$9. If Charlie buys the T-shirt, then his consumer surplus
is

Multiple Choice

$19.

$0.90.
$90.

$1.

Graphically, producer surplus is measured as the area

Multiple Choice

above the supply curve and above the actual price.

above the supply curve and below the actual price.

under the demand curve and below the actual price.

under the demand curve and above the actual price.

Productive efficiency occurs at the point where

Multiple Choice

marginal benefit exceeds marginal cost by the greatest

amount.

the production technique minimizes economic surplus.

the production technique minimizes cost.

consumer surplus exceeds producer surplus by the

greatest amount.

The market supply curve indicates the

Multiple Choice
total revenues that sellers would receive from selling
various quantities of the product.

total amount that buyers will pay in buying a given

quantity of the product.

maximum prices that buyers are willing and able to pay

for the product.

minimum acceptable prices that sellers are willing to

accept for the product.

Which of the following goods is both nonrival and

nonexcludable?

A hot dog at a hot dog stand

A tuna in the ocean

A soccer match in a stadium

The light from a lighthouse at a harbor entrance

Which of the following goods is nonrival?

A soccer match in a stadium

A visit to the doctor at her office

A pizza at a pizza parlor

A tuna in the ocean

The production of paper often creates a waste product
that pollutes waterways. Assume the producer of paper
does not directly pay to dispose of the waste in the water.

In this case, the price of paper will be the socially

efficient price and the amount of paper produced will be
the socially efficient amount.

If one person’s consumption of a good does not preclude

another’s consumption, the good is said to be

Multiple Choice

nonexcludable.
rival in consumption.

nonrival in consumption.

excludable.

If there are external benefits associated with the

consumption of a good or service

Multiple Choice

the private demand curve will overestimate the true

demand curve.

consumers will be willing to pay for all these benefits in

private markets.

the market demand curve will be the vertical summation

of the individual demand costs.
the private demand curve will underestimate the true
demand curve.

If a good that generates negative externalities were

priced to take these negative externalities into account,
its

Multiple Choice

price would decrease, and its output would increase.

price would remain constant and output would increase.

price would increase but its output would remain

constant.
price would increase, and its output would decrease.

What are the two characteristics that differentiate private

goods from public goods?

Multiple Choice

ownership and usage

negative externality and positive externality

rivalry and excludability

marginal cost and marginal benefit

A negative externality or spillover cost (additional social

cost) occurs when
Multiple Choice

the price of the good exceeds the marginal cost of

producing it.

firms fail to achieve allocative efficiency.

the total cost of producing a good exceeds the costs

borne by the producer.

firms fail to achieve productive efficiency.

Where there are spillover (or external) benefits from

having a particular product in a society, the government
can make the quantity of the product approach the
socially optimal level by doing the following except

Multiple Choice
providing the product itself.

taxing the sellers of the product.

subsidizing the buyers of the product.

subsidizing the sellers of the product.

If some activity creates external benefits as well as

private benefits, then economic theory suggests that the
activity ought to be
Multiple Choice

subsidized.

prohibited.

taxed.

left alone.