ECON 200 Exam 1 - the product is elastic c An increase in the price of a product will shift the products supply curve to the right d Rent controls

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PREVIEW FIRST EXAMINATION 1) Using supply-demand diagrams show the effects of each of the following. Label all parts of your diagram. Specifically state what will happen to the price and quantity sold of the good. a) The market for new houses, apartment rents increase significantly. b) The market for cattle, the price of cattle feed increases. c) The market for compact discs, the price of compact disc players decreased. d) The market for pretzels, an advertising campaign convinces consumers that pretzels are a food that improves health. e) The market for car tires, a new technology reduces the cost of producing tires. 2) True/False. Explain. Indicate whether the statement is true or false and explain your choice. a) To eliminate scarcity you should lower the price of goods and services and to eliminate a shortage we should increase the price. b) If an increase in the price of a product causes total revenue to fall, the demand for
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Unformatted text preview: the product is elastic. c) An increase in the price of a product will shift the products supply curve to the right. d) Rent controls are a good way to keep the cost of apartments low for everyone. 3) Briefly explain and graphically illustrate the economic reasoning behind the following newspaper headlines. a) “Bountiful Wheat Crop is Hurting Wheat Growers” b) “Car Rental Firms and Hotels Hit Hard by Higher Air Fares” c) “Bad Weather Limits Fishing: Seafood Prices Double” d) “Minimum Wage Cost Jobs” 4) Why do we expect supply to be more elastic in the long-run than in the short-run? 5) Using a production possibility curve clearly illustrate the concept of opportunity cost. 6) In a capitalistic economy how is the question “What to Produce?” answered? 7) Which would tend to be more elastic – the demand for automobiles or the demand for Ford automobiles? Explain your choice. 8) Define the law of supply....
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This test prep was uploaded on 04/03/2008 for the course ECON 200 taught by Professor Cramer during the Fall '07 term at University of Arizona- Tucson.

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