HW_3 - ECO 108: Introduction to Economics Problem Set 3...

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ECO 108: Introduction to Economics Problem Set 3 (Chapter 3) Professor: Shanjun Li 1.The buyer's reservation price of a particular good or service is the A) minimum amount one would be willing to pay for it. B) same as the market price. C) maximum amount one would be willing to pay for it. D) price at which one develops reservations about its quality. E) price one must pay to ensure one gets it. 2.Shelly purchases a leather purse for $400. One can infer that A) she paid too much. D)her reservation price was less than $400. B) her reservation price was at least $400. E) she paid too little. C) her reservation price was exactly $400. 3.The buyer's reservation price of a good or service is a monetary measure of the __________ to the consumer. A) necessity of the good D) benefit of the good B) quality of the good E) prestige of the good C) lowest price acceptable 4.As the price of a good rises, A) firms earn larger profits. B) more firms can cover their opportunity costs of producing the good. C) firms find they can raise price by even more. D) consumers become more willing to purchase the good. E) government regulation becomes more justified. 5.Which of the following is NOT a characteristic of a market in equilibrium? A) Quantity demanded equals quantity supplied. B) Excess supply is zero. C) All consumers are able to purchase as much as they wish. D) Excess demand is zero. E) The equilibrium price is stable, i.e., there is no pressure for it to change. 6.In a free market, if the price of a good is above the equilibrium price, then A) government needs to set a higher price. B) suppliers, dissatisfied with growing inventories, will raise the price. C) demanders, wanting to ensure they acquire the good, will bid the price lower. D) government needs to set a lower price. E) suppliers, dissatisfied with growing inventories, will lower the price. 1
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7.A regulated maximum price that is above the equilibrium price A) will lead to black markets. D) will lead to excess demand in the market.
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HW_3 - ECO 108: Introduction to Economics Problem Set 3...

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