3 demand curve
If the demand for gadgets increases as a result of a decrease in the price of widgets, the widgets and gadgets are: a. complementary goods. b. substitute goods. c. normal goods. d. elastically demanded.
A
A demand curve is ______ sloping because ______. a. downward; of increasing opportunity costs b. upward; people prefer to purchase high-quality consumer goods c. downward; reservation prices tend to fall over time d. downward; fewer people are willing to buy an item at higher prices
d
Assume both the demand for beef and the supply of beef decrease. Which of the following outcomes is certain to occur? a. The equilibrium price of beef will rise. b. The equilibrium quantity of beef will rise. c. The equilibrium price of beef will fall. d. The equilibrium quantity of beef will fall.
d
if the local slaughterhouse gives off an unpleasant stench, then the equilibrium quantity of meat will be _____ the quantity that maximizes total economic surplus. a. more equitable b. equal to c. lower than Incorrect d. higher than
d
An outcome is socially optimal if it: a. is an equilibrium outcome. b. leaves no unexploited opportunities for individuals. c. is determined by the government. d. maximizes total economic surplus.
d A socially optimal outcome is one that maximizes total surplus.
A market equilibrium might not maximize total economic surplus because: a. efficiency is not an important social goal. b. in a market equilibrium individuals do not act rationally. c. in a market equilibrium individuals do not exploit all opportunities for individual gain. d. sometimes goods entail costs and benefits that do not fall on buyers and sellers.
d In a market equilibrium, buyers and sellers take advantage of all opportunities for individual gain, but if people other than buyers benefit from a good, or if people other than sellers bear costs because of it, then what's best for individual buyers and sellers may not be best for society as a whole.
A good example of central planning at work in the U.S. would be
New York City's rent control
Refer to the accompanying figure. Suppose the solid line shows the demand for coffee. If coffee and tea are substitutes, and the price of tea falls, then you would expect: a. the equilibrium price and quantity of pencils to fall. b. the equilibrium price and quantity of pencils to rise. c. the equilibrium price of pencils to fall and the equilibrium quantity of pencils to rise. d. the equilibrium price of pencils to rise and the equilibrium quantity of pencils to fall.
a
What might cause a demand curve to shift to the right? a.An increase in the price of a substitute b. An increase in the product's own price c. An increase in the price of a complement
a
If pencils and paper are complements for most consumers, then if the price of paper increases, you would expect: a. the equilibrium price and quantity of pencils to fall. b. the equilibrium price and quantity of pencils to rise. c. the equilibrium price of pencils to fall and the equilibrium quantity of pencils to rise. d. the equilibrium price of pencils to rise and the equilibrium quantity of pencils to fall.
a If pencils and paper are complements, and the price of paper increases, then the demand for pencils will fall. As a result, the equilibrium price and quantity of pencils will fall.
price ceiling
a maximum price that can be legally charged for a good or service
If the demand for a good decreases as income decreases, then the good is a(n): a. complementary good. b. normal good. c. inferior good. d. substitute good.
b
If the price of doughnuts decreases, then one would expect the: a. supply of doughnuts to decrease. b. quantity of doughnuts supplied to decrease. c. supply of doughnuts to increase. d. quantity of doughnuts supplied to increase.
b
If there are no unexploited opportunities for individuals in a particular market, then one can conclude that: a. government regulation has been successful. b. the market is in equilibrium. c. the market is not in equilibrium. d. a socially optimal outcome has been achieved.
b
Suppose a new study highlights the health benefits of eating bacon. At the same time, suppose the cost of producing bacon falls. Given these changes, you should expect to see: a. a decrease in the equilibrium price of bacon, but it's hard to say what will happen to the equilibrium quantity. b. an increase in the equilibrium quantity of bacon, but it's hard to say what will happen to the equilibrium price. c. an increase in both the equilibrium price and quantity of bacon. d. an increase in the equilibrium price of bacon, but it's hard to say what will happen to the equilibrium quantity.
b
Suppose rice is a normal good. If consumers' incomes fall, and a new technology is introduced that lowers the marginal cost of producing rice, then the equilibrium: a. price of rice will increase, but we cannot say for sure what will happen to the equilibrium quantity. b. price of rice will fall, but we cannot say for sure what will happen to the equilibrium quantity. c. quantity of rice will increase, but we cannot say for sure what will happen to the equilibrium price. d. quantity of rice will decrease, but we cannot say for sure what will happen to the equilibrium price.
b
The price of bananas will increase in response to: a.) an excess supply of bananas. b.) an excess demand for bananas. c.) an increase quantity of bananas supplied. d.) an increase in the supply of bananas.
b
office workers and word processing programs are complements if: a. an increase in the price of word processing programs leads to an increase in the demand for office workers. b. a decrease in the wage paid to office workers leads to an increase in the demand for word processing programs. c. they perform similar functions. d. a decrease in the wage paid to office workers leads to a leftward shift in the demand for word processing programs.
b
An increase in the demand for GM automobiles results in: a. a lower equilibrium price for GM automobiles. b. an increase in the quantity supplied of GM automobiles. c. an increase in the supply of GM automobiles. d. a lower equilibrium quantity of GM automobiles.
b An increase in demand raises the equilibrium price, leading the quantity supplied to increase.
When the current price of a good is below the equilibrium price: a. buyers have an incentive to offer to pay sellers b. more than the current price. c. there will be excess supply. d. the price will tend to stay below the equilibrium price. sellers will notice their inventories are growing.
b If, at the current price, there are more buyers who want to buy a good than there are sellers who wish to sell it, then frustrated buyers will have an incentive to offer to pay sellers a higher price to obtain the good.
if butter and popcorn are compliments, than an increase in $ of popcorn will lead to a. an increase in the equilibrium quantity of butter b. a decrease in the equilibrium quantity of butter c. a decrease in the equilibrium price of butter d. a increase in the equilibrium price of butter
b, c
Efficiency occurs if the: a. market is in equilibrium. b. socially optimal quantity of goods and services is being produced. c. individually rational quantity of goods and services is being produced. d. government does not interfere with market prices.
c
What might cause a decrease in current supply of a product? a. An increase in the product's own price b. New information that leads sellers to believe that the product's price will fall in the future c. New information that leads sellers to believe that the product's price will rise in the future Correct d. A decrease in the price of one of the inputs used to make the product
c
If supply and demand both increase, the new equilibrium price will be ______ and the new equilibrium quantity will be ______. a. lower; lower b. lower; uncertain c. uncertain; higher d. higher; higher
c An increase in demand and an increase in supply will both cause equilibrium quantity to increase, but will have opposing effects on equilibrium price.
seller's surplus is
the difference between the $ the seller receives and the sellers reservation $