CH4-5 FINAL REVIEW

Assume that airline travel is a normal good. Higher incomes would Answer A. increase both the price and the quantity of airline travel. B. decrease both the price and quantity of airline travel. C. increase the price and decrease the quantity of airline travel D. decrease the price and increase the quantity of airline travel.

A

If both supply and demand decreased, but supply decreased more than demand, the result would be Answer A. a higher price and a lower equilibrium quantity. B. a lower price and a lower equilibrium quantity. C. no change in the price and a lower equilibrium quantity. D. a higher price and a greater equilibrium quantity. E. a lower price and a greater equilibrium quantity.

A

If the equilibrium price of wheat is $3 per bushel and then a price floor of $2.50 per bushel is imposed by the government, Answer A. there will be no effect on the wheat market. B. there will be a shortage of wheat. C. there will be a surplus of wheat. D. the price of wheat will decrease.

A

Along a supply curve, Answer A. supply changes as price changes. B. quantity supplied changes as price changes. C. supply changes as technology changes. D. quantity supplied changes as technology changes.

B

Buyers determine the_______ side of the market; sellers determine the ________side of the market. Answer A. demand; demand B. demand; supply C. supply; demand D. supply; supply

B

If incomes are rising, in the market for an inferior good, Answer A. demand will rise. B. demand will fall. C. supply will rise. D. supply will fall.

B

If you observed the price of a good decreasing and the quantity exchanged decreasing, it would be most likely caused by a(n) Answer A. increase in demand. B. decrease in demand. C. increase in supply. D. decrease in supply.

B

Suppose CNN announces that bad weather in Central America has greatly reduced the number of cocoa bean plants and for this reason the price of chocolate is expected to rise soon. As a result, Answer A. the current market demand for chocolate will decrease. B. the current market demand for chocolate will increase. C. the current quantity demanded for chocolate will decrease. D. no change will occur in the current market for chocolate.

B

What will cause a shift in the demand curve? hint PYNTE

Changes in: P- Price of good Y- Income N- number of buyers T- taste E- expectations

A current surplus is due to a price floor. If the price floor is removed, Answer A. price would increase, quantity demanded would increase, and quantity supplied would increase. B. price would increase, quantity demanded would decrease, and quantity supplied would decrease. C. price would decrease, quantity demanded would increase, and quantity supplied would decrease. D. price would decrease, quantity demanded would decrease, and quantity supplied would increase.

C

A leftward shift in supply could be caused by Answer A. an improvement in productive technology. B. a decrease in income. C. some firms leaving the industry. D. a fall in the price of inputs to the industry.

C

A supply curve illustrates a(n) _______relationship between ______and ______. Answer A. direct; price; supply B. direct; price; quantity demanded C. direct; price; quantity supplied D. introverted; price; quantity demanded E. inverse; price; quantity supplied

C

An upward-sloping supply curve shows that Answer A. buyers are willing to pay more for particularly scarce products. B. sellers expand production as the product price falls. C. sellers are willing to increase production of their goods if they receive higher prices for them. D. buyers are willing to buy more as the product price falls.

C

A market will experience a _____in a situation where quantity supplied exceeds quantity demanded and a _____in a situation where quantity demanded exceeds quantity supplied. Answer A. shortage; shortage B. surplus; surplus C. shortage; surplus D. surplus; shortage

D

All of the following factors will affect the supply of shoes except one. Which will not affect the supply of shoes? Answer A. higher wages for shoe factory workers B. higher prices for leather C. a technological improvement that reduces waste of leather and other raw materials in shoe production D. an increase in consumer income

D

Antonio's makes the greatest pizza and delivers it hot to all the dorms around campus. Last week Antonio's supplier of pepperoni informed him of a 25 percent increase in price. Which variable determining the position of the supply curve has changed, and what effect does it have on supply? Answer A. future expectations; supply decreases B. future expectations; supply increases C. input prices; supply decreases D. input prices; supply increases E. technology; supply increases

C

Which of the following is true? Answer A. The intersection of the supply and demand curves shows the equilibrium price and equilibrium quantity in a market. B. A surplus is a situation where quantity supplied exceeds quantity demanded. C. A shortage is a situation where quantity demanded exceeds quantity supplied. D. Shortages and surpluses set in motion actions by many buyers and sellers that will move the market toward the equilibrium price and quantity unless otherwise prevented. E. All of the above are true.

E

Which of the following is true? Answer A. The relationship between price and quantity demanded is inverse or negative. B. The market demand curve is the vertical summation of individual demand curves. C. A change in a good's price causes a movement along its demand curve. D. All of the above are true. E. Answers (a) and (c) are true.

E

Which of the following will most likely occur with a 20 percent increase in the minimum wage? Answer A. higher unemployment rates among experienced and skilled workers B. higher unemployment rates among young and low-skilled workers C. lower unemployment rates for young and low-skilled workers D. the price floor (minimum wage) will be binding in the young and low-skilled labor market but not in the experienced and skilled labor market E. both (b) and (d)

E

Why is demand an inverse relatonship

because one decreases and the other increases

A current shortage is due to a price ceiling. If the price ceiling is removed, Answer A. price would increase, quantity supplied would increase, and quantity demanded would decrease. B. price would increase, quantity supplied would decrease, and quantity demanded would increase. C. price would decrease, quantity supplied would increase, and quantity demanded would decrease. D. price would decrease, quantity supplied would decrease, and quantity demanded would increase.

A

An increase in the expected future price of a good by consumers would, other things equal, Answer A. increase the current price and increase the current quantity exchanged. B. increase the current price and decrease the current quantity exchanged. C. decrease the current price and increase the current quantity exchanged. D. decrease the current price and decrease the current quantity exchanged.

A

Which of the following is a market? Answer A. a garage sale B. a restaurant C. the New York Stock Exchange D. an eBay auction E. all of the above

E

The difference between a change in quantity demanded and a change in demand is that a change in Answer A. quantity demanded is caused by a change in a good's own price, while a change in demand is caused by a change in some other variable, such as income, tastes, or expectations. B. demand is caused by a change in a good's own price, while a change in quantity demanded is caused by a change in some other variable, such as income, tastes, or expectations. C. quantity demanded is a change in the amount people actually buy, while a change in demand is a change in the amount they want to buy. D. This is a trick question. A change in demand and a change in quantity demanded are the same thing.

A

The difference between a change in quantity supplied and a change in supply is that a change in Answer A. quantity supplied is caused by a change in a good's own price, while a change in supply is caused by a change in some other variable, such as input prices, prices of related goods, expectations, or taxes. B. supply is caused by a change in a good's own price, while a change in the quantity supplied is caused by a change in some other variable, such as input prices, prices of related goods, expectations, or taxes. C. quantity supplied is a change in the amount people want to sell, while a change in supply is a change in the amount they actually sell. D. supply and a change in the quantity supplied are the same thing.

A

The price of a good will tend to rise when Answer A. a temporary shortage at the current price occurs (assuming no price controls are imposed). B. a temporary surplus at the current price occurs (assuming no price controls are imposed). C. demand decreases. D. supply increases.

A

When transportation costs are high relative to a good's selling price, Answer A. markets tend to be more local. B. markets tend to be more global. C. markets do not exist. D. it makes no difference in how local or global markets are.

A

Whenever the price of Good A decreases, the demand for Good B increases. Goods A and B appear to be Answer A. complements. B. substitutes. C. inferior goods. D. normal goods. E. inverse goods.

A

Which of the following is true? Answer A. Differences in the conditions under which the exchange between buyers and sellers occurs make it difficult to precisely define a market. B. All markets are effectively global in scope. C. All markets are effectively local in scope. D. Both (a) and (b) are true.

A

What are the two reasons why a supply curve is positively sloped?

A supply curve is positively sloped because (1) the benefits to sellers from selling increase as the price they receive increases, and (2) the opportunity costs of supplying additional output rise with output (the law of increasing opportunity costs), so it takes a higher price to make increasing output in the self-interest of sellers.

Whenever the price of Good A increases, the demand for Good B increases as well. Goods A and B appear to be Answer A. complements. B. substitutes. C. inferior goods. D. normal goods. E. inverse goods.

B

Which of the following would be most likely to increase the demand for jelly? Answer A. an increase in the price of peanut butter, which is often used with jelly B. an increase in income; jelly is a normal good C. a decrease in the price of jelly D. medical research that finds that daily consumption of jelly makes people live 10 years less, on average

B

Which of the following is not a determinant of supply? Answer A. input prices B. technology C. tastes D. expectations E. the prices of related goods

C

Which of the following is true? Answer A. A price ceiling reduces the quantity exchanged in the market, but a price floor increases the quantity exchanged in the market. B. A price ceiling increases the quantity exchanged in the market, but a price floor decreases the quantity exchanged in the market. C. Both price floors and price ceilings reduce the quantity exchanged in the market. D. Both price floors and price ceilings increase the quantity exchanged in the market.

C

If you observed the price of a good increasing and the quantity exchanged decreasing, it would be most likely caused by a(n) Answer A. increase in demand. B. decrease in demand. C. increase in supply. D. decrease in supply.

D

In a competitive market, Answer A. there are a number of buyers and sellers. B. no single buyer or seller can appreciably affect the market price. C. sellers offer similar products. D. all of the above are true.

D

Other things equal, a decrease in consumer income would Answer A. increase the price and increase the quantity of autos exchanged. B. increase the price and decrease the quantity of autos exchanged. C. decrease the price and increase the quantity of autos exchanged. D. decrease the price and decrease the quantity of autos exchanged.

D

Section Quiz If the demand for milk is downward sloping, then an increase in the price of milk will result in a(n) Answer A. increase in the demand for milk. B. decrease in the demand for milk. C. increase in the quantity of milk demanded. D. decrease in the quantity of milk demanded. E. decrease in the supply of milk.

D

Which of the following is true? Answer A. The law of demand states that when the price of a good falls (rises), the quantity demanded rises (falls), ceteris paribus. B. An individual demand curve is a graphical representation of the relationship between the price and the quantity demanded. C. The market demand curve shows the amount of a good that all buyers in the market would be willing and able to buy at various prices. D. All of the above are true.

D

Which of the following is true? Answer A. The law of supply states that the higher (lower) the price of a good, the greater (smaller) the quantity supplied. B. The relationship between price and quantity supplied is positive because profit opportunities are greater at higher prices and because the higher production costs of increased output mean that suppliers will require higher prices. C. The market supply curve is a graphical representation of the amount of goods and services that suppliers are willing and able to supply at various prices. D. All of the above are true.

D

Which of the following would not cause a change in the demand for cheese? Answer A. an increase in the price of crackers, which are consumed with cheese B. an increase in the income of cheese consumers C. an increase in the population of cheese lovers D. an increase in the price of cheese

D

If a price floor was set at the current equilibrium price, which of the following would cause a surplus as a result? Answer A. an increase in demand B. a decrease in demand C. an increase in supply D. a decrease in supply E. either (b) or (c)

E

Which of the following are true statements? Answer A. Changes in demand will cause a change in the equilibrium price and/or quantity, ceteris paribus. B. Changes in supply will cause a change in the equilibrium price and/or quantity, ceteris paribus. C. Supply and demand curves can shift simultaneously in response to changes in both supply and demand determinants. D. When simultaneous shifts occur in both supply and demand curves, we will be able to determine one, but not both, of the variables. E. All of the above are true.

E