Chapter 3

In the past few years, the demand for donuts has greatly increased. This increase in demand might best be explained by:

a change in buyer tastes.

Assume that the demand curve for product C is downsloping. If the price of C falls from $2.00 to $1.75:

a larger quantity of C will be demanded

Refer to the diagram. A price of $60 in this market will result in:

a surplus of 100 units.

If X is a normal good, a rise in money income will shift the:

demand curve for X to the right

Suppose that in the clothing market, production costs have fallen, but the equilibrium price and quantity purchased have both increased. Based on this information we can conclude that:

demand for clothing has grown faster than the supply of clothing.

(Consider This) Suppose that coffee growers sell 200 million pounds of coffee beans at $2 per pound in 2015 and 240 million pounds for $3 per pound in 2016. Based on this information, we can conclude that the:

demand for coffee beans has increased

(Consider This) Suppose that coffee growers sell 200 million pounds of coffee beans at $2 per pound in 2015 and 240 million pounds for $3 per pound in 2016. Based on this information, we can conclude that the:

demand for coffee beans has increased.

Refer to the table. In relation to column (3), a change from column (5) to column (4) would indicate a(n):

decrease in supply.

Suppose an excise tax is imposed on product X. We expect this tax to:

decrease the demand for complementary good Y and increase the demand for substitute product Z.

The relationship between quantity supplied and price is _____ and the relationship between quantity demanded and price is _____.

direct; inverse

(Last Word) A market for human organs (rather than the current volunteer-donor system) would be expected to:

eliminate the shortage of organs.

(Consider This) Ticket scalping implies that:

event sponsors have established ticket prices at below-equilibrium levels

(Consider This) Ticket scalping implies that:

event sponsors have established ticket prices at below-equilibrium levels.

An increase in the price of product A will:

increase the demand for substitute product B

At the current price there is a shortage of a product. We would expect price to:

increase, quantity demanded to decrease, and quantity supplied to increase.

Assume the demand curve for product X shifts to the right. This might be caused by:

a decline in income if X is an inferior good

A decrease in the demand for recreational fishing boats might be caused by an increase in the:

price of outboard motors

Refer to the diagram. A decrease in demand is depicted by a:

shift from D2 to D1

Refer to the diagram. A surplus of 160 units would be encountered if the price was:

$1.60.

Other things equal, which of the following might shift the demand curve for gasoline to the left?

The development of a low-cost electric automobile.

In moving along a supply curve, which of the following is not held constant?

The price of the product for which the supply curve is relevant.

When the price of Nike soccer balls fell, Ronaldo purchased more Nike soccer balls and fewer Adidas soccer balls. Which of the following best explains Ronaldo's decision to buy more Nike soccer balls?

The substitution effect.

A government subsidy to the producers of a product:

increases product supply

College students living off-campus frequently consume large amounts of ramen noodles and boxed macaroni and cheese. When they finish school and start careers, their consumption of both goods frequently declines. This suggests that ramen noodles and boxed macaroni and cheese are:

inferior goods.

Price floors and ceiling prices

interfere with the rationing function of prices.

If there is a surplus of a product, its price:

is above the equilibrium level.

The law of demand states that, other things equal

price and quantity demanded are inversely related

The demand curve shows the relationship between:

price and quantity demanded.

If the supply of a product decreases and the demand for that product simultaneously increases, then equilibrium:

price must rise, but equilibrium quantity may rise, fall, or remain unchanged.

Other things equal, if the price of a key resource used to produce product X falls, the:

product supply curve of X will shift to the right.

An increase in product price will cause:

quantity demanded to decrease

If we say that a price is too high to clear the market, we mean that:

quantity supplied exceeds quantity demanded.

Suppose that tacos and pizza are substitutes, and that soda and pizza are complements. We would expect an increase in the price of pizza to:

reduce the demand for soda and increase the demand for tacos

An effective price floor on wheat will:

result in a surplus of wheat.

Assume a drought in the Great Plains reduces the supply of wheat. Noting that wheat is a basic ingredient in the production of bread and potatoes are a consumer substitute for bread, we would expect the price of wheat to:

rise, the supply of bread to decrease, and the demand for potatoes to increase.

A government subsidy to the producers of a product:

increases product supply.

A demand curve:

indicates the quantity demanded at each price in a series of prices.

(Advanced analysis) Answer the question on the basis of the following information. The demand for commodity X is represented by the equation P = 10 - 0.2Q and supply by the equation P = 2 + 0.2Q. Refer to the given information. The equilibrium price for X is:

$6

(Advanced analysis) Answer the question on the basis of the following information. The demand for commodity X is represented by the equation P = 10 - 0.2Q and supply by the equation P = 2 + 0.2Q. Refer to the given information. The equilibrium price for X is:

$6.

Refer to the table. If demand is represented by columns (3) and (2) and supply is represented by columns (3) and (5), equilibrium price and quantity will be:

$8 and 60 units.

Refer to the diagram, which shows demand and supply conditions in the competitive market for product X. If the initial demand and supply curves are D0 and S0, equilibrium price and quantity will be:

0F and 0C, respectively

Which of the diagrams illustrate(s) the effect of a decline in the price of personal computers on the market for software?

A only.

Which of the following statements is correct?

If supply increases and demand decreases, equilibrium price will fall.

A surplus of a product will arise when price is

above equilibrium, with the result that quantity supplied exceeds quantity demanded.

Refer to the table. In relation to column (3), a change from column (4) to column (5) would most likely be caused by:

an improvement in production technology.

Refer to the diagram, in which S1 and D1 represent the original supply and demand curves and S2 and D2 the new curves. In this market:

an increase in demand has been more than offset by an increase in supply

A recent study found that an increase in the federal tax on beer (and thus an increase in the price of beer) would reduce the demand for marijuana. We can conclude that:

beer and marijuana are complementary goods.

If the demand for steak (a normal good) shifts to the left, the most likely reason is that:

consumer incomes have fallen

When an economist says that the demand for a product has increased, this means that:

consumers are now willing to purchase more of this product at each possible price.

In the following question you are asked to determine, other things equal, the effects of a given change in a determinant of demand or supply for product X upon (1) the demand (D) for, or supply (S) of, X; (2) the equilibrium price (P) of X; and (3) the equilibrium quantity (Q) of X. Refer to the given information. A decrease in the number of consumers of product X will:

decrease D, decrease P, and decrease Q.

A normal good is one:

for which the consumption varies directly with income

In the following question you are asked to determine, other things equal, the effects of a given change in a determinant of demand or supply for product X upon (1) the demand (D) for, or supply (S) of, X; (2) the equilibrium price (P) of X; and (3) the equilibrium quantity (Q) of X. Refer to the given information. Consumer expectations that the price of X will rise sharply in the future will:

increase D, increase P, and increase Q

In the following question you are asked to determine, other things equal, the effects of a given change in a determinant of demand or supply for product X upon (1) the demand (D) for, or supply (S) of, X; (2) the equilibrium price (P) of X; and (3) the equilibrium quantity (Q) of X. Refer to the given information. An increase in the price of a product that is a close substitute for X will:

increase D, increase P, and increase Q.

In the following question you are asked to determine, other things equal, the effects of a given change in a determinant of demand or supply for product X upon (1) the demand (D) for, or supply (S) of, X; (2) the equilibrium price (P) of X; and (3) the equilibrium quantity (Q) of X. Refer to the given information. If X is an inferior good, a decrease in income will:

increase D, increase P, and increase Q.

With a downsloping demand curve and an upsloping supply curve for a product, an increase in consumer income will:

increase equilibrium price and quantity if the product is a normal good.

Refer to the table. In relation to column (3), a change from column (2) to column (1) would indicate a(n):

increase in demand.

Refer to the diagram, which shows demand and supply conditions in the competitive market for product X. A shift in the demand curve from D0 to D1 might be caused by a(n):

increase in the price of complementary good Y.

The equilibrium price and quantity in a market usually produce allocative efficiency because:

marginal benefit and marginal cost are equal at that point.

If a legal ceiling price is set above the equilibrium price:

neither the equilibrium price nor the equilibrium quantity will be affected.

If an economy produces its most wanted goods but uses outdated production methods, it is:

not achieving productive efficiency.

A decrease in the price of digital cameras will:

shift the demand curve for memory cards to the right.

Refer to the diagram. A price of $20 in this market will result in a:

shortage of 100 units

In 2007, the price of oil increased, which in turn caused the price of natural gas to rise. This can best be explained by saying that oil and natural gas are:

substitute goods and the higher price for oil increased the demand for natural gas.

An increase in the excise tax on cigarettes raises the price of cigarettes by shifting the:

supply curve for cigarettes leftward.

Refer to the diagram, in which S1 and D1 represent the original supply and demand curves and S2 and D2 the new curves. In this market the indicated shift in supply may have been caused by:

the development of more efficient machinery for producing this commodity.

When the price of a product falls, the purchasing power of our money income rises and thus permits consumers to purchase more of the product. This statement describes:

the income effect

Allocative efficiency refers to:

the production of the product mix most wanted by society.

Suppose that corn prices rise significantly. If farmers expect the price of corn to continue rising relative to other crops, then we would expect:

the supply to increase as farmers plant more corn

Productive efficiency refers to:

the use of the least-cost method of production

At the equilibrium price:

there are no pressures on price to either rise or fall.