Chapter 3 (Micro)

Given linear demand curves, if demand and supply both increase but demand increases by a greater amount than supply, then:

the equilibrium price and quantity both increase.

Given linear demand curves, if demand and supply increase by identical amounts, then:

the equilibrium price stays the same and the equilibrium quantity rises.

Given linear demand curves, if demand increases and supply decreases, then __________.

the equilibrium price will increase but the effect on the equilibrium quantity will be ambiguous

All of the following scenarios depict the characteristics of substitutes except: the price of bacon increases and the demand for eggs decreases. the price of automobiles decreases and the demand for public transit decreases. the price of coffee increases and the demand for tea increases. the price of tennis rackets decreases and the demand for golf clubs decreases.

the price of bacon increases and the demand for eggs decreases.

All of the following scenarios depict the characteristics of complements except: the price of coffee increases and the demand for cream increases. the price of bacon decreases and the demand for eggs increases. the price of automobiles decreases and the demand for tires increases. the price of tennis racquets increases and the demand for tennis shoes decreases.

the price of coffee increases and the demand for cream increases.

At the market equilibrium​ price,

quantity demanded equals quantity supplied.

In a price system:

relative prices change constantly to reflect changes in supply and demand.

Which of the following will cause an outward (rightward) shift in supply?

A technological improvement.

Which of the following is consistent with the law of supply? An increase in the market price of MP3 players causes an increase in the production of MP3 players. A reduction of the price of salt led to a 5 percent increase in the quantity of salt consumed. Fewer passengers chose to travel by airplane after the terrorist strikes of 9/11. The state of California has less grape regulation than New York, and grape production is lower in New York.

An increase in the market price of MP3 players causes an increase in the production of MP3 players.

Which of the following would cause an increase in the demand for fish​? A. A decrease in consumer incomes ​(fish is a normal​ good). B. A decrease in the price of fish. C. An increase in the price of chicken​, a substitute for fish. D. An increase in the number of firms in the market.

C. An increase in the price of chicken​, a substitute for fish.

Which of the following would cause an increase in the supply of beef​? A. An increase in the number of buyers in the market. B. An increase in the price of beef. C. An increase in taxes. D. A decrease in the price of inputs to beef production.

D. A decrease in the price of inputs to beef production.

Assume the cost of aluminum used by soft-drink companies increases. Which of the following correctly describes the resulting effects in the market for canned soft drinks? I. The demand for soft drinks decreases. II. The quantity of soft drinks demanded decreases. III. The supply of soft drinks decreases. IV. The quantity of soft drinks supplied decreases.

II and III

The market for corn is initially in equilibrium. Suppose that the production of biofuels, which use corn as an input, increase, and at the same time, increases in the price of oil cause farm production costs to rise. Which of the following explains the effect on equilibrium price and quantity in the corn market? The price of corn will rise, but the effect on equilibrium quantity cannot be determined without more information. The price and quantity of corn will rise. The price and quantity of corn will fall. The quantity of corn will rise, but the effect on equilibrium price cannot be determined without more information. The quantity of corn will fall, but the effect on equilibrium price cannot be determined without more information.

The price of corn will rise, but the effect on equilibrium quantity cannot be determined without more information.

Washington state had a bumper apple crop this year, significantly increasing the supply of apples in the U.S. Given this information, choose the statement that correctly describes the effect on the U.S. apple market. The quantity of apples demanded will increase as the price of apples falls. The demand for apples will increase as the price of apples falls. The quantity of apples demanded will increase at every price. The quantity of apples supplied will increase at every price, increasing the price of apples.

The quantity of apples demanded will increase as the price of apples falls.

Which of the following represents an inferior good? When consumer income increases, the demand for bologna decreases. When consumer income decreases, the demand for steak decreases. When consumer income increases, the demand for tea increases. When consumer income decreases, the demand for aspirin is unchanged.

When consumer income increases, the demand for bologna decreases.

Other things remaining equal, the law of demand says that higher prices will lead to:

a smaller quantity demanded and lower prices to a larger quantity demanded.

The condition that exists when quantity supplied exceeds quantity demanded at the current price is known as __________.

a surplus or excess supply

All of the following will decrease the supply of airline flights except: a technological change that makes airplanes safer and more fuel-efficient. a rise in the price of jet fuel. a reduction in the number of airline companies offering service. an increase in the salaries of pilots.

a technological change that makes airplanes safer and more fuel-efficient.

At the market equilibrium price:

quantity demanded equals quantity supplied.

Economists assume that when there is a change in demand and/or supply, that prices reach a new equilibrium:

after an adjustment period that varies.

The law of demand states that

as price​ increases, quantity demanded​ decreases, all other things equal.

The law of supply states that

as price​ increases, quantity supplied​ increases, all other things equal.

Market price is determined by _________.

both supply and demand