Chapter 4 Macro Slice

When there is a surplus in a market: A. sellers have an incentive to reduce their prices so they can outcompete other sellers and sell less. B. sellers have an incentive to reduce their prices so they can outcompete other sellers and sell more. C. sellers have an incentive to raise their prices so they can outcompete other sellers and sell more. D. sellers have an incentive to raise their prices so they can outcompete other sellers and sell less.

B. sellers have an incentive to reduce their prices so they can outcompete other sellers and sell more.

If demand increases, ceteris paribus, market price will be ______ at the new equilibrium point. lower either higher or lower the same higher

higher

If in a market there are no unexploited gains from trade and no wasteful trades, it must be that: A. the difference between consumer surplus and producer surplus is maximized. B. the lowest-value buyers and the highest-cost sellers are trading. C. the equilibrium quantity is being produced. D. consumer surplus and producer surplus are equal.

C. the equilibrium quantity is being produced.

The equilibrium price is the price where: A. the quantity demanded is the opposite of the quantity supplied. B. there is the greatest pressure on the price to change. C. the quantity demanded is equal to the quantity supplied. D. the quantity demanded and the quantity supplied are both zero.

C. the quantity demanded is equal to the quantity supplied.

An early frost in the vineyards of Napa Valley would cause a(n): increase in the supply of wine, decreasing price .increase in the demand for wine, increasing price. decrease in the demand for wine, decreasing price. decrease in the supply of wine, increasing price.

decrease in the supply of wine, increasing price.

A surplus will occur in the market for oil if: A. the price of oil is above the equilibrium price. B. the quantity of oil is below the equilibrium quantity. C. the quantity of oil is above the equilibrium quantity. D. the price of oil is below the equilibrium price.

A. the price of oil is above the equilibrium price.

Economic growth in China has led to more Chinese people owning cars, which: increased demand and supply of oil, causing oil prices to increase rapidly. decreased demand for oil, causing oil prices to rise. increased demand for oil but decreased supply, causing oil prices to increase rapidly. increased demand for oil, causing oil prices to rise.

increased demand for oil, causing oil prices to rise.

In a free market setting where quantity supplied is 50 units and quantity demanded is 40 units, price will: move in an indeterminate direction remain the same. rise. fall.

fall

What is the difference between a change in the demand and a change in quantity demanded? A change in demand requires a movement along the demand curve; a change in quantity demanded does not. A change in demand shifts the entire curve; a change in quantity demanded means price changed. A change in demand creates a new market equilibrium; a change in quantity demanded does not. A change in quantity demanded means consumer preferences have changed.

A change in demand shifts the entire curve; a change in quantity demanded means price changed.

The equilibrium quantity is equal to: A. both quantity demanded and quantity supplied at the equilibrium price. B. the higher of quantity demanded and quantity supplied, which are different, at the equilibrium price. C. the lower of quantity demanded and quantity supplied, which are different, at the equilibrium price. D. the equilibrium price.

A. both quantity demanded and quantity supplied at the equilibrium price.

Markets find equilibrium, and maximize gains from trade, when: A. buyers and sellers act in their own self interest. B. buyers and sellers act in the best interest of society. C. government closely regulates prices. D. buyers and sellers compete with each other.

A. buyers and sellers act in their own self interest.

At the equilibrium price for oil, only the _______ buyers buy oil and only the _______ sellers sell oil. A. low-value; low cost B. high-value; high-cost C. low-value; high cost D. high-value; low-cost

D. high-value; low-cost

The demand and supply curves show how buyers and sellers ________; the interaction of buyers and sellers ________. A. compete against each other; determines the winner B. compete against each other; shows that there is no winner C. determine the price; shows how they respond to prices D. respond to prices; determines the price

D. respond to prices; determines the price

The equilibrium price is the only ________ price. A. fair B. profitable C. true D. stable

D. stable

In Vernon Smith's supply and demand lab experiment: there were many unrealized gains from trade. the subjects did not know their own willingness to pay or sell. it took a long time to arrive at equilibrium. Smith knew the true demand and supply curves, but the subjects did not.

Smith knew the true demand and supply curves, but the subjects did not.

Brazilian rosewood is renowned for its tonal qualities and gorgeous figuring on acoustic guitars. However, Brazilian rosewood is now banned from use in the construction of new guitars. What will likely happen to the price of used Brazilian rosewood guitars over time? The price for used Brazilian rosewood guitars will decrease as fewer people decide to sell their rosewood guitars. The price of used Brazilian rosewood guitars will increase at first and then decrease, since an increase in demand raises prices, causing people to buy less of the product. The price for used Brazilian rosewood guitars will increase because there will be a smaller supply of those guitars on the used market.

The price for used Brazilian rosewood guitars will increase as more people try to cash in by selling their increasingly rare rosewood guitars.

Which choice explains how the OPEC crisis of 1973 affected oil prices? The supply of oil was reduced, leading to a rise in oil prices. The demand for oil increased, leading to a rise in oil prices. The demand for oil decreased, leading to a fall in oil prices. The supply of oil was increased, leading to a fall in oil prices.

The supply of oil was reduced, leading to a rise in oil prices.

Tim values treats for his dog at $10 per box, and John values them at $6 per box. If the price of dog treats is $3 per box, but only one box is available between these two buyers, then gains from trade will be maximized when: John buys the treats. either buys the treats, since they both value them more than the market price. Tim buys the treats. consumer surplus is equal to $3.

Tim buys the treats.

A technological innovation in the production of golf balls increases ______, causing the price to ______ and the ______. supply; fall; quantity demanded to increase the quantity supplied; fall; quantity demanded to increase supply; fall; demand to increase supply; rise; demand to decrease

supply; fall; quantity demanded to increase

An increase in demand causes a: temporary shortage at the old equilibrium price and a higher new equilibrium price and quantity. temporary shortage at the old equilibrium price, a higher new equilibrium price, and a lower new equilibrium quantity. temporary surplus at the old equilibrium price and a lower equilibrium price and quantity. permanent shortage, leaving the equilibrium price and quantity unchanged.

temporary shortage at the old equilibrium price and a higher new equilibrium price and quantity.

At the market equilibrium: A. all units that sellers could possibly produce are sold. B. all trades that generate gains from trade greater than the price take place, and no trades that generate gains from trade less than the price are produced. C. all trades that can generate gains from trade take place, and no trades take place that would not generate gains from trade. D. all units that buyers could possibly buy are purchased.

C. all trades that can generate gains from trade take place, and no trades take place that would not generate gains from trade.

Gains from trade are maximized at market equilibrium because: A. only the lowest-value buyers buy and only the highest-cost sellers sell. B. only the lowest-value buyers buy and only the lowest-cost sellers sell. C. only the highest-value buyers buy and only the lowest-cost sellers sell. D. only the highest-value buyers buy and only the highest-cost sellers sell.

C. only the highest-value buyers buy and only the lowest-cost sellers sell.

In a market, buyers compete with ________, and sellers compete with ________ . A. sellers; sellers as well B. buyers; buyers as well C. other buyers; other sellers D. sellers; buyers

C. other buyers; other sellers

At a price lower than the equilibrium price, there is a _______, and buyers _______. A. surplus; demand less than sellers are willing to sell B. surplus; demand more than sellers are willing to sell C. shortage; demand more than sellers are willing to sell D. shortage; demand less than sellers are willing to sell

C. shortage; demand more than sellers are willing to sell

The "gains from trade" can be defined as: A. the difference between a good's quantity and its price. B. the difference between a good's value and its price. C. the difference between a good's price and its cost. D. the difference between a good's value and its cost.

D. the difference between a good's value and its cost.

Graphically speaking, the equilibrium price and quantity can be found by locating: A. the quantity where price demanded and price supplied are equal. B. the bottom of the supply and demand curves. C. the top of the supply and demand curves. D. the intersection of the supply and demand curves.

D. the intersection of the supply and demand curves.

Suppose there is an increase in demand in a market and no change in the supply. What will happen to the market equilibrium price and quantity? Equilibrium price will rise; equilibrium quantity will rise. Equilibrium price will fall; equilibrium quantity will rise. Equilibrium price will fall; equilibrium quantity will fall. Equilibrium price will rise; equilibrium quantity will fall.

Equilibrium price will rise; equilibrium quantity will rise.