econ chapter 3 quiz review

Suppose that the price of coal falls in the market. According to the law of supply, what will happen?

A lower quantity of coal will be supplied in the market.

Let's assume that in the market for watermelons the equilibrium price is 50 cents for a pound of watermelon, and the quantity sold is approximately 10 pounds. What kind of price control could create an excess supply of watermelons?

A price floor of 75 cents per pound

Suppose the price of Dasani bottled water decreases. What would you expect to happen to the demand for Aquafina bottled water? Dasani and Aquafina bottled water are substitute goods.

demand for Aquafina bottled water will decrease

The graph below represents the market for gasoline. The price ceiling causes a shortage of ______ thousands of gallons of gas.

1,060

The graph below represents the fertilizer market. The price floor causes a surplus of ______ truckloads of fertilizer.

366

What are some potential examples of demand "shift factors"?

All of the other three answers: prices of related goods and services income consumer tastes

All of these scenarios cause the Demand Curve for a product to shift (left or right), except for one. Identify that one scenario that does not shift the Demand Curve.

All of these scenarios cause the Demand Curve for a product to shift (left or right), except for one. Identify that one scenario that does not shift the Demand Curve.

When considering factors that shift demand curves, which of the following will increase demand?

An increase in income (for a normal good)

You are responsible for setting prices of finished clothing items at a major textile manufacturer. In the past year the price of cotton, a critical input, has increased by 20%. What is the likely result?

Supply of clothing will decrease.

Assume a market is currently at the equilibrium price and quantity, and a price ceiling is set below equilibrium price. Which of the following statements is true:

The quantity demanded will rise and the quantity supplied will fall, causing a shortage.

Suppose there is a decrease in the price of butter. What do we expect to happen to the demand for bread? Assume that bread and butter are often consumed together.

There will be an increase in demand for bread.

Assuming all other variables that affect supply are held constant, which of the following outcomes happen in the market for DVD players if the price of DVD players increases?

There will be an increase in the quantity supplied of DVD players.

Which of the following is not a factor that could cause a shift in supply for a certain good?

a change in income

An effective price floor is set ___________ equilibrium and is meant to help the producer and results in a ______________.

above, surplus

In the context of observing how changes in price affect quantity demanded, the ceteris paribus assumption means that __________.

all variables other than price and quantity demanded are held constant

Suppose that you really enjoy going to the movie theater, but at your current level of income, it is more affordable to rent a movie at home. Then suppose you receive a promotion and your income rises. With this extra money, you go to the movie theater more often instead of renting movies. This scenario demonstrates that to you, rental movies are a(n) ________ good and movies at the movie theater are a(n) _________ good.

inferior; normal

Using the graph below, if a price is set at $10, a ____________ will result, with eventual downward pressure on the price to reach equilibrium.

surplus

Suppose that the demand and supply curves have similar steepness. If demand for the good increases slightly and at the same time supply of that good significantly decreases, the equilibrium price of the good will ________ and the equilibrium quantity of the good will ________.

increase; decrease

A fall in production costs will result in a(n) ___________ in supply and a ___________ shift of the supply curve.

increase; rightward

Figure: Shifts in Demand and Supply (Figure: Shifts in Demand and Supply) Look at the figure Shifts in Demand and Supply. The figure shows how supply and demand might shift in response to specific events. Suppose consumer incomes increase. Which panel BEST describes how this will affect the market for used furniture, an inferior good?

panel D

When trying to understand supply and quantity supplied, quantity supplied refers to the _____________ and supply refers to the _____________.

point on the supply curve; curve

Quantity demanded is different from demand because _________________________.

quantity demanded is the number of units consumers demand at a specific price, while demand is a schedule comprised of quantity demanded at different prices

Where supply and demand intersect on a graph, quantity demanded equals quantity supplied and there is no excess supply-surplus or excess demand-shortage. This intersection is referred to as ________________.

the equilibrium

According to the law of demand, if all else remains equal, as the price of a good becomes lower, then _________________________.

the quantity demanded of the good will increase