Macro Test 1

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

$0.50

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

$1.60

Refer to the diagram. If this is a competitive market, price and quantity will move toward:

$40 and 150, respectively

Refer to the diagram. The highest price that buyers will be willing and able to pay for 100 units of this product is:

$60

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 diagrams illustrate(s) the effect of a decrease in incomes on the market for secondhand clothing?

A only.

Which of the following will cause the demand curve for product A to shift to the left?

An increase in money income if A is an inferior good.

Which of the following will cause a decrease in market equilibrium price and an increase in equilibrium quantity?

An increase in supply.

Which of the diagrams illustrate(s) the effect of a decline in the price of irrigation equipment on the market for corn?

C only.

Which of the diagrams illustrates the effect of a governmental subsidy on the market for AIDS research?

C only.

Which of the diagrams illustrates the effect of an increase in automobile worker wages on the market for automobiles?

D only.

In which of the following instances is the effect on equilibrium price dependent on the magnitude of the shifts in supply and demand?

Demand rises and supply rises.

A decrease in supply of X increases the equilibrium price of X, which reduces the demand for X and automatically returns the price of X to its initial level.

False

Surpluses drive market prices up; shortages drive them down.

False

Refer to the four graphs above. Select the graph above that best shows the changes in demand and supply in the market specified in the following situation: In the market for corn, if gasoline producers use more ethanol from corn, and good weather during the growing season yields a bumper harvest.

Graph A

Refer to the four graphs above. Select the graph above that best shows the changes in demand and supply in the market specified in the following situation: In the market for music CDs sold in stores, if more consumers switch to music-downloads from the Internet, and the cost of making music CDs decreases because of technological improvement in production.

Graph C

Refer to the four graphs above. Select the graph that best shows the changes in demand and supply in the market specified in the following situation: In the market for beef, if a new diet fad favoring beef consumption becomes hugely popular, while cattle producers see steeply rising costs of cattle feed.

Graph D

Which of the following would most likely increase the demand for gasoline?

The expectation by consumers that gasoline prices will be higher in the future.

A government tax per unit of output reduces supply.

True

If two goods are complements:

a decrease in the price of one will increase the demand for the other.

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

a surplus of 100 units.

A surplus of a product will arise when price is:

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

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 demand may have been caused by:

an increase in incomes if the product is a normal good.

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

consumer incomes have fallen.

A shift to the right in the demand curve for product A can be most reasonably explained by saying that:

consumer preferences have changed in favor of A so that they now want to buy more at each possible price.

Assume in a competitive market that price is initially above the equilibrium level. We can predict that price will:

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

If Z is an inferior good, an increase in money income will shift the:

demand curve for Z to the left.

If products A and B are complements and the price of B decreases, the:

demand for A will increase and the quantity of B demanded will increase.

A market is in equilibrium:

if the amount producers want to sell is equal to the amount consumers want to buy.

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.

Refer to the diagram, which shows demand and supply conditions in the competitive market for product X. Other things equal, a shift of the supply curve from S0 to S1 might be caused by a(n):

increase in the wage rates paid to laborers employed in the production of X.

A demand curve:

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

If consumer incomes increase, the demand for product X:

may shift either to the right or left.

Refer to the diagram. An increase in quantity supplied is depicted by a:

move from point y to point x.

The demand curve shows the relationship between:

price and quantity demanded.

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

price of outboard motors.

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

quantity supplied exceeds quantity demanded.

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

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

shift from D2 to D1.

A decrease in the price of digital cameras will:

shift the demand curve for memory cards to the right.

If products C and D are close substitutes, an increase in the price of C will:

shift the demand curve of D to the right.

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

shortage of 100 units.

Refer to the diagram, which shows demand and supply conditions in the competitive market for product X. Given D0, if the supply curve moved from S0 to S1, then:

supply has decreased and equilibrium quantity has decreased.

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.

By an "increase in demand," economists mean that:

the quantity demanded at each price in a set of prices is greater.

At the point where the demand and supply curves for a product intersect:

the quantity that consumers want to purchase and the amount producers choose to sell are the same.