Macroeconomics Midterm Part 1

During the recession of 2007-2009, despite falling income levels, McDonald's experienced increased sales. The increase in demand for Big Macs despite the decline in income indicates that Big Macs are considered

inferior goods.

Which of the following is the correct way to describe equilibrium in a market?

At equilibrium, quantity demanded equals quantity supplied.

The popularity of digital cameras has enticed large discount stores like Wal-Mart and Costco to offer digital photo printing services. How does this affect the digital photo printing market?

The supply curve for digital photo printing services shifts to the right.

Which of the following would cause both the equilibrium price and equilibrium quantity of cotton (assume that cotton is a normal good) to increase?

an increase in consumer income

Select the phrase that correctly completes the following statement. "A positive change in technology caused an increase in the supply of flat-screen televisions. As a result ________."

the price of flat-screen televisions decreased and the quantity demanded of flat-screen televisions increased

What is the difference between an "increase in demand" and an "increase in quantity demanded"?

An "increase in demand" is represented by a rightward shift of the demand curve while an "increase in quantity demanded" is represented by a movement along a given demand curve.

What is the difference between an "increase in supply" and an "increase in quantity supplied"?

An "increase in supply" means the supply curve has shifted to the right while an "increase in quantity supplied" refers to a movement along a given supply curve in response to an increase in price.

If the demand for a product increases and the supply of the same product increases, the equilibrium price will increase.

False

If the number of firms producing mouthwash increases and consumer preference for mouthwash increases, the equilibrium price of mouthwash will definitely increase.

False

Market equilibrium occurs where supply equals demand.

False

Prices of California Merlot wine (assume that this is a normal good) have risen steadily in recent years. Over this same period, prices for French oak barrels used for wine storage have dropped and consumer incomes have risen. Which of the following best explains the rising prices of California Merlots?

The demand curve for Merlot has shifted to the right more than the supply curve has shifted to the right.

Technological advances have resulted in lower prices for digital cameras. What is the impact of this on the market for traditional (non-digital) cameras?

The demand curve for traditional cameras shifts to the left.

Positive technological change in the production of LCD televisions caused the price of LCD televisions to fall. Holding everything else constant, how would this affect the market for blu-ray players (a complement to LCD televisions)?

The demand for blu-ray players would increase and the equilibrium price of blu-ray players would increase.

The following appeared in a Florida newspaper a week after a hurricane hit the state. "Floridians are relieved that the storm produced no fatalities but homeowners face weeks, if not months, of rebuilding. Matters are made worse by the soaring prices of plywood and other building materials that always follow in a hurricane's path. Complaints of profiteering and price gouging have not deterred firms from raising their prices by over 100 percent." Which of the following offers the best explanation for the price increases referred to in the article?

The hurricane caused an increase in the demand for building materials.

In October 2005, the U.S. Fish and Wildlife Service banned the importation of beluga caviar, the most prized of caviars, from the Caspian Sea. What happened in the market for caviar in the U. S.?

The supply curve shifted to the left.

As the number of firms in a market decreases, the supply curve will shift to the left and the equilibrium price will rise.

True

If the demand curve for a product shifts to the left and the supply curve for the product shifts to the left, the equilibrium quantity will decrease.

True

Scarcity is defined as the situation that exists when the quantity demanded for a good is greater than the quantity supplied.

True

Last year, the Pottery Palace supplied 8,000 ceramic pots at $40 each. This year, the company supplied the same quantity of ceramic pots at $55 each. Based on this evidence, The Pottery Palace has experienced

a decrease in supply.

Which of the following will shift the demand curve for a good?

a decrease in the price of a complementary good

If an increase in income leads to in an increase in the demand for peanut butter, then peanut butter is

a normal good.

If an increase in income leads to a decrease in the demand for popcorn, then popcorn is

an inferior good.

A successful marketing campaign will increase the demand for Red Bull. This will ________ the equilibrium price and ________ the equilibrium quantity of Red Bull.

increase; increase

Olive oil producers want to sell more olive oil at a higher price. Which of the following events would have this effect?

research finds that consumption of olive oil reduces the risk of heart disease

An increase in demand causes a change in equilibrium price;

the change in price does not cause a further change in demand or supply.

The Internet has created a new category in the book selling market, namely, the "barely used" book. How does the availability of barely used books affect the market for new books?

the demand curve for new books shifts to the left.

If the price of automobiles was to increase, then

the demand for gasoline would decrease.

A change in all of the following variables will change the market demand for a product except

the price of the product.