Micro Chapter 3

Other things being equal, the effects of an increase in the price of computers would best be represented by which of the following? a. A movement up along the demand curve for computers. b. A movement down along the demand curve for computers. c. A leftward shift in the demand curve for computers. d. A rightward shift in the demand curve for computers

A

shortage

A market condition existing at any price where the quantity supplied is less than the quantity demanded is a (an) ________

Change in quantity demanded

A movement along a stationary demand curve caused by a change in price

change in quantity supplied

A movement along a stationary supply curve in response to a change in price is called a

Assume Congress passes a new tax of $2.00 per pack on cigarettes. The effect on the supply curve is a (an): a. decrease in supply. b. increase in supply. c. decrease in quantity supplied. d. increase in quantity supplied

A

Exhibit 1 Supply for Tucker's Cola data Quantity supplied per week (millions of gallons) Price per gallon 6 $3.00 5 2.50 4 2.00 3 1.50 2 1.00 1 .50 17. As shown in Exhibit 1, the price and quantity supplied by sellers of Tucker's Cola have a (an) relationship. a. direct. b. inverse. c. negative. d. zero.

A

Exhibit 2 Supply and demand curves In Exhibit 2, at a price of $.50 the market for good X will experience a: a. shortage of 100 units. b. surplus of 100 units. c. shortage of 300 units. d. surplus of 200 units.

A

market

A (an) _______ is any arrangement in which buyers and sellers interact to determine the price and quantity of goods and services exchanged.

inferior good

A (an) _____________ is one that there is an inverse relationship between changes in income and its demand curve

substitute good

A (an) _______________ is one that competes with another good for consumer purchases. As a result, there is a direct relationship between a price change for one good and the demand for its "competitor" good

complementary good

A (an) __________________ is one that is jointly consumed with another good. As a result, there is an inverse relationship between a price change for one good and the demand for its "go together" good

Assume that Coca-Cola and Pepsi-Cola are substitutes. A rise in the price of Coca-Cola will have which of the following effects on the market for Pepsi? a. A movement down along the Pepsi demand curve. b. A rightward shift in the Pepsi demand curve. c. A movement up along the Pepsi demand curve. d. A leftward shift in the Pepsi demand curve

B

Assume that crackers and soup are complementary goods. The effect on the soup market of an increase in the price of crackers (other things being equal) would best be described as a (an): a. decrease in the quantity of soup demanded. b. decrease in the demand for soup. c. increase in the quantity of soup demanded. d. increase in the demand for soup

B

Exhibit 2 Supply and demand curves In Exhibit 2, if the price moves from $2.00 to $1.00, inventories will: a. remain unchanged. b. fall. c. rise. d. fall and then rise

B

Which of the following best represents the effects of a decrease in the price of tomato juice, other things being equal? a. An upward movement along the demand curve for tomato juice. b. A downward movement along the demand curve for tomato juice. c. A rightward shift in the demand curve for tomato juice. d. A leftward shift in the demand curve for tomato juice

B

Yesterday Seller A supplied 400 units of a good X at $10 per unit. Today Seller A supplies the same quantity of units at $5 per unit. Based on this evidence, Seller A has experienced a (an): a. decrease in supply. b. increase in supply. c. increase in the quantity supplied. d. decrease in the quantity supplied. e. increase in demand

B

Assume that both oranges and peaches can be grown on the same type of land. A decrease in the price of peaches, other things being equal, will cause a (an): a. upward movement along the supply curve for oranges. b. downward movement along the supply curve for oranges. c. rightward shift of the supply curve for oranges. d. leftward shift of the supply curve for oranges

C

Assuming that wheat and corn can both be grown on the same type of land, a decrease in the price of corn, other factors held constant, will cause a (an): a. downward movement along the supply curve for wheat. b. upward movement along the supply curve for wheat. c. rightward shift in the supply curve for wheat. d. leftward shift in the supply curve for wheat

C

The theory of supply states that: a. there is a negative relationship between the price of a good and the quantity of it purchased by suppliers. b. there is a positive relationship between the price of a good and the quantity that buyers choose to purchase. c. there is a positive relationship between the price of a good and the quantity of it offered for sale by suppliers. d. at a lower price, a greater quantity will be supplied

C

Three of the four events described below might reasonably be expected to shift the demand curve for beef to a new position. One would not shift the demand curve. The single exception is a (an): a. change in people's tastes with respect to beef. b. increase in the money income of beef consumers. c. fall in the price of beef. d. widespread advertising campaign undertaken by the producers of a product competitive with beef (e.g., pork).

C

When the price of a good in a market is above equilibrium: a. the quantity supplied exceeds the quantity demanded. b. a surplus of a good. c. the price will fall in the near future. d. All of the answers above are correct

C

Which of the following best explains the determination of the equilibrium price of a product? a. production costs b. the supply of a good c. the interaction of supply and demand d. the decisions of government

C

Which of the following is true for the law of demand? a. Sellers increase the quantity of a good available as the price of the good increases. b. An increase in price results from false needs. c. There is an inverse relationship between the price of a good and the quantity of the good demanded. d. Prices increase as more units of a product are demanded.

C

A demand curve for The Steel Porcupines concert tickets would show the: a. quality of service that customers demand when they buy a ticket. b. number of people who like to attend the concert. c. number of tickets the promoters are willing to sell at each price. d. number of concert tickets that will be purchased at each price

D

Assume that a computer is a normal good. An increase in consumer income, other things being equal, would: a. cause an upward movement along the demand curve for computers. b. cause a downward movement along the demand curve for computers. c. shift the demand curve for computers to the left. d. shift the demand curve for computers to the right

D

Assume that brand X is an inferior good and name brand Y is a normal good. An increase in consumer income, other things being equal, will cause a (an): a. upward movement along the demand curve for name brand Y. b. downward movement along the demand curve for brand X. c. rightward shift in the demand curve for brand X. d. leftward shift in the demand curve for brand X.

D

Exhibit 1 Supply for Tucker's Cola data Quantity supplied per week (millions of gallons) Price per gallon 6 $3.00 5 2.50 4 2.00 3 1.50 2 1.00 1 .50 In reference to Exhibit 1, assume the price of Tucker's Cola is $1.00 per gallon. If the price were to rise to $3.00 per gallon, and all other factors, such as taxes, etc. remained constant, the result would be a (an): a. decrease in supply. b. increase in supply. c. decrease in quantity supplied. d. increase in quantity supplied

D

Exhibit 2 Supply and demand curves In Exhibit 2, if the market price of good X is initially $.50, a movement toward equilibrium requires: a. no change, because an equilibrium already exists. b. the price to fall below $.50 and both the quantity supplied and the quantity demanded to rise. c. the price to remain the same, but the supply curve to shift to the left. d. the price to rise above $.50, the quantity supplied to rise, and the quantity demanded to fall.

D

Exhibit 2 Supply and demand curves In Exhibit 2, if the market price of good X is initially $1.50, a movement toward equilibrium requires: a. no change, because an equilibrium already exists. b. the price to fall below $1.50 and both the quantity supplied and the quantity demanded to fall. c. the price to remain the same, but the supply curve to shift to the left. d. the price to fall below $1.50, the quantity supplied to fall, and the quantity demanded to rise

D

Exhibit 2 Supply and demand curves In the market shown in Exhibit 2, the equilibrium price and quantity of good X are: a. $0.50, 250. b. $2.00, 300. c. $2.00, 100. d. $1.00, 200.

D

Market equilibrium is defined as: a. the condition in which there is neither a shortage or surplus. b. the condition under which the separately formulated plans of buyers and sellers exactly mesh when tested in the market. c. represented graphically by the intersection of the supply and demand curves. d. All of the answers above are correct

D

Supply curves slope upward because: a. the quality is assumed to vary with price. b. technology improves over time, increasing the ability of firms to produce more at each possible price. c. increases in the price of a good lead to rightward shifts of the supply curve. d. rising prices provide producers with higher profit incentives needed to increase the quantity supplied

D

The "ceteris paribus" clause in the law of demand does not allow which of the following factors to change? a. Consumer tastes and preferences. b. The prices of other goods. c. Expectations. d. All of the answers above are correct.

D

Which of the following will increase the demand for large automobiles? a. A fall in the price of small automobiles b. A rise in insurance rates for large automobiles c. A fall in the price of large automobiles d. An increase in buyers' incomes (assuming large automobiles to be a normal good)

D

Which of the following will not cause a movement along the supply curve? a. Changes in the sellers' expectations. b. Increases in taxes per unit of output. c. Advances in technology. d. All of the answers above are correct

D

An advance in technology results in: a. suppliers offering a larger quantity than before at each given price. b. suppliers offering the same quantity as before at a lower price. c. a rightward shift of the supply curve. d. an increase in supply. e. All of the answers above are correct

E

There is news that the price of Tucker's Root Beer will increase significantly next week. If the demand for Tucker's Root Beer reacts only to this factor and shifts to the right, the position of this demand curve has reacted to a change in: a. tastes. b. income levels. c. the price of other goods. d. the number of buyers. e. expectations.

E

price system

The ____________ is the supply and demand mechanism which establishes equilibrium through the ability of prices to rise and fall

Law of supply

The principle that there is a direct relationship between the price of a good and the quantity sellers are willing to offer for sale in a defined time period, ceteris paribus, is the _____________

equilibrium

The unique price and quantity established at the intersection of the supply and demand curves is called

surplus

When the price of a good is greater than the equilibrium price, there is an excess quantity supplied called a (an)

normal good

___________ is one that consumers buy more of when their income increases.

Law of Demand

states that there is an inverse relationship between the price and the quantity demanded, ceteris paribus.