Microeconomics 232, Unit 2 quiz answers

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Suppose that as the price of apples rises, people switch from eating apples to eating oranges. This is known as:

The substitution effect of a price change

If several manufacturers leave the computer industry, then

The supply curve shifts to the left showing a decrease in supply

Excess demand occurs:

When price is below the equilibrium price

An economist for a bicycle company predicts that, other things equal, a rise in consumer incomes will increase the demand for bicycles. This prediction is based on the assumption that:

bicycles are normal goods

The law of supply indicates that, other things equal,

producers will offer more of a product at high prices than at low prices.

An increase in product price will cause

quantity demanded to decrease.

An efficiency loss (or deadweight loss):

is measured as the combined loss of consumer surplus and producer surplus from over or under producing

If supply and demand shift in the same direction, the equilibrium ___ will always shift in that very same direction

Curve??

A demand curve is ___ sloping because ___

Downward; fewer people are willing to buy an item at higher prices

If price is above the equilibrium price, then there will be:

Excess supply

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

$0.50

Refer to the diagram. The equilibrium price and quantity in this market will be

$1.00 and 200

Refer to the diagram. Assuming equilibrium price P1, consumer surplus is represented by areas:

A + B

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

A surplus of 100 units

Supposed that the the technology used to manufacture laptops has improved. The likely result would be:

An increase in supply of laptops

Refer to the diagram. Assuming equilibrium price P1, producer surplus is represented by areas:

C + D

If supply is held constant and demand increases, the equilibrium price and equilibrium quantity will

Decrease

If demand is held constant and supply increases, the equilibrium price will ___ and the equilibrium quantity will ___

Decrease, increase

If supply is held constant and demand increases, the equilibrium price and equilibrium quantity will

Increase

If demand is held constant and supply decreases, the equilibrium price will ___ and the equilibrium quantity will ___

Increase, decrease

A positive change in tastes and preferences for a good or service will ___ demand, thus shifting the demand curve to the ___

Increase, right

If supply and demand shift in the same direction, the equilibrium ___ is dependent on whether supply or demand shifted more

Price

The construction of a demand curve assumes that the primary variable influencing decisions to consume goods is

Price

The construction of a supply curve assumes that the primary variable influencing decisions to produce goods is

Price

Refer to the diagram. An effective government-set price ceiling is best illustrated by

Price A

Refer to the diagram. Rent controls are best illustrated by

Price A

Refer to the diagram. An effective government-set price floor is best illustrated by

Price C

The demand curve shows the relationship between

Price and quantity demanded

If supply and demand shift in opposite directions, the equilibrium ___ will move in the same direction as demand, but the equilibrium ___ is dependent on whether supply or demand shifted more

Price, quantity

You can spend $10 for lunch and you would like to purchase two cheeseburgers. When you get to the restaurant, you find out the price for cheeseburgers has increased from $5 to $6, so you decided to purchase just one cheeseburger. This is best described as:

The income effect of a price change

Jennifer buys a piece of costume jewelry for $33 for which she was willing to pay $42. The minimum acceptable price to the seller, Nathan, was $30. Jennifer experiences:

a consumer surplus of $9 and Nathan experiences a producer surplus of $3.

As the price of flour (an input into the cookie production process) increases, firms that produce cookies will

decrease the supply of cookies

The relationship between quantity supplied and price is ___, and the relationship between quantity demanded and price is ___

direct, inverse

When the price of a product increases, a consumer is able to buy less of it with a given money income. This describes the:

income effect

The law of demand states that, other things equal,

price and quantity demanded are inversely related

An improvement in production technology will

shift the supply curve to the right

If new manufacturers enter the computer industry, then (ceteris paribus):

supply curve shifts to the right showing an increase in supply

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

When a market is in equilibrium:

there is neither excess demand nor excess supply

A product market is in equilibrium

where the demand and supply curves intersect


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