Survey of Econ Mid term ch. 3

Which of the following is a consequence of rent controls established to keep housing affordable for the poor? + All of these are consequences of rent controls. + Less rental housing is available as prospective landlords find it unprofitable to rent at restricted prices. + Apartment buildings are torn down in favor of office buildings, shopping malls, and other buildings where rents are not controlled. + The quality of rental housing declines as landlords lack the funds and incentive to maintain properties.

All of these are consequences of rent controls.

Other things equal, which of the following might shift the demand curve for gasoline to the left? + An increase in the price of train and air transportation + The development of a low-cost electric automobile + A large decline in the price of automobiles + The discovery of vast new tar sands oil reserves in Canada

The development of a low-cost electric automobile

If two goods are complements: + a decrease in the price of one will increase the demand for the other. + they are necessarily inferior goods. + they are consumed independently. + an increase in the price of one will increase the demand for the other.

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

Economists use the term "demand" to refer to: + a particular price-quantity combination on a stable demand curve. + an upsloping line on a graph that relates consumer purchases and product price. + the total amount spent on a particular commodity over a stipulated time period. + a schedule of various combinations of market prices and amounts demanded.

a schedule of various combinations of market prices and amounts demanded.

Refer to the above table. Suppose that demand is represented by columns (3) and (2) and supply is represented by columns (3) and (5). If the price were artificially set at $9: + the market would clear. + demand would change from columns (3) and (2) to columns (3) and (1). + a surplus of 20 units would occur. + a shortage of 20 units would occur.

a surplus of 20 units would occur.

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: + there are many goods that are complementary to bicycles. + there are many goods that are substitutes for bicycles. + there are few goods that are substitutes for bicycles. + bicycles are normal goods.

bicycles are normal goods.

With a downsloping demand curve and an upsloping supply curve for a product, a decrease in resource prices will: + decrease equilibrium price and quantity. + increase equilibrium price and quantity. + increase equilibrium price and decrease equilibrium quantity. + decrease equilibrium price and increase equilibrium quantity.

decrease equilibrium price and increase equilibrium quantity.

Assume, in a competitive market, price is initially above the equilibrium level. We predict that price will: + .decrease, quantity demanded will increase, and quantity supplied will decrease. + decrease and quantity demanded and quantity supplied will both decrease. + decrease, quantity demanded will decrease, and quantity supplied will increase. + increase, quantity demanded will decrease, and quantity supplied will increase.

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

A normal good is one: + for which the consumption varies directly with incomes. + whose amount demanded will increase as its price decreases. + whose amount demanded will decrease as its price decreases. + whose demand curve will shift leftward as incomes rise.

for which the consumption varies directly with incomes.

A binding price floor means that: + sellers are artificially restricting supply to raise price. + inflation is severe in this particular market. + government is imposing a maximum legal price that is + typically below the equilibrium price. + government is imposing a minimum legal price that is typically above the equilibrium price.

government is imposing a minimum legal price that is typically above the equilibrium price.

A market is in equilibrium: + whenever the demand curve is downsloping and the supply curve is upsloping. + at all prices above that shown by the intersection of the supply and demand curves. + provided there is no surplus of the product. + if the amount producers want to sell is equal to the amount consumers want to buy.

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

With a downsloping demand curve and an upsloping supply curve for a product, an increase in consumer income will: + decrease equilibrium price and quantity if the product is a normal good. + have no effect on equilibrium price and quantity. + increase equilibrium price and quantity if the product is a normal good. + reduce the quantity demanded but not shift the demand curve.

increase equilibrium price and quantity if the product is a normal good.

When the price of oil declines significantly, the price of gasoline also declines. The latter occurs because of a(n): + increase in the demand for gasoline. + decrease in the demand for gasoline. + decrease in the supply of gasoline. + increase in the supply of gasoline.

increase in the supply of gasoline.

An unusually large crop of coffee beans would: + decrease the quantity of coffee consumed. + increase the price of tea. + increase the supply of coffee. + increase the price of coffee.

increase the supply of coffee.

At the current price there is a shortage of a product. We would expect price to: + increase, quantity demanded to increase, and quantity supplied to increase. + increase, quantity demanded to increase, and quantity supplied to decrease. + decrease, quantity demanded to increase, and quantity supplied to decrease. + increase, quantity demanded to decrease, and quantity supplied to increase.

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

A government subsidy to the producers of a product: + reduces product demand. + reduces product supply. + increases product supply. + increases product demand.

increases product supply.

Tennis rackets and ballpoint pens are: + independent goods. + substitute goods. + inferior goods. + complementary goods.

independent goods.

A demand curve: + graphs as an upsloping line. + shows the relationship between income and spending. + indicates the quantity demanded at each price in a series of prices. + shows the relationship between price and quantity supplied.

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

Price floors and price ceilings: + both cause surpluses. + interfere with the rationing function of prices. + cause the supply and demand curves to shift until equilibrium is established. + both cause shortages.

interfere with the rationing function of prices.

If a product is in surplus, its price: + will rise in the near future. + is in equilibrium. + is above the equilibrium level. + is below the equilibrium level.

is above the equilibrium level.

A market: : + always requires face-to-face contact between buyer and seller. + is an institution or mechanism that brings together buyers and sellers. + exhibits upsloping demand and downsloping supply curves. + entails the exchange of goods but not services.

is an institution or mechanism that brings together buyers and sellers.

The law of demand states that: + the larger the number of buyers in a market, the lower the product price will be. + price and quantity demanded are directly related. + price and quantity demanded are inversely related. + consumers will buy more of a product at high prices than at low prices.

price and quantity demanded are inversely related

The demand curve shows the relationship between: + money income and quantity demanded. + price and production costs. + price and quantity demanded. + consumer tastes and the quantity demanded.

price and quantity demanded.

The supply curve shows the relationship between: + physical inputs of resources and the resulting units of output. + price and quantity supplied. + total business revenues and quantity supplied. + production costs and the amount demanded.

price and quantity supplied.

The law of supply indicates that: + producers will offer more of a product at high prices than they will at low prices. + consumers will purchase less of a good at high prices than they will at low prices. + producers will offer more of a product at low prices than they will at high prices. + the product supply curve is downsloping.

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

If the price of a product increases, we would expect: + demand to decrease. + quantity demanded to increase. + supply to decrease. + quantity supplied to increase.

quantity supplied to increase.

Suppose that tacos and pizza are substitutes, and soda and pizza are complements. We would expect an increase in the price of pizza to: + reduce the demand for tacos and increase the demand for sodas. + increase the demand for both soda and tacos. reduce the demand for both soda and tacos. reduce the demand for soda and increase the demand for tacos.

reduce the demand for soda and increase the demand for tacos.

The law of supply: + reflects the amounts that producers want to offer at each price in a series of prices. + is reflected in a downsloping supply curve. + reflects the income and substitution effects of a price change. + shows that the relationship between producer revenue and quantity supplied is negative.

reflects the amounts that producers want to offer at each price in a series of prices.

An effective price ceiling will: + result in a product shortage. + induce new firms to enter the industry. + clear the market. + result in a product surplus.

result in a product shortage.

Assume a drought in the Great Plains reduces the supply of wheat. Since 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: + fall, the supply of bread to increase, and the demand for potatoes to increase. + rise, the supply of bread to decrease, and the demand for potatoes to decrease. + rise, the supply of bread to increase, and the demand for potatoes to increase. + rise, the supply of bread to decrease, and the demand for potatoes to increase.

rise, the supply of bread to decrease, and the demand for potatoes to increase.

An improvement in production technology will: + shift the supply curve to the right. + shift the demand curve to the left. + shift the supply curve to the left. + increase equilibrium price.

shift the supply curve to the right.

If the price of product L increases, the demand curve for close-substitute product J will: + shift to the left. + shift to the right. + remain unchanged. + shift downward toward the horizontal axis.

shift to the right.

In 2007 the price of oil increased, which in turn caused the price of natural gas to rise. This can best be explained by saying that oil and natural gas are: + complementary goods and the higher price for oil decreased the supply of natural gas. + substitute goods and the higher price for oil increased the demand for natural gas. + substitute goods and the higher price for oil decreased the supply of natural gas. + complementary goods and the higher price for oil increased the demand for natural gas.

substitute goods and the higher price for oil increased the demand for natural gas.

An increase in demand means that: + given supply, the price of the product will decline. + the demand curve has shifted to the left. + the demand curve has shifted to the right. + price has declined and, therefore, consumers want to purchase more of the product.

the demand curve has shifted to the right.

In presenting the model of a demand curve, economists presume the most important variable in determining the quantity demanded is: + consumer tastes. + consumer income. + the price of the product itself. + the prices of related goods.

the price of the product itself.

Suppose that corn prices rise significantly. If farmers expect the price of corn to continue rising relative to other crops, then we would expect: + the supply to fall as farmers plant more of other crops. + consumer demand for wheat to fall. + the supply to increase as farmers plant more corn. + the supply of ethanol, a corn-based product, to increase.

the supply to increase as farmers plant more corn.

The ride-sharing service Uber uses "surge pricing": + because equilibrium prices do not exist in the ride-sharing market. + to discourage customers from wanting rides during off-peak hours. + to attract more drivers when demand for rides suddenly increases. + to undercut the prices charged by taxi companies.

to attract more drivers when demand for rides suddenly increases.