chapter 3

Which of the following choices correctly illustrates how changes in opportunity costs affect supply? A) A farmer produces corn and wheat. The price of wheat rises; so he shifts his resources towards wheat and the supply of wheat rises. B) A fisherman fishes for lobsters and oysters. The price of lobsters rises; so he decides to spend more of his time fishing for oysters because he can make the same amount of money with fewer lobsters. C) A textbook for economics becomes cheaper; so more students opt to buy that particular textbook. D) Milk and cereal are complementary goods; so when the price of cereal falls, the quantity supplied of milk rises.

A) A farmer produces corn and wheat. The price of wheat rises; so he shifts his resources towards wheat and the supply of wheat rises.

Which of the following might happen as a result of an aging population? A) An increase in the demand for healthcare. B) Advertisers target young people in order to offset the demands of the growing elderly. C) Prescription drug demand will become more horizontal. D) An aging population will move us along age sensitive demand curves.

A) An increase in the demand for healthcare.

What does the law of demand state? I. There is a negative relationship between price and quantity demanded. II. There is an inverse relationship between price and quantity that buyers are willing and able to purchase. III. There is an inverse relationship between price and demand. A) I and II only B) II and III only C) I and III only D) I, II, and III

A) I and II only

Which of the following does NOT shift the demand curve? A) changes in the product's price B) changes in income C) changes in population D) changes in tastes and preferences

A) changes in the product's price

Assume that spaghetti is an inferior good for most people. As their incomes increase, all other things held constant, the: A) demand for spaghetti will decrease shifting the demand curve to the left. B) demand for spaghetti will decrease shifting the demand curve to the right. C) demand for spaghetti will increase shifting the demand curve to the left. D) demand for spaghetti will increase shifting the demand curve to the right.

A) demand for spaghetti will decrease shifting the demand curve to the left.

If the price of shotguns ______, the demand for shotgun shells will _______. A) increases; decrease B) increases; increase C) decreases; decrease D) double; double

A) increases; decrease

New research indicates that running marathons is actually bad for the heart (it increases inflammatory markers associated with heart attacks). This news will: A) lead to a decrease in the demand for running shoes. B) have no effect on the demand or supply of running shoes. C) increase the supply of running shoes. D) lead to an increase in the demand for running shoes.

A) lead to a decrease in the demand for running shoes.

Quantity demanded is: A) the amount of a good or service that a buyer is able and willing to purchase at a given price. B) the amount of a good or service that a buyer is able and willing to sell at a given price. C) the amount of a good or service that a seller is able and willing to sell at a given price. D) the amount of a good or service that a buyer is able and willing to purchase at various given prices.

A) the amount of a good or service that a buyer is able and willing to purchase at a given price.

Nigeria receives $53 of producer surplus from each barrel of oil sold at $60. At that level of production, Nigeria's cost to produce a barrel of oil is: A) $1.13. B) $7. C) $53. D) $113.

B) $7.

Coke and Pepsi are substitute soft drinks. Which of the following would cause the demand curve for Pepsi to shift to the left? A) A report emerges that shows that drinking Pepsi helps to promote weight loss. B) The price of Coke decreases. C) The price of Pepsi rises. D) The cost of making Pepsi rises.

B) The price of Coke decreases.

New production technology in the manufacture of plasma television screens has reduced the number of defective screens. What effect will this have in the market for plasma televisions? A) The demand curve will increase. B) The supply curve will increase. C) The demand and supply curve both increase. D) The demand curve will decrease.

B) The supply curve will increase.

Weather forecasters predict that a major winter storm will strike your town within the next few days. Which of the following would NOT occur based upon the expected storm? A) an increase in the demand for groceries B) a decrease in the supply of winter clothing C) an increase in the demand for gasoline and tire chains D) an increase in the supply of electric generators to the area

B) a decrease in the supply of winter clothing

In the market for fertilizer, an: A) increase in an input price will increase the demand for fertilizer. B) advance in technology will increase the supply of fertilizer. C) increase in an input price will increase the supply of fertilizer. D) increase in the cost of equipment will increase the supply of fertilizer.

B) advance in technology will increase the supply of fertilizer.

A local university decides to double its enrollment over the next five years in order to increase tuition revenue. Which of the following would most likely occur in the market for rental housing in the surrounding community? A) a decrease in the price of rental housing B) an increase in the demand for rental housing C) a decrease in the supply of rental housing D) a population change leads to a change in quantity demanded, not demand

B) an increase in the demand for rental housing

Which of the following are likely to be complements? A) hotdogs and hamburgers B) books and book-lights C) coffee and tea D) cars and vans

B) books and book-lights

If Romaine lettuce and Iceberg lettuce are substitutes, an increase in the price of Romaine lettuce will ______ the demand for Iceberg lettuce. A) reduce B) increase C) not shift D) decrease

B) increase

In the oil market, an increase in the wage of oil workers will: A) shift the supply curve of oil to the right. B) shift the supply curve of oil to the left. C) shift the demand curve for oil to the left. D) shift the demand curve for oil to the right.

B) shift the supply curve of oil to the left.

The supply curve illustrates: A) that limited resources are available for society to use. B) the relationship between the quantity supplied and the price of a good. C) the total cost of producing a good. D) the willingness to produce a good if the technology to produce it becomes available.

B) the relationship between the quantity supplied and the price of a good.

Which of the following statements correctly defines a demand curve? A) A demand curve is a function that shows the relationship between prices and the quantity available for sale. B) A demand curve is a function that shows the relationship between prices and their associated quantities supplied. C) A demand curve is a function that shows the relationship between prices and their associated quantities demanded. D) A demand curve is a function that shows the relationship between quantity demanded and quantity supplied.

C) A demand curve is a function that shows the relationship between prices and their associated quantities demanded.

Suppose it is widely believed that the price of flat-screen, high-definition televisions will be lower next year. What will happen as a result of such beliefs? A) The demand for flat-screen TVs will increase now. B) The demand for flat-screen TVs will increase next year when the prices fall. C) The demand for flat-screen TVs will decrease now. D) The demand for flat-screen TVs will not change.

C) The demand for flat-screen TVs will decrease now.

A firm produces volleyballs and soccer balls. What happens to the supply of soccer balls if the market price of volleyballs increases? A) The opportunity cost of producing soccer balls rises, so the supply curve of soccer balls increases. B) The opportunity cost of producing soccer balls falls, so the supply curve of soccer balls decreases. C) The opportunity cost of producing soccer balls rises, so the supply curve of soccer balls decreases. D) The opportunity cost of producing soccer balls falls, so the supply curve of soccer balls increases.

C) The opportunity cost of producing soccer balls rises, so the supply curve of soccer balls decreases.

Which one of the following choices would cause the demand curve for an inferior good to shift to the left? A) a fall in incomes B) a fall in the price of the inferior good C) a rise in incomes D) a rise in the price of the inferior good

C) a rise in incomes

Mario buys eight units of good X when his income is $2,000 a month. When his income increases to $2,700 per month, he buys only six units of good X. For Mario, good X is: A) a normal good. B) an expensive good. C) an inferior good. D) a useless good.

C) an inferior good.

Potato chips and popcorn are substitutes. A subsidy for potato chips will ______ the demand for popcorn and the quantity of popcorn sold will ______. A) increase; increase B) increase; decrease C) decrease; decrease D) decrease; increase

C) decrease; decrease

Firms are willing and able to sell 100 guitars per day at a price of $250 per guitar. What price will firms require to sell 100 guitars per day if there is a tax of $15 per guitar? A) $235 B) $250 C) between $235 and $250 D) $265

D) $265

The quantity of cell phones that firms plan to sell this month depends on all of the following EXCEPT the: A) number of producers of cell phones. B) price of a cell phone. C) wages of workers in electronics factories. D) All of these choices affect market conditions.

D) All of these choices affect market conditions.

Which of the following statements about consumer surplus is incorrect? A) Consumer surplus is the net benefit to consumers from the exchange that occurs in a market. B) Consumer surplus is the gains from trade on the part of the consumer that result from a market transaction. C) Total consumer surplus is the area beneath the demand curve and above the market price. D) Consumer surplus is the difference between the minimum price the consumer is willing to pay and the market price.

D) Consumer surplus is the difference between the minimum price the consumer is willing to pay and the market price.

Joe runs a landscape company and uses one of his home's bedrooms as a home office. This office could be used to earn rental income from college students. If average rental income in Joe's neighborhood were to rise: A) Joe's opportunity cost of using a bedroom as a home office would decrease. B) Joe's landscape company would experience a decrease in demand for services at all prices. C) Joe should expand his office space in his home. D) Joe's opportunity cost of using a bedroom as a home office would increase.

D) Joe's opportunity cost of using a bedroom as a home office would increase.

Which of the following could cause an increase in the demand for gasoline? A) the resolution of a civil war in one of the world's biggest oil producing nations B) the expectation that the price of gasoline will decrease in the future C) a new technology that makes the production of gasoline significantly less expensive D) an approaching hurricane that threatens a major oil refinery in Texas

D) an approaching hurricane that threatens a major oil refinery in Texas

If the price of computers ______, the demand for printers will ______. A) increases; increase B) decreases; decrease C) decreases; not change D) increases; decrease

D) increases; decrease

Which of the following factors causes a decrease in supply? A) a decrease in demand B) a decrease in the price of the product C) an increase in the price of the product D) new taxes on output

D) new taxes on output

Which of the following are factors that shift the demand curve? A) costs of production, price of the product, and subsidies B) income, population, tastes, and input prices C) expectations, opportunity costs, price of the product D) price of substitutes, tastes, price of complements

D) price of substitutes, tastes, price of complements

The quantity of DVDs that people plan to buy this month depends on all of the following EXCEPT the: A) price of DVDs. B) price of movies for download. C) population. D) quantity of DVDs the sellers have stocked.

D) quantity of DVDs the sellers have stocked.

In the early 1980s, movie rentals averaged $5 a night; by the early 1990s that average was $1 per night. This is an example of a supply curve shifter based on: A) a change in tastes and preferences. B) a decrease in the wages of workers in the video rental stores. C) an increase in the number of VRCs owned by consumers. D) the entry of new suppliers into the market.

D) the entry of new suppliers into the market.

The price of coffee has increased, yet evidence suggests the demand for coffee has been stable. A possible explanation is that: A) there has been no change in the supply of coffee. B) there has been increased use of subsidies in coffee production. C) wages of workers in coffee production might have decreased. D) wages of workers in coffee production might have increased.

D) wages of workers in coffee production might have increased.