Chapter 3 Economics Review

Which of the following price/output points would be found on the market supply schedule used to create the market supply curve below? a. $2.00/150 b. $5.00/300 c. $5.00/3,000 d. $2.00/2,000

$5.00/3,000

According to this table, what number of bean bags per hour would be the BEST level of production from a firm's point of view? (productions costs chart) a. 4 beanbags per hour; marginal cost is only $5 b. 8 beanbags per hour; total cost is under $100 c. 10 beanbags per hour; profit is at its highest level d. 12 beanbags per hour; marginal cost is higher than price

10 beanbags per hour; profit is at its highest level

How many slices of pizza per day would you expect a pizzeria in this market to sell if it were pricing its slices at $3.50? (chart of demand curve) a. 150 b. 175 c. 200 d. 225

175

Falling prices caused by quantity demand to ride and quantity supplied to fall until, once again, they were equal. Which of the following might have forced a firm to cut prices in this scenario? a. a surplus in the market b. a shortage in the market c. equilibrium in the market d. elasticity in the market

a shortage in the market

A wildfire has put a major lumber producer out of business. How might an economist show one consequence of this in a graph? (picture of a forest fire) a. a supply curve that has shifted to the right b. a supply curve that has shifted to the left c. a demand curve that has shifted to the right d. a demand curve that has shifted to the left

a supply curve that has shifted to the left

Use the diagram to identify which of the following would cause consumers to demand fewer slices of pizza. (price and demand arrows) a. an increase in the supply of pizza slices b. a decrease in the supply of tacos c. an increase in the price of pizza slices d. a decrease in the price of pizza slices

an increase in the price of pizza slices

How are price ceilings and price floors similar? a. both involve the government's setting of a maximum price b. both represent input changes that affect demand c. both bring about disequilibrium in the market d. both are examples of government price supports

both bring about disequilibrium in the market

Which of the following is generally true after a shift in supply or demand? a. supply rises along with demand b. demand falls as prices rise c. equilibrium is gradually restored d. equilibrium price moves down the demand curve

equilibrium is gradually restored

A study by the National Bureau of Economic Research (NBER examined the responsiveness of consumers to changes in gasoline prices. The study determined that elasticity of demand for gasoline ranges from 0.21 to 0.75. According to the NBER study, what will happen if a major supplier of oil cuts production, causing the price of gasoline to increase greatly? a. gasoline consumption will increase by a large amount b. gasoline consumption will increase by a small amount c. gasoline consumption will decrease by a large amount d. gasoline consumption will decrease by a small amount

gasoline consumption will increase by a large amount

How does the addition of the fifth worker affect the number of beanbags produced per hour? a. it increases production by five beanbags b. it decreases production by five beanbags c. it increases marginal returns by one beanbag d. it decreases marginal returns by two beanbags

it decreases marginal returns by two beanbags

The Larvine family was on a tight budget, but they loved Japanese food. Every Friday, the family of five ate dinner at the only Japanese restaurant in town. A month ago, however, a new owner raised the prices of the family's favorite dishes by 10 percent. The extra cost forces the Larvines to limit their restaurant dinners to once a month. What can you say about the Larvines' demand for meals at the Japanese restaurant? a. it is elastic; a small increase in price resulted in a large decrease in consumption b. it is unitary elastic; a small increase in prices resulted in a small increase in consumption c. it is unitary elastic; a small increase in price resulted in a small decrease in consumption d. it is inelastic; a small increase in price resulted in a small decrease in consumption

it is elastic; a small increase in price resulted in a large decrease in consumption

Based on the graph, after adding the eighth worker, what is the beanbag company's owner MOST LIKELY going to do? (marginal returns graph) a. order more beans for making beanbags b. order more clothes for making beanbags c. reduce the workforce d. hire more workers

reduce the workforce

At what point should the owners of a failing factory shut it down? a. when profit per hour is lower than operating cost per hour b. when revenue per hour is lower than operating cost per hour c. when revenue per hour and marginal cost per hour are equal d. when fixed cost per hour and marginal cost per hour are equal

when revenue per hour and marginal cost per hour are equal

Based on these graphs, which of the following BEST describes equilibrium? (finding equilibrium graphs) a. the point at which the quantity supplied equals the price b. the point at which the quantity supplied equals 200 or more c. the point at which the price equals $3.00 d. the point at which the demand and supply both equal 200

the point at which the demand and supply both equal 200

When warfare cut off some of the supply of a rare metal used in making cell phones, one firm's marginal cost rose higher than its marginal revenue. Which of the following events in the graph is the most likely result of this event? (shifts in the supply curve graphs) a. the angle of the original supply curves b. the angle of the new supply curves c. the shift of the supply curve to the left d. the shift of the supply curve to the right

the shift of the supply curve to the left

Which of the following signals does the image below give to consumers? (a shoe with price markdown stickers) a. you can earn high profits by producing more of this product b. you seem to be getting a good price on this product c. think carefully; the price of this product is rising d. demand for this product is increasing

you seem to be getting a price on this product

Which of the following BEST restates the point made in the statement below? "The most famous law in economics, and the one economists are most sure of, is the law of demand. On this law is built almost the whole edifice of economics." - David Henderson, "Demand," The Concise Encyclopedia of Economics a. the way markets respond to a change in price is highly predictable b. the laws of demand and supply are easy to understand c. economists rely on laws as much as any other profession d. economic theory rests almost entirely on speculation about how consumers behave

the way markets respond to a change in price is highly predictable

Jenna is a plant lover. She could afford to buy a new houseplant every three months. Something happened in Jenna's life that caused her demand curve for plants to shift to the right. Using the graphs below, identify which of the following is the most likely explanation for the result. (changes in demand chart) a. Jenna has decided that she has to sell some of her houseplants b. Jenna has switched from buying plants to buying knickknacks c. Jenna now buys a new houseplant every six months d. Jenna now buys a new houseplant every month.

Jenna now buys a new houseplant every month

Which of the following is the likely result of a successful advertising campaign for an electronic game? (picture of Mario ad) a. a supply curve that has shifted to the right b. a supply curve that has shifted to the left c. a demand curve that has shifted to the right d. a demand curve that has shifted to the left

a demand curve that has shifted to the right

How would a new government subsidy for rice farmers affect the market for rice? a. it would increase the supply by decreasing rice farmers' production cost b. it would increase the supply by increasing demand for rice c. it would decrease the supply by increasing rice farmers' production cost d. it would decrease the supply by encouraging farmers to grow another grain

it would increase the supply by decreasing rice farmers' production cost

A change in the cost of an imputes can decrease quantity supplied. As the supply curve shifts to the left suppliers raise their prices, and the quantity demanded falls. After the movement described above, where will the new equilibrium point be? a. at a spot along the demand curve above and to the left of the original equilibrium point b. at a spot along the demand curve above and to the right of the original equilibrium point c. at a spot along the demand curve below and to the right of the original equilibrium point d. at a spot along the demand curve below and to the left of the original equilibrium point

at a spot along the demand curve above and to the left of the original equilibrium point

Based on this diagram, which of the following situations reflects the substitution effect resulting from a special sale on Z-Ball brand golf balls? (substitution effect chart) a. the price of Z-Balls increases when the demand for them increases b. the price of Z-Balls decreases when the demand for them increases c. consumers reject the Z-Balls, assuming they are an inferior product d. consumers purchase Z-Balls rather than the brand they normally buy

consumers purchase Z-Balls rather than the brand they normally buy

Which of the following BEST explains how the situation shows in the graph affects producers and consumers? (surplus graph) a. it benefits the producer, because the higher price increases profits b. it benefits the consumer, because the price must come down to reach equilibrium c. it benefits the consumer, because the quantity supplied is greater than the quantity demanded d. it benefits neither, because consumers must pay more and producers must throw out excess supply

it benefits neither, because consumers must pay more and producers must throw out excess supply

Suppose that, at the regular price of $50 for a package of six, the supply of LED light bulbs was 100. After the price decreased to $40, the supply increased to 200. Which of the following BEST describes the elasticity of supply for the light bulbs? (elasticity and supply chart) a. it is inelastic; the elasticity of supply equals 0.5 b. it is inelastic; the elasticity of supply equals 0.8 c. it is elastic; the elasticity of supply equals 2 d. it is elastic; the elasticity of supply equals 5

it is elastic; the elasticity of supply equals 5