Chapter 3

11) The "law of demand" states that, other thing remaining the same, the higher A) the price of a good, the smaller is the quantity demanded. B) the price of a good, the higher is the quantity demanded. C) consumers' incomes, the greater is the demand. D) the price of a good, the lower is the demand for this good.

A

16) The quantity of iPods that people plan to buy this month depends on all of the following EXCEPT the A) technology used to produce an iPod. B) price of a music download from iTunes. C) price of an iPod. D) price of CD players.

A

18) Which of the following shifts the supply curve for good X leftward? A) an increase in the cost of the machinery used to produce X B) a decrease in the wages of workers employed to produce X C) a technological advance in the production of X D) a situation in which quantity demanded exceeds quantity supplied

A

19) Which of the following decreases the supply of restaurant meals? A) Waiters get a pay raise. B) The price of movies, a complement to restaurant meals, falls. C) Consumers' incomes decrease and restaurant meals are a normal good. D) Consumers' incomes increase and restaurant meals are a normal good.

A

2) Twenty years ago a stove cost $300 and a refrigerator cost $1,500. Today a stove costs $600, while a refrigerator costs $1,800. Which of the following statements is true? A) The relative price of a stove has increased. B) The relative price of a refrigerator has increased. C) The relative price of stoves and refrigerators has not changed. D) The money price of a refrigerator has fallen.

A

21) Because of increasing marginal cost, most supply curves A) have a positive slope. B) are horizontal. C) have a negative slope. D) are vertical.

A

22) In the above figure, what is the minimum supply price for the fourth gallon of ice cream? A) $5.00 B) $4.00 C) $3.00 D) $2.00

A

23) An increase in the cost of producing video tape shifts the supply curve of video tape ________ and shifts the demand curve for video tape ________. A) leftward; not at all B) not at all; leftward C) rightward; leftward D) leftward; leftward

A

25) The above table gives the demand and supply schedules for Blu-ray discs. Based on the table, the equilibrium quantity and price of Blu-ray discs is A) 20,000 and $20. B) 16,000 and $24. C) 28,000 and $12. D) 16,000 and $16.

A

32) A shortage causes the A) price to rise. B) supply curve to shift rightward. C) demand curve to shift leftward. D) price to fall.

A

33) In the above figure, in order for the equilibrium price to remain constant while the equilibrium quantity increases, the A) supply and demand curves both would have to shift rightward. B) supply curve would have to shift rightward and the demand curve would have to shift leftward. C) supply curve would have to shift leftward and the demand curve would have to shift rightward. D) supply and demand curves both would have to shift leftward.

A

38) You observe that in the market for coffee that both the equilibrium price of coffee and the equilibrium quantity have increased. You predict that the demand for coffee A) has increased with no change in the supply of coffee. B) has increased but it is not as large as the increase in supply. C) has increased less than supply of coffee has decreased. D) has not changed but that the supply of coffee has decreased.

A

40) You notice that the price and quantity of wheat both decrease. This observation can be the result of the A) demand curve for wheat shifting leftward. B) demand curve for wheat shifting rightward. C) supply curve of wheat shifting rightward. D) supply curve of wheat shifting leftward.

A

28) If a market is NOT in equilibrium, then which of the following is likely to occur? A) The price will adjust to bring the market to equilibrium. B) The demand curve will shift to bring the market to equilibrium. C) The supply curve will shift to bring the market to equilibrium. D) Both A and B are correct.

A

3) The opportunity cost of good A in terms of good B is equal to the A) money price of good A minus the money price of good B. B) money price of good B minus the money price of good A. C) ratio of the money price of good B to the money price of good A. D) ratio of the money price of good A to the money price of good B.

D

10) A decrease in the expected future price of cars A) increases the current quantity demanded of cars, that is, there is a movement downward along the demand curve for cars. B) decreases the current demand for cars, that is, there is a leftward shift of the demand curve for cars. C) increases the current demand for cars, that is, there is a rightward shift of the demand curve for cars. D) decreases the current quantity demanded of cars, that is, there is a movemen

B

12) For normal goods which of the following explains why demand curves slope downward? A) resources and technology B) substitution effect and income effect C) prices and income D) substitutes and complements

B

17) The price of jet fuel falls. This fall shifts the A) demand curve for airplane trips rightward. B) supply curve of airplane trips rightward. C) supply curve of airplane trips leftward. D) demand curve for airplane trips leftward.

B

24) If the price of lumber rises, then, in the market for sawdust, A) there is a movement downward along the supply curve for sawdust. B) the supply curve of sawdust shifts rightward. C) there is a movement upward along the supply curve for sawdust. D) the supply curve of sawdust shifts leftward.

B

26) If the quantity of textbooks supplied is 10,000 per year and the quantity of textbooks demanded is 12,000 per year, there is a ________ in the market and the price will ________. A) surplus; fall B) shortage; rise C) surplus; rise D) shortage; fall

B

27) The table shows the demand and supply schedules for jeans. A) At $60 a pair, there is a surplus of jeans and the price will rise. B) At $40 a pair, there is a shortage of jeans and the price will rise. C) At $40 a pair, there is a shortage of jeans and the price will fall. D) At $60 a pair, there is a shortage of jeans and the price will fall.

B

29) The interaction of supply and demand explains A) neither the prices nor the quantities of goods and services. B) both the prices and the quantities of goods and services. C) the prices of goods and services but not their quantities. D) the quantities of goods and services but not their prices.

B

30) The equilibrium price is the price at which the quantity A) sold equals the quantity bought. B) demanded equals the quantity supplied. C) supplied equals the quantity bought. D) demanded equals the quantity sold.

B

34) In the above figure, if D2 is the original demand curve and the population falls, which price and quantity might result? A) point a, with price P2 and quantity Q2 B) point b, with price P1 and quantity Q1 C) point c, with price P3 and quantity Q3 D) point d, with price P1 and quantity Q3

B

8) An ice cream cone costs $1.50. A can of soda costs $0.75. The relative price of an ice cream cone is A) 1/2 can of soda per ice cream cone, the opportunity cost of an ice cream cone. B) 2 cans of soda per ice cream cone, the opportunity cost of an ice cream cone. C) $0.75, the opportunity cost of a can of soda. D) $1.50, the opportunity cost of a can of soda.

B

1) If the money price of hats rises and no other prices change, the I. relative price of a hat rises. II. opportunity cost of a hat rises. A) only II B) only I C) both I and II D) neither I nor II

C

13) When the price of an inferior good falls, the substitution effect leads to ________ in the quantity purchased and the income effect leads to ________ in the quantity purchased. A) an increase; an increaseB) a decrease; an increase C) an increase; a decrease D) a decrease; a decrease

C

15) Jeep Cherokees are a normal good. If people's incomes increase, the direct result will be A) a decrease in the demand for the vehicles. B) an increase in the supply of the vehicles. C) an increase in the demand for the vehicles. D) Both answers A and C are correct.

C

31) If the price is above the equilibrium price, then there is a A) shortage, and market forces will operate to lower price. B) shortage, and market forces will operate to raise price. C) surplus, and market forces will operate to lower price. D) surplus, and market forces will operate to raise price.

C

36) The price of a gallon of milk falls. Which of the following is a possible cause? A) Milk is a normal good and people's incomes rise. B) a decrease in the price of oatmeal, a complement to milk C) a discovery that milk cause diabetes D) a drought that reduces supplies of feed grains fed to cows that produce milk

C

6) The opportunity cost of a hot dog in terms of hamburgers is the A) ratio of the slope of the supply curve for hot dogs to the slope of the supply curve for hamburgers. B) ratio of the slope of the demand curve for hot dogs to the slope of the demand curve for hamburgers. C) ratio of the money price of a hot dog to the money price of a hamburger. D) money price of a hot dog minus the money price of a hamburger.

C

14) The figure above shows the demand for fruit snacks. Which movement reflects how consumers would react to an increase in the price of a non-fruit snack? A) from point a to point e B) from point a to point b C) from point a to point c D) from point a to point d

D

20) The wage rate paid by Walkman producers falls and at the same time the price of raw materials used in the production of Walkmans rises. You predict that the supply curve of Walkmans will A) surely become steeper. B) surely shift rightward. C) surely shift leftward. D) shift either leftward or rightward.

D

35) In 2011, the price of peanuts was rising, which lead peanut butter buyers to expect the price of peanut butter would rise in the future. Consequently, in the current market for peanut butter there was ________ which resulted in ________ in the price of peanut butter and ________ in the quantity of peanut butter. A) a decrease in demand for peanut butter; a decrease; a decrease B) an increase in supply of peanut butter; a decrease; an increase C) a decrease in supply of peanut butter; an increase; a decrease D) an increase in demand for peanut butter; an increase; an increase

D

37) If both the demand and supply increase, the equilibrium quantity ________ and the equilibrium price ________. A) decreases; rises B) increases; falls C) decreases; might rise, fall, or not change D) increases; might rise, fall, or not change

D

39) The above figures show the market for hamburger meat. Which figure shows the effect when more farmers decide to raise cows that are processed into hamburger meat? A) Figure A B) Figure B C) Figure C D) Figure D

D

4) The relative price of a good is A) equal to the money price of a good. B) what you get paid for babysitting your cousin. C) equal to the price of that good divided by the quantity demanded of the good. D) an opportunity cost.

D

5) The money price of a pizza is $12 per pizza and the money price of a taco is $2 per taco. The relative price of a pizza is A) $24 per pizza. B) 1/6 pizza per taco. C) $12 per pizza. D) 6 tacos per piz

D

7) If the money price of wheat increases and no other prices change, the A) relative price of wheat falls. B) relative price of wheat is unaffected. C) demand for wheat increases. D) opportunity cost of wheat rises.

D

9) Scarcity guarantees that A) demands will be equal to wants. C) most demands will be satisfied. B) demands will exceed wants. D) wants will exceed demands.

D