Chapter 3 Microeconomics

20. Andy views beer and pizza as complements to one another. If the price of pizza decreases, economists would expect: A. Andy's demand for pizza to increase. B. Andy's demand for pizza to decrease. C. Andy's quantity of pizza demanded to decrease. D. Andy's demand for beer to increase.

D. Andy's demand for beer to increase.

7. The ___________ is the only price where quantity demanded is equal to quantity supplied. A. equilibrium price B. horizontal axis intercept C. vertical axis intercept D. market price

A. equilibrium price

8. After widespread press reports about the dangers of contracting "mad cow disease" by consuming beef from Canada, the likely economic effect on the U.S. demand curve for beef from Canada is: A. no change only the supply curve for beef is likely to be affected. B. a shift of the demand curve for beef to the left. C. a movement down along the demand curve for beef to the right. D. a shift of the demand curve for beef to the right.

B. a shift of the demand curve for beef to the left.

19. ______________ are enacted when discontented sellers, feeling that prices are too low, appeal to legislators to keep prices from falling. A. Rent controls B. Price ceilings C. Price floors D. Subsidies

C. Price floors

12. When __________________, a firm will supply a higher quantity at any given price for its output, and the supply curve will shift to the right. A. prices rise B. equilibrium is achieved C. costs of production fall D. there is a population increase

C. costs of production fall

10. Refer to Figure 3-2. A change from Point A to Point B represents a(n): A. increase in demand. B. decrease in demand. C. decrease in quantity demanded. D. increase in quantity demanded.

C. decrease in quantity demanded.

9. Refer to Figure 3-1. Using the graph above and beginning on D1, a shift to D2 would indicate a(n): A. increase in quantity demanded. B. decrease in quantity demanded. C. increase in demand. D. decrease in demand.

C. increase in demand.

18. Interpret the following statement: "An increase in the price of wheat will encourage farmers to increase the quantity of wheat supplied to the market." A. The statement is correct. B. The statement would be correct if "quantity of wheat demanded" were substituted for "quantity of wheat supplied." C. The statement is incorrect because it confuses a change in quantity supplied with a change in supply. D. The statement would be correct if it read that a "decrease in the price of wheat will encourage farmers to increase the quantity of wheat supplied to the market."

A. The statement is correct.

13. A severe freeze has once again damaged the Florida orange crop. The impact on the market for orange juice will be a leftward shift of: A. the supply curve. B. the demand curve, as consumers try to economize because of the shortage. C. both the supply and demand curves. D. the supply curve and a rightward shift of the demand curve, resulting in a higher equilibrium price.

A. the supply curve.

2. Any given demand or supply curve is based on the ceteris paribus assumption that ___________________. A. everything is variable. B. all else is held equal C. no one knows which variables will change and which will remain constant. D. what is true for the individual is not necessarily true for the whole.

B. all else is held equal

14. Refer to Figure 3-3. A change from Point A to Point E represents a(n): A. increase in supply. B. decrease in supply. C. increase in quantity supplied. D. decrease in quantity supplied.

B. decrease in supply.

17. Which of the following would reduce the supply of microcomputers? A. a technological improvement that lowers the cost of producing the computers B. higher wage rates for the workers that assemble the computers C. a reduction in the price of computer chips used to produce the computers D. a reduction in the price of computers.

B. higher wage rates for the workers that assemble the computers

11. If new manufacturers enter the computer industry, then (ceteris paribus): A. the supply curve shifts to the left. B. the supply curve shifts to the right. C. the demand curve shifts to the left. D. some established manufacturers must exit the industry.

B. the supply curve shifts to the right.

4. In economics, the demand for a good refers to the amount of the good that people: A. would like to have if the good were free. B. will buy at various prices. C. need to achieve a minimum standard of living. D. will buy at alternative income levels.

B. will buy at various prices.

16. Refer to Figure 3-3. A change from Point A to Point B represents a(n): A. increase in supply. B. decrease in supply. C. increase in quantity supplied. D. decrease in quantity supplied.

C. increase in quantity supplied.

3. Economists refer to the relationship that a higher price leads to a lower quantity demanded as the_____________. A. income gap B. market equilibrium C. law of demand D. price model

C. law of demand

1. The downward slope of the demand curve illustrates the pattern that as _____________ rises, _________________ decreases. A. quantity demanded, price B. quantity supplied, quantity demanded C. price, quantity demanded D. price, quantity supplied

C. price, quantity demanded

5. When economists talk about supply, they are referring to a relationship between price received for each unit sold and the _________________. A. demand schedule B. market price C. quantity supplied D. demand curve

C. quantity supplied

15. Refer to Figure 3-3. A change from Point A to Point D represents a(n): A. decrease in quantity supplied. B. increase in quantity supplied. C. decrease in supply. D. increase in supply.

D. increase in supply.

6. When quantity demanded decreases in response to a change in price: A. the demand curve shifts to the right. B. the demand curve shifts to the left. C. there is a movement down along the demand curve. D. there is a movement up along the demand curve.

D. there is a movement up along the demand curve.