Chapter 3 Questions

What if the increase in demand were larger than the increase in​ supply?

The equilibrium price and quantity increase.

Suppose that at first the price of a pair of shoes is ​$15 and the price of a t-shirt is $9. Then, the price of a pair of shoes changes to $30 and the price of t-shirt changes to $21. What has happened to the money prices and relative prices of these two goods?

The money price of a pair of shoes and t-shirt have risen and the relative price of a pair of shoes has fallen while the relative price of a t-shirt has risen.

Which one of the following statements is true? If the money price of a good increases, its relative price necessarily decreases. If the money price of a good increases, its relative price necessarily increases. Rational consumers always ignore the monetary price of a good when deciding whether to buy it. The relative price of a good refers to the opportunity cost of purchasing it.

The relative price of a good refers to the opportunity cost of purchasing it.

If the price of flash memory chips used in manufacturing smartphones​ decreases, what will happen in the market for​ smartphones?

This would cause smartphone supply to increase causing the equilibrium price to decrease and the equilibrium quantity to increase.

All of the following will cause a shift in the supply of jeans EXCEPT a per-unit government subsidy on the production of jeans. an increase in the cost of producing jeans. a decrease in the prices of jeans. a decrease in the number of jean manufacturers.

a decrease in the prices of jeans.

When the price of a good falls, there will be an outward shift in the good's demand curve. a movement along the good's demand curve. both an outward shift in the good's demand curve and a movement along the good's demand curve. no change in quantity demanded.

a movement along the good's demand curve.

According to the law of​ supply, as the price of the good decreases, it causes...

a movement downward along the supply curve.

Which of the following will cause the demand curve for beer to shift right? a decline in population a fall in average incomes of beer consumers a successful advertising campaign linking beer consumption to lower cholesterol a fall in the price of beer

a successful advertising campaign linking beer consumption to lower cholesterol.

An increase in the number of consumers in a market would cause an increase in supply. an increase in demand. an increase in quantity supplied. an increase in quantity demanded.

an increase in demand.

Indicate whether the following events would cause an​ "increase or a decrease in demand or an​ increase or a decrease in the quantity demanded​" for​ cable-based Internet access​ service, which is a normal good. Firms providing wireless​ (an alternative to​ cable) Internet access services reduce their prices. This will cause​ a(n) ____________

decrease in demand. (b/c a different good than the one being studied changed prices, the good being studied's price itself did not change)

Publishers expect that the market price of economics textbooks will increase next month. This will cause​ a(n)

decrease in supply.

There is a decrease in the market demand for smartphones. This will cause​ a(n)

decrease in the quantity supplied. Equilibrium quantity would decrease. Equilibrium price would decrease.

The price of an MP3 music player increased from $50 to $70 while the price of a music download increased from $1 to $2. The relative price of an MP3 music player in terms of music downloads increased from 0.04 to 0.05. decreased, but we need more information to know by how much. increased, but we need more information to know by how much. decreased from 50 to 35.

decreased from 50 to 35.

Demand is a schedule of each possible price and the amount people will buy when their incomes change. how much of a good people will purchase at each income level. how much of a good people will purchase at each different possible price. how much of a good a person wants.

how much of a good people will purchase at each different possible price.

The price of touch screens used in smartphones declines. This will cause​ a(n)

increase in supply. Equilibrium quantity would increase. Equilibrium price would decrease.

An improvement in technology in the production of computers would increase the demand for computers. decrease the supply of computers. increase the supply of computers. decrease the demand for computers.

increase the supply of computers.

Refer to the above figure. Other things being equal, if price is at P2 , then we would expect price to decline until an equilibrium is achieved at P0. consumers to bid against each other for goods and force the price still higher. consumers to reduce their offering price for the good. an excess quantity demanded to occur.

price to decline until an equilibrium is achieved at P0.

When the amount supplied is greater at each price, there is a(n) upward movement along the supply curve. leftward shift in the supply curve. downward movement along the supply curve. rightward shift in the supply curve.

rightward shift in the supply curve.

a. If the price of bacon​ rises, and as a result the demand for sausage​ increases, this implies that these two goods are _________

substitutes.

As the price decreases...

the quantity produced by firms decreases.

An increase in supply will occur when the supply curve shifts upward to the left. the demand curve shifts upward to the right. the demand curve shifts downward to the left. the supply curve shifts downward to the right.

the supply curve shifts downward to the right.

A decrease in supply will occur when the supply curve shifts upward to the left. the demand curve shifts upward to the right. the demand curve shifts downward to the left. the supply curve shifts downward to the right.

the supply curve shifts upward to the left.

Refer to the above figure. Suppose that Cheerios and Apple Jacks are substitutes. Which diagram shows the effect on the demand for Cheerios when the price of Apple Jacks cereal has increased? A B neither graph both graphs

A

A rightward shift in the supply curve for a good may be caused by any of the following except A. a decrease in the wage paid to labor. B. an increase in the per unit subsidy. C. an increase in average consumer income. D. an improvement in technology.

C. an increase in average consumer income.

What if the increase in demand were smaller than the increase in​ supply?

Equilibrium price falls and quantity rises.

If the demand and supply curves increase​ (shift outward) by identical proportions then

Equilibrium price stays the same and quantity rises.

Consider the market for tennis balls shown at right. Consider the effect of the following two events on the​ market: i. An increase in the cost of labor ii.A decrease in the price of a tennis racquets

D1 and S1 are the new shifts in the demand and supply curves. B is the new equilibrium point.

Assume the cost of aluminum used by​ soft-drink companies increases. Which of the following correctly describes the resulting effects in the market for canned soft​ drinks? I. The demand for soft drinks decreases. II. The quantity of soft drinks demanded decreases. III. The supply of soft drinks decreases. IV. The quantity of soft drinks supplied decreases.

II and III.

The price of a new textbook increased by 25 percent and the price of a used textbook increased by 30 percent. What happened to the relative price of the new textbook? It increased by 5 percent. It increased, but we can't tell by how much without more information. It decreased, but we can't tell by how much without more information. It decreased by 5 percent.

It decreased, but we can't tell by how much without more information.

If a change in ceteris paribus condition described below could cause the demand to​ increase, indicate​ 'yes'. Otherwise, indicate​ 'no'. A decrease in the cost of production.

No, that only affects the supply curve.

Assume that the cost of aluminum used by​ soft-drink companies increases. Indicate which of the following statements describing the resulting effects in the market for soft drinks distributed in aluminum cans are true​ (T) or false​ (F). a. The demand for soft drinks decreases. b. The quantity of soft drinks demanded decreases. c. The supply of soft drinks decreases. d. The quantity of soft drinks supplied decreases.

a. The demand for soft drinks decreases. F b. The quantity of soft drinks demanded decreases. T c. The supply of soft drinks decreases. T d. The quantity of soft drinks supplied decreases. F

In the market for portable power​ banks, indicate whether the following events would cause an​ "increase or a decrease in demand​" or an​ "increase or a decrease in the quantity demanded.​" a. There is an increase in the price of carry cases for portable power banks. e. Consumers of portable power banks anticipate that the price of this good will decline in the future.

a. decrease in demand. Equilibrium quantity would decrease. Equilibrium price would decrease. e. decrease in demand.

We measure the demand schedule in terms of a time dimension and ________-quality units. a. variable b. constant

b. constant