Chapter 4

Holding demand constant, if the supply curve shifts to the right, there will be a(n) _____ in the equilibrium price and a(n) _____ in the equilibrium quantity. increase; decrease decrease; decrease increase; increase decrease; increase

decrease; increase

Vernon Smith's laboratory experiments revealed that the supply and demand model: works well on paper but not in practice. works best when buyers and sellers have extensive training in economics. is too simple to be tested scientifically. successfully predicts real-life behavior.

successfully predicts real-life behavior.

Carla participates in a supply and demand experiment in her economics course. What can she expect the laboratory experiment to reveal about the supply and demand model? It successfully predicts real-life behavior. It is too simple to be tested scientifically. It works well on paper but not in practice. It works best when buyers and sellers have extensive training in economics.

It successfully predicts real-life behavior.

Which BEST describes the movement from an equilibrium at point K to a new equilibrium at point J? a decrease in quantity supplied followed by a decrease in demand a decrease in supply followed by a decrease in quantity demanded an increase in supply followed by a decrease in quantity demanded an increase in supply and a decrease in demand

a decrease in supply followed by a decrease in quantity demanded

If the demand for oil increased: the demand curve would shift to the left. the supply curve would shift to the right. quantity supplied would increase. quantity supplied would decrease.

quantity supplied would increase.

Vernon Smith began his laboratory experiments expecting: exactly the results that he got. to win a Nobel Prize. price, quantity, and gains from trade to converge even more quickly to equilibrium. to prove that the supply and demand model was wrong.

to prove that the supply and demand model was wrong.

Lower production costs result in: A lower equilibrium quantity. no change in the equilibrium price. a lower equilibrium price. a higher equilibrium price.

a lower equilibrium price.

If the supply of oil decreased: the demand curve would shift to the right. quantity demanded would decrease. quantity demanded would increase. the demand curve would shift to the left.

quantity demanded would decrease.

If, in this market, demand is represented by curve D1, supply is represented by curve S2, and the price is P1: there will be a shortage in this market. there will be a surplus in this market. this market is in equilibrium. the price will eventually rise to price P2.

there will be a shortage in this market.

If demand is represented by curve D1, supply is represented by curve S1, and the price is P3: there will be a shortage in this market. there will be a surplus in this market. this market is in equilibrium. the price will eventually rise above price P3.

there will be a surplus in this market.

Which statement about a free market maximizing the gains from trade is false? The supply of goods is bought by the buyers with the highest willingness to pay. The supply of goods is sold by the sellers with the lowest costs. All buyers and sellers in the market fully intend to maximize total gains from trade. Between buyers and sellers, there are neither unexploited gains from trade nor wasted resources.

All buyers and sellers in the market fully intend to maximize total gains from trade.

What did Vernon Smith expect when he began his laboratory experiments? He expected exactly the results that he got. He expected them to prove that the supply and demand model was wrong. He expected to win a Nobel Prize in Economics. He expected price, quantity, and gains from trade to converge even more quickly to equilibrium.

He expected them to prove that the supply and demand model was wrong.

Which BEST describes the movement from an equilibrium at point M to a new equilibrium at point K? a decrease in quantity demanded and an increase in quantity supplied a decrease in demand and an increase in supply a decrease in quantity demanded followed by an increase in supply a decrease in demand followed by an increase in quantity supplied

a decrease in quantity demanded followed by an increase in supply

Which of the following is caused by a shift in the supply curve? a leftward shift of the demand curve a movement along a fixed supply curve a rightward shift of the demand curve a movement along the demand curve

a movement along the demand curve

Who is represented by the portion of the curve labeled A? potential buyers who decide not to buy sellers potential sellers who decide not to sell buyers

buyers

If the supply of oil decreased in the United States, then: quantity demanded would decrease in the United States. quantity demanded would increase in the United States. the demand curve would shift to the right in the United States. the demand curve would shift to the left in the United States.

quantity demanded would decrease in the United States.

How would a global fall in income affect oil prices? There would be no effect on oil prices. Oil prices would rise as the demand for oil increased. Oil prices would fall as the demand for oil dropped. Oil prices would fall nearly to zero.

Oil prices would fall as the demand for oil dropped.

What would happen if the supply of oil decreased? The demand curve would shift to the left. Quantity demanded would increase. The demand curve would shift to the right. Quantity demanded would decrease.

Quantity demanded would decrease.

What would happen if the demand for oil increased? The demand curve would shift to the left. The market price would fall. The quantity demanded would fall. The market price would rise.

The market price would rise.

"Quantities higher than the equilibrium quantity produce more gains from trade than are achieved at the equilibrium quantity because there are more buyers and more sellers." This statement is: false, because the additional sellers are high-cost sellers and the additional buyers are low-value buyers. false, because the additional buyers all place values on the good that are higher than the costs to the additional sellers. true. false, because quantities higher than the equilibrium quantity pull in more buyers but fewer sellers.

false, because the additional sellers are high-cost sellers and the additional buyers are low-value buyers.

Holding demand constant, if the supply curve shifts to the left, there will be a(n) _____ in the equilibrium price and a(n) _____ in the equilibrium quantity. decrease; increase decrease; decrease increase; increase increase; decrease

increase; decrease

From the early twentieth century to the 1970s, the demand for oil: increased steadily. decreased and then increased rapidly. remained unchanged. decreased steadily.

increased steadily.

Assume stainless steel jewelry is an inferior good. As the incomes of consumers decrease, the equilibrium price of stainless steel jewelry _____, and the equilibrium quantity of stainless steel jewelry increases. decreases and then increases does not change decreases increases

increases

Wasteful trades occur at: the equilibrium quantity. quantities greater than the equilibrium quantity. quantities below the equilibrium quantity. both quantities above and quantities below the equilibrium quantity.

quantities greater than the equilibrium quantity.

What portion of a curve represents the producers with the highest costs? CDBA

c