ECON 2302: Pretest 1B

Sellers tend to offer _______ for sale as price increases, and so the supply curve is ______ sloping.

more; upward

If the demand for Personal Computers (PC) shifts to the right (up) as consumers' incomes rise, PC's are

normal goods.

Suppose one knows two facts: first, the market for prescription drugs experiences chronic shortages and second, government sets the price for prescription drugs. One can conclude that the

government has set the price below the equilibrium price.

A good example of central planning at work in the USA would be

New York City's rent control.

Refer to the figure above. What might cause Supply to shift from the Original Supply to the New Supply?

New technology reduces the amount of coffee beans necessary to make a good-tasting pot of coffee.

Everyone in the neighborhood has been complaining about the deteriorating condition of the park, but nobody has cleaned it up. Why not?

No single person's reservation price to clean the park makes it worth cleaning it.

If the demand for steak increases as income increases, this means that steak is a(n)

normal good.

If, in a particular market, all unexploited opportunities have been realized, one can conclude that

the market is in equilibrium.

One observes that the equilibrium price of a DVD player increases and the equilibrium quantity increases. Which of the following best fits the observed data?

An increase in demand with supply constant

Which of the following is not required for total economic surplus in a particular market to be maximized?

Government regulation of the market is needed.

Gertie saw a pair of jeans that she was willing to buy for $35. The price tag, though, said they were $29.99. Therefore,

Gertie should buy the jeans because the price is less than her reservation price.

Almost every holiday season at least one gift idea achieves fad status. When that happens, prices tend to increase dramatically. Why?

Quantity demanded exceeds quantity supplied.

Refer to the figure above. Suppose all the sellers in this market started out charging a price of $45 per unit. What is the most likely result?

They would be forced to lower their prices because at $45 there would be excess supply.

Assume the demand for coffee increases while the supply decreases. Which of the following outcomes is certain to occur?

The equilibrium price of coffee will rise.

Assume both the demand and the supply of beef decrease. Which of the following outcomes is certain to occur?

The equilibrium quantity of beef will fall.

A movement along a demand curve from one price-quantity combination to another is called

a change in quantity demanded.

Suppose that the equilibrium price of French fries rises while the equilibrium quantity falls. The most consistent explanation for these observations is

a decrease in the supply of French fries with no change in demand.

As the price of flour (an input into the cookie production process) increases, firms that produce cookies will

decrease the supply of cookies.

The supply of Shrek action figures is shown below. The bold, solid line is the current supply. Retailers learn that a new Shrek movie will be released next month. That news is likely to cause

an immediate shift in the supply function to Supply A in anticipation of increased prices.

Refer to the figure above. What might cause Demand to shift from the Original Demand to the New Demand?

an increase in incomes

Suppose you notice that more and more people are driving gas-guzzling cars. Since you drive an economy car, their increased demand for gas:

causes the price you pay for gas to increase.

In Cuba, a bureaucratic committee makes the production decisions for the country's firms and factories. Therefore, Cuba is an example of a

centralized economy.

Efficiency is an important goal in economics because it

assures a higher level of output.

A market comprised of a downward sloping demand curve that intersects an upward sloping supply curve is said to be stable because

at any price other than equilibrium, forces in the market move price towards the equilibrium.

If the price of computers increases and the demand for monitors decreases, then

computers and monitors are complements.

Refer to the figure above. An increase in demand is represented by shifting from

curve C to curve D.

Refer to the figure above. A decrease in supply is represented by shifting from

curve b to curve a

A market in disequilibrium would feature

either excess supply or excess demand.

Refer to the figure above. At a price of $3, the market will experience ______________ in the amount of _________ units.

excess demand; 5 units

If supply decreases while demand increases simultaneously, the new equilibrium price is ___________ and the new equilibrium quantity is _________________.

higher; indeterminate

You can spend $5 for lunch and you would like to have two Double Cheeseburgers. When you get to the restaurant, you find out the price for Double Cheeseburger has increased from $2.50 to $2.99. You decide to have two single Cheeseburgers for lunch. This is best described as a(n)

income effect

According to the equilibrium principle,

market equilibrium exploits all opportunities for individual gain, but may not exploit gains possible through collective action.

An outcome is socially optimal if it

maximizes total economic surplus

The buyer's reservation price of a particular good or service is the

maximum amount one would be willing to pay for it.

As the price of a good rises,

more firms can cover their opportunity costs of producing the good.

If the demand for a good decreases as income decreases, it is a(n)

normal good

A shortage occurs when

quantity demanded exceeds quantity supplied.

Jessica's marginal cost for producing a pitcher of lemonade is $0.25. Therefore, $0.25 can also be called her

reservation price.

Refer to the figure above. Suppose supply increases substantially. Then

the quantity demanded will increase.

Whenever the quantity demanded is not equal to the quantity supplied, the quantity that is actually sold in the market is

the smaller of the quantity demanded and the quantity supplied.

As coffee becomes more expensive, Joe starts drinking tea, therefore quantity demanded for coffee decreases. This is called

the substitution effect.

You have noticed that there is a persistent shortage of teachers in an inner-city school district in your state. Based on this observation, you suspect that

the wage for teachers at those schools is lower than the equilibrium wage.

Assume that Joe is willing to produce another hamburger that costs $1 to make. Mary is hungry and is willing to buy a hamburger for $3. According to the No Cash on the Table principle, Joe and Mary

will make a trade

Suppose that the production of oranges reduces global warming by .1%. The equilibrium price of oranges is _______ because not all of the _________ are accounted for in the marketplace.

too low; benefits