Econ Ch3

Assume the demand curve for product X shifts to the right. This might be caused by: A. a decline in income if X is an inferior good. B. a decline in the price of Z if X and Z are substitute goods. C. a change in consumer tastes that is unfavorable to X. D. an increase in the price of Y if X and Y are complementary goods.

a decline in income if X is an inferior good.

If producers must obtain higher prices than previously to produce various levels of output, the following has occurred: A. a decrease in demand. B. an increase in demand. C. a decrease in supply. D. an increase in supply.

a decrease in supply.

A rightward shift in the demand curve for product C might be caused by: A. an increase in income if C is an inferior good. B. a decrease in income if C is a normal good. C. a decrease in the price of a product that is a close substitute for C. D. a decrease in the price of a product that is complementary to C.

a decrease in the price of a product that is complementary to C.

If L and M are complementary goods, an increase in the price of L will result in: A. an increase in the sales of L. B. no change in either the price or sales of M. C. a decrease in the sales of M. D. an increase in the sales of M.

a decrease in the sales of M.

Economists use the term "demand" to refer to: A. a particular price-quantity combination on a stable demand curve. B. the total amount spent on a particular commodity over a stipulated time period. C. an upsloping line on a graph that relates consumer purchases and product price. D. a schedule of various combinations of market prices and amounts demanded.

a schedule of various combinations of market prices and amounts demanded.

A surplus of a product will arise when price is: A. above equilibrium with the result that quantity demanded exceeds quantity supplied. B. above equilibrium with the result that quantity supplied exceeds quantity demanded. C. below equilibrium with the result that quantity demanded exceeds quantity supplied. D. below equilibrium with the result that quantity supplied exceeds quantity demanded.

above equilibrium with the result that quantity supplied exceeds quantity demanded.

The location of the supply curve of a product depends on: A. the technology used to produce it. B. the prices of resources used in its production. C. the number of sellers in the market. D. all of these.

all of these.

Which of the following will cause a decrease in market equilibrium price and an increase in equilibrium quantity? A. an increase in supply. B. an increase in demand. C. a decrease in supply. D. a decrease in demand.

an increase in supply.

One can say with certainty that equilibrium quantity will increase when supply: A. and demand both decrease. B. increases and demand decreases. C. decreases and demand increases. D. and demand both increase.

and demand both increase.

Markets explained on the basis of supply and demand: A. assume many buyers and many sellers of a standardized product. B. assume market power so that buyers and sellers bargain with one another. C. do not exist in the real-world economy. D. do not exist in the real-world economy.

assume many buyers and many sellers of a standardized product.

A recent study found that an increase in the Federal tax on beer (and thus an increase in the price of beer) would reduce the demand for marijuana. We can conclude that: A. beer and marijuana are substitute goods. B. beer and marijuana are complementary goods. C. beer is an inferior good. D. marijuana is an inferior good.

beer and marijuana are complementary goods.

A firm's supply curve is upsloping because: A. the expansion of production necessitates the use of qualitatively inferior inputs. B. mass production economies are associated with larger levels of output. C. consumers envision a positive relationship between price and quality. D. beyond some point the production costs of additional units of output will rise.

beyond some point the production costs of additional units of output will rise.

An economist for a bicycle company predicts that, other things equal, a rise in consumer incomes will increase the demand for bicycles. This prediction is based on the assumption that: A. there are many goods that are substitutes for bicycles. B. there are many goods that are complementary to bicycles. C. there are few goods that are substitutes for bicycles. D. bicycles are normal goods.

bicycles are normal goods.

The rationing function of prices refers to the: A. tendency of supply and demand to shift in opposite directions. B. fact that ration coupons are needed to alleviate wartime shortages of goods. C. capacity of a competitive market to equate the quantity demanded and the quantity supplied. D. ability of the market system to generate an equitable distribution of income.

capacity of a competitive market to equate the quantity demanded and the quantity supplied.

When an economist says that the demand for a product has increased, this means that: A. consumers are now willing to purchase more of this product at each possible price. B. the product has become particularly scarce for some reason. C. product price has fallen and as a consequence consumers are buying a larger quantity of the product. D. the demand curve has shifted to the left.

consumers are now willing to purchase more of this product at each possible price.

There will be a surplus of a product when: A. price is below the equilibrium level. B. the supply curve is downward sloping and the demand curve is upward sloping. C. the demand and supply curves fail to intersect. D. consumers want to buy less than producers offer for sale.

consumers want to buy less than producers offer for sale.

An increase in the price of a product will reduce the amount of it purchased because: A. supply curves are upsloping. B. the higher price means that real incomes have risen. C. consumers will substitute other products for the one whose price has risen. D. consumers substitute relatively high-priced for relatively low-priced products.

consumers will substitute other products for the one whose price has risen.

With a downsloping demand curve and an upsloping supply curve for a product, a decrease in resource prices will: A. increase equilibrium price and quantity. B. decrease equilibrium price and quantity. C. decrease equilibrium price and increase equilibrium quantity. D. increase equilibrium price and decrease equilibrium quantity.

decrease equilibrium price and increase equilibrium quantity.

Suppose an excise tax is imposed on product X. We would expect this tax to: A. increase the demand for complementary good Y and decrease the demand for substitute product Z. B. decrease the demand for complementary good Y and increase the demand for substitute product Z. C. increase the demands for both complementary good Y and substitute product Z. D. decrease the demands for both complementary good Y and substitute product Z.

decrease the demand for complementary good Y and increase the demand for substitute product Z.

Assume in a competitive market that price is initially above the equilibrium level. We can predict that price will: A. decrease, quantity demanded will decrease, and quantity supplied will increase. B. decrease and quantity demanded and quantity supplied will both decrease. C. decrease, quantity demanded will increase, and quantity supplied will decrease. D. increase, quantity demanded will decrease, and quantity supplied will increase.

decrease, quantity demanded will increase, and quantity supplied will decrease.

If X is a normal good, a rise in money income will shift the: A. supply curve for X to the left. B. supply curve for X to the right. C. demand curve for X to the left. D. demand curve for X to the right.

demand curve for X to the right.

If Z is an inferior good, an increase in money income will shift the: A. supply curve for Z to the left. B. supply curve for Z to the right. C. demand curve for Z to the left. D. demand curve for Z to the right.

demand curve for Z to the left.

The quantity demanded of a product increases as its price declines because the: A. lower price shifts the demand curve rightward. B. lower price shifts the demand curve leftward. C. lower price results in an increase in supply. D. demand curve is downsloping.

demand curve is downsloping.

If products A and B are complements and the price of B decreases the: A. demand curves for both A and B will shift to the left. B. amount of B purchased will increase, but the demand curve for A will not shift. C. demand for A will increase and the amount of B demanded will increase. D. demand for A will decline and the demand for B will increase.

demand for A will increase and the amount of B demanded will increase.

In which of the following instances will the effect on equilibrium price be dependent on the magnitude of the shifts in supply and demand? A. demand rises and supply rises. B. supply falls and demand remains constant. C. demand rises and supply falls. D. supply rises and demand falls.

demand rises and supply rises.

The relationship between quantity supplied and price is _____ and the relationship between quantity demanded and price is _____. A. direct, inverse B. inverse, direct C. inverse, inverse D. direct, direct

direct, inverse

The optimal or allocatively efficient point on a production possibilities curve is achieved where: A. the smallest physical amounts of inputs are used to produce each good. B. each good is produced at a level where marginal benefits equal marginal costs. C. large amounts of capital goods are produced relative to consumer goods. D. large amounts of consumer goods are produced relative to capital goods.

each good is produced at a level where marginal benefits equal marginal costs.

Suppose that at prices of $5, $4, $3, $2, and $1 for product Z, the corresponding quantities supplied are 3, 4, 5, 6, and 7 units, respectively. Which of the following would increase the quantities supplied of Z to, say, 6, 8, 10, 12, and 14 units at these prices? A. improved technology for producing Z B. an increase in the prices of the resources used to make Z C. an increase in the excise tax on product Z D. increases in the incomes of the buyers of Z

improved technology for producing Z

Suppose that in each of four successive years producers sell more of their product and at lower prices. This could be explained: A. by small annual increases in supply accompanied by large annual increases in demand. B. in terms of a stable supply curve and increasing demand. C. in terms of a stable demand curve and increasing supply. D. as an exception to the law of supply.

in terms of a stable demand curve and increasing supply.

"In the corn market, demand often exceeds supply and supply sometimes exceeds demand." "The price of corn rises and falls in response to changes in supply and demand." In which of these two statements are the terms demand and supply being used correctly? A. in neither statement. B. in the second statement. C. in the first statement. D. in both statements.

in the second statement.

Given a downsloping demand curve and an upsloping supply curve for a product, an increase in the price of a substitute good will: A. increase equilibrium price and quantity. B. decrease equilibrium price and quantity. C. increase equilibrium price and decrease equilibrium quantity. D. decrease equilibrium price and increase equilibrium quantity.

increase equilibrium price and quantity.

Suppose product X is an input in the production of product Y. Product Y in turn is a substitute for product Z. An increase in the price of X can be expected to: A. decrease the demand for Z. B. increase the demand for Z. C. have no effect on the demand for Z. D. decrease the supply of Z.

increase the demand for Z.

If the demand and supply curves for product X are stable, a government-mandated increase in the price of X will: A. increase the supply of X and decrease the demand for X. B. increase the demand for X and decrease the supply of X. C. increase the quantity supplied and decrease the quantity demanded of X. D. decrease the quantity supplied of X and increase the quantity demanded of X.

increase the quantity supplied and decrease the quantity demanded of X.

Assume product A is an input in the production of product B. In turn product B is a complement to product C. We can expect a decrease in the price of A to: A. increase the supply of B and increase the demand for C. B. decrease the supply of B and increase the demand for C. C. decrease the supply of B and decrease the demand for C. D. increase the supply of B and decrease the demand for C.

increase the supply of B and increase the demand for C.

At the current price there is a shortage of a product. We would expect price to: A. increase, quantity demanded to increase, and quantity supplied to decrease. B. increase, quantity demanded to decrease, and quantity supplied to increase. C. increase, quantity demanded to increase, and quantity supplied to increase. D. decrease, quantity demanded to increase, and quantity supplied to decrease.

increase, quantity demanded to decrease, and quantity supplied to increase.

Assume in a competitive market that price is initially below the equilibrium level. We can predict that price will: A. decrease, quantity demanded will decrease, and quantity supplied will increase. B. decrease and quantity demanded and quantity supplied will both decrease. C. increase, quantity demanded will increase, and quantity supplied will decrease. D. increase, quantity demanded will decrease, and quantity supplied will increase.

increase, quantity demanded will decrease, and quantity supplied will increase.

Tennis rackets and ballpoint pens are: A. substitute goods. B. complementary goods. C. inferior goods. D. independent goods.

independent goods.

College students living off-campus frequently consume large amounts of ramen noodles and boxed macaroni and cheese. When they finish school and start their careers, their consumption of both goods frequently declines. This suggests that ramen noodles and boxed macaroni and cheese are: A. inferior goods. B. normal goods. C. complementary goods. D. substitute goods.

inferior goods.

A market: A. reflects upsloping demand and downsloping supply curves. B. entails the exchange of goods, but not services. C. is an institution that brings together buyers and sellers. D. always requires face-to-face contact between buyer and seller.

is an institution that brings together buyers and sellers.

The upward slope of the supply curve reflects the: A. principle of specialization in production. B. law of supply. C. fact that price and quantity supplied are inversely related. D. law of diminishing marginal utility.

law of supply.

The equilibrium price and quantity in a market usually produces allocative efficiency because: A. all consumers who want the good are satisfied. B. marginal benefit and marginal cost are equal at that point. C. equilibrium insures an equitable distribution of output. D. the excess of goods produced at equilibrium guarantees that all will have enough.

marginal benefit and marginal cost are equal at that point.

If consumer incomes increase, the demand for product X: A. will necessarily remain unchanged. B. may shift either to the right or left. C. will necessarily shift to the right. D. will necessarily shift to the left.

may shift either to the right or left.

The demand for most products varies directly with changes in consumer incomes. Such products are known as: A. complementary goods. B. competitive goods. C. inferior goods. D. normal goods.

normal goods.

The law of demand states that: A. price and quantity demanded are inversely related. B. the larger the number of buyers in a market, the lower will be product price. C. price and quantity demanded are directly related. D. consumers will buy more of a product at high prices than at low prices.

price and quantity demanded are inversely related.

An increase in the quantity demanded means that: A. given supply, the price of the product can be expected to decline. B. price has declined and consumers therefore want to purchase more of the product. C. the demand curve has shifted to the right. D. the demand curve has shifted to the left.

price has declined and consumers therefore want to purchase more of the product.

If the supply of a product decreases and the demand for that product simultaneously increases, then equilibrium: A. price must rise, but equilibrium quantity may rise, fall, or remain unchanged. B. price must rise and equilibrium quantity must fall. C. price and equilibrium quantity must both increase. D. price and equilibrium quantity must both decline.

price must rise, but equilibrium quantity may rise, fall, or remain unchanged.

The law of supply indicates that: A. producers will offer more of a product at high prices than they will at low prices. B. the product supply curve is downsloping. C. consumers will purchase less of a good at high prices than they will at low prices. D. producers will offer more of a product at low prices than they will at high prices.

producers will offer more of a product at high prices than they will at low prices.

The location of the product supply curve depends on: A. production technology. B. the number of buyers in the market. C. the tastes of buyers. D. the location of the demand curve.

production technology.

If the supply and demand curves for a product both decrease, then equilibrium: A. quantity must fall and equilibrium price must rise. B. price must fall, but equilibrium quantity may rise, fall, or remain unchanged. C. quantity must decline, but equilibrium price may rise, fall, or remain unchanged. D. quantity and equilibrium price must both decline.

quantity must decline, but equilibrium price may rise, fall, or remain unchanged.

If we say that a price is too high to clear the market, we mean that: A. quantity demanded exceeds quantity supplied. B. the equilibrium price is above the current price. C. quantity supplied exceeds quantity demanded. D. the price of the good is likely to rise.

quantity supplied exceeds quantity demanded.

Camille's Creations and Julia's Jewels both sell beads in a competitive market. If at the market price of $5, both are running out of beads to sell (they can't keep up with the quantity demanded at that price), then we would expect both Camille's and Julia's to: A. raise their price and reduce their quantity supplied. B. raise their price and increase their quantity supplied. C. lower their price and reduce their quantity supplied. D. lower their price and increase their quantity supplied.

raise their price and increase their quantity supplied.

Suppose that tacos and pizza are substitutes, and that soda and pizza are complements. We would expect an increase in the price of pizza to: A. reduce the demand for tacos and increase the demand for sodas. B. reduce the demand for soda and increase the demand for tacos. C. increase the demand for both soda and tacos. D. reduce the demand for both soda and tacos.

reduce the demand for soda and increase the demand for tacos.

The term quantity demanded: A. refers to the entire series of prices and quantities that comprise the demand schedule. B. refers to a situation in which the income and substitution effects do not apply. C. refers to the amount of a product that will be purchased at some specific price. D. means the same thing as demand.

refers to the amount of a product that will be purchased at some specific price.

The law of supply: A. reflects the amounts that producers will want to offer at each price in a series of prices. B. is reflected in a downsloping supply curve. C. shows that the relationship between producer revenue and quantity supplied is negative. D. reflects the income and substitution effects of a price change.

reflects the amounts that producers will want to offer at each price in a series of prices.

Data from the registrar's office at Gigantic State University indicate that over the past twenty years tuition and enrollment have both increased. From this information we can conclude that: A. higher education is an exception to the law of demand. B. the supply of education provided by GSU has also increased over the twenty-year period. C. school-age population, incomes, and preferences for education have changed over the twenty-year period. D. GSU's supply curve of education is downsloping.

school-age population, incomes, and preferences for education have changed over the twenty-year period.

A decrease in the price of digital cameras will: A. cause the demand curve for memory cards to become vertical. B. shift the demand curve for memory cards to the right. C. shift the demand curve for memory cards to the left. D. not affect the demand for memory cards.

shift the demand curve for memory cards to the right.

If products C and D are close substitutes, an increase in the price of C will: A. tend to cause the price of D to fall. B. shift the demand curve of C to the left and the demand curve of D to the right. C. shift the demand curve of D to the right. D. shift the demand curves of both products to the right.

shift the demand curve of D to the right.

If the price of product L increases, the demand curve for close-substitute product J will: A. shift downward toward the horizontal axis. B. shift to the left. C. shift to the right. D. remain unchanged.

shift to the right.

A leftward shift of a product supply curve might be caused by: A. an improvement in the relevant technique of production. B. a decline in the prices of needed inputs. C. an increase in consumer incomes. D. some firms leaving an industry.

some firms leaving an industry.

In 2007 the price of oil increased, which in turn caused the price of natural gas to rise. This can best be explained by saying that oil and natural gas are: A. complementary goods and the higher price for oil increased the demand for natural gas. B. substitute goods and the higher price for oil increased the demand for natural gas. C. complementary goods and the higher price for oil decreased the supply of natural gas. D. substitute goods and the higher price for oil decreased the supply of natural gas.

substitute goods and the higher price for oil increased the demand for natural gas.

Suppose that in 2007 Ford sold 500,000 Mustangs at an average price of $18,800 per car; in 2008, 600,000 Mustangs were sold at an average price of $19,500 per car. These statements: A. suggest that the demand for Mustangs decreased between 2007 and 2008. B. suggest that the supply of Mustangs must have increased between 2007 and 2008. C. suggest that the demand for Mustangs increased between 2007 and 2008. D. constitute an exception to the law of demand in that they suggest an upsloping demand curve.

suggest that the demand for Mustangs increased between 2007 and 2008.

Because of unseasonably cold weather, the supply of oranges has substantially decreased. This statement indicates that: A. the demand for oranges will necessarily rise. B. the equilibrium quantity of oranges will rise. C. the amount of oranges that will be available at various prices has declined. D. the price of oranges will fall.

the amount of oranges that will be available at various prices has declined.

A normal good is one: A. whose amount demanded will increase as its price decreases. B. whose amount demanded will increase as its price increases. C. whose demand curve will shift leftward as incomes rise. D. the consumption of which varies directly with incomes.

the consumption of which varies directly with incomes.

An increase in demand means that: A. given supply, the price of the product will decline. B. the demand curve has shifted to the right. C. price has declined and consumers therefore want to purchase more of the product. D. the demand curve has shifted to the left.

the demand curve has shifted to the right.

Other things equal, which of the following might shift the demand curve for gasoline to the left? A. the discovery of vast new oil reserves in Montana B. the development of a low-cost electric automobile C. an increase in the price of train and air transportation D. a large decline in the price of automobiles

the development of a low-cost electric automobile

In a competitive market the equilibrium price and quantity occur where: A. the downsloping demand curve intersects the upsloping supply curve. B.the upsloping demand curve intersects the downsloping supply curve. C. consumers and suppliers bargain to a mutually acceptable price. D. quantity demanded exceeds quantity supplied or vice versa.

the downsloping demand curve intersects the upsloping supply curve.

Which of the following would mostly likely increase the demand for gasoline? A. the expectation by consumers that gasoline prices will be higher in the future. B. the expectation by consumers that gasoline prices will be lower in the future. C. a widespread shift in car ownership from SUVs to hybrid sedans. D. a decrease in the price of public transportation.

the expectation by consumers that gasoline prices will be higher in the future.

When the price of a product falls, the purchasing power of our money income rises and thus permits consumers to purchase more of the product. This statement describes: A. an inferior good. B. the rationing function of prices. C. the substitution effect. D. the income effect.

the income effect.

Allocative efficiency involves determining: A. which output-mix will result in the most rapid rate of economic growth. B. which production possibilities curve reflects the lowest opportunity costs. C. the mix of output that will maximize society's satisfaction. D. the optimal rate of technological progress.

the mix of output that will maximize society's satisfaction.

In moving along a stable demand curve which of the following is not held constant? A. the price of the product for which the demand curve is relevant. B. price expectations. C. consumer incomes. D. the prices of complementary goods.

the price of the product for which the demand curve is relevant.

In moving along a stable supply curve which of the following is not held constant? A. the number of firms producing this good B. expectations about the future price of the product C. techniques used in producing this product D. the price of the product for which the supply curve is relevant

the price of the product for which the supply curve is relevant

In presenting the idea of a demand curve, economists presume that the most important variable in determining the quantity demanded is: A. the price of the product itself. B. consumer income. C. the prices of related goods. D. consumer tastes.

the price of the product itself.

If there is a shortage of product X: A. fewer resources will be allocated to the production of this good. B. the price of the product will rise. C. the price of the product will decline. D. the supply curve will shift to the left and the demand curve to the right, eliminating the shortage.

the price of the product will rise.

In constructing a stable demand curve for product X: A. consumer preferences are allowed to vary. B. the prices of other goods are assumed constant. C. money incomes are allowed to vary. D. the supply curve of product X is assumed to be fixed.

the prices of other goods are assumed constant.

Allocative efficiency refers to: A. the use of the least-cost method of production. B. the production of the product-mix most wanted by society. C. the full employment of all available resources. D. production at some point inside of the production possibilities curve.

the production of the product-mix most wanted by society.

When the price of a product rises, consumers shift their purchases to other products whose prices are now relatively lower. This statement describes: A. an inferior good. B. the rationing function of prices. C. the substitution effect. D. the income effect.

the substitution effect.

Suppose that corn prices rise significantly. If farmers expect the price of corn to continue rising relative to other crops, then we would expect: A. the supply of ethanol, a corn-based product, to increase. B. consumer demand for wheat to fall. C. the supply to increase as farmers plant more corn. D. the supply to fall as farmers plant more of other crops.

the supply to increase as farmers plant more corn.

At the equilibrium price: A. quantity supplied may exceed quantity demanded or vice versa. B. there are no pressures on price to either rise or fall. C. there are forces that cause price to rise. D. there are forces that cause price to fall.

there are no pressures on price to either rise or fall.

At the point where the demand and supply curves intersect: A. the buying and selling decisions of consumers and producers are inconsistent with one another. B. the market is in disequilibrium. C. there is neither a surplus nor a shortage of the product. D. quantity demanded exceeds quantity supplied.

there is neither a surplus nor a shortage of the product.

A product market is in equilibrium: A. when there is no surplus of the product. B. when there is no shortage of the product. C. when consumers want to buy more of the product than producers offer for sale. D. where the demand and supply curves intersect.

where the demand and supply curves intersect.

The demand curve for a product might shift as the result of a change in: A. consumer tastes. B. consumer incomes. C. the prices of related goods. D. all of these.

all of these.

The supply curve shows the relationship between: A. price and quantity supplied. B. production costs and the amount demanded. C. total business revenues and quantity supplied. D. physical inputs of resources and the resulting units of output.

price and quantity supplied.

A decrease in the demand for recreational fishing boats might be caused by an increase in the: A. income of sports fishers. B. price of outboard motors. C. size and number of fish available. D. price of sailing boats.

price of outboard motors.

An improvement in production technology will: A. increase equilibrium price. B. shift the supply curve to the left. C. shift the supply curve to the right. D. shift the demand curve to the left.

shift the supply curve to the right.

Increasing marginal cost of production explains: A. the law of demand. B. the income effect. C. why the supply curve is upsloping. D. why the demand curve is downsloping.

why the supply curve is upsloping.

A market is in equilibrium: A. provided there is no surplus of the product. B. at all prices above that shown by the intersection of the supply and demand curves. C. if the amount producers want to sell is equal to the amount consumers want to buy. D. whenever the demand curve is downsloping and the supply curve is upsloping.

if the amount producers want to sell is equal to the amount consumers want to buy.

An increase in the price of product A will: A. reduce the demand for resources used in the production of A. B. increase the demand for complementary product C. C. increase the demand for substitute product B. D. reduce the demand for substitute product B.

increase the demand for substitute product B.

An unusually large crop of coffee beans might: A. increase the supply of coffee. B. increase the price of coffee. C. decrease the quantity of coffee consumed. D. increase the price of tea.

increase the supply of coffee.

The construction of demand and supply curves assumes that the primary variable influencing decisions to produce and purchase goods is: A. price B. expectations C. preferences D. incomes

price

An increase in product price will cause: A. quantity demanded to decrease. B. quantity supplied to decrease. C. quantity demanded to increase. D. the supply curve to shift to the left.

quantity demanded to decrease.

When the price of a product increases, a consumer is able to buy less of it with a given money income. This describes: A. the cost effect. B. the inflationary effect. C. the income effect. D. the substitution effect.

the income effect.

Which of the following is most likely to be an inferior good? A. fur coats B. ocean cruises C. used clothing D. steak

used clothing

Assuming competitive markets with typical supply and demand curves, which of the following statements is correct? A. An increase in supply with a decrease in demand will result in an increase in price. B. An increase in supply with no change in demand will result in an increase in price. C. An increase in supply with no change in demand will result in a decline in sales. D. An increase in demand with no change in supply will result in an increase in sales.

An increase in demand with no change in supply will result in an increase in sales.

Which of the following statements is correct? A. An increase in the price of C will decrease the demand for complementary product D. B. A decrease in income will decrease the demand for an inferior good. C. An increase in income will reduce the demand for a normal good. D. A decline in the price of X will increase the demand for substitute product Y.

An increase in the price of C will decrease the demand for complementary product D.

With a downsloping demand curve and an upsloping supply curve for a product, placing an excise tax on this product will: A. increase equilibrium price and quantity. B. decrease equilibrium price and quantity. C. decrease equilibrium price and increase equilibrium quantity. D. increase equilibrium price and decrease equilibrium quantity.

increase equilibrium price and decrease equilibrium quantity.

If price is above the equilibrium level, competition among sellers to reduce the resulting: A. surplus will increase quantity demanded and decrease quantity supplied. B. shortage will decrease quantity demanded and increase quantity supplied. C. surplus will decrease quantity demanded and increase quantity supplied. D. shortage will increase quantity demanded and decrease quantity supplied.

surplus will increase quantity demanded and decrease quantity supplied.

The demand curve shows the relationship between: A. money income and quantity demanded. B. price and production costs. C. price and quantity demanded. D. consumer tastes and the quantity demanded.

price and quantity demanded.

If consumers are willing to pay a higher price than previously for each level of output, we can say that, the following has occurred: A. a decrease in demand. B. an increase in demand. C. a decrease in supply. D. an increase in supply.

an increase in demand.

An increase in consumer incomes will: A. increase the demand for an inferior good. B. increase the supply of an inferior good. C. increase the demand for a normal good. D. decrease the supply of a normal good.

increase the demand for a normal good.

One can say with certainty that equilibrium price will decline when supply: A. and demand both decrease. B. increases and demand decreases. C. decreases and demand increases. D. and demand both increase.

increases and demand decreases.

A government subsidy to the producers of a product: A. reduces product supply. B. increases product supply. C. reduces product demand. D. increases product demand.

increases product supply.

Graphically, the market demand curve is: A. steeper than any individual demand curve that is part of it. B. greater than the sum of the individual demand curves. C. the horizontal sum of individual demand curves. D. the vertical sum of individual demand curves.

the horizontal sum of individual demand curves.

By an increase in demand we mean that : A. product price has fallen so consumers move down to a new point on the demand curve. B. the quantity demanded at each price in a set of prices is greater. C. the quantity demanded at each price in a set of prices is smaller. D. a leftward shift of the demand curve has occurred.

the quantity demanded at each price in a set of prices is greater.

If the demand curve for product B shifts to the right as the price of product A declines, then: A. both A and B are inferior goods. B. A is a superior good and B is an inferior good. C. A is an inferior good and B is a superior good. D. A and B are complementary goods.

A and B are complementary goods.

DVD players and DVDs are: A. complementary goods. B. complementary goods. C. independent goods. D. inferior goods.

complementary goods.

Digital cameras and memory cards are: A. substitute goods. B. complementary goods. C. independent goods. D. inferior goods.

complementary goods.

If the demand for steak (a normal good) shifts to the left, the most likely reason is that: A. consumer incomes have fallen. B. cattle production has declined. C. the price of steak has risen. D. the price of cattle feed has gone up.

consumer incomes have fallen.

A shift to the right in the demand curve for product A can be most reasonably explained by saying that: A. consumer incomes have declined and they now want to buy less of A at each possible price. B. the price of A has increased and, as a result, consumers want to purchase less of it. C. consumer preferences have changed in favor of A so that they now want to buy more at each possible price. D. the price of A has declined and, as a result, consumers want to purchase more of it.

consumer preferences have changed in favor of A so that they now want to buy more at each possible price.

An inferior good is: A. one whose demand curve will shift rightward as incomes rise. B. one whose price and quantity demanded vary directly. C. one which has not been approved by the Federal Food and Drug Administration. D. not accurately defined by any of the above statements.

not accurately defined by any of the above statements.

When the price of Nike soccer balls fell, Ronaldo purchased more Nike soccer balls, and fewer Adidas soccer balls. Which of the following best explains Ronaldo's decision to buy more Nike soccer balls? A. the substitution effect B. the income effect C. an increase in the demand for Nike soccer balls D. the price effect

the substitution effect

When product prices change, consumers are inclined to purchase larger amounts of the now cheaper products and less of the now more expensive products. This describes: A. the cost effect. B. the price effect. C. the income effect. D. the substitution effect.

the substitution effect.

Which of the following statements is correct? A. If demand increases and supply decreases, equilibrium price will fall. B. If supply increases and demand decreases, equilibrium price will fall. C. If demand decreases and supply increases, equilibrium price will rise. D. If supply declines and demand remains constant, equilibrium price will fall.

If supply increases and demand decreases, equilibrium price will fall.

Which of the following statements is true about productive and allocative efficiency? A. Realizing allocative efficiency implies that productive efficiency has been realized. B. Productive efficiency can only occur if there is also allocative efficiency. C. Society can achieve either productive efficiency or allocative efficiency, but not both simultaneously. D. Productive efficiency and allocative efficiency can only occur together; neither can occur without the other.

Realizing allocative efficiency implies that productive efficiency has been realized.

In which of the following statements are the terms "demand" and "quantity demanded" used correctly? A. When the price of ice cream rose, the demand for both ice cream and ice cream toppings fell. B. When the price of ice cream rose, the quantity demanded of ice cream fell, and the demand for ice cream toppings fell. C. When the price of ice cream rose, the demand for ice fell, and the quantity demanded of ice cream toppings fell. D. None of these statements use the terms correctly.

When the price of ice cream rose, the quantity demanded of ice cream fell, and the demand for ice cream toppings fell.

In the past few years, the demand for donuts has greatly increased. This increase in demand might best be explained by: A. an increase in the cost of making donuts. B. an increase in the price of coffee. C. consumers expecting donut prices to fall. D. a change in buyer tastes.

a change in buyer tastes.

Which of the following will not cause the demand for product K to change? A. a change in the price of close-substitute product J B. an increase in consumer incomes C. a change in the price of K D. a change in consumer tastes

a change in the price of K

Assume that the demand schedule for product C is downsloping. If the price of C falls from $2.00 to $1.75: A. a smaller quantity of C will be demanded. B. a larger quantity of C will be demanded. C. the demand for C will increase. D. the demand for C will decrease.

a larger quantity of C will be demanded.

Which of the following would not shift the demand curve for beef? A. a widely publicized study that indicates beef increases one's cholesterol B. a reduction in the price of cattle feed C. an effective advertising campaign by pork producers D. a change in the incomes of beef consumers

a reduction in the price of cattle feed

A competitive market will: A. achieve an equilibrium price. B. produce shortages. C. produce surpluses. D. create disorder.

achieve an equilibrium price.

When the price of oil declines significantly, the price of gasoline also declines. The latter occurs because of a(n): A. increase in the demand for gasoline. B. decrease in the demand for gasoline. C. increase in the supply of gasoline. D. decrease in the supply of gasoline.

increase in the supply of gasoline.

Other things equal, an excise tax on a product will: A. increase its supply. B. increase its price. C. increase the quantity sold. D. increase its demand.

increase its price.

Other things equal, the provision of a per unit subsidy for a product will: A. increase its supply. B. increase its price. C. decrease the quantity sold. D. decrease its demand.

increase its supply.

A demand curve: A. shows the relationship between price and quantity supplied. B. indicates the quantity demanded at each price in a series of prices. C. graphs as an upsloping line. D. shows the relationship between income and spending.

indicates the quantity demanded at each price in a series of prices.

If a product is in surplus supply, its price: A. is below the equilibrium level. B. is above the equilibrium level. C. will rise in the near future. D. is in equilibrium.

is above the equilibrium level.

If an economy produces its most wanted goods but uses outdated production methods, it is: A. achieving productive efficiency, but not allocative efficiency. B. not achieving productive efficiency. C. achieving both productive and allocative efficiency. D. engaged in roundabout production.

not achieving productive efficiency.

Allocative efficiency is concerned with: A. producing the combination of goods most desired by society. B. achieving the full employment of all available resources. C. producing every good with the least-cost combination of inputs. D. reducing the concavity of the production possibilities curve.

producing the combination of goods most desired by society.

Other things equal, if the price of a key resource used to produce product X falls, the: A. product supply curve of X will shift to the right. B. product demand curve of X will shift to the right. C. product supply curve of X will shift to the left. D. product demand curve of X will shift to the left.

product supply curve of X will shift to the right.

Assume a drought in the Great Plains reduces the supply of wheat. Noting that wheat is a basic ingredient in the production of bread and that potatoes are a consumer substitute for bread, we would expect the price of wheat to: A. rise, the supply of bread to increase, and the demand for potatoes to increase. B. rise, the supply of bread to decrease, and the demand for potatoes to increase. C. rise, the supply of bread to decrease, and the demand for potatoes to decrease. D. fall, the supply of bread to increase, and the demand for potatoes to increase.

rise, the supply of bread to decrease, and the demand for potatoes to increase.

Since their introduction, prices of DVD players have fallen and the quantity purchased has increased. This statement: A. suggests that the supply of DVD players has increased. B. suggests that the demand for DVD players has increased. C. constitutes an exception to the law of demand in that they suggest an upward sloping demand curve. D. constitutes an exception to the law of supply in that they suggest a downward sloping supply curve.

suggests that the supply of DVD players has increased.

An increase in the excise tax on cigarettes raises the price of cigarettes by shifting the: A. demand curve for cigarettes rightward. B. demand curve for cigarettes leftward. C. supply curve for cigarettes rightward. D. supply curve for cigarettes leftward.

supply curve for cigarettes leftward.

The income and substitution effects account for: A. the upward sloping supply curve. B. the downward sloping demand curve. C. movements along a given supply curve. D. the "other things equal" assumption.

the downward sloping demand curve.

Steve went to his favorite hamburger restaurant with $3, expecting to buy a $2 hamburger and a $1 soda. When he arrived he discovered that hamburgers were on sale for $1, so Steve bought two hamburgers and a soda. Steve's response to the decrease in the price of hamburgers is best explained by: A. the substitution effect. B. the income effect. C. the price effect. D. a rightward shift in the demand curve for hamburgers.

the income effect.

Productive efficiency refers to: A. the use of the least-cost method of production. B. the production of the product-mix most wanted by society. C. the full employment of all available resources. D. production at some point inside of the production possibilities curve.

the use of the least-cost method of production.

If two goods are complements: A. they are consumed independently. B. an increase in the price of one will increase the demand for the other. C. a decrease in the price of one will increase the demand for the other. D. they are necessarily inferior goods.

a decrease in the price of one will increase the demand for the other.

Which of the following will cause the demand curve for product A to shift to the left? A. population growth that causes an expansion in the number of persons consuming A. B. an increase in money income if A is a normal good. C. a decrease in the price of complementary product C. D. an increase in money income if A is an inferior good.

an increase in money income if A is an inferior good.

Assuming conventional supply and demand curves, changes in the determinants of supply and demand will: A. in all likelihood alter both equilibrium price and quantity. B. alter equilibrium quantity, but not equilibrium price. C. alter equilibrium price, but not equilibrium quantity. D. have no effect on equilibrium price or quantity.

in all likelihood alter both equilibrium price and quantity.

With a downsloping demand curve and an upsloping supply curve for a product, an increase in consumer income will: A. increase equilibrium price and quantity if the product is a normal good. B. decrease equilibrium price and quantity if the product is a normal good. C. have no effect on equilibrium price and quantity. D. reduce the quantity demanded, but not shift the demand curve.

increase equilibrium price and quantity if the product is a normal good.

One reason that the quantity demanded of a good increases when its price falls is that the: A. price decline shifts the supply curve to the left. B. lower price shifts the demand curve to the left. C. lower price shifts the demand curve to the right. D. lower price increases the real incomes of buyers, enabling them to buy more.

lower price increases the real incomes of buyers, enabling them to buy more.

If the price of K declines, the demand curve for the complementary product J will: A. shift to the left. B. shift to the right. C. decrease. D. remain unchanged.

shift to the right.