exam 1 202

(True/False) Other thing being equal, if the price of a good falls, the demand for the good increases.

False

(True/False) Other thing being equal, if the price of a good falls, its quantity demanded increases.

True

Which of the following activities is most likely to produce an externality? a. A student has a party in her dorm room. b. A student sits at home and watches television. c. A student reads a novel for pleasure. d. A student eats a hamburger in the student union.

a. A student has a party in her dorm room.

Which of the following products would be least capable of producing an externality? a. Food b. Cigarettes c. Stereo equipment d. Education e. Inoculations against disease

a. Food

Which of the following events could cause an increase in the supply of ceiling fans? a. The number of sellers of ceiling fans increases. b. There is an increase in the price of air conditioners, and consumers regard air conditioners and ceiling fans as substitutes. c. There is an increase in the price of the motor that powers ceiling fans. d. All of the above are correct.

a. The number of sellers of ceiling fans increases.

A decrease in the supply of computer chips is represented by a. a leftward shift of the supply curve for computer chips. b. a rightward shift of the supply curve for computer chips. c. a flattening of the supply curve for computer chips. d. a movement down and to the left along the supply curve for computer chips.

a. a leftward shift of the supply curve for computer chips.

Which of the following would be an example of a monopoly? a. a local utility company such as Entergy b. local grocery store c. a bakery in a large city d. a potato farmer

a. a local utility company such as Entergy

A competitive market is a. a market in which there are many buyers and many sellers so that each has a negligible impact on price. b. a market where consumers can freely interact with sellers. c. a market where producer suppliers are under no government restrictions. d. a market in which firms compete with one another.

a. a market in which there are many buyers and many sellers so that each has a negligible impact on price.

Foreign trade a. allows a country to have a greater variety of products at a lower cost than if it tried to produce everything at home. b. allows a country to avoid trade-offs. c. makes the members of a country more equal. d. increases the scarcity of resources. e. is none of the above.

a. allows a country to have a greater variety of products at a lower cost than if it tried to produce everything at home.

An increase (rightward shift) in the demand for a good will tend to cause a. an increase in the equilibrium price and quantity. b. a decrease in the equilibrium price and quantity. c. an increase in the equilibrium price and a decrease in the equilibrium quantity. d. a decrease in the equilibrium price and an increase in the equilibrium quantity. e. none of the above.

a. an increase in the equilibrium price and quantity.

All of the following shift the supply of watches to the right except a. an increase in the price of watches. b. an advance in the technology used to manufacture watches. c. a decrease in the wage of workers employed to manufacture watches. d. manufacturers' expectations of lower watch prices in the future. e. All of the above cause an increase in the supply of watches.

a. an increase in the price of watches.

A negatively-sloped demand curve of a good implies that a. buyers tend to buy more of the good when its price falls. b. buyers tend to buy more of the good when their incomes increase. c. buyers tend to buy more of the good when the price of a substitute rises. d. buyers tend to buy more of the good when the price of a complement falls.

a. buyers tend to buy more of the good when its price falls.

Suppose there is an increase in both the supply and demand for personal computers. In the market for personal computers, we would expect the a. equilibrium quantity to rise and the change in the equilibrium price to be ambiguous. b. equilibrium quantity to rise and the equilibrium price to rise. c. change in the equilibrium quantity to be ambiguous and the equilibrium price to rise. d. equilibrium quantity to rise and the equilibrium price to remain constant. e. equilibrium quantity to rise and the equilibrium price to fall.

a. equilibrium quantity to rise and the change in the equilibrium price to be ambiguous.

Suppose there is an increase in both the supply and demand for personal computers. Furthermore, suppose the supply of personal computers increases more than demand for personal computers. In the market for personal computers, we would expect the a. equilibrium quantity to rise and the equilibrium price to fall. b. equilibrium quantity to rise and the change in the equilibrium price to be ambiguous. c. equilibrium quantity to rise and the equilibrium price to remain constant. d. equilibrium quantity to rise and the equilibrium price to rise. e. change in the equilibrium quantity to be ambiguous and the equilibrium price to fall.

a. equilibrium quantity to rise and the equilibrium price to fall.

An increase in the price of beef provides a. information that tells producers to produce more beef. b. information that tells consumers to buy less pork. c. no information because prices in a market system are managed by planning boards. d. information that tells consumers to buy more beef.

a. information that tells producers to produce more beef.

Consider the demand for a normal good. Other things being equal, if an economic recession reduces consumers' incomes, a. its demand curve shifts to the left. b. its demand curve shifts to the right. c. there is no shift of the demand curve, but its quantity demanded increases. d. there is no shift of the demand curve, but its quantity demanded decreases.

a. its demand curve shifts to the left.

When the demand for a good decreases, a. its demand curve shifts to the left. b. its demand curve shifts to the right. c. there is no shift of the demand curve, but its quantity demanded increases. d. there is no shift of the demand curve, but its quantity demanded decreases.

a. its demand curve shifts to the left.

A monopolistic market has a. only one seller. b. at least a few sellers. c. many buyers and sellers. d. firms that are price takers. e. none of the above.

a. only one seller.

Because people respond to incentives, we would expect that if the average salary of accountants increases by 50 percent while the average salary of teachers increases by 20 percent, a. students will shift majors from education to accounting. b. students will shift majors from accounting to education. c. fewer students will attend college. d. None of the above is true.

a. students will shift majors from education to accountin

If an increase in the price of blue jeans leads to an increase in the demand for tennis shoes, then blue jeans and tennis shoes are a. substitutes. b. complements. c. normal goods. d. inferior goods. e. none of the above.

a. substitutes.

A technological advance will shift the a. supply curve to the right. b. supply curve to the left. c. demand curve to the right. d. demand curve to the left.

a. supply curve to the right.

If buyers and/or sellers are price takers, then a. they have no influence on market price because there are so many in the market. b. they can influence the market price. c. they have ultimate control over market price. d. buyers will be able to find prices lower than determined in the market.

a. they have no influence on market price because there are so many in the market.

Toyota Camry and Honda Accord are substitute for each other. Other things being equal, if the price of Camry falls, the demand curve of Accord shifts ________ and the price of Accord ________. a. to the right; rises b. to the right; falls c. to the left; rises d. to the left; falls

a. to the right; rises

Which of the following situations describes the greatest market power? a. Volvo's impact on the price of autos b. Microsoft's impact on the price of desktop operating systems c. a farmer's impact on the price of corn d. a student's impact on college tuition

b. Microsoft's impact on the price of desktop operating systems

Refer to the adjacent figure. The shift from S to S1 could be caused by a. a decrease in the price of the good. b. an improvement in technology. c. an increase in income. d. an increase in input prices.

b. an improvement in technology.

Refer to the adjacent graph. The movement from point A to point B on the graph would be caused by a. a decrease in the price of the good. b. an increase in the price of the good. c. an advance in technology. d. a decrease in input prices.

b. an increase in the price of the good.

The law of demand states that an increase in the price of a good a. decreases the demand for that good. b. decreases the quantity demanded for that good. c. increases the supply of that good. d. increases the quantity supplied of that good. e. does none of the above.

b. decreases the quantity demanded for that good.

If suppliers expect the price of their product to fall in the future they will a. decrease supply now. b. increase supply now. c. decrease supply in the future but not now. d. increase supply in the future but not now.

b. increase supply now.

The relationship between price and quantity supplied is a. negative. b. positive c. the same as the relationship between price and quantity demanded. d. not well understood by economists because laboratory-type experiments have not been conducted.

b. positive

Trade-offs are required because wants are unlimited and resources are a. marginal. b. scarce. c. efficient. d. unlimited. e. economical.

b. scarce.

Suppose that a decrease in the price of X results in less of good Y sold. This would mean that X and Y are a. complementary goods. b. substitute goods. c. unrelated goods. d. normal goods.

b. substitute goods.

If the number of sellers in a market increases, the a. demand in that market will increase. b. supply in that market will increase. c. supply in that market will decrease. d. demand in that market will decrease.

b. supply in that market will increase.

Suppose you find $20. If you choose to use the $20 to go to the football game, your opportunity cost of going to the game is a. nothing, because you found the money. b. $20 (because you could have used the $20 to buy other things). c. $20 (because you could have used the $20 to buy other things) plus the value of your time spent at the game. d. $20 (because you could have used the $20 to buy other things) plus the value of your time spent at the game, plus the cost of the dinner you purchased at the game. e. none of the above.

c. $20 (because you could have used the $20 to buy other things) plus the value of your time spent at the game.

Consider the market for orange juice. The New England Journal of Medicine reported that the daily consumption of orange juice significantly reduces the likelihood of colon cancer. Unusually wet weather and cold temperatures in California damaged a significant portion of the orange crop. We would expect that a. the demand for orange juice increases and the supply of orange juice increases. b. the demand for orange juice increases and the supply of orange juice decreases. c. the demand for orange juice decreases and the supply of orange juice increases. d. the demand for orange juice decreases and the supply of orange juice decreases.

b. the demand for orange juice increases and the supply of orange juice decreases.

If the price of a good is below the equilibrium price, a. there is a surplus and the price will rise. b. there is a shortage and the price will rise. c. there is a shortage and the price will fall. d. there is a surplus and the price will fall. e. the quantity demanded is equal to the quantity supplied and the price remains unchanged.

b. there is a shortage and the price will rise.

Who is it that ultimately determines the demand for a product or service? a. the producers who create the product or service. b. those who buy the product or service. c. those who supply the raw materials used in the production of the good or service. d. the government.

b. those who buy the product or service.

Suppose there is an increase in steel prices. We would expect the supply curve for steel barrels a. to shift rightward. b. to shift leftward. c. to become flatter. d. to remain unchanged.

b. to shift leftward.

Suppose consumer tastes shift toward the consumption of apples. Which of the following statements is an accurate description of the impact of this event on the market for apples? a. There is a decrease in the quantity demanded of apples and an increase in the supply for apples. b. There is an increase in the quantity demanded of apples and in the supply for apples. c. There is an increase in the demand for apples and an increase in the quantity supplied of apples. d. There is an increase in the demand for apples and a decrease in the supply of apples. e. There is an increase in the demand and supply of apples.

c. There is an increase in the demand for apples and an increase in the quantity supplied of apples.

Which of the following do economists not generally regard as a legitimate reason for the government to intervene in a market? a. To enforce property rights b. To promote efficiency c. To protect an industry from foreign competition d. To promote equality

c. To protect an industry from foreign competition

You have spent $1,000 building a hot-dog stand based on estimates of sales of $2,000. The hot-dog stand is nearly completed, but now you estimate total sales to be only $800. You can complete the hot-dog stand for another $300. Should you complete the hot-dog stand? (Assume that the hot dogs cost you nothing.) a. No. b. There is not enough information to answer this question. c. Yes.

c. Yes.

Which of the following shifts the demand for watches to the right? a. a decrease in the price of watches b. a decrease in consumer incomes if watches are a normal good c. a decrease in the price of watch batteries if watch batteries and watches are complements d. an increase in the price of watches e. none of the above

c. a decrease in the price of watch batteries if watch batteries and watches are complements

Refer to the adjacent figure. The shift from S to S1 is called a. a decrease in supply. b. a decrease in quantity supplied. c. an increase in supply. d. an increase in quantity supplied.

c. an increase in supply.

If a good is "normal," then an increase in buyer income will result in a. no change in the demand for the good. b. a decrease in the demand for the good. c. an increase in the demand for the good. d. There is no sufficient information to infer an outcome.

c. an increase in the demand for the good.

A decrease (leftward shift) in the supply for a good will tend to cause a. an increase in the equilibrium price and quantity. b. a decrease in the equilibrium price and quantity. c. an increase in the equilibrium price and a decrease in the equilibrium quantity. d. a decrease in the equilibrium price and an increase in the equilibrium quantity. e. none of the above.

c. an increase in the equilibrium price and a decrease in the equilibrium quantity.

Refer to the adjacent graph. The movement from point A to point B on the graph is called a. a decrease in supply. b. an increase in supply. c. an increase in the quantity supplied. d. a decrease in the quantity supplied.

c. an increase in the quantity supplied.

Lead is an important input in the production of crystal. If the price of lead decreases, other things equal, we would expect the supply of a. crystal to be unaffected. b. crystal to decrease. c. crystal to increase. d. lead to increase.

c. crystal to increase.

An inferior good is one for which an increase in income causes a(n) a. decrease in supply. b. increase in supply. c. decrease in demand. d. increase in demand.

c. decrease in demand.

Other thing being equal, a decrease in the price of hand-held computing devices such as tablets will a. increase the demand for e-books and the demand curve of e-books shifts to the left. b. decrease the demand for e-books and the demand curve of e-books shifts to the right. c. increase the demand for e-books and the demand curve of e-books shifts to the right. d. decrease the demand for e-books and the demand curve of e-books shifts to the left.

c. increase the demand for e-books and the demand curve of e-books shifts to the right.

A perfectly competitive market has a. only one seller. b. at least a few sellers. c. many buyers and sellers. d. firms that set their own prices. e. none of the above.

c. many buyers and sellers.

The term used to describe a situation in which markets do not allocate resources efficiently is a. economic meltdown. b. the effect of the invisible hand. c. market failure. d. equilibrium.

c. market failure

Economics is the study of how a. to reduce our wants until we are satisfied. b. to avoid having to make trade-offs. c. society manages its scarce resources. d. to fully satisfy our unlimited wants. e. society manages its unlimited resources.

c. society manages its scarce resources.

The side of the market that deals with the willingness and ability to produce and sell is a. demand. b. competition. c. supply. d. monopoly.

c. supply.

In most societies, resources are allocated by a. a single central planner. b. those firms that use resources to provide goods and services. c. the combined actions of millions of households and firms. d. a small number of central planners.

c. the combined actions of millions of households and firms.

Honda Accord and Chevy Malibu are substitute for each other. If the US government increases taxes on imported cars, a. there is a movement up the demand curve of Chevy Malibu. b. there is a movement down the demand curve of Chevy Malibu. c. the demand curve of Chevy Malibu shifts to the right. d. the demand curve of Chevy Malibu shifts to the left.

c. the demand curve of Chevy Malibu shifts to the right.

Which of the following is not part of the opportunity cost of going on vacation? a. the money you could have made if you had stayed home and worked b. the money you spent on a Broadway show c. the money you spent on food d. the money you spent on airline tickets

c. the money you spent on food

The most significant determinant of quantity demanded is a. the price of a substitute good. b. the price of a complement good. c. the price of the good itself. d. the number of sellers in the market.

c. the price of the good itself.

According to the law of supply, a. the quantity supplied of a good is negatively related to the price of the good. b. when the price of a good falls, the quantity supplied of the good rises. c. the supply curve for a good is upward-sloping. d. All of the above are correct.

c. the supply curve for a good is upward-sloping.

If the price of a good is above the equilibrium price, a. there is a shortage and the price will rise. b. there is a surplus and the price will rise. c. there is a surplus and the price will fall. d. the quantity demanded is equal to the quantity supplied and the price remains unchanged. e. there is a shortage and the price will fall.

c. there is a surplus and the price will fall.

Price acts as a. an incentive to sellers. b. a constraint to buyers. c. a way of quantifying perceived value of a good or service in a market. d. All of the above answers are correct.

d. All of the above answers are correct.

When the demand curve of a good shifts to the right, a. the demand for the good increases. b. the demand for the good decreases. c. buyers buy more of the good than before at each and every price. d. Both a and c.

d. Both a and c.

When the government implements programs such as progressive income tax rates, which of the following is likely to occur? a. Equality is increased and efficiency is increased. b. Equality is decreased and efficiency is decreased. c. Equality is decreased and efficiency is increased. d. Equality is increased and efficiency is decreased.

d. Equality is increased and efficiency is decreased.

Which of the following statements is true about a market economy? a. Taxes help prices communicate costs and benefits to producers and consumers. b. With a large enough computer, central planners could guide production more efficiently than markets. c. The strength of a market system is that it tends to distribute resources evenly across consumers. d. Market participants act as if guided by an "invisible hand" to produce outcomes that promote general economic well-being.

d. Market participants act as if guided by an "invisible hand" to produce outcomes that promote general economic well-being.

Which of the following statements is true about the impact of an increase in the price of lettuce? a. The demand for lettuce will decrease. b. The supply of lettuce will decrease. c. The equilibrium price and quantity of salad dressing will rise. d. The equilibrium price and quantity of salad dressing will fall. e. Both a and d are true.

d. The equilibrium price and quantity of salad dressing will fall.

A supply curve slopes upward because a. as more is produced, total cost of production falls. b. an increase in input prices increases supply. c. the quantity supplied of most goods and services increases over time. d. an increase in price gives producers an incentive to supply a larger quantity.

d. an increase in price gives producers an incentive to supply a larger quantity.

If an increase in consumer incomes leads to a decrease in the demand for camping equipment, then camping equipment is a. a complementary good. b. a substitute good. c. a normal good. d. an inferior good. e. none of the above

d. an inferior good.

Other things being equal, if the government subsidizes the purchase of electric cars, the demand for gasoline-powered vehicles a. increases and the demand curve of gas-powered vehicles shifts to the left. b. decreases and the demand curve of gas-powered vehicles shifts to the right. c. increases and the demand curve of gas-powered vehicles shifts to the right. d. decreases and the demand curve of gas-powered vehicles shifts to the left.

d. decreases and the demand curve of gas-powered vehicles shifts to the left.

The law of supply states that an increase in the price of a good a. decreases the demand for that good. b. decreases the quantity demanded for that good. c. increases the supply of that good. d. increases the quantity supplied of that good. e. does none of the above.

d. increases the quantity supplied of that good.

Fundamentally, economics deals with a. poverty. b. banking. c. money. d. scarcity.

d. scarcity.

A rational person does not act unless a. the action makes money for the person. b. the action is ethical. c. the action produces marginal costs that exceed marginal benefits. d. the action produces marginal benefits that exceed marginal costs. e. None of the above is true.

d. the action produces marginal benefits that exceed marginal costs.

Consider the market for orange juice. The New England Journal of Medicine reported that the daily consumption of orange juice significantly reduces the likelihood of colon cancer. Unusually wet weather and cold temperatures in California damaged a significant portion of the orange crop. We would expect that a. the equilibrium price of orange juice falls and the equilibrium quantity of orange juice increases. b. the equilibrium price of orange juice rises and the equilibrium quantity of orange juice decreases. c. the equilibrium price of orange juice remains ambiguous and the equilibrium quantity of orange juice decreases. d. the equilibrium price of orange juice rises and the equilibrium quantity of orange juice remains ambiguous.

d. the equilibrium price of orange juice rises and the equilibrium quantity of orange juice remains ambiguous.

The positive relationship between price and quantity supplied is called a. profit. b. a change in supply. c. a shift of the supply curve. d. the law of supply.

d. the law of supply.

If the price of a good is equal to the equilibrium price, a. there is a shortage and the price will rise. b. there is a surplus and the price will fall. c. there is a surplus and the price will rise. d. the quantity demanded is equal to the quantity supplied and the price remains unchanged. e. there is a shortage and the price will fall.

d. the quantity demanded is equal to the quantity supplied and the price remains unchanged.

Which of the following involve a trade-off? a. Buying a new car b. Going to college c. Watching a football game on Saturday afternoon d. Taking a nap e. All of the above involve trade-offs.

e. All of the above involve trade-offs.

Which of the following is NOT a characteristic of a competitive market? a. Many sellers and many buyers b. Market participants have no market power c. No market entry barriers d. A good traded in a competitive market is homogeneous e. None of the above

e. None of the above

Suppose a frost destroys much of the Florida orange crop. At the same time, suppose consumer tastes shift toward orange juice. What would we expect to happen to the equilibrium price and quantity in the market for orange juice? a. Price will decrease; quantity is ambiguous. b. Price will increase; quantity will increase. c. Price will increase; quantity will decrease. d. The impact on both price and quantity is ambiguous. e. Price will increase; quantity is ambiguous.

e. Price will increase; quantity is ambiguous.

Suppose both buyers and sellers of wheat expect the price of wheat to rise in the near future. What would we expect to happen to the equilibrium price and quantity in the market for wheat today? a. Price will increase; quantity will decrease. b. Price will decrease; quantity is ambiguous. c. Price will increase; quantity will increase. d. The impact on both price and quantity is ambiguous. e. Price will increase; quantity is ambiguous.

e. Price will increase; quantity is ambiguous.

Raising taxes and increasing welfare payments a. proves that there is such a thing as a free lunch. b. reduces market power. c. improves efficiency at the expense of equality. d. improves equality at the expense of efficiency. e. does none of the above

e. does none of the above.