Exam 1 Micro Econ

Willingness to pay is the:

highest value that a consumer believes a good or service is worth

An increase in the price of oranges would lead to a(n):

movement up the supply curve for oranges

If television sellers expect the prices of televisions to fall in the future, we are likely to see the price:

of televisions fall and quantity of televisions rise

Employers give stock options to full-time employees who have been on the job more than three years. This is an example of:

people following incentives

Which event will lead to a decrease in supply?

(1) a decrease in the number of sellers in the market (2) an increase in taxes (3) an increase in resource costs

The opportunity costs of attending college include:

(1) the costs of textbook or eBooks (2) required student activity fees (3) the forgone wages that could have been earned working

Which factor would change the demand for sea kayak tours?

(1) the onset of sunny, summer beach weather (2) news reports of whales in the harbor' (3) an increase in the price of bicycle tours, a substitute activity

When the supply curve shifts out (to the right) and the demand curve shifts in (to the left), the equilibrium will:

decrease

Amit is willing to pay $330 for a new game console. The game console sells for $200 and Amit purchases it for $330. The $330 is his willingness-to-pay.

False

An increase in population will lead to a decrease in quantity demanded in the market due to strains in resources

False

If bad weather persists in a summer resort town, we can expect demand to shift left and the equilibrium price for hotels to rise.

False

Markets gravitate toward equilibrium levels only when government intervenes.

False

The law of supply states that as the price of a good increases, quantity supplied decreases, ceteris paribus.

False

Which statement illustrates the law of demand?

Lindsay offers to buy more sticks of chewing gum at $1 than at $2.

Generally speaking, private markets are the most efficient institutions for providing goods and services

True

Graphically, a change in demand is represented by a shift of the demand curve.

True

If both supply and demand shift, but you don't have information about which curve shifted the most, then the direction of the change in either price or quantity (but not both) can be predicted.

True

Microeconomics looks at how markets are structured.

True

The law of demand states that as the price of a good increases, the quantity demanded decreases

True

The law of supply states that if prices fall, producers will offer fewer products to the market.

True

Willingness-to-pay is the maximum one would be willing to pay for a good or service

True

Consider the demand for olive oil. What would happen to the demand for olive oil if a study confirming its beneficial health effects is published at the same time that an investigative reports finds that much of the olive oil imported into the country is actually sunflower oil that has been dyed?

We would expect demand to shift in each direction, but the final position will depend on which event has the bigger impact on demand

Assume the demand schedule for smart phones is downward sloping. If the price of smart phones increases from $200 to $600:

a decrease in quantity demanded of smart phones will occur

The supply of coffee has increased twice as much as the demand for coffee. As a result, we can predict a(n):

decrease in equilibrium price, but equilibrium increases

If supply increases and at the same time demand decreases, equilibrium price:

decreases and equilibrium quantity is indeterminate

A decrease in the quantity supplied of iPads is caused by a(n):

drop in the price of iPads

A society that is able to produce goods and services at the lowest possible cost is experiencing:

production efficiency

If the supply curve shifts rightward, and the demand curve also shifts rightward, and if demand grows relatively less than supply, then price will:

fall and quantity will rise

Suppose that the price of pork rises. We would expect that the supply of beef will:

fall because farmers will shift resources from beef production to pork production

Suppose it is discovered that consuming Greek yogurt leads to a longer life. This information would lead to a(n):

increase in demand

A decrease in the supply of a good causes a(n):

increase in the equilibrium price and a decrease in equilibrium quantity

One of the key ingredients in making rational choices is access to:

information

The price of automobiles is rising because more people want to purchase cars. As a result,

quantity supplied increases

Quantity supplied is the:

quantity that producers are willing and able to sell at a given price

To say that economics is a way of thinking about how people make rational decisions means that people:

respond to incentives

If consumers believe that an item will be available in the future, then demand will shift _______ and the equilibrium quantity will ________.

right; rise

The law of supply states that as prices _________, the quantity ________.

rise; supplied rises

In the market for coffee, consumers expect the price of coffee beans to rise next week. This would make the demand for coffee this week:

shift right

Carmax is a national chain that sells used cars. The likely impact of its arrival in the market would be to __________. Everything else held constant, this would likely _______ the price of used cars.

shift the supply of used cars to the right; lower

When quantity demanded exceeds quantity supplied, a ________ occurs and prices are pushed __________ toward equilibrium

shortage; up

Suppliers of Chia Pets have reduced supply since the gift-giving season has passed. Suppliers are MOST likely responding to:

their expectation that the price of Chia Pets will fall in the market place

In the market for cable television, fewer people are subscribing to cable while the cost of providing cable television has increased. As a result, we can expect a(n):

unknown change in the equilibrium price but a decrease in the equilibrium quantity of cable televsion