Macro Chapter 4

What happens as a result of the change in demand in the diagram? A) a decrease in both the equilibrium price and the equilibrium quantity B) an increase in both the equilibrium price and the equilibrium 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

B) an increase in both the equilibrium price and the equilibrium quantity

If supply decreases and its slope remains the same, consumer surplus: A) increases. B) decreases. C) stays the same. D) cannot be determined given the information provided.

B) decreases.

Which of the following might explain why the price of DVD players has been falling? A) an increase in consumer income B) a decrease in the price of high-definition Blu-ray players C) a decrease in the price of DVDs D) an increase in the price of gasoline

B) a decrease in the price of high-definition Blu-ray players

If market demand decreases: A) equilibrium price and quantity will both increase. B) equilibrium price and quantity will both decrease. C) equilibrium price will increase but equilibrium quantity will decrease. D) equilibrium price will decrease but equilibrium quantity will increase.

B) equilibrium price and quantity will both decrease.

In a free market setting where quantity supplied is 50 units and quantity demanded is 40 units, price will: A) rise. B) fall. C) remain the same. D) move in an indeterminate direction.

B) fall.

Technological advances have increased the supply of digital cameras. As a result the: A) demand for digital cameras will increase, putting downward pressure on the price of digital cameras. B) quantity demanded for digital cameras will increase. C) quantity supplied of digitals cameras will increase, putting downward pressure on the price of digital cameras. D) demand and supply of digital cameras will both increase.

B) quantity demanded for digital cameras will increase.

(Figure: Price and Quantity 1) In the diagram, at a price of $40, the quantity demanded is ______, the quantity supplied is ______, and there is a ______. A) 40; 60; surplus of 20 units B) 80; 20; shortage of 60 units C) 60; 40; shortage of 20 units D) 20; 60; surplus of 40 units

C) 60; 40; shortage of 20 units

(Figure: Demand and Supply) Refer to the figure. Which statement is TRUE? A) The gains from trade are maximized at 20 units of output. B) At 16 units of output, there are unexploited gains from trade. C) Buyers are willing to pay $20 for the 16th unit of output and it costs sellers $60 to produce that unit. D) A free market is likely to produce less than 12 units of output.

C) Buyers are willing to pay $20 for the 16th unit of output and it costs sellers $60 to produce that unit.

After a hurricane in Florida destroys half of the orange crop, economists predict: A) an increase in both orange prices and orange sales. B) a decrease in both orange prices and orange sales. C) an increase in orange prices and a decrease in orange sales. D) a decrease in orange prices and an increase in orange sales.

C) an increase in orange prices and a decrease in orange sales.

When Asian countries went into a recession in 1997, the demand for oil _______ and the price of oil ________. A) increased; increased B) decreased; increased C) decreased; decreased D) increased; decreased

C) decreased; decreased

In the figure, the demand curve shifted from D0 to D1. To describe this movement, we would say that: A) demand increased, which caused an increase in supply. B) quantity demanded increased, which caused an increase in supply. C) demand increased, which caused an increase in quantity supplied. D) quantity demanded increased, which caused an increase in quantity supplied.

C) demand increased, which caused an increase in quantity supplied.

Which of the following would cause the current supply of iPods to increase? A) an economic boom, which increases the amount that people are willing to spend on personal electronics B) a decrease in the price of songs on iTunes C) producers expecting that the future price of iPods will decrease D) an increase in the wages offered to technicians building iPods

C) producers expecting that the future price of iPods will decrease

In a free market setting where quantity supplied is 50 units and quantity demanded is 50 units, price will: A) rise. B) fall. C) remain the same. D) move in an indeterminate direction.

C) remain the same.

Refer to the figure. If the price of the product is $14, there is a: A) shortage of 30 units of the product, and the price will rise to $16. B) surplus of 20 units of the product, and the price will rise to $16. C) shortage of 50 units of the product, and the price will rise to $16. D) surplus of 40 units of the product, and the price will rise to $16.

C) shortage of 50 units of the product, and the price will rise to $16.

(Table: Equilibrium Adjustment) Refer to the table. If the price in the free market is $2, then a: A) surplus of 50 units would exist, and price would fall. B) surplus of 50 units would exist, and price would rise. C) shortage of 50 units would exist, and price would rise. D) shortage of 50 units would exist, and price would fall.

C) shortage of 50 units would exist, and price would rise.

(Table: Equilibrium Price, Quantity) Refer to the table. If the price in the market was $16, there would be a: A) shortage of 10 units. B) shortage of 35 units. C) surplus of 10 units. D) surplus of 45 units.

C) surplus of 10 units.

(Figure: Demand, Supply Shifts) In the figure, the initial demand curve is D1 and the initial supply curve is S1. If technological innovations lower the costs of production, what will happen? A) D1 will shift to D3 and equilibrium price and equilibrium quantity will increase. B) S1 will shift to S2 and equilibrium price will increase but equilibrium quantity will decrease. C) D1 will shift to D2 and equilibrium price and equilibrium quantity will decrease. D) S1 will shift to S3 and equilibrium price will decrease but equilibrium quantity will increase.

D) S1 will shift to S3 and equilibrium price will decrease but equilibrium quantity will increase.

(Figure: Price and Quantity 2) At a cost of $20 per unit in the diagram, the value of the unexploited gains from trade is: A) $200. B) $500. C) $600. D) $900.

D) $900.

(Figure: Gains from Trade) Refer to the figure. What are the total gains from trade at the free market equilibrium? A) $1,000 B) $500 C) $0 D) $1,500

A) $1,000

Refer to the figure. When the supply curve shifts from S0 to S1, the equilibrium price rises to: A) $12 and the equilibrium quantity falls to 70. B) $10 and the equilibrium quantity falls to 100. C) $12 and the equilibrium quantity falls to 40. D) $10 and the equilibrium quantity falls to 70.

A) $12 and the equilibrium quantity falls to 70.

(Figure: Price and Quantity 1) In the diagram, at which price is there a surplus? A) $80 B) $50 C) $40 D) $0

A) $80

(Figure: Market Changes) Refer to the figures. If these figures represent the market for blue jeans, which figure shows the effect of an increase in the price of denim, a raw material used to make jeans? A) Figure A B) Figure B C) Figure C D) Figure D

A) Figure A

Which of the four panels shows an increase in income on an inferior good? A) Panel A B) Panel B C) Panel C D) Panel D

A) Panel A

After adjusting for inflation, a comparison of the price of leg warmers reveals that the price of leg warmers was significantly higher in the 1980s than it is today. Which of the following can explain this? A) Since the 1980s jeans have become preferable to leg warmers, decreasing the demand for leg warmers. B) New regulation on the importing of leg warmers made abroad decreased the supply of leg warmers to the United States. C) An increase in the price of cotton used to make leg warmers has led to a decrease in the price of leg warmers today. D) The expected increase in the price of yarn has led to a decrease in the price of leg warmers today.

A) Since the 1980s jeans have become preferable to leg warmers, decreasing the demand for leg warmers.

The U.S. government limits the importation of Chinese-made bras. What effect does this trade restriction have on the market for bras? A) The equilibrium price will increase and the equilibrium quantity will decrease. B) The demand for bras will increase, leading to a lower equilibrium price. C) The equilibrium price will increase and the equilibrium quantity will increase. D) The equilibrium price will decrease, leading to a higher equilibrium quantity.

A) The equilibrium price will increase and the equilibrium quantity will decrease.

Tim values treats for his dog at $10 per box, and John values them at $6 per box. If the price of dog treats is $3 per box but only one box is available between these two buyers, then gains from trade will be maximized when: A) Tim buys the treats. B) John buys the treats. C) either buys the treats, since they both value them more than the market price. D) consumer surplus is equal to $3.

A) Tim buys the treats.

Imagine a free market in equilibrium. After a sudden increase in demand (but before the price can adjust), the market experiences: A) a shortage. B) a surplus. C) no change. D) a new equilibrium.

A) a shortage.

Gains from trade will be maximized at the free market equilibrium price and quantity because the supply of goods is: A) bought by the buyers who have the highest willingness to pay. B) bought by the buyers who have the lowest willingness to pay. C) sold by the sellers with the highest opportunity cost. D) sold by the sellers that minimize producer surplus.

A) bought by the buyers who have the highest willingness to pay.

In 1980 when Iraq attacked Iran, the price of oil _______ because of a(n) ______. A) increased; disruption in the supply of oil B) increased; decrease in the demand for oil C) fell; increased demand for oil D) fell; increased quantity of oil supplied

A) increased; disruption in the supply of oil

In a free market setting where quantity supplied is 40 units and quantity demanded is 50 units, price will: A) rise. B) fall. C) remain the same. D) move in an indeterminate direction.

A) rise.

Imagine a free market in equilibrium. After a sudden decrease in supply (but before the price can adjust), the market experiences a: A) shortage. B) surplus. C) its initial equilibrium. D) a new equilibrium.

A) shortage.

A technological innovation in the production of golf balls increases ______, causing the price to ______ and the ______. A) supply; fall; quantity demanded to increase B) the quantity supplied; fall; quantity demanded to increase C) supply; rise; demand to decrease D) supply; fall; demand to increase

A) supply; fall; quantity demanded to increase

(Table: Equilibrium Adjustment) Refer to the table. If the price in the free market is $8, then a: A) surplus of 25 units would exist, and price would tend to fall. B) surplus of 25 units would exist, and price would tend to rise. C) shortage of 25 units would exist, and price would tend to rise. D) shortage of 25 units would exist, and price would tend to fall.

A) surplus of 25 units would exist, and price would tend to fall.

(Figure: Price and Quantity 3) The value of wasted resources at a quantity of 80 units in the diagram is: A) $800. B) $900. C) $600. D) $200.

B) $900.

Why is the world unlikely to ever literally run out of oil? A) There is an unlimited supply of oil. B) As the cheap-to-produce oil gets used up, the price of oil will rise, encouraging conservation and production using more expensive techniques. C) The demand for oil is not very high. D) As the demand for oil increases, the quantity supplied increases as well.

B) As the cheap-to-produce oil gets used up, the price of oil will rise, encouraging conservation and production using more expensive techniques.

(Figure: Demand, Supply Shifts) In the figure, the initial demand curve is D1 and the initial supply curve is S1. If this depicts the equilibrium in the market for computer printers, what will happen when the price of computers increases? A) There is not enough information to determine what will happen. B) D1 will shift to D2. C) D1 will shift to D3. D) S1 will shift to S3.

B) D1 will shift to D2.

The United Nations estimates that Earth's population growth rate will slow down by the year 2050 at which time population may start to decrease. If technological change allows the supply of oil to increase at a constant rate, and nothing else changes, what effect will a slowdown in population growth have on the price of oil? A) Demand will increase during this period, and the price of oil will continue to increase beyond 2050. B) Demand will increase more slowly during this period but since supply is growing at a constant rate, the rate of price increase will fall, and ultimately the price of oil may begin to fall. C) Demand will increase, raising the quantity supplied. Since the quantity supplied will increase, the price must go down. D) The supply of oil will fall and prices will rise.

B) Demand will increase more slowly during this period but since supply is growing at a constant rate, the rate of price increase will fall, and ultimately the price of oil may begin to fall.

How is a class in which students are graded on a curve like a competitive market? A) In both cases, the quantity supplied equals the quantity demanded. B) In a competitive market, demanders compete against one another for goods, the same way students compete for grades. C) In a competitive market, demanders compete against suppliers for goods, the same way students compete for grades. D) If the price is too high, demanders should blame suppliers, the same way students should blame professors for bad grades.

B) In a competitive market, demanders compete against one another for goods, the same way students compete for grades.

What will happen in the market for cotton as a result of a severe drought? A) The demand for cotton will decrease, causing the equilibrium price to fall and equilibrium quantity to fall. B) The demand for cotton will increase, causing the equilibrium price to rise and equilibrium quantity to rise. C) The supply of cotton will decrease, causing the equilibrium price to fall and equilibrium quantity to fall. D) The supply of cotton will decrease, causing the equilibrium price to rise and equilibrium quantity to fall.

D) The supply of cotton will decrease, causing the equilibrium price to rise and equilibrium quantity to fall.

If market supply increases: A) equilibrium price and quantity will both increase. B) equilibrium price and quantity will both decrease. C) equilibrium price will increase but equilibrium quantity will decrease. D) equilibrium price will decrease but equilibrium quantity will increase

D) equilibrium price will decrease but equilibrium quantity will increase