MacroEcon Chapter 3 Test
When an economist says that the demand for a product has increased, this means that
consumers are now willing to purchase more of this product at each possible price
A decrease in the number of consumers of product X will
decrease D, increase P, and decrease Q
A reduction in the number of firms producing X will
decrease S, increase P, and decrease Q
An increase in the prices of resources used to produce X will
decrease S, increase P, and decrease Q
With a downsloping demand curve and an upsloping supply curve for a product, a decrease in resource prices will
decrease equilibrium price and increase equilibrium quantity
Suppose an excise tax is imposed on product X. We would expect this tax to
decrease the demand for complementary good Y and increase the demand for substitute product Z
A market is in equilibrium
if the amount producers want to sell is equal to the amount consumers want to buy
Suppose in each of four successive years producers sell more of their product and at lower prices. This could be explained
in terms of 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?
in the second statement
An increase in the price of a product that is a close substitute for X will
increase D, increase P, and increase Q
An increase in the tastes and preferences for X will
increase D, increase P, and increase Q
Refer to the above, An increase in income, if X is a normal good, will
increase D, increase P, and increase Q
An improvement in the technology used to produce X will
increase S, decrease P, and increase Q
"When the price of a product rises, consumers shift their purchases to other products whose prices are now relatively lower." This statement describes:
the substitution effect
Market explained on the basis of supply and demand
assume many buys and many sellers of a standardized product
If the demand curve for product B shifts to the right as the price of product A declines, then
A and B are complementary goods
Decrease in incomes on the market for secondhand clothing
A only
If the demand for a normal good (for example, steak) shifts to the left, the most likely reason is the
consumer incomes have fallen
Which of the above diagrams illustrates the effect of an increase in automobile worker wages on the market for automobiles
D only
In 2000 the demand for "Razor" two wheel scooters greatly increased. This increase in demand might best be explained by
a change in buyer tastes
Which of the following will not cause the demand for product K to change
a change in the price of K
If producers must obtain higher prices than previously to produce various levels of output, the following has occurred
a decrease in supply
A right ward shift in the demand curve for product C might be caused by
a decrease in the price of a product that is complementary to C
Assume that the demand schedule for product C is downsloping. If the price of C falls from $2.00 to $1.75
a larger quantity of C will be demanded
Which of the following would not shift the demand curve for beef
a reduction in the price of cattle feed
Economists use the term "demand" to refer to
a schedule of various combinations of market prices and amounts demanded
A surplus of a product will arise when price is
above equilibrium with the result that quantity supplied exceeds quantity demanded
The location of the supply curve of a product depends on
all of the above technology used to produce it, the prices of resources used in its production, the number of sellers in the market
Which of the following will cause the demand curve for product A to shift to the left
an increase in money income if A is an inferior good
Which of the following will cause a decrease in market equilibrium price and an increase in equilibrium quantity?
an increase in supply
Which of the following statements is correct
an increase in the price of C will decrease the demand for complementary product D
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
beer and marijuana are complementary goods
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
bicycles are normal goods
The rationing function of prices refers to the
capacity of a competitive market to equate the quantity demanded and the quantity supplied
Video cassette recorders and video cassettes are
complementary goods
If X is a normal good, a rise in money income will shift the
demand curve for X to the right
If Z is an inferior good, a decrease in money income will shift the
demand curve for Z to the right
In which of the following instances will the effect on equilibrium price be dependent on the magnitude of the shift in supply and demand
demand rises and supply rises
The relationship between quantity supplied and price is ________ and the relationship between quantity demanded and price is _______
direct, inverse
If the demand and supply curves for product X are stable, a government-mandated increase in the price of X will
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
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
increase, quantity demanded to decrease, and quantity supplied to increase
57) Assume in a competitive market that price is initially below the equilibrium level. We can predict that price will
increase, quantity demanded will decrease, and quantity supplied will increase
One reason that the quantity of a good demanded increases when its price falls is that the
lower price increases the real incomes of buys, enabling them to buy more
The law of demand states that
price and quantity demanded are inversely related
If the supply of a product decreases and the demand for the product simultaneously increases, then equilibrium
price must rise, but equilibrium quantity may either rise, fall , or remain unchanged
A decrease in the demand for recreational fishing boats might be caused by an increase in the
price of outboard motors
The law of supply indicates that
producers will offer more of a product at high prices than they will at low prices
An increase in product price will cause
quantity demand to decrease
64) If the supply and demand curves for a product both decrease, then equilibrium
quantity must decline, but equilibrium price may either rise, fall, or remain unchanged
The term "quantity demanded"
refers to the amount of a product that will be purchased at some specific price
If products C and D are close substitutes, and increase in the price of C will
shift the demand curve of D to the right
An improvement in production technology will
shift the supply curve to the right
If the price of product L increases, the demand curve for close-substitute product J will
shift to the right
A leftward shift of a product supply curve might be caused by
some firms leaving an industry
If price is above equilibrium level, competition among sellers to reduce the resulting
surplus will increase quantity demanded and decrease quantity supplied
An "increase in demand" means that
the demand curve has shifted to the right
The income and substitution effects account for
the downward sloping demand curve
Graphically, the market demand curve
the horizontal sum of individual demand curves
When the price of a product increases, a consumer is able to buy less of it with a given money income. This describes
the income effect
If there is a shortage of product X
the price of the product will rise
By an "increase in demand" we mean that
the quantity demanded at each price in a set of prices is greater
Which of the following is most likely to be an inferior good
used clothing
Effect of a decline in the price of personal computers on the market for software
A only
Increase in the price of Bud on the market for Coors
A only