AP Econ unit 2

What should a company do if it is making $0 economic profit?

Continue to operate since it is making an accounting profit.

Inefficiencies due to price controls are called

Dead-weight loss

Lower price and quantity

Decrease in Demand

Decrease in quantity and increase in price

Decrease in Supply

Which of the following will occur if consumers expect the price of a good to fall in the coming months?

Demand will decrease today

Which of the following conditions will cause producer surplus to increase?

More consumers come into the market

Which of these situations would cause an increase in the supply of jeans?

Producers improve productivity with computerized sewing machines.

Along a given demand curve for a product,

Quantity demanded decreases as price increases.

Price Floors always lead to

surpluses

When the price of a product falls, the purchasing power of our money income rises and will permit consumers to purchase more of the product. This statement describes:

the income effect.

Which of the following will not change the demand for ice cream?

A change in the price of ice cream.

If consumers are willing to pay a lower price than previously for each level of output, we can say that which of the following has occurred?

A decrease in demand

Kale continues to be the darling of the food industry and drives higher profits for kale producers

Change in Profit Opportunities from producing Other Products

New machinery developed for harvesting spinach

Change in Technology

If the price of coffee increases, which of the following is most likely to happen? A. An increase in the quantity of coffee consumers want to purchase. B. No change in the quantity of coffee consumers want to purchase. C. A decrease in the quantity of coffee consumers want to purchase. D. An increase in the demand for coffee. E. A decrease in the demand for coffee.

A decrease in the quantity of coffee consumers want to purchase.

Assume that the demand for apples is downward sloping. If the price of apples falls from $.80 per pound to $.65 per pound, which of the following will occur?

A larger quantity of apples will be demanded

Assume that the supply of pears is upward sloping. If the price of pears increases from 1.50 per pound to 2.00 per pound, which of the following will occur? A. Supply for pears will decrease. B. Supply for pears will increase. C. Demand for pears will increase. D. A smaller quantity of pears will be supplied. E. A larger quantity of pears will be supplied.

A larger quantity of pears will be supplied.

If consumers are willing to pay a higher price than previously for each level of output, we can say that which of the following has occurred?

An increase in demand

A technological advance in phone production will lead to which of the following?

An increase in phone supply

Which of the following situations would cause the supply of cars to move to the right? A. An increase in the efficiency of car production technology. B. An increase in the cost of steel used in car production.. C. A decrease in the number of people buying cars. D. An increase in consumers' income. E. A decrease in the number of car production companies in the industry.

An increase in the efficiency of car production technology.

Farmers continue to sell farmland to housing developers

Change Number of Sellers

People lose hours and income because of recession

Change in Consumer Income

New study shows eating spinach is good for health

Change in Consumer Tastes

People fear on-going drought will hurt spinach crop in the fall

Change in Consumers' Price Expectations

Fertilizer used in growing spinach goes up in price

Change in Cost of Production

Government introduces new subsidies to encourage farmers to grow more greens

Change in Government Tax/Subsidy

Farmers anticipate continued demand for spinach helping to drive higher profits

Change in Market Price Expectations

More people moving into the area

Change in Number of Consumers

Mushrooms, a popular item to serve with Spinach, double in price

Change in Price of a Complementary Good

Swiss Chard, a popular alternative to Spinach, goes on sale

Change in Price of a Substitute Good

Higher price and quantity

Increase in Demand

Increase in quantity and decrease in price

Increase in Supply

Which of the following will cause a shift to the right in the supply curve?

Technological advancements

Assume that people like mustard on their hot dogs. Due to increases in the cost of production, the supply of hot dogs decreases. How will this affect the market for mustard?

The demand for mustard will go down as hot dogs and mustard are complements

Which of the following is true at equilibrium?

The quantity demanded is the same as the quantity supplied

Which of the following is NOT an explicit cost for a business?

The salary the owner could have received from working for someone else.

Which of the following would lead to an increase in the price of blueberries? A. There is ideal weather for growing blueberries. B. The price of strawberries, a substitute good, falls. C. New technology leads to larger blueberry harvests. D. The wages of workers harvesting blueberries increases. E. The price of yogurt, a complementary good, increases.

The wages of workers harvesting blueberries increases

What is the equation to find ACCOUNTING profit?

Total Revenue - Explicit Costs

In the past few years, the demand for donuts has greatly increased. This increase in demand might best be explained by:

a change in consumer tastes

Suppose that in the market for computer memory chips, the equilibrium price is $50 per chip. If the current price is $55 per chip, then there will be a(an)______________ of memory chips.

surplus

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

The market price of a good will tend to fall if:

demand decreases

Most economists agree that price controls are good for the economy (true or false)

false

The market price of a good will tend to fall if:

it is above the equilibrium price

The market price of a good will tend to rise if:

it is below the equilibrium price.

The demand curve shows the relationship between:

price and quantity demanded

Which real-world issue illustrates the concept of a price ceiling?

rent controls

Consumer surplus: A. rises as the price of the product increases. B. rises as the cost of production decreases. C. falls as the cost of production falls.. D. rises as consumer income increases. E. is the difference between what the producer is willing to accept and what the buyer wants to pay.

rises as consumer income increases.

Consumer surplus:

rises as the price of the product decreases

Price Ceilings always lead to

shortage

If an increase in the price of good Y causes the quantity demanded of good X to increase, this means the two goods are:

substitute goods

If the price of sweaters increased and as a result, the price of sweatshirts also increased, it could be concluded that sweaters and sweatshirts are:

substitute goods and the higher price for sweaters increased the demand for sweatshirts