AP Micro Q1 T2

In a perfectly competitive market, which of the following shifts in the supply and demand curves will definitely cause both equilibrium price and quantity to decrease?

Supply Curve: No shift, Demand Curve: Shifts to the left

Which of the following is true of a price floor?

The intention of the government in creating the price floor is to assist the producers of the good.

Which of the following is true in the market for a certain product if producers consistently are willing to sell more at the going price than consumers are willing to buy?

There is a price floor on the product.

Which of the following will occur if the government imposes a price ceiling below the equilibrium price of a good?

There will be a shortage in the market.

If the minimum wage for teenagers increased to a rate higher than their market equilibrium wage, what would be the effect on their wage and employment?

Wage: Increase, Employment: Decrease

If the demand for good Y increases as the price of good X decreases, it can be concluded that

X and Y are complementary goods

Leather and beef are jointly produced such that an increase in the production of one results in an equal increase in the production of the other. An increase in the demand for leather will most likely cause

a decrease in the price of beef

To alleviate a financial crisis, a university increases student fees. This action will increase university revenues if the price elasticity of demand for university education is

inelastic

In the short run, a decrease in production costs of a product will shift

only the supply curve to the right

If a 5 percent wage increase in a particular labor market results in a 10 percent decrease in employment, the demand for labor is

relatively elastic

Consumer surplus is defined as

the difference between the value that consumers place on a good and the price they pay

Following a decrease in the supply of oranges, the price of orange juice increased by 20 percent, which resulted in a 10 percent increase in the quantity of apple juice consumed. This implies that the cross elasticity of demand between orange juice and apple juice is

0.5

Which of the following is true in the elastic range of a firm's demand curve?

A decrease in price will likely lead to an increase in total revenue.

Assume that the demand for a certain good is perfectly inelastic and the supply curve of the good is upward sloping. Which of the following occurs in the market for the good if the price of an input used to produce the good increases?

A decrease in the supply and an increase in the equilibrium price

An increase in which of the following will most likely result in a long-run surplus of a product?

A price is set by law above the equilibrium price

Which of the following best illustrates the concept of consumer surplus?

A thirsty athlete pays $0.85 for a cold drink when she would have gladly paid $1.50 for the drink.

If bologna is an inferior good, which of the following must be true?

An increase in consumer income will decrease the demand of bologna.

If a normal good is produced in a competitive market, which of the following combination of events could cause the price of the good to increase and the quantity to decrease?

An increase in the average income of consumers and an increase in the price of a variable input

Assume that apple juice and grape juice are substitutes. Which of the following will cause an increase in the quantity of apple juice supplied?

An increase in the price of apple juice

Which of the following events will cause the demand curve for hamburgers to shift to the right?

An increase in the price of pizza, a substitute for hamburgers

Which of the following will decrease the demand for beef?

An increase in the price of potatoes, if potatoes and beef are complementary goods

Assume that a monopolist is producing in the inelastic portion of its demand curve. Which of the following will occur if the monopolist decreases its price?

Both total revenue and profits will decrease.

After the government imposed a $0.20 per gallon tax on gasoline, the price of a gallon of gasoline increased from $1.00 to $1.15. Which of the following statements is true?

Consumers bear most, but not all, of the tax burden.

If the market demand for a good is inelastic and the supply is elastic, which of the following is true when there is an increase in sales tax?

Consumers will bear most of the burden of the tax.

Assume that a 2 percent increase in the price of bologna causes a 5 percent decrease in the demand for cheese. What is the cross-price elasticity of demand between the two goods, and how are these goods related?

Cross-price elasticity of demand equals −2.5, and these goods are complements.

Which of the following changes in the demand for and the supply of a good will necessarily result in an increase in both the equilibrium price and quantity of the good in a market?

Demand: Increase Supply:No change

The demand curve for a normal good slopes down for which of the following reasons? I. An increase in the price of the good induces consumers to purchase substitute products. II. An increase in the price of the goods reduces consumers' purchasing power. III. An increase in the price of the good increases consumers' utility from consuming that good. Responses

I. An increase in the price of the good induces consumers to purchase substitute products. II. An increase in the price of the goods reduces consumers' purchasing power.

Which of the following situations best illustrates the law of demand?

In the past several months, as the price of compact disc players has decreased, the quantity of compact disc players sold has increased

Assume that consumers consider potatoes to be an inferior good, but consider rice to be a normal good. An increase in consumers' incomes will most likely affect the equilibrium price and quantity of potatoes and rice in which of the following ways?

Potatoes- Price: Decrease, Quantity: Decrease Rice- Price: Increase, Quantity Increase

A monopolist produces two unrelated goods, X and Y. The demand for X is currently price elastic and the demand for Y is currently price inelastic. To increase its total revenue, the firm should change the price of X and Y in which of the following ways?

Price of X: Decrease, Price of Y: Increase

A decrease in raw material prices will change the equilibrium price and quantity in a market in which of the following ways?

Price: Decrease, Quantity: Increase

Assume that both the supply of and the demand for a good are relatively price elastic. The imposition of a per-unit excise tax on the sale of the good would cause the equilibrium price and quantity to change in which of the following ways?

Price: Increase, Quantity: Decrease

A change in which of the following will cause a change in the supply of personal computers (PC's) in the short run?

Technology

Assume a consumer finds that his total expenditure on compact discs stays the same after the price of compact discs declines. Which of the following is true for this price change?

The consumer's demand for compact discs is unit price elastic.

The American Heart Association has just issued a report warning consumers about the negative health effects of eating beef. Which of the following changes in the beef market is most likely to occur as a result?

The demand curve will shift to the left, decreasing the price of beef.

Which of the following must be true if the revenues of wheat farmers increase when the price of wheat increase?

The demand for wheat is price inelastic.

Which of the following would cause the equilibrium price of good X to increase?

The price of an essential input in the production of good X increases.

Which of the following occurs if the price of oranges is below the equilibrium price?

The quantity demanded of oranges is greater than the quantity supplied.

Assume that popcorn and movie attendance are complements and that Salty Concession grows corn suitable for popping. Mr Concession will most likely sell a greater quantity of popping corn at a higher price if which of the following occurs?

The release of three summer movies sets records for movie attendance

If the government imposes a tax on the production of cars, which of the following will occur in the market for cars?

The supply curve will shift to the left.

Which of the following situations would necessarily lead to an increase in the price of peaches?

The wage paid to peach farm workers rises at the same time that medical researchers find that eating peaches reduces the chances of a person's developing cancer.

If the demand for potatoes increases whenever a person's income increases, then potatoes are an example of

a normal good

The supply curve for automobiles will shift to the left in response to

an increse in wages in the automobile industry

If the increase in the price of one good decreases the demand for another, then the two goods are

complementary goods

A decrease in the supply of oranges raised the price of oranges in the market. The substitution effect of the price increase will motivate consumers to

increase the quantity of other fruits demanded and decrease the quantity of oranges demanded

If a store raises its prices by 20 percent and its total revenue increases by 10 percent, the demand it faces in this price range must be

inelastic