Chapter 3 Microeconomics

As firms leave an industry, supply decreases. This is illustrated as a shift of the supply curve to the ______.

left

Diminishing marginal utility states that less satisfaction is derived from each successive unit of a product consumed. Therefore, the law of demand is upheld because, as each successive unit yields ______, consumers will buy additional units only if the price of those units is progressively ______. Multiple choice question. more and more utility; increased less and less utility; reduced less and less utility; increased more and more utility; reduced

less and less utility; reduced

When a product's demand varies directly with money income, it is considered a(n) ______ good. Multiple choice question. superior abnormal complementary inferior

superior

The supply curve measures quantity ______ on the horizontal axis and ______ on the vertical axis. price; supplied price; demanded supplied; price demanded; price

supplied; price

Improvements in technology is a determinant of ______. supply quantity supplied quantity demanded demand

supply

Market ______ is a schedule or curve showing the various amounts of a product that producers are willing and able to make available for sale at each possible price during a specific period.

supply

Producer expectations of future prices are a determinant of ______ (one word).

supply

The prices of substitute goods in production is a determinant of ______ .

supply

When the number of sellers or producers in an industry increases, ______ of a particular good or service will _____. When the number of sellers in an industry ______, supply of a particular good or service will ______. supply; rise; decreases; fall supply; fall; decreases; rise demand; rise; decreases; fall supply; fall; increases; fall

supply; rise; decreases; fall

An increase in the number of hair salons will cause: a downward movement along the supply curve of hair salon services the supply curve of hair salon services to shift to the left an upward movement along the supply curve of hair salon services the supply curve of hair salon services to shift to the right

the supply curve of hair salon services to shift to the right

What determines market price and equilibrium output in a market? The number of sellers in a market Quantity demanded The interaction of buyers and sellers Input prices Quantity supplied

The interaction of buyers and sellers

equilibrium price

The price in a competitive market at which the quantity demanded and the quantity supplied are equal, there is neither a shortage nor a surplus, and there is no tendency for price to rise or fall.

diminishing marginal utility

The principle that as a consumer increases the consumption of a good or service, the marginal utility obtained from each additional unit of the good or service decreases.

law of demand

The principle that, other things equal, an increase in a product's price will reduce the quantity of it demanded, and conversely for a decrease in price.

law of supply

The principle that, other things equal, an increase in the price of a product will increase the quantity of it supplied, and conversely for a price decrease.

productive efficiency

The production of a good in the least costly way; occurs when production takes place at the output level at which per-unit production costs are minimized.

A ______ good is one that is used together with another good. normal substitute complementary exception

complementary

The inverse relationship between price and quantity demanded reflects diminishing marginal utility, the substitution effect, and the ______ effect.

income

If the birthrate increases, the purchase of baby products is likely to ______. Multiple choice question. stay the same increase decrease

increase

In general, a firm will ______ (increase/decrease) the output of a good or service if the price of the good is rising.

increase

Other things equal, if consumers believe that gas prices will rise in a week, the demand for gas today will ______. decrease be lower than next week not change increase

increase

A favorable change in consumer tastes and preferences for a product will ______ demand, shifting the demand curve to the (right/left).

increase,right

Greater resource prices _______ the costs of production, thereby, ______ the incentive for firms to produce the good at each price. increases; reducing decreases; reducing increases; raising decreases; raising

increases; reducing

"My income increased because of a substantial raise; therefore I decreased my consumption of Spam." This statement best exemplifies the relationship between income and a(n) ______ good. complementary substitute normal inferior

inferior

Goods whose demand varies inversely with money income are called ______ goods.

inferior

A demand curve shows the ______. Multiple choice question. inverse relationship between price and quantity supplied for a product inverse relationship between price and quantity demanded for a product positive relationship between price and quantity supplied for a product positive relationship between price and quantity demanded for a product

inverse relationship between price and quantity demanded for a product

supply schedule

A table of numbers showing the amounts of a good or service producers are willing and able to make available for sale at each of a series of possible prices during a specified period of time.

Which of the following are the characteristics of a competitive market? Multiple select question. A large number of buyers and sellers A surplus of narrow range of products A large number of buyers but small number of sellers Standardized products

A large number of buyers and sellers Standardized products

price ceiling

A legally established maximum price for a good, or service. Normally set at a price below the equilibrium price.

change in demand

A movement of an entire demand curve or schedule such that the quantity demanded changes at every particular price; caused by a change in one or more of the determinants of demand.

change in supply

A movement of an entire supply curve or schedule such that the quantity supplied changes at every particular price; caused by a change in one or more of the determinants of supply.

supply

A schedule or curve that shows the various amounts of a product that producers are willing and able to make available for sale at each of a series of possible prices during a specified period of time.

Which of the following refers to government financial assistance for the production of a good which lowers producers' costs and increases supply? A tax A bailout A subsidy A loan

A subsidy

In the marketplace, what is a good that can be used in place of another good called? A substitute good A superior good A complementary good An inferior good

A substitute good

substitution effect

(1) A change in the quantity demanded of a consumer good that results from a change in its relative expensiveness caused by a change in the good's own price. (2) The reduction in the quantity demanded of the second of a pair of substitute resources that occurs when the price of the first resource falls and causes firms that employ both resources to switch to using more of the first resource (whose price has fallen) and less of the second resource (whose price has remained the same).

equilibrium quantity

(1) The quantity at which the intentions of buyers and sellers in a particular market match at a particular price such that the quantity demanded and the quantity supplied are equal; (2) the profit-maximizing output of a firm.

change in quantity demanded

A change in the quantity demanded along a fixed demand curve (or within a fixed demand schedule) as a result of a change in the price of the product.

income effect

A change in the quantity demanded of a product that results from the change in real income (purchasing power) caused by a change in the product's price.

change in quantity supplied

A change in the quantity supplied along a fixed supply curve (or within a fixed supply schedule) as a result of a change in the product's price.

In the marketplace, what is a good that is used together with another good? A superior good A complementary good A substitute good An independent good

A complementary good

demand curve

A curve that illustrates the demand for a product by showing how each possible price (on the vertical axis) is associated with a specific quantity demanded (on the horizontal axis).

supply curve

A curve that illustrates the supply for a product by showing how each possible price (on the vertical axis) is associated with a specific quantity supplied (on the horizontal axis).

Which of the following would most likely lead to a decrease in demand? Multiple choice question. A decrease in the number of buyers An aging population An increase in the number of buyers A large-scale immigration

A decrease in the number of buyers

inferior good

A good or service whose consumption declines as income rises, prices held constant.

normal good

A good or service whose consumption increases when income increases and falls when income decreases, price remaining constant.

Which of the following are reasons for the inverse relationship between price and quantity demanded? Multiple select question. A higher price makes it more likely the consumer will substitute another good. A lower price represents a low-quality product. Buyers will buy more of a good if their friends are buying it. Consumption is subject to diminishing marginal utility. A lower price increases the purchasing power of a buyer's income, enabling a buyer to purchase more of a product. People ordinarily buy more of a product at a low price than at a high price.

A higher price makes it more likely the consumer will substitute another good. Consumption is subject to diminishing marginal utility. A lower price increases the purchasing power of a buyer's income, enabling a buyer to purchase more of a product. People ordinarily buy more of a product at a low price than at a high price.

Which statement about demand and supply is true? Multiple choice question. An increase in the price of a good is likely to decrease the supply of the good. An increase in consumer income is likely to increase the demand for a normal good. An increase in consumer income shifts the demand curve to the left. An increase in the price of a good shifts the supply curve to the left.

An increase in consumer income is likely to increase the demand for a normal good.

Which of the following causes consumers to buy large quantities of a product at each possible price? An increase in the number of buyers A decrease in the price of a substitute good An unfavorable change in consumer tastes An increase in the price of a complementary good

An increase in the number of buyers

Which of the following factors increase the demand for any good or service? An increase in the number of buyers A rise in consumer income if the product is a normal good Consumer expectations that either prices or income will fall in the future An increase in the price of a substitute good An unfavorable change in consumer tastes for the product

An increase in the number of buyers A rise in consumer income if the product is a normal good An increase in the price of a substitute good

Which of the following would result in a change in supply? An increase in the number of shoe stores at the local mall An increase in the number of automobile buyers A decrease in subsidies to state universities An increase in the excise tax on cigarettes

An increase in the number of shoe stores at the local mall A decrease in subsidies to state universities An increase in the excise tax on cigarettes

Which of the following statements are true? Multiple select question. An increase in the price of a normal good would decrease the quantity demanded of the good. An increase in consumers' income would decrease the demand for a normal good. A decrease in consumers' income would decrease the demand for a normal good. A decrease in consumers' income would decrease the demand for an inferior good.

An increase in the price of a normal good would decrease the quantity demanded of the good. A decrease in consumers' income would decrease the demand for a normal good.

Which of the following illustrates a change in quantity demanded? Following hurricane Katrina, oil production in the United States declined by 30%. As a result of increasing prices, Mr. Snow decides to buy fewer shovels during a snowy winter. The price of apples rises, and people continue to buy more and more apples. As a result of a recession in the United States, people spend less money on entertainment.

As a result of increasing prices, Mr. Snow decides to buy fewer shovels during a snowy winter.

According to the law of demand, which of the following statements are true, all other things being equal? Multiple select question. As price increases, quantity demanded increases. As price decreases, quantity demanded decreases. As price increases, quantity demanded decreases. As price decreases, quantity demanded increases.

As price increases, quantity demanded decreases. As price decreases, quantity demanded increases.

determinants of demand

Factors other than price that determine the quantities demanded of a good or service. Also referred to as "demand shifters" because changes in the determinants of demand will cause the demand curve to shift either right or left.

determinants of supply

Factors other than price that determine the quantities supplied of a good or service. Also referred to as "supply shifters" because changes in the determinants of supply will cause the supply curve to shift either right or left.

______ resource prices raise production costs and, assuming a fixed product price, ______ profits. Lower; reduce Higher; higher Higher; reduce Lower; higher

Higher; reduce

Which exemplifies a pair of substitute goods? Hot dogs and hamburgers CDs and CD players Snow boards and lift tickets Golf balls and golf clubs

Hot dogs and hamburgers

Which of the following affects the demand for normal goods and inferior goods? Consumer expectations Price of related goods The number of buyers Technology Income

Income

Which of the following is a determinant of demand? Producer expectations Technology Income Resource prices

Income

Which of the following does not exemplify an improvement in technology affecting supply? Increased subsidies to farmers for producing more corn Advances in producing flat panel computer monitors that have greatly reduced their cost The introduction of the mass-assembly line Invention of new vaccines

Increased subsidies to farmers for producing more corn

Which of the following is true of the supply curve of a good? It is a downward-sloping curve. It is an upward-sloping curve. It shifts to the left as the price of inputs falls. It shifts to the right as the price of inputs rises.

It is an upward-sloping curve.

Which of the following are substitutes? Bleach and cheese Pepsi and Coca-Cola Guns and bullets Peanut butter and crackers

Pepsi and Coca-Cola

Which of the following has the greatest effect on the quantity supplied? Cost Tastes and preferences Positive technological changes Price

Price

Which of the following are determinants of demand? Multiple select question. Prices of related goods Corporate taxes and subsidies Number of buyers Resource prices Consumer income Consumer tastes Consumer expectations

Prices of related goods Number of buyers Consumer income Consumer tastes Consumer expectations

complementary goods

Products and services that are used together. When the price of one falls, the demand for the other increases (and conversely).

substitute goods

Products or services that can be used in place of each other. When the price of one falls, the demand for the other product falls; conversely, when the price of one product rises, the demand for the other product rises.

Which of the following types of goods affect the demand for another product due to a change in their price? (Select all that apply) Normal goods Inferior goods Substitute goods Complementary goods

Substitute goods Complementary goods

Which of the following are determinants of supply? Taxes and subsidies Prices of other goods Number of buyers Producer expectations

Taxes and subsidies Prices of other goods Producer expectations

Which of the following are determinants of supply? (Check all that apply.) Taxes and subsidies Consumer expectations Technology Resource prices

Taxes and subsidies Technology Resource prices

allocative efficiency

The apportionment of resources among firms and industries to obtain the production of the products most wanted by society (consumers); the output of each product at which its marginal cost and marginal benefit are equal, and at which the sum of consumer surplus and producer surplus is maximized.

A change in demand comes from a change in consumers' minds because of ______. a change in government regulations related to pricing a change in the amount of products produced the change in the product price only a change in a determinant of demand other than price

a change in a determinant of demand other than price

The inverse relationship between price and quantity demanded can be graphically illustrated by ______. Multiple choice question. an upward sloping curve a horizontal line a vertical line a downward sloping curve

a downward sloping curve

The willingness and ability of a consumer to buy a normal product falls because of ______. Multiple choice question. a raise in wages no change in income a fall in income a rise in income

a fall in income

The ___ incurred by firms when producing a good or service arise from the prices of the inputs that are used to produce said good or service. costs of production marginal product of labor losses negative externality

costs of production

An increase in business taxes causes a(n) ______ in supply and will ______ production costs. increase; increase decrease; increase decrease; decrease increase; decrease

decrease; increase

An unfavorable change in consumer tastes and preferences for a product will ______ demand, which is illustrated as a shift of the demand curve to the ______. Multiple choice question. increase; left increase; right decrease; right decrease; left

decrease; left

According to the law of supply, price and quantity supplied have a(n) ______ relationship. exponential direct inverse negative

direct

During the second quarter, the price of Jonah's burgers remains constant, but the price of Sam's burgers increases. Other things ______, the law of demand indicates that fewer Sam's burgers will be purchased than in the previous quarter. (Enter one word in the blank.)

equal

The "other-things-equal" assumption is important in the law of demand because ______. Multiple choice question. only the price is a factor of the amount of a product purchased factors in addition to price affect the amount of a product purchased demand is not affected by the price of competing goods demand is not affected by the price of substitute goods

factors in addition to price affect the amount of a product purchased

The determinants of demand, other things equal, are assumed to be ______ when a demand curve is drawn or computed.

fixed

Producer expectations refer to firms' expectations of ______ for a good or service that they produce. resource availability life-cycle future prices

future prices

The prices of the ______ (one word) used in the production process help determine the costs of production incurred by firms.

resources

If the government of a country subsidizes the production of a good, it: lowers the cost of production. increases the cost of production. reduces supply. increases supply.

lowers the cost of production. increases supply.

On a simple supply model, a change in quantity supplied is illustrated by a ______ and a change in supply is illustrated by a ______. shift of the demand curve; shift of the supply curve shift of the supply curve; movement along the supply curve movement along the supply curve; shift of the supply curve

movement along the supply curve; shift of the supply curve

The relationship between the price of a good or service and the quantity demanded of that good or service described by the law of demand is Multiple choice question. negative equal direct positive

negative

Upon receiving a substantial raise, Jessie increased her monthly consumption of beef. This information best exemplifies the relationship between income and a(n) ______. Multiple choice question. normal good inferior good

normal good

As people's income increases, the demand for ______ goods goes up but the demand for ______ goods goes down. normal; superior inferior; superior inferior; normal normal; inferior

normal; inferior

If prices for a good or service are expected to increase in the future, the demand for that good or service will ______ today. If prices are expected to decrease in the future, demand will ______ today. fall; fall rise; fall rise; rise rise; not change fall; rise

rise; fall

A change in demand occurs due to a change in a consumer's state of mind about purchasing a product that is based on something other than the of the ______ product.

price

The determinants of the supply of a good are any factors other than the product's ______ that cause the supply curve of the good to shift. cost price

price

When drawing a supply curve, _____ is labeled on the vertical axis. quantity cost product price

price

All competitive markets involve which of the following? Multiple select question. price quantity demand supply government regulators

price quantity demand supply

The supply curve illustrates the relationship between ______. cost and price product and quantity supplied price and quantity supplied price and quantity demanded

price and quantity supplied

All the following are the determinants of demand except ______. Multiple choice question. the prices of related goods consumer expectations price of substitutes in production consumers' incomes consumer tastes

price of substitutes in production

All the following are the determinants of demand except ______. consumers' incomes price of substitutes in production the prices of related goods consumer expectations consumer tastes

price of substitutes in production

The determinant of supply dealing with alternative products that can be produced by firms is called ______. price of substitutes in production number of producers or competitors in a market resource prices producer expectations taxes and subsidies

price of substitutes in production

The determinants of demand for a product are factors, other than the ______, that affect consumption or buyers' decisions to purchase and consume. Multiple choice question. level of income number of sellers price of the product price of inputs

price of the product

A change in ______ refers to a movement along the demand curve in response to changes in the price of a good or service, whereas a change in ______ refers to a shift of the demand curve leftward or rightward in response to anything other than changes in the price of a good or service. quantity demanded; demand quantity supplied; supply supply; quantity supplied demand; quantity demanded

quantity demanded; demand

The price of ______ goods is a determinant of demand. intermediate related inexpensive independent producer

related