Chapter 4: Test
Which of the following would most likely serve as an example of a monopoly?
an electricity provider
A group of pizza buyers and pizza sellers forms a(n)
market
Refer to the Figure. At a price of
$6, there is a shortage of 40 units.
Refer to the Table. The equilibrium price and quantity, respectively, are
$70 and 40 units.
Which of the following scenarios would cause a shortage in a market?
The actual price is $10, the equilibrium price is $12, the quantity demanded is 1,250 and the quantity supplied is 800.
Which of the following scenarios would cause a surplus in a market?
The actual price is $20, the equilibrium price is $25, the quantity supplied is 100 and the quantity demanded is 75.
Which of the following demonstrates the law of supply?
When camera prices rose, camera sellers increased their quantity supplied of cameras. According to the law of supply, other things equal, the quantity supplied of a good increases when the price of the good increases.
The highest form of competition is called
perfect competition.
If wireless phone manufacturers begin using new technology to produce phones, we would expect the
price of wireless phones to increase.
Refer to the Table. If the market consists of John and Phillip only and the price decreases by $2, the quantity demanded in the market increases by
4 units
Which of the following changes would not shift the demand curve for gas?
Senior citizens incomes increase due to a change in social security benefits.
When the price of lumber changes, the demand curve for lumber
does not shift because the quantity demanded of lumber changes at every possible price.
Refer to the Figure. Which of the following movements would illustrate the effect in the market for cars of a decrease in the price of gas?
Point C to Point D
Refer to the Figure. Which of the following movements would illustrate the effect in the market for paper of an increase in the price of pulp, used in the production of paper?
Point C to Point D Pulp is an input into the production of paper. When the price of pulp increases, the supply of paper decreases, as shown by a movement from Point C to Point D.
What will happen to the equilibrium price and quantity of iPhones if the price of other smart phones falls, Apple develops new technology to produce iPhones, wireless phone contracts become more expensive, and Apple expects the price of iPhones to decrease in the near future?
Price will fall, and the effect on quantity is ambiguous.
Cookies are normal goods. What will happen to the equilibrium price and quantity of cookies if the price of sugar falls, the price of milk falls, more firms start producing cookies, and cookie lovers experience an increase in income?
Price will rise, and the effect on quantity is ambiguous.
Which of the following is not an example of a competitive market?
Residents of Middleton have one cable television provider.
Refer to the Figure. Which of the following would cause the demand curve to shift from Demand C to Demand A in the market for pickup trucks?
a change in consumer tastes toward public transit and environmentally conscious travel modes The shift from Demand C to Demand A is a decrease in demand. The demand for pickup trucks decreases when consumers prefer public transit and environmentally conscious travel modes.
If generic medicine is an inferior good, then an increase in
a consumer's income will cause the demand curve for generic medicine to shift to the left. When income increases, the demand for inferior goods decreases and the demand for normal goods increases. A decrease in demand is a shift to the left.
Which of the following is not required for a market to exist?
a meeting location and time
Refer to the Figure. Which of the following would cause the supply curve to shift from Supply C to Supply A in the market for tables?
an increase in the price of wood A shift from Supply C to Supply A is a decrease in supply. When the price of wood, an input into tables, increases, the supply of tables decreases.
If Alice expects to earn a higher income next month, she may choose to
buy fewer clothes this month.
Furniture is a normal good if the demand
curve for furniture shifts to the left when income increases.
An increase in quantity demanded is different from shifting the demand curve to the right because an increase in quantity demanded
is caused by a price increase while a shift to the right is caused by a change in a nonprice determinant of demand.
The millennials are the largest generation in US history and, according to a recent study, 80% of them use mobile phone as their primary form of communication. As a result of millennials entering the market for mobile phones, the market demand for
landline phones remains constant, but we observe a movement upward and to the left along the demand curve.
If the price of umbrellas rose to $15 per umbrella, consumers would purchase fewer umbrellas than if the price were $10 per umbrella. If the price of rain boots fell to $20 per pair, consumers would purchase more rain boots than if the price were $25 per pair. These relationships illustrate the
law of supply.
Suppose there are five barbers in the town of Crossroads. If we add the respective quantities of haircuts that each firm would be willing to sell when the price of a haircut is $12 per haircut, $15 per haircut, and $18 per haircut, and so forth, we have found the
market supply curve.
Refer the figure. Which of the following movements would illustrate the effect in the market for restaurant meals of a decrease in consumer incomes if restaurant meals are a normal good?
point A to point C
Refer the figure. In the market for pizza in a college, which of the following movements would illustrate the effect of an increase in wages paid to pizza makers and a return of college students after the summer break?
point B to point A
When the price of pizza increases, the
quantity supplied of pizza increases. The quantity supplied of a good is the amount that sellers are willing and able to sell. The Law of Supply states that, other things being equal, an increase in the price of a good causes an increase in the quantity supplied. The supply curve does not shift in response to a price change.
Refer to the Figure. Consider the market for winter sweaters. A decrease in the price of wool could be shown in the market for winter sweaters by a
shift from S2 to S1. Wool is an input into the production of winter sweaters. When an input price decreases, supply for the good made with the input increases. A shift from S2 to S1 is an increase in supply.
Refer to the Table. If the price were $60, a
shortage of 35 units would exist, and price would tend to rise. When the price is $60, the quantity demanded, 55 units, exceeds the quantity supplied, 20 units, resulting in a shortage of 55-20 = 35 units. The price will tend to rise until the quantity supplied equals the quantity demanded.
Suppose milk is currently selling for $2.50 per gallon, but the equilibrium price of milk is $3.00 per gallon. We would expect a
shortage to exist and the market price of milk to increase.
Which of the following events must cause equilibrium price to fall in the market for gas-powered snow blowers?
shoveling snow is shown to be more environmentally friendly than using a snow blower and producers of gas-powered snow blowers expect prices of gas-powered snow blowers to increase in the near future
If Betty experiences an increase in her income, then we would expect Betty's demand for
substitute goods to increase.
Refer to the Table. If these are the only four sellers in the market, then the market quantity supplied at a price of $16 is
56 units
Refer to the Table. If the market consists of Albert and Phillip only and the price falls by $2, the quantity demanded in the market increases by
6 units
Refer to the Table. If these are the only four sellers in the market, then the market quantity supplied at a price of $4 is
14 units
Refer to the Figure. If Consumer A and Consumer B are the only consumers in the market, then the market quantity demanded when the price is $4 is
16 Units
Refer to the Figure. If Consumer A and Consumer B are the only consumers in the market, then the market quantity demanded when the price is $8 is
16 units
Refer to the Figure. If these are the only two sellers in the market, then the market quantity supplied at a price of $6 is
22 units. The market quantity supplied is the sum of the supplies of the individual suppliers. When the price is $6, Firm A supplies 10 units and Firm B supplies 12 units; therefore, the market quantity supplied is 22 units.
Refer to the table. If the law of demand applies to this good, then Q1 could be
700
Which of the following demonstrates the law of demand?
Miguel buys more bagels at $2.00 per bagel than at $1.50 per bagel, other things equal.
Refer to the Figure. Which of the following would cause the demand curve to shift from Demand A to Demand B in the market for sweatshirts, a normal good?
a change in seasons from spring to summer
Refer to the Figure. Which of the following would cause the supply curve to shift from Supply A to Supply C in the market for treadmills?
a decrease in the number of producers of treadmills
If candles and candlesticks are complements, then which of the following would increase the demand for candles?
a decrease in the price of candlesticks
Refer to the Figure. Which of the following would cause the demand curve to shift from Demand B to Demand C in the market for pickup trucks in the United States?
a decrease in the price of gas
Refer to the Figure. Which of the following would cause the supply curve to shift from Supply B to Supply A in the market for replacement windows?
an expectation by firms that the price of replacement windows will increase in the very near future
Refer to the Figure. The movement from S1 to S2 could be caused by
an increase in input prices. The movement from S1 to S2 is a decrease in supply. A decrease in supply can be caused by an increase in input prices.
Refer to the Figure. In the market for beer, a movement from point A to point B could be caused by
an increase in the price of beer. A movement from point A to point B is a movement along curve S1 and is caused by an increase in the price of beer from P to P'.
An increase in the price of a good would
decrease the demand for the good.
Consider the market for coffee makers. If coffee becomes cheaper, consumption of coffee is found to reduce heart disease, the wages of workers in manufacturing plants increases, and the price of plastic increases, the equilibrium price will
rise Coffee is a complement to coffee makers, so when coffee becomes cheaper, demand for coffee makers increases. Demand also increases in response to a study showing health benefits from drinking coffee. Supply decreases when wages of workers making coffee makers increases and when the price of plastic, an input into coffee makers, increases. When demand increases and supply decreases, the equilibrium price will rise.
Refer to the Figure. An increase in demand is represented by a
shift from Demand A to Demand B.
In the market for haircuts, demand is determined by:
the buyers of haircuts.
The supply curve for yoga mats shifts when
the price of yoga mats changes.
Refer to the Figure. If these are the only two sellers in the market, then the market quantity supplied at a price of $3 is
11 units. The market quantity supplied is the sum of the supplies of the individual suppliers. When the price is $3, Firm A supplies 5 units and Firm B supplies 6 units; therefore, the market quantity supplied is 11 units.
Refer to the Figure. If Consumer A and Consumer B are the only consumers in the market, then the market quantity demanded when the price is $6 is
12 units
Refer to the Figure. At a price of
$10, there is neither a shortage nor a surplus. At a price of $10, the quantity demanded, 50 units, equals the quantity supplied, 50 units, resulting in equilibrium.
In the market for bread, supply is determined by
both the buyers and sellers of bread.
Workers in a union at an automobile assembly plant negotiate a higher wage. It is likely that
supply of autos will shift to the left.
Which of the following is the most likely to be a perfectly competitive market?
wheat In perfectly competitive markets the goods offered for sale are all exactly the same and the buyer and sellers are so numerous that no single buyer or seller has any influence over the market price.
The US government announces that next month it will offer tax rebates on new energy efficient windows. As a result of this information, today's demand curve for energy efficient windows
will not shift; rather, there is a movement upward and to the left along the demand curve for energy efficient windows.
Refer to the table. The table contains a supply schedule for a good. If the law of supply applies to this good, then Q1 could be:
0 The law of supply states that, all else equal, when the price increases, the quantity supplied increases.
Refer to the table. If the law of demand applies to this good, then Q1 could be
1000
Refer to the Figure. There is a shortage of
20 units when the price is $8. At a price of $8, the quantity demanded, 60 units, exceeds the quantity supplied, 40 units, resulting in a shortage of 20 units.
Refer to the table. The table contains a supply schedule for a good. If the law of supply applies to this good, then Q1 could be
260
Refer to the Table. If these are the only three buyers in the market, then the market quantity demanded at a price of $14 is
33 Units
Refer to the Figure. If these are the only two sellers in the market, then the market quantity supplied at a price of $9 is
33 units
Refer to the Figure. If Consumer A and Consumer B are the only consumers in the market, then the market quantity demanded when the price is $10 is
6 units
Refer to the Table. If the market consists of John and Albert only and the price decreases by $2, the quantity demanded in the market increases by
6 units
Refer to the Table. If the market consists of John, Albert, and Phillip and the price decreases by $2, the quantity demanded in the market increases by
6 units The quantity demanded in the market is the sum of all of the individual demands. When the price decreases by $2, the sum of the individual quantities demanded increases by 6 units at all price levels. For example, when the price is $20, the quantity demanded in the market is 2+5+8 = 15 units and when the price is $18, the quantity demanded in the market is 3+7+11 = 21 units; 21-15 = 6.
Suppose that Jarrod receives a pay increase. We would expect
Jarrod's demand for pizza, a normal good, to shift to the right.
What would happen to the equilibrium price and quantity of sunscreen if a new formula is developed that makes production cheaper, and scientists discovered that sunscreen causes more cancer than sun damage?
Both the equilibrium price and quantity would decrease.
If a drought affects the harvest of coffee beans and coffee and tea are considered to be substitutes, what changes occur in the markets for coffee and tea?
Both the price and quantity of coffee fall; the price of tea rises and the quantity of tea falls.
Washing machines and dryers are complementary goods. When the technology used to produce washing machines improves, what changes occur in the markets for washing machines and dryers?
Both the price and quantity of washing machines rise; the price of dryers falls and the quantity of dryers rises.
When a new study reveals that eating pretzels can increase the likelihood of developing lung cancer, which of the following outcomes is expected?
DONT KNOW FROM THIS POINT ON Both the price and quantity of pretzels will fall. When consumers consider the results of the study, the demand for pretzels decreases. When demand decreases, the equilibrium price falls and the equilibrium quantity falls.
Refer to the Figure. The movement from point C to point D on the graph is called a(n)
decrease in the quantity supplied.
A(n) ___________ in the price of a good will ____________.
decrease; increase quantity supplied
Refer to the Table. If these are the only four sellers in the market, when the price decreases by $4, the market quantity supplied
decreases by 14 units.
Suppose a study from a major university reports that consuming chocolate reduces the likelihood of dying from cancer. We could expect the current demand for
hot cocoa to increase.
A movement upward and to the right along the supply curve for mobile phones is caused by a(n)
improvement in the technology used to make mobile phones.
Refer to the Figure. The movement from Point B to Point A represents a(n)
increase in the quantity supplied.
If gum and breath mints are substitutes, a higher price for gum would
increase the demand for breath mints. When the price of a good increases, the demand for its substitutes increase.
Refer to the Table. If the market consists of John, Albert, and Phillip and the price decreases by $2, the quantity demanded in the market
increases by 6 units.
A decrease in quantity supplied is different from shifting the supply curve to the left because a decrease in quantity supplied
is caused by a change in a nonprice determinant of supply while a shift to the left is caused by a price increase.
An increase in quantity supplied is different from shifting the supply curve to the right because an increase in quantity supplied
is caused by a change in a nonprice determinant of supply while a shift to the right is caused by a price decrease.
A decrease in quantity demanded is different from shifting the demand curve to the left because a decrease in quantity demanded
is caused by a price increase while a shift to the left is caused by a change in a nonprice determinant of demand. According to the law of demand, other things equal, the quantity demanded of a good decreases when the price of the good increases. The demand curve shifts in response to a change in a nonprice determinant of demand.
ABC Photography Co. purchases new computer software that reduces the costs of editing and distributing photos. As a result, the
supply curve for ABC's photos will increase. When firms have new production technology, the cost of production decreases so firms increase supply.
If sellers expect lower prices in the near future, the current
supply will decrease.
Refer to the Table. If the price were $80, a(n)
surplus of 35 units would exist, and price would tend to fall. When the price is $80, the quantity supplied, 60 units, exceeds the quantity demanded, 25 units, resulting in a surplus of 60-25 = 35 units. The price will tend to fall until the quantity supplied equals the quantity demanded.
Cotton is an important input in the production of t-shirts. If the price of cotton increases, then we would expect the supply of
t-shirts to decrease. When the price of an input increases, the supply of the good produced with that input decreases because production becomes more expensive.
A very snowy winter in Boston will cause
the demand curve for snow blowers to shift to the right. Consumers' tastes change in response to new conditions. More consumers will demand snow blowers during a very snowy winter. A shift to the right of the demand curve shows an increase in demand.
If the price of cheeseburgers rose to $12 per cheeseburger, producers would produce more cheeseburgers than if the price were $10 per cheeseburger. If the price of hotdogs fell to $3 per hotdog, producers would produce fewer hotdogs than if the price were $5 per hotdog. These relationships illustrate
the difference between substitute and complementary goods.
Today's supply curve for corn could shift in response to a change in
the expected future price of corn. The supply curve shifts in response to changes in the non-price determinants of supply. The expected future price of corn is one of the non-price determinants of the supply for corn.
Sonia buys 15 lattes per month when the price is $4.00 per latte and 20 lattes per month when the price is $3.00 per latte. Sonia's buying decisions demonstrate
the law of demand.
Suppose there are five suppliers of ice cream in the town of Summerville. When the price of ice cream is $2 per scoop, Firm A is willing to sell 20 scoops, Firm B is willing to sell 50 scoops, Firm C is willing to sell 35 scoops, Firm D is willing to sell 100 scoops, and Firm E is willing to sell 40 scoops. From this information we can conclude that
the market quantity supplied is less than 250 scoops when the price is $2 per scoop. The market quantity supplied is the sum of the individual supplies. When the price is $2 per scoop, the market quantity supplied is 20+50+35+100+40 = 245 scoops, which is less than 250 scoops.
An increase in the number of orange growers causes
the market supply curve for oranges to shift to the left.
Which of the following events must cause the equilibrium quantity to rise in the market for burritos?
the price of pizza increases and the price of tortillas decreases The equilibrium quantity in a market must rise when both demand and supply increase. When the price of pizza increases, the demand for burritos increases because pizza and burritos are substitutes. When the price of tortillas decreases, the supply of burritos increases because tortillas are an input into burritos.
Assume the market for wheat is perfectly competitive. When one wheat buyer exits the market,
the price of wheat does not change; but when one wheat seller exits the market, the price of wheat increases.
If buyers and sellers in a certain market are price takers, then individually
they have the ability to negotiate prices that are different from the market price.