Econ 120 Chapter 2

Assume that Joe is willing to produce a hamburger for $1, and Mary is willing to pay $3 for a hamburger. Which of the following is true? a.) Joe and Mary can make a mutually beneficial exchange. b.) Joe and Mary cannot make a mutually beneficial exchange. c.) Joe and Mary will not trade in equilibrium. d.) Joe and Mary will only trade if the equilibrium price is less than $1.

a

If pencils and paper are complements for most consumers, then if the price of paper increases, you would expect: a.) the equilibrium price and quantity of pencils to fall b.) the equilibrium price and quantity of pencils to rise c.) the equilibrium price of pencils to fall and the equilibrium quantity of pencils to rise d.) the equilibrium price of pencils to rise and the equilibrium quantity of pencils to fall

a

The price of bananas will increase in response to: a.) an excess supply of bananas. b.) an excess demand for bananas. c.) an increase quantity of bananas supplied. d.) an increase in the supply of bananas.

b

Suppose that the market price for hot dogs sold by street vendors has just risen from $4.50 to $5.00, and that in response Curly has now begun operating a hot dog cart. We can assume that Curly's reservation price for hot dogs is: a.) at least $5.00. b.) $4.50. c.) greater than $4.50 but no more than $5.00. d.) $5.00.

c

If the local slaughterhouse gives off an unpleasant stench, then the equilibrium quantity of meat will be _____ the quantity that maximizes total economic surplus. a.) more equitable b.) equal to c.) lower than d.) higher than

d

It is likely that for most people: a.) coffee and tea are substitutes. b.) coffee and non-dairy creamer are substitutes. c.) coffee and Coke are complements. d.) coffee and coffee mugs are substitutes.

a

Suppose that Tom bought a bike from Helen for $195. If Helen's reservation price was $185, and Tom's reservation price was $215, the total economic surplus from this transaction was: a.) $30 b.) $185 c.) $195 d.) $215

a

Suppose that when the price of oranges is $3 per pound, the quantity demanded is 4.7 tons per day and the quantity supplied is 3.9 tons. In this case: a.) excess demand will lead the price of oranges to rise b.) excess supply will lead the price of oranges to fall c.) excess demand will lead the price of oranges to fall d.) excess supply will lead the price of oranges to rise

a

What might cause a demand curve to shift to the right? a.) An increase in the price of a substitute. b.) An increase in the product's own price. c.) An increase in the price of a complement. d.) A decrease in the price of a substitute.

a

If the demand for a good decreases as income decreases, then the good is a(n): a.) complementary good. b.) normal good. c.) inferior good. d.) substitute good.

b

Shelly purchases a leather purse for $400. One can infer that: a.) she paid too much. b.) her reservation price was at least $400. c.) her reservation price was exactly $400. d.) her reservation price was less than $400.

b

The entire group of buyers and sellers of a particular good or service makes up: a.) the demand curve. b.) the supply curve. c.) the market. d.) the equilibrium price and quantity.

c

Suppose demand decreases, but there is no change in supply. As the market reaches its new equilibrium: a.) excess demand will lead the price to rise. b.) excess supply will lead the price to rise. c.) excess demand will lead the price to fall. d.) excess supply will lead the price to fall.

d

Suppose you observe a decrease in the equilibrium price and quantity of corn. Of the options listed below, this is best explained by: a.) a decrease in the cost of growing corn. b.) an increase in the cost of growing corn. c.) a rise in consumer income assuming corn is a normal good. d.) a fall in consumer income assuming corn is a normal good.

d

When a market is in equilibrium: a.) there is either excess demand or excess supply. b.) both excess demand and excess supply are positive. c.) both excess demand and excess supply are positive and equal to each other. d.) there is neither excess demand nor excess supply.

d