ECON 131 CHAP 3

Other things equal, an excise tax on a product will: A. increase its supply. B. increase its price. C. increase the quantity sold. D. increase its demand.

B

Since their introduction, prices of DVD players have fallen and the quantity purchased has increased. This statement: A. suggests that the supply of DVD players has increased. B. suggests that the demand for DVD players has increased. C. constitutes an exception to the law of demand in that they suggest an upward sloping demand curve. D. constitutes an exception to the law of supply in that they suggest a downward sloping supply curve.

A

The construction of demand and supply curves assumes that the primary variable influencing decisions to produce and purchase goods is: A. price. B. expectations. C. preferences. D. incomes.

A

The supply curve shows the relationship between: A. price and quantity supplied. B. production costs and the amount demanded. C. total business revenues and quantity supplied. D. physical inputs of resources and the resulting units of output.

A

When the price of Nike soccer balls fell, Ronaldo purchased more Nike soccer balls, and fewer Adidas soccer balls. Which of the following best explains Ronaldo's decision to buy more Nike soccer balls? A. the substitution effect B. the income effect C. an increase in the demand for Nike soccer balls D. the price effect

A

Allocative efficiency is concerned with: A. producing the combination of goods most desired by society. B. achieving the full employment of all available resources. C. producing every good with the least-cost combination of inputs. D. reducing the concavity of the production possibilities curve.

A

Assume product A is an input in the production of product B. In turn product B is a complement to product C. We can expect a decrease in the price of A to: A. increase the supply of B and increase the demand for C. B. decrease the supply of B and increase the demand for C. C. decrease the supply of B and decrease the demand for C. D. increase the supply of B and decrease the demand for C.

A

Assume the demand curve for product X shifts to the right. This might be caused by: A. a decline in income if X is an inferior good. B. a decline in the price of Z if X and Z are substitute goods. C. a change in consumer tastes that is unfavorable to X. D. an increase in the price of Y if X and Y are complementary goods.

A

College students living off-campus frequently consume large amounts of ramen noodles and boxed macaroni and cheese. When they finish school and start their careers, their consumption of both goods frequently declines. This suggests that ramen noodles and boxed macaroni and cheese are: A. inferior goods. B. normal goods. C. complementary goods. D. substitute goods.

A

Given a downsloping demand curve and an upsloping supply curve for a product, an increase in the price of a substitute good will: A. increase equilibrium price and quantity. B. decrease equilibrium price and quantity. C. increase equilibrium price and decrease equilibrium quantity. D. decrease equilibrium price and increase equilibrium quantity.

A

If the demand for steak (a normal good) shifts to the left, the most likely reason is that: A. consumer incomes have fallen. B. cattle production has declined. C. the price of steak has risen. D. the price of cattle feed has gone up.

A

In presenting the idea of a demand curve, economists presume that the most important variable in determining the quantity demanded is: A. the price of the product itself. B. consumer income. C. the prices of related goods. D. consumer tastes.

A

Other things equal, the provision of a per unit subsidy for a product will: A. increase its supply. B. increase its price. C. decrease the quantity sold. D. decrease its demand.

A

Which of the following will cause a decrease in market equilibrium price and an increase in equilibrium quantity? A. an increase in supply. B. an increase in demand. C. a decrease in supply. D. a decrease in demand.

A

With a downsloping demand curve and an upsloping supply curve for a product, an increase in consumer income will: A. increase equilibrium price and quantity if the product is a normal good. B. decrease equilibrium price and quantity if the product is a normal good. C. have no effect on equilibrium price and quantity. D. reduce the quantity demanded, but not shift the demand curve.

A

In 2007 the price of oil increased, which in turn caused the price of natural gas to rise. This can best be explained by saying that oil and natural gas are: A. complementary goods and the higher price for oil increased the demand for natural gas. B. substitute goods and the higher price for oil increased the demand for natural gas. C. complementary goods and the higher price for oil decreased the supply of natural gas. D. substitute goods and the higher price for oil decreased the supply of natural gas.

B

In which of the following statements are the terms "demand" and "quantity demanded" used correctly? A. When the price of ice cream rose, the demand for both ice cream and ice cream toppings fell. B. When the price of ice cream rose, the quantity demanded of ice cream fell, and the demand for ice cream toppings fell. C. When the price of ice cream rose, the demand for ice fell, and the quantity demanded of ice cream toppings fell. D. None of these statements use the terms correctly.

B

A demand curve: A. shows the relationship between price and quantity supplied. B. indicates the quantity demanded at each price in a series of prices. C. graphs as an upsloping line. D. shows the relationship between income and spending.

B

A recent study found that an increase in the Federal tax on beer (and thus an increase in the price of beer) would reduce the demand for marijuana. We can conclude that: A. beer and marijuana are substitute goods. B. beer and marijuana are complementary goods. C. beer is an inferior good. D. marijuana is an inferior good.

B

Allocative efficiency refers to: A. the use of the least-cost method of production. B. the production of the product-mix most wanted by society. C. the full employment of all available resources. D. production at some point inside of the production possibilities curve.

B

Assume a drought in the Great Plains reduces the supply of wheat. Noting that wheat is a basic ingredient in the production of bread and that potatoes are a consumer substitute for bread, we would expect the price of wheat to: A. rise, the supply of bread to increase, and the demand for potatoes to increase. B. rise, the supply of bread to decrease, and the demand for potatoes to increase. C. rise, the supply of bread to decrease, and the demand for potatoes to decrease. D. fall, the supply of bread to increase, and the demand for potatoes to increase.

B

By an increase in demand we mean that : A. product price has fallen so consumers move down to a new point on the demand curve. B. the quantity demanded at each price in a set of prices is greater. C. the quantity demanded at each price in a set of prices is smaller. D. a leftward shift of the demand curve has occurred.

B

Digital cameras and memory cards are: A. substitute goods. B. complementary goods. C. independent goods. D. inferior goods.

B

If an economy produces its most wanted goods but uses outdated production methods, it is: A. achieving productive efficiency, but not allocative efficiency. B. not achieving productive efficiency. C. achieving both productive and allocative efficiency. D. engaged in roundabout production.

B

If there is a shortage of product X: A. fewer resources will be allocated to the production of this good. B. the price of the product will rise. C. the price of the product will decline. D. the supply curve will shift to the left and the demand curve to the right, eliminating the shortage.

B

One can say with certainty that equilibrium price will decline when supply: A. and demand both decrease. B. increases and demand decreases. C. decreases and demand increases. D. and demand both increase.

B

Suppose an excise tax is imposed on product X. We would expect this tax to: A. increase the demand for complementary good Y and decrease the demand for substitute product Z. B. decrease the demand for complementary good Y and increase the demand for substitute product Z. C. increase the demands for both complementary good Y and substitute product Z. D. decrease the demands for both complementary good Y and substitute product Z.

B

Suppose that tacos and pizza are substitutes, and that soda and pizza are complements. We would expect an increase in the price of pizza to: A. reduce the demand for tacos and increase the demand for sodas. B. reduce the demand for soda and increase the demand for tacos. C. increase the demand for both soda and tacos. D. reduce the demand for both soda and tacos.

B

The income and substitution effects account for: A. the upward sloping supply curve. B. the downward sloping demand curve. C. movements along a given supply curve. D. the "other things equal" assumption.

B

Allocative efficiency involves determining: A. which output-mix will result in the most rapid rate of economic growth. B. which production possibilities curve reflects the lowest opportunity costs. C. the mix of output that will maximize society's satisfaction. D. the optimal rate of technological progress.

C

An improvement in production technology will: A. increase equilibrium price. B. shift the supply curve to the left. C. shift the supply curve to the right. D. shift the demand curve to the left.

C

Assume in a competitive market that price is initially above the equilibrium level. We can predict that price will: A. decrease, quantity demanded will decrease, and quantity supplied will increase. B. decrease and quantity demanded and quantity supplied will both decrease. C. decrease, quantity demanded will increase, and quantity supplied will decrease. D. increase, quantity demanded will decrease, and quantity supplied will increase.

C

Graphically, the market demand curve is: A. steeper than any individual demand curve that is part of it. B. greater than the sum of the individual demand curves. C. the horizontal sum of individual demand curves. D. the vertical sum of individual demand curves.

C

If the supply and demand curves for a product both decrease, then equilibrium: A. quantity must fall and equilibrium price must rise. B. price must fall, but equilibrium quantity may rise, fall, or remain unchanged. C. quantity must decline, but equilibrium price may rise, fall, or remain unchanged. D. quantity and equilibrium price must both decline.

C

If two goods are complements: A. they are consumed independently. B. an increase in the price of one will increase the demand for the other. C. a decrease in the price of one will increase the demand for the other. D. they are necessarily inferior goods.

C

Increasing marginal cost of production explains: A. the law of demand. B. the income effect. C. why the supply curve is upsloping. D. why the demand curve is downsloping.

C

Suppose that corn prices rise significantly. If farmers expect the price of corn to continue rising relative to other crops, then we would expect: A. the supply of ethanol, a corn-based product, to increase. B. consumer demand for wheat to fall. C. the supply to increase as farmers plant more corn. D. the supply to fall as farmers plant more of other crops.

C

Suppose that in each of four successive years producers sell more of their product and at lower prices. This could be explained: A. by small annual increases in supply accompanied by large annual increases in demand. B. in terms of a stable supply curve and increasing demand. C. in terms of a stable demand curve and increasing supply. D. as an exception to the law of supply.

C

The term quantity demanded: A. refers to the entire series of prices and quantities that comprise the demand schedule. B. refers to a situation in which the income and substitution effects do not apply. C. refers to the amount of a product that will be purchased at some specific price. D. means the same thing as demand.

C

Which of the following will not cause the demand for product K to change? A. a change in the price of close-substitute product J B. an increase in consumer incomes C. a change in the price of K D. a change in consumer tastes

C

With a downsloping demand curve and an upsloping supply curve for a product, a decrease in resource prices will: A. increase equilibrium price and quantity. B. decrease equilibrium price and quantity. C. decrease equilibrium price and increase equilibrium quantity. D. increase equilibrium price and decrease equilibrium quantity.

C

A rightward shift in the demand curve for product C might be caused by: A. an increase in income if C is an inferior good. B. a decrease in income if C is a normal good. C. a decrease in the price of a product that is a close substitute for C. D. a decrease in the price of a product that is complementary to C.

D

An increase in the excise tax on cigarettes raises the price of cigarettes by shifting the: A. demand curve for cigarettes rightward. B. demand curve for cigarettes leftward. C. supply curve for cigarettes rightward. D. supply curve for cigarettes leftward.

D

Assuming competitive markets with typical supply and demand curves, which of the following statements is correct? A. An increase in supply with a decrease in demand will result in an increase in price. B. An increase in supply with no change in demand will result in an increase in price. C. An increase in supply with no change in demand will result in a decline in sales. D. An increase in demand with no change in supply will result in an increase in sales.

D

Economists use the term "demand" to refer to: A. a particular price-quantity combination on a stable demand curve. B. the total amount spent on a particular commodity over a stipulated time period. C. an upsloping line on a graph that relates consumer purchases and product price. D. a schedule of various combinations of market prices and amounts demanded.

D

If the demand curve for product B shifts to the right as the price of product A declines, then: A. both A and B are inferior goods. B. A is a superior good and B is an inferior good. C. A is an inferior good and B is a superior good. D. A and B are complementary goods.

D

Tennis rackets and ballpoint pens are: A. substitute goods. B. complementary goods. C. inferior goods. D. independent goods.

D

The demand for most products varies directly with changes in consumer incomes. Such products are known as: A. complementary goods. B. competitive goods. C. inferior goods. D. normal goods.

D

When the price of a product falls, the purchasing power of our money income rises and thus permits consumers to purchase more of the product. This statement describes: A. an inferior good. B. the rationing function of prices. C. the substitution effect. D. the income effect.

D

Which of the following will cause the demand curve for product A to shift to the left? A. population growth that causes an expansion in the number of persons consuming A. B. an increase in money income if A is a normal good. C. a decrease in the price of complementary product C. D. an increase in money income if A is an inferior good.

D