Econ 2010 Chapter 3 Review

If the quantity of textbooks supplied is 10,000 per year and the quantity of textbooks demanded is 12,000 per year, there is a ________ in the market and the price will ________. A) shortage; rise B) shortage; fall C) surplus; rise D) surplus; fall

A) shortage; rise

If income increases or the price of a complement falls, the A) demand curve for a normal good shifts leftward. B) demand curve for a normal good shifts rightward. C) supply curve of a normal good shifts leftward. D) supply curve of a normal good shifts rightward.

B) demand curve for a normal good shifts rightward. Six main factors bring changes in demand. They are changes in ■ The prices of related goods ■ Expected future prices ■ Income ■ Expected future income and credit ■ Population ■ Preferences

If a producer can use resources to produce either good A or good B, then A and B are A) complements in production. B) substitutes in production. C) substitutes in consumption. D) complements in consumption.

B) substitutes in production.

When the price of a pizza decreases from $12 to $10, it is definitely the case that the A) income effect means people buy less pizza. B) substitution effect means people buy more pizza. C) quantity demanded of pizza will not change. D) None of the above answers is correct.

B) substitution effect means people buy more pizza.

Each point on a supply curve represents A) the highest price buyers will pay for the good. B) the lowest price for which a supplier can profitably sell another unit. C) the lowest price buyers will accept per unit of the good. D) the highest price sellers can get for each unit over time.

B) the lowest price for which a supplier can profitably sell another unit.

An increase in technology for producing personal computers leads to A) an increase in the demand for personal computers. B) a decrease in the demand for personal computers. C) an increase in the supply of personal computers. D) a decrease in the supply of personal computers.

C) an increase in the supply of personal computers.

If the price of crude oil falls, the equilibrium price of gasoline ________ and the equilibrium quantity ________. A) rises; increases B) rises; decreases C) falls; increases D) falls; decreases

C) falls; increases

When demand increases and supply does not change, the equilibrium price ________ and the equilibrium quantity ________. A) rises; decreases B) falls; decreases C) rises; increases D) falls; increases

C) rises; increases

The law of demand states that, other things remaining the same, the higher the price of a good, the A) smaller is the demand for the good. B) larger is the demand for the good. C) smaller is the quantity of the good demanded. D) larger is the quantity of the good demanded.

C) smaller is the quantity of the good demanded.

Price($) Quantity supplied(lbs) Quantity demanded(lbs) 3 1 7 4 2 5 5 4 4 6 5 2 7 6 1 The above table shows the demand schedule and supply schedule for chocolate chip cookies. What is the equilibrium quantity and equilibrium price for chocolate chip cookies? A) 7 pounds, $3.00 per pound B) 2 pounds, $3.00 per pound C) 2 pounds, $6.00 per pound D) 4 pounds, $5.00 per pound

D) 4 pounds, $5.00 per pound

Which of the following statements is TRUE? A) An increase in the price of gasoline will decrease the demand for gasoline. B) An increase in the price of gasoline will increase the quantity demanded of gasoline. C) An increase in the price of gasoline will increase the supply of gasoline. D) An increase in the price of gasoline will increase the quantity supplied of gasoline.

D) An increase in the price of gasoline will increase the quantity supplied of gasoline.

Which of the following does NOT shift the supply curve? A) a technological advance B) a decrease in the wages of labor used in production of the good C) a fall in the price of a substitute in production D) an increase in the price of the good

D) an increase in the price of the good

When supply decreases and demand does not change, the equilibrium quantity ________ and the equilibrium price ________. A) increases; rises B) decreases; falls C) increases; falls D) decreases; rises

D) decreases; rises

The figure above shows the demand for fruit snacks. Which movement reflects how consumers would react to an increase in the price of a fruit snack that is expected to occur in the future? A) from point a to point e B) from point a to point b C) from point a to point c D) from point a to point d

D) from point a to point d

The figure above shows the demand for fruit snacks. Which movement reflects an increase in the price of a substitute for fruit snacks? A) from point a to point e B) from point a to point b C) from point a to point c D) from point a to point d

D) from point a to point d Fruit demand increases, curve moves rightward

The figure above shows the demand for fruit snacks. Which movement reflects an increase in demand? A) from point a to point e B) from point a to point b C) from point a to point c D) from point a to point d

D) from point a to point d The demand curve shift rightward

You observe that an increase in the price of salsa decreases the demand for tortilla chips and increases the demand for potato chips. You can conclude that A) salsa and tortilla chips are substitutes. B) salsa and potato chips are complements. C) tortilla chips and potato chips are complements. D) salsa and tortilla chips are complements.

D) salsa and tortilla chips are complements.

Which of the following decreases the demand for an inferior good? A) an increase in income B) a decrease in the price of a complement C) a decrease in income D) an increase in the price of a substitute

A) an increase in income

The figure above shows the demand for fruit snacks. Which movement reflects a decrease in quantity demanded but NOT a decrease in demand? A) from point a to point e B) from point a to point b C) from point a to point c D) from point a to point d

A) from point a to point e Demand states the same, but quantity demanded decreases (moves upward along the demand curve)

An increase in the expected future price of a good A) increases its demand. B) decreases its demand. C) increases its supply. D) has no effect on either its demand or its supply.

A) increases its demand.

Which of the following explains why supply curves slope upward? A) prices and income B) increasing marginal cost C) resources and technology D) substitutes in production and complements in production

B) increasing marginal cost

People buy more of good 1 when the price of good 2 rises. These goods are A) complements. B) substitutes. C) normal goods. D) inferior goods.

B) substitutes.