Econ 2020 Chapter 3

Economists use the term "demand" to refer to:

a schedule of various combinations of market prices and amounts demanded.

Which of the following will cause the demand curve for product A to shift to the left?

an increase in money income if A is an inferior good.

If producers must obtain higher prices than before to produce a given level of output, then the following has occurred:

a decrease in supply.

Tennis rackets and ballpoint pens are:

complementary goods

(Advanced analysis) Answer the question on the basis of the following information. The demand for commodity X is represented by the equation P = 10 - 0.2Q and supply by the equation P = 2 + 0.2Q. Refer to the above information. If demand changed from P = 10 - .2Q to P = 7 - .3Q, the new equilibrium price is:

$4.

A price floor in a competitive market will result in persistent shortages of a product.

FALSE

If market demand increases and market supply decreases, the change in equilibrium price is unpredictable without first knowing the exact magnitudes of the demand and supply changes.

FALSE

Which of the following statements is true about price ceilings?

Price ceilings cause goods to be rationed by some other means than legally determined market prices.

Which of the following statements is true about productive and allocative efficiency?

Realizing allocative efficiency implies that productive efficiency has been realized.

A government tax per unit of output reduces supply.

TRUE

A market that is achieving allocative efficiency must also be achieving productive efficiency

TRUE

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

inferior goods.

If there is a surplus of a product, its price:

is above the equilibrium level.

The law of supply indicates that, other things equal:

producers will offer more of a product at high prices than at low prices.

Allocative efficiency is concerned with:

producing the combination of goods most desired by society.

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:

reduce the demand for soda and increase the demand for tacos.

The term "quantity demanded"

refers to the amount of a product that will be purchased at some specific price.

An effective price floor will:

result in a product surplus.

A government subsidy to the producers of a product:

increases product supply.

(Advanced analysis) Answer the question on the basis of the following information. The demand for commodity X is represented by the equation P = 10 - 0.2Q and supply by the equation P = 2 + 0.2Q. Refer to the above information. The equilibrium price for X is:

$6

(Advanced analysis) Answer the question on the basis of the following information. The demand for commodity X is represented by the equation P = 10 - 0.2Q and supply by the equation P = 2 + 0.2Q. Refer to the above information. If demand changed from P = 10 - .2Q to P = 7 - .3Q, the new equilibrium quantity is:

10.

Which of the following statements is correct?

An increase in the price of C will decrease the demand for complementary product D.

Which of the following statements is correct

If supply increases and demand decreases, equilibrium price will fall

(Advanced analysis) The equation for the supply curve in the below diagram is approximately:

P = 4 + 1/3Q.

A surplus of a product will arise when price is:

above equilibrium with the result that quantity supplied exceeds quantity demanded.

In the following question you are asked to determine, other things equal, the effects of a given change in a determinant of demand or supply for product X upon (1) the demand (D) for, or supply (S) of, X, (2) the equilibrium price (P) of X and (3) the equilibrium quantity (Q) of X. Refer to the above. A decrease in the number of consumers of product X will:

decrease D, decrease P, and decrease Q.

In the following question you are asked to determine, other things equal, the effects of a given change in a determinant of demand or supply for product X upon (1) the demand (D) for, or supply (S) of, X, (2) the equilibrium price (P) of X and (3) the equilibrium quantity (Q) of X. Refer to the above. A reduction in the number of firms producing X will:

decrease S, increase P, and decrease Q.

In the following question you are asked to determine, other things equal, the effects of a given change in a determinant of demand or supply for product X upon (1) the demand (D) for, or supply (S) of, X, (2) the equilibrium price (P) of X and (3) the equilibrium quantity (Q) of X. Refer to the above. An increase in the prices of resources used to produce X will:

decrease S, increase P, and decrease Q.

Suppose that at prices of $1, $2, $3, $4, and $5 for product Z, the corresponding quantities supplied are 3, 4, 5, 6, and 7 units, respectively. Which of the following would increase the quantities supplied of Z to, say, 6, 8, 10, 12, and 14 units at these prices?

improved technology for producing Z

In the following question you are asked to determine, other things equal, the effects of a given change in a determinant of demand or supply for product X upon (1) the demand (D) for, or supply (S) of, X, (2) the equilibrium price (P) of X and (3) the equilibrium quantity (Q) of X. Refer to the above. Consumer expectations that the price of X will rise sharply in the future will:

increase D, increase P, and increase Q.

In the following question you are asked to determine, other things equal, the effects of a given change in a determinant of demand or supply for product X upon (1) the demand (D) for, or supply (S) of, X, (2) the equilibrium price (P) of X and (3) the equilibrium quantity (Q) of X. Refer to the above. If X is an inferior good, a decrease in income will:

increase D, increase P, and increase Q.

In the following question you are asked to determine, other things equal, the effects of a given change in a determinant of demand or supply for product X upon (1) the demand (D) for, or supply (S) of, X, (2) the equilibrium price (P) of X and (3) the equilibrium quantity (Q) of X. Refer to the above. An improvement in the technology used to produce X will:

increase S, decrease P, and increase Q.

Assuming conventional supply and demand curves, changes in the determinants of both supply and demand will:

n all likelihood alter both equilibrium price and quantity.

The demand for most products varies directly with changes in consumer incomes. Such products are known as

normal goods

An inferior good is:

not accurately defined by any of these statements.

If an economy produces its most wanted goods but uses outdated production methods, it is:

not achieving productive efficiency.

Since their introduction, prices of DVD players have fallen and the quantity purchased has increased. This statement:

suggests that the supply of DVD players has increased.

Which of the following would most likely increase the demand for gasoline?

the expectation by consumers that gasoline prices will be higher in the future.

Allocative efficiency involves determining:

the mix of output that will maximize society's satisfaction.

In moving along a demand curve which of the following is not held constant?

the price of the product for which the demand curve is relevant.

At the equilibrium price:

there are no pressures on price to either rise or fall.