Econ 494 - Ch 3
Suppose Martin just bought a guitar from Jackson off Craigslist for $110. Martin's reservation price was $140, and Jackson's reservation price was $100. The seller's surplus from this transaction was _____ dollars.
$10 110 - 100
Suppose Martin just bought a guitar from Jackson off Craigslist for $110. Martin's reservation price was $140, and Jackson's reservation price was $100. The buyer's surplus from this transaction was 30Blank 1Blank 1 30 , Correct Unavailable _____ dollars.
$30 140 - 110
Suppose Martin just bought a guitar from Jackson off Craigslist for $110. Martin's reservation price was $140, and Jackson's reservation price was $100. The total surplus from this transaction was ______ dollars.
$40 140 - 100
Which of the following factors will lead to a decrease in demand?
A decrease in the price of a substitute A decrease in the population of potential buyers
Which of the following is likely to lead to an increase in the demand for cell phones?
A decrease in the price of cell phone apps (a complement to cell phones) An increase in income (assuming cell phones are a normal good)
Which of the following is likely to lead to a decrease in the current supply of gold?
An announcement that makes suppliers believe that gold prices are going to increase next year
Which of the following factors will lead to a decrease in supply?
An expectation of higher prices in the future
Suppose Bianca buys a used a textbook from Sebastian for $80. If Bianca's surplus from this transaction was $25, we can infer that
Bianca's reservation price was $105.
The introduction of rent controls could lead to which of the following?
Discrimination against tenants on the basis of race, religion or other factors Poorer maintenance of rent-controlled apartments
Which of the following will a seller's reservation price generally be equal to?
The marginal cost of producing another unit of the good The smallest dollar amount for which a seller would be willing to sell an additional unit
Which of the following is likely to lead to an increase in the supply of pumpkins?
Weather that is beneficial to the pumpkin crop A decrease in the cost of growing pumpkins
A shift of the entire supply curve is considered ______.
a change in supply
A movement along the supply curve is considered ______.
a change in the quantity supplied
If the price of cheese increases, then this should lead to _____ in the supply of pizza.
a decrease
If butter and popcorn are complements, then an increase in the price of popcorn will lead to:
a decrease in the equilibrium quantity of butter a decrease in the equilibrium price of butter
Office workers and word processing programs are complements if
a decrease in the wage paid to office workers leads to an increase in the demand for word processing programs
A change in quantity demanded is represented by
a movement along the demand curve
A medical breakthrough that decreases the cost of treating cancer should lead to ____ in the supply of cancer treatments.
an increase
Two goods are substitutes if
an increase in the price of one good, leads to an increase (rightward shift) in the demand for the other
If a late frost damages a part of this year's orange crop, this should lead to:
an increase in the price of oranges a decrease in the number of oranges bought and sold in the market
If bread and peanut butter are complements, then a decrease in the price of peanut butter will lead to:
an increase the price of bread an increase in the amount of bread that people buy
If a country's economic decisions are made by an individual or small number of individuals, then it has a
centralized economy.
If a local art museum announces that it is going to lower the cost of admission into the museum next month, then this should lead to _____ in the current demand for admission into the art museum.
decrease
If bagels and cereal are substitutes, then a decrease in the price of bagels will lead to _____ in the demand for cereal.
decrease
If iPads are a normal good, then a fall in consumer income should lead to _____ in the demand for iPads.
decrease
If the price of blueberries increases, then this should lead the supply of blueberry muffins to _____.
decrease
The numbers in the table below likely capture the daily _______ tennis balls. Price Quantity 0.50----- 300 1.00 ----- 200 1.50 ----- 100
demand for
If Ramen Noodles are an inferior good, then a fall in income should lead to _____ in the demand for Ramen Noodles.
increase
If butter and popcorn are complements, then a decrease in the price of butter will lead to _____ in the demand for popcorn.
increase
A technological innovation that reduces the cost of extracting natural gas from the earth's surface should:
increase the quantity of natural gas bought and sold in the market decrease the price of natural gas
Given that paper is made from wood, a decrease in the price of wood should:
increase the quantity of paper bought and sold in the market decrease the price of paper
Given that paper is made from wood, a decrease in the price of wood should:
increase the quantity of paper bought and sold in the market decrease the price of paper
All else equal, the introduction of tractors into farming in the early 1900s is likely to have:
increased the quantity of agricultural products bought and sold in the market decreased the price of agricultural products
Suppose your roommate recently lost his part-time job, and you notice that afterward his consumption of Ramen Noodles increases. This suggests that for your roommate Ramen Noodles are _____.
inferior good
According to the textbook, government price controls fail because
legislation cannot alter basic economic incentives.
If supply increases and demand decreases, the new equilibrium price will be ______ and the new equilibrium quantity will be ______.
lower, uncertain
A change in demand is represented by a ______.
shift in the entire demand curve
If the demand for apartments decreases when house prices falls, then this suggests that apartments and houses are _____.
substitutes
If the demand for tea increases when the price of coffee goes up, then this suggests that coffee and tea are:
substitutes
The change in the quantity demanded of a good that results because buyers switch to or from substitutes when the price of the good changes is known as the _____ of a price change.
substitution effect
A schedule or graph showing the quantity of a good that sellers wish to sell at each price is known as a _____.
supply curve
You observe that the price of ice cream has gone up and that less ice cream is being bought and sold. The best explanation for this is that the
supply of ice cream has decreased
Relative to the summer months, people have less exposure to the sun during the winter. Thus, relative to the summer, we can expect _____.
the demand for sunscreen to be lower in the winter the amount of sunscreen bought and sold in the market to be lower in the winter the price of sunscreen to be lower in the winter
If people tend to go swimming more in the summer than in the winter, then we would expect _____.
the demand for swimsuits to be higher in the summer the price of swimsuits to be higher in the summer the quantity of swimsuits bought and sold to be higher in the summer
Buyer's surplus is
the difference between a buyer's reservation price and the price the buyer actually pays
If Jason's reservation price for a pound of apples is $1.40, and the market price for a pound of apples is $1.52, then Jason
will not buy a pound of apples
An increase in the price of cotton is likely to shift the supply curve for clothing (that uses cotton as an input) to
the left
Seller's surplus is:
the difference between the price the seller receives and the seller's reservation price
Suppose the demand for gasoline increases at the same time the supply of gasoline falls, then we know that
the equilibrium price of gasoline will go up but the equilibrium quantity could go up or down
Suppose that people's incomes rise at the same time that the cost of producing cell phones falls. If cell phones are a normal good, then we know that
the equilibrium quantity of cell phones will go up, but the price could go up or down
If more people decide to go to medical school because of the popular television show "Grey's Anatomy", then this should lead to _____ in the supply of doctors.
an increase
Prozac and Wellbutrin are both prescription medications to treat depression. If the price of Prozac increases, then this should lead to:
an increase in the price of Wellbutrin an increase in the number of people who use Wellbutrin
Given that flour is an important input to bread, an increase in the price of flour should lead to:
an increase in the price of bread a decrease in the quantity of bread bought and sold in the market
The most John is willing to pay for a slice of pizza is $2.56. Thus, $2.56 is
John's reservation price for pizza
The introduction of rent controls could lead to which of the following?
Lower rent for those who live in rent-controlled apartments An decrease in the quantity of apartments available for rent
Two goods are complements if
an increase in the price of one good, leads to a decrease (leftward shift) in the demand for the other
Given that college professors are an important input to the production of a college education, a decrease in the salaries of college professors would:
decrease college tuition increase the number of students attending college Reason: If the salaries of college professors decrease, the supply of a college education should increase (a rightward shift in the supply curve), leading to an decrease in equilibrium price (tuition) and an increase in equilibrium quantity (the number of students attending college)
You observe that the price of books has gone down at the same time that the number of books bought and sold in the market has decreased. The best explanation for this is that the:
demand for books has decreased
After the price of Revlon nail polish increased, Jen stopped buying Revlon nail polish and started buying a cheaper brand of nail polish instead. This is called
the substitution effect of a price change.
If the price of doughnuts decreases, then one would expect the
quantity of doughnuts supplied to decrease.
Suppose that as the price of coffee increases, consumers purchase less coffee in part because they can no longer afford to buy as much coffee as they used to. This reduction in the quantity of coffee demanded is known as the _____ of a price change.
income effect
Suppose that as the price of movie tickets increases, people stop going to the movies as often because they can no longer afford to do so. This reduction in the quantity of movie tickets demanded is known as the _____ of a price change.
income effect
A maximum allowable price specified by law is a _______.
price ceiling
