Econ Test 3 study
Which of the following statements is true about productive and allocative efficiency?
Realizing allocative efficiency implies that productive efficiency has been realized.
When an economist says that the demand for a product has increased, this means that:
consumers are now willing to purchase more of this product at each possible price.
Assume in a competitive market that price is initially above the equilibrium level. We can predict that price will:
decrease, quantity demanded will increase, and quantity supplied will decrease.
If Z is an inferior good, an increase in money income will shift the:
demand curve for Z to the left.
In which of the following instances is the effect on equilibrium price dependent on the magnitude of the shifts in supply and demand?
demand rises and supply rises.
A price ceiling means that:
government is imposing a legal price that is typically below the equilibrium price.
With a downsloping demand curve and an upsloping supply curve for a product, an increase in consumer income will:
increase equilibrium price and quantity if the product is a normal good.
If products C and D are close substitutes, an increase in the price of C will:
shift the demand curve of D to the right.
Price floors and ceiling prices:
interfere with the rationing function of prices.
If there is a surplus of a product, its price:
is above the equilibrium level.
If the supply of a product decreases and the demand for that product simultaneously increases, then equilibrium:
price must rise, but equilibrium quantity may rise, fall, or remain unchanged.
A decrease in the demand for recreational fishing boats might be caused by an increase in the:
price of outboard motors.
(Consider This) Ticket scalping is likely to:
produce a more interested audience.
The law of supply indicates that, other things equal:
producers will offer more of a product at high prices than at low prices.
Other things equal, if the price of a key resource used to produce product X falls, the:
product supply curve of X will shift to the right.
Refer to the above information. The equilibrium price for X is:
$6.
Refer to the above information. If demand changed from P = 10 Picture .2Q to P = 7 Picture .3Q, the new equilibrium quantity is:
10.
(Advanced analysis) Answer the next question(s) on the basis of the following information. The demand for commodity X is represented by the equation P = 10 Picture 0.2Q and supply by the equation P = 2 + 0.2Q. Refer to the above information. The equilibrium quantity is:
20
Assuming competitive markets with typical supply and demand curves, which of the following statements is correct?
An increase in demand with no change in supply will result in an increase in sales.
Which of the following statements is correct?
If supply increases and demand decreases, equilibrium price will fall.
Over time, the equilibrium price of a gigabyte of computer memory has fallen while the equilibrium quantity purchased has increased. Based on this we can conclude that:
Increases in the supply of computer memory have exceeded increases in demand.
Assume the demand curve for product X shifts to the right. This might be caused by:
a decline in income if X is an inferior good.
Economists use the term "demand" to refer to:
a schedule of various combinations of market prices and amounts demanded.
A surplus of a product will arise when price is:
above equilibrium with the result that quantity supplied exceeds quantity demanded.
Because of unseasonably cold weather, the supply of oranges has substantially decreased. This statement indicates the:
amount of oranges that will be available at various prices has declined.
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.
Markets, viewed from the perspective of the supply and Markets, viewed from the perspective of the supply and demand model:
assume many buyers and many sellers of a standardized product.
The rationing function of prices refers to the:
capacity of a competitive market to equate quantity demanded and quantity supplied.
Suppose that in each of four successive years producers sell more of their product and at lower prices. This could be explained:
in terms of a stable demand curve and increasing supply.
When the price of a product increases, a consumer is able to buy less of it with a given money income. This describes the:
income effect.
With a downsloping demand curve and an upsloping supply curve for a product, placing an excise tax on this product will:
increase equilibrium price and decrease equilibrium quantity.
When the price of oil declines significantly, the price of gasoline also declines. The latter occurs because of a(n):
increase in the supply of gasoline.
Suppose product X is an input in the production of product Y. Product Y in turn is a substitute for product Z. An increase in the price of X can be expected to:
increase the demand for Z.
An increase in the price of product A will:
increase the demand for substitute product B.
If the demand and supply curves for product X are stable, a government-mandated increase in the price of X will:
increase the supply of X and decrease the demand for X.
Assume in a competitive market that price is initially below the equilibrium level. We can predict that price will:
increase, quantity demanded will decrease, and quantity supplied will increase.
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?
increases in the incomes of the buyers of Z
If a legal ceiling price is set above the equilibrium price:
neither the equilibrium price nor equilibrium quantity will be affected.
An effective price floor will:
result in a product surplus.
An effective price floor on wheat will:
result in a surplus of wheat.
A decrease in the price of digital cameras will:
shift the demand curve for memory cards to the right.
If the price of product L increases, the demand curve for close-substitute product J will:
shift to the right.
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:
substitute goods and the higher price for oil increased the demand for natural gas.
Suppose that in 2007, Ford sold 500,000 Mustangs at an average price of $18,800 per car; in 2008, 600,000 Mustangs were sold at an average price of $19,500 per car. These statements:
suggest that the demand for Mustangs increased between 2007 and 2008.
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.
An increase in the excise tax on cigarettes raises the price of cigarettes by shifting the:
supply curve for cigarettes leftward.
Other things equal, which of the following might shift the demand curve for gasoline to the left?
the development of a low-cost electric automobile
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.
Graphically, the market demand curve is:
the horizontal sum of individual demand curves.
Steve went to his favorite hamburger restaurant with $3, expecting to buy a $2 hamburger and a $1 soda. When he arrived he discovered that hamburgers were on sale for $1, so Steve bought two hamburgers and a soda. Steve's response to the decrease in the price of hamburgers is best explained by:
the income effect.
Allocative efficiency involves determining:
the mix of output that will maximize society's satisfaction.
In presenting the idea of a demand curve, economists presume the most important variable in determining the quantity demanded is:
the price of the product itself.
If there is a shortage of product X, and the price is free to change:
the price of the product will rise.
By an "increase in demand" economists mean that:
the quantity demanded at each price in a set of prices is greater.
Productive efficiency refers to:
the use of the least-cost method of production.
Which of the following is most likely to be an inferior good?
used clothing
