Exam Prep: 1 Macroeconomics

Which of the following will NOT affect the supply of cars?

a decrease in the price of cars

Which one of the following would cause an increase in the supply of cardboard?

an improvement in the technology used to produce cardboard

After the price of milk increases, David buys more eggs and less cereal. For David

milk and eggs are substitutes, and milk and cereal are complements.

Because of scarcity, a rationing device is needed. Price is a rationing device. It rations resources to producers who pay the price for the resources. It rations goods to those buyers who pay the price for the goods. True or false? (blank)

true

If the price of good X is $10 and the price of good Y is $20, it follows that the relative price of good X is (Blank) Y and the relative price of Y is (Blank) X.

1. 1/2 2. 2

The (Blank) price of a good is the price of a good in money terms; the (Blank) price of a good is the price of a good in terms of another good.

1. Absolute 2. relative

A (Blank) is a government-mandated maximum price above which legal trades cannot be made. (blank) will be greater than quantity supplied at a price ceiling that exists below the equilibrium price. In other words, at a price ceiling, a (blank) exists in the market.

1. Price ceiling 2. Quantity demanded 3. shortage

Goods A and B are substitutes. It follows that as the price of good A rises, the (Blank) of good A will decline and the demand for good B will (Blank)

1. Quantity demanded 2. Fall

The absolute price of good X goes from $10 to $15 at the same time that the absolute price of good Y goes from $20 to $100. It follows that the (Blank) price of good (Blank) has fallen.

1. Relative 2. X

At a disequilibrium price below equilibrium price, a (blank) exists in the market, such that (blank) is greater than quantity supplied.

1. Shortage 2. quantity demanded

A (Blank) will exist in the market at a price floor that is above the equilibrium price. In short, (Blank) will be greater than quantity demanded.

1. Surplus 2. Quantity supplied

If the maximum buying price for good X is $40 and the price paid for good X is $23, then (blank) surplus is (Blank) dollars.

1. consumers' 2. 17

If supply rises by more than demand rises, equilibrium price will (blank) and equilibrium quantity will (blank) .

1. fall 2. rise

The number of sellers of good X rises. As a result, equilibrium price will (blank) and equilibrium quantity will (blank) (assuming that the supply curve is upward-sloping).

1. fall 2. rise

If equilibrium price is $10, then at a price of $12 there will be (Blank) exchanges and less (Blank) surplus.

1. fewer 2. consumers'

If we assume that the supply curve for good X is vertical, then an increase in the demand for good X will lead to a (Blank) equilibrium price and to an unchanged equilibrium quantity (true or false)? (Blank)

1. higher 2. true

Consider the demand curve for apples. The price of an apple is a (movement) factor whereas a change in preferences is a (Blank) factor.

1. movement 2. shift

Demand is the willingness and (Blank) of buyers to purchase different quantities of a good at different prices during a specific period.

Ability

When the price of tablet devices decreased in the 2010s, there was an increase in the demand for computing apps because tablet devices and computing apps are

Complementary goods

(Blank) is the difference between maximum buying price and price paid.

Consumers surplus

An agricultural price floor will lower (blank) surplus.

Consumers'

If the price of a good is expected to rise, the current demand for the good will (Blank)

Decrease

Kariuki decreases his consumption of grapes after his income goes up. For Kariuki

Grapes are an inferior good

Which of the following statements is FALSE?

If the price of a good rises, quantity demanded of the good decreases and the demand curve shifts toward the origin as long as supply is static.

If X is a normal good, then as income rises the demand for good X will (Blank) .

Increase

Other things being equal, an increase in the price of a good leads to a decrease in the amount people purchase. This is known as

Law of Demand

A (Blank) is a government-mandated minimum price below which legal trades cannot be made.

Price floor

(Blank) is the difference between minimum and maximum selling price.

Producer's Surplus

As the price of a good rises, the (Blank) of the good declines.

Quantity Demanded

An upward-sloping curve represents the law of supply, which holds that as price rises, (Blank) rises.

Quantity supplied

Suppose the price of cement goes up in the United States. What happens in the market for new homes?

Supply shifts upward and to the left.

Suppliers will provide more of a good when

The Market Price Increases

If one day it was discovered that lime juice caused cancer, which of the following would likely result?

The demand curve for lime juice would shift to the left.

If the price of cotton used in making blue jeans increases, which of the following will occur?

The supply curve for jeans will shift leftward.

One of the effects of a price ceiling is that non-price rationing devices will be used. An example of a non-price rationing device is first come-first served. This non-price rationing device usually generates long lines of people trying to purchase the good. True or false? (Blank)

True

A black market

can arise when government imposes a price ceiling below the market clearing price.

A deadweight loss will result from a price floor. This is the loss to society of not producing the (Blank) level of output.

competitive or supply-and-demand-determined

A higher absolute price for a good is always consistent with a higher relative price for the good. True or false? (Blank)

false

All the following are shift factors for a supply curve: prices of relevant resources, taxes and subsidies, technology, and number of sellers, and own price. True or false? (Blank)

false

There will be (Blank) exchanges made at a price ceiling (below equilibrium price) than at equilibrium price.

more

A shortage will occur whenever

price is below the equilibrium price.

If a price ceiling is set above the current market clearing price, then

quantity demanded will remain equal to quantity supplied at the current market clearing price.

If income rises, and good X is an inferior good, then the demand curve for good X will shift to the (blank).

right

If demand for good X increases by more than the supply of good X decreases, then equilibrium price will rise and equilibrium quantity will (Blank) .

rise

If demand rises and supply does not change, then equilibrium price will (Blank) and equilibrium quantity will rise.

rise

When income increases, the demand curve for an inferior good

shifts to the left.

Market supply is obtained by

summing the amount supplied by individual producers at various prices.

An effective price ceiling occurs when

the government sets a maximum price for a good below the equilibrium price.

The market clearing price of a good is

the price at which there is no surplus and no shortage.

There will be an increase in supply when

there is an improvement in technology.

A (Blank) sale is a sale whereby one good can be purchased only if another good is also purchased.

tie-in

Bad weather ends up destroying 20 percent of food crop X. As a result, the price of food crop X rises. In this context, price is acting as a (Blank).

transmitter of information

An increase in income will shift the demand curve for good X to the right if good X is a normal good and an increase in the price of relevant resources will shift the supply curve for good X to the left. True or false? (blank)

true