Macro Chapter 3

if hot dogs and ketchup are complements, then an increase in the price of ketchup will lead to:

- a decrease in the price of hot dogs - a decrease in the number of hot dogs bought and sold in the market

the smallest amount you would have to pay Bronx Pizza to get them sell an additional cheese pizza is $8.84. Thus, $8.84 is

Bronx Pizzas reservation price

a change in the quantity supplied is represented by

a movement along the supply curve

If your cousin gets a big raise at work, and as a result, goes out to eat more often, then this suggests that for your cousin restaurant meals are _______.

a normal good

if the demand for wine increases as peoples income go up, then wine is

a normal good

If the supply curve moves down ( to the right ) then

the supply increases

Suppose Martin just bought a guitar from Jackson off Craigslist for $110. Martins reservation price was $140, and Jacksons reservation price was $100. The sellers surplus from this transaction was ____ dollars.

$10

if masons reservation price for a pound of apples in $1.40, and the market price for a pound of apples is $1.52, then mason

will not buy a pound of apples

A medical breakthrough that decreases the cost of treating cancer should lead to _______ in the supply of cancer treatments

an increase

the largest dollar amount that a buyer is willing to pay for a good is the

buyers reservation price

income effect

captures the change in the quantity demanded of a good that results because a change in the price of a good changed the buyers purchasing power

Substitution effect

captures the changes in the quantity demanded of a good that results because buyers switch into or out of substitutions as the price of the good changes.

A schedule or graph showing the quantity of good that buyers wish to buy each price is known as

demand curve

if the demand for apartments decreases when house price falls, then this suggests that apartments and houses are _______.

substitutes

the socially optimal quantity is

the quantity of a good that maximizes the total economic surplus that results from producing and consuming the good.

if red bull and coke are substitutes, then a decrease in the price of red bull should lead to:

- a decrease in the amount of coke bought and sold in the market - a decrease in the price of coke

The following situations the market equilibrium is likely to be inefficient

- a market in which the consumption of the good entails a significant benefit to others (like vaccinations) - a market in which the production of the good entails a significant cost to others (like pollutions from the production process)

The following factors will lead to an increase in demand

- an expectation of higher prices in the future - a decrease in the price of a complement

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

the introduction of rent controls could lead to

- discrimination against tenants on the basis of race, religion, or other factors - poorer maintenance of rent-controlled apartments

Given that flour is an important input of bread, an increase in the price of flour should lead to:

- increase the price of bread - decrease the quantity of bread bought and sold in the market

the introduction of rent controls would lead to

- lower rent for those who live in rent-controlled apartments - a decrease in the quantity of apartments available for rent

The following factors will lead to an increase in supply

-a decrease in the cost of inputs to the production process -a technological advance that lowers production costs

Failure to achieve economic efficiency means that ______.

-everyone in the economy could be made better off -total economic surplus is not maximized

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

Suppose that was the price of pencils increases, people buy fewer pencils and instead use pens. The resulting reduction in the quantity of pencils demanded is known as the ______ of a price change.

Substitution effect

An increase in the supply of corn (rightward shift) could be the result of ______ in the price of an input to the production of corn.

a decrease (a decrease in the price of an input to production leads to an increase in supply)

when the movement moves along the demand line, up, to the left, this represents

a decrease in quantity demanded

a change in quantity demanded is represented by

a movement along the demand curve

if butter and popcorn are complements, then a decrease in the price of butter will lead to _________ in the demand for popcorn.

an increase

if more people decide to go to medical school because of the popular tv show "Greys Anatomy", then this should lead to ______ in the supply of doctors.

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 an increase in the price of one good, causes a decrease (leftward shift) in the demand for another good, then the two goods are ________.

complements

if the price of blueberries increases, then this should lead the supply of blueberry muffins to ________.

decrease

a maximum allowable price specified by law is a

price ceiling

a change in supply is represented by a

shift in the entire supply curve

a change in demand is represented by a

shift of the entire demand curve

a schedule or graph showing the quantity of a good that sellers wish to sell at each price is known as a _______.

supply curve

Sellers Surplus is

the difference between the price the seller receives and the sellers reservation price

economic efficiency occurs when

all goods and services are produced and consumed at their socially optimal levels

These are equal to the sellers reservation price generally

- the smallest dollar amount for which a seller would be willing to sell an additional unit - the marginal cost of producing another unit of the good

failure to achieve economic efficiency means that

- total economic surplus is not maximized - everyone in the economy could be made better off

if ramen noodles are an inferior good, then a fall in income should lead to _______ in the demand for them.

an increase