Macroeconomics Ch. 3
If the price of computers increases and the demand for monitors decreases as a result, then:
computers and monitors are complements.
Shelly purchases a leather purse for $400. One can infer that:
her reservation price was at least $400.
According to the equilibrium principle:
market equilibrium exploits all opportunities for individual gain, but may not exploit gains possible through collective action.
An outcome is socially optimal if it:
maximizes total economic surplus
The buyer's reservation price of a particular good or service is the:
maximum amount the buyer would be willing to pay for it.
If the demand for a good decreases as income decreases, it is a(n):
normal good.
If the demand for steak increases as income increases, this means that steak is a(n):
normal good.
Efficiency occurs when:
the socially optimal quantity of goods and services is being produced.
What will happen to the equilibrium price and quantity of beef, if the price of chicken feed increases (assume that chicken and beef are substitutes)?
Both will increase.
Tennis rackets and tennis balls are
Complements
Washing machines and dryers are
Complements
Ice cream and chocolate are
Complements and Substitutes
Which of the following is NOT true of a demand curve? A. It has negative slope. B. It shows the amount consumers are willing and able to purchase at various prices, holding other factors constant. C. It relates the price of an item to the quantity demanded of that item. D. It shows how an increase in price leads to an increase in quantity demanded of a good.
D. It shows how an increase in price leads to an increase in quantity demanded of a good.
The price of grapefruit falls drastically
Equilibrium price will decrease and equilibrium quantity will decrease
Suppose exceptionally good weather provides a much bigger than expected orange harvest.
Equilibrium price will decrease and equilibrium quantity will increase.
Suppose the wage paid to orange pickers rises.
Equilibrium price will increase and equilibrium quantity will decrease
A study finds that a daily glass of orange juice reduces the risk of heart disease
Equilibrium price will increase and equilibrium quantity will increase.
Suppose the current issue of the New York Times reports an outbreak of mad cow disease in Nebraska, as well as the discovery of a new breed of chicken that gains more weight than existing breeds that consume the same amount of food. How will these developments affect the equilibrium price and quantity of chickens sold in the United States?
Equilibrium quantity will increase, but the effect on equilibrium price is unknown.
Cloth diapers and disposable diapers are
Substitutes
Buyers in the market for CDs learn of an increase in the price of CDs.
The demand curve remains unchanged.
Buyers in the market for pizza read a study linking pepperoni consumption to heart disease.
The demand curve shifts to the left.
The income of buyers in the market for Adirondack vacations increase.
The demand curve shifts to the right
Buyers in the market for CDs learn of an increase in the price of downloadable MP3s (a substitute for CDs).
The demand curve shifts to the right.
A tornado sweeps through Iowa.
The supply curve shifts to the left.
A new and improved crop rotation technique is discovered.
The supply curve shifts to the right.
The government offers new tax breaks to farmers.
The supply curve shifts to the right.
The price of fertilizer falls.
The supply curve shifts to the right.
The entire group of buyers and sellers of a particular good or service makes up:
a market
When the price of an item increases, buyers tend to purchase less of that item:
because of both the substitution and the income effects
The equilibrium price and quantity of any good or service is established by:
both demanders and suppliers
In Cuba, a bureaucratic committee makes the production decisions for the country's firms and factories. Therefore, Cuba is an example of a:
centralized economy
As the price of flour (an input into the cookie production process) increases, firms that produce cookies will:
decrease the supply of cookies.
A decrease in the price of pizza will cause a(n):
increase in quantity demanded
As consumers' incomes increase, the demand for ground beef decreases. Ground beef is called a(n):
inferior good
As consumers' incomes decrease, the demand curve for bologna sandwiches shifts to the right. Therefore bologna sandwiches are:
inferior goods.
A shortage occurs when:
quantity demanded exceeds quantity supplied
The demand curve illustrates the fact that consumers:
tend to purchase more of a good as its price falls.
In general, when the supply curve shifts to the left and demand is constant then:
the equilibrium price will rise
