Macroeconomics Chapter 4

A leftward shift of a supply curve represents a decrease in supply. a. True b. False

a. True

As the price of milk increases, producers are normally willing to supply greater quantities. This response is known as the law of a. supply b. demand c. averages d. variable proportions e. increasing costs

a. supply

If a decrease in the price of good A causes an increase in the demand for good B, then A and B must be complements. a. True b. False

A

Tax preparation services and IRS tax publications can be considered substitutes. a. True b. False

A

If the price of labor increases, employers will hire more labor because it is more valuable. a. True b. False

B.

Which of the following would shift the supply curve for CDs to the right? a. a decrease in the price of materials used to make CDs b. a rise in the cost of labor used to make CDs c. an increase in the price of audio cassettes d. a decrease in the number of suppliers e. an increase in the price of CDs

a. a decrease in the price of materials used to make CDs

If the tea harvest is bad in a particular year, what will happen in the market for coffee? a. increased price and decreased quantity b. increased price and increased quantity c. decreased price and increased quantity d. decreased price and decreased quantity e. no change in equilibrium price and quantity

b. increased price and increased quantity

The basic reason that supply curves slope upward is that a. demand curves slope downward b. production is characterized by increasing costs c. profits decline as product prices rise d. greater output can only result from improved technology e. price and quantity supplied are inversely related

b. production is characterized by increasing costs

Rent controls can result in a. deteriorating or abandoned buildings b. strong incentives to oust protected tenants c. payments to motivate tenants to move out d. benefits to rich people who get a windfall from low rents e. All of the answers are correct.

e. All of the answers are correct.

Which of the following statements about gold jewelry and round-trip bus tickets to Bismarck, North Dakota, is most likely to be correct? a. They are both inferior goods. b. Their demand curves probably are quite similar. c. They are complements. d. They are substitutes. e. They are unrelated.

e. They are unrelated.

The law of demand is illustrated by a demand curve that is a. horizontal b. vertical c. upward sloping d. constant e. downward sloping

e. downward sloping

Which of the following would not shift the demand curve for pork? a. an increase in the price of beef b. an increase in the price of pork c. an increase in the incomes of pork consumers d. a widespread advertising campaign for pork e. a finding that consumption of beef increases the risk of heart attack

b. an increase in the price of pork

Which of the following would cause both the equilibrium price and equilibrium quantity of cookies to decrease? a. a rise in the price of milk (a complement) b. a rise in consumer incomes c. a rise in the price of cookie dough d. a drop in the price of cookie dough e. a rise in the price of crackers (a substitute)

a. a rise in the price of milk (a complement)

A surplus occurs whenever a. current price is greater than equilibrium price b. quantity supplied exceeds quantity demanded at the equilibrium price c. quantity demanded is greater than quantity supplied d. the problem of scarcity of a good is solved e. some buyers would be willing and able to pay even more for it than they have to at equilibrium

a. current price is greater than equilibrium price

The law of demand says that the lower the price of a good, other things constant, a. the smaller the demand for that good b. the larger the demand for that good c. the smaller the quantity demanded of that good d. the larger the quantity demanded of that good e. the smaller the real income of consumers and the lower the quantity demanded of that good

d. the larger the quantity demanded of that good

Which of the following statements about markets is not true? a. A market is an impersonal mechanism. b. Markets coordinate the independent decisions of buyers and sellers. c. Markets reduce the transaction costs of exchange. d. More specialized markets are generally found in urban areas. e. All markets provide the same amounts of information.

e. All markets provide the same amounts of information.

If a certain type of clothing becomes more fashionable, we would expect that its price a. will decrease and quantity will remain constant b. and quantity will both decrease c. will increase and quantity will decrease d. will decrease and quantity will increase e. and quantity will both increase

e. and quantity will both increase

A decrease in demand for a good could mean that a. consumers are willing to pay a higher price for each quantity of the good b. consumers are willing to buy larger quantities of the good at each price c. the demand curve has undergone a parallel shift to the right d. the demand curve has undergone a nonparallel shift to the right e. the demand curve has shifted to the left

e. the demand curve has shifted to the left

An improvement in technology would shift a. the demand curve leftward b. the demand curve rightward c. the supply curve leftward d. neither the supply nor the demand curve; instead, there is movement along both of them e. the supply curve rightward

e. the supply curve rightward

Producers are willing and able to offer greater quantities for sale at higher prices because a. they have the incentive to pay the increasing opportunity cost of resources to attract them from alternative uses b. they will decrease their profits by expanding production at higher prices c. the government orders them to do so d. lower prices attract new firms, which have higher costs of production e. they hire superior quality, higher-priced resources as production expands

a. they have the incentive to pay the increasing opportunity cost of resources to attract them from alternative uses

The effect of an increase in consumer income on equilibrium price and quantity of Florida orange juice (a normal good) is a. to increase equilibrium price and quantity b. to decrease equilibrium price and quantity c. to increase equilibrium price and decrease equilibrium quantity d. to increase equilibrium quantity and decrease equilibrium price e. that equilibrium price and quantity remain constant

a. to increase equilibrium price and quantity

There are three consumers in the market for playing cards: Don, John, and Ron. At a price of $2 per pack, the quantities demanded by each are 3, 2, and 1, respectively. At a price of $1.50 per pack, the quantities demanded by each are 4, 5, and 3, respectively. Which of the following is true? a. The market demand curve for playing cards does not obey the law of demand. b. The price decrease causes the quantity demanded in this market to increase by 6. c. The price decrease causes John's demand curve to shift the most. d. At a price of $1 per pack, the quantity demanded in this market must be 20. e. Don's behavior does not obey the law of demand.

b. The price decrease causes the quantity demanded in this market to increase by 6.

The recent increase in popularity of professional basketball has resulted in a. a decrease in the price of tickets to basketball games b. an increase in the price of professional basketball tickets c. increased competition among pro basketball teams d. a rise in the price of college basketball tickets e. the bankruptcy of some pro basketball teams

b. an increase in the price of professional basketball tickets

The income effect of an increase in the price of backpacks (a normal good) is a(n) a. decrease in the demand for backpacks b. decrease in the quantity demanded of backpacks c. increase in the demand for backpacks d. increase in the quantity demanded of backpacks e. new demand curve because everything else is no longer constant

b. decrease in the quantity demanded of backpacks

Larger quantities of any good will be supplied at higher prices because a. consumers will be more satisfied b. higher prices attract resources from other uses c. people are naturally lazy and have to be bribed to give up their leisure d. price and quantity supplied are inversely related e. of the law of decreasing opportunity cost

b. higher prices attract resources from other uses

Tickets to the Michigan-Notre Dame football game are usually sold out in advance of game day. This suggests that a. the price of the tickets must be very high or else people would not consider them valuable b. the price is set below the equilibrium level c. the football stadium is relatively small d. everyone who attends the game will enjoy it e. the price is determined primarily by the fixed supply of tickets

b. the price is set below the equilibrium level

If the market for beef cattle was initially in equilibrium, an increase in the price of the feed grains used to fatten cattle would cause a. the demand for beef cattle to increase, driving the price of beef upward b. the supply of beef cattle to decline, driving the price of beef upward in the long run c. the supply of beef to increase, placing downward pressure on the price of beef in the long run d. both supply and demand to fall, leaving the price of beef virtually unchanged e. the supply of beef to increase, driving the price of beef down and increasing demand

b. the supply of beef cattle to decline, driving the price of beef upward in the long run

In what way is consumer demand different from consumer wants? a. Demand is only for necessities. b. Demand is only for luxuries. c. Demand takes into account the ability to pay. d. Consumer wants are only for luxuries. e. Consumer wants are only for necessities.

c. Demand takes into account the ability to pay.

Which of the following statements about demand is true? a. Since most college students want a Mercedes sports coupe, their demand for it is high. b. If price increases, the demand curve shifts to the right. c. The demand curve for bacon will not shift when the price of bacon changes. d. If a supply curve shifts, thereby changing the price, the demand curve will shift as well. e. If a demand curve shifts, the supply curve will shift as well, whether or not the price changes.

c. The demand curve for bacon will not shift when the price of bacon changes.

Suppose there are only two goods, apples and oranges. What happens if the price of each good increases by 15 percent? a. The consumer will substitute apples for oranges. b. The consumer will substitute oranges for apples. c. There is no substitution effect because relative prices have remained constant. d. Demand for both goods increases. e. Demand for both goods decreases.

c. There is no substitution effect because relative prices have remained constant.

A new hormone will increase the amount of milk each cow produces. If this hormone is adopted by many dairies, what will be the effect on the milk market? a. an increase in supply, higher equilibrium price, and lower equilibrium quantity b. a decrease in supply, lower equilibrium price, and lower equilibrium quantity c. an increase in supply, lower equilibrium price, and higher equilibrium quantity d. an increase in supply, higher equilibrium price, and higher equilibrium quantity e. a decrease in supply, lower equilibrium price, and higher equilibrium quantity

c. an increase in supply, lower equilibrium price, and higher equilibrium quantity

Assume that supply increases slightly and demand increases greatly. Which of the following will happen? a. equilibrium price will fall and equilibrium quantity will rise b. equilibrium price will rise and equilibrium quantity will fall c. equilibrium price will rise and equilibrium quantity will rise d. equilibrium price will fall and equilibrium quantity will fall e. neither equilibrium price nor equilibrium quantity will change

c. equilibrium price will rise and equilibrium quantity will rise

The equilibrium point represents the only price-quantity combination in a market that a. causes both buyers and sellers to agree to a price increase b. causes both buyers and sellers to agree to a price decrease c. exactly matches the independent plans of buyers and sellers d. allows buyers to purchase what they want e. allows sellers to earn a profit

c. exactly matches the independent plans of buyers and sellers

Two goods are considered substitutes only if a(n) a. decrease in the demand for one leads to a decrease in the supply of the other b. increase in the demand for one leads to a decrease in the supply of the other c. increase in the price of one leads to an increase in the demand for the other d. decrease in the price of one leads to an increase in the demand for the other e. decrease in the supply of one leads producers to switch to production of the other

c. increase in the price of one leads to an increase in the demand for the other

Many people argue against increasing the minimum wage because they believe the result would be increased unemployment. Which of the following best summarizes this argument? A higher minimum wage would a. increase the supply of labor while decreasing the demand for labor b. decrease the supply of labor while increasing the demand for labor c. increase the quantity supplied of labor while decreasing the quantity demanded of labor d. decrease the quantity supplied of labor while increasing the quantity demanded of labor e. increase the supply of labor while decreasing the quantity demanded of labor

c. increase the quantity supplied of labor while decreasing the quantity demanded of labor

If people believe that prices are going to be higher in the future then they are today, they will a. wait until the future to purchase the things they wand b. decrease their demand now c. increase their demand now d. increase their supply now e. save more today so they have the income to buy more in the future

c. increase their demand now

If good B is a complement to good A, then a decrease in the price of B a. increases the quantity demanded of A b. decreases the demand for A c. increases the demand for A d. decreases the quantity demanded of A e. will cause the demand for B to increase

c. increases the demand for A

The law of demand states that a. there is a positive relationship between price and quantity demanded b. price is the only factor that influences the quantity that people are willing and able to buy c. price and quantity demanded are inversely related d. the demand curve shifts whenever the price of a good changes e. by producing a product, firms create a demand for it

c. price and quantity demanded are inversely related

If the price of a haircut (a normal good) increases, other things constant, the a. demand for haircuts increases b. demand for haircuts decreases c. quantity demanded of haircuts decreases d. quantity demanded of haircuts increases e. demand for haircuts, or quantity demanded of haircuts decreases; they are the same thing

c. quantity demanded of haircuts decreases

Supply and demand curves both a. have negative slopes b. have positive slopes c. relate quantities to prices d. reflect the actions of producers e. reflect the actions of consumers

c. relate quantities to prices

A change in income will a. affect the demand for candy through the income effect of a price change b. affect the quantity demanded of candy through the income effect of a price change c. shift the demand curve for candy d. have no effect on the demand for candy, because income is assumed constant along a demand curve e. affect quantity demanded only if candy is a normal good

c. shift the demand curve for candy

Which of the following best defines supply? a. the amount of a good that producers want to sell at a particular price b. the amount of a good that consumers will buy c. the amount of a good that producers are willing and able to sell at each possible price, other things constant d. the amount of a good that producers are willing to sell at each possible price, other things constant e. the amount of a good that producers are willing and able to buy at each possible price, other things constant

c. the amount of a good that producers are willing and able to sell at each possible price, other things constant

The income effect refers to the impact of a change in a. income on the price of a good b. the general price level caused by a change in the price of another good c. the price of a good on real income d. the price of a substitute for the good under consideration e. demand when income changes

c. the price of a good on real income

When a market is in equilibrium, a. producers earn profits b. the minimum possible price is achieved c. there is no incentive for consumers or producers to change their current behavior d. excess demand is less than excess supply e. the maximum possible price is achieved

c. there is no incentive for consumers or producers to change their current behavior

Jennifer learns that the price of CDs will be going up 10 percent next week. She usually buys three CDs per week. What happens to Jennifer's demand for CDs this week? a. It does not change because only quantity demanded changes when price changes. b. It increases because the price will be lower next week. c. It decreases because the price will be higher next week. d. It increases because the price will be higher next week. e. It decreases because the price will be lower next week.

d. It increases because the price will be higher next week.

Which of the following is true of the relationship between price and quantity supplied? a. There is always an inverse relationship. b. More is supplied at lower prices. c. Producers work harder and sell more when the price decreases. d. There is a direct relationship between price and quantity supplied. e. It is always true that a higher price leads to a decrease in quantity supplied.

d. There is a direct relationship between price and quantity supplied.

Which of the following will increase the supply of vanilla ice cream? a. an increase in the price of vanilla beans (an ingredient in ice cream) b. a decrease in the sales tax on restaurant bills c. an increase in the price of chocolate ice cream d. a decrease in the price of milk (an ingredient in ice cream) e. an increase in the price of hot fudge

d. a decrease in the price of milk (an ingredient in ice cream)

The effect of a decrease in the price of personal computers, other things constant, is likely to be best represented by which of the following? a. a leftward shift of the demand curve b. a movement leftward along the demand curve c. a rightward shift of the demand curve d. a movement rightward along the demand curve e. a rightward shift of the supply curve

d. a movement rightward along the demand curve

If we say that demand has increased, we mean that there has been a. a leftward movement along the demand curve b. a rightward movement along the demand curve c. a leftward shift of the demand curve d. a rightward shift of the demand curve e. an increase in the slope of the demand curve

d. a rightward shift of the demand curve

The demand for a product is the amounts that a. buyers purchase in the market b. buyers are willing to purchase at a given price c. sellers are willing to sell at a particular price d. buyers are willing and able to purchase at alternative prices e. buyers are able to purchase at a specific price

d. buyers are willing and able to purchase at alternative prices

Two events occur simultaneously in the market for automobiles: (1) an improvement in assembly line technology and (2) the economy enters a recession (which decreases consumers' income). An economist would predict with certainty that a. equilibrium quantity will rise b. equilibrium quantity will fall c. equilibrium price will rise d. equilibrium price will fall e. the equilibrium price will remain the same

d. equilibrium price will fall

The income effect of a decrease in the price of legal services (a normal good) is a(n) a. decrease in the demand for legal services b. decrease in the quantity demanded of legal services c. increase in the demand for legal services d. increase in the quantity demanded of legal services e. new demand curve because everything else is no longer constant

d. increase in the quantity demanded of legal services

If demand increases and supply decreases, quantity will a. always increase b. always decrease c. increase only if supply decreases more than demand increases d. increase only if supply decreases less than demand increases e. decrease only if supply decreases less than demand increases

d. increase only if supply decreases less than demand increases

If the demand for bicycles increases, a. the quantity demanded decreases b. equilibrium price increases and equilibrium quantity decreases c. equilibrium price decreases and equilibrium quantity increases d. quantity supplied increases e. quantity supplied decreases

d. quantity supplied increases

A rightward shift of a supply curve a. represents a decrease in supply b. might be caused by an increase in demand c. might be caused by a price ceiling d. would cause an excess quantity supplied at the previous equilibrium price e. might be caused by a decrease in demand

d. would cause an excess quantity supplied at the previous equilibrium price

A decrease in demand will result in a(n) a. increase in equilibrium price and quantity b. decrease in equilibrium price and quantity c. decrease in equilibrium price and an increase in equilibrium quantity d. increase in equilibrium price and a decrease in equilibrium quantity e. change in equilibrium price and quantity only if supply changes too

decrease in equilibrium price and quantity

A surplus of shoes will cause a. a decrease in the supply of shoes b. a decrease in the demand for shoes c. both a decrease in the supply of shoes and an increase in the demand for shoes d. a decrease in the price of shoes, through a shift of either the supply curve or the demand curve e. a decrease in the price of shoes

e. a decrease in the price of shoes