Microeconomics Test 1 Review (Hw 2)

15. Which of the following is evidence of a shortage of walnuts? A) Firms lower the price of walnuts. B) The price of cashews is lowered in order to make up for the walnut shortage. C) The equilibrium price of walnuts falls due to a decrease in demand. D) The quantity of walnuts demanded is greater than the quantity supplied.

The quantity of walnuts demanded is greater than the quantity supplied.

A shortage occurs when the market price is lower than the equilibrium price.

True

In response to a surplus the market price of a good will fall; as the price falls, the quantity demanded will increase and quantity supplied will decrease until equilibrium is reached.

True

Suppose that when the price of hamburgers decreases, the Ruiz family increases their purchases of ketchup. To the Ruiz family, A) hamburgers and ketchup are complements. B) hamburgers and ketchup and substitutes. C) hamburgers and ketchup are normal goods. D) hamburgers are normal goods and ketchup is an inferior good.

hamburgers and ketchup are complements.

When the price of a good falls, consumers buy a larger quantity because of the ________ effect and the ________ effect. A) substitution; income B) normal; inferior C) substitute; complement; D) supply; demand

substitution; income

A change in all of the following variables will change the market demand for a product except A) the price of the product. B) population and demographics. C) income. D) tastes.

the price of the product.

(see image on hw 2) If the price is $10, A) there would be a surplus of 600 units. B) there would be a shortage of 600 units. C) there would be a surplus of 200 units. D) there would be a shortage of 200 units.

there would be a shortage of 600 units.

13. Refer to Figure 1-1. At a price of $10, how many units will be sold? A) 200 B) 400 C) 600 D) 800

200

2. What is the difference between an "increase in demand" and an "increase in quantity demanded"? A) There is no difference between the two terms; they both refer to a shift of the demand curve. B) An "increase in demand" is represented by a rightward shift of the demand curve while an "increase in quantity demanded" is represented by a movement along a given demand curve. C) There is no difference between the two terms; they both refer to a movement downward along a given demand curve. D) An "increase in demand" is represented by a movement along a given demand curve, while an "increase in quantity demanded" is represented by a rightward shift of the demand curve.

An "increase in demand" is represented by a rightward shift of the demand curve while an "increase in quantity demanded" is represented by a movement along a given demand curve.

A normal good is a good for which the demand increases as income decreases, holding everything else constant.

False

An increase in the price of inputs will cause the supply curve for a product to shift to the right.

False

If consumers believe the price of LCD televisions will decrease in the future, this will cause the demand for LCD televisions to increase now.

False

1. If the Apple Watch and the Samsung Gear S2 are considered substitutes, then, other things equal, an increase in the price of the Apple Watch will A) decrease the demand for the Apple Watch. B) increase the demand for the Gear S2. C) increase the quantity demanded for the Gear S2. D) increase the quantity demanded for the Apple Watch.

Increase the demand for the Gear S2

Technological advances have resulted in lower prices for digital cameras. What is the impact of this on the market for traditional (non-digital) cameras? A) The demand curve for traditional cameras shifts to the right. B) The supply curve for traditional cameras shifts to the right. C) The demand curve for traditional cameras shifts to the left. D) The supply curve for traditional cameras shifts to the left.

The demand curve for traditional cameras shifts to the left.

14. Refer to Figure the image. If the current market price is $10, the market will achieve equilibrium by A) a price increase, increasing the supply and decreasing the demand. B) a price decrease, decreasing the supply and increasing the demand. C) a price decrease, decreasing the quantity supplied and increasing the quantity demanded. D) a price increase, increasing the quantity supplied and decreasing the quantity demanded.

a price increase, increasing the quantity supplied and decreasing the quantity demanded.

In 2004, hurricanes damaged a large portion of Florida's orange crop. As a result of this, many orange growers were not able to supply fruit to the market. If, following the hurricane, the price remained at its pre-hurricane level, we would expect to see A) a surplus of oranges. B) the quantity demanded equal to the quantity supplied. C) a shortage of oranges. D) an increase in the demand for oranges.

a shortage of oranges.

If an increase in income leads to a decrease in the demand for popcorn, then popcorn is A) an inferior good. B) a neutral good. C) a necessity. D) a normal good.

an inferior good.

If a firm has an incentive to increase supply now and decrease supply in the future, then the firm expects that the A) price of its product will be lower in the future than it is today. B) price of its product will be higher in the future than it is today. C) price of inputs will be lower in the future than they are today. D) demand for the product will be lower in the future than it is today.

price of its product will be lower in the future than it is today.

3. By drawing a demand curve with ________ on the vertical axis and ________ on the horizontal axis, economists assume that the most important determinant of the demand for a good is the ________ of the good. A) quantity; price; quantity B) price; quantity; quantity C) price; quantity; price D) quantity; price; price

price; quantity; price

One would speak of a change in the quantity of a good supplied, rather than a change in supply, if A) supplier expectations about future prices change. B) the price of the good changes. C) the cost of producing the good changes. D) prices of substitutes in production change.

the price of the good changes.