Quiz 2

Refer to Table 4-6. Which combination would produce a decrease in equilibrium quantity and an indeterminate change in equilibrium price? A B C D

D

If scientists discover that steamed milk, which is used to make lattés, prevents heart attacks, what would happen to the equilibrium price and quantity of lattés? a. Both the equilibrium price and quantity would increase. b. Both the equilibrium price and quantity would decrease. c. The equilibrium price would increase, and the equilibrium quantity would decrease. d. The equilibrium price would decrease, and the equilibrium quantity would increase.

a. Both the equilibrium price and quantity would increase.

Suppose the incomes of buyers in a market for a particular normal good decrease and there is also a reduction in input prices. What would we expect to occur in this market? a. Equilibrium price would decrease, but the impact on equilibrium quantity would be ambiguous. b. Equilibrium price would increase, but the impact on equilibrium quantity would be ambiguous. c. Equilibrium quantity would decrease, but the impact on equilibrium price would be ambiguous. d. Equilibrium quantity would increase, but the impact on equilibrium price would be ambiguous.

a. Equilibrium price would decrease, but the impact on equilibrium quantity would be ambiguous.

If a surplus exists in a market, then we know that the actual price is a. above the equilibrium price, and quantity supplied is greater than quantity demanded. b. above the equilibrium price, and quantity demanded is greater than quantity supplied. c. below the equilibrium price, and quantity demanded is greater than quantity supplied. d. below the equilibrium price, and quantity supplied is greater than quantity demanded.

a. above the equilibrium price, and quantity supplied is greater than quantity demanded.

In markets, prices move toward equilibrium because of: a. incentives and their impact the actions of buyers and sellers. b. government regulations placed on market participants. c. increased competition among sellers. d. buyers' ability to affect market outcomes.

a. incentives and their impact the actions of buyers and sellers.

Refer to Figure 4-16. In this market, equilibrium price and quantity, respectively, are a. $10 and 30 units. b. $10 and 50 units. c. $10 and 70 units. d. $4 and 50 units.

b. $10 and 50 units.

If consumers view cappuccinos and lattés as substitutes, what would happen to the equilibrium price and quantity of lattés if the price of cappuccinos falls? a. Both the equilibrium price and quantity would increase. b. Both the equilibrium price and quantity would decrease. c. The equilibrium price would increase, and the equilibrium quantity would decrease. d. The equilibrium price would decrease, and the equilibrium quantity would increase.

b. Both the equilibrium price and quantity would decrease.

A country club usually only allows members to purchase tickets for its celebrity golf tournament, but the club is considering allowing non-members to purchase tickets this year. The demand and supply schedules are as follows: Refer to Table 4-8. If both members and non-members are allowed to purchase tickets to this year's celebrity golf tournament and the country club sets the ticket price at $30, then there will be a. a shortage of 300 tickets. b. a surplus of 300 tickets. c. 600 tickets sold. d. 600 tickets unsold.

b. a surplus of 300 tickets.

Refer to Figure 4-10. Which of the following would cause the supply curve to shift from Supply B to Supply A in the market for tennis racquets? a. a decrease in the price of tennis balls b. an expectation by firms that the price of tennis racquets will increase in the very near future c. a decrease in the price of tennis racquet strings d. an improvement in technology that allows firms to use less labor in the production of tennis racquets

b. an expectation by firms that the price of tennis racquets will increase in the very near future

A higher price for batteries would result in a(n) a. increase in the demand for flashlights. b. decrease in the demand for flashlights. c. increase in the demand for batteries. d. decrease in the demand for batteries.

b. decrease in the demand for flashlights.

Refer to Figure 4-8. The movement from Point A to Point B represents a(n): a. increase in the price. b. decrease in the quantity supplied. c. shift in the supply curve. d. both a) and b) are correct.

b. decrease in the quantity supplied.

Which of the following events must cause equilibrium quantity to fall? a. demand increases and supply decreases b. demand and supply both decrease c. demand decreases and supply increases d. demand and supply both increase

b. demand and supply both decrease

At the equilibrium price, the quantity of the good that buyers are willing and able to buy: a. is greater than the quantity that sellers are willing and able to sell. b. exactly equals the quantity that sellers are willing and able to sell. c. is less than the quantity that sellers are willing and able to sell. d. either a) or c) could be correct.

b. exactly equals the quantity that sellers are willing and able to sell.

When a shortage exists in a market, sellers: a. raise price, which increases quantity demanded and decreases quantity supplied until the shortage is eliminated. b. raise price, which decreases quantity demanded and increases quantity supplied until the shortage is eliminated. c. lower price, which increases quantity demanded and decreases quantity supplied until the shortage is eliminated. d. lower price, which decreases quantity demanded and increases quantity supplied until the shortage is eliminated.

b. raise price, which decreases quantity demanded and increases quantity supplied until the shortage is eliminated.

Refer to Figure 4-5. Suppose that the federal government is concerned about obesity in the United States. Congress is considering two plans. One would require "junk food" producers to include warning labels on all junk food. The other would impose a tax on all products considered to be junk food. We could illustrate the tax as producing a movement from: a. Point A to Point B in Panel 1. b. Point B to Point A in Panel 1. c. Point A to Point C in Panel 2. d. Point C to Point A in Panel 2.

c. Point A to Point C in Panel 2.

Refer to Figure 4-10. Which of the following would cause the supply curve to shift from Supply A to Supply C in the market for winter coats? a. an increase in the price of winter coats b. a decrease in the number of firms selling winter coats c. a decrease in the price of zippers and snaps d. a decrease in the price of winter hats and gloves

c. a decrease in the price of zippers and snaps

Refer to Figure 4-10. Which of the following would cause the supply curve to shift from Supply B to Supply A in the market for disposable ballpoint pens? a. a decrease in the price of disposable ballpoint pens b. an increase in the price of fountain pens c. an increase in the price of ink d. an improvement in technology that allows firms to use less labor in the production of disposable ballpoint pens

c. an increase in the price of ink

Good X and good Y are substitutes. If the price of good Y increases, then the a. demand for good X will decrease. b. quantity demanded of good X will decrease. c. demand for good X will increase. d. quantity demanded of good X will increase.

c. demand for good X will increase.

When the price of hot dogs changes, the demand curve for hot dogs: a. shifts because the price of hot dogs is measured on the vertical axis of the graph. b. shifts because the quantity demanded of hot dogs is measured on the horizontal axis of the graph. c. does not shift because the price of hot dogs is measured on the vertical axis of the graph. d. does not shift because the price of hot dogs is measured on the horizontal axis of the graph.

c. does not shift because the price of hot dogs is measured on the vertical axis of the graph.

A shortage exists in a market if: a. there is an excess supply of the good. b. quantity supplied exceeds quantity demanded. c. the current price is below its equilibrium price. d. All of the above are correct.

c. the current price is below its equilibrium price.

Refer to Figure 4-4. Which of the following would cause the demand curve to shift from Demand A to Demand B in the market for oranges in the United States? a. a freeze in Florida b. a technological advance that allows oranges to ripen faster c. a decrease in the price of apples d. an announcement by the FDA that oranges prevent heart disease

d. an announcement by the FDA that oranges prevent heart disease

A decrease in the price of a good will a. increase supply. b. decrease supply. c. increase quantity supplied. d. decrease quantity supplied.

d. decrease quantity supplied.

Equilibrium quantity must decrease when demand: a. increases and supply does not change, when demand does not change and supply decreases, and when both demand and supply decrease. b. increases and supply does not change, when demand does not change and supply increases, and when both demand and supply decrease. c. decreases and supply does not change, when demand does not change and supply increases, and when both demand and supply decrease. d. decreases and supply does not change, when demand does not change and supply decreases, and when both demand and supply decrease.

d. decreases and supply does not change, when demand does not change and supply decreases, and when both demand and supply decrease.

The law of demand states that, other things equal, when the price of a good a. falls, the demand for the good rises. b. rises, the quantity demanded of the good rises. c. rises, the demand for the good falls. d. falls, the quantity demanded of the good rises.

d. falls, the quantity demanded of the good rises

When the price of a good or service changes, a. the demand curve shifts in the opposite direction. b. the supply curve shifts in the opposite direction. c. the supply curve shifts in the same direction. d. there is a movement along a given supply curve.

d. there is a movement along a given supply curve.