Chapter 3
The socially optimal quantity is that level for which the marginal cost and marginal benefit of the good are the same.
True
If bread and peanut butter are complements, then a decrease in the price of peanut butter will lead to:
an increase the price of bread., an increase in the amount of bread that people buy.
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 demand for bread increases when the price of peanut butter falls, then this suggests that bread and peanut butter are _____.
complements
If the demand for tea increases when the price of coffee goes up, then this suggests that coffee and tea are:
substitutes.
Given the figure on the right, if the government imposes a price ceiling of $2 per gallon on milk, the quantity of milk supplied will equal
3,000 gallons per day.
A movement along the demand curve is considered ______.
a change in the quantity demanded
An increase in the supply of corn (a rightward shift in the supply curve) could be the result of _____ in the price of an input to the production of corn.
a decrease
If people who currently own homes learn that home prices are likely to go up in their area next year, then this should lead to ____ in the current supply of homes.
a decrease
If torrential rains wipe out this year's corn crop, this should lead to _____ in the supply of corn.
a decrease
A supply curve is ______.
a schedule or graph showing the quantity of a good that sellers wish to sell at each price
If Ramen Noodles are an inferior good, then a fall in income should lead to _____ in the demand for Ramen Noodles.
an increase in
Given the figure on the right, if the government of Pleasantville makes it unlawful to charge more than $500 per month for a one-bedroom apartment, then this would result in an excess
demand of 20,000 apartments per month.
Suppose that as the price of coffee increases, consumers purchase less coffee in part because they can no longer afford to buy as much coffee as they used to. This reduction in the quantity of coffee demanded is known as the _____ of a price change.
income effect
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
A change in demand is represented by a ______.
shift in the entire demand curve
Suppose that as the price of movie tickets increases, people go to the movies less often and instead rent movies at home. The resulting reduction in the quantity of movies demanded is known as the _____ of a price change.
substitution effect
A schedule or graph showing the quantity of a good that sellers wish to sell at each price is known as a _____.
supply curve
The socially optimal quantity is:
the quantity of a good that maximizes the total economic surplus that results from producing and consuming the good.
In the figure displayed, when the price of milk is $3 per gallon
the quantity supplied equals the quantity demanded., the market is in equilibrium.
The change in the quantity demanded of a good that results because buyers switch to or from substitutes when the price of the good changes is known as the _____ of a price change.
substitution effect
