Chapter 3 Micro Questions

According to the law of demand, a. there is a positive relationship between quantity demanded and price b. as the price rises, demand will shift to the left c. there is a negative relationship between quantity demanded and price d. as the price rises, demand will shift to the right e. as the price rises, consumers will continue to purchase the same quantity of the good

C

An increase in quantity supplied can be caused by a(n) a. decrease in quantity demanded b. rise in resource input prices c. increase in price d. decrease in the number of firms in the market e. tax levied on the producer

C

If two goods are often consumed together, they are a. substitute goods b. inferior goods c. complementary goods d. normal goods e. unrelated goods

C

In a market system, prices are determined by a. corporate executives b. government bureaucrats c. supply and demand d. total market demand e. production costs

C

Which of the following sets of goods are most likely to be complementary goods? a. shoes and pizza b. automobiles and computers c. baseballs and baseball gloves d. football tickets and baseball tickets e. Dell and Gateway computers

C

A substitute good is one that a. appeals to a wide spectrum of consumers b. is used together with another good c. is exchanged on the black market d. is produced by the same firm as another good e. can be used in place of another good, fulfilling the same basic purpose

E

Because price and quantity demanded are inversely related, a. the demand curve is usually upward-sloping b. buyers purchase more of the good as the price rises c. the supply curve must be rising d. price and quantity supplied must be positively related e. the demand curve is usually downward-sloping

E

Which of the following could lead to a rightward shift of the demand curve for a good? a. a decrease in the price of a substitute good b. an increase in the price of a complementary good c. a decrease in the price of the good, assuming it is a normal good d. an increase in the price of the good, assuming it is an inferior good e. expectations that the price of the good will rise in the future

E

Which of the following is assumed constant along a given supply curve for pistachio ice cream? a. the price of pistachios and the price of pistachio ice cream b. the price of pistachio ice cream and the price of alternate flavors of ice cream c. the prices of alternate goods, but not the prices of inputs d. all variables affecting supply other than the productive capacity of the industry e. all variables affecting supply other than the price of pistachio ice cream

E

Which of the following statements about markets is false? a. markets are used to allocate resources in market systems b. markets can vary in geographical size c. prices are used to allocate goods in markets d. markets are used to allocate resources in centrally-planned socialist economic systems e. supply and demand explains how prices are set in competitive markets

D

A decrease in the price of a commodity results in a(n) a. decrease in supply b. decrease in quantity demanded c. increase in demand d. decrease in quantity supplied e. increase in supply

D

If the resource prices faced by a firm rise, the result is a(n) a. decrease in supply b. increase in supply c. decrease in demand d. increase in quantity demanded e. decrease in quantity supplied

A

If the price of film increases, the demand for film processing would decrease; moreover, the equilibrium price and quantity of film processing should also decrease. a. True b. False

A

If the price of leather (an input for leather shoes) increases, the equilibrium price of leather shoes will increase and the equilibrium quantity of leather shoes will decrease. a. True b. False

A

All else constant, if butter and margarine are substitute goods, then as the price of butter rises, a. the demand for margarine will fall b. the quantity of butter demanded will fall c. the demand for butter will fall d. the demand for butter will rise e. butter and margarine will become complementary goods, provided that butter is a normal good

B

If sellers decide to sell more calculators by mass producing them and lowering the price so consumers will buy more, the supply and demand curves will both shift to the right. a. True b. False

B (??)

A decrease in both equilibrium price and quantity could be produced by a(n) a. decrease in supply, with demand constant b. increase in supply, with demand constant c. decrease in demand, with supply constant d. increase in demand, with supply constant e. improvement in technology

C

An excess supply of rice in a competitive market would indicate that a. the problem of scarcity has been solved in that market b. buyers want to purchase more rice at the current price than the sellers want to sell c. the market will not be able to approach equilibrium d. the entire supply curve must shift to the left in order to attain equilibrium e. the current price exceeds the equilibrium price

E

If the demand for baseball cards rises and the supply curve does not shift, then the price a. will rise and quantity will fall b. and quantity will rise c. will fall and quantity will rise d. and quantity will fall e. will rise, but quantity may rise or fall

B

If prices are free to rise and fall, and supply and demand cross at a positive price, quantity combination, neither excess demand nor excess supply can persist in a market. a. True b. False

A

When a market is in equilibrium, a. quantity demanded equals quantity supplied b. quantity demanded exceeds quantity supplied c. the demand curve is identical to the supply curve d. the economy must be at a point along the production possibilities frontier e. the law of demand is equivalent to the law of supply

A

When demand increases, a. consumers are willing and able to purchase more of the good at every price b. consumers are willing and able to purchase less of the good at every price c. there is a movement to the right along the demand curve d. this is referred to as a change in quantity demanded e. the price will tend to fall

A

If a good is a normal good then a. other things equal, no consumer will buy it b. a rise in income or wealth will increase the amount of the good that consumers will purchase c. a decline in income will increase the amount of it that consumers will purchase d. abnormal goods are never substituted for it e. normal consumers will always demand it

B

The law of demand states that the quantity demanded of a good and a. the price of a substitute are positively related b. its price are inversely related c. its price are positively related if it is an inferior good d. the wealth of buyers are positively related e. its price are inversely related if it is a normal good

B

The supply and demand model a. tries to include as many realistic details as possible in order to provide insights into real-world competitive markets b. uses simplifying assumptions while still providing insights into real-world competitive markets c. uses simplifying assumptions that severely limit its usefulness in practice d. is too complicated to be useful in practice e. is unable to explain price movements in most real-world competitive markets

B

Economists view shifts of supply and demand as a. unusual events that call for government intervention b. unusual events resulting from the failure of the price to fall c. normal and frequent events d. normal and frequents events that do not affect equilibrium prices e. normal and frequent events that result from government intervention

C

If Greg uses a special glue to make model planes that he sells and the price of his model planes increases, then one would expect that the equilibrium price of the special glue would _____ and the equilibrium quantity would _____. a. increase; decrease b. decrease; increase c. increase; increase d. decrease; decrease e. increase; indeterminant

C

If an improvement in production technology causes a decrease in production costs, the result is a(n) a. decrease in quantity supplied b. increase in demand c. increase in supply d. improvement is working conditions e. increase in quantity supplied

C

If steel manufacturers expected that the price of steel was going to rise in the next six months, this would a. have no change in the competitive market for steel b. lead to a decreased demand for steel c. lead to a decreased supply of steel d. increase the future demand for automobiles e. lead to a decrease in the quantity of steel supplied to the market

C

When households and businesses interact in product markets goods and services are a. not exchanged b. flowing toward businesses c. flowing toward households d. not used at all e. flowing to both businesses and households

C

Which of the following could lead to an increase in the equilibrium quantity of a good? a. a decrease in supply and a decrease in demand b. an increase in the price of an input c. an increase in demand and an increase in supply d. a decrease in demand regardless of supply e. a decrease in technology

C

Assuming the most typical shapes of the demand and supply curves, which of the following could lead to an increase in the current equilibrium price for personal computers? a. a decrease is the price of computer chips b. a decrease in buyers' incomes, assuming that computers are a normal good c. a technological improvement that reduces manufacturing costs d. expectations of a higher future price e. an increase in the price of computer software

D

Characterizing a market involves a. counting the number of demanders and measuring their quantity demanded b. counting the number of suppliers and measuring their costs c. equating the number of suppliers and the number of demanders d. deciding which market best suits the problem being analyzed e. deciding how to increase the degree of competition

D

Consider the competitive market for oil. Which of the following would result from the discovery of new oil fields that can be profitably accessed at the current price? a. both b and d b. an increase in the demand for oil c. an excess demand for oil as oil companies shift resources to developing the new fields d. an excess supply of oil if the price of oil fails to drop sufficiently e. an increase in the expected future price of oil

D

Since producers must be compensated for the rising opportunity cost that accompanies increases in output, a. the law of demand applies to most markets b. supply curves usually slope downward c. demand curves usually slope downward d. supply curves usually slope upward e. technical inefficiency would not exist in the long run

D

Suppose that today the market for lima beans is in equilibrium. Tomorrow both the supply and demand curves for lima beans will shift to the left. As a result, the equilibrium price _____ and the equilibrium quantity will _____. a. will fall; fall b. will fall; rise c. will rise; fall d. cannot be determined; fall e. cannot be determined; rise

D

An increase in demand coupled with an increase in supply results in a(n) a. increase in price and an ambiguous effect on equilibrium quantity b. increase in equilibrium quantity and a decrease in equilibrium price c. decrease in equilibrium quantity and an ambiguous effect on equilibrium price d. increase in economic rent e. ambiguous effect on equilibrium price and an increase in equilibrium quantity

E

The equilibrium price and quantity of a good, once attained, will a. change only if either supply or demand changes b. change only if both supply and demand change c. change only if supply changes d. change only if demand changes e. never change

A

If the price of new automobiles rises in the U.S. market while prices remain unchanged in foreign markets, a. foreign firms will want to export fewer automobiles to the United States b. foreign firms will want to export more automobiles to the United States c. foreign firms will not change their exports to the United States since it is a different market d. U.S. firms will want to export more automobiles to foreign markets e. U.S. firms will not change their exports to foreign markets unless foreign prices also change

B

Of the following, which is most likely to be a normal good? a. hamburger b. automobiles c. used clothing d. low-rent housing units e. macaroni and cheese

B

Of the following, which is true of the relationship between the quantity of a good supplied and its price? a. As price increases, the quantity supplied usually decreases. b. As price increases, the quantity supplied usually increases. c. As price increases, supply increases. d. When demand increases, so will supply. e. They always meet at the point of equilibrium in the market.

B

When individuals come together to buy and sell goods and services, they form a(n) a. economy b. market c. production possibilities frontier d. supply curve e. demand curve

B

The quantity demanded of a good a. is the amount that would be purchased with an unlimited income b. is the amount that would be demanded even if income were zero c. is subject to the buyer's income constraints d. is a fixed amount unaffected by the buyer's circumstances e. must match the amount actually purchased in the market

C

A decrease in equilibrium price and an increase in equilibrium quantity could be brought about by a(n) a. increase in demand b. decrease in demand c. increase in resource prices d. improvement in production technology e. favorable shift in tastes and preferences

D

Which of the following would increase the amount of an inferior good that buyers would like to purchase? a. an increase in buyers' incomes b. an increase in the price of a complement c. a decrease in the price of a substitute d. a decrease in buyers' incomes e. a decrease in its expected future price

D

Evan left a job in which he was earning $75,000 a year for one he liked better but pays only $50,000 a year. Around the same time as the job switch, Evan needed to buy a new car. Had he kept his old job he would have bought a new car but instead he was forced to buy a used car. Therefore a. used cars are normal goods for Evan b. new cars are inferior goods for Evan c. the supply curve for new cars shifted to the left d. new and used cars are complements e. used cars are inferior goods for Evan

E

The amount of a commodity that buyers in the market would like to purchase at a particular price is a. equilibrium b. quantity supplied c. quantity produced d. infinite e. quantity demanded

E

When households and businesses interact in resource markets money a. is not exchanged b. is flowing toward businesses c. is flowing toward households d. is not used at all e. is flowing to both businesses and households

C

If the demand for new automobiles falls when income falls, automobiles are said to be normal goods. a. True b. False

A

If the price of orange juice rises, the demand for grapefruit juice will a. increase because the two goods are substitutes b. increase because it is a complement c. decrease because the two goods are substitutes d. decrease because the two goods are complements e. not change unless the price of grapefruit juice also changes

A

Suppose that a large dairy farmer is able to raise the market price of milk by withholding milk supply from the market. In this instance, a. the milk market is perfectly competitive b. buyers will decrease their demand for milk c. buyers will increase their demand for milk d. the milk market is imperfectly competitive e. the milk market will collapse in the long run

D

The demand curve for apples slopes downward a. because supply and demand are equal in equilibrium b. since producers supply more when consumers demand more c. because people are assumed to be basically greedy d. because the law of demand holds in the market for apples e. because apples are preferred to all other goods

D

With other things constant, the supply schedule for a particular good indicates the quantities a. actually sold with different productive capacities b. supplied with different productive capacities c. actually sold at various prices of the good d. supplied at various prices of the good e. supplied at various prices of the good and with various productive capacities

D

In a circular flow diagram of the economy, households and businesses interact a. in both product markets and resource markets b. in neither product markets and resource markets c. in product markets but not resource markets d. in resource markets but not product markets e. very rarely

A

The demand curve for a particular good indicates the various quantities a. demanded at various prices, other things equal b. demanded at different income levels, other things equal c. actually purchased at various prices, other things equal d. actually purchased at different income levels, other things equal e. demanded at various prices and income levels, other things equal

A

The economic model of demand a. explains the consequences of a change in buyers' tastes, but not the causes b. explains the causes of a change in buyers' tastes, but not the consequences c. explains both the causes and consequences of a change in buyers' tastes d. explains neither the causes nor the consequences of a change in buyers' tastes e. ignores buyers' tastes because they are too unstable to include in the model

A

Which of the following statements about demand is correct? a. A change in the price of bicycles will not lead to a shift of the demand curve for bicycles. b. A change in the price of automobiles will lead to a shift of the demand curve for motorcycles. c. A change in demand is equivalent to a movement along a given demand curve. d. When price falls, so does the quantity demanded. e. When the demand curve shifts to the right, so will the supply curve.

A

Which of the following would cause a leftward shift of the supply curve for computers? a. an increase in the price of printed circuit boards used to build computers b. a decrease in the price of electricity c. an increase in incomes of consumers d. a decrease in the price of computers e. a decrease in the size of the population

A

Which of the following would shift the demand curve for the normal good regular vanilla ice cream to the left? a. reports of health risks as a result of eating vanilla ice cream b. an increase in the price of frozen yogurt c. a decrease in the price of hot fudge sauce d. an increase in the price of regular vanilla ice cream e. an increase in buyers' incomes

A

In a perfectly competitive market, a. there can be few or many buyers and sellers b. the price is driven upward when suppliers hold back on goods and services c. each participant is too small to affect the market price d. government intervention is needed to ensure that prices are fair for consumers e. resources are allocated by a central authority

C

A decrease in demand and an increase in supply results in a(n) a. decrease in equilibrium price and an ambiguous effect on equilibrium quantity b. increase in equilibrium price and an ambiguous effect on equilibrium quantity c. ambiguous effect on equilibrium price and an increase in equilibrium quantity d. ambiguous effect on equilibrium price and an decrease in equilibrium quantity e. increase in equilibrium price and a decrease in equilibrium quantity

A

An increase in demand coupled with a decrease in supply results in a(n) a. increase in equilibrium price and an ambiguous effect on equilibrium quantity b. increase in equilibrium quantity and a decrease in equilibrium price c. decrease in equilibrium quantity and an ambiguous effect on equilibrium price d. surplus e. decrease in the equilibrium price and quantity

A

An increase in equilibrium price and a decrease in equilibrium quantity could be caused by a(n) a. increase in resource prices b. increase in demand c. increase in supply d. favorable shift in tastes and preferences e. improvement in production technology

A

Assume the most typical shapes for the demand and supply in a competitive market. Suppose that demand falls and supply increases. Which of the following statements is correct? a. The equilibrium price will fall; the equilibrium quantity may rise or fall. b. The equilibrium price will rise; the equilibrium quantity may rise or fall. c. The equilibrium quantity will fall; the equilibrium price may rise or fall. d. The equilibrium quantity will rise; the equilibrium price may rise or fall. e. The equilibrium price will fall; the equilibrium quantity will not change.

A

Given the demand curve for laptop computers, if the government began to encourage households to own a computer by providing a subsidy to each family that buys one, a. both the equilibrium price and quantity of laptops will increase b. both the equilibrium price and quantity of laptops will decrease c. the equilibrium price of laptops will increase but the equilibrium quantity will decrease d. the equilibrium price of laptops will decrease but the equilibrium quantity will increase e. subsidies to households have no effect on either the supply or demand

A

If both the demand and supply curves for computers shift to the right, the price of computers may rise, fall, or remain unchanged. a. True b. False

A

In a competitive market, excess demand for a good exists whenever a. the current price is below the equilibrium price b. resources are scarce c. the quantity supplied at the current price exceeds the quantity demanded d. sellers are subject to the constraints imposed by input prices and technology e. the current price is above the equilibrium price

A

Market equilibrium occurs at that price for which a. quantity supplied equals quantity demanded b. cost equals the wages to labor c. the surplus quantity drives increased demand d. quantity supplied exceeds quantity demanded e. quantity supplied is less than quantity demanded

A

Oil and Natural Gas can each be used as a source of energy and are, for many purposes interchangable. Which of the following best explains the increase in the price of natural gas that accompanied the increase in the price of oil during the 1990-1991 Persian Gulf War? a. Increased oil prices raised demand for natural gas, a substitute good. b. Increased oil prices raised the quantity demanded of natural gas by movement along the natural gas demand curve. c. Increased oil prices reduced supply of natural gas, a substitute good. d. Increased oil prices reduced supply of natural gas, an alternate good. e. Increased oil prices raised supply of natural gas, a substitute good.

A

One of the three Key Steps of economic analysis is a. describing the conditions necessary for equilibrium and a method for determining that equilibrium b. determining who are the suppliers and a method for counting the number of suppliers c. determining who are the demanders and a method for counting the number of demanders d. pairing up each demander with a particular supplier e. pairing up each suppliers with a particular demander

A

A decrease in demand, with supply constant, results in a(n) a. increase in equilibrium price and a decrease in equilibrium quantity b. decrease in equilibrium price and a decrease in equilibrium quantity c. increase in equilibrium price and an increase in equilibrium quantity d. increase in equilibrium price and an ambiguous effect on equilibrium quantity e. decrease in supply

B

A speculator is someone who a. buys a good for immediate consumption b. buys a good for a low price, hoping to sell it in the future for a higher price c. buys a good for one price and hopes to sell it for a lower price in the future d. sells a good for a lower price than its original purchase price e. sells all of his or her merchandise and then exits the market

B

At the market equilibrium a. quantity exceeds price b. excess demand equals excess supply (and both are zero) c. price and quantity are equal d. each seller produces at full capacity e. everyone who is represented along the demand curve buys the good

B

If the market for a good is initially in equilibrium and there is a rightward shift of the demand curve, then a. the equilibrium price will fall b. there will be a rightward movement along the supply curve c. the supply curve will also shift to the right d. the supply curve will shift to the left e. the demand curve will shift back as consumers react to the higher equilibrium price

B

The rapid rise in oil prices during 2007-2008 can be explained by noting the fact that a. the supply of oil increased more rapidly than the demand for oil increased b. the demand for oil increased more rapidly than the supply for oil increased c. the demand for oil decreased at the same time that the supply of oil increased d. the quantity demanded of oil increased more rapidly than the quantity supplied of oil increased e. the quantity supplied of oil increased more rapidly than the quantity demanded of oil increased

B

The three-step procedure for economic analysis a. works better in macroeconomics than in microeconomics b. begins with characterizing the market c. helps governments decide how to change the market equilibrium d. focuses on goals and constraints e. is used only in microeconomics

B

Which of the following would be the best example of a spot market? a. the market for fine art b. the market for bananas c. the market for stocks and bonds d. the market for baseball cards

B

An increase in supply could be caused by a(n) a. increase in price b. government-imposed price ceiling c. decrease in resource prices d. decrease in consumer incomes e. unfavorable shift in tastes and preferences

C

Assume the typical shapes of the demand and supply curves. If both demand and supply increase in a competitive market, the equilibrium price will a. always rise b. always fall c. rise if demand increases more than supply increases d. fall if demand increases more than supply increases e. remain unchanged

C

Defining a market involves deciding how to view a. equilibrium supply and demand b. normative economic analysis c. the thing being traded, the decision makers, and the trading environment d. suppliers, demanders, shortages, and surpluses e. excess demand and excess supply

C

If the same dairy can produce either whole milk or skim milk, an increase in the profitability of whole milk results in a(n) a. decrease in the quantity supplied of whole milk b. increase in the supply of whole milk c. decrease in the supply of skim milk d. increase in the supply of skim milk e. decrease in the quantity supplied of skim milk

C

If the supply curve does not shift, an increase in demand results in a(n) a. increase in equilibrium price and a decrease in equilibrium quantity b. decrease in equilibrium price and a decrease in equilibrium quantity c. increase in equilibrium price and an increase in equilibrium quantity d. decrease in equilibrium price and an increase in equilibrium quantity e. increase in supply

C

The most likely reason that oil prices spiked during 2007-2008 was because a. suppliers drastically cut back on production b. speculators heavily invested in the futures market c. there was an increase in demand due to an increase in usage d. there was an increase in demand as buyers began to hoard oil for future use e. suppliers increased their production to match the increase in demand

C

Which of the following would shift the entire supply curve for electricity to the left? a. a decrease in the price per unit of electricity b. a decrease in the price of coal used to generate electricity c. new EPA regulations that force the closing of the worst polluting coal-burning power plants d. a decrease in the price of alternative forms of energy e. a technological improvement that reduces the cost of producing electricity

C

A decrease in demand coupled with a decrease in supply results in a(n) a. increase in equilibrium price and a decrease in equilibrium quantity b. decrease in equilibrium price and a decrease in equilibrium quantity c. increase in equilibrium price and a increase in equilibrium quantity d. ambiguous effect of equilibrium price and a decrease in equilibrium quantity e. ambiguous effect on equilibrium price and a increase in equilibrium quantity

D

All of the following would be examples of a spot markets except one. Which would not be a spot market? a. The market for milk b. The market for beauty salon services c. The market for higher education d. The market for basketball cards e. The market for used cars

D

An increase in both equilibrium price and quantity could be produced by a(n) a. decrease in supply, with demand constant b. increase in supply, with demand constant c. decrease in demand, with supply constant d. increase in demand, with supply constant e. rise in resource prices

D

An increase in demand causes a. a surplus b. excess supply c. an increase in supply d. an increase in equilibrium price and equilibrium quantity e. an improvement in technology

D

An increase in supply results in a(n) a. increase in demand b. decrease in equilibrium quantity and an increase in equilibrium price c. decrease in equilibrium quantity and a decrease in equilibrium price d. decrease in equilibrium price and an increase in equilibrium quantity e. unfavorable shift in tastes and preferences

D

Excess demand occurs when a. the actual price is greater than the equilibrium price b. equilibrium is undefined c. consumer wants are unlimited d. the actual price is less than the equilibrium price e. the market is in equilibrium

D

If the supply of coffee falls due to bad weather conditions in coffee-exporting countries, then the a. price and quantity will rise b. price and quantity will fall c. price will fall and quantity will rise d. price will rise and quantity will fall e. quantity will fall, but price may rise or fall

D

In a competitive market, when price is below the equilibrium level, the price will be driven upward due to a. excess supply b. government intervention c. competition among suppliers d. excess demand e. technical inefficiency

D

Which of the following is the best definition of a spot market? a. A market in which a good is bought or sold with the idea that the price will increase in the future b. A market in which a good is bought or sold with the hope that the price will decrease in the future c. A market in which prices do not fluctuate up or down very easily d. A market in which a good is bought or sold for immediate delivery or consumption e. A market in which the good being traded is used to remove spots on clothes

D

A decrease in supply results in a(n) a. decrease in demand b. increase in equilibrium quantity and a decrease in equilibrium price c. decrease in equilibrium quantity and a decrease in equilibrium price d. increase in demand e. increase in equilibrium price and a decrease in equilibrium quantity

E

If there is an increase in the demand for automobiles, and at the same time auto workers receive a substantial raise, what will happen to equilibrium price and quantity in the automobile market? a. Price and quantity will rise. b. Price and quantity will fall. c. Price will rise; quantity will fall. d. Quantity will rise; price change cannot be determined. e. Price will rise; quantity change cannot be determined.

E

Which of the following would lead to a change in both the quantity of a good buyers wish to purchase and in the quantity sellers wish to sell? a. a change in the price of a substitute good b. a change in buyers' incomes c. a change in the price of a key input d. a technological improvement e. a change in the expected future price of the good

E

Income is to wealth as a. hours are to minutes b. inches are to feet c. periods are to sentences d. demand is to quantity demanded e. learning is to knowledge

E

"As income rises, the demand for most goods also rises." This statement a. is inconsistent with the law of demand b. suggests that many goods are inferior goods c. shows that the quantity demanded is inversely related to price d. suggests that most goods are normal goods e. does not apply to goods traded in competitive markets

D

"Supply curves are upward sloping" is a graphical way of saying a. supply equals demand b. price and quantity supplied are inversely related c. price and quantity demanded are directly related d. price and quantity supplied are directly related e. price and quantity demanded are inversely related

D

A decrease in the price of a particular good, with all other variables constant, causes a. a shift to a different demand schedule with higher quantities demanded b. a shift to a different demand schedule with lower quantities demanded c. a movement along a given demand curve to a lower quantity demanded d. a movement along a given demand curve to a higher quantity demanded e. no movement along a given demand curve unless supply also changes

D

The law of demand says that a. the customer is always right b. quantity supplied equals quantity demanded c. price and quantity supplied are inversely related d. price and quantity demanded are inversely related e. income and quantity demanded are directly related

D

Complementary goods a. are usually used in conjunction with each other b. are usually used in place of one another c. do not adhere to the law of demand d. are goods whose demand rises as incomes rise e. are goods whose demand falls as wealth falls

A

If a supply curve shifts rightward along a downward sloping demand curve a. the quantity supplied will increase b. the quantity supplied will decrease c. it makes no sense to talk about a change in quantity supplied d. the quantity demanded will decrease e. the price will increase

A

Supply curves usually slope upward because producers face increasing opportunity costs when increasing output. a. True b. False

A

The amount of a good or service that buyers would be willing and able to purchase at a specific price is known as a. quantity demanded b. demand c. supply d. quantity supplied e. opportunity cost

A

The law of demand says that as the price of a good rises, the quantity demanded of the good tends to fall. a. True b. False

A

A good is said to be a normal good when a. decreases in income lead to an increase in demand for the good b. decreases in income lead to a decrease in demand for the good c. increases in income lead to a decrease in demand for the good d. increases in price lead to a decrease in the quantity demanded of the good e. increases in price lead to a decrease in demand for the good

B

Bread and butter are complements. A decrease in the price of bread results in a(n) a. decrease in the supply of break b. increase in the demand for butter c. increase in the demand for bread d. increase in resource prices e. violation of the law of demand

B

What do supply and demand curves have in common? a. They both usually slope upward. b. They both show a relationship between quantity and price. c. They both usually slope downward. d. They can both shift in response to changes in income or wealth. e. Neither of them is influenced by the size of the population.

B

When households and businesses interact in product markets resources are a. not exchanged b. flowing toward businesses c. flowing toward households d. not used at all e. flowing to both businesses and households

B

Which of the following statements is correct? a. The demand curve typically slopes upward; the supply curve typically slopes downward. b. The demand curve typically slopes downward; the supply curve typically slopes upward. c. Both the demand and supply curves typically slope downward. d. Both the demand and supply curve typically slope upward. e. The demand curve is typically vertical; the supply curve is typically horizontal.

B

If the price of jelly (a complement with peanut butter) decreases, both the demand and supply curves of peanut butter will shift rightward. a. True b. False

B (since they are substitutes, the demand and supply curves for peanut butter will shift leftward)

A group of buyers and sellers with the potential to trade with each other is known as a(n) a. trading bloc b. cartel c. market d. industry e. sector

C

An increase in the price of a good results in a(n) a. decrease in demand b. increase in demand c. increase in quantity demanded d. decrease in quantity demanded e. increase in supply

D

Each point along the market demand curve shows a. the quantity of the good that firms would be willing and able to supply at a specific price b. the relationship between the price of the good and total quantity demanded at a series of prices c. the opportunity cost of supplying a given quantity of goods to the market d. the quantity of the good that consumers would be willing and able to purchase at a specific price e. how population changes affect the quantity demanded at a specific price

D

Holding everything else constant, as the price of natural gas rises, selling natural gas becomes a. more profitable, and the quantity supplied falls b. less profitable, and the quantity supplied rises c. less profitable, and the quantity supplied falls d. more profitable, and the quantity supplied rises e. more profitable, but the quantity supplied does not change

D

If Holly's demand for fast food decreases as her income rises, then a. fast food is a normal good for her b. the law of demand must apply c. fast food is a complementary good d. fast food is an inferior good for her e. fast food is a substitute good

D

If an increase in a person's income causes that person to buy more apples, then apples are a. neutral with respect to price b. complements c. inferior goods d. normal goods e. substitute goods

D

If some piece of information causes buyers to expect the price of a good to rise in the future, but sellers take the same information and believe it will have no impact on price, the result is a. a decrease in supply today b. an increase in supply today c. a decrease in quantity demanded today d. an increase in demand today e. an increase in quantity demanded today

D

The term quantity demanded a. can refer to either an individual or all buyers in a market b. only refers to all buyers in a specific market c. only refers to individual buyers in a market d. refers to how many units of a good a buyer would be willing and able to purchase at a series of prices e. determines price when it intersects with the supply curve

A

Of the following, which could cause the demand curve for personal computers to shift to the left? a. a decrease in the price of personal computers b. an increase in the price of computer software c. a decrease in the price of computer software d. an increase in wealth (assuming personal computers are a normal good) e. expectations of an increase in the price of personal computers in the future

B

Both the supply and demand curves can shift due to changes in income. a. True b. False

B (only the demand curve shifts)

A decrease in demand for a normal good could be caused by a(n) a. increase in price b. decrease in price c. decrease in consumer incomes d. increase in consumer incomes e. increase in production costs

C

An increase in buyers' incomes a. increases the quantity demanded of a good b. decreases the quantity demanded of a good c. increases the demand for a normal good d. increases the demand for an inferior good e. decreases the quantity demanded of a normal good

C

If the price of ground beef falls, the demand for hamburger buns will a. increase because the two goods are substitutes b. decrease because the two goods are complements c. decrease because the two goods are substitutes d. increase because the two goods are complements e. not change unless the price of hamburger buns also changes

D

Orange juice and cranberry juice are substitute goods. An increase in the price of orange juice results in a(n) a. increase in the demand for orange juice b. increase in the supply of cranberry juice c. increase in the quantity demanded of orange juice d. increase in the demand for cranberry juice e. decrease in the quantity demanded of cranberry juice

D

Studies show that the supply curve for bananas has shifted. All of the following could be possible explanations for the shift, except one. Which is the exception? a. The price of land for growing bananas has risen. b. Weather conditions in banana-growing countries have worsened. c. The price of apples has fallen. d. The price of bananas has risen. e. The salaries paid to banana growers has risen.

D

Supply curves are usually assumed to slope upward because a. profits fall as prices rise b. a higher price leads to increases in demand c. a higher price leads to decreases in demand d. a higher price attracts resources from other less valued uses e. firms drop out of the market as prices rise

D

Which of the following could cause the market demand curve for hot dogs to shift to the left? a. an increase in the price of hot dogs b. a decrease in the price of hamburgers c. an increase in the size of the population d. an increase in the price of hot dog buns or rolls e. an increase in the price of mustard

D

Which of the following would not lead to a change in the supply of chocolate ice cream? a. a change in productive capacity b. a change in the price of strawberry ice cream c. a change in the price of milk d. a change in the price of chocolate ice cream e. a change in the expected future price of chocolate ice cream

D

All of the following, except one, would increase the demand for a particular model of a Ford automobile. Assume that this model is a normal good. Which is the exception? a. an increase in buyers' incomes b. increased prices of other Ford models c. an expected future increase in the price d. an increase in the U.S. population e. a decrease in the price of steel

E

In analyzing the market for a particular good, the most appropriate size of the market to consider a. is the global market b. is a local market c. is a national market d. is a state-wide market e. depends on the purpose of the analysis

E

The demand curve for dolls shows the quantity of dolls demanded a. by suppliers of those dolls b. by U.S. consumers c. at the equilibrium price for dolls d. at each level of income e. at each possible price of dolls

E

The law of supply says that a. supply and income are inversely related b. supply follows demand c. quantity supplied equals quantity demanded d. price and quantity supplied are inversely related e. price and quantity supplied are directly related

E

When there is a change in demand, a. there is a rightward movement along the demand curve b. there is a leftward movement along the demand curve c. there is a shift of the supply curve d. changes in price lead to different changes in quantity demanded e. there is a shift of the demand curve

E

If two goods are substitutes, then a. an increase in the demand for one of them will lead to an increase in demand for the other b. an increase in the demand for one of them will lead to a decrease in demand for the other c. an increase in the supply of one of them will lead to an increase in supply of the other d. an increase in the supply of one of them will lead to a decrease in supply for the other e. they cannot be produced at the same time

A

Which of the following best defines quantity supplied? a. the amount of a good sellers would choose to produce, in a given set of circumstances b. the amount of a good sellers will be able to sell, in a given set of circumstances c. the various amounts of a good sellers would like to sell over various sets of circumstances d. the amount of a good sellers would like to sell if they could choose the price for which it sold e. the amount of a good that sellers would be able to sell if they could choose the price for which it sold

A

Which of the following items is most likely to be an inferior good? a. bus tickets b. airline tickets c. housing d. stereo equipment e. home computers

A

If automobiles are like most goods and the price of automobiles rises, then holding all else constant, the a. demand for automobiles will rise b. quantity demanded of automobiles will fall c. demand for automobiles will fall d. quantity demanded of automobiles will rise e. supply of automobiles will fall

B

If buyers' tastes and preferences shift in favor of a good, the result is a. an increase in quantity demanded b. an increase in demand c. an increase in quantity demanded and an increase in supply d. a decline in supply e. an increase in supply

B

The market for General Motors' bonds a. exists only within the geographical boundaries of the United States b. is not defined by its geographic location c. is at the New York Stock Exchange d. is at the U.S. Treasury e. is in London, England

B

When households and businesses interact in product markets money a. is not exchanged b. is flowing toward businesses c. is flowing toward households d. is not used at all e. is flowing to both businesses and households

B

The demand curve for a product will shift rightward when the price of a substitute decreases. a. True b. False

B (demand curve will shift leftward)

An increase in the number of buyers in the market causes a. a decrease in equilibrium quantity b. a decrease in equilibrium price c. an increase in demand d. a decrease in production e. an increase in supply

C

An increase in the population will lead to a. a rightward shift in every individual's demand curve b. no shift in the market demand curve c. a rightward shift in the market demand curve d. a rightward movement along every individual's demand curve e. a rightward movement along the market demand curve

C

An increase in the price of a particular good, with all other variables constant, causes a. a movement along a given supply curve to a lower quantity supplied b. a shift to a different supply curve with lower quantities supplied c. a movement along a given supply curve to a higher quantity supplied d. a shift to a different supply curve with higher quantities supplied e. no movement along a given supply curve unless demand also changes

C

Betsy graduates from college, where she earned $3,000 a year working part-time, and takes a job as a third grade teacher, where she now earns $30,000 per year. About the same time she received her first paycheck, her bicycle was stolen. With her old income she would have purchased a new bike but with her new income she purchased a new car. Therefore, a. bicycles are a normal good for Betsy b. automobiles are an inferior good for Betsy c. automobiles are a normal good for Betsy d. Betsy's supply curve for automobiles is upward-sloping e. bicycles and automobiles are complementary goods for Betsy

C

If two goods are substitutes, then a(n) a. increase in the demand for one of them will cause its price to fall b. increase the supply of one of them will cause its price to rise c. increase in the price of one of them will cause the demand for the other to increase d. increase in the price of one of them will cause the supply of the other to increase e. decrease in the price of one of them will cause the demand for the other to increase

C

Which of the following are the best examples of substitute goods? a. personal computers and computer software programs b. milk and cookies c. Packard Bell and IBM personal computers d. hot dogs and mustard e. contact lenses and lens cleaning solutions

C

Which of the following is assumed constant along the demand curve for gasoline? a. the price of gasoline and the prices of related goods b. the price of gasoline, buyers' incomes, and tastes c. all variables affecting demand other than the price of gasoline d. all variables affecting demand other than the supply of gasoline e. buyers' incomes and tastes, but not the prices of related goods

C

Which of the following would not cause the demand curve for college football tickets to shift? a. an increase in the price of professional football tickets b. a decrease in the price of college basketball tickets c. an increase in the price of college football tickets d. a drop in student incomes e. an increase in student preferences for college football tickets

C

Which of the following would not lead to a shift of the demand curve for apples? a. an increase in the price of oranges b. a decrease in incomes for consumers c. a decrease in the supply of apples d. an increased preference for apples e. a decrease in the population

C

Which of the following would shift the demand curve for new college textbooks to the right? a. an increase in the price of new college textbooks b. a decrease in the price of new college textbooks c. an increase in the price of used college textbooks d. a decrease in the population of college students e. a decrease in the wealth of college students

C

Procter & Gamble Co. is a major soap producer. All of the following, except one, would shift its supply curve of liquid soap to left. Which is the exception? a. an increase in the price of bar soap b. an increase in the price of a key ingredient of liquid soap c. environmental regulations force Procter & Gamble to use a more costly technology to produce liquid soap d. a decrease in the price of liquid soap e. an increase in the wage rate for factory workers who produce liquid soap

D

The law of supply states that the quantity supplied of a good and a. the price of a key input are inversely related b. its price are inversely related c. the price of a key input are positively related d. its price are positively related e. the price of an alternate good are positively related

D

The market for a particular good is more likely to be local a. the lower the cost of transporting the good and the greater the ease of communication between buyers and sellers b. the higher the cost of transporting the good and the greater the ease of communication between buyers and sellers c. the lower the cost of transporting the good and the greater the ease of determining the good's quality d. the lower the cost of transporting the good and the more difficult the communication between buyers and sellers e. the higher the cost of transporting the good and the more difficult the communication between buyers and sellers

E

The quantity supplied of a good a. is the amount that sellers would provide if the firms faced no constraints b. is the amount that sellers would provide if input prices were zero c. must match the amount actually purchased in the market d. is a fixed amount unaffected by the sellers' circumstances e. is subject to the constraints imposed by technology and input prices

E