CHAPTER 3 SMARTBOOK

Which of the following are the characteristics of a competitive market?

- A large number of buyers and sellers - Standardized products

In which of the following cases the demand for a normal good would likely increase?

- An increase in the number of buyers - A decrease in the price of complementary goods

Which of the following factors increase the demand for any good or service?

- An increase in the number of buyers - An increase in the price of a substitute good - A rise in consumer income if the product is a normal good

Which of the following would result in a change in supply?

- An increase in the number of shoe stores at the local mall - An increase in the excise tax on cigarettes - An increase or decrease in wages

Which of the following types of goods affect the demand for another product due to a change in their price?

- Complementary goods - Substitute goods

Equilibrium price in a market changes when there is a change in which of the following?

- Demand - Supply

If the government of a country subsidizes the production of a good, it:

- Increases supply - Lowers the cost of production

In general, what goals does the improvement of production techniques help companies to achieve?

- Lower production costs - Increase supply - Use fewer resources per unit of ouput

Which of the following are determinants of demand?

- Number of buyers - Consumer income - Prices of related goods - Consumer expectations - Consumer tastes

Which of the following will cause a change in supply and not quantity supplied?

- Number of sellers - Technology - Producer expectations

Which of the following exemplify a decrease in the demand for goods due to a decrease in the number of buyers?

- People leaving the small towns where they grew up to look for job opportunities - People retiring and leaving the cities where they worked

All competitive markets involve which of the following?

- Supply - Demand - Price - Quantity

Which of the following are determinants of supply?

- Technology - Resource prices - Taxes and subsidies

Which are the reasons for changes in buyer tastes?

- The development of new technology - The results of health studies - The introduction of products

A decrease in demand while holding supply constant results in ____.

A decrease in both equilibrium price and quantity

The inverse relationship between price and quantity demanded can be graphically illustrated by ____.

A downward sloping curve

Which of the following refers to government financial assistance for the production of a good which lowers producers' costs and increases supply?

A subsidy

Which of the following refers to a particular apportionment or mix of goods and services most highly valued by society?

Allocative efficiency

Which statement about demand and supply is true?

An increase in consumer income is likely to increase the demand for a normal good

Which of the following exemplifies a change in buyers' tastes?

An increase in demand for digital cameras over 35mm cameras

Which of the following is likely to cause an increase in the demand for a good or service?

An increase in the number of buyers

The supply curve is ____ sloping curve.

An upward

Other things equal, the fundamental characteristic of supply is _____.

As price falls, the quantity supplied falls

The law of demand is consistent with common sense because people ordinarily _____.

Buy more at a low price

The price actually paid for a good is not reflected in the demand because demand is merely a statement of _____ buying the good.

Buyers' intention regarding the

The rationing function of prices refers to the ability of the competitive forces of supply and demand to establish a price at which ____.

Buying and selling decisions are consistent

How do improvements in productive technology enable firms to produce more units of output?

By utilizing fewer resources, thereby lowering costs

The concept of demand can be summarized by a schedule or curve showing the quantity of a product that would be _____.

Consumed at various possible prices

The _____ incurred by firms when producing a good or service arise from the prices of the inputs that are used to produce said good or service.

Costs of production

An increase in business taxes causes a(n) ____ in supply and will ____ production costs.

Decrease; increase

An unfavorable change in consumer tastes and preferences for a product will ____ demand, which is illustrated as a shift of the demand curve to the ____.

Decrease; left

A buyer's intentions or plans in regard to the purchase of a product is known as _____.

Demand

A change in the number of buyers is a determinant of market ____.

Demand

The inverse, or negative, relationship between price and quantity demanded is known as the law of ____.

Demand

A shortage results from an excess of quantity ____.

Demanded

Consumers experience ____ marginal utility the more they consume of a particular good or service.

Diminishing

Consumers will only buy additional units of a good if the price of the good is reduced is an example of _____.

Diminishing marginal utility

According to the law of supply, price and quantity supplied have a(n) _____ relationship.

Direct

During the second quarter, the price of Jonah's burgers remains constant, but the price of Sam's burgers increases. Other things ___, the law of demand indicates that fewer Sam's burgers will be purchased than in the previous quarter.

Equal

The ____ output is the quantity at which quantity demanded equals quantity supplied in a competitive market.

Equilibrium

The interaction between buyers and sellers determines the equilibrium price and the ____ quantity.

Equilibrium

The "other-things-equal" assumption is important in the law of demand because _____.

Factors in addition to price affect the amount of a product purchased

T/F: A change in one of the determinants of supply results in a movement along the supply curve.

False

Producer expectations refer to firms' expectations of ___ for a good or service that they produce.

Future prices

___ resource prices raise production costs and, assuming a fixed product price, _____ profits.

Higher; reduce

Which of the following statements correctly describes the relationship between price and quantity demanded of a good or service?

Holding all else constant, as price increases, quantity demanded decreases and as price decreases, quantity demanded increases

Which of the following affects the demand for normal goods and inferior goods?

Income

If the birthrate increases, the purchase of baby products is likely to _____.

Increase

In general, a firm will _____ the output of a good or service if the price of the good is rising.

Increase

If producers expect lower prices for their goods or services in the future, they will ____ now, which is illustrated by a shift of the supply curve to the ____.

Increase their supply; right

A favorable change in consumer tastes and preferences for a product will ____ demand, shifting the demand curve to the _____.

Increase; right

Greater resource prices ____ the costs of production, thereby, ____ the incentive for firms to produce the good at each price.

Increases; reducing

Government subsidies of the production of a good has the effect of ___.

Increasing supply

What are two goods called when a change in the price of one good has little or no effect on the demand for the other?

Independent goods

A demand curve shows the _____.

Inverse relationship between price and quantity demanded for a product

The ___ is consistent with common sense because people ordinarily do buy more of product at a lower price.

Law of demand

As firms leave an industry, supply decreases. This is illustrated as a shift of the supply curve to the ____.

Left

Diminishing marginal utility states that less satisfaction is derived from each successive unit yields _____, consumers will buy additional units only if the price of those units is progressively _____.

Less and less utility; reduced

The income effect indicates that a ___ price increases the purchasing power of income, enabling consumers to purchase ____ of a product and vice versa.

Lower; more

____ benefit is the additional utility gained from consuming one more unit of a good or service.

Marginal

The demand by a consumer for a good or service essentially reflects the ___ of the good or service, based on the utility received.

Marginal benefit

The equilibrium price where the quantity demanded equals the quantity supplied is otherwise known as the ____-clearing price.

Market

Other things equal, firms will produce and offer for sale ____ of their product at a high price than at a low price.

More

The determinants of the supply of a good are any factors other than the product's _____ that cause the supply curve of the good to shift.

Price

The only factor that causes a movement along the supply curve is:

Price

When drawing a supply curve, ____ is labeled on the vertical axis.

Price

Which of the following has the greatest effect on the quantity supplied?

Price

Which of the following is the most important factor for a producer in determining how much of a product to produce?

Price

The supply curve illustrates the relationship between ______.

Price and quantity supplied

The determinant of supply dealing with alternative products that can be produced by firms is called ___.

Price of substitutes in production

The interaction between buyers and sellers, which determines the equilibrium ___ and ___, is illustrated by the intersection of the demand and supply curves.

Price; quantity

A change in ____ causes a movement along the supply curve.

Product price

The production of a good or service in the least costly way is known as ___ efficiency.

Productive

Competition among corn producers forces them to use the best technology and right mix of productive resources; otherwise their costs will be too high relative to the market price and they will be unprofitable. This is best described as ____.

Productive efficiency

If the government subsidizes the production of a good, it in effect ____ the producers' costs and ____ supply.

Raises; increases

Due to the substitution effect, buyers have an incentive to buy less expensive product in place of similar products that have become _____.

Relatively more expensive

A change in ____ causes the supply curve of a product to shift leftward or rightward.

Resource prices

The prices of the ____ used in the production process help determine the costs of production incurred by firms.

Resources

The law of supply states that as price ____, the quantity supplied (Qs) rises; as price _____, the quantity supplied falls.

Rises; falls

A ___ the demand curve represents a change in demand while a ____ the demand curve represents a change in the quantity demanded.

Shift of; movement along

A _____ the supply curve represents a change in supply while a ___ the supply curve represents a change in the quantity supplied.

Shift of; movement along

The _____ suggests that at lower prices, buyers have an incentive to substitute less expensive products for similar products that are now relatively more expensive.

Substitution effect

When a product's demand varies directly with money income, it is considered a(n) ____ good.

Superior

The supply curve measures quantity _____ on the horizontal axis and ____ on the vertical axis.

Supplied; price

A change in ___, rather than a change in quantity supplied, means a change in the schedule or a shift of the supply curve.

Supply

A change in ____, rather than a change in the quantity supplied, means a change in the schedule or a shift of the supply curve.

Supply

A surplus is also known as excess ____.

Supply

Market ____ is a schedule or curve showing the various amounts of a product that producers are willing and able to make available for sale at each possible price during a specific period.

Supply

The ____ of a good or service by a producer essentially reflects the marginal cost of producing the good or service.

Supply

The number of sellers or competitors in a market is a determinant or shifter of the ___ curve.

Supply

Which of the following specifically refers to demand?

The buyer side of any market

What is the price where the intentions of buyers and sellers match?

The equilibrium price

What determines market price and equilibrium output in a market?

The interaction of buyers and sellers

Other things equal, which of the following is correct regarding increasing the number of sellers in an industry?

The market supply becomes greater

What does allocative efficiency refer to?

The particular mix of goods most highly valued by society

T/F: Resource costs or changes in these costs to production are responsible for shifts in the supply curve.

True

T/F: The law of demand can be supported by the income effect.

True

T/F: When the price of one product rises, the demand for its substitute will increase.

True

T/F: A surplus is when quantity supplied exceeds quantity demanded.

True

Diminishing marginal ____ states that, in any specific time period, buyers will derive less satisfaction from each additional unit of the product consumed.

Utility