Chapter 4 (Exam 1)
Indicate which of the following will cause a movement along a supply curve. Which will shift the supply curve to the left? Which will shift the supply curve to the right? Will supply increase or decrease? 1) A decrease in the price of an input, such as wages for labor 2) A decrease in the price of another good firms in the industry could produce 3) A decrease in the price of the good itself 4) A tax on the land used by the producer 5) Expectations of rising prices of the good int he near future
1) A decrease in the price of an input, such as wages for labor --> Shift the supply curve to the right; an increase in supply 2) A decrease in the price of another good firms in the industry could produce --> Shift the supply curve to the right; an increase in supply 3) A decrease in the price of the good itself --> a movement along a supply curve; no change in supply 4) A tax on the land used by the producer --> Shift the supply curve to the left; a decrease in supply 5) Expectations of rising prices of the good int he near future --> Shift the supply curve to the left; a decrease in supply
Indicate which of the following will cause a movement along a demand curve. Which will shift the demand curve to the left? Which will shift the demand curve to the right? Will demand increase or decrease? 1) An increase in the price of the good 2) An increase in income for a normal good 3) A decrease in the price of a substitute good 4) Expectations of falling income in the near future 5) Expectations of rising prices in the near future
1) An increase in the price of the good --> A movement along a demand curve, no change in demand. 2) An increase in income for a normal good --> Shift the demand curve to the right and an increase in demand. 3) A decrease in the price of a substitute good --> Shift the demand curve to the left and a decrease in demand. 4) Expectations of falling income in the near future --> Shift the demand curve to the left and a decrease in demand. (If the good is normal.) 5) Expectations of rising prices in the near future --> Shift the demand curve to the right and an increase in demand now.
Match the economic change to its associated effect on demand, supply, quantity demanded, or quantity supplied. 1) Change in technology 2) Price of the good sold by a firm 3) Number of sellers 4) Tastes and preferences 5) Price of related goods
1) Change in technology --> Supply changes 2) Price of the good sold by a firm --> Quantity supplied changes 3) Number of sellers --> Supply changes 4) Tastes and preferences --> Demand changes 5) Price of related goods --> Demand and supply change
An increase in the prices of inputs will cause the equilibrium price to ______________ and the equilibrium quantity to ______________. A) Increase; increase B) Increase; decrease C) Decrease; decrease D) Decrease; increase
B) Increase; decrease
An increase in the number of potential buyers will most likely cause which of the following? A) An increase in demand B) A decrease in demand C) An increase in the quantity demanded D) A decrease in the quantity demanded
A) An increase in demand
Oprah Winfrey made comments about the possibility of contracting mad-cow disease from eating beef. Some observers said that those comments had negative effects on the beef market. In the same period of time, changes in rate of production may have been the real culprit. If only Oprah's comments affected the market, then the equilibrium price would have ______________ and the equilibrium quantity would have ______________. A) Decreased; decreased B) Increased; increased C) Decreased; increased D) Increased; decreased
A) Decreased; decreased
An increase in the price of a substitute good will cause the equilibrium price of its substitute to ______________ and the equilibrium quantity to ______________. A) Increase; increase B) Increase; decrease C) Decrease; decrease D) Decrease; increase
A) Increase; increase
Indicate how an increase in tastes for apples will affect the equilibrium price and the equilibrium quantity in the market for apples. A) Increase; increase B) Increase; decrease C) Decrease; decrease D) Decrease; increase
A) Increase; increase
Consider the markets for ball-point pens and "rollerball" pens. Suppose that, due to an increased cost of the metal that is used in "rollerball" pens, the prices of "rollerball" pens increase. There are no other changes. What would happen to the demand schedules of both products? The demand curve for ball-point pens would ______________ ; the demand curve for "rollerball" pens would ______________. A) Increase; not change B) Increase; increase C) Decrease; not change D) Decrease; increase E) Not change; decrease
A) Increase; not change
Consider a decrease in the cost of land used in apple orchards. Select whether this change will affect either supply and demand of apples and whether this change will cause it to increase, decrease or not change. A) Supply B) Demand C) Increase D) Decrease E) Neither F) Cannot tell
A) Supply and C) Increase
What would be the initial change in the market for beer if a city suddenly restricted the number of bar licenses they permitted? (Note: A bar requires a licenses to operate.) A) Supply would decrease and there would be a shortage B) Supply would decrease and there would be a surplus C) Demand would increase and there would be a shortage D) Demand would increase and there would be a surplus
A) Supply would decrease and there would be a shortage
A decrease in income will cause which of the following to happen to the demand for used cars? Assume used cars are inferior goods. A) The demand for used cars will increase. B) The demand for used cars will decrease. C) The quantity demanded for used cars will increase. D) The quantity demanded for used cars will decrease.
A) The demand for used cars will increase.
"Many Coca-Cola bottlers increased the price of Coke because the price of corn syrup (an important ingredient in Coke production) has increased." Other things constant, this most recent change in the market for Coca-Cola can best be explained as which of the following? A) A decrease in demand with supply relatively unchanged B) A decrease in supply with demand relatively unchanged C) An increase in supply with demand relatively unchanged D) An increase in demand with supply relatively unchanged
B) A decrease in supply with demand relatively unchanged
If income decreases and, at the same time, a new technology is discovered that lowers the cost of producing the good, which of the following will happen? A) The equilibrium quantity will increase. The equilibrium price will increase. B) Cannot tell the change in equilibrium quantity. The equilibrium price will decrease. C) The equilibrium quantity will decrease. The equilibrium price will increase. D) Cannot tell the change in equilibrium quantity. Cannot tell the change in equilibrium price.
B) Cannot tell the change in equilibrium quantity. The equilibrium price will decrease.
Consider the market for peaches. Suppose that the conditions for growing peaches in the southeast become unfavorable, and many of the southeastern peach farmers decide to leave the industry and look for other jobs. With this migration of farmers, what will happen to the supply of peaches from the southeast? A) Increase B) Decrease C) Not change
B) Decrease
Consider an increase in the number of potential buyers. Select whether this change will affect either the supply or demand of apples and whether this change will cause it to increase, decrease or not change. A) Supply B) Demand C) Increase D) Decrease E) Neither F) Cannot tell
B) Demand and C) Increase
Assume that tastes change so that tennis is no longer as desirable to play as it is now. What would happen to the market for tennis balls? A) Demand increases, the equilibrium quantity is larger, and the price is higher. B) Demand decreases, the equilibrium quantity is smaller, and the price is lower. C) Demand increases, the equilibrium quantity is smaller, and the price is lower. D) Demand decreases, the equilibrium quantity is larger, and the price is higher.
B) Demand decreases, the equilibrium quantity is smaller, and the price is lower.
What will happen to current purchases if people expect lower prices in the future? What will happen with expectations of higher incomes? A) Demand increases; demand increases B) Demand decreases; demand increases C) Demand increases; demand decreases D) Demand decreases; demand decreases
B) Demand decreases; demand increases
How will a decrease in the price of DVDs affect the demand for DVD players? Why? A) Quantity demanded of DVD players increases B) Demand for DVD players increases C) Quantity demanded of DVD players decreases D) Demand for DVD players decreases
B) Demand for DVD players increases
If (1) the cost of manufacturing computers decreases and (2) at the same time the quality improves, making computers more useful for households, which of the following is most likely to happen? A) Equilibrium price will increase, equilibrium quantity will increase B) Equilibrium price may increase or decrease; equilibrium quantity will increase C) Equilibrium price will decrease; equilibrium quantity will decrease D) Equilibrium price may increase or decrease; equilibrium quantity will decrease
B) Equilibrium price may increase or decrease; equilibrium quantity will increase
Okra was $13.00 per bushel in 2015, and 1.5 million bushels were sold. Okra was $14.00 per bushel in 2016, and 2.0 million bushels were sold. "If in both cases the okra market was in equilibrium, this must be an example of an exception to the law of demand." A) True B) False
B) False
"Some people predict, however, that the prices of chocolate will increase drastically in about three years because of some unhealthy crops." Given this expectation for the future, what will happen to the demand for chocolate now? What will the demand do? A) Decrease as people switch to substitute goods B) Increase as consumers buy more now to avoid higher prices later C) Decrease; when prices increase, demand decreases D) Stay the same as consumers plan to adjust to the prices in the future
B) Increase as consumers buy more now to avoid higher prices later
Expectations of lower prices in the near future may cause some producers to do what? A) Increase the quantity supplied of the good now B) Increase the supply of the good now C) Decrease the supply of the good now D) Decrease the quantity supplied of the good now
B) Increase the supply of the good now
Recently, stores have been reporting increased sales of DVD players and a reduction in their prices. In accordance with this trend, one might predict that there has been a(n) ______________ in demand and a(n) ______________ in supply. A) Increase; no change B) No change; increase C) Decrease; no change D) No change; decrease
B) No change; increase
Consider the markets for ball-point pens and the market for "rollerball" pens. Suppose that, due to an increased cost of the metal that is used in "rollerball" pens, the prices of "rollerball" pens and ball-point pens increase. There are no other changes. This is true because the two products have a unique relationship. What is the likely relationship between "rollerball" pens and ball-point pens? What are they? A) Complementary goods B) Substitute goods C) Normal goods D) Inferior goods
B) Substitute goods
Indicate how a decrease in the cost of producing oranges (a substitute for apples) will affect the equilibrium price and the equilibrium quantity in the market for apples. A) Increase; increase B) Increase; decrease C) Decrease; decrease D) Decrease; increase
C) Decrease; decrease
Oprah Winfrey made comments about the possibility of contracting mad-cow disease from eating beef. Some observers said that those comments had negative effects on the beef market. In the same period of time, changes in rate of production may have been the real culprit. If the "over-production" affected the market, then the equilibrium price would have ______________ and the equilibrium quantity would have ______________. A) Decreased; decreased B) Increased; increased C) Decreased; increased D) Increased; decreased
C) Decreased; increased
A decrease in the price of a complementary good will cause its complement's equilibrium price to ______________ and the equilibrium quantity to ______________. A) Decrease; decrease B) Increase; decrease C) Increase; increase D) Decrease; increase
C) Increase; increase
Consider the market for peaches. Suppose that the conditions for growing peaches in the southeast become unfavorable, and many of the southeastern peach farmers decide to leave the industry and look for other jobs. In which direction will the demand curve for peaches shift? A) Left B) Right C) Not change
C) Not change
How does an decrease in input costs affect suppliers? A) Demand increases B) Demand decreases C) Supply increases D) Supply decreases
C) Supply increases
An increase in the cost of an input will cause which of the following? A) An increase in supply and a shift to the right of the supply curve B) An increase in supply and a shift to the left of the supply curve C) A decrease in supply and a shift to the right of the supply curve D) A decrease in supply and a shift to the left of the supply curve
D) A decrease in supply and a shift to the left of the supply curve
New technology lowering the costs of production will cause the equilibrium price to ______________ and the equilibrium quantity to ______________. A) Increase; increase B) Increase; decrease C) Decrease; decrease D) Decrease; increase
D) Decrease; increase
How will an increase in the price of DVDs affect the demand for DVD players? Why? A) Quantity demanded of DVD players increases B) Demand for DVD players increases C) Quantity demanded of DVD players decreases D) Demand for DVD players decreases
D) Demand for DVD players decreases
"Falling oil prices have caused a sharp decrease in the supply of oil." Speaking precisely, this quotation is _______. A) Correct; a decrease in price always causes a decrease in supply. B) Incorrect; a decrease in price causes an increase in supply, not a decrease in supply. C) Incorrect; a decrease in price causes an increase in the quantity supplied, not a decrease in supply. D) Incorrect; a decrease in price causes a decrease in the quantity supplied, not a decrease in supply.
D) Incorrect; a decrease in price causes a decrease in the quantity supplied, not a decrease in supply.
Health insurance makes medical care more affordable for individuals. What will happen to the equilibrium price of medical care as a result of better health care coverage and why? A) Price decreases because demand increases B) Price decreases because supply increases C) Price increases because supply decreases D) Price increases because demand increases
D) Price increases because demand increases
Which of the following does not cause a change in demand? A) Tastes and preferences B) Income C) Prices of related goods - substitutes and complements D) Price of the good E) The number of potential buyers
D) Price of the good
How does an increase in input costs affect suppliers? A) Demand increases B) Demand decreases C) Supply increases D) Supply decreases
D) Supply decreases
Six months ago, the cost of an important input in an industry increased. Then, three months later another change occurred. Production engineers invented a new method that uses fewer raw materials for the same level of production. If these were the only two events that influenced production in the last six months, what has been the influence on the supply? A) Six months ago the supply curve shifted to the left, and then three months ago the quantity supplied at each price fell. B) The first event caused production to decrease and supply to drop, but the second event increased supply above what it had been originally. C) The influences of both events had equal effects on the supply, only one was negative and the other positive so that they perfectly balanced out. D) The event of six months ago caused added costs to production and then lowered supply. The event of three months ago allowed more to be produced at each price, so the supply increased.
D) The event of six months ago caused added costs to production and then lowered supply. The event of three months ago allowed more to be produced at each price, so the supply increased.
"The winds of the recent hurricanes in Florida are bringing significant financial gain to California orange growers. Due to the extensive damage to the Florida orange crop, many oranges were destroyed. The ones remaining were just as good as the previous oranges. California oranges are commanding their highest prices ever." If Florida and California oranges are substitute goods, which of the following statements best explains the economics of the quotation? A) The demand for Florida oranges has been reduced, causing their prices to fall and therefore increasing the demand for the substitute California oranges. B) The supply of Florida oranges has decreased, causing the supply of California oranges to increase and their prices to rise. C) The demand for Florida oranges has been reduced by the hurricanes, causing a greater demand for the California oranges and an increase in their price. D) The supply of Florida oranges has decreased, causing their price to increase and the demand for the California oranges to increase also.
D) The supply of Florida oranges has decreased, causing their price to increase and the demand for the California oranges to increase also.
Assume that the price in a market is currently below the equilibrium price. Explain exactly why that situation will change by putting the steps in the correct order. A) There is a shortage since quantity demanded is greater than quantity supplied B) The steps repeat until there is a new equilibrium C) The shortage becomes smaller D) A new equilibrium is reached with a larger quantity exchanged and a higher price E) Prices begin to rise F) Some buyers are willing to pay more for a good and sellers can raise prices while still selling all of their supply G) Quantity demanded begins to decrease and quantity supplied increases
Step 1: A) There is a shortage since quantity demanded is greater than quantity supplied Step 2: F) Some buyers are willing to pay more for a good and sellers can raise prices while still selling all of their supply Step 3: E) Prices begin to rise Step 4: G) Quantity demanded begins to decrease and quantity supplied increases Step 5: C) The shortage becomes smaller Step 6: B) The steps repeat until there is a new equilibrium Step 7: D) A new equilibrium is reached with a larger quantity exchanged and a higher price