Chapter 4

an increase in the proportion of teenagers in the total population of a country is likely to: a. result in an upward movement along the market demand curve for pizza. b. shift the market demand curve of pizza leftward. c. result in a downward movement along the market demand curve for pizza. d. shift the market demand curve for pizza rightward.

not B Answer is D

Which of the following would cause a downward movement along the demand curve for a normal good, leading to an increase in the quantity demanded? a. A decline in the price of the good. b. An increase in the price of a complementary good. c. A decrease in the price of a substitute good. d. Consumer expectations that the good will become more expensive in the near future.

a. A decline in the price of the good.

The following image shows the market for pretzels. At a price of $9, which of the following is most likely? a. Competition among producers will force the price per pretzel to decrease to $7. b. There will be surplus of 27,000 pretzels per week. c. Competition among consumers will exert an upward pressure on the price per pretzel. d. There will be a shortage of 18,000 pretzels per week.

a. Competition among producers will force the price per pretzel to decrease to $7.

Which of the following is the best example of transaction costs? a. The amount of time a person spends looking for a house. b. The increase in production costs resulting from an increase in the hourly wages of workers. c. The costs incurred because of an increase in the number of temporary workers. d. The extra money a person could have earned by working over the weekend had he not chosen to go camping with his friends.

a. The amount of time a person spends looking for a house.

Other things remaining constant, the substitution effect of a price change implies that a fall in the price of burgers: a. decreases the demand for sandwiches. b. increases the opportunity cost of burgers. c. increases the purchasing power of consumers. d. decreases the demand for burgers.

a. decreases the demand for sandwiches.

If consumers expect the price of gasoline to increase tomorrow, the demand for gasoline is likely to _____ today. a. increase b. remain unchanged c. decline substantially d. be zero

a. increase

Other things remaining constant, a higher price for a good _____ that good. a. makes producers more willing to increase the quantity supplied of b. limits the ability of producers to increase the quantity supplied of c. decreases the market supply of d. makes consumers more willing to purchase

a. makes producers more willing to increase the quantity supplied of

Suppose the market for pretzels is in equilibrium. It is discovered that high consumption of pretzels increases the risk of heart diseases. As a result of this, _____. a. the equilibrium price of pretzels will decrease and the equilibrium quantity of pretzels will decrease b. both the equilibrium price and quantity of pretzels will decrease c. the equilibrium price of pretzels will decrease and the equilibrium quantity of pretzels will increase d. both the equilibrium price and quantity of pretzels will increase

a. the equilibrium price of pretzels will decrease and the equilibrium quantity of pretzels will decrease

According to the law of supply, _____. a. the higher the price of a product, the greater the quantity supplied b. the higher the price of a product, the greater the cost of production c. the lower the price of a product, the greater the market supply d. the lower the price of a product, the greater the profit earned by a firm

a. the higher the price of a product, the greater the quantity supplied

Suppose there are only three consumers—John, James, and Erin—in the market for strawberries. At a price of $3 per box of strawberries, the market demand is 72 boxes of strawberries per day. At this price, John has a demand for 17 boxes of strawberries per day and Erin has a demand for 23 boxes of strawberries per day. Which of the following is true? a. If the price of a box of strawberries decreases to $2.50 per box of strawberries, the demand for strawberries will most likely decrease for all consumers. b. At a price of $3, James has a demand of 32 boxes of strawberries per day. c. If the price of strawberries increases to $3.50 per box of strawberries, the quantity demanded of strawberries will most likely increase for all consumers. d. At a price of $4, the market demand will be 72 boxes of strawberries per day.

b. At a price of $3, James has a demand of 32 boxes of strawberries per day.

Which of the following is most likely to decrease supply in the market for pizza? a. The price of burgers increasing due an increase in the price of beef. b. Cheese prices increasing because price supports for dairy farmers are removed. c. The popularity of pizza inducing a greater number of fast food joints to include pizza in their menu. d. Reports revealing that eating pizza increases the risk of stomach ulcers.

b. Cheese prices increasing because price supports for dairy farmers are removed.

Suppose the federal government provides wheat farmers with an effective price floor, or a guaranteed minimum price. Which of the following is likely to be true? a. It will increase economic welfare. b. The price floor set by the government is higher than the equilibrium price. c. It will cause an excess demand for wheat in the market. d. The market is likely to remain in equilibrium even after the price floor is imposed.

b. The price floor set by the government is higher than the equilibrium price.

Suppose the market for fresh California navel oranges was in equilibrium before an unanticipated freeze destroyed half of the California navel orange crop. If all other factors affecting supply or demand are assumed to have remained unchanged, which of the following is likely to be true? a. The demand for navel oranges will decrease, resulting in a lower market equilibrium price and quantity. b. The supply of navel oranges will decrease, resulting in a higher market equilibrium price and a lower market equilibrium quantity. c. Both supply and demand will increase, resulting in an increase in equilibrium quantity and an indeterminate change in price. d. Both supply and demand will decrease, resulting in a decrease in both equilibrium quantity and price.

b. The supply of navel oranges will decrease, resulting in a higher market equilibrium price and a lower market equilibrium quantity.

Suppose a company trying to increase profits sells its laptops at a price that is higher than the equilibrium price of laptops in the market. Which of the following is likely to happen as a consequence? a. The equilibrium price of laptops will increase to the level charged by this brand. b. There will be an excess supply of this particular brand of laptops in the market. c. There will be an excess demand for this particular brand of laptops in the market. d. The equilibrium price of laptops will decrease.

b. There will be an excess supply of this particular brand of laptops in the market.

The following image shows the market for cupcakes. The initial demand and supply curves are D and S, respectively. A decrease in the price of flour used to make cupcakes will result in: a. a rightward shift of the demand curve from D to D'. b. a fall in the equilibrium price of cupcakes to $6. c. a rise in the equilibrium quantity of cupcakes to 23 cupcakes.

b. a fall in the equilibrium price of cupcakes to $6.

Suppose there is an increase in the incidence of polio in a country. This will most likely result in: a. a leftward shift of the market demand curve for polio vaccinations. b. a rightward shift of the market demand curve for polio vaccinations. c. a downward movement along the market demand curve for polio vaccinations. d. an upward movement along the market demand curve for polio vaccinations.

b. a rightward shift of the market demand curve for polio vaccinations.

An increase in the money income of a consumer will most likely result in a(n) _____ the demand curve for an inferior good. a. rightward shift of b. leftward shift of c. upward movement along d. downward movement along

b. leftward shift of

A yearly performance appraisal rewarded an employee with a 25 percent hike in the salary. This can: a. result in a downward movement along the demand curve. b. shift the demand curve rightward. c. result in an upward movement along the demand curve. d. shift the supply curve leftward.

b. shift the demand curve rightward.

Suppose the price of petrol is expected to fall in the future. As a result, the current demand for it decreases and the current supply increases. However, the change in supply is much greater than the change in demand. Thus, _____. a. both the equilibrium quantity and price of petrol will increase b. the equilibrium quantity of petrol will increase and the equilibrium price of petrol will decrease c. the equilibrium quantity of petrol will decrease and the equilibrium price of petrol will increase d. both the equilibrium quantity and price of petrol will decrease

b. the equilibrium quantity of petrol will increase and the equilibrium price of petrol will decrease

Suppose the government in Candora sets a minimum wage for unskilled labor. As a result, _____. a. competition among unskilled labor will exert an upward pressure on the minimum wage b. the overall economic welfare in Candora will decrease c. the money income of unskilled labor in Candora will decrease d. there will be a shortage of unskilled labor in Candora

b. the overall economic welfare in Candora will decrease

The law of supply states that: a. a shift in the supply curve of a product must be the result of a change in prices. b. the price and quantity supplied of a product are positively related. c. the price and quantity supplied of a product are inversely related. d. an increase in demand for a product will cause a leftward shift in the supply curve.

b. the price and quantity supplied of a product are positively related.

The following image shows the market for cupcakes. The initial demand and supply curves are D and S, respectively. The market for cupcakes will most likely clear at an equilibrium price of $8 per cupcake if: a. the consumers and producers of cupcakes expect a rise in the market price of cupcakes in the future. b. the price of cookies, a substitute for cupcakes, increases and, at the same time, the price of flour used to make cupcakes decreases. c. the price of coffee, a complementary good, increases and, at the same time, the number of bakeries in the market increases. d. the number of consumers of cupcakes decreases and, at the same time, the price of ovens used for baking decreases.

b. the price of cookies, a substitute for cupcakes, increases and, at the same time, the price of flour used to make cupcakes decreases.

The government of Amenia imposes a ceiling on the price of bread. Which of the following is most likely to be true? a. As the government tries to ensure that most people can at least afford bread, an imposition of price ceiling is likely to raise economic welfare in Amenia. b. The market is likely to remain in equilibrium even after the price ceiling is imposed. c. A ceiling on the price of bread will cause an excess demand for bread in the market. d. A ceiling on the price of bread implies that the current price of bread in Amenia is higher than what the equilibrium price would have been.

c. A ceiling on the price of bread will cause an excess demand for bread in the market.

Which of the following is likely to shift the supply curve of pizza rightward? a. A higher price of pizza that makes potential producers less willing to supply pizza. b. A higher price of pizza that makes existing producers more willing to increase the quantity supplied. c. A new, high-tech oven that costs the same as existing ovens and bakes pizza in half the time. d. A new medical report claiming that eating pizza increases the risk of heart attacks.

c. A new, high-tech oven that costs the same as existing ovens and bakes pizza in half the time.

Which of the following would cause an upward movement along the supply curve of hamburgers? a. An increase in the price of beef. b. A fall in the price of substitutes like pizzas. c. An increase in the market price of hamburgers. d. A fall in market demand for hamburgers.

c. An increase in the market price of hamburgers.

Suppose two things happen simultaneously that impact the equilibrium in the computer software market. First, technological innovation lowers the cost of producing computer software. Second, the price of computer hardware, a complement to computer software, declines. Which of the following is likely to be true in this case? a. The demand for software would decrease and supply would remain unchanged, resulting in a lower market equilibrium price and quantity. b. The supply of software would decrease and the demand would increase, resulting in a higher market equilibrium price and an indeterminate change in market equilibrium quantity. c. Both the supply of software and the demand for software would increase, resulting in an increase in equilibrium quantity and an indeterminate change in price. d. Both the supply of software and the demand for software would increase, resulting in a decrease in equilibrium quantity and a decrease in price.

c. Both the supply of software and the demand for software would increase, resulting in an increase in equilibrium quantity and an indeterminate change in price.

Which of the following is true of the market demand curve for a good? a. It is an upward-sloping curve that is the sum of the individual downward-sloping demand curves of all consumers in the market. b. It shows the quantities of a good demanded by a consumer at various income levels. c. It is the sum of the individual demand curves of all consumers in the market. d. It is the sum of the individual demand curves of all consumers with the same income.

c. It is the sum of the individual demand curves of all consumers in the market.

Improved technology has reduced the risk of grain loss during storage. If wheat farmers expect wheat prices to rise substantially in about four months, which of the following is likely to be true? a. The expectation of higher prices in the future is unlikely to have any impact on current wheat supply. b. The supply of wheat is likely to increase immediately. c. The current supply of wheat will decline as farmers store wheat in anticipation of the higher prices. d. The price of wheat breads is likely to decline in the future.

c. The current supply of wheat will decline as farmers store wheat in anticipation of the higher prices.

Which of the following is most likely to increase the supply of corn? a. The farm workers union successfully negotiating a pay increase for corn harvest workers. b. New medical reports claiming that eating corn bread increases risk of heart attacks. c. The price of soybeans dropping substantially and soybean farmers can also grow corn. d. The government eliminating subsidies formerly paid to corn farmers.

c. The price of soybeans dropping substantially and soybean farmers can also grow corn.

Which of the following varies along the supply curve of a good? a. The prices of other goods. b. Consumer expectations. c. The price of the good. d. The state of technology.

c. The price of the good.

A summer in Miami turned out to be warmer than usual, causing people to consume more cola. This can be represented by: a. an upward movement along the demand curve for cola. b. a downward movement along the demand curve for cola. c. a rightward shift of the demand curve for cola. d. a leftward shift of the demand curve for cola.

c. a rightward shift of the demand curve for cola.

Suppose a firm uses a particular machine to manufacture steel bolts and screwdrivers. A drop in the price of steel bolts, with the price of screwdrivers unchanged, will most likely lead to: a. a decrease in the quantity demanded of steel bolts. b. a decrease in the production of screwdrivers. c. an increase in the production of screwdrivers. d. a decrease in the demand for steel bolts.

c. an increase in the production of screwdrivers.

A pest attack destroys half of the California navel orange crop. Simultaneously, the price of kiwifruit, a substitute for navel oranges, falls. As a result, _____. a. the demand for navel oranges would decrease but the supply would remain unchanged, resulting in a lower market equilibrium price and quantity b. the supply would decrease and the demand would increase, resulting in a higher market equilibrium price and an indeterminate change in market equilibrium quantity c. both supply and demand would decrease, resulting in a decrease in equilibrium quantity and an indeterminate change in price d. both supply and demand would increase, resulting in an increase in equilibrium quantity and an indeterminate change in price

c. both supply and demand would decrease, resulting in a decrease in equilibrium quantity and an indeterminate change in price

Check My Work A price ceiling imposed by the government will have an impact only if: a. it increases competition among suppliers in a market. b. it increases competition among consumers in the market. c. it is set below the equilibrium price in a market. d. it is set at the equilibrium price in a market.

c. it is set below the equilibrium price in a market.

An increase in supply means that: a. there is a downward movement along the supply curve. b. the supply curve has shifted leftward. c. producers are willing to sell more at each price. d. there is an upward movement along the supply curve.

c. producers are willing to sell more at each price.

The following image shows the market for pretzels. At a price of $4 per pretzel, there is a _____. Figure 4.1 a. surplus of 27,000 pretzels per week b. surplus of 18,000 pretzels per week c. shortage of 27,000 pretzels per week d. shortage of 18,000 pretzels per week

c. shortage of 27,000 pretzels per week

The more important an item is as a share of a consumer's budget, _____. a. the larger the quantity supplied of the item. b. the bigger the substitution effect of a change in the price of that item. c. the bigger the income effect of a change in the price of that item. d. the lesser the quantity supplied of the item.

c. the bigger the income effect of a change in the price of that item.

The following image shows the market for cupcakes. The initial demand and supply curves are D and S, respectively. Suppose cupcakes are normal goods. As a result of an increase in the income of consumers, _____. a. the equilibrium quantity of cupcakes will rise to 18 b. the supply of cupcakes will increase from S to S' c. the equilibrium price of cupcakes will rise to $9 d. the demand for cupcakes will remain unchanged

c. the equilibrium price of cupcakes will rise to $9

Check My Work Suppose there is a tsunami in Japan, which is a major supplier of external storage devices. As a result, the supply of external storage devices decreases. However, the market demand for external storage devices increases. Thus, _____. a. both the equilibrium price and quantity of external storage devices increase b. the change in equilibrium price of external storage devices is indeterminate and the equilibrium quantity of external storage devices decreases c. the equilibrium price of external storage devices increases and the change in the equilibrium quantity of external storage devices is indeterminate d. both the equilibrium price and quantity of external storage devices increase

c. the equilibrium price of external storage devices increases and the change in the equilibrium quantity of external storage devices is indeterminate

If the prices of all goods changed by the same percentage, _____. a. there would be rightward shift of the market demand curve b. there would be no income effect of the price changes of goods on the quantity demanded c. there would be no substitution effect of the price changes of goods on the quantity demanded d. there would be a leftward shift of the market supply curve

c. there would be no substitution effect of the price changes of goods on the quantity demanded

The following image shows the market for pretzels. The equilibrium price and quantity in the market are _____, respectively. Figure 4.1 a. $4 and 40,000 pretzels b. $9 and 33,000 pretzels c. $9 and 15,000 pretzels d. $7 and 25,000 pretzels

d. $7 and 25,000 pretzels

Which of the following statements is true? a. Two goods are considered substitutes if an increase in the price of one shifts the demand curve for the other leftward. b. Two goods are considered complements if an increase in the price of one shifts the demand curve for the other rightward. c. An increase in consumer income shifts the demand curve for related goods leftward. d. An increase in the price of an unrelated good reduces a consumer's real income and can reduce the demand for other goods.

d. An increase in the price of an unrelated good reduces a consumer's real income and can reduce the demand for other goods.

Which of the following would most likely cause a consumer to increase the demand for veggie burgers? a. A decline in the price of veggie burgers. b. An increase in the prices of some of the vegetables used for the burger. c. An increase in the price of burger buns. d. An increase in the price of tofu burgers, which are perceived as substitutes for veggie burgers.

d. An increase in the price of tofu burgers, which are perceived as substitutes for veggie burgers.

When the equilibrium price of an apple is $0.75, the individual supplies of apples from three apple orchards are 460, 580, and 700 apples respectively. Identify the correct statement from the following. a. The market supply at $0.75 is 1,540 apples. b. If the price rises above $0.75, there will be an excess demand for apples in the market. c. If the price rises above $0.75, the market supply will be lower than 1,740 apples. d. The market demand at $0.75 is 1,740 apples.

d. The market demand at $0.75 is 1,740 apples.

As personal income increases, consumers are willing and able to buy more of a good at each price. This causes: a. an upward movement along the demand curve. b. a leftward shift of the demand curve. c. a downward movement along the demand curve. d. a rightward shift of the demand curve.

d. a rightward shift of the demand curve.

A decrease in the price of cocoa will most likely lead to: a. an increase in the demand for chocolate. b. a decrease in the demand for chocolate. c. a decrease in the supply of chocolate. d. an increase in the supply of chocolate.

d. an increase in the supply of chocolate.

Price floors and ceilings: a. restore equilibrium in a market and increase economic welfare. b. shift the supply curve for a good rightward. c. shift the demand curve for a good leftward. d. cause market disequilibrium and reduce economic welfare.

d. cause market disequilibrium and reduce economic welfare.

A fall in the price of sodas will result in a(n): a. decrease in the quantity supplied. b. increase in the quantity supplied. c. increase in the supply of sodas and no change in the quantity supplied. d. decrease in the supply of sodas and no change in the quantity supplied.

d. decrease in the supply of sodas and no change in the quantity supplied.

If the price of tofu falls, the quantity of tofu demanded will increase. This will be indicated by a(n): a. upward movement along the demand curve for tofu. b. leftward shift of the demand curve for tofu. c. rightward shift of the demand curve for tofu. d. downward movement along the demand curve for tofu.

d. downward movement along the demand curve for tofu.

As money income increases, consumers tend to substitute used furniture with new furniture. Used furniture is an example of a(n): a. normal good. b. complementary good. c. public good. d. inferior good.

d. inferior good.

A technological innovation in the market for computer software will most likely result in a(n) ____ the supply curve of computer software. a. downward movement along b. leftward shift of c. upward movement along d. rightward shift of

d. rightward shift of

The coordination that occurs through markets takes place not because of some central plan but because of _____. a. transaction costs b. surplus and shortage c. equilibrium d. the invisible hand

d. the invisible hand

When the price of wheat increases, _____. a. the producers of bread will be willing to produce more bread at each price, but will not be able to supply as much as they want to b. the consumers of bread will be both willing and able to buy more bread at the current price c. the consumers of bread will be willing to buy more bread at the current price d. the producers of bread will supply less bread at each price

d. the producers of bread will supply less bread at each price

When a market is in equilibrium, _____. a. there is excess supply in the market b. the quantity demanded exceeds the quantity supplied c. there is a downward pressure on the price d. the quantity demanded is equal to the quantity supplied

d. the quantity demanded is equal to the quantity supplied

Demand is the relationship between the price of a good and: a. the income of individual consumers. b. the amount spent on advertising the good. c. the quality of the good consumers expect at that particular price. d. the quantity of the good consumers are willing and able to buy.

d. the quantity of the good consumers are willing and able to buy.

According to the substitution effect, a drop in the price of a normal good: a. decreases the real income of consumers and they tend to buy more of the good. b. increases the income earned by consumers and they tend to buy less of the good. c. decreases the income earned by consumers and they tend to buy more of the good. d. increases the real income of consumers and they tend to buy more of the good.

not C