ECO Chapter 1-3
Refer to the diagram. If this is a competitive market, price and quantity will move toward:
$40 and $150 respectively
(advanced analysis) The demand for commodity X is represented by the equation P=10-0.2Q and supply equation P=2+0.2Q. The equilibrium price for X is:
$6
Refer to the diagram. The highest price that buyers will be willing and able to pay for 100 units of this product is:
$60
Which of the following would not shift the demand curve for beef
a reduction in the price of cattle feed
Refer to the table. Suppose that demand is represented by columns (3) and (2) and supply is represented by columns (3) and (5). If the price were artificially set at $6:
a shortage of 40 units would occur
Refer to the diagram. A price of $60 in this market will result in:
a surplus of 100 units
Refer to the table. Suppose that demand is represented by columns (3) and (2) and supply is represented by columns (3) and (5). If the price were artificially set at $9:
a surplus of 20 units would occur
The term laissez-faire suggests that
government should not interfere with the operation of the economy.
A market is in equilibrium
if the amount producers want to sell is equal to the amount consumers want to buy.
When the price of a product increases, a consumer is able to buy less of it with a given money income. This describes the:
income effect
the construction of demand and supply curves assumes that the primary variable influencing decisions to produce and purchase goods is
price
The law of demand states that, other things equal:
price and quantity demanded are inversely related
The supply curve shows the relationship between
price and quantity supplied
In the circular flow diagram, firms get their ability to pay for the costs of production from the
revenues they receive for their products
Other things equal, if the price of a key resource used to produce product X falls, the
supply curve of product X will shift to the right
In moving along a demand curve, which of the following is not held constant?
the price of the product itself
If there is a shortage of product X, and the price is free to change:
the price of the product will rise
If a price ceiling is set below the equilibrium price in a market
the quantity demanded will exceed the quantity supplied
Increasing marginal cost of production explains
why the supply curve is upsloping
At the equilibrium price
there are no pressures on price to either rise or fall.
Over time, the equilibrium price of a gigabyte of computer memory has fallen while the equilibrium quantity purchased has increased. Based on this we can conclude that:
Increases in the supply of computer memory have exceeded increases in demand
Suppose that corn prices rise significantly. If farmers expect the price of corn to continue rising relative to other crops, then we would expect:
The supply to increase as farmers plant more corn
If two goods are complements:
a decrease in the price of one will increase the demand for the other.
The figure below shows three demand curves for coffee. Which of the following would cause a shift in coffee demanded from D1 to D3
a decrease in the price of tea
In the circular flow model, households earn their incomes in the
resource markets
The simple circular flow model show that workers and capital owners off their services to firms through the
resource markets
Economists use the term "demand" to refer to
a schedule of various combinations of market prices and amounts/quantities demanded
In 2007, the price of oil increased, which in turn caused the price of natural gas to rise. This can best be explained by saying that oil and natural gas are
substitute goods, and the higher price for oil increased the demand for natural gas
When the price of a product falls, the purchasing power of our money income rises and thus permits consumers to purchase more of the product. This statement describes:
the income effect
The idea that the desires of resource supplies and firms to further their own self interest will automatically further the public interest is known as
the invisible hand
In moving along a supply curve, which of the following is not held constant?
the price of the product itself
At the point where the demand and supply curves for a product intersect,
the quantity that consumers want to purchase and the amount producers choose to sell are the same
When the price of Nike soccer balls fell, Ronaldo purchased more Nike soccer balls and fewer adidas soccer balls. Which of the following best explains Ronaldos decision to buy more Nike soccer balls.
the substitution effect
When the price of a product rises, consumers shift their purchases to other products whose prices are now relatively lower. This statement describes:
the substitution effect
If there is a surplus of a product, its price:
is above the equilibrium level.
A market
is an institution that brings together buyers and sellers
The upward slope of the supply curve reflects the
law of supply
One reason that the quantity demanded of a good increases when its price falls is that the
lower price increases the real income of buyers, enabling them to buy more
Refer to the diagram. A shortage of 160 units would be encountered if price was:
$.50
Refer to the diagram. The equilibrium price and quantity in this market will be:
$1 and $200
Refer to the diagram. A surplus of 160 units would be encountered if the price was:
$1.60
Answer the question on the basis of the given supply and demand data for wheat. Equilibrium price will be
$2
Refer to the table. If demanded is represented by columns (3) and (1) and supply is represented by columns (3) and (4), equilibrium price and quantity will be
$9 and $60
(Advanced analysis) The demand for commodity X is represented by the equation P=10-0.2Q and supply by the equation P=2+0.2Q. The equilibrium quantity is
20
Refer to the above graph, which shows the market for bicycles. S1 and D1 are the original supply and demand curves. D2 and D3 and S2 and S3 are possible new demand and supply curves. Starting from the initial equilibrium (point 1), which point on the graph is most likely to be the new equilibrium after an increase in wages of bicycle workers, a significant increase in the price of gasoline.
4
Refer to the above graph, which shows the market for bicycles. S1 and D1 are the original supply and demand curves. Stating from the initial equilibrium (point 1), which point on the graph is most likely to be the new equilibrium after the introduction of technological improvements in bicycle production and successful publicity campaigns by the government on the virtues of bicycling to work?
5
If the demand curve for product B shifts to the right as the price of product A declines, then:
A and B are complementary goods
Which of the diagrams illustrates the effect of a decline in the price of personal computers on the market for software.
A only
Which of the diagrams illustrates the effect of an decrease in income on the market for second hand clothing
A only
Which of the following statements is correct
A. An increase in the price of C will decrease the demand for complementary product D.
Which of the diagrams illustrates the effect of a decline in the price of irrigation equipment on the market for corn
C only
Which of the diagrams illustrates the effect of a governmental subsidy on the market for AIDS research
C only
If government set a maximum price of $45 in the market
It would create neither a shortage nor a surplus
Refer to the diagram. An effective government set price floor is best illustrated by
Price C
If government set a minimum price of $50 in the market, a
Surplus of 21 units would occur
Answer the question on the basis of the given supply and demand data for wheat. If the price in this market was $4,
The farmers would not be able to sell all their wheat
In the past few years, the demand for donuts has greatly increased. This increase in demand might best be explained
a change in buyer tastes
Which of the following will not cause the demand for product K to change
a change in the price of product K
If producers must obtain higher prices than before to produce a given level of output, then the following has occurred:
a decrease in supply
A surplus of a product will arise when price is:
above equilibrium with the result that quantity supplied exceeds quantity demanded.
Refer to the table. In relation to column (3), a change from column (4) to column (5) would most likely be caused by
an improvement in production technology
A recent study found that an increase in the federal tan on beer (which increase the price of beer) should reduce the demand for marijuana. Bases on this info. we can conclude that
beer and marijuana are complementary goods
According to the circular flow model, products markets are where
businesses earn their revenues from households
In the circular flow model of the market system, households major role is to
buy products and sell resources
With a downsloping demand curve and an upsloping supply curve for a product a decrease in resource prices will
decrease equilibrium price and increase equilibrium quantity
Refer to the table. In relation to column (3), a change from column (5) to column (4) would indicate a(n)
decrease in supply
Suppose an excise tax is imposed on product X. We expect this tas to
decrease the demand for complementary good Y and increase the demand for substitute product Z.
If product A and B are complements and the price of B decreases the
demand for A will increase and the quantity of B demanded will increase
Suppose that in the clothing market, production costs have fallen, but the equilibrium price and quantity purchased have both increased. Based on this information we can conclude that:
demand for clothing has grown faster than the supply of clothing
Suppose product X is an input in the production of product Y. Product Y in turn is a substitute for product Z. An increase in the price of X can be expected to:
increase the demand for Z
if the demand and supply curves for product X are stable, a government-mandated increase in the price of X will
increase the quantity supplied of X and decrease the quantity demanded of X
Assume product A is an input in the production of a product B. In turn, product B is a complement to product C. We can expect a decrease in the price of A to
increase the supply of B and increase the demand for C
Running shoes and staplers are
independent goods.
Refer to the diagram. A decrease in quantity demanded is depicted by a
move from point y to point x
Refer to the diagram. An increase in quantity supplied is depicted by a:
move from point y to point x
The law of supply indicates that, other things equal
producers will offer more of a product at high prices than at low prices
An increase in product price will cause
quantity demanded to decrease.
If we say that a price is too high to clear the market, we mean that
quantity supplied exceeds quantity demanded
Refer to the table. In relation to column (3), a change from column (1) to column (2) would most likely be caused by:
reduced taste for the good
In the circular flow model of the market system, business firms' major role is to
sell products and buy resources
Refer to the diagram. A decrease in demand is depicted by a:
shift from D2 to D1
Refer to the diagram. A decrease in supply is depicted by a
shift from S2 to S1
An improvement in production technology will:
shift the supply curve to the right
Other things equal, which of the following might shift the demand curve for gasoline to the left
the development of a low cost electric automobile
Refer to the figure above, which shows three supply curves for corn. Which f the following would cause the supply of corn to shift from S1 to S2.
the development of a more effective insecticide against corn rootworm
Graphically, the market demand curve is
the horizontal sum of individual demand curves
If the price of Pepsi decreases, other factors constant, then we'd expect to see a consequent shift of the demand curve for:
Coke to the left
Which of the diagrams illustrates the effect of an increase in automobile worker wages on the market for automobiles?
D only
Assume that the graphs show a competitive market for the product stated in the question. Select the graph above that best shows the change in the market specified in the following situation: the market for leather coats, when leather coats become more fashionable among young consumers.
Graph A
Assume that the graphs show a competitive market for the product stated in the question. Select the graph above that best shows the change in the market specified in the following situation: the market for digital cameras, when the productivity of workers in the digital camera industry increases
Graph C
The circular flow model illustrates
The interdependence of businesses and consumers
Refer to the diagram. Flow 4 represents
consumer expenditures and business revenue
A shift to the right in the demand curve for the product A can be most reasonable explained by saying that
consumer preferences have changed in favor of A so that they now want to buy more at each possible price
An increase in the price of a product will reduce the amount of it purchased because
consumers will substitute other products for the one whose price has risen
Refer to the provided figure. If box A represents households, B the product market, and C business, and if flow (3) represents revenues, then flow (1) would represent
consumption expenditures
The relationship between quantity supplied and price is (blank), and the relationship between quantity demanded and price is (blank).
direct; inverse
Given a downsloping demand curve and an upsloping supply curve for a product, an increase in the price of a substitute good will (from the buyer's perspective) will:
increase equilibrium price and quantity
Refer to the table. In relation to column (3), a change from column (2) to column (1) would indicate a(n):
increase in demand
At the current price, there is a shortage of a product. We would expect price to
increase, quantity demanded to decrease and quantity supplied to increase
A govern,net subsidy to the producers of a product
increases product supply
Refer to the diagram. a price of $20 in this market will result in a
shortage of 100 units
A leftward shift of a product supply curve might be caused by
some firms leaving an industry
