ECON Chapter 3

*Wrong 16. A change in the ceteris paribus conditions for supply will lead to a

change in quantity supplied.

7. If the price of hot dogs​ increases, the demand for hot dog buns will

decrease

16. How does a change in quantity supplied differ from a change in​ supply?

A change in the price affects quantity​ supplied, not supply.

*Wrong 9. Which of the following is consistent with the law of​ supply?

A reduction of the price of​ salt, led to a 5 percent increase in the quantity of salt consumed.

Which of the following is consistent with the law of demand? A. The state of CaliforniaCalifornia has less grape regulation than New York, and grape production is higher in New York. B. An increase in the supply of MP 3 players causes a decrease in the consumption of MP 3 players. C. Airplanes flew with fewer passengers after the terrorist strikes of 9 divided by 11the terrorist strikes of 9/11. D. A reduction​ of the price of salt led to a 5 percent increase in the quantity of salt purchased.

A reduction​ of the price of salt led to a 5 percent increase in the quantity of salt purchased.

Which of the following will cause an outward​ (rightward) shift in​ supply? A. The cost of an input increases. B. A technological improvement. C. A decline in labor productivity. D. A reduction in consumer incomes.

A technological improvement.

In the market for flash memory​ drives, indicate whether the following events would cause an​ "increase or a decrease in demand​" or an​ "increase or a decrease in the quantity demanded.​" A. There are increases in the prices of storage racks and boxes used to store flash memory drives. B. There is a decrease in the price of computer drives that read the information contained on flash memory drives. C. There is a dramatic increase in the price of secure digital cards that, like flash memory drives, can be used to store digital data. D.A booming economy increases the income of the typical buyer of flash memory drives(this is a normal good). E. Consumers of flash memory drives anticipate that the price of this good will decline in the future.

A. Decrease in Demand. -Equilibrium quantity would decrease. Equilibrium price would decrease. B. Increase in demand. -Equilibrium quantity would Increase. Equilibrium price would Increase. C. Increase in demand. -Equilibrium quantity would Increase. Equilibrium price would Increase. D. Increase in demand -Equilibrium quantity would Increase. Equilibrium price would Increase. E. Decrease in demand. -Equilibrium quantity would decrease. Equilibrium price would decrease.

Consider the market for laptop computers. Click on the graph to the right to determine how the following event will impact this market. Do this by illustrating the event on the graph and then assess its impact on the equilibrium quantity and the market price. Event​: The price of memory chips used in laptop computers declines. A. The supply​ increases, causing the equilibrium quantity to rise and the market price to fall. B.The supply​ increases, causing the equilibrium quantity to fall and the market price to rise. C. The supply​ decreases, causing the equilibrium quantity to fall and the market price to rise. D. The quantity supplied​ increases, causing the equilibrium quantity to rise and the market price to fall.

A. The supply​ increases, causing the equilibrium quantity to rise and the market price to fall.

According to the law of supply, as the price of the good increases, it causes A. a movement upward along the supply curve. B. a movement downward along the supply curve. C. a shift of the supply curve to the right​. D. a shift of the supply curve to the left​.

A. a movement upward along the supply curve As the price increases, firms are enticed to produce more​. This is seen as a movement along the stationary supply curve.

All of the following pairs of goods are substitutes except A. we observe the price of bacon increases and the demand for eggs decreases. B. we observe the price of coffee increases and the demand for tea increases. C. we observe the price of automobiles decreases and the demand for public transit decreases. D. we observe the price of tennis racquets decreases and the demand for golf clubs decreases.

A. we observe the price of bacon increases and the demand for eggs decreases. The price of one good and the quantity demanded of a related good move in opposite directions. These two goods are not substitutes.

8. Which of the following statements is FALSE about the demand​ curve? A. When demand​ decreases, there is a drop in the quantity demanded at each price. B. An increase in demand shifts the demand curve to the​ left, closer to the price axis. C. A change in demand is graphically shown by shifting the entire demand curve. D. When only the price of a good​ changes, there is movement along the demand curve but no change in demand.

An increase in demand shifts the demand curve to the​ left, closer to the price axis.

9. Which of the following is consistent with the law of​ supply? A. An increase in the market price of MP 3 playersMP3 players causes an increase in the production of MP 3 playersMP3 players. B. Fewer passengers chose to travel by airplane after the terrorist strikes of 9 divided by 11the terrorist strikes of 9/11. C. A reduction of the price of​ salt, led to a 5 percent increase in the quantity of salt consumed. D. The state of CaliforniaCalifornia has less grapegrape regulation than New YorkNew York​, and grapegrape production is lower in New YorkNew York.

An increase in the market price of MP 3 playersMP3 players causes an increase in the production of MP 3 playersMP3 players.

14. Which of the following would cause an increase in the supply of chicken​? A. A decrease in the price of inputs to chicken production. B.An increase in taxes. C. An increase in the price of chicken. D. An increase in the number of buyers in the market.

An increase in the price of chicken.

1. Suppose that the price of a jar of peanut butterjar of peanut butter is ​$1010 and the price of a box of teabox of tea is ​$66. What is the relative price of a jar of peanut butterjar of peanut butter​? A. 0.600 B. 1.667 C. 4.000 D. 16.000 What is the relative price of a box of teabox of tea​? A. 4.000 B. 16.00016.000 C. 1.6671.667 D. 0.6000.600

B, D

Which of the following is an implication of the law of​ supply? A. Individuals will purchase fewer units at a higher price and more units at a lower price. B. Increases in money prices will lead to an increase in supply while increases in relative prices will lead to a decrease in supply. C. Producers will offer more units at a higher price and fewer units at a lower price. D. Changes in the price of a good leads to a shift in the supply curve.

C. Producers will offer more units at a higher price and fewer units at a lower price. The law of supply indicates a positive relationship between the price and the quantity supplied of a good. At higher​ prices, firms are willing to produce more than at lower prices. This is shown as movement along the supply curve.

All of the following pairs of goods are complements except A. we observe the price of tennis racquets increases and the demand for tennis shoes decreases. B. we observe the price of automobiles decreases and the demand for tires increases. C. we observe the price of coffee decreases and the demand for tea decreases. D. we observe the price of bacon decreases and the demand for sausage increases.

C. we observe the price of coffee decreases and the demand for tea decreases. The price of one good and the quantity demanded of a related good move in the same direction. These two goods are not complements.

What if the increase in demand were smaller than the increase in​ supply?

Equilibrium price falls and quantity rises

If the demand and supply curves increase​ (shift outward) by identical proportions then

Equilibrium price stays the same and quantity rises.

8. Mary decreases her consumption of Good X after the price of Good Y decreased. For Mary...

Good X and Good Y are substitutes.

12. Graphically, the market supply curve is obtained by

Horizontally summing quantity supplied at various prices for individual producers.

Assume the cost of aluminum used by​ soft-drink companies increases. Which of the following correctly describes the resulting effects in the market for canned soft​ drinks? I. The demand for soft drinks decreases. II. The quantity of soft drinks demanded decreases. III. The supply of soft drinks decreases. IV. The quantity of soft drinks supplied decreases.

II and III II. The quantity of soft drinks demanded decreases. III. The supply of soft drinks decreases.

15. Which of the following will shift​ today's supply curve to the​ right? A. Prices are expected to be lower in the future. B. Prices are expected to be higher in the future. C. Sales taxes increase. D. Input prices rise.

Prices are expected to be lower in the future.

7. More cattle are found to have mad cow disease. As a​ result, consumer confidence in the safety of beef is shaken. What would an economist predict will happen in the beef​ market?

The demand curve will shift to the left.

What if the increase in demand were larger than the increase in​ supply?

The equilibrium price and quantity increase.

11. Other things being​ equal, an increase in the price of a good leads to an increase in the amount produced. This is known as A. the law of supply. B. equilibrium. C. the law of demand. D. ceteris paribus.

The law of supply.

4. Adding the quantities demanded by all consumers at every price will yield

The market demand curve.

Suppose that at first the price of a bag of coffee bag of coffee is $5 and the price of a box of tea is ​$3. ​Then, the price of a bag of coffee bag​ of coffee changes to ​$10 and the price of a box of teabox of tea changes to ​$7. What has happened the money prices and relative prices of these two​ goods? A. The money and relative prices of a bag of coffeebag of coffee and a box of teabox of tea have not changed. B. The money price of a bag of coffee and a box of teabox of tea have risen and the relative price of a bag of coffee has fallen while relative price of a box of teabox of tea has risen. C. The money price of a bag of coffee and a box of teabox of tea have fallen and the relative price of a box of teabox of tea and a bag of coffee have risen. D. The money price of a bag of coffee and a box of teabox of tea have risen and the relative prices of a box of teabox of tea and a bag of coffee have fallen.

The money price of a bag of coffee and a box of teabox of tea have risen and the relative price of a bag of coffee has fallen while relative price of a box of teabox of tea has risen.

1. Suppose that at first the price of a jar of peanut butter is ​$5 and the price of a jar of jelly is ​$3. ​Then, the price of a jar of peanut butter changes to ​$10 and the price of a jar of jelly changes to ​$7. What has happened the money prices and relative prices of these two​ goods?

The money price of a jar of peanut butter and a jar of jelly have risen and the relative price of a jar of peanut butter has fallen while relative price of a jar of jelly has risen.

6A. For each of the following shifts in the demand curve and associated price change of a complement or substitute​ item, explain whether the change in the price of the complement or substitute must have been an increase or a decrease. A Fall in the demand for e-book readers follows a change in the price of e-books which are complements.

The price of the complement increases. When the price of one good and the quantity demanded of a related good move in the same direction. These two goods are not complements.

6B. For each of the following shifts in the demand curve and associated price change of a complement or substitute item, explain whether the change in the price of the complement or substitute must have been an increase or a decrease. A Fall in the demand for physical books follows a change in the price of books which are substitute​.

The price of the substitute decreases.

11. A given supply curve illustrates

The relationship between price and quantity supplied.

*Wrong 13. Consider the market for laptop computers. Click on the graph to the right to determine how the following event will impact this market. Do this by illustrating the event on the graph and then assess its impact on the equilibrium quantity and the market price. Event​: The priceprice of memory chips used inmemory chips used in laptop computers declines.

The supply​ decreases, causing the equilibrium quantity to fall and the market price to rise.

19. What happens as the result of a​ shortage? A. Supply of the good decreases. B. Consumers begin to view the good as an inferior good because they have a hard time finding it. C. There is upward pressure on prices. D. There is downward pressure on prices.

There is downward pressure on prices.

17. Assume that the cost of aluminium used by soft drink companies increases. Indicate which of the following statements describing the resulting effects in the market for soft drinks distributed in aluminium cans are True (T) or false (F)

a. The demand for soft drinks decreases. (F) b. The quantity of soft drinks demanded decreases. (T) c. The supply of soft drinks decreases. (T) d. The quantity of soft drinks supplied decreases. (F)

**Wrong 14. Consider the market for economics textbooks. Explain whether the following events would cause an increase or a decrease in supply or an increase or a decrease in the quantity supplied. a. The market price of paper increases. This will cause​ a(n) b. The market price of economics textbooks increases. This will cause​ a(n) c. The number of publishers of economics textbooks increases. This will cause​ a(n) d. Publishers expect that the market price of economics textbooks will increase next month. This will cause​ a(n)

a. decrease in supply. (decrease in quantity supplied.) b. increase in supply. c. increase in quantity supplied. d. decrease in supply.

4. A market demand curve is found by

adding the quantities demanded for each individual consumer at each price.

1. The law of demand states that

as price​ increases, quantity demanded​ decreases, all other things equal.

4. A schedule of how much of a good people will purchase for a range of possible prices during a specified time​ period, other things​ constant, is the definition of

demand.

10. According to the law of​ supply, price and quantity are __________ related. When prices​ increase, the quantity supplied __________. .

directly, increases

20. Another name for a surplus is

excess quantity supplied.

15. A​ per-unit government subsidy to producers of a good tends to

increase the supply of the good.

*Wrong 3. The price of a new car is​ $40,000 while the price of a​ five-year old car of the same brand is​ $16,000. The next year the price of the new car increases to​ $44,000 and the price of a​ five-year old car of the same brand is​ $17,600.

increased by 10 percent

*Wrong 3. The price of a new textbook is​ $60 in one year and​ $75 two years​ later, while the price of a used copy of the textbook increased from​ $25 to​ $37.50. The relative price of a new textbook

increased by 25 percent.

The law of supply then implies that a ___________ along the supply curve occurs due to a change in market price.

movement

A. The law of supply states that there is a ______ relationship between the price and ____________. B. Thus, as the price increases A. the quantity demanded increases. B. the demand increases. C. the quantity produced by firms increases. D. the supply increases.

positive, the quantity supplied C. the quantity produced by firms increases.

20. A shortage will occur whenever

price is below the equilibrium price.

20. When there is an excess quantity​ supplied A. the market is in equilibrium. B. quantity demanded is less than quantity supplied. C. quantity demanded is greater than quantity supplied. D. prices will remain stable.

quantity demanded is greater than quantity supplied.

12. If the price of a product​ increases, we would expect

quantity supplied to increase.

8. Which of the following are complementary​ goods?

sport utility vehicles and gasoline

19. The market clearing price of a good is

the price at which there is no surplus and no shortage.

3. The law of demand includes the statement​ "other things being​ equal." These other things include all of the following EXCEPT A. the price of related goods. B. the price of the good itself. C. incomes. D. tastes.

the price of the good itself.

11. A MOVEMENT along a supply curve is induced by a change in

the​ product's price.