ECON CHAPTER 4 (PART 1)

Suppose you like to make, from scratch, pies filled with banana cream and vanilla pudding. You notice that the price of bananas has increased. As a result, your demand for vanilla pudding would a. decrease. b. increase. c. be unaffected. d. There is insufficient information given to answer the question.

A. Decrease

Ashley bakes bread that she sells at the local farmer's market. If she purchases a new convection oven that reduces the costs of baking bread, the a. supply curve for Ashley's bread will increase. b. supply curve for Ashley's bread will decrease. c. demand curve for Ashley's bread will increase. d. demand curve for Ashley's bread will decrease.

A. Supply curve for Ashley's bread will increase.

A likely example of complementary goods for most people would be a. canoes and paddles. b. snow mobiles and sofas. c. coffee and tea. d. tennis balls and basketballs.

A. canoes and paddles.

An increase in quantity demanded a. results in a movement downward and to the right along a demand curve. b. results in a movement upward and to the left along a demand curve. c. shifts the demand curve to the left. d. shifts the demand curve to the right.

A. results in a movement downward and to the right along a demand curve.

The demand for a good or service is determined by a. those who buy the good or service. b. the government. c. those who sell the good or service. d. both those who buy and those who sell the good or service.

A. those who buy the good or service.

If sellers expect higher basket prices in the near future, the current a. supply of baskets will increase. b. supply of baskets will decrease. c. supply of baskets will be unaffected. d. demand for baskets will decrease.

B. Supply of baskets will decrease.

Suppose scientists provide evidence that people who drink energy drinks are more likely to have a heart attack than people who do not drink energy drinks. We would expect to see a. no change in the demand for energy drinks. b. a decrease in the demand for energy drinks. c. an increase in the demand for energy drinks. d. a decrease in the supply of energy drinks.

B. a decrease in the demand for energy drinks.

Which of the following would cause a movement along the supply curve for cupcakes? a. an improvement in technology for commercial mixers b. a decrease in the price of cupcakes c. an increase in the price of cake flour d. All of the above are correct.

B. a decrease in the price of cupcakes

If the price of ice cream rose to $30 per gallon, consumers would purchase fewer gallons of ice cream than if the price were $4 per gallon. If the price of chocolate sauce fell to $0.50 per can, consumers would purchase more chocolate sauce than if the price were $5 per can. These relationships illustrate the a. law of supply. b. law of demand. c. difference between normal and inferior goods. d. difference between substitute and complement goods.

B. law of demand.

If Max experiences a decrease in his income, then we would expect Max's demand for a. each good he purchases to remain unchanged. b. normal goods to decrease. c. luxury goods to increase. d. inferior goods to decrease

B. normal goods to decrease.

If Miguel expects to earn a higher income next month, he may choose to a. save more now and spend less of his current income on goods and services. b. save less now and spend more of his current income on goods and services. c. decrease his current demand for goods and services. d. move along his current demand curves for goods and services.

B. save less now and spend more of his current income on goods and services.

Ford Motor Company announces that next month it will offer $3,000 rebates on new Mustangs. As a result of this information, today's demand curve for Mustangs a. shifts to the right. b. shifts to the left. c. shifts either to the right or to the left, but we cannot determine the direction of the shift from the given information. d. will not shift; rather, the demand curve for Mustangs will shift to the right next month.

B. shifts to the left.

Lead is an important input in the production of crystal. If the price of lead decreases, then we would expect the supply of a. crystal to be unaffected. b. crystal to decrease. c. crystal to increase. d. lead to increase.

C. Crystal to increase.

Which of the following demonstrates the law of demand? a. After Jon got a raise at work, he bought more pretzels at $1.50 per pretzel than he did before his raise. b. Melissa buys fewer muffins at $0.75 per muffin than at $1 per muffin, other things equal. c. Dave buys more donuts at $0.25 per donut than at $0.50 per donut, other things equal. d. Kendra buys fewer Snickers at $0.60 per Snickers after the price of Milky Ways falls to $0.50 per Milky Way.

C. Dave buys more donuts at $0.25 per donut than at $0.50 per donut, other things equal.

Which of the following events would cause a movement downward and to the left along the supply curve for mangos? a. The number of sellers of mangos decreases. b. There is an advance in technology that reduces the cost of producing mangos. c. The price of mangos falls. d. The price of fertilizer increases, and fertilizer is an input in the production of mangos.

C. The price of mangos falls.

If macaroni and cheese is an inferior good, then an increase in a. the price will cause the demand curve for macaroni and cheese to shift to the left. b. the price will cause the demand curve for macaroni and cheese to shift to the right. c. a consumer's income will cause the demand curve for macaroni and cheese to shift to the left. d. a consumer's income will cause the demand curve for macaroni and cheese to shift to the right.

C. a consumer's income will cause the demand curve for macaroni and cheese to shift to the left.

An decrease in the price of oranges would lead to a(n) a. increased supply of oranges. b. increase in the prices of inputs used in orange production. c. a movement down and to the left along the supply curve for oranges. d. a movement up and to the right along the supply curve for oranges.

C. a movement down and to the left along the supply curve for oranges.

A likely example of substitute goods for most people would be a. tables and chairs. b. bicycles and helmets. c. apple juice and orange juice. d. coffee and sugar.

C. apple juice and orange juice.

If muffins and bagels are substitutes, a higher price for bagels would result in a(n) a. increase in the demand for bagels. b. decrease in the demand for bagels. c. increase in the demand for muffins. d. decrease in the demand for muffins.

C. increase in the demand for muffins.

Other things equal, when the price of a good falls, the a. quantity supplied of the good increases. b. supply decreases. c. quantity supplied of the good decreases. d. demand increases.

C. quantity supplied of the good decreases.

Workers at a bicycle assembly plant currently earn the mandatory minimum wage. If the federal government increases the minimum wage by $1.00 per hour, then it is likely that the a. demand for bicycle assembly workers will increase. b. supply of bicycles will shift to the right. c. supply of bicycles will shift to the left. d. firm must increase output to maintain profit levels.

C. supply of bicycles will shift to the left.

The supply of a good or service is determined by a. those who buy the good or service. b. the government. c. those who sell the good or service. d. both those who buy and those who sell the good or service.

C. those who sell the good or service.

Which of the following characteristics is required for a perfectly competitive market? a. The goods offered for sale are exactly the same. b. There are so many buyers and sellers that no single buyer or seller has any influence over the market price. c. It is difficult for new sellers to enter the market. d. Both a and b are correct.

D. Both a and b are correct.

Which of the following demonstrates the law of supply? a. When leather became more expensive, belt producers decreased their supply of belts. b. When car production technology improved, car producers increased their supply of cars. c. When sweater producers expected sweater prices to rise in the near future, they decreased their current supply of sweaters. d. When ketchup prices rose, ketchup sellers increased their quantity supplied of ketchup.

D. When ketchup prices rose, ketchup sellers increased their quantity supplied of ketchup.

An increase in the price of a good will a. increase demand. b. decrease demand. c. increase quantity demanded. d. decrease quantity demanded.

D. decrease quantity demanded.

A decrease in the price of a good will a. increase supply. b. decrease supply. c. increase quantity supplied. d. decrease quantity supplied.

D. decrease quantity supplied.

A decrease in demand is represented by a a. movement downward and to the right along a demand curve. b. movement upward and to the left along a demand curve. c. rightward shift of a demand curve. d. leftward shift of a demand curve.

D. leftward shift of a demand curve.

When drawing a demand curve, a. demand is measured along the vertical axis, and price is measured along the horizontal axis. b. quantity demanded is measured along the vertical axis, and price is measured along the horizontal axis. c. price is measured along the vertical axis, and demand is measured along the horizontal axis. d. price is measured along the vertical axis, and quantity demanded is measured along the horizontal axis.

D. price is measured along the vertical axis, and quantity demanded is measured along the horizontal axis.

The market demand curve a. is found by vertically adding the individual demand curves. b. slopes upward. c. represents the sum of the prices that all the buyers are willing to pay for a given quantity of the good. d. represents the sum of the quantities demanded by all the buyers at each price of the good.

D. represents the sum of the quantities demanded by all the buyers at each price of the good.

The market supply curve a. is found by vertically adding the individual supply curves. b. slopes downward. c. represents the sum of the prices that all the sellers are willing to accept for a given quantity of the good. d. represents the sum of the quantities supplied by all the sellers at each price of the good.

D. represents the sum of the quantities supplied by all the sellers at each price of the good.

In a market economy, a. supply determines demand and demand, in turn, determines prices. b. demand determines supply and supply, in turn, determines prices. c. the allocation of scarce resources determines prices and prices, in turn, determine supply and demand. d. supply and demand determine prices and prices, in turn, allocate the economy's scarce resources.

D. supply and demand determine prices and prices, in turn, allocate the economy's scarce resources.