Economics Chapter 3

What would happen in the market for knee replacement surgery if insurance companies started to cover a smaller portion of the cost of the surgery?

Demand will decrease, but this will not shift the supply curve

The substitution effect of a price refers to ____

The shift in the demand curve due to a change in purchasing power brought about by the price change

If in the market for apples the supply has decreased, then ____

The supply curve for apples has shifted to left

Which of the following describes a characteristic of a perfectly competitive market?

There are many buyers and sellers

George Gnat subscribes to a monthly pest control service for his home. Last week, the owner of the service informed George that he will have to raise his monthly service fee because of increases in the price of gasoline used by his workers on their service trips. How is the market for pest control services affected by this?

There is a decrease in the supply of pest control services.

If the price of peaches, a substitute for plums, increases the demand for plums will decrease.

False

Suppose that when the price of hamburgers increases, the Ruiz family increases their purchases of hot dogs. To the Ruiz family ____

Hamburgers and hot dogs are substitutes

A(n) ____ is represented by a rightward shift of the demand curve while a(n) ____ is represented by a movement along a given demand curve.

Increase in demand; increase in quantity demanded

Which of the following generation categories has the smallest population in the United States in 2017?

The baby boomers

In January, buyers of gold expect that the price of gold will fall in February. What happens in the gold market in January, holding all else constant?

The demand curve shifts to the left

If the price of propane-fueled gas grills was to decrease, then ____

The demand for propane would increase

A demand curve shows the relationship between ____

The price of a product and the quantity of the product demanded.

One would speak of a movement along a supply curve for a good, rather than a change in supply, if ____

The price of the good changes

If the demand for a product increases and the supply of the same product decreases, the equilibrium price will increase.

True

If the population increases and input prices increase, the equilibrium price of a product will definitely increase.

True

Market equilibrium occurs when the quantity supplied is equal to the quantity demanded

True

The substitution effect explains why there is an inverse relationship between the price of a product and the quantity of the product demanded.

True

The ____ effect of a price change refers to the impact of a change in the price of a good on a consumer's purchasing power

Income

The law of demand implies, holding everything else constant, that as the price of yogurt ____

Increases, the quantity of yogurt demanded will decrease

A supply curve ____

Is a curve that shows the relationship between the price of a product and the quantity of the product supplied.

When the price of a good rises, consumers buy a smaller quantity because of the ____ effect and the ____ effect.

Substitution; income

Technological advancements have led to lower prices and an increase in the sale of color laser printers. How does this affect the market for traditional inkjet printers?

The demand curve for inkjet printers shifts to the left

If a firm expects that the price of its product will be lower in the future than it is today ____

The firm has an incentive to increase supply now and decrease supply in the future

Electric car manufacturers want to sell more electric cars at a higher price. Which of the following events would have this effect?

An increase in the price of gasoline

Farmers can raise either goats or ostriches on their land. Which of the following would cause the supply of goats to decrease?

An increase in the price of ostriches

Which of the following would cause a decrease in the supply of peanut butter?

An increase in the price of peanuts

If an increase in income leads to a decrease in the demand for salami, then salami is ____

An inferior good

Which of the following would cause a decrease in the equilibrium price and decrease in the equilibrium quantity of papayas?

A decrease in demand

Which of the following would cause an increase in the equilibrium price and decrease in the equilibrium quantity of watermelon?

A decrease in supply

Which of the following would shift the supply curve for energy drinks to the left?

A decrease in the number of firms that produce energy drinks

Which of the following would cause the equilibrium price of apple juice to decrease and the equilibrium quantity of apple juice to increase?

A decrease in the price of apples

Farmers can plant either corn or soybeans in their fields. Which of the following would cause the supply of soybeans to increase?

A decrease in the price of corn

If, in response to a decrease in the price of coffee, the quantity of coffee demanded increases, then economics would describe this as ____

An increase in quantity demanded

An increase in the demand for peanuts due to changes in consumer tastes, accompanied by an increase in the supply of peanuts as a result of favorable growing conditions, will result in ____

An increase in the equilibrium quantity of peanuts; the equilibrium price may increase or decrease

The market for smart water is becoming more competitive. The increase in competition in this market is an example of how the market responds to ____

Changes in consumer tastes

A change in which variable will change the market demand for a product?

Expected future prices

A decrease in the number of firms in a market will cause supply to increase.

False

At market equilibrium ____

Quantity demanded equals quantity supplied

A change in quantity supplied is represented by a movement along the supply curve.

True

A normal good is a good for which the demanded decreases as income decreases, holding everything else constant.

True

A surplus is defined as a situation that exists when the quantity of a good supplied is greater than the quantity demanded

True

If an increase in income leads to in an increase in the demand for sushi, then sushi is ____

A normal good

let D = demand. S = Supply, P = equilibrium price, Q = equilibrium quantity. What happens in the market for sushi if the Surgeon General announces that a majority of the raw fish it dies imported to make sushi contains high levels of toxic mercury?

D decreased, S no change, P and Q decrease

As the number of firms in the market increases, the supply curve will shift to the left and the equilibrium price will rise.

False

If consumers believe the price of tablet computers will increase in the future, this will cause the demand for tablet computers to decrease now.

False

If the demand curve for a product shifts to the right and the supply curve for the product shift to the left, equilibrium price and equilibrium quantity will both increase.

False

The income effect explains why there is usually a direct relationship between the price of product and the quantity of the product demanded.

False

An inferior good is a good for which the quantity demanded increases as the price decreases, holding everything else constant.

False

All else equal, as the price of a product falls, the quantity supplied decreases.

True