Economics Chapters 3&4

Hurricane Katrina damaged a large portion of refining and pipeline capacity when it swept through the Gulf coast states in August 2005. As a result of this, many gasoline distributors were not able to maintain normal deliveries. At the pre-hurricane equilibrium price (at the initial equilibrium price) we would expect to see -a surplus of gasoline -the quantity demanded equal to the quantity supplied -a shortage of gasoline -an increase in the demand for gasoline

a shortage of gasoline

Indicate whether each of the following situations would shift the supply curve to the left, to the right, or not at all a. an increase in the price of an input b. an increase in productivity c. an increase in the price of a substitute in production d. a decrease in the expected future price of a product e. a decrease in current price of the product

a. left b. right c. left d. right e. no shift

Electric car enthusiasts want to buy more electric cars at a lower price. All of the following events would have this effect except -technological advancement in the production of electric car batteries -an increase in the number of manufacturers of electric cars -a decrease in the price of lithium, which is used in the electric car batteries -an increase in the price of gasoline

an increase in the price of gasoline

If a decrease in income leads to an increase in the demand for macaroni, then macaroni is -an inferior good -a neutral good -a necessity -a normal good

an inferior good

A decrease in supply is caused by a decrease in the price of the product -true -false

false

A decrease in the number of firms in a market will cause supply to increase -true -false

false

When the price of a good rises, consumers buy a smaller quantity because of the ________ effect and the _________ effect. -substitution; income -normal; inferior -substitute; complement -supply; demand

substitution; income

By drawing a demand curve with the price on the vertical axis and quantity on the horizontal axis, economists assume that the most important determinant of the demand for a good is -consumer income -consumer tastes and preferences -the price of the good -the quality of the good

the price of the good

Which of the following describes a characteristic of a perfectly competitive market? -there are many buyers but few sellers -there are many sellers but few buyers -there are many buyers and sellers -equilibrium is achieved when demand for the product sold in the market equals the supply

there are many buyers and sellers

A change in quantity supplied is represented by a movement along the supply curve -true -false

true

A decrease in the price of inputs will cause the supply curve for a product to shift to the right -true -false

true

Which of the following would cause a decrease in the supply of peanut butter? -a decrease in the price of jelly (assuming that peanut butter and jelly are complements) -a decrease in the price of peanut butter -an increase in the price of peanuts -an increase in the technology used to produce peanut butter

an increase in the price of peanuts

At a product's equilibrium price -anyone who needs the product will be able to buy the the product, regardless of ability to pay -the federal government will provide the product to anyone who cannot afford it -not all sellers who are willing to accept the price will find buyers for their products -any buyer who is willing and able to pay the price will find a seller for the product

any buyer who is willing and able to pay the price will find a seller for the product

A positive technological change will cause the quantity of a good supplied to increase -true -false

false

An increase in quantity supplied is represented by a rightward shift of the supply curve -true -false

false

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

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 -true -false

false

If the price of a product is expected to increase in the future, the supply today will increase -true -false

false

If the price of peaches, a substitute for plums, increases the demand for plums will decrease -true -false

false

Peanut butter and jelly are complements. If the price of peanut butter increases, the demand for jelly will increase -true -false

false

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

false

The income effect of a price change refers to the change in the quantity demanded of a good that results from a change in the price of a substitute product -true -false

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 complements -hamburgers and hot dogs are inferior goods -hamburgers and hot dogs are normal goods -hamburgers and hot dogs are substitutes

hamburgers and hot dogs are substitutes

Suppose that when the price of oranges decreases, Sarita decreases her purchases of peaches. To Sarita -oranges and peaches are complements -oranges and peaches are inferior goods -oranges and peaches are normal goods -oranges and peaches are substitutes

oranges and peaches are substitutes

At market equilibrium -demand equals supply -quantity demanded equals quantity supplied -surpluses are greater than shortages -shortages are greater than surpluses

quantity demanded equals quantity supplied

Factory incentives on cell phones have encouraged consumers to upgrade their phones. How does this affect the market for bluetooth headsets? -the quantity of bluetooth headsets demanded increases -the quantity of bluetooth headsets demanded decreases -the demand for bluetooth headsets increases -the demand for bluetooth headsets decreases

the demand for bluetooth headsets increases

Which of the following is evidence of a shortage of chocolate? -firms lower the price of chocolate -the price of chocolate is raised in order to increase sales -the equilibrium price of chocolate falls due to a decrease in demand -the quantity of chocolate demanded is greater than the quantity supplied

the quantity of chocolate demanded is greater than the quantity supplied

If the United States lifts the embargo on Cuban products, what will happen in the U.S. market for Cuban cigars? -the supply curve will shift to the left -the supply curve will shift to the right -the demand curve will shift to the right -the demand curve will shift to the left

the supply curve will shift to the right

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

true

All else equal, as the price of a product falls, the quantity supplied decreases -true -false

true

An increase in population results in an increase in demand -true -false

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 -false

true

Which of the following would shift the supply curve for energy drinks to the left? -a decrease in the expected future price of energy drinks -an increase in consumer income (assuming that energy drinks are normal goods) -a decrease in the number of firms that produce energy drinks -a decrease in the price of an input used to produce energy drinks

a decrease in the number of firms that produce energy drinks

Which of the following would shift the supply curve for smartphones to the right? -an increase in the price of a substitute in production -an increase in consumer income (assuming that all smartphones are normal goods) -a decrease in the number of firms that produce smartphones -a decrease in the price of an input used to produce smartphones

a decrease in the price of an input used to produce smartphones

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 -supply will decrease, but this will not shift the supply curve -demand and supply will both decrease -demand will decrease and supply will increase

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

Assume that the price for lawn care has fallen and sales of lawn care services have also fallen. One can conclude that -the law of supply has been violated -the number of lawn care service companies has increased -the demand for lawn care service has decreased -lawn care services are deliberately charging low prices because they want to discourage people from maintaining their own lawns

the demand for lawn care service has decreased