Homework 4

Which of the following will move the supply curve for housing in Florida, a popular retirement state, to the left? Higher construction costs Increase in the cost of insurance Higher real-estate prices Increasing the number of people who are retiring

Higher construction costs

Which of the following statements is true about productive and allocative efficiency? Productive efficiency and allocative efficiency can only occur together; neither can occur without the other. Society can achieve either productive efficiency or allocative efficiency, but not both simultaneously. Productive efficiency can only occur if there is also allocative efficiency. Realizing allocative efficiency implies that productive efficiency has been realized.

Realizing allocative efficiency implies that productive efficiency has been realized.

Which of the following would cause both the equilibrium price and equilibrium quantity of barley (assume that barley is an inferior good) to increase? unusually good weather that results in a bumper crop of barley a drought that sharply reduces barley output an increase in consumer income a decrease in consumer income

a decrease in consumer income

A decrease in the demand for eggs due to changes in consumer tastes, accompanied by a decrease in the supply of eggs as a result of an outbreak of Avian flu, will result in... a decrease in the equilibrium quantity of eggs; the equilibrium price may increase or decrease. a decrease in the equilibrium quantity of eggs and no change in the equilibrium price. a decrease in the equilibrium price of eggs and no change in the equilibrium quantity. a decrease in the equilibrium price of eggs; the equilibrium quantity may increase or decrease.

a decrease in the equilibrium quantity of eggs; the equilibrium price may increase or decrease.

Which of the following would decrease the supply of energy drinks? a decrease in the price of an input used to produce energy drinks 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 number of firms that produce energy drinks

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

an increase in the price of gasoline.

According to a recent study, "Stricter college alcohol policies, such as raising the price of alcohol, or banning alcohol on campus, decrease the number of students who use marijuana." On the basis of this information, how would you describe alcohol and marijuana? complementary goods jointly produced goods unrelated goods substitute goods

complementary goods

Studies have shown that smoking cigarettes can cause heart disease. Assume this is true, and favorable weather has increased the tobacco harvest in North Carolina. In the market for cigarettes, these two developments would... decrease demand and increase supply, resulting in a decrease in the equilibrium price and an uncertain effect on the equilibrium quantity of cigarettes. decrease demand and decrease supply, resulting in an increase in the equilibrium quantity and a decrease in the equilibrium price of cigarettes. decrease demand and increase supply, resulting in an increase in both the equilibrium price and the equilibrium quantity of cigarettes. increase demand and increase supply resulting in an increase in the equilibrium quantity and an uncertain effect on the equilibrium price of cigarettes.

decrease demand and increase supply, resulting in a decrease in the equilibrium price and an uncertain effect on the equilibrium quantity of cigarettes.

Suppose that college tuition is higher this year than last year and that more students are enrolled in college this year than last year. Based on this information, we can best conclude that: the law of demand is invalid. this situation has nothing to do with the law of demand. the demand for a college education is positively sloped. despite the increase in price, enrollment rose due to some other factor changing.

despite the increase in price, enrollment rose due to some other factor changing.

The point at which the supply curve and the demand curve intersect is called: equilibrium, because quantity supplied exceeds quantity demanded so there is a surplus. equilibrium, because quantity demanded exceeds quantity supplied so there is a shortage. irrelevant, because real-world prices never reach this point. equilibrium, because quantity demanded equals quantity supplied so there is no tendency for price to change.

equilibrium, because quantity demanded equals quantity supplied so there is no tendency for price to change.

The more the current price exceeds the equilibrium price, the: smaller the resulting shortage will be. smaller the resulting surplus will be. greater the resulting shortage will be. greater the resulting surplus will be.

greater the resulting surplus will be.

Suppose that in each of four successive years, producers sell more of their product and at lower prices. This could be explained... by small annual increases in supply accompanied by large annual increases in demand. in terms of a stable supply curve and increasing demand. in terms of a stable demand curve and increasing supply. as an exception to the law of supply.

in terms of a stable demand curve and increasing supply.

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. substitution scarcity income ceteris paribus

income

If an economy produces its most wanted goods but uses outdated production methods, it is... achieving productive efficiency but not allocative efficiency. achieving both productive and allocative efficiency. engaged in roundabout production. not achieving productive efficiency.

not achieving productive efficiency.

According to the law of demand, an increase in the price of baseball trading cards causes: baseball trading cards to grow in abundance. the scarcity of baseball trading cards to increase. people to buy fewer trading cards. people to buy more trading cards.

people to buy fewer trading cards.

If the price of steel rises, the law of supply predicts that, other things constant, the: supply of steel will decrease. quantity supplied of steel will increase. supply of steel will increase. quantity supplied of steel will decrease.

quantity supplied of steel will increase.

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... complementary goods, and the higher price for oil increased the demand for natural gas. substitute goods, and the higher price for oil decreased the supply of natural gas. complementary goods, and the higher price for oil decreased the supply of natural gas. substitute goods, and the higher price for oil increased the demand for natural gas.

substitute goods, and the higher price for oil increased the demand for natural gas.

Suppose that in 2007, Ford sold 500,000 Mustangs at an average price of $18,800 per car; in 2008, 600,000 Mustangs were sold at an average price of $19,500 per car. These statements... suggest that the demand for Mustangs increased between 2007 and 2008. suggest that the demand for Mustangs decreased between 2007 and 2008. constitute an exception to the law of demand in that they suggest an upsloping demand curve. suggest that the supply of Mustangs must have increased between 2007 and 2008.

suggest that the demand for Mustangs increased between 2007 and 2008.

If there is a shortage of product X, and the price is free to change,... the price of the product will decline. fewer resources will be allocated to the production of this good. the supply curve will shift to the left and the demand curve to the right, eliminating the shortage. the price of the product will rise.

the price of the product will rise.