MACRO T2

An increase in the price of a product will reduce the amount of its purchased because

consumers will substitute other products for the one whose price has risen.

Refer to the above data. If the price in this market was $4

farmers would not be able to sell their wheat

The Illinois Central Railroad once asked the Commerce Commission to increase its commuter rates by 20 percent. Railroad argued that declining revenues made this rate increase essential. Opponents of the rate increase contended that the railroad's revenue would fall because of the rate hike. It can be concluded that

he railroad felt that the demand for the passengers service was inelastic and the opponents of the rate increase felt it was elastic.

Assuming conventional supply and demand curves, changes in the determinants of supply and demand will:

in all likelihood alter both equilibrium price and quantity.

The law of demand and supply states that

price and quantity demanded are inversely related

In which of the following cases will total revenue increase?

price rises and demand is inelastic

An increase in supply is shown as a:

rightward shift

When the price of a product increases, a consumer is able to buy less of it with a given money income. This describes the:

the income effect.

allocative efficiency involves determining

the mix of output that will maximize society's satisfaction.

If there is a shortage of product X:

the price of the product will rise.

A market

is an institution that brings together buyers and sellers

A decrease in supply is shown as a:

leftward shift in demand curve

If the initial demand and supply curves are D0 and S0 equilibrium price and quantity will be:

0F and 0C respectively.

If supply is S1 and demand D0 then

0F represents a price that would result in a shortage of AC.

Refer to the above diagram. The equilibrium price and quantity in this market will be:

1.00 and 200

Refer to the above diagram. A surplus of 160 units would be encountered if price was

1.60

Refer to the above diagram. If this is a competitive market, price and quantity will move toward

40/150

In the past view years, the demand for donuts has greatly increased, this increase in demand might best be explained by:

A change in buyers taste

Which of the following will NOT cause the demand for product k to change?

A change in the price of K.

which of the following illustrates the effect of a decline in the price of computers on the market for software?

A only

Which of the following statements is correct? A) An increase in the price of C will decrease the demand for complementary product D. B) A decrease in income will decrease the demand for an inferior good. C) An increase in income will reduce the demand for a normal good. D) A decline in the price of X will increase the demand for substitute product Y.

A.

Refer to the above diagram, which shows demand and supply conditions in the competitive market for product X. Other things equal, a shift of the supply curve from S0 to S1 might be caused by a(n): A) increase in the wage rates paid to laborers employed in the production of X. B) government subsidy per unit of output paid to firms producing X. C) decline in the price of the basic raw material used in producing X. D) increase in the number of firms producing X.

A. increase in the wage rates paid to laborers employed in the production of X.

The upward slope of the supply curve reflects the: A) principle of specialization in production. B) law of supply. C) fact that price and quantity supplied are inversely related. D) law of diminishing marginal utility.

B

Refer to the above diagram, which shows demand and supply conditions in the competitive market for product X. A shift in the demand curve from D0 to D1 might be caused by a(n): A) decrease in income if X is an inferior good. B) increase in the price of complementary good Y. C) increase in money incomes if X is a normal good. D) increase in the price of substitute product Y.

B, increase in the price of complementary good Y.

Refer to the above diagram, which shows demand and supply conditions in the competitive market for product X. Given D0, if the supply curve moved from S0 to S1 , then: A) supply has increased and equilibrium quantity has decreased. B) supply has decreased and equilibrium quantity has decreased. C) there has been an increase in the quantity supplied. D) supply has increased and price has risen to 0G.

B, supply has decreased and equilibrium quantity has decreased.

Which of the above diagrams illustrate(s) the effect of a decline in the price of irrigation equipment on the market for corn? A) Bonly B) Conly C) BandC D) Donly

B. Conly

Which of the above diagrams illustrate(s) the effect of a decrease in incomes on the market for secondhand clothing? A) A and C B) A only C) B only D) C only

B/ A only

Which of the above diagrams illustrate(s) the effect of an increase in the price of Budweiser beer on the market for Coors beer? A) A and C B) A only C) B only D) C only

B/ A only

A recent study found that an increase in the federal tax on beer would reduce the demand for marijuana

Beer and Marijuana are complementary

Which of the above diagrams illustrate(s) the effect of a governmental subsidy on the market for AIDS research? A) A only B) B only C) C only D) D only

C. C only

When an economist says that the demand for a product has increased, this means that:

Consumers are now willing to purchase more of this product at each possible price

Refer to the above diagram. A SHORTAGE of 160 units would be encountered if price was: A) $1.10, that is, $1.60 minus $.50. B) $1.60. C) $1.00. D) $.50.

D

The use of money contributes to economic efficiency because: A) governmental direction of the production and distribution of output can be avoided by using money. B) roundabout production could not occur without the availability of money. C) it is necessary for the creation of capital goods. D) it promotes specialization by overcoming the problems with barter.

D

which of the following diagrams illustrate the effect of an increase in automobile worker wages on the market for automobiles

D only

Refer to the above diagram, which shows demand and supply conditions in the competitive market for product X. If supply is S1 and demand D0, then A) at any price above 0G a shortage would occur. B) 0F represents a price that would result in a surplus of AC. C) a surplus of GH would occur. D) 0F represents a price that would result in a shortage of AC.

D, 0F represents a price that would result in a shortage of AC.

When the price of oil declines significantly, the price of gasoline also declines. The latter occurs because of a(n):

Increase in supply of gasoline

The construction of demand and supply curves assumes that the primary variable influencing decisions to produce and purchase goods is

Price

A leftward shift of a product supply curve might be caused by

Some firms leaving the industry

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

Substitute goods and the higher price for oil

An increase in the excise tax on cigarettes raises the price of cigarettes by shifting the:

Supply curve leftward

S1 and D1 represent the original S/D. S2 and D2 new curves. In this market the indicated shift in supply may have been caused by

The development of more efficient machinery for producing this commodity.

In presenting the idea of a demand curve, economists presume that the most important variable in determining the quantity demanded is:

The price of the product itself

In which of the following statements are the terms demanded and quantity demanded used correctly.

When the price of ice cream rose, the quantity demanded of ice cream fell, and the demand for ice cream toppings fell.

An economist for a bicycle company predicts that, other things equal, a rise in consumer incomes will increase the demand for bicycles. This prediction is based on the assumption that:

bicycles are natural goods

Assume in a competitive market that price is initially above the equilibrium level. We can predict that price will:

decrease, quantity demanded will increase, and quantity supplied will decrease.

S1 and D1 represent the original supply and demand curve S2 and D2 the new curves. In this market

demand has increased and equilibrium price has decreased.

Other things equal, a shift of the supply curve from S0 to S1 might be caused by a(n)

increase in the wage rates paid to laborers employed in the production of X.

Refer to the above diagram an increase in quantity supplied is depicted by

moving from point y to point x

Gigantic State University raises tuition for the purpose of increasing its revenue so that more faculty can be hired. GSU is assuming that the demand for education at GSU is:

relatively inelastic

Data from the registrar's office at Gigantic State University indicate that over the past twenty years tuition and enrollment have both increased. From this information we can conclude that:

school-age population, incomes, and preferences for education have changed over the twenty-year period.

Refer to the above diagram A decreases in demand is depicted by a

shift from D2 to D1.

An improvement in production technology will:

shift the supply curve to the right

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.