Macroeconomics Chapter 3

A decrease in supply while holding demand constant results in a(n) ______ in equilibrium price, and a(n) ______ in equilibrium quantity

increase; decrease

If the government of a country subsidizes the production of a good, it:

increases supply lowers production costs

Greater resource prices _______ the costs of production, thereby, ______ the incentive for firms to produce the good at each price

increases; reducing

What are two goods called when a change in the price of one good has little or no effect on the demand for the other?

independent goods

What determines market price and equilibrium output in a market?

interactiion of buyers and sellers

If costs of production rise, the producer has an incentive to produce __________ output

less

______ is a schedule or curve showing the various amounts of a product that producers are willing and able to make available for sale at each possible price during a specific period.

market supply

The equilibrium price is otherwise known as the __________price

market-clearing

______ is on the vertical axis of a supply curve

price

If prices for a good or service are expected to increase in the future, demand for that good or service will ______ today. If prices are expected to decrease in the future, demand will ______ today.

rise; fall

Supply refers to the ______ of a product and demand refers to the ______ of the product

selling; buying

A change in demand is represented by a ______ the demand curve while a change in quantity demanded is represented by a _______ the demand curve

shift of; movement along

_______ refers to the production of a product, whereas demand refers to the consumption of a product

supply

A ______ good is one that is used together with another good -complementary -normal -substitute -Giffen

-complementary

A decrease in demand while holding supply constant results in_________ -an increase in equilibrium price and decline in equilibrium quantity -a decrease in equilibrium price and an increase in equilibrium quantity -a decrease in both equilibrium price and quantity -an increase in both equilibrium price and quantity

-a decrease in both equilibrium price and quantity

A decrease in equilibrium price and indeterminate result on equilibrium quantity is a result of which of the following?

An increase in supply and a simultaneous decrease in demand

The added cost of producing one more unit of output is called ________ cost

marginal

The ability of the competitive forces of supply and demand to establish a price at which selling and buying decisions are consistent is called _____

the rationing function of prices

A buyer's intentions or plants in regard to the purchase of a product is known as: -buyer's remorse -demand -wishful thinking -supply

-demand

All the following illustrate a market, except _____

a farmer sharing his surplus wheat with neighbors

A change in the number of buyers is a determinant of market

demand

Government may place legal limits on prices when it is determined that prices are unfairly ___ for buyers or unfairly __ for sellers

high;low

In general, a firm will ___________ the output of a good or service if the price of the good is higher.

increase

Which of the following is likely to cause an increase in the demand for a good or service?

An increase in the number of buyers

True or False: A shortage occurs when quantity supplied exceeds quantity demanded

False

True or False: Allocative efficiency is the particular mix of goods and services least valued by society

False

True or False: If the demand for a good increases when consumer incomes rise, then the good is considered "inferior"

False

True of False: a substitute good is one that is used in place of another good.

True

True or False: Resource costs or changes in these costs to production are responsible for shifts in the supply curve

True

Producer expectations of future prices are a determinant of

supply

The number of sellers or competitors in a market is a determinant or shifter of the _________ curve

supply

The prices of substitute goods that are used in production is a determinant of__________

supply

Which of the following specifically refers to demand?

the buyer side of any market

Diminishing marginal ______ states that, in any specific time period, buyers will derive less satisfaction from each additional unit of the product consumed

utility

In which of the following cases the demand for a normal good would likely increase?

A decrease in the price of complementary goods An increase in the number of buyers

The vast majority of goods that are not related to one another are called ___________ goods -substitute -independent -complementary -dependent

-independent

True or False: Resource costs or changes in these costs to productions are responsible for shifts in the supply curve

True

Which of the following market structure consists of a large number of independently acting on buyers and sellers? -A monopolistic competition -A perfect competition -An oligopoly -A monopoly

-A perfect competition

Which of the following has the greatest effect on the quantity supplied?

Price

Which of the following types of goods affect the demand for another product due to a change in their price?

Substitute goods Complementary goods

Which of the following are determinants of supply?

Technology Resource prices Taxes and subsidies Prices of other goods Producer expectations number of suppliers

True or False: The law of demand can be supported by the income effect.

True

True or false: An increase in the number of buyers in a market, ceteris paribus, is likely to increase demand

True

Which of the following illustrates the relationship between a good and its complement?

When the price of tuition decreases, the demand for textbooks increases. When the price of lettuce increases, the demand for salad dressing decreases

The effects on equilibrium price and quantity due to an increase in supply and a simultaneous decrease in demand are shown by _____

an increase in equilibrium price and quantity

The supply curve is

an upward sloping curve

Other things equal, if consumers believe that gas prices will rise in a week, the demand for gas today will

be lower than next week

An unfavorable change in consumer tastes and preferences for a product will ______ demand, which is illustrated as a shift of the demand curve to the ______

decrease; left

Consumer expectation is a determinant of _________

demand

A shortage results from an excess of quantity ________

demanded

The ___________ of the supply of a good are any factors other than the product's ______ that cause the supply curve of the good to shift

determinants, price

According to the law of supply, price and quantity supplied have a

direct relationship

The willingness and ability of a consumer to buy a normal product falls because of ___

fall in income

Which exemplifies a pair of substitute goods?

hot dogs and hamburgers

Which of the following is a determinant of demand?

income

An increase in demand while holding supply constant results in a ________ in both equilibrium price and quantity -increase -no change -decrease

increase

On a simple supply model, a change in quantity supplied is illustrated by a ______ and a change in supply is illustrated by a ___

movement along the supply curve; shift of the supply curve

All the following are the determinants of demand except ___

price of substitutes in production

The determinant of supply dealing with alternative products that can be produced by firms is called ____

price of substitutes in production

The interaction between buyers and sellers determines the equilibrium price and the equilibrium________

quantity

Which of the following refers to government financial assistance for the production of a good which lowers producers' costs and increases supply?

subsidy

Market _________ is a schedule or curve showing the various amounts of a product that producers are willing and able to make available for sale at each possible price during a specific period

supply

True or False: According to the law of supply, price and quantity supplied are directly related

true

Which of the following refers to government financial assistance for the production of a good which lowers producer's costs and increases supply? -A loan -A bailout -A tax -A subsidy

-A subsidy

Which of the following statements describe the law of demand -All other things being equal, as price decreases, quantity demanded increases. -All other things being equal, as price increases, quantity demanded increases -All other things being equal, as price decreases, quantity demanded decreases -All other things being equal, as price increases, quantity demanded decreases.

-All other things being equal, as price decreases, quantity demanded increases. -All other things being equal, as price increases, quantity demanded decreases.

Identify a true statement about demand and supply -An increase in consumer income is likely to increase the demand for a normal good. -And increase in the price of a good is likely to decrease the supply of the good -An increase in consumer income shifts the demand curve to the left -An increase in the price of a good shifts the supply curve to the left.

-An increase in consumer income is likely to increase the demand for a normal good.

Which of the following are effects of a decrease in supply while holding demand constant? -An increase in equilibrium quantity and a decrease in equilibrium price -An increase in equilibrium price and a decrease in equilibrium quantity -An increase in both equilibrium price and quantity -A decrease in both equilibrium price and quantity.

-An increase in equilibrium price and a decrease in equilibrium quantity

Which of the following are determinants of demand? -Consumer tastes -Resource prices -Prices of related goods -Consumer income -Consumer expectations -Number of sellers -Corporate taxes and subsidies -Number of buyers

-Consumer tastes -Prices of related goods -Consumer income -Consumer expectations -Number of buyers

_________ resource prices raise production costs and, assuming a fixed product price, _________ profits. -Higher; higher -Lower; reduce -Higher; reduce -Lower; higher

-Higher; reduce

From an economic perspective, which of the following are true of a market? -In a market, buyers and sellers make strategic decisions to make themselves better off. -In a market, buyers and sellers interact to buy and sell goods or services -A market is a location that is utilized only to hold excess producer supplies and inventories -Some markets are local, whereas some markets are national or international

-In a market, buyers and sellers make strategic decisions to make themselves better off. -In a market, buyers and sellers interact to buy and sell goods or services -Some markets are local, whereas some markets are national or international

Which of the following are the characteristics of a competitive market? -Large number of buyers and sellers -Small numbers of buyers and sellers -Standardized products -Differentiated products

-Large number of buyers and sellers -Standardized products

Other things equal, the fundamental characteristic of supply is: -as price rises, the quantity supplied does not change -as price falls, the quantity supplied falls -as price rises, the quantity supplied falls -as price falls, the quantity supplied rises

-as price falls, the quantity supplied falls

The concept of demand can be summarized by a schedule or curve showing the quantity of a product that would be: -given away at only one price -produced at various possible prices -subsidized at various possible prices -consumed at various possible prices.

-consumed at various possible prices.

The ________ incurred by firms when producing a good or service arise from the prices of the inputs that are used to produce said good or service. -costs of production -negative externality -losses -marginal product of labor

-costs of production

An increase in supply while holding demand constant results in a ________ in equilibrium price, but a____________ in equilibrium quantity. -decrease; increase -increase; increase -decrease; decrease -increase; decrease

-decrease; increase

The "other things equal" in the relationship between price and quantity supplied refer to the: -determinants of demand -determinants of supply -determinants of sellers -factors of production

-determinants of supply

Consumers experience _________ marginal utility the more they consume of a particular good or service. -constant -diminishing -additional -increasing

-diminishing

In order to construct a supply curve and demonstrate the law of supply, one would have to: -draw a downward sloping curve to demonstrate the inverse relationship between price and quantity demanded -draw an upward sloping curve to demonstrate the direct relationship between price and quantity supplied. -draw and upward sloping curve to demonstrate the inverse relationship between price and quantity demanded -draw a downward sloping curve to demonstrate the direct relationship between price and quantity demanded

-draw an upward sloping curve to demonstrate the direct relationship between price and quantity supplied.

Producer expectations refer to firms' expectations of_________ for a good or service that they produce -resource availability -consumer demand -future prices -life-cycle

-future prices

Beyond some quantity of production each added worker produces less added output, i.e., firms encounter ___________ in marginal cost. -increases -proportional changes -decreases -no changes

-increases

A demand curve shows the: -inverse relationship between price and quantity demanded for a product. -positive relationship between price and quantity demanded for a product -inverse relationship between price and quantity supplied for a product -positive relationship between price and quantity supplied for a product.

-inverse relationship between price and quantity demanded for a product.

An inverse relationship between two variables is a _________ relationship -complex -positive -negative -upside-down

-negative

The supply curve illustrates the relationship between: -price and quantity demanded -cost and price -price and quantity supplied -product and quantity supplied

-price and quantity supplied

Competition among corn producers forces them to use the best technology and right mix of productive resources; otherwise their costs will be too high relative to the market price and they will be unprofitable. This is best described as: -substitution in production -productive efficiency -energy efficiency -the law of supply -investment in physical capital goods

-productive efficiency

The price of _________ goods is a determinant of demand -independent -inexpensive -intermediate -producer -related

-related

The law of supply states that as price_______, the quantity supplied (Qs) rises; as the price_____, the quantity supplied falls. -falls; rises -falls; falls -rises; rises -rises; falls

-rises; falls

A ________ the demand curve represents a change in demand while a _______ the demand curve represents a change in the quantity demanded -movement along; shift of -shift of; movement along -rotation of; movement along -rotation of; shift of

-shift of; movement along

The market supply curve is the horizontal__________ of all the ________ supply curves for a good or service -subtraction; total -summation; total -summation; individual -multiplication; individual

-summation; individual

The market supply is derived by summing the quantity________ by each firm at each price -supplied -equilibrium -demanded

-supplied

The supply curve measures quantity_______ on the horizontal axis and _______ on the vertical axis. -price; supplied -price; demanded -supplied; price -demanded; price

-supplied; price

A surplus is also known as an excess of__________ -capital -imports -demand -supply

-supply

Improvements in technology is a determinant of_________ -quantity supplied -demand -quantity demanded -supply

-supply

Which of the following statements are true?

A decrease in consumers' income would decrease the demand for a normal good. An increase in the price of a normal good would decrease the quantity demanded of the good.

_______ while holding demand constant, results in an increase in the equilibrium price of the good, but a decrease in the equilibrium quantity of the good

A decrease in the supply of a good

In the marketplace, what is a good that can be used in place of another good called?

A substitute good

Which of the following shows the effects on equilibrium price and quantity due to an increase in supply and a simultaneous decrease in demand?

Equilibrium price falls and the change in equilibrium quantity is indeterminate

True or False: In the supply and demand model, quantity demanded is illustrated on the vertical axis, while the price is illustrated on the horizontal axis.

False

True or False: The supply curve of a good is an upward-sloping curve because as the price of the good decreases, producers will be willing to supply more of the good

False