Macroeconomics Chapter 4

Refer to the Figure. At a price of

$10, there is neither a shortage nor a surplus. (correct. At a price of $10, the quantity demanded, 50 units, equals the quantity supplied, 50 units, resulting in equilibrium.)

If wireless phone manufacturers begin using new technology to produce phones, we would expect the

supply curve for wireless phones to shift to the right.

If buyers and sellers in a certain market are price takers, then individually

they must accept the price the market determines.

In competitive markets,

both buyers and sellers are price takers.

Refer to the table. If the law of demand applies to this good, then Q1 could be

1,500. (correct. The law of demand states that, all else equal, when the price increases, the quantity demanded decreases.)

Refer to the table. If the law of demand applies to this good, then Q1 could be

500.

Suppose that Jarrod receives a pay increase. We would expect

Jarrod's demand for pizza, a normal good, to shift to the right.

If gum and breath mints are substitutes, a higher price for gum would

increase the demand for breath mints.

Consider the market for jelly beans. If the price of jelly beans decreases, the

quantity demanded of jelly beans increases.

Which of the following demonstrates the law of supply?

When camera prices rose, camera sellers increased their quantity supplied of cameras.

Refer to the Figure. At a price of

$6, there is a shortage of 40 units. (correct. When the price is $6, the quantity supplied, 30 units, is less than the quantity demanded, 70 units, resulting in a shortage of 70-30 = 40 units.)

Refer to the Table. The equilibrium price and quantity, respectively, are

$70 and 40 units. (correct. The equilibrium occurs at the price at which the quantity demanded equals the quantity supplied. At a price of $70, the quantity demand and quantity supplied are both 40 units.)

Refer to the table. The table contains a supply schedule for a good. If the law of supply applies to this good, then Q1 could be:

0. (correct. The law of supply states that, all else equal, when the price increases, the quantity supplied increases.)

Refer to the Figure. If these are the only two sellers in the market, then the market quantity supplied at a price of $3 is

11 units. (correct. The market quantity supplied is the sum of the supplies of the individual suppliers. When the price is $3, Firm A supplies 5 units and Firm B supplies 6 units; therefore, the market quantity supplied is 11 units.)

Refer to the Figure. If Consumer A and Consumer B are the only consumers in the market, then the market quantity demanded when the price is $6 is

12 units. (correct. The market quantity demanded is the sum of the individual demands. When the price is $6, the sum of the quantities demanded by the two consumers is 12 units; 2+10 = 12.)

Refer to the Table. If these are the only four sellers in the market, then when the price increases by $4, the market quantity supplied increases by

14 Units (Correct. The market quantity supplied is the sum of all of the individual supplies. When the price increases by $4, the sum of the individual quantities supplied increases by 14 units at all price levels. For example, when the price is $0, the quantity supplied in the market is 0 units and when the price is $4, the quantity supplied in the market is 2+5+4+3 = 14 units; 14-0 = 14.)

Refer to the Table. If these are the only four sellers in the market, then the market quantity supplied at a price of $4 is

14 units. (Correct. The market quantity supplied is the sum of all of the individual supplies. When the price is $4, the sum of the individual quantities supplied is 2+5+4+3 = 14 units.)

Refer to the Figure. If Consumer A and Consumer B are the only consumers in the market, then the market quantity demanded when the price is $4 is

16 units. (correct. The market quantity demanded is the sum of the individual demands. When the price is $4, the sum of the quantities demanded by the two consumers is 16 units; 4+12 = 16.)

Refer to the Figure. There is a shortage of

20 units when the price is $8. (correct. At a price of $8, the quantity demanded, 60 units, exceeds the quantity supplied, 40 units, resulting in a shortage of 20 units.)

Refer to the Figure. If these are the only two sellers in the market, then the market quantity supplied at a price of $6 is

22 units. (correct. The market quantity supplied is the sum of the supplies of the individual suppliers. When the price is $6, Firm A supplies 10 units and Firm B supplies 12 units; therefore, the market quantity supplied is 22 units.)

Refer to the Table. If the market consists of John and Albert only and the price decreases by $2, the quantity demanded in the market increases by

3 units. (correct. The quantity demanded in the market is the sum of all of the individual demands. When the price decreases by $2, the sum of the quantities demanded by John and Albert increases by 3 units at all price levels. For example, when the price is $20, the quantity demanded in the market is 2+5 = 7 units and when the price is $18, the quantity demanded in the market is 3+7 = 10 units; 10-7 = 3.)

Refer to the Figure. If these are the only two sellers in the market, then the market quantity supplied at a price of $9 is

33 units. (correct. The market quantity supplied is the sum of the supplies of the individual suppliers. When the price is $9, Firm A supplies 15 units and Firm B supplies 18 units; therefore, the market quantity supplied is 33 units.)

Refer to the Table. If these are the only three buyers in the market, then the market quantity demanded at a price of $14 is

33 units. (correct. The quantity demanded in the market is the sum of all of the individual demands. When the price is $14, the sum of the quantities demanded by all three buyers is 33 units; 5+11+17 = 33.)

Refer to the Table. If the market consists of John and Phillip only and the price decreases by $2, the quantity demanded in the market increases by

4 units (correct. The quantity demanded in the market is the sum of all of the individual demands. When the price decreases by $2, the sum of the quantities demanded by John and Phillip increases by 4 units at all price levels. For example, when the price is $20, the quantity demanded in the market is 2+8 = 10 units and when the price is $18, the quantity demanded in the market is 3+11 = 14 units; 14-10 = 4.)

Refer to the Table. If the market consists of Albert and Phillip only and the price falls by $2, the quantity demanded in the market increases by

5 units. (Correct. The quantity demanded in the market is the sum of all of the individual demands. When the price decreases by $2, the sum of the quantities demanded by Albert and Phillip increases by 5 units at all price levels. For example, when the price is $20, the quantity demanded in the market is 5+8 = 13 units and when the price is $18, the quantity demanded in the market is 7+11 = 18 units; 18-13 = 5.)

Refer to the Table. If these are the only four sellers in the market, then the market quantity supplied at a price of $16 is

56 units. (correct. The market quantity supplied is the sum of all of the individual supplies. When the price is $16, the sum of the individual quantities supplied is 8+20+16+12 = 56 units.)

Refer to the Figure. If Consumer A and Consumer B are the only consumers in the market, then the market quantity demanded when the price is $10 is

6 units. (correct. The market quantity demanded is the sum of the individual demands. When the price is $10, the sum of the quantities demanded by the two consumers is 6 units; 0+6 = 6.)

Refer to the Table. If the market consists of John, Albert, and Phillip and the price decreases by $2, the quantity demanded in the market increases by

6 units. (correct. The quantity demanded in the market is the sum of all of the individual demands. When the price decreases by $2, the sum of the individual quantities demanded increases by 6 units at all price levels. For example, when the price is $20, the quantity demanded in the market is 2+5+8 = 15 units and when the price is $18, the quantity demanded in the market is 3+7+11 = 21 units; 21-15 = 6.)

Refer to the Figure. If Consumer A and Consumer B are the only consumers in the market, then the market quantity demanded when the price is $8 is

8 Units (Correct. The market quantity demanded is the sum of the individual demands. When the price is $8, the sum of the quantities demanded by the two consumers is 8 units; 0+8 = 8.)

Refer to the Figure. Which of the following would cause the demand curve to shift from Demand B to Demand C in the market for pickup trucks in the United States?

A decrease in the price of gas (Correct. A shift from Demand B to Demand C is an increase in demand. Gas is a complement to pickup trucks so a decrease in the price of gas causes an increase in the demand for pickup trucks.)

When a new study reveals that eating pretzels can increase the likelihood of developing lung cancer, which of the following outcomes is expected?

Both the price and quantity of pretzels will fall.

Refer to the Table. If the market consists of John, Albert, and Phillip and the price decreases by $2, the quantity demanded in the market

Increases by 6 units. (Correct. The quantity demanded in the market is the sum of all of the individual demands. When the price decreases by $2, the sum of the individual quantities demanded increases by 6 units at all price levels. For example, when the price is $20, the quantity demanded in the market is 2+5+8 = 15 units and when the price is $18, the quantity demanded in the market is 3+7+11 = 21 units; 21-15 = 6.)

Which of the following demonstrates the law of demand?

Jenna buys fewer pairs of shoes at $50.00 per pair than at $30.00 per pair, other things equal.

Suppose there are five barbers in the town of Crossroads. If we add the respective quantities of haircuts that each firm would be willing to sell when the price of a haircut is $12 per haircut, $15 per haircut, and $18 per haircut, and so forth, we have found the

Market supply curve.

The highest form of competition is called

Perfect competition

Refer to the Figure. Which of the following movements would illustrate the effect in the market for cars of a decrease in the price of gas?

Point A to Point D (correct. Gas is a complement to cars. When the price of gas decreases, the demand for cars increases, as shown by movement from Point A to Point D.)

Refer to the Figure. Which of the following movements would illustrate the effect in the market for paper of an increase in the price of pulp, used in the production of paper?

Point C to Point D (correct. Pulp is an input into the production of paper. When the price of pulp increases, the supply of paper decreases, as shown by a movement from Point C to Point D.)

When the price of pizza increases, the

Quantity supplied of pizza increases.

Cookies are normal goods. What will happen to the equilibrium price and quantity of cookies if the price of sugar falls, the price of milk falls, more firms start producing cookies, and cookie lovers experience an increase in income?

Quantity will rise, and the effect on price is ambiguous.

Refer to the Figure. Consider the market for jeans. An increase in the number of sellers of jeans could be shown by a

Shift from S2 to S1 (Correct. A shift from S2 to S1 is an increase in supply. Supply increases when more sellers enter the market.)

Refer to the Figure. Consider the market for winter sweaters. A decrease in the price of wool could be shown in the market for winter sweaters by a

Shift from S2 to S1. (Correct. Wool is an input into the production of winter sweaters. When an input price decreases, supply for the good made with the input increases. A shift from S2 to S1 is an increase in supply.)

The US government announces that next month it will offer tax rebates on new energy efficient windows. As a result of this information, today's demand curve for energy efficient windows

Shifts to the left.

Which of the following scenarios would cause a shortage in a market?

The actual price is $10, the equilibrium price is $12, the quantity demanded is 1,250 and the quantity supplied is 800.

Which of the following scenarios would cause a surplus in a market?

The actual price is $25, the equilibrium price is $20, the quantity supplied is 100 and the quantity demanded is 75.

What would happen to the equilibrium price and quantity of sunscreen if a new formula is developed that makes production cheaper, and scientists discovered that sunscreen causes more cancer than sun damage?

The equilibrium price would decrease, and the effect on equilibrium quantity would be ambiguous.

If the price of cheeseburgers rose to $12 per cheeseburger, producers would produce more cheeseburgers than if the price were $10 per cheeseburger. If the price of hotdogs fell to $3 per hotdog, producers would produce fewer hotdogs than if the price were $5 per hotdog. These relationships illustrate

The law of supply.

An increase in the number of orange growers causes

The market supply curve for oranges to shift to the right.

If a drought affects the harvest of coffee beans and coffee and tea are considered to be substitutes, what changes occur in the markets for coffee and tea?

The price of coffee rises and the quantity of coffee falls; both the price and quantity of tea rise.

Which of the following events would cause a movement upward and to the left along the demand curve for flannel sheets?

The price of flannel sheets increases.

Which of the following changes would not shift the demand curve for gas?

The price of gas decreases due to increased production.

Washing machines and dryers are complementary goods. When the technology used to produce washing machines improves, what changes occur in the markets for washing machines and dryers?

The price of washing machines falls and the quantity of washing machines rises; both the price and quantity of dryers rise.

Refer to the Figure. Which of the following would cause the demand curve to shift from Demand C to Demand A in the market for pickup trucks?

a change in consumer tastes toward public transit and environmentally conscious travel modes (correct. The shift from Demand C to Demand A is a decrease in demand. The demand for pickup trucks decreases when consumers prefer public transit and environmentally conscious travel modes.)

If generic medicine is an inferior good, then an increase in

a consumer's income will cause the demand curve for generic medicine to shift to the left.

If candles and candlesticks are complements, then which of the following would increase the demand for candles?

a decrease in the price of candlesticks

The supply curve for yoga mats shifts when

a determinant of the supply of yoga mats other than the price of yoga mats changes.

Which of the following is not required for a market to exist?

a meeting location and time

Which of the following would most likely serve as an example of a monopoly?

an electricity provider

Refer to the Figure. Which of the following would cause the demand curve to shift from Demand A to Demand B in the market for sweatshirts, a normal good?

an expectation by buyers that their incomes will increase in the very near future. (correct. A shift from Demand A to Demand B is an increase in demand for sweatshirts. When consumers expect their income to increase in the very near future, their demand for normal goods increases.)

Refer to the Figure. Which of the following would cause the supply curve to shift from Supply B to Supply A in the market for replacement windows?

an expectation by firms that the price of replacement windows will increase in the very near future. (Correct. A shift from Supply B to Supply A is a decrease in supply. If firms expect that the price of replacement windows will increase in the very near future, they will reduce their supply today.)

Refer to the Figure. The movement from S1 to S2 could be caused by

an increase in input prices. (correct. The movement from S1 to S2 is a decrease in supply. A decrease in supply can be caused by an increase in input prices.)

Refer to the Figure. In the market for beer, a movement from point A to point B could be caused by

an increase in the price of beer. (Correct. A movement from point A to point B is a movement along curve S1 and is caused by an increase in the price of beer from P to P'.)

Refer to the Figure. The movement from point C to point D on the graph is called a(n)

decrease in the quantity supplied. (correct. A movement downward and to the left along a supply curve is a decrease in the quantity supplied caused by a decrease in the price.)

An increase in the price of a good would

decrease the quantity demanded of the good.

A(n) ___________ in the price of a good will ____________.

decrease; decrease quantity supplied

Refer to the Table. If these are the only four sellers in the market, when the price decreases by $4, the market quantity supplied

decreases by 14 units. (correct. The market quantity supplied is the sum of all of the individual supplies. When the price decreases by $4, the sum of the individual quantities supplied decreases by 14 units at all price levels. For example, when the price is $20, the quantity supplied in the market is 10+25+20+15 = 70 units and when the price is $16, the quantity supplied in the market is 8+20+16+12 = 56 units; 70-56 = 14.)

When the price of lumber changes, the demand curve for lumber

does not shift because the quantity demanded of lumber does not change at every possible price.

Suppose a study from a major university reports that consuming chocolate reduces the likelihood of dying from cancer. We could expect the current demand for

hot cocoa to increase.

A movement upward and to the right along the supply curve for mobile phones is caused by a(n)

increase in the price of mobile phones.

If Betty experiences an increase in her income, then we would expect Betty's demand for

inferior goods to decrease.

A decrease in quantity supplied is different from shifting the supply curve to the left because a decrease in quantity supplied

is caused by a price decrease while a shift to the left is caused by a change in a nonprice determinant of supply.

An increase in quantity demanded is different from shifting the demand curve to the right because an increase in quantity demanded

is caused by a price decrease while a shift to the right is caused by a change in a nonprice determinant of demand.

A decrease in quantity demanded is different from shifting the demand curve to the left because a decrease in quantity demanded

is caused by a price increase while a shift to the left is caused by a change in a nonprice determinant of demand.

An increase in quantity supplied is different from shifting the supply curve to the right because an increase in quantity supplied

is caused by a price increase while a shift to the right is caused by a change in a nonprice determinant of supply.

If the price of umbrellas rose to $15 per umbrella, consumers would purchase fewer umbrellas than if the price were $10 per umbrella. If the price of rain boots fell to $20 per pair, consumers would purchase more rain boots than if the price were $25 per pair. These relationships illustrate the

law of demand.

A group of pizza buyers and pizza sellers forms a(n)

market.

The millennials are the largest generation in US history and, according to a recent study, 80% of them use mobile phone as their primary form of communication. As a result of millennials entering the market for mobile phones, the market demand for

mobile phones shifts to the right.

Refer the figure. In the market for pizza in a college, which of the following movements would illustrate the effect of an increase in wages paid to pizza makers and a return of college students after the summer break?

point B to point D (correct. There are two effects in this market. When wages of pizza makers increase, the supply of pizzas decreases. When college students return, the number of buyers increases, causing an increase in demand. A movement from point B to point D shows both a decrease in supply and an increase in demand.)

What will happen to the equilibrium price and quantity of iPhones if the price of other smart phones falls, Apple develops new technology to produce iPhones, wireless phone contracts become more expensive, and Apple expects the price of iPhones to decrease in the near future?

rice will fall, and the effect on quantity is ambiguous.

Consider the market for coffee makers. If coffee becomes cheaper, consumption of coffee is found to reduce heart disease, the wages of workers in manufacturing plants increases, and the price of plastic increases, the equilibrium price will

rise.

Refer to the Figure. A decrease in demand is represented by a

shift from Demand C to Demand A. (correct. A shift from Demand C to Demand A is a decrease in demand. At all possible price levels, the quantity demanded is lower on Demand A than on Demand C.)

If Alice expects to earn a higher income next month, she may choose to

shift her demand for clothes to the right.

Refer to the Table. If the price were $60, a

shortage of 35 units would exist, and price would tend to rise. (Correct. When the price is $60, the quantity demanded, 55 units, exceeds the quantity supplied, 20 units, resulting in a shortage of 55-20 = 35 units. The price will tend to rise until the quantity supplied equals the quantity demanded.)

Suppose milk is currently selling for $2.50 per gallon, but the equilibrium price of milk is $3.00 per gallon. We would expect a

shortage to exist and the market price of milk to increase.

ABC Photography Co. purchases new computer software that reduces the costs of editing and distributing photos. As a result, the

supply curve for ABC's photos will increase.

Workers in a union at an automobile assembly plant negotiate a higher wage. It is likely that

supply of autos will shift to the left.

Refer to the Table. If the price were $80, a(n)

surplus of 35 units would exist, and price would tend to fall. (Correct. When the price is $80, the quantity supplied, 60 units, exceeds the quantity demanded, 25 units, resulting in a surplus of 60-25 = 35 units. The price will tend to fall until the quantity supplied equals the quantity demanded.)

Suppose tickets to a baseball game are currently selling for $60 each, but the equilibrium price of tickets is $50 each. We would expect a

surplus to exist and the market price of tickets to decrease.

Cotton is an important input in the production of t-shirts. If the price of cotton increases, then we would expect the supply of

t-shirts to decrease.

In the market for haircuts, demand is determined by:

the buyers of haircuts.

A very snowy winter in Boston will cause

the demand curve for snow blowers to shift to the right.

If consumers want to buy more apples at every possible price,

the demand curve is shifted to the right.

Today's supply curve for corn could shift in response to a change in

the expected future price of corn.

Sonia buys 15 lattes per month when the price is $4.00 per latte and 20 lattes per month when the price is $3.00 per latte. Sonia's buying decisions demonstrate

the law of demand.

Suppose there are five suppliers of ice cream in the town of Summerville. When the price of ice cream is $2 per scoop, Firm A is willing to sell 20 scoops, Firm B is willing to sell 50 scoops, Firm C is willing to sell 35 scoops, Firm D is willing to sell 100 scoops, and Firm E is willing to sell 40 scoops. From this information we can conclude that

the market quantity supplied is less than 250 scoops when the price is $2 per scoop.

Suppose there are five suppliers of ice cream in the town of Summerville. If the price of ice cream is $2.50 per scoop, Firm A is not willing to sell any scoops, Firm B is willing to sell 25 scoops, Firm C is willing to sell 5 scoops, Firm D is willing to sell 10 scoops, and Firm E is not willing to sell any scoops. When the price of ice cream is $3 per scoop, Firm A is willing to sell 20 scoops, Firm B is willing to sell 50 scoops, Firm C is willing to sell 35 scoops, Firm D is willing to sell 100 scoops, and Firm E is willing to sell 40 scoops. From this information we can conclude that

the market supply curve between the prices of $2.50 and $3.00 is upward sloping.

Which of the following events must cause the equilibrium quantity to rise in the market for burritos?

the price of pizza increases and the price of tortillas decreases (correct. The equilibrium quantity in a market must rise when both demand and supply increase. When the price of pizza increases, the demand for burritos increases because pizza and burritos are substitutes. When the price of tortillas decreases, the supply of burritos increases because tortillas are an input into burritos.)

Assume the market for wheat is perfectly competitive. When one wheat buyer exits the market,

the price of wheat does not change; when one wheat seller exits the market, the price of wheat does not change.

In the market for bread, supply is determined by

the sellers of bread.

Which of the following events must cause equilibrium price to fall in the market for gas-powered snow blowers?

the weather forecasters predict a drier than normal winter and producers of gas-powered snow blowers find a faster method of production

Which of the following is the most likely to be a perfectly competitive market?

wheat