Marco: Chapter 3
Which of the following statements is true? A) An increase in demand causes a change in equilibrium price; the change in price does notcause a further shifts in demand or supply. B) If demand decreases and supply increases one cannot determine if equilibrium price willincrease or decrease without knowing which change is greater. C) A decrease in supply causes equilibrium price to rise; the increase in price then results in adecrease in demand. D) If both demand and supply increase there must be an increase in equilibrium price;equilibrium quantity may either increase or decrease. E) All of the above are true
A) An increase in demand causes a change in equilibrium price; the change in price does notcause a further shifts in demand or supply
Which of the following would cause a decrease in the supply of milk?A) An increase the price of a product that producers sell instead of milk. B) An increase in the price of cookies (assuming that milk and cookies are complements). C) A decrease in the price of milk D) An increase in the number of firms that produce milk. E) More than one of the above would decrease the supply of milk
A) An increase the price of a product that producers sell instead of milk.
Which of the following correctly describes how price adjustments eliminate a shortage? A) As the price rises, the quantity demanded decreases while the quantity supplied increases. B) As the price falls, the quantity demanded increases while the quantity supplied decreases. C) As the price falls, the quantity demanded decreases while the quantity supplied increases. D) As the price rises, the quantity demanded increases while the quantity supplied decreases.
A) As the price rises, the quantity demanded decreases while the quantity supplied increases.
In most years, consumers demand more gasoline during summer months. Thus, during thesummer months, the price of gasoline is typically higher than during other times of the year, andpeople use more gasoline at these higher prices. Does this outcome represent a violation of the lawof demand? A) No it is not a violation of the law of demand. The ʺceteris paribusʺ portion of the law of demand doesnʹt hold in this example. B) No it is not a violation of the law of demand. The law of demand maintains that, ceterisparibus, people will demand more of a good at higher prices which is exactly what happensin this example. C) Yes it is a violation of the law of demand. Gasoline is different than most goods. People tendto use more of it at higher prices.
A) No it is not a violation of the law of demand. The ʺceteris paribusʺ portion of the law of demand doesnʹt hold in this example.
Suppose that in 1996, 12 million cars were purchased at $15,000 each, while in 1997, 14 million carswere purchased at $18,000 each. What might have caused this change? A) The price of airplane tickets (a substitute for cars) rose B) Automobile manufacturing technology increased C) Automobile manufacturing technology decreased D) The price of airplane tickets (a substitute for cars) fell
A) The price of airplane tickets (a substitute for cars) rose
Suppose that in October the price of a cup of cafe latte was $2.50 and 400 lattes were consumed. InNovember the price of a latte was $2.00 and 300 lattes were consumed. What might have causedthis change? A) The price of tea (a substitute for cafe lattes) fell. B) The price of coffee beans (an input of production of cafe lattes) rose. C) The price of tea (a substitute for cafe lattes) rose. D) The price of coffee beans (an input of production of cafe lattes) fell.
A) The price of tea (a substitute for cafe lattes) fell.
In recent years the cost of producing wines in the U.S. has increased largely due to rising rents forvineyards. At the same time, more and more Americans prefer wine over beer. Which of thefollowing best explains the effect of these events in the wine market? A) The supply curve has shifted to the left and the demand curve has shifted to the right. As aresult, there has been an increase in the equilibrium price and an uncertain effect on theequilibrium quantity. B) Both the supply and demand curves have shifted to the right. As a result, there has been anincrease in both the equilibrium price and the equilibrium quantity. C) Both the supply and demand curves have shifted to the right. As a result, there has been anincrease in the equilibrium price and an uncertain effect on the equilibrium quantity. D) The supply curve has shifted to the left and the demand curve has shifted to the right. As aresult there has been an increase in the equilibrium quantity and an uncertain effect on theequilibrium price.
A) The supply curve has shifted to the left and the demand curve has shifted to the right. As aresult, there has been an increase in the equilibrium price and an uncertain effect on theequilibrium quantity.
Suppose that the market for bottled water is initially in equilibrium. If the demand for bottledwater decreases, but the price of bottled water stays at the initial equilibrium price, then A) There will be a surplus of bottled water. B) The bottled water market will be in equilibrium. C) There will be a shortage of bottled water.
A) There will be a surplus of bottled water.
If a decrease in income leads to an increase in the demand for macaroni, then macaroni is A) an inferior good. B) a neutral good. C) a necessity.
A) an inferior good.
Suppose that the demand for tatoo ink increases at the same time that there is a technologicaladvance in the production of tatoo ink. It is impossible for the A) equilbrium quantity of tatoo ink to fall. B) equilbrium price of tatoo ink to fall. C) equilbrium quantity of tatoo ink to rise. D) equilbrium price of tatoo ink to rise.
A) equilbrium quantity of tatoo ink to fall.
Suppose that when the price of hamburgers increases, the Ruiz family increases their purchases ofhot dogs. To the Ruiz family, A) hamburgers and hot dogs are substitutes. B) hamburgers and hot dogs are inferior goods. C) hamburgers and hot dogs are complements. D) hamburgers and hot dogs are normal goods.
A) hamburgers and hot dogs are substitutes
The law of demand implies, holding everything else constant, that as the price of yogurt A) increases, the quantity of yogurt demanded will decrease B) increases, the demand for yogurt will increase. C) decreases, the quantity of yogurt demanded will decrease. D) decreases, the demand for yogurt will increase.
A) increases, the quantity of yogurt demanded will decrease
The cost of raising beef cattle has risen at the same time as consumer preference for beef hasdeclined (i.e. decrease in beef demand). In the market for beef, these events result in theequilibrium price ________ and the equilibrium quantity ________. A) increasing, decreasing, or not changing; decreasing B) increasing; increasing, decreasing, or not changing C) decreasing ; increasing, decreasing, or not changing D) increasing, decreasing, or not changing; increasing
A) increasing, decreasing, or not changing; decreasing
The law of demand defines a A) negative relationship between price and quantity demanded. B) negative relationship between income and quantity demanded. C) positive relationship between income and quantity demanded. D) positive relationship between price and quantity demanded.
A) negative relationship between price and quantity demanded.
If the demand for jelly increases at the same time that the price of grapes (used to make jelly) rises A) the equilibrium price of jelly rises and the equilibrium quantity of jelly might rise or fall. B) the equilibrium price of jelly falls and the equilibrium quantity of jelly might rise or fall. C) the equilibrium price of jelly might rise or fall, and the equilibrium quantity of jelly falls. D) the equilibrium price of jelly might rise or fall, and the equilibrium quantity of jelly rises.
A) the equilibrium price of jelly rises and the equilibrium quantity of jelly might rise or fall.
During the winter, about 20% of the local lettuce crop was destroyed by flooding. At the sametime that part of the lettuce crop was destroyed, the demand for lettuce increased. Taken together,these two situations would have caused: A) the equilibrium price of lettuce to increase. The equilibrium quantity of lettuce could haveincreased, decreased, or remained the same. B) both the equilibrium price and quantity of lettuce to decrease. C) the equilibrium price to increase and the equilibrium quantity of lettuce to decrease. D) the equilibrium price of lettuce to either increase, decrease, or remain the same and theequilibrium quantity of lettuce to decrease.
A) the equilibrium price of lettuce to increase. The equilibrium quantity of lettuce could haveincreased, decreased, or remained the same.
Which of the following is held constant along a given demand curve? A) the incomes of buyers B) the price of the good C) Both of the above D) None of the above
A) the incomes of buyers
Select the phrase that correctly completes the following statement. ʺAn increase in input pricescaused a decrease in the supply of baseballs. As a result ________.ʺ A) the price of baseballs increased and the quantity demanded of baseballs decreased B) the price of baseballs increased. The higher price caused the supply of baseballs to increase C) the price of baseballs increased and the demand for baseballs decreased D) the equilibrium quantity of baseballs increased
A) the price of baseballs increased and the quantity demanded of baseballs decreased
Suppose favorable weather resulted in a bumper crop of oranges in Florida. In the market fororanges A) the supply curve shifted to the right resulting in a decrease in the equilibrium price. B) the supply curve shifted to the right resulting in an increase in the equilibrium price. C) the demand curve shifted to the left resulting in a decrease in the equilibrium price. D) the demand curve shifted to the right resulting in an increase in the equilibrium price.
A) the supply curve shifted to the right resulting in a decrease in the equilibrium price.
Farmers can plant either corn or soybeans in their fields. Which of the following would cause thesupply of soybeans to decrease? A) A decrease in the price of corn. B) An increase in the price of corn. C) A decrease in the price of soybeans. D) An increase in the price of soybeans.
B) An increase in the price of corn.
During 2002 the supply of petroleum increased while at the same time the demand for petroleumincreased. If the magnitude of the increase in demand was greater than the magnitude of theincrease in supply, which of the following occurred? A) The equilibrium price of petroleum decreased and the equilibrium quantity increased. B) The equilibrium price of petroleum increased and the equilibrium quantity increased. C) The equilibrium price of petroleum decreased and the equilibrium quantity did not change. D) The equilibrium price of petroleum decreased and the equilibrium quantity decreased. E) The equilibrium price of petroleum increased and the equilibrium quantity decreased.
B) The equilibrium price of petroleum increased and the equilibrium quantity increased.
If the demand for letters written by Abraham Lincoln is higher than the demand for letters writtenby John Wilkes Booth, what would have to be true for the market equilibrium prices for theseletters to be equal? A) If the demand for Lincoln letters is greater than the demand for Booth letters, the marketequilibrium price for Lincoln letters will always be greater than the market equilibrium pricefor Booth letters. B) The supply of Booth letters would have to be less than the supply of Lincoln letters. C) The supply of Lincoln letters would have to be less than the supply of Booth letters. D) The supply of Lincoln letters and the supply of Booth letters would have to be equal.
B) The supply of Booth letters would have to be less than the supply of Lincoln letters.
Suppose that in 2009, 12 million cars were purchased at $15,000 each, while in 2010, 14 million carswere purchased at $12,000 each. What most likely caused this change? A) The demand for automobiles decreased B) The supply of automobiles increased C) The supply of automobiles decreased D) The demand for automobiles increased
B) The supply of automobiles increased
Which of the following shifts the supply curve rightward? A) an increase in the number of potential buyers B) a decrease in the price of an input used to produce the good C) a decrease in the price of the good D) an increase in the price of the goodE) More than one of the above is correct
B) a decrease in the price of an input used to produce the good
Petroleum and solar power are substitutes (in consumption). Petroleum and automobiles arecomplements (in consumption). When the price of petroleum decreases, the demand for solarpower will __________ and the demand for automobiles will ___________. A) decrease ; decrease B) decrease ; increase C) increase ; decrease D) not change ; not change E) increase ; increase
B) decrease ; increase
During the 1990s positive technological change in the production of chicken caused an increase insupply of chicken. What should this change have done to the equilibrium price and quantity ofchicken?A) increase the equilibrium price and increase the equilibrium quantity B) decrease the equilibrium price and increase the equilibrium quantity C) increase the equilibrium price and decrease the equilibrium quantity D) decrease the equilibrium price and decrease the equilibrium quantity
B) decrease the equilibrium price and increase the equilibrium quantity
Suppose that the demand for tatoo ink decreases at the same time that there is a technologicaladvance in the production of tatoo ink. It is impossible for the A) equilbrium quantity of tatoo ink to fall. B) equilbrium price of tatoo ink to rise. C) equilbrium quantity of tatoo ink to rise. D) equilbrium price of tatoo ink to fall.
B) equilbrium price of tatoo ink to rise.
Suppose that ʺsafe carsʺ and ʺdangerous carsʺ are substitutes in consumption. If there is atechnological advance in the production of ʺsafe carsʺ then the equilibrium price of ʺsafe carsʺ will__________ and the equilibrium quantity of ʺsafe carsʺ will ______________. Additionally, theequilibrium quantity of ʺdangerous carsʺ will ______________ .A) rise ; decrease ; increase B) fall ; increase ; decrease C) fall ; increase ; increase D) rise ; increase ; increase E) None of the above
B) fall ; increase ; decrease
Suppose that good weather increases the supply of avocados. Avocados are an input in theproduction of guacamole, and guacamole is in turn a consumption substitute for salsa. Theequilibrium price of salsa will __________ and the equilibrium quantity of salsa will ________. A) not change; not change B) fall; fall C) rise; fall D) rise; rise E) fall; rise
B) fall; fall
Consider the market for tacos. If a new report warns that taco consumption is an unhealthybehavior at the same time that the price of beef (input to taco production) rises, the price of tacoswill ____________ and the quantity of tacos will ____________. A) fall ; rise, fall, or not change B) rise, fall, or not change ; fall C) rise ; rise, fall, or not change D) rise, fall, or not change ; rise E) None of the above
B) rise, fall, or not change ; fall
Lettuce is an inferior good. During the winter, about 20% of the lettuce crop was destroyed byflooding. At the same time that part of the lettuce crop was destroyed, consumer income also decreased. Taken together, these two situations would have caused: A) the equilibrium price to increase and the equilibrium quantity of lettuce to decrease. B) the equilibrium price of lettuce to increase. The equilibrium quantity of lettuce could haveincreased, decreased, or remained the same. C) the equilibrium price of lettuce to either increase, decrease, or remain the same and theequilibrium quantity of lettuce to decrease. D) both the equilibrium price and quantity of lettuce to decrease.
B) the equilibrium price of lettuce to increase. The equilibrium quantity of lettuce could haveincreased, decreased, or remained the same.
One would speak of a movement along a supply curve for a good, rather than a change in supply,if A) the cost of producing the good changes. B) the price of the good changes C) Both of the above are correct
B) the price of the good changes
Consider the market for tacos. There is a decrease in taco demand at the same time that there is adecrease in taco supply. As these shifts occur, we observe that the equilibrium price of tacos risesand the equilibrium quantity of tacos falls. We can thus deduce that A) the supply and demand shifts were of equal size B) the supply shift was larger in size than the demand shift C) the demand shift was larger in size than the supply shift
B) the supply shift was larger in size than the demand shift
An insect that is resistant to currently used pesticides has infested the cotton crop, and this yearʹscrop is only half of what was produced last year. You accurately predict that this A) will shift the supply curve of cotton to the left, the equilibrium price of cotton will increase,and the demand for cotton will fall. B) will shift the supply curve of cotton to the left, the equilibrium price of cotton will increase,and the quantity demanded of cotton will decrease. C) will shift the supply curve of cotton to the right, the equilibrium price of cotton will increase,and the demand for cotton will fall. D) will shift the supply curve of cotton to the right, the equilibrium price of cotton will increase,and the quantity demanded of cotton will decrease.
B) will shift the supply curve of cotton to the left, the equilibrium price of cotton will increase,and the quantity demanded of cotton will decrease.
The phrase ʺdemand has increasedʺ means that A) there has been a downward movement along a demand curve. B) there has been an upward movement along a demand curve. C) a demand curve has shifted to the right. D) a demand curve has shifted to the left
C) a demand curve has shifted to the right.
A(n) ________ is represented by a rightward shift of the demand curve while a(n) ________ isrepresented by a movement along a given demand curve. A) increase in quantity demanded; increase in demand B) increase in demand; decrease in demand C) increase in demand; increase in quantity demanded D) decrease in demand; decrease in quantity demanded
C) increase in demand; increase in quantity demanded
A supply curve is what? A) is the relationship between the supply of a good and the cost of producing the good B) is a table that shows the relationship between the price of a product and the profits earned bysellers. C) is a curve that shows the relationship between the price of a product and the quantity of theproduct supplied. D) is a curve that shows the relationship between the price of a product and the quantity of theproduct that producers and consumers are willing to exchange with one another
C) is a curve that shows the relationship between the price of a product and the quantity of theproduct supplied.
The law of demand states that, other things remaining the same, the higher the price of a good, the A) larger is the quantity demanded of the good. B) larger is the demand for the good. C) smaller is the quantity demanded of the good. D) smaller is the demand for the good.
C) smaller is the quantity demanded of the good.
Consider the market for flavored mineral water. If the price of soda (a consumption substitute forflavored mineral water) increases, which one of the following is likely to be the outcome? A) the equilibrium quantity of flavored mineral water will fall B) the price of flavored mineral water will fall C) the demand for flavored mineral water will increase (shift right) D) the demand for soda will decrease (shift left) E) More than one of the above are correct
C) the demand for flavored mineral water will increase (shift right)
One would speak of a movement along a supply curve for a good, rather than a change in supply,if A) the cost of producing the good changes. B) the number of firms providing the good changes. C) the price of the good changes. D) there is a technological breakthrough in the production of the good. E) More than one of the above is correct
C) the price of the good changes.
Which of the following illustrates the ʺlaw of supplyʺ? A) As the cost of producing socks increases, sock producers respond by producing more socksto make up for their lower profit margin. B) As the cost of producing socks increases, sock producers respond by producing less socks. C) As the price of socks decreases, sock producers respond by producing more socks. D) As the price of socks decreases, sock producers respond by producing fewer socks.
D) As the price of socks decreases, sock producers respond by producing fewer socks.
Which of the following statements is true? A) If both demand and supply decrease there must be a decrease in equilibrium price;equilibrium quantity may either increase or decrease. B) A decrease in supply causes equilibrium price to rise; the increase in price then results in adecrease in demand. C) An increase in demand causes a change in equilibrium price; the change in price causes ashift of the supply curve. D) If demand increases and supply decreases then the equilibrium price will increase. E) More than one of the above is correct
D) If demand increases and supply decreases then the equilibrium price will increase.
Suppose that in 2009, 12 million cars were purchased at $15,000 each, while in 2010, 11 million carswere purchased at $12,000 each. What most likely caused this change? A) The supply of automobiles decreased B) The demand for automobiles increased C) The supply of automobiles increased D) The demand for automobiles decreased
D) The demand for automobiles decreased
Suppose that in 2009, 12 million cars were purchased at $15,000 each, while in 2010, 14 million carswere purchased at $18,000 each. What most likely caused this change? A) The supply of automobiles decreased B) The supply of automobiles increased C) The demand for automobiles decreased D) The demand for automobiles increased
D) The demand for automobiles increased
During 2008 the supply of eggs increased while at the same time the demand for eggs decreased. Ifthe magnitude of the demand shift was greater than the magnitude of the supply shift, which ofthe following occurred? A) The equilibrium price of eggs increased and the equilibrium quantity decreased. B) The equilibrium price of eggs decreased and the equilibrium quantity increased. C) The equilibrium price of eggs increased and the equilibrium quantity increased. D) The equilibrium price of eggs decreased and the equilibrium quantity decreased. E) The equilibrium price of eggs increased and the equilibrium quantity did not change.
D) The equilibrium price of eggs decreased and the equilibrium quantity decreased.
Suppose that in 2011, 12 million cars were purchased at $15,000 each, while in 2012, 10 million carswere purchased at $13,000 each. What might have caused this change? A) The price of airplane tickets (a comsumption substitute for cars) rose B) Automobile manufacturing technology decreased C) Automobile manufacturing technology increased D) The price of airplane tickets (a comsumption substitute for cars) fell
D) The price of airplane tickets (a comsumption substitute for cars) fell
Hurricane Katrina damaged a large portion of refining and pipeline capacity when it sweptthrough the Gulf coast states in August 2005. As a result of this, many gasoline distributors werenot able to maintain normal deliveries. If the price of gasoline stayed at the pre-hurricane price(that is, if the price of gasoline did not change despite the hurricane), then we would expect to see A) an increase in the demand for gasoline. B) a surplus of gasoline. C) the quantity demanded equal to the quantity supplied. D) a shortage of gasoline.
D) a shortage of gasoline.
Which of the following definitely results in a productʹs equilibrium price rising? A) a decrease in both demand and supply B) an increase in both demand and supply C) a decrease in demand combined with an increase in supply D) an increase in demand combined with a decrease in supply E) More than one of the above
D) an increase in demand combined with a decrease in supply
Which of the following would cause an increase in the supply of cheese? A) an increase in the costs of producing cheese B) an increase in demand for cheese C) an increase in the price of cheese D) an increase in the number of firms that produce cheese E) All of the above
D) an increase in the number of firms that produce cheese
If the market for tires is unregulated and is presently characterized by excess supply, you canaccurately predict that price will A) decrease, the quantity demanded will fall, and the quantity supplied will rise. B) increase, the quantity demanded will fall, and the quantity supplied will rise. C) increase, the quantity demanded will rise, and the quantity supplied will fall. D) decrease, the quantity demanded will rise, and the quantity supplied will fall.
D) decrease, the quantity demanded will rise, and the quantity supplied will fall.
Suppose that you observe an increase in the equilibrium price of a good. You are not able toobserve what happens to the equilibrium quantity. Which of the following is the most correctconclusion? A) either supply increased or demand increased B) it must be the case that supply increased C) it must be the case that demand increased D) either supply decreased or demand increased
D) either supply decreased or demand increased
A change in which variable will change (shift) the market demand for a product? A) the number of firms in the market B) the price of the product C) the quantity supplied of the product D) expected future prices E) More than one of the above is correct
D) expected future prices
In 1996, a group of American doctors called for a limit on the number of foreign-trainedphysicians permitted to practice in the United States. Such a policy would result in a decrease insupply of doctor services in the United States. It is likely that the equilibrium price of doctorservices would __________ and the equilibrium quantity of doctor services would ___________. A) increase ; increase B) decrease ; increase C) not change ; decrease D) increase ; decrease E) decrease ; decrease
D) increase ; decrease
If buyers and sellers both expect the price of washing machines to rise within the next six months,today in the washing machine market, the demand will A) decrease, supply will increase, and the change in the equilibrium price will be ambiguous. B) increase, supply will increase, and the change in the equilibrium price will be ambiguous. C) increase, supply will decrease, and the equilibrium price will fall. D) increase, supply will decrease, and the equilibrium price will rise. E) decrease, supply will increase, and the equilibrium price will fall.
D) increase, supply will decrease, and the equilibrium price will rise.
A demand curve shows the relationship between A) the quantity that consumers are willing and able to buy and the quantity that sellers arewilling and able to offer. B) the price of a product and the income demanded to buy it. C) the amount of a product sellers are willing to sell at a particular price and the amountconsumers are willing to buy at that price. D) the price of a product and the quantity of the product demanded.
D) the price of a product and the quantity of the product demanded.
Suppose that the demand for a product falls during the winter months, but its price rises duringthose months. Which of the following best describes how this could occur? A) there is also a decrease in supply during winter months and it is quite small in size B) there is also an increase in supply during winter months and it is quite large in size C) there is also an increase in supply during winter months and it is quite small in size D) there is also a decrease in supply during winter months and it is quite large in size E) None of the above - it is impossible for price to rise if demand decreases
D) there is also a decrease in supply during winter months and it is quite large in size
Suppose that the demand for a product falls during the winter months, but its price rises duringthose months. Which of the following best describes how this could occur? A) there is also an increase in supply during winter months and it is quite large in size B) there is also a decrease in supply during winter months and it is quite small in size C) there is also an increase in supply during winter months and it is quite small in size D) there is also a decrease in supply during winter months and it is quite large in size E) None of the above - it is impossible for price to rise if demand decreases
D) there is also a decrease in supply during winter months and it is quite large in size
