Micro Chapter 3 Quiz

Because of unseasonably cold weather, the supply of oranges has substantially decreased. This statement indicates the: A. amount of oranges that will be available at various prices has declined. B. price of oranges will fall. C. equilibrium quantity of oranges will rise. D. demand for oranges will necessarily rise.

A. amount of oranges that will be available at various prices has declined.

The law of demand states that, other things equal: A. price and quantity demanded are inversely related. B. price and quantity demanded are directly related. C. consumers will buy more of a product at high prices than at low prices. D. the larger the number of buyers in a market, the lower will be product price.

A. price and quantity demanded are inversely related.

At the equilibrium price: A. there are no pressures on price to either rise or fall. B. there are forces that cause price to rise. C. quantity supplied may exceed quantity demanded or vice versa. D. there are forces that cause price to fall.

A. there are no pressures on price to either rise or fall.

Price floors and ceiling prices: A. cause the supply and demand curves to shift until equilibrium is established. B. interfere with the rationing function of prices. C. both cause surpluses. D. both cause shortages.

B. interfere with the rationing function of prices.

A market: A. entails the exchange of goods, but not services. B. is an institution that brings together buyers and sellers. C. reflects upsloping demand and downsloping supply curves. D. always requires face-to-face contact between buyer and seller.

B. is an institution that brings together buyers and sellers.

Productive efficiency refers to: A. the production of the product mix most wanted by society. B. the use of the least-cost method of production. C. production at some point inside of the production possibilities curve. D. the full employment of all available resources.

B. the use of the least-cost method of production.

Other things equal, which of the following might shift the demand curve for gasoline to the left? A. A large decline in the price of automobiles. B. The discovery of vast new oil reserves in Montana. C. The development of a low-cost electric automobile. D. An increase in the price of train and air transportation.

C. The development of a low-cost electric automobile.

A firm's supply curve is upsloping because: A. consumers envision a positive relationship between price and quality. B. mass production economies are associated with larger levels of output. C. the expansion of production necessitates the use of qualitatively inferior inputs. D. beyond some point the production costs of additional units of output will rise.

D. beyond some point the production costs of additional units of output will rise.

Assume in a competitive market that price is initially below the equilibrium level. We can predict that price will: A. increase, quantity demanded will increase, and quantity supplied will decrease. B. decrease, quantity demanded will decrease, and quantity supplied will increase. C. decrease and quantity demanded and quantity supplied will both decrease. D. increase, quantity demanded will decrease, and quantity supplied will increase.

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

Which of the following is most likely to be an inferior good? Used clothing. Fur coats. Ocean cruises. Steak.

Used clothing.