micro-economics Chapter 3 Quiz

Table 3-1Refer to Table 3-1. The table above shows the demand schedules for Kona coffee of two individuals (Luke and Ravi) and the rest of the market. At a price of $4, the quantity demanded in the market would be A) 40 lbs. B) 70 lbs. C) 110 lbs. D) 150 lbs.

150 lbs.

A normal good is a good for which the demanded decreases as income decreases, holding everything else constant. True False

true

Let D = demand, S = supply, P = equilibrium price, Q = equilibrium quantity. What happens in the market for sushi if the Surgeon General announces that a majority of the raw fish that is imported to make sushi contains high levels of toxic mercury? A) D decreases, S no change, P and Q decrease B) D and S decrease, P and Q decrease C) D no change, S increases, P decreases, Q decreases D) S decreases, D no change, P increases, Q decreases

A) D decreases, S no change, P and Q decrease

Figure 3-7 Refer to Figure 3-7. Assume that the graphs in this figure represent the demand and supply curves for tuna. Which panel best describes what happens in this market when there is a decrease in the productivity of commercial fishermen? A) Panel (b) B) Panel (a) C) Panel (c) D) Panel (d)

A) Panel (b)

Figure 3-2 Refer to Figure 3-2. A decrease in the price of inputs would be represented by a movement from A) S1 to S2. B) B to A. C) S2 to S1. D) A to B.

A) S1 to S2

A decrease in input costs in the production of LCD televisions caused the price of LCD televisions to decrease. Holding everything else constant, how would this affect the market for video game consoles (a complement to LCD televisions)? A) The demand for video game consoles would increase and the equilibrium price of video game consoles would increase. B) The demand for video game consoles would decrease because consumers could afford to buy fewer LCD televisions and video game consoles. C) The supply of video game consoles would increase and the equilibrium price of video game consoles would decrease. D) The demand for video game consoles would decrease and the equilibrium price of video game consoles would decrease.

A) The demand for video game consoles would increase and the equilibrium price of video game consoles would increase

Refer to Figure 3-8. The graph in this figure illustrates an initial competitive equilibrium in the market for motorcycles at the intersection of D2 and S1 (point C). If the price of motorcycle side cars (a complement to motorcycles) decreases, and the wages of motorcycle workers increase, how will the equilibrium point change? A) The equilibrium point will move from C to B. B) The equilibrium point will move from C to A. C) The equilibrium will first move from C to A, then return to C. D) The equilibrium point will move from C to E

A) The equilibrium point will move from C to B.

Figure 3-4 Refer to Figure 3-4. If the current market price is $25, the market will achieve equilibrium by A) a price decrease, decreasing the quantity supplied and increasing the quantity demanded. B) a price increase, increasing the quantity supplied and decreasing the quantity demanded. C) a price increase, increasing the supply and decreasing the demand. D) a price decrease, decreasing the supply and increasing the demand.

A) a price decrease, decreasing the quantity supplied and increasing the quantity demanded.

In cities with rent control, people have an incentive to list their apartments on sites such as Airbnb at rents ________ the controlled rates, because rent control causes a ________ of apartments. A) above; shortage B) above; surplus C) below; surplus D) below; shortage

A) above; shortage

In cities with rent control, people have an incentive to list their apartments on sites such as Airbnb at rents ________ the controlled rates, because rent control causes a ________ of apartments. A) above; shortage B) below; shortage C) above; surplus D) below; surplus

A) above; shortage

Electric car manufacturers want to sell more electric cars at a higher price. Which of the following events would have this effect? A) an increase in the price of gasoline. B) technological advancement in the production of electric car batteries. C) an increase in the number of manufacturers of electric cars. D) a decrease in the price of lithium, which is used in the electric car batteries.

A) an increase in the price of gasoline.

The difference between the ________ for a good and the ________ is called consumer surplus. A) highest price a consumer is willing to pay; price the consumer actually pays B) lowest price a consumer is willing to pay; price the consumer actually pays C) highest price a consumer is willing to pay; lowest price a consumer is willing to pay D) price the consumer actually pays; actual cost to the producer

A) highest price a consumer is willing to pay; price the consumer actually pays

In order to be binding, a price floor A) must lie above the free-market equilibrium price. B) must be high enough for firms to earn a profit. C) must coincide with the free-market equilibrium price. D) must lie below the free-market equilibrium price.

A) must lie above the free-market equilibrium price.

Assume that the demand curve for DVD players shifts to the left and the supply curve for DVD players shifts to the right, but the supply curve shifts more than the demand curve. As a result, A) the equilibrium price of DVD players will decrease; the equilibrium quantity will increase. B) the equilibrium price of DVD players will decrease; the equilibrium quantity may increase or decrease. C) both the equilibrium price and quantity of DVD players will decrease. D) the equilibrium price of DVD players may increase or decrease; the equilibrium quantity will increase.

A) the equilibrium price of DVD players will decrease; the equilibrium quantity will increase.

Assume that both the demand curve and the supply curve for DVD players shift to the left but the supply curve shifts more than the demand curve. As a result, A) the equilibrium price of DVD players will increase; the equilibrium quantity will decrease. B) both the equilibrium price and quantity of DVD players will decrease. C) the equilibrium price of DVD players may increase or decrease; the equilibrium quantity will increase. D) the equilibrium price of DVD players will decrease; the equilibrium quantity may increase or decrease.

A) the equilibrium price of DVD players will increase; the equilibrium quantity will decrease.

Figure 3-4 Refer to Figure 3-4. At a price of $20, how many units will be supplied? A) 600 B) 400 C) 500 D) 800

A) 600

Table 3-1Refer to Table 3-1. The table above shows the demand schedules for Kona coffee of two individuals (Luke and Ravi) and the rest of the market. At a price of $6, the quantity demanded in the market would be A) 36 lbs. B) 89 lbs. C) 123 lbs. D) 68 lbs.

B) 89 lbs.

Figure 3-2 Refer to Figure 3-2. An increase in the price of the product would be represented by a movement from A) S2 to S1. B) A to B. C) B to A. D) S1 to S2.

B) A to B

Which of the following is a consequence of minimum wage laws? A) All workers benefit when the minimum wage is increased. B) Employers will be reluctant to offer low-skilled workers jobs with training. C) Producers have an incentive to offer workers non-wage benefits such as health care benefits and convenient working hours rather than a higher wage. D) Low-skilled workers benefit because minimum wage increases the number of jobs providing low-skilled workers with training.

B) Employers will be reluctant to offer low-skilled workers jobs with training.

Let D = demand, S = supply, P = equilibrium price, Q = equilibrium quantity. What happens in the market for solar panels if the government offers tax breaks to encourage manufacturers to produce more solar panels? A) D increases, S no change, P and Q increase B) S increases, D no change, P decreases, Q increases C) D no change, S increases, P decreases, Q decreases D) D and S increase, P and Q decrease

B) S increases, D no change, P decreases, Q increases

Figure 3-2 Refer to Figure 3-2. A decrease in the price of substitutes in production would be represented by a movement from A) B to A. B) S1 to S2. C) A to B. D) S2 to S1.

B) S1 to S2.

During the 1990s positive technological change in the production of chicken caused the price of chicken to fall. Holding everything else constant, how would this affect the market for pork (a substitute for chicken)? A) The demand for pork would decrease and the equilibrium price of pork would increase. B) The demand for pork would decrease and the equilibrium price of pork would decrease. C) The supply of pork would increase and the equilibrium price of pork would decrease. D) The demand for pork would increase because consumers could afford to buy more chicken and pork

B) The demand for pork would decrease and the equilibrium price of pork would decrease.

Figure 4-3 Figure 4-3 shows the market for granola. The market is initially in equilibrium at a price of P1 and a quantity of Q1. Now suppose producers decide to cut output to Q2 in order to raise the price to P2.Refer to Figure 4-3. What area represents the deadweight loss at the equilibrium price of P1? A) G + H B) There is no deadweight loss at the price of P1. C) C + E + H D) C + E

B) There is no deadweight loss at the price of P1.

If a decrease in income leads to a decrease in the demand for ice cream, then ice cream is A) a complement. B) a normal good. C) a neutral good. D) a necessity.

B) a normal good.

Figure 3-5 Refer to Figure 3-5. In a free market such as that depicted above, a shortage is eliminated by A) a price decrease, decreasing the supply and increasing the demand. B) a price increase, increasing the quantity supplied and decreasing the quantity demanded. C) a price increase, increasing the supply and decreasing the demand. D) a price decrease, decreasing the quantity supplied and increasing the quantity demanded.

B) a price increase, increasing the quantity supplied and decreasing the quantity demanded.

If, in response to a decrease in the price of coffee, the quantity of coffee demanded increases, economists would describe this as A) an increase in consumers' taste for coffee. B) an increase in quantity demanded. C) a change in consumer income. D) an increase in demand.

B) an increase in quantity demanded.

Last month, the Tecumseh Corporation supplied 400 units of three-ring binders at $6 per unit. This month, the company supplied the same quantity of binders at $4 per unit. Based on this evidence, Tecumseh has experienced A) a decrease in supply. B) an increase in supply. C) a decrease in the quantity supplied. D) an increase in the quantity supplied.

B) an increase in supply.

Last month, the Tecumseh Corporation supplied 400 units of three-ring binders at $6 per unit. This month, the company supplied the same quantity of binders at $4 per unit. Based on this evidence, Tecumseh has experienced A) an increase in the quantity supplied. B) an increase in supply. C) a decrease in the quantity supplied. D) a decrease in supply.

B) an increase in supply.

If the price of prime rib falls, the income effect due to the price change will cause A) an increase in the quantity of prime rib supplied. B) an increase in the quantity of prime rib demanded. C) an increase in the demand for prime rib. D) an increase in the demand for flank steak, a substitute for prime rib.

B) an increase in the quantity of prime rib demanded.

If a decrease in income leads to an increase in the demand for macaroni, then macaroni is A) a necessity. B) an inferior good. C) a normal good. D) a neutral good.

B) an inferior good.

Figure 3-5 Refer to Figure 3-5. At a price of $15, the quantity sold A) is 4 units. B) is 2 units. C) is 6 units. D) cannot be determined.

B) is 2 units.

The sum of consumer surplus and producer surplus is equal to A) the deadweight loss. B) the economic surplus. C) total profit. D) zero.

B) the economic surplus.

The sum of consumer surplus and producer surplus is equal to A) total profit. B) the economic surplus. C) zero. D) the deadweight loss.

B) the economic surplus.

If a firm expects that the price of its product will be lower in the future than it is today A) the firm has an incentive to decrease supply now and increase supply in the future. B) the firm has an incentive to increase supply now and decrease supply in the future. C) the firm has an incentive to increase quantity supplied now and decrease quantity supplied in the future. D) the firm will not change supply until it knows for certain what will happen to its price.

B) the firm has an incentive to increase supply now and decrease supply in the future.

By drawing a demand curve with price on the vertical axis and quantity on the horizontal axis, economists assume that the most important determinant of the demand for a good is A) the quality of the good. B) the price of the good. C) consumer tastes and preferences. D) consumer income.

B) the price of the good.

Refer to Figure 4-4. The figure above represents the market for iced tea. Assume that this is a competitive market. If the price of iced tea is $1 A) economic surplus is maximized. B) the quantity supplied is less than the economically efficient quantity. C) not enough consumers want to buy iced tea. D) the quantity supplied is economically efficient but the quantity demanded is economically inefficient.

B) the quantity supplied is less than the economically efficient quantity.

Figure 4-3 shows the market for granola. The market is initially in equilibrium at a price of P1 and a quantity of Q1. Now suppose producers decide to cut output to Q2 in order to raise the price to P2.Refer to Figure 4-3. What area represents the deadweight loss at P2? A) G + H B) C + E + H C) C + E D) B + C

C) C + E

Figure 3-1 Refer to Figure 3-1. An increase in the price of a substitute would be represented by a movement from A) D2 to D1. B) A to B. C) D1 to D2. D) B to A.

C) D1 to D2.

Figure 3-1 Refer to Figure 3-1. An increase in the price of a complement would be represented by a movement from A) B to A. B) D1 to D2. C) D2 to D1. D) A to B.

C) D2 to D1.

Figure 3-8 Refer to Figure 3-8. The graph in this figure illustrates an initial competitive equilibrium in the market for motorcycles at the intersection of D1 and S1 (point A). If there is an increase in the wages of motorcycle workers and an increase in the price of motorcycle insurance, a complement to motorcycles, the equilibrium could move to which point? A) C B) A C) E D) B

C) E

Which of the following is a consequence of minimum wage laws? A) All workers benefit when the minimum wage is increased. B) Producers have an incentive to offer workers non-wage benefits such as health care benefits and convenient working hours rather than a higher wage. C) Employers will be reluctant to offer low-skilled workers jobs with training. D) Low-skilled workers benefit because minimum wage increases the number of jobs providing low-skilled workers with training.

C) Employers will be reluctant to offer low-skilled workers jobs with training.

Refer to Figure 3-7. Assume that the graphs in this figure represent the demand and supply curves for laptop computers. Which panel best describes what happens in this market when the price of computer hard drives falls? A) Panel (b) B) Panel (d) C) Panel (a) D) Panel (c)

C) Panel (a)

Figure 3-2 Refer to Figure 3-2. An increase in the expected future price of the product would be represented by a movement from A) B to A. B) S1 to S2. C) S2 to S1. D) A to B.

C) S2 to S1.

Electric car enthusiasts want to buy more electric cars at a lower price. All of the following events would have this effect except A) a decrease in the price of lithium, which is used in the electric car batteries. B) technological advancement in the production of electric car batteries. C) an increase in the price of gasoline. D) an increase in the number of manufacturers of electric cars.

C) an increase in the price of gasoline.

Table 3-2Refer to Table 3-2. The table above shows the demand schedules for cashews of two individuals (Jordy and Amy) and the rest of the market. If the price of cashews rises from $4 to $6, the market quantity demanded would A) increase by 33 lbs. B) decrease by 33 lbs. C) decrease by 39 lbs. D) increase by 39 lbs.

C) decrease by 39 lbs.

The difference between the ________ for a good and the ________ is called consumer surplus. A) lowest price a consumer is willing to pay; price the consumer actually pays B) price the consumer actually pays; actual cost to the producer C) highest price a consumer is willing to pay; price the consumer actually pays D) highest price a consumer is willing to pay; lowest price a consumer is willing to pay

C) highest price a consumer is willing to pay; price the consumer actually pays

To affect the market outcome, a price floor A) must be set above the legal price. B) must be set above the price ceiling. C) must be set above the equilibrium price. D) must be set above the black market price.

C) must be set above the equilibrium price.

Suppose that when the price of pickles decreases, Teddy increases his purchase of ketchup. To Teddy, A) pickles and ketchup are normal goods. B) pickles and ketchup and substitutes. C) pickles and ketchup are complements. D) pickles are a normal good and ketchup is an inferior good.

C) pickles and ketchup are complements.

The substitution effect of a price change refers to A) the shift of a demand curve when the price of a substitute good changes. B) the movement along the demand curve due to a change in purchasing power brought about by the price change. C) the change in quantity demanded that results from a change in price making a good more or less expensive relative to other goods that are substitutes. D) the shift in the demand curve due to a change in purchasing power brought about by the price change.

C) the change in quantity demanded that results from a change in price making a good more or less expensive relative to other goods that are substitutes.

If the price of propane-fueled gas grills was to decrease, then A) the demand for propane would decrease. B) the quantity of propane demanded would increase. C) the demand for propane would increase. D) the quantity of propane demanded would decrease.

C) the demand for propane would increase.

Figure 4-4 Refer to Figure 4-4. The figure above represents the market for iced tea. Assume that this is a competitive market. If the price of iced tea is $3 A) the quantity demanded is economically efficient but the quantity supplied is economically inefficient. B) too many consumers want to buy iced tea. C) the quantity supplied is greater than the economically efficient quantity. D) economic surplus is maximized.

C) the quantity supplied is greater than the economically efficient quantity.

Figure 3-1 Refer to Figure 3-1. If the product represented is an inferior good, a decrease in income would be represented by a movement from A) A to B. B) D2 to D1. C) B to A. D) D1 to D2.

D) D1 to D2.

All renters benefit from rent control and all landlords lose. True False

False

Figure 3-2 Refer to Figure 3-2. An increase in the price of the product would be represented by a movement from A) S1 to S2. B) S2 to S1. C) B to A. D) A to B.

D) A to B.

If the price of gasoline increases, what will be the impact in the market for public transportation? A) The quantity of public transportation demanded decreases. B) The demand curve for public transportation shifts to the left. C) The quantity of public transportation demanded increases. D) The demand curve for public transportation shifts to the right.

D) The demand curve for public transportation shifts to the right.

If the price of beef jerky rises, the substitution effect due to the price change will cause A) an increase in the demand for beef jerky. B) an increase in the quantity of beef jerky demanded. C) an increase in the demand for hot sauce, a complement for beef jerky. D) a decrease in the quantity of beef jerky demanded.

D) a decrease in the quantity of beef jerky demanded.

Table 4-2 Refer to Table 4-2. The table above lists the highest prices five consumers are willing to pay for a concert ticket. If the price of one ticket rises from $20 to $38 A) only three tickets will be sold. B) no one will buy a ticket. C) consumer surplus increases from $88 to $142. D) consumer surplus decreases from $62 to $12.

D) consumer surplus decreases from $62 to $12.

Table 4-2 Refer to Table 4-2. The table above lists the highest prices five consumers are willing to pay for a concert ticket. If the price of one ticket falls from $50 to $20 A) everyone will buy a ticket. B) only three tickets will be sold. C) consumer surplus decreases from $48 to $24. D) consumer surplus increases from $0 to $62.

D) consumer surplus increases from $0 to $62.

Suppose that when the price of hamburgers increases, the Ruiz family increases their purchases of hot dogs. To the Ruiz family, A) hamburgers and hot dogs are inferior goods. B) hamburgers and hot dogs are complements. C) hamburgers and hot dogs are normal goods. D) hamburgers and hot dogs are substitutes.

D) hamburgers and hot dogs are substitutes.

Table 3-2Refer to Table 3-2. The table above shows the demand schedules for cashews of two individuals (Jordy and Amy) and the rest of the market. If the price of cashews falls from $4 to $2, the market quantity demanded would A) decrease by 28 lbs. B) decrease by 36 lbs. C) increase by 28 lbs. D) increase by 36 lbs.

D) increase by 36 lbs.

Suppose consumer preference for beef starts to rise while the cost of raising beef continues to rise. In the market for beef, this would be represented by the equilibrium price ________ and the equilibrium quantity ________. A) decreasing; increasing or decreasing B) increasing or decreasing; increasing C) increasing or decreasing; decreasing D) increasing; increasing or decreasing

D) increasing; increasing or decreasing

Suppose consumer preference for beef starts to rise while the cost of raising beef continues to rise. In the market for beef, this would be represented by the equilibrium price ________ and the equilibrium quantity ________. A) increasing or decreasing; decreasing B) decreasing; increasing or decreasing C) increasing or decreasing; increasing D) increasing; increasing or decreasing

D) increasing; increasing or decreasing

Table 4-4 Table 4-4 shows the demand and supply schedules for the low-skilled labor market in the city of Westover. Refer to Table 4-4. If a minimum wage of $9.50 is mandated there will be a A) shortage of 20,000 units of labor. B) surplus of 10,000 units of labor. C) shortage of 10,000 units of labor. D) surplus of 20,000 units of labor.

D) surplus of 20,000 units of labor.

Table 4-4 Table 4-4 shows the demand and supply schedules for the low-skilled labor market in the city of Westover. Refer to Table 4-4. If a minimum wage of $10.50 is mandated there will be a A) surplus of 30,000 units of labor. B) shortage of 30,000 units of labor. C) shortage of 60,000 units of labor. D) surplus of 60,000 units of labor.

D) surplus of 60,000 units of labor.

A firm has an incentive to decrease supply now and increase supply in the future if it expects that A) the prices of inputs used to produce the product will rise in the future. B) more firms will enter the market in the future. C) the price of its product will be lower in the future than it is today. D) the price of its product will be higher in the future than it is today.

D) the price of its product will be higher in the future than it is today.

A decrease in the number of firms in a market will cause supply to increase. True False

False

A surplus occurs when the market price is lower than the equilibrium price. True False

False

It is possible for a market for a good to experience a surplus and a shortage at the same time. True False

False

Producer surplus is the difference between the highest price a firm is willing to accept for a product and the price it actually receives for the product. True False

False

Rent control is an example of a price floor. True False

False

The income effect of a price change refers to the change in the quantity demanded of a good that results from a change in the price of a substitute product. True False

False

Figure 3-2 Refer to Figure 3-2. A decrease in the price of substitutes in production would be represented by a movement from A) B to A. B) S1 to S2. C) S2 to S1. D) A to B.

S1 to S2.

A decrease in the price of inputs will cause the supply curve for a product to shift to the right. True False

True

The total amount of producer surplus in a market is equal to the area above the market supply curve and below the market price. True False

True

Holding everything else constant, an increase in the price of raisins will result in A) an increase in the quantity of raisins demanded. B) an increase in the demand for raisins. C) a decrease in the supply of raisins. D) a decrease in the quantity of raisins demanded.

a decrease in the quantity of raisins demanded.

The law of demand implies, holding everything else constant, that as the price of yogurt A) decreases, the demand for yogurt will increase. B) decreases, the quantity of yogurt demanded will decrease. C) increases, the quantity of yogurt demanded will decrease. D) increases, the demand for yogurt will increase.

increases, the quantity of yogurt demanded will decrease.