MicroEcon Ch 3 Quiz
If the maximum price a person is willing and able to pay for a good is $50, and consumers' surplus is $20, then it follows that the price the buyer paid for the good is
$30
Refer to Exhibit 3-16. Which of the graphs best represents the market for theater tickets on the day of the performance?
(3)
Refer to Exhibit 3-14. At a price of $14, there is a ____________ unit ____________ of good X. Price of Good X 10 11 12 13 14 15 Quantity Demanded 120 110 100 90 80 70 Quantity Supplied 60 70 80 90 100 110
20; surplus
Refer to Exhibit 3-14. At a price of $10, there is a ____________ unit ____________ of good X.
60; shortage
Refer to Exhibit 3-9. A severe recession has sharply decreased the incomes of consumers. Knowing that X is a normal good, you expect a movement in the market for X from
B to A.
If price is on the vertical axis and quantity demanded is on the horizontal axis, why is a demand curve downward sloping (left to right)?
Because a demand curve is the graphical representation of the law of demand, which specifies an inverse relationship between price and quantity demanded, ceteris paribus.
Which of the following pairs of goods would be most likely to be complements?
DVD's and DVD players.
Labor is a resource that is necessary to produce many goods. "If the price of labor falls," says the economist, "the prices of goods will soon follow." How does this work?
If the price of labor falls, the supply of goods rises, and the prices of those goods fall.
When P = $65, the quantity demanded of a good is 80 units, and the quantity supplied of the good is 40 units. For every $10 increase in the price of this good, quantity demanded falls by 10 units and quantity supplied rises by 10 units. The equilibrium price of this good is ___________and the equilibrium quantity of this good is _________ units.
NOT: $75; 70 ++$85,60++
Refer to Exhibit 4-9. Suppose that the government imposes a price ceiling at a price of $11. How many fewer units would be exchanged with the price ceiling than in a free market? Price of Good X 10 11 12 13 14 15 Quantity Demanded 220 200 180 150 120 80 Quantity Supplied 110 150 180 210 240 290
NOT: 50 30 NOT: 40 70
Refer to Exhibit 3-11. Fill in blanks (C) and (D) respectively with "Exchange" or "No Exchange"to indicate whether or not exchange would take place at the given prices.
NOT: No Exchange; Exchange NOT: Exchange; No Exchange ++Exchange; Exchange++
Which of the following statements is FALSE?
NOT: Price and quantity supplied are directly related.
In year 1 the price of good X is $10 and 100 units are bought and sold. In year 2 the price of good X is $13 and 230 units are bought and sold. What can explain this?
NOT: The supply of good X was higher in year 2 than in year 1 and the demand for good X was the same in year 2 as in year 1.
government imposes a $2.50 per-unit tax on the production of good X. As a result the
NOT: demand for good X falls and the price of good X falls. ++quantity supplied of good X falls and the price of good X rises.++
law of supply states that price and quantity supplied are: DEFINITION: AS THE PRICE OF A GOOD RISES, THE QTY SUPPLIED OF THE GOOD RISES, AND AS THE PRICE OF A GOOD FALLAS, THE QTY SUPPLIED OF THE GOOD FALLAS, CETERIS PARIBUS
NOT: inversely related, ceteris paribus. ++directly related, ceteris paribus++
A "decrease in the quantity demanded" means that
NOT: the demand curve has shifted to the right. ++left++
Resource X is necessary to the production of good Y. If the price of resource X falls,
NOT: the supply curve of Y shifts leftward. ++the supply curve of Y shifts rightward.
At a price of $15 each, Marta buys 4 books per month. When the price increases to $20, Marta buys 3 books per month. Luz says that Marta's demand for books has decreased. Is Luz correct?
No, Luz is incorrect. Marta's quantity demanded has decreased, but her demand has stayed the same.
Which of the following statements best represents the law of supply?
Price and quantity supplied are directly related, ceteris paribus.
If the workers of a firm successfully negotiate an increase in wages, which of the following is most likely to happen?
The supply curve of the product the firm produces shifts leftward.
Tobacco production is one of the more heavily subsidized industries in the United States. Suppose that as a result of intense lobbying from health-related concerns, Congress repeals the tobacco firms' subsidies. Which of the following scenarios would likely occur?
The tobacco firms' supply curve would shift leftward, since it would now cost more to produce each level of output.
Which of the following is true about the relationship between price and quantity supplied?
There is usually a direct relationship.
Refer to Exhibit 3-2. Suppose equilibrium is at point B. Something then changes and equilibrium becomes point C. Which of the following is consistent with the change in equilibrium from point B to C (assuming that this is a normal good)?
There was a decrease in resource prices and income stayed constant.
When income rises for the buyers of good X, the ____________ curve for good X will shift
This question cannot be answered unless we know whether good X is a normal good, a neutral good, or an inferior good.
Which of the following statements represents a correct and sequentially accurate economic explanation?
X is an inferior good and Y is a substitute for X. Income rises, the demand for X falls, the price of X falls, and the demand for Y falls.
Which of the following will not shift a supply curve?
a change in the good's own price
If computers and software are complements, then
a fall in the price of computers will increase the demand for software and, ceteris paribus, the price of software will rise.
In the supply-and-demand diagram of the market for peanut butter, the equilibrium point has moved up and to the right. What could have caused this?
a shift in preferences toward peanut butter
Refer to Exhibit 4-6. Suppose the minimum wage is set at $7. The result will be
a surplus of workers.
At a price above the equilibrium price, there is
a surplus.
One of the effects of a price floor (set above equilibrium price) is
a surplus.
If Max's demand for hot dogs falls as his income rises, then for Max hot dogs are
an inferior good.
Refer to Exhibit 4-8. If the wheat market is in competitive equilibrium, the consumers' surplus will equal
area 1 + 2 + 4
Refer to Exhibit 3-10. If the price is $10,
buyers will bid up the price.
Refer to Figure 3-3. A change from Point A to Point E represents a(n): (The diagram had three supply lines)
decrease in supply
Someone says, "Even though the equilibrium wage rate is $6 an hour in the unskilled labor market, if we impose a minimum wage of $7 an hour, no one currently working will lose his or her job." This person must believe that the
demand curve for unskilled labor is vertical.
Good Y is an inferior good. If the income of those who buy good Y rises, the _____________ curve for good Y will shift ____________ resulting in a(n) _____________ in the equilibrium price of Y and a(n) ____________ in the equilibrium quantity of Y.
demand; leftward; decrease; decrease
Good X is a normal good. If the income of those who buy good X rises, the _____________ curve for good X will shift ____________ resulting in a(n) _____________ in the equilibrium price of X and a(n) ____________ in the equilibrium quantity of X.
demand; rightward; increase; increase
If demand decreases by a greater amount than supply decreases, then equilibrium price __________ and equilibrium quantity __________.
falls; falls
A decrease in the expected price of corn would likely do the following to the current supply and demand for corn:
increase the supply, but decrease the demand.
The demand curve for a typical good has a(n):
negative slope because some consumers switch to other goods as the price rises.
A(n) _______________ good is one in which as income rises or falls, there is no change in the demand for the good.
neutral
If the demand for computer software rises as incomes rise, then computer software is a (an)
normal good
As the price of good A rises, the demand for good B rises. Therefore, goods A and B are
normal goods. inferior goods. substitutes. NOT: complements. none of the above
On a supply-and-demand diagram, quantity demanded equals quantity supplied
only at the single equilibrium price.
You can determine producers' surplus if you know the minimum selling price and
price received
What is the definition of producers' surplus?
price received minus minimum selling price
A demand curve shows the relationship between price and _________________ on a graph.
quantity demanded
_________________ refers to the total number of units that are purchased at that price.
quantity demanded
A price floor (set above the equilibrium price) on rice will
result in a surplus of rice.
An effective price floor will
result in a surplus.
An increase in the number of buyers in a particular market will result in a
rightward shift in the demand curve.
If the demand for a good increases by more than the supply of the good increases, then equilibrium price will __________ and equilibrium quantity will __________.
rise; rise
Refer to Exhibit 3-4. A price of $6 in the market will result in a
surplus of 10 units.
A "decrease in demand" means that
the demand curve has shifted to the left.
An "increase in demand" means that
the demand curve has shifted to the right.
Demand refers to
the different quantities of a good people are willing and able to buy at different prices.
According to the law of supply:
there is a direct relationship between price and the quantity supplied.
On a supply-and-demand diagram, equilibrium is found
where the demand and supply curves intersect.
