Microeconomics 232, Unit 2 quiz answers
Suppose that as the price of apples rises, people switch from eating apples to eating oranges. This is known as:
The substitution effect of a price change
If several manufacturers leave the computer industry, then
The supply curve shifts to the left showing a decrease in supply
Excess demand occurs:
When price is below the equilibrium price
An economist for a bicycle company predicts that, other things equal, a rise in consumer incomes will increase the demand for bicycles. This prediction is based on the assumption that:
bicycles are normal goods
The law of supply indicates that, other things equal,
producers will offer more of a product at high prices than at low prices.
An increase in product price will cause
quantity demanded to decrease.
An efficiency loss (or deadweight loss):
is measured as the combined loss of consumer surplus and producer surplus from over or under producing
If supply and demand shift in the same direction, the equilibrium ___ will always shift in that very same direction
Curve??
A demand curve is ___ sloping because ___
Downward; fewer people are willing to buy an item at higher prices
If price is above the equilibrium price, then there will be:
Excess supply
Refer to the diagram. A shortage of 160 units would be encountered if price was:
$0.50
Refer to the diagram. The equilibrium price and quantity in this market will be
$1.00 and 200
Refer to the diagram. Assuming equilibrium price P1, consumer surplus is represented by areas:
A + B
Refer to the diagram. A price of $60 in this market will result in
A surplus of 100 units
Supposed that the the technology used to manufacture laptops has improved. The likely result would be:
An increase in supply of laptops
Refer to the diagram. Assuming equilibrium price P1, producer surplus is represented by areas:
C + D
If supply is held constant and demand increases, the equilibrium price and equilibrium quantity will
Decrease
If demand is held constant and supply increases, the equilibrium price will ___ and the equilibrium quantity will ___
Decrease, increase
If supply is held constant and demand increases, the equilibrium price and equilibrium quantity will
Increase
If demand is held constant and supply decreases, the equilibrium price will ___ and the equilibrium quantity will ___
Increase, decrease
A positive change in tastes and preferences for a good or service will ___ demand, thus shifting the demand curve to the ___
Increase, right
If supply and demand shift in the same direction, the equilibrium ___ is dependent on whether supply or demand shifted more
Price
The construction of a demand curve assumes that the primary variable influencing decisions to consume goods is
Price
The construction of a supply curve assumes that the primary variable influencing decisions to produce goods is
Price
Refer to the diagram. An effective government-set price ceiling is best illustrated by
Price A
Refer to the diagram. Rent controls are best illustrated by
Price A
Refer to the diagram. An effective government-set price floor is best illustrated by
Price C
The demand curve shows the relationship between
Price and quantity demanded
If supply and demand shift in opposite directions, the equilibrium ___ will move in the same direction as demand, but the equilibrium ___ is dependent on whether supply or demand shifted more
Price, quantity
You can spend $10 for lunch and you would like to purchase two cheeseburgers. When you get to the restaurant, you find out the price for cheeseburgers has increased from $5 to $6, so you decided to purchase just one cheeseburger. This is best described as:
The income effect of a price change
Jennifer buys a piece of costume jewelry for $33 for which she was willing to pay $42. The minimum acceptable price to the seller, Nathan, was $30. Jennifer experiences:
a consumer surplus of $9 and Nathan experiences a producer surplus of $3.
As the price of flour (an input into the cookie production process) increases, firms that produce cookies will
decrease the supply of cookies
The relationship between quantity supplied and price is ___, and the relationship between quantity demanded and price is ___
direct, inverse
When the price of a product increases, a consumer is able to buy less of it with a given money income. This describes the:
income effect
The law of demand states that, other things equal,
price and quantity demanded are inversely related
An improvement in production technology will
shift the supply curve to the right
If new manufacturers enter the computer industry, then (ceteris paribus):
supply curve shifts to the right showing an increase in supply
At the point where the demand and supply curves for a product intersect
the quantity that consumers want to purchase and the amount producers choose to sell are the same
When a market is in equilibrium:
there is neither excess demand nor excess supply
A product market is in equilibrium
where the demand and supply curves intersect