Test 2

Which of the following changes is likely to happen to the demand curve if the price of baby formula increases?

A movement along the demand curve.

Which of the following changes is likely to cause a shift in the demand curves for baby formula?

An increase in the income of the parents.

Attempts are being made to develop a biodegradable plastic using agricultural produce such as potatoes. Identify a likely impact on the equilibrium price and quantity of potatoes if such attempts are successful, all other things remaining constant. The equilibrium price will increase and the equilibrium quantity will decrease. The equilibrium price will decrease and the equilibrium quantity will increase. Both equilibrium price and quantity will decrease. Both equilibrium price and quantity will increase

Both equilibrium price and quantity will increase.

Two events occur simultaneously in the market for automobiles: (1) an improvement in assembly line technology and (2) an expansion in the economy that increases consumers' income. Which of the following can be predicted about this market with certainty? Equilibrium quantity will rise. Equilibrium quantity will fall. Equilibrium price will fall. Equilibrium price will rise.

Equilibrium quantity will rise.

Suppose you drink more tea because the price of coffee has increased. Which of the following best explains your action?

Substitution effect of a price change.

Which of the following will indicate a surplus of a product in the market to suppliers? The quantity supplied exceeds the quantity demanded at a particular price. The quantity demanded exceeds the quantity supplied at a particular price. The quantity demanded equals the quantity supplied at a particular price. All of the above.

The quantity supplied exceeds the quantity demanded at a particular price.

What is the effect of an increase in the price of potato chips on the market for pretzels, a substitute good, that is initially in equilibrium? There is a decrease in demand for pretzels. There is an increase in demand for pretzels. There is a decrease in demand for potato chips. There is an increase in demand for potato chips.

There is an increase in demand for pretzels.

Which of the following reasons is likely to result from a rightward shift of the supply curve except? There is a big increase in the number of sellers of baby formula. The cost of dairy goods to make baby formula becomes cheaper. Sellers expect huge profits for the baby formula market. Wages of dairy workers increase.

Wages of dairy workers increase.

If the demand for a product increases, then we would expect equilibrium price to increase and equilibrium quantity to decrease. to decrease and equilibrium quantity to increase. and equilibrium quantity to both increase. and equilibrium quantity to both decrease.

and equilibrium quantity to both increase.

A shortage of shoes will cause: a decrease in the supply of shoes. a decrease in the demand for shoes. an increase in the price of shoes. a decrease in the price of shoes.

an increase in the price of shoes.

The law of demand states that as the price of a good decreases:

buyers purchase more of the good, because their real income increases with a decrease in price.

A minimum wage above the market equilibrium wage: causes a surplus of workers. causes a shortage of workers. has no effect on the equilibrium quantity of workers. all of the above

causes a surplus of workers.

A movement along a demand curve can be attributed to a change in:

in the supply curve. the law of good market. in the demand curve. the income and preference of a consumer.

If corn and soybean are alternative crops grown by most farmers, a decrease in the price of corn is likely to: increase the supply of soybeans. decrease the supply of soybeans. increase the supply of corn decrease the supply of corn.

increase the supply of soybeans.

Consider the market for wheat that is initially in equilibrium. In which of the following situations will the equilibrium price of wheat increase and the change in the equilibrium quantity of wheat be indeterminate? leftward shift in demand and no shift in supply. leftward shift in supply and no shift in demand. leftward shift in supply and a rightward shift in demand. rightward shift in supply and a leftward shift in demand.

leftward shift in supply and a rightward shift in demand.

Producers supply smaller quantities of any good at lower prices because:

lower prices mean smaller profits.

A supply curve typically slopes upward because. opportunity cost of production decreases as quantity supplied increases. opportunity cost of production increases as quantity supplied increases. quantity supplied is positively related to consumer income. quantity supplied is positively related to consumer income.

opportunity cost of production increases as quantity supplied increases.

The effect of rent control is: shortage of housing. surplus of housing. enough housing for everyone. no effect on housing.

shortage of housing.

When quantity demanded of a good is smaller than the quantity supplied at the prevailing market price: the market is in equilibrium. the price of the good will tend to increase. the price of the good will tend to decrease. There is a shortage of goods.

the price of the good will tend to decrease.