Ch 3-4 Macro Practice Questions

German firms import machinery from the United Kingdom. What would happen to the supply of German goods manufactured using machinery from the United Kingdom if the euro were to rise in value against the British pound?

The supply curve would shift to the right.

What moves the supply curve?

changes in price

Peanut butter and peanut oil are complements-in-production. When the price of peanut butter rises, the:

supply of peanut oil will fall

An equilibrium price is:

determined by the intersection of the demand and supply curves

When there is a shortage of highly skilled workers in a particular region:

highly skilled workers can negotiate higher salaries

What is the relationship between marginal costs, variable costs and fixed costs?

marginal costs include variable costs but exclude fixed costs

In a perfectly competitive market, if the quantity demanded exceeds the quantity supplied, we expect prices to:

rise

What is diminishing marginal product?

the marginal product of an input declines as you use more of that input (can only occur in the short run)

What is the equilibrium?

the point at which there is no tendency for change (no surplus or shortage)

What is equilibrium price?

the price at which the market is in equilibrium

Anderson Windows and Doors imports wood from Canada. What would happen to Anderson's supply curve if the U.S. dollar were to rise in value against the Canadian dollar?

the supply curve would shift to the right

A meat processing plant produces both steak and ground beef. What effect would a rising market price for steak have on the supply of ground beef?

the supply of ground beef will decrease

What is the Law of Supply?

the tendency for quantity supplied to by higher (or the same) when the price is higher

What are fixed costs?

costs that don't vary with the produced quantity of output

surplus; 4,000

(Figure: The Demand and Supply of Quinoa) Use Figure: The Demand and Supply of Quinoa. If the price of quinoa is $8, a _____ of _____ bushels per period will result.

What are the three aspects of a perfectly competitive market?

1. All firms in an industry sell an identical good; and 2. There are many buyers and sellers 3. Each seller and buyer is small relative to the size of the market.

What are the four steps to use market demand to estimate market supply?

1. Survey suppliers (and potential suppliers). 2. For each price, add up the total quantity supplied by all sellers. 3. Scale up! 4. Plot the total quantity supplied at each price.

You buy two loaves of bread at a price set by the government. The price of the bread never changes, and it is the only kind of bread produced. This scenario is an example of a:

centrally planed market

Graph C

(Figure: Four Supply Curves) Lenovo produces laptops and desktop computers. Which graph shows what will happen in the market for Lenovo desktops if the demand for laptops increases?

Graph B

(Figure: Four Supply Curves) Which graph shows the effect on the supply curve for new housing in Dubai if there is a decrease in the demand for new housing?

Graph A

(Figure: Four Supply Curves) Which graph shows what will happen in the market for furniture if an excess supply of timber drives down wood prices?

$5

At what price does this market experience a shortage of 140 units?

What happens to the equilibrium price and quantity when demand decreases and simultaneously supply increases, but the demand shift is larger than the supply shift?

Both the equilibrium price and quantity fall.

(Figure: Four Supply Curves) Which of these graphs shows what will happen to the supply curve for luxury SUVs if there is an increase in the demand for these vehicles?

Graph D

How could an affect in expectations shift the supply curve?

If you expect the price of your product to rise next year, then you want store your product to sell next year (at the high price => current supply will decrease (left shift) and your supply next year will increase (right shift)

$11

Question in Picture:

Graph D

The Canadian dollar has strengthened against the U.S. dollar, meaning that it takes fewer Canadian dollars to purchase a U.S. dollar. What will happen to the supply of Canadian goods that use inputs made in the United States? Choose the graph that correctly depicts your answer.

Graph A shows what happens in the market for Minute Maid; Graph B shows what happens in the market for Tropicana.

You are studying the demand for Minute Maid and Tropicana orange juice. As Minute Maid improves the taste of its juice, consumers come to prefer Minute Maid over Tropicana. Which graph depicts the impact of these changes on the market for Minute Maid and for Tropicana?

Which of these lists only factors that would cause a decrease in the supply of an item? 1. a rise in the price of a substitute-in-production; a rise in the price of a complement-in-production; expectations that the price of the item will rise in the future 2. a fall in input prices; an improvement in production technology; a fall in the price of a substitute-in-production 3. a decrease in the number of sellers in the market; a fall in the price of a complement-in-production; an improvement in production technology

a rise in input prices; a decrease in the number of sellers in the market; a rise in the price of a substitute-in-production

If the supply and demand curves intersect at a price of $60, then any price above that would result in:

a surplus

A benefit of markets is that they:

allocate resources to their best uses

What are subsitutes-in-production?

alternative uses of your resources (your supply of a good will decrease if the price of a substitute-in-production rises)

Consider the market for online video streaming services (Netflix, Apple TV, Amazon Prime, HULU, to name a few). What would cause the equilibrium price of online streaming services to rise with certainty?

an increase in demand combined with a decrease in supply

The market for lobster is in equilibrium. Which of these is MOST likely to increase the equilibrium price of lobster? 1. more boats fishing for lobster 2. decreasing household incomes, with lobster being a normal good 3. a record catch 4. an increase in the price of salmon, a substitute in consumption

an increase in the price of salmon, a substitute in consumption

What are variable costs?

costs like labor and raw material that vary with the produced quantity of output

Scenario: Amazon announces they are developing technology to deliver orders within 30 minutes. Owners of local stores wonder how their sales will be affected.

decrease in both price and quantity

A fall in wages leads to greater absenteeism at a steel factory. Since the hourly wage is the price of labor, the fall in wages represents a(n):

decrease in the quantity of labor supplied

If rice is an inferior good, when incomes rise, the equilibrium price will _____, and the equilibrium quantity will _____.

decrease; decrease

How could a change in the number of sellers shift the supply curve?

if new sellers enter the market the total quantity supplied at each price increases (right shift), or vise versa and left shift

Scenario: A major retailer announces plans to install charging stations for electric cars in 400 parking spaces in 120 cities.

increase in both price and quantity

When making a profit-maximizing "how much" decision, if the price of a good or activity is greater than the marginal cost of that good or activity, then the individual can be made better off by:

increasing the quantity as long as the price of one more unit exceeds the marginal cost

What does a shortages or surpluses do to the price?

make it higher/ lower

Suppose that more security guards become aware that wearing Kevlar (bulletproof) vests can protect them from injury and decide to start wearing Kevlar. At the same time, the price of materials used to produce the vests falls. The equilibrium price of Kevlar vests _____, and the equilibrium quantity produced _____.

probably changes but in an ambiguous direction; increases

What is productivity growth?

producing more output with fewer inputs

Graphically, the equilibrium quantity is the:

quantity corresponding to the intersection of the demand and supply curves

What is equilibrium quantity?

quantity demanded and supplied in equilibrium

What happens to the equilibrium price and quantity when demand increases and simultaneously supply decreases, but the demand shift is smaller than the supply shift?

the equilibrium price rises, and the equilibrium quantity falls

What is marginal product?

the increase in output that arises from an additional unit of an input, like labor

You're the production manager at an amusement park. In response to a surge in amusement park attendance associated with the lifting of coronavirus-related restrictions, you would increase your _____ inputs, causing _____.

variable; a rightward movement along the amusement park's supply curve

When is your supply curve your marginal costs curve?

when price= marginal cost

When does the market move to a new equilibrium?

when the market demand or supply curve shifts

When you participate in a market transaction,

you and your trading partner both give something of value to the other

Why is the supply curve upward sloping?

rising marginal costs

What is the rational rule for sellers in completive markets?

sell one more unit if the price is greater than (or is equal to) the marginal cost (price=mc) (maximizes profits)

What happens to the supply curve with an increase or decrease in supply.

shift right or left

decrease in quantity supplied

(Figure: Graph 1) In the graph, the movement from point E to point F represents a(n):

decrease in supply

(Figure: Graph 2) In the graph, the movement from point M to point G represents a(n):

What are the five factors that shift the market supply curve?

1. Input prices 2. Productivity and technology 3. Prices of related outputs 4. Expectations 5. The type and number of sellers

Exxon imports a significant amount of oil from Canada. What would happen to Exxon's supply curve if the U.S. dollar were to fall in value against the Canadian dollar?

The supply curve would shift to the left.

The market price of cruise ship vacations has increased recently. Some economists suggest that the price increased because of an increase in the number of retirees. In other words, they believe that:

demand increased

What happens when there's a decrease in demand and supply?

eq price depends, eq quantity falls

What happens when there's an increase in demand and supply?

eq price depends, eq quantity rises

What happens when there's a decrease in demand and an increase in supply?

eq price falls, eq quantity depends

What happens when there's a increase in demand and a decrease in supply?

eq price rises, eq quantity depends

The cost of sensors used in making radio frequency identification (RFID) chips falls, and a successful ad campaign makes using "tap" technology in credit card usage more fashionable. As a result, the equilibrium price of RFID chips _____, and the equilibrium quantity _____.

may increase, decrease, or stay the same; increases

If the price of jet fuel rises, the:

quantity of jet fuel supplied will increase

50

question in picture:

What are input prices, and what happens to the supply curve when they change?

raw materials used to build goods; rise in input prices => left shift, fall in prices => right shift

A shift in market supply or market demand probably means:

you will pay a new price and buy a different quantity in a market economy.

Which scenarios illustrate markets in action? (i) You rent a book at the university bookstore. (ii) You bargain at a street stall. (iii) You mow your own lawn. (iv) You get a manicure at a nail salon. (v) You grow your own vegetables and consume them yourself.

(i), (ii), and (iv)

You run a successful tattoo business but expect that the prices of various tools used in tattooing, such as tattoo machines, tattoo needles, stencils, and ink will rise over the next year. As a result, the opportunity cost of providing tattoo services today will:

fall, causing your supply curve to shift to the right

What are compliments-in-production?

goods that are made together (your supply of a good will increase if the price of a compliment-in-production rises)

What is the individual supply curve?

graph plotting the quantity of an item that a business plans to sell at each price

You notice that the entry fee at your favorite miniature golf course has risen. Which of these is the most likely reason for the increase in price?

the wages of the workers who run the course have risen