Ch3 & 4 Practice Questions

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

A) an inferior good.

Assume that both the demand curve and the supply curve for MP3 players shift to the right but the demand curve shifts more than the supply curve. As a result A) both the equilibrium price and quantity of MP3 players will increase. B) the equilibrium price of MP3 players will increase; the equilibrium quantity may increase or decrease. C) the equilibrium price of MP3 players may increase or decrease; the equilibrium quantity will increase. D) the equilibrium price of MP3 players will decrease; the equilibrium quantity may increase or decrease.

A) both the equilibrium price and quantity of MP3 players will increase.

Suppose that when the price of strawberries decreases, Simone increases her purchase of whipped cream. To Simone A) strawberries and whipped cream are complements. B) strawberries and whipped cream and substitutes. C) strawberries and whipped cream are normal goods. D) strawberries are a normal good and whipped cream is an inferior good.

A) strawberries and whipped cream are complements.

When the price of a good falls, consumers buy a larger quantity because of the ________ effect and the ________ effect. A) substitution; income B) normal; inferior C) substitute; complement; D) supply; demand

A) substitution; income

The actual division of the burden of a tax between buyers and sellers in a market is called A) tax incidence. B) tax liability. C) tax bearer. D) tax parity.

A) tax incidence.

Economic efficiency is defined as a market outcome in which the marginal benefit to consumers of the last unit produced is equal to the marginal cost of production, and in which A) the sum of consumer surplus and producer surplus is at a maximum. B) economic surplus is minimized. C) the sum of the benefits to firms is equal to the sum of the benefits to consumers. D) the sum of consumer surplus and producer surplus is minimized.

A) the sum of consumer surplus and producer surplus is at a maximum.

A demand curve shows A) the willingness of consumers to buy a product at different prices. B) the willingness of consumers to substitute one product for another product. C) the relationship between the price of a product and the demand for the product. D) the relationship between the price of a product and the total benefit consumers receive from the product.

A) the willingness of consumers to buy a product at different prices.

An increase in the price of pineapples will result in A) a smaller quantity of pineapples supplied. B) a larger quantity of pineapples supplied. C) a decrease in the demand for pineapples. D) an increase in the supply of pineapples.

B) a larger quantity of pineapples supplied.

Which of the following would cause a decrease in the equilibrium price and an increase in the equilibrium quantity of salmon? A) a decrease in demand and an increase in supply B) an increase in supply C) an increase in supply and an increase in demand greater than the increase in supply D) a decrease in demand and a decrease in supply

B) an increase in supply

In a competitive market, the demand curve shows the ________ received by consumers and the supply curve shows the ________. A) utility; average cost. B) marginal benefit; marginal cost C) economic surplus; opportunity cost D) net benefit; net cost

B) marginal benefit; marginal cost

The total amount of producer surplus in a market is equal to A) the difference between quantity supplied and quantity demanded. B) the area above the market supply curve and below the market price. C) the area above the market supply curve. D) the area between the demand curve and the supply curve below the market price.

B) the area above the market supply curve and below the market price.

________ is maximized in a competitive market when marginal benefit equals marginal cost. A) Deadweight loss B) Marginal profit C) Economic surplus D) Selling price

C) Economic surplus

A movement along the demand curve for toothpaste would be caused by A) a change in the price of toothbrushes. B) a change in consumer income. C) a change in the price of toothpaste. D) a change in population.

C) a change in the price of toothpaste.

Willingness to pay measures A) the maximum price a buyer is willing to pay for a product minus the amount the buyer actually pays for it. B) the amount a seller actually receives for a good minus the minimum amount the seller is willing to accept for the good. C) the maximum price that a buyer is willing to pay for a good or service. D) the maximum price a buyer is willing to pay minus the minimum price a seller is willing to accept.

C) the maximum price that a buyer is willing to pay for a good or service.

CH4

CH4

Which of the following would cause an increase in the supply of peanut butter? A) a decrease in the price of grape jelly (assuming that peanut butter and grape jelly are complements) B) an increase in the price of peanut butter C) an increase the price of a product that producers sell instead of peanut butter D) an increase in the number of firms that produce peanut butter

D) an increase in the number of firms that produce peanut butter

The difference between the highest price a consumer is willing to pay for a good and the price the consumer actually pays is called A) producer surplus. B) the substitution effect. C) the income effect. D) consumer surplus.

D) consumer surplus.

Suppose that when the price of hamburgers decreases, the Landry family decreases their purchases of chicken nuggets. To the Landry family A) hamburgers and chicken nuggets are complements. B) hamburgers and chicken nuggets are inferior goods. C) hamburgers and chicken nuggets are normal goods. D) hamburgers and chicken nuggets are substitutes.

D) hamburgers and chicken nuggets are substitutes.

If a firm expects that the price of its product will be higher in the future than it is today, then A) the firm will go out of business. B) the firm has an incentive to increase supply now and decrease supply in the future. C) the firm has an incentive to decrease quantity supplied now and increase quantity supplied in the future. D) the firm has an incentive to decrease supply now and increase supply in the future.

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

Consumers are willing to purchase a product up to the point where A) the marginal benefit of consuming the product is equal to the marginal cost of consuming it. B) the consumer surplus is equal to the producer surplus. C) the marginal benefit of consuming the product equals the area below the supply curve and above the market price. D) the marginal benefit of consuming a product is equal to its price.

D) the marginal benefit of consuming a product is equal to its price.

Indicate whether the situation would shift the supply curve to the left, to the right, or not at all. b. An increase in the current price of the product

No shift

Indicate whether the situation would shift the supply curve to the left, to the right, or not at all. c. A decrease in productivity

Shift to the left

Indicate whether the situation would shift the supply curve to the left, to the right, or not at all. d. An increase in the expected future price of a product

Shift to the left

Indicate whether the situation would shift the supply curve to the left, to the right, or not at all. a. An increase in the number of firms in the market

Shift to the right

Indicate whether the situation would shift the supply curve to the left, to the right, or not at all. e. A decrease in the price of an input

Shift to the right