ECN 211: Chapter 4

The discovery of a large new reserve of crude oil will shift the ________ curve for gasoline, leading to a ________ equilibrium price. a. demand, higher b. demand, lower c. supply, lower d. supply, higher

c. supply, lower

Suppose a frost destroys much of the Florida orange crop. At the same time, suppose consumer tastes shift toward orange juice. What would we expect to happen to the equilibrium price and quantity in the market for orange juice? a. The impact on both price and quantity is ambiguous. b. Price will increase; quantity will increase. c. Price will increase; quantity is ambiguous. d. Price will increase; quantity will decrease. e. Price will decrease; quantity is ambiguous.

c. Price will increase; quantity is ambiguous.

Which of the following shifts the demand for watches to the right? a. a decrease in the price of watches b. a decrease in consumer incomes if watches are a normal good c. a decrease in the price of watch batteries if watch batteries and watches are complements d. an increase in the price of watches e. none of the above

c. a decrease in the price of watch batteries if watch batteries and watches are complements

A decrease (leftward shift) in the supply for a good will tend to cause a. an increase in the equilibrium price and quantity. b. a decrease in the equilibrium price and quantity. c. an increase in the equilibrium price and a decrease in the equilibrium quantity. d. a decrease in the equilibrium price and an increase in the equilibrium quantity. e. none of the above.

c. an increase in the equilibrium price and a decrease in the equilibrium quantity.

An inferior good is one for which an increase in income causes a(n) a. decrease in supply. b. increase in demand. c. decrease in demand. d. increase in supply.

c. decrease in demand.

Suppose there is an increase in both the supply and demand for personal computers. Furthermore, suppose the supply of personal computers increases more than demand for personal computers. In the market for personal computers, we would expect the a. equilibrium quantity to rise and the equilibrium price to rise. b. change in the equilibrium quantity to be ambiguous and the equilibrium price to fall. c. equilibrium quantity to rise and the equilibrium price to fall. d. equilibrium quantity to rise and the change in the equilibrium price to be ambiguous. e. equilibrium quantity to rise and the equilibrium price to remain constant.

c. equilibrium quantity to rise and the equilibrium price to fall.

In a perfectly competitive market, a. one seller has successfully outcompeted its rivals so no other sellers remain. b. every seller tries to undercut the prices charged by its rivals. c. every seller takes the price of its product as set by market conditions. d. every seller tries to distinguish itself by offering a better product than its rivals.

c. every seller takes the price of its product as set by market conditions.

A perfectly competitive market has a. only one seller. b. at least a few sellers. c. many buyers and sellers. d. firms that set their own prices. e. none of the above.

c. many buyers and sellers.

market

a group of buyers and sellers of a particular good or service

competitive market

a market in which there are many buyers and many sellers so that each has a negligible impact on the market price

shortage

a situation in which quantity demanded is greater than quantity supplied

surplus

a situation in which quantity supplied is greater than quantity demanded

equilibrium

a situation in which the market price has reached the level at which quantity supplied equals quantity demanded

demand schedule

a table that shows the relationship between the price of a good and the quantity demanded

supply schedule

a table that shows the relationship between the price of a good and the quantity supplied

If the economy goes into a recession and incomes fall, what happens in the markets for inferior goods? a. Prices and quantities both rise. b. Prices and quantities both fall. c. Prices rise and quantities fall. d. Prices fall and quantities rise.

a. Prices and quantities both rise.

Which of the following shifts the supply curve for pizza to the right? a. a decrease in the price of cheese, an input to pizza b. a kitchen fire that destroys a popular pizza joint c. an increase in the price of root beer, a complement to pizza d. an increase in the price of pizza

a. a decrease in the price of cheese, an input to pizza

Which of the following moves the pizza market up along a given supply curve? a. an increase in the price of pizza b. a decrease in the price of cheese, an input to pizza c. an increase in the price of root beer, a complement to pizza d. a kitchen fire that destroys a popular pizza joint

a. an increase in the price of pizza

Which of the following will shift the demand curve for pizza to the right? a. the departure of college students, as they leave for summer vacation b. an increase in the price of hamburgers, a substitute for pizza c. an increase in the price of root beer, a complement to pizza d. a decrease in the price of pizza

b. an increase in the price of hamburgers, a substitute for pizza

demand curve

a graph of the relationship between the price of a good and the quantity demanded

supply curve

a graph of the relationship between the price of a good and the quantity supplied

normal good

a good for which an increase in income raises the quantity demanded

inferior good

a good for which, other things being equal, an increase in income leads to a decrease in demand

An increase (rightward shift) in the demand for a good will tend to cause a. an increase in the equilibrium price and quantity. b. a decrease in the equilibrium price and quantity. c. an increase in the equilibrium price and a decrease in the equilibrium quantity. d. a decrease in the equilibrium price and an increase in the equilibrium quantity. e. none of the above.

a. an increase in the equilibrium price and quantity.

All of the following shift the supply of watches to the right except a. an increase in the price of watches. b. an advance in the technology used to manufacture watches. c. a decrease in the wage of workers employed to manufacture watches. d. manufacturers' expectations of lower watch prices in the future. e. All of the above cause an increase in the supply of watches.

a. an increase in the price of watches.

A monopolistic market has a. only one seller. b. at least a few sellers. c. many buyers and sellers. d. firms that are price takers. e. none of the above.

a. only one seller.

If an increase in the price of blue jeans leads to an increase in the demand for tennis shoes, then blue jeans and tennis shoes are a. substitutes. b. complements. c. normal goods. d. inferior goods. e. none of the above.

a. substitutes.

A change in which of the following will NOT shift the demand curve for hamburgers? a. the price of hamburgers b. the income of hamburger consumers c. the price of hot dogs d. the price of hamburger buns

a. the price of hamburgers

If the price of a good is below the equilibrium price, a. there is a shortage and the price will rise. b. there is a shortage and the price will fall. c. the quantity demanded is equal to the quantity supplied and the price remains unchanged. d. there is a surplus and the price will fall. e. there is a surplus and the price will rise.

a. there is a shortage and the price will rise.

If the price of a good is above the equilibrium price, a. there is a surplus and the price will fall. b. there is a shortage and the price will rise. c. there is a surplus and the price will rise. d. there is a shortage and the price will fall. e. the quantity demanded is equal to the quantity supplied and the price remains unchanged.

a. there is a surplus and the price will fall.

Suppose consumer tastes shift toward the consumption of apples. Which of the following statements is an accurate description of the impact of this event on the market for apples? a. There is an increase in the quantity demanded of apples and in the supply for apples. b. There is an increase in the demand for apples and an increase in the quantity supplied of apples. c. There is an increase in the demand and supply of apples. d. There is a decrease in the quantity demanded of apples and an increase in the supply for apples. e. There is an increase in the demand for apples and a decrease in the supply of apples.

b. There is an increase in the demand for apples and an increase in the quantity supplied of apples.

The best definition of a market is a. a place where buyers meet and an auctioneer calls out prices. b. a group of buyers and sellers of a good or service. c. a venue where the sole supplier of a good offers its product. d. a store that offers a variety of goods and services.

b. a group of buyers and sellers of a good or service.

The law of demand states that an increase in the price of a good a. decreases the demand for that good. b. decreases the quantity demanded for that good. c. increases the supply of that good. d. increases the quantity supplied of that good. e. does none of the above.

b. decreases the quantity demanded for that good.

Suppose there is an increase in both the supply and demand for personal computers. In the market for personal computers, we would expect the a. equilibrium quantity to rise and the equilibrium price to remain constant. b. equilibrium quantity to rise and the change in the equilibrium price to be ambiguous. c. equilibrium quantity to rise and the equilibrium price to rise. d. change in the equilibrium quantity to be ambiguous and the equilibrium price to rise. e. equilibrium quantity to rise and the equilibrium price to fall.

b. equilibrium quantity to rise and the change in the equilibrium price to be ambiguous.

If the price of a good is equal to the equilibrium price, a. there is a shortage and the price will rise. b. the quantity demanded is equal to the quantity supplied and the price remains unchanged. c. there is a shortage and the price will fall. d. there is a surplus and the price will fall. e. there is a surplus and the price will rise.

b. the quantity demanded is equal to the quantity supplied and the price remains unchanged.

Which of the following might lead to an increase in the equilibrium price of jelly and a decrease in the equilibrium quantity of jelly sold? a. an increase in consumers' incomes, as long as jelly is a normal good b. an increase in the price of Marshmallow Fluff, a substitute for jelly c. an increase in the price of grapes, an input into jelly d. an increase in the price of peanut butter, a complement to jelly

c. an increase in the price of grapes, an input into jelly

Movie tickets and film streaming services are substitutes. If the price of film streaming increases, what happens in the market for movie tickets? a. The supply curve shifts to the left. b. The demand curve shifts to the left. c. The supply curve shifts to the right. d. The demand curve shifts to the right.

d. The demand curve shifts to the right.

An increase in ________ will cause a movement along a given supply curve, which is called a change in ________. a. demand, supply b. supply, quantity demanded c. supply, demand d. demand, quantity supplied

d. demand, quantity supplied

If pasta is an inferior good, then the demand curve shifts to the ________ when ________ rises. a. right, consumers' income b. left, the price of pasta c. right, the price of pasta d. left, consumers' income

d. left, consumers' income

Suppose both buyers and sellers of wheat expect the price of wheat to rise in the near future. What would we expect to happen to the equilibrium price and quantity in the market for wheat today? a. Price will increase; quantity will decrease. b. The impact on both price and quantity is ambiguous. c. Price will decrease; quantity is ambiguous. d. Price will increase; quantity is ambiguous. e. Price will increase; quantity will increase.

d. Price will increase; quantity is ambiguous

Which of the following statements is true about the impact of an increase in the price of lettuce? a. The demand for lettuce will decrease. b. The supply of lettuce will decrease. c. The equilibrium price and quantity of salad dressing will rise. d. The equilibrium price and quantity of salad dressing will fall. e. Both a and d are true.

d. The equilibrium price and quantity of salad dressing will fall.

If an increase in consumer incomes leads to a decrease in the demand for camping equipment, then camping equipment is a. a complementary good. b. a substitute good. c. a normal good. d. an inferior good. e. none of the above.

d. an inferior good.

The market for which product best fits the definition of a perfectly competitive market? a. tap water b. movies c. computer operating systems d. eggs

d. eggs

The law of supply states that an increase in the price of a good a. decreases the demand for that good. b. decreases the quantity demanded for that good. c. increases the supply of that good. d. increases the quantity supplied of that good. e. does none of the above.

d. increases the quantity supplied of that good.

quantity demand

the amount of a good that buyers are willing and able to purchase

quantity supplied

the amount of a good that sellers are willing and able to sell

law of supply and demand

the claim that the price of any good adjusts to bring the quantity supplied and the quantity demanded for that good into balance

law of demand

the claim that, other things being equal, the quantity demanded of a good falls when the price of the good rises

law of supply

the claim that, other things being equal, the quantity supplied of a good rises when the price of the good rises

equlibrium price

the price that balances quantity supplied and quantity demanded

equilibrium quantity

the quantity supplied and the quantity demanded at the equilibrium price

complements

two goods for which an increase in the price of one leads to a decrease in the demand for the other

substitutes

two goods for which an increase in the price of one leads to an increase in the demand for the other