ECON 130 EXAM 1 Chapter 4

Ashley bakes bread that she sells at the local farmer's market. If she purchases a new convection oven that reduces the costs of baking bread, the a. supply curve for Ashley's bread will increase. b. supply curve for Ashley's bread will decrease. c. demand curve for Ashley's bread will increase. d. demand curve for Ashley's bread will decrease.

a.

Assume that pizza and Pepsi are complements. If the price of pizza were to decrease, how will this affect equilibrium price and quantity for Pepsi? a. equilibrium price and quantity will increase b. equilibrium price and quantity will decrease c. equilibrium price will increase, but equilibrium quantity will decrease d. equilibrium price will decrease, but equilibrium quantity will increase

a.

In a market economy, supply and demand determine a. both the quantity of each good produced and the price at which it is sold. b. the quantity of each good produced but not the price at which it is sold. c. the price at which each good is sold but not the quantity of each good produced. d. neither the quantity of each good produced nor the price at which it is sold.

a.

Suppose roses are currently selling for $20 per dozen, but the equilibrium price of roses is $30 per dozen. We would expect a a. shortage to exist and the market price of roses to increase. b. shortage to exist and the market price of roses to decrease. c. surplus to exist and the market price of roses to increase. d. surplus to exist and the market price of roses to decrease.

a.

What would happen to the equilibrium price and quantity of coffee if the wages of coffee-bean pickers fell and the price of tea fell? a. Price would fall, and the effect on quantity would be ambiguous. b. Price would rise, and the effect on quantity would be ambiguous. c. Quantity would fall, and the effect on price would be ambiguous. d. Quantity would rise, and the effect on price would be ambiguous.

a.

A leftward shift of a demand curve is called a(n) a. increase in demand. b. decrease in demand. c. decrease in quantity demanded. d. increase in quantity demanded.

b.

If suppliers expect the price of their product to fall in the future, then they will a. decrease supply now. b. increase supply now. c. decrease supply in the future but not now. d. increase supply in the future but not now.

b.

If there were a higher tax placed on cigarettes, what would be the change in equilibrium price and quantity? a. equilibrium price and quantity will increase b. equilibrium price and quantity will decrease c. equilibrium price will increase, but equilibrium quantity will decrease d. equilibrium price will decrease, but equilibrium quantity will increase

b.

If toast and butter are complements, then which of the following would increase the demand for toast? a. a decrease in the price of toast b. a decrease in the price of butter c. an increase in the price of butter d. Both a and b are correct.

b.

Which of the following changes would not shift the demand curve for a good or service? a. a change in income b. a change in the price of the good or service c. a change in expectations about the future price of the good or service d. a change in the price of a related good or service

b.

Which of the following events would unambiguously cause a decrease in the equilibrium price of cotton shirts? Hint: Assume wool and cotton are substitutes a. an increase in the price of wool shirts and a decrease in the price of raw cotton b. a decrease in the price of wool shirts and a decrease in the price of raw cotton c. an increase in the price of wool shirts and an increase in the price of raw cotton d. a decrease in the price of wool shirts and an increase in the price of raw cotton

b.

Which of the following demonstrates the law of demand? a. After Jon got a raise at work, he bought more pretzels at $1.50 per pretzel than he did before his raise. b. Melissa buys fewer muffins at $0.75 per muffin than at $1 per muffin, other things equal. c. Dave buys more donuts at $0.25 per donut than at $0.50 per donut, other things equal. d. Kendra buys fewer Snickers at $0.60 per Snickers after the price of Milky Ways falls to $0.50 per Milky Way.

c.

A movement upward and to the left along a demand curve is called a(n) a. increase in demand. b. decrease in demand. c. decrease in quantity demanded. d. increase in quantity demanded.

c.

A very hot summer in Atlanta will cause a. the demand curve for lemonade to shift to the left. b. the demand for air conditioners to decrease. c. the demand for jackets to decrease. d. a movement downward and to the right along the demand curve for tank tops.

c.

An decrease in the price of a good will a. increase demand. b. decrease demand. c. increase quantity demanded. d. decrease quantity demanded.

c.

An increase in the number of college scholarships issued by private foundations would a. increase the supply of education. b. decrease the supply of education. c. increase the demand for education. d. decrease the demand for education.

c.

Assume Leo buys coffee beans in a competitive market. It follows that a. Leo has a limited number of sellers from which to buy coffee beans. b. Leo will negotiate with sellers whenever he buys coffee beans. c. Leo cannot influence the price of coffee beans even if he buys a large quantity of them. d. None of the above is correct.

c.

If a shortage exists in a market, then we know that the actual price is a. above the equilibrium price, and quantity supplied is greater than quantity demanded. b. above the equilibrium price, and quantity demanded is greater than quantity supplied. c. below the equilibrium price, and quantity demanded is greater than quantity supplied. d. below the equilibrium price, and quantity supplied is greater than quantity demanded.

c.

If muffins and bagels are substitutes, a higher price for bagels would result in a(n) a. increase in the demand for bagels. b. decrease in the demand for bagels. c. increase in the demand for muffins. d. decrease in the demand for muffins.

c.

Lead is an important input in the production of crystal. If the price of lead decreases, then we would expect the supply of a. crystal to be unaffected. b. crystal to decrease. c. crystal to increase. d. lead to increase.

c.

Suppose that minimum wage has increased for workers producing shirts. How will this affect equilibrium price and quantity for shirts? a. equilibrium price and quantity will increase b. equilibrium price and quantity will decrease c. equilibrium price will increase, but equilibrium quantity will decrease d. equilibrium price will decrease, but equilibrium quantity will increase

c.

What would happen to the equilibrium price and quantity of lattés if coffee shops began using a machine that reduced the amount of labor necessary to produce steamed milk, which is used to make lattés, and scientists discovered that lattés cause heart attacks? a. Both the equilibrium price and quantity would increase. b. Both the equilibrium price and quantity would decrease. c. The equilibrium price would decrease, and the effect on equilibrium quantity would be ambiguous. d. The equilibrium quantity would decrease, and the effect on equilibrium price would be ambiguous.

c.

When the price of a good is higher than the equilibrium price, a. a shortage will exist. b. buyers desire to purchase more than is produced. c. a surplus will exist d. quantity demanded exceeds quantity supplied.

c.

In a competitive market, the price of a product a. is determined by buyers, and the quantity of the product produced is determined by sellers. b. is determined by sellers, and the quantity of the product produced is determined by buyers. c. and the quantity of the product produced are both determined by sellers. d. None of the above is correct.

d.

In a market economy, supply and demand are important because they a. play a critical role in the allocation of the economy's scarce resources. b. determine how much of each good gets produced. c. can be used to predict the impact on the economy of various events and policies. d. All of the above are correct.

d.

Suppose that more fishermen are starting to focus on catching shrimp. What happens to the equilibrium price and quantity for shrimp? a. equilibrium price and quantity will increase b. equilibrium price and quantity will decrease c. equilibrium price will increase, but equilibrium quantity will decrease d. equilibrium price will decrease, but equilibrium quantity will increase

d.

Suppose the number of buyers in a market increases and a technological advancement occurs also. What would we expect to happen in the market? a. Equilibrium price would decrease, but the impact on equilibrium quantity would be ambiguous. b. Equilibrium price would increase, but the impact on equilibrium quantity would be ambiguous. c. Equilibrium quantity would decrease, but the impact on equilibrium price would be ambiguous. d. Equilibrium quantity would increase, but the impact on equilibrium price would be ambiguous.

d.