ECON 202 - CH3 Study Questions

B. shift the demand curve for film to the right.

A decrease in the price of cameras will: A. cause the demand curve for film to become vertical. B. shift the demand curve for film to the right. C. shift the demand curve for film to the left. D. not affect the demand for film.

D. some firms leaving an industry.

A leftward shift of a product supply curve might be caused by: A. an improvement in the relevant technique of production. B. a decline in the prices of needed inputs. C. an increase in consumer incomes. D. some firms leaving an industry.

C. if the amount producers want to sell is equal to the amount consumers want to buy.

A market is in equilibrium: A. provided there is no surplus of the product. B. at all prices above that shown by the intersection of the supply and demand curves. C. if the amount producers want to sell is equal to the amount consumers want to buy. D. whenever the demand curve is downsloping and the supply curve is upsloping.

B. government is imposing a legal price that is below the equilibrium price.

A price ceiling means that: A. there is currently a surplus of the relevant product. B. government is imposing a legal price that is below the equilibrium price. C. government wants to stop a deflationary spiral. D. government is imposing a legal price that is above the equilibrium price.

C. consumer preferences have changed in favor of A so that they now want to buy more at each possible price.

A shift to the right in the demand curve for product A can be most reasonably explained by saying that: A. consumer incomes have declined and they now want to buy less of A at each possible price. B. the price of A has increased and, as a result, consumers want to purchase less of it. C. consumer preferences have changed in favor of A so that they now want to buy more at each possible price. D. the price of A has declined and, as a result, consumers want to purchase more of it.

B. above equilibrium with the result that quantity supplied exceeds quantity demanded.

A surplus of a product will arise when price is: A. above equilibrium with the result that quantity demanded exceeds quantity supplied. B. above equilibrium with the result that quantity supplied exceeds quantity demanded. C. below equilibrium with the result that quantity demanded exceeds quantity supplied. D. below equilibrium with the result that quantity supplied exceeds quantity demanded.

C. result in a surplus of wheat.

An effective price floor on wheat will: A. force otherwise profitable farmers out of business. B. result in a shortage of wheat. C. result in a surplus of wheat. D. clear the market for wheat.

B. result in a product surplus.

An effective price floor will: A. force some firms in this industry to go out of business. B. result in a product surplus. C. result in a product shortage. D. clear the market.

C. shift the supply curve to the right.

An improvement in production technology will: A. increase equilibrium price. B. shift the supply curve to the left. C. shift the supply curve to the right. D. shift the demand curve to the left.

C. increase the demand for a normal good.

An increase in consumer incomes will: A. increase the demand for an inferior good. B. increase the supply of an inferior good. C. increase the demand for a normal good. D. decrease the supply of a normal good.

D. increase, quantity demanded will decrease, and quantity supplied will increase.

Assume in a competitive market that price is initially below the equilibrium level. We can predict that price will: A. decrease, quantity demanded will decrease, and quantity supplied will increase. B. decrease and quantity demanded and quantity supplied will both decrease. C. decrease, quantity demanded will increase, and quantity supplied will decrease. D. increase, quantity demanded will decrease, and quantity supplied will increase.

B. increase, quantity demanded to decrease, and quantity supplied to increase.

At the current price there is a shortage of a product. We would expect price to: A. increase, quantity demanded to increase, and quantity supplied to decrease. B. increase, quantity demanded to decrease, and quantity supplied to increase. C. increase, quantity demanded to increase, and quantity supplied to increase. D. decrease, quantity demanded to increase, and quantity supplied to decrease.

B. there are no pressures on price to either rise or fall.

At the equilibrium price: A. quantity supplied may exceed quantity demanded or vice versa. B. there are no pressures on price to either rise or fall. C. there are forces that cause price to rise. D. there are forces that cause price to fall.

D. the quantity that consumers want to purchase and the amount producers choose to sell are the same.

At the point where the demand and supply curves for a product intersect: A. the selling price and the buying price need not be equal. B. the market may, or may not, be in equilibrium. C. either a shortage or a surplus of the product might exist, depending on the degree of competition. D. the quantity that consumers want to purchase and the amount producers choose to sell are the same.

C. ceiling prices and the resulting product shortages.

Black markets are associated with: A. price floors and the resulting product surpluses. B. price floors and the resulting product shortages. C. ceiling prices and the resulting product shortages. D. ceiling prices and the resulting product surpluses.

A. surplus will increase quantity demanded and decrease quantity supplied.

If price is above the equilibrium level, competition among sellers to reduce the resulting: A. surplus will increase quantity demanded and decrease quantity supplied. B. shortage will decrease quantity demanded and increase quantity supplied. C. surplus will decrease quantity demanded and increase quantity supplied. D. shortage will increase quantity demanded and decrease quantity supplied.

D. A and B are complementary goods.

If the demand curve for product B shifts to the right as the price of product A declines, then: A. both A and B are inferior goods. B. A is a superior good and B is an inferior good. C. A is an inferior good and B is a superior good. D. A and B are complementary goods.

C. quantity must decline, but equilibrium price may either rise, fall, or remain unchanged.

If the supply and demand curves for a product both decrease, then equilibrium: A. quantity must fall and equilibrium price must rise. B. price must fall, but equilibrium quantity may either rise, fall, or remain unchanged. C. quantity must decline, but equilibrium price may either rise, fall, or remain unchanged. D. quantity and equilibrium price must both decline.

A. price must rise, but equilibrium quantity may either rise, fall, or remain unchanged.

If the supply of a product decreases and the demand for that product simultaneously increases, then equilibrium: A. price must rise, but equilibrium quantity may either rise, fall, or remain unchanged. B. price must rise and equilibrium quantity must fall. C. price and equilibrium quantity must both increase. D. price and equilibrium quantity must both decline.

B. the price of the product will rise.

If there is a shortage of product X: A. fewer resources will be allocated to the production of this good. B. the price of the product will rise. C. the price of the product will decline. D. the supply curve will shift to the left and the demand curve to the right, eliminating the shortage.

C. interfere with the rationing function of prices.

Price ceilings and price floors: A. cause surpluses and shortages respectively. B. make the rationing function of free markets more efficient. C. interfere with the rationing function of prices. D. shift demand and supply curves and therefore have no effect on the rationing function of prices.

A. price and quantity demanded are inversely related.

The law of demand states that: A. price and quantity demanded are inversely related. B. the larger the number of buyers in a market, the lower will be product price. C. price and quantity demanded are directly related. D. consumers will buy more of a product at high prices than at low prices.

A. reflects the amounts that producers will want to offer at each price in a series of prices.

The law of supply: A. reflects the amounts that producers will want to offer at each price in a series of prices. B. is reflected in a downsloping supply curve. C. shows that the relationship between producer revenue and quantity supplied is negative. D. reflects the income and substitution effects of a price change.

A. direct, inverse

The relationship between quantity supplied and price is _____ and the relationship between quantity demanded and price is _____. A. direct, inverse B. inverse, direct C. inverse, inverse D. direct, direct

D. the income effect.

When the price of a product falls, the purchasing power of our money income rises and thus permits consumers to purchase more of the product. This statement describes: A. an inferior good. B. the rationing function of prices. C. the substitution effect. D. the income effect.

C. the substitution effect.

When the price of a product rises, consumers shift their purchases to other products whose prices are now relatively lower. This statement describes: A. an inferior good. B. the rationing function of prices. C. the substitution effect. D. the income effect.