Econ 211 Quiz 2

When an economist says that the demand for a product has increased, this means that:

consumers are now willing to purchase more of this product at each possible price.

A market is in equilibrium:

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

Suppose that in each of four successive years producers sell more of their product and at lower prices. This could be explained:

in terms of a stable demand curve and increasing supply.

"In the corn market, demand often exceeds supply and supply sometimes exceeds demand." "The price of corn rises and falls in response to changes in supply and demand." In which of these two statements are the terms demand and supply being used correctly?

in the second statement.

(Advanced analysis) Answer the next question(s) on the basis of the following information. The demand for commodity X is represented by the equation P = 10 - 0.2Q and supply by the equation P = 2 + 0.2Q. Refer to the above. An increase in the price of a product that is a close substitute for X will:

increase D, increase P, and increase Q.

Refer to the above diagram. An increase in quantity supplied is depicted by a:

move from point y to point x.

If a legal ceiling price is set above the equilibrium price:

neither the equilibrium price nor equilibrium quantity will be affected.

The demand for most products varies directly with changes in consumer incomes. Such products are known as:

normal goods.

. Refer to the above diagram. Rent controls are best illustrated by:

price A.

Refer to the above diagram. A government-set price ceiling is best illustrated by:

price A.

Refer to the above diagram. A government price support program to aid farmers is best illustrated by:

price C.

The supply curve shows the relationship between:

price and quantity supplied.

An increase in the quantity demanded means that:

price has declined and consumers therefore want to purchase more of the product.

If the supply of a product decreases and the demand for that product simultaneously increases, then equilibrium:

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

The construction of demand and supply curves assumes that the primary variable influencing decisions to produce and purchase goods is:

price.

Allocative efficiency is concerned with:

producing the combination of goods most desired by society.

Other things equal, if the price of a key resource used to produce product X falls, the:

product supply curve of X will shift to the right.

An improvement in production technology will:

shift the supply curve to the right.

A leftward shift of a product supply curve might be caused by:

some firms leaving an industry.

Suppose that corn prices rise significantly. If farmers expect the price of corn to continue rising relative to other crops, then we would expect:

the supply to increase as farmers plant more corn.

Productive efficiency refers to:

the use of the least-cost method of production.

At the equilibrium price:

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

Which of the following is most likely to be an inferior good?

used clothing

A product market is in equilibrium:

where the demand and supply curves intersect.

Refer to the above data. Equilibrium price will be:

$2.

Advanced analysis) Answer the next question(s) on the basis of the following information. The demand for commodity X is represented by the equation P = 10 - 0.2Q and supply by the equation P = 2 + 0.2Q. Refer to the above information. The equilibrium price for X is:

$6.

Refer to the above table. If demand is represented by columns (3) and (1) and supply is represented by columns (3) and (4), equilibrium price and quantity will be:

$9 and 60 units.

Which of the above diagrams illustrate(s) the effect of an increase in the price of Budweiser beer on the market for Coors beer?

A only.

If an effective ceiling price is placed on hamburgers then:

All of these are likely outcomes.

Assuming competitive markets with typical supply and demand curves, which of the following statements is correct?

An increase in demand with no change in supply will result in an increase in sales.

A market that achieves productive efficiency is producing the quantity of goods most desired by society.

FALSE

Producing a good in the least costly way is known as allocative efficiency.

FALSE

Surpluses drive market prices up; shortages drive them down.

FALSE

Toothpaste and toothbrushes are substitute goods.

FALSE

Which of the following statements is correct?

If supply increases and demand decreases, equilibrium price will fall.

Over time, the equilibrium price of a gigabyte of computer memory has fallen while the equilibrium quantity purchased has increased. Based on this we can conclude that:

Increases in the supply of computer memory have exceeded increases in demand.

Which of the following statements is true about price ceilings?

Price ceilings cause goods to be rationed by some other means than legally determined market prices.Refer to the above data. Equilibrium price will be:

A government subsidy per unit of output increases supply.

TRUE

In a competitive market, every consumer willing to pay the market price can buy a product and every producer willing to sell the product at that price can sell it.

TRUE

In which of the following statements are the terms "demand" and "quantity demanded" used correctly?

When the price of ice cream rose, the quantity demanded of ice cream fell, and the demand for ice cream toppings fell.

Which of the following will not cause the demand for product K to change?

a change in the price of K

Assume the demand curve for product X shifts to the right. This might be caused by:

a decline in income if X is an inferior good.

If producers must obtain higher prices than previously to produce various levels of output, the following has occurred:

a decrease in supply.

A rightward shift in the demand curve for product C might be caused by:

a decrease in the price of a product that is complementary to C.

Assume that the demand schedule for product C is downsloping. If the price of C falls from $2.00 to $1.75:

a larger quantity of C will be demanded.

Which of the following would not shift the demand curve for beef?

a reduction in the price of cattle feed

Refer to the above table. Suppose that demand is represented by columns (3) and (2) and supply is represented by columns (3) and (5). If the price were artificially set at $6, a:

a shortage of 40 units would occur.

The location of the supply curve of a product depends on:

all of these.

Refer to the above diagram, in which S1 and D1 represent the original supply and demand curves and S2 and D2 the new curves. In this market:

an increase in demand has been more than offset by an increase in supply.

Which of the following will cause a decrease in market equilibrium price and an increase in equilibrium quantity?

an increase in supply.

One can say with certainty that equilibrium quantity will increase when supply:

and demand both increase.

Markets explained on the basis of supply and demand:

assume many buyers and many sellers of a standardized product.

An economist for a bicycle company predicts that, other things equal, a rise in consumer incomes will increase the demand for bicycles. This prediction is based on the assumption that:

bicycles are normal goods.

Black markets are associated with:

ceiling prices and the resulting product shortages.

Digital cameras and memory cards are:

complementary goods.

With a downsloping demand curve and an upsloping supply curve for a product, a decrease in resource prices will:

decrease equilibrium price and increase equilibrium quantity.

. If X is a normal good, a rise in money income will shift the:

demand curve for X to the right.

The relationship between quantity supplied and price is _____ and the relationship between quantity demanded and price is _____.

direct, inverse

Answer the next question(s) on the basis of the given supply and demand data for wheat:

farmers would not be able to sell all their wheat.

A price floor means that:

government is imposing a minimum legal price that is typically above the equilibrium price.

In the following question(s) you are asked to determine, other things equal, the effects of a given change in a determinant of demand or supply for product X upon (1) the demand (D) for, or supply (S) of, X, (2) the equilibrium price (P) of X and (3) the equilibrium quantity (Q) of X. Refer to the above. An increase in the tastes and preferences for X will:

increase D, increase P, and increase Q.

With a downsloping demand curve and an upsloping supply curve for a product, placing an excise tax on this product will:

increase equilibrium price and decrease equilibrium quantity.

When the price of oil declines significantly, the price of gasoline also declines. The latter occurs because of a(n):

increase in the supply of gasoline.

Assume product A is an input in the production of product B. In turn product B is a complement to product

increase the supply of B and increase the demand for C.

An unusually large crop of coffee beans might:

increase the supply of coffee.

(Last Word) A market for human organs (rather than the current volunteer-donor system) would be expected to:

increase total health care spending.

Assume in a competitive market that price is initially below the equilibrium level. We can predict that price will:

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

A government subsidy to the producers of a product:

increases product supply.

Tennis rackets and ballpoint pens are:

independent goods.

College students living off-campus frequently consume large amounts of ramen noodles and boxed macaroni and cheese. When they finish school and start their careers, their consumption of both goods frequently declines. This suggests that ramen noodles and boxed macaroni and cheese are:

inferior goods.

Price ceilings and price floors:

interfere with the rationing function of prices.

(Advanced analysis) The equation for the demand curve in the below diagram:

is P = 35 - .5Q.

If the supply and demand curves for a product both decrease, then equilibrium:

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

If we say that a price is too high to clear the market, we mean that:

quantity supplied exceeds quantity demanded.

Camille's Creations and Julia's Jewels both sell beads in a competitive market. If at the market price of $5, both are running out of beads to sell (they can't keep up with the quantity demanded at that price), then we would expect both Camille's and Julia's to:

raise their price and increase their quantity supplied.

Suppose that tacos and pizza are substitutes, and that soda and pizza are complements. We would expect an increase in the price of pizza to:

reduce the demand for soda and increase the demand for tacos.

An effective price floor will:

result in a product surplus.

Assume a drought in the Great Plains reduces the supply of wheat. Noting that wheat is a basic ingredient in the production of bread and that potatoes are a consumer substitute for bread, we would expect the price of wheat to:

rise, the supply of bread to decrease, and the demand for potatoes to increase.

Data from the registrar's office at Gigantic State University indicate that over the past twenty years tuition and enrollment have both increased. From this information we can conclude that:

school-age population, incomes, and preferences for education have changed over the twenty-year period.

A decrease in the price of digital cameras will:

shift the demand curve for memory cards to the right.

Since their introduction, prices of DVD players have fallen and the quantity purchased has increased. This statement:

suggests that the supply of DVD players has increased.

An increase in the excise tax on cigarettes raises the price of cigarettes by shifting the:

supply curve for cigarettes leftward.

(Consider This) Suppose that salsa manufacturers sell 2 million bottles at $3.50 in one year, and 3 million bottles at $3 in the next year. Based on this information we can conclude that the:

supply of salsa has increased.

If price is above the equilibrium level, competition among sellers to reduce the resulting:

surplus will increase quantity demanded and decrease quantity supplied.

. Other things equal, which of the following might shift the demand curve for gasoline to the left?

the development of a low-cost electric automobile

Which of the following would mostly likely increase the demand for gasoline?

the expectation by consumers that gasoline prices will be higher in the future.

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:

the income effect.

When the price of a product increases, a consumer is able to buy less of it with a given money income. This describes:

the income effect.

In moving along a stable demand curve which of the following is not held constant?

the price of the product for which the demand curve is relevant.

If there is a shortage of product X:

the price of the product will rise.

By an increase in demand we mean that:

the quantity demanded at each price in a set of prices is greater.

When the price of Nike soccer balls fell, Ronaldo purchased more Nike soccer balls, and fewer Adidas soccer balls. Which of the following best explains Ronaldo's decision to buy more Nike soccer balls?

the substitution effect