econ ch.3

Why does your grocery store sell day-old bakery goods but not day-old canned goods?

An excess supply of bakery goods will quickly spoil, but excess canned goods will not

Minimum wage laws are an example of:

a regulated price.

In a free market, if the price of a good is below the equilibrium price, then;

demanders, to acquire the good, will bid the price higher.

Suppose one knows two facts: first, the market for prescription drugs experiences chronic shortages and second, government sets the price for prescription drugs. One can conclude that the:

government has set the price below the equilibrium price.

In order to understand how the price of a good is determined in the free market, one must account for the desires of:

purchasers and sellers.

A shortage occurs when:

quantity demanded exceeds quantity supplied.

Refer to the figure above. If supply were to shift to the left, and demand were to also shift to the left, in the new equilibrium:

quantity would be lower, but the direction of the price change cannot be determined.

An increase in the quantity demanded of tea occurs whenever:

the price of the tea falls.

You have noticed that there is a persistent shortage of teachers in an inner-city school district in your state. Based on this observation, you suspect that:

the wage for teachers at those schools is lower than the equilibrium wage.

Refer to the figure above. At a price of $20:

there would be excess demand of approximately 25 units.

Refer to the figure above. In the original market equilibrium:

40 cups of coffee are sold for $2.00 each.

Which of the following directly follows from the No Cash on the Table Principle?

For a transaction to occur, the buyer's reservation price must be greater than the seller's reservation price.

Gertie saw a pair of jeans that she was willing to buy for $35. The price tag, though, said they were $29.99. Therefore:

Gertie should buy the jeans because the price is less than her reservation price.

Which of the following is NOT true of a demand curve?

NOT It shows the amount consumers are willing and able to purchase at various prices, holding other factors constant.

A good example of central planning at work in the U.S. would be:

New York City's rent control.

The tendency of markets to automatically gravitate toward equilibrium is an application of which core principle?

The Incentive Principle

Assume the demand for coffee increases while the supply decreases. Which of the following outcomes is certain to occur?

The equilibrium price of coffee will rise

Assume both the demand and the supply of beef decrease. Which of the following outcomes is certain to occur?

The equilibrium quantity of beef will fall.

Suppose you bought a concert ticket from Ticketmaster for $50, but when you got to the concert scalpers (individuals who re-sell tickets at the event) were selling tickets in the same seating area as yours for $25. What is probably true?

There is an excess supply of tickets for this concert at the Ticketmaster price.

A movement along a demand curve from one price-quantity combination to another is called:

a change in quantity demanded.

Suppose that a disease that affects people who consume beef has been discovered in the United States. One likely result is:

a decrease in demand for beef.

"As the price of personal computers continues to fall, demand increases." This headline is inaccurate because:

a falling price for personal computers increases quantity demanded, not demand.

Refer to the table above. Relative to column A, it appears that column B represents ______.

an increase in demand

Whether or not a good can be classified as a complement depends on whether;

an increase in demand for one good follows a decrease in the price of the other.

Refer to the figure above. Assume the market is originally at point W. Movement to point X is a combination of:

an increase in quantity supplied and an increase in demand.

Refer to the figure above. Assume the market is originally at point W. Movement to point Z is a combination of:

an increase in supply and an increase in demand.

Efficiency is an important goal in economics because it:

assures a higher level of output.

When the price of an item increases, buyers tend to purchase less of that item:

because of both the substitution and the income effects.

Refer to the figure above. The equilibrium price in this market is:

between $40 and $50.

In Cuba, a bureaucratic committee makes the production decisions for the country's firms and factories. Therefore, Cuba is an example of a:

centralized economy

When the price of a good is below its equilibrium value:

consumers will bid the price up.

Refer to the figure above. An increase in demand is represented by shifting from:

curve C to curve D.

Refer to the figure above. A decrease in demand is represented by shifting from:

curve D to curve C.

When the supply of a good decreases, consumers will eventually:

decrease their quantity demanded.

Suppose that both supply and demand for iPads decrease. One can predict that the:

equilibrium quantity will fall but the equilibrium price can rise or fall.

Refer to the figure above. Assume that column A and column B are the initial demand and supply curves. At a price of $30, the market would experience:

excess demand of 45 units.

Shelly purchases a leather purse for $400. One can infer that:

her reservation price was at least $400.

You can spend $5 for lunch and you would like to have two double cheeseburgers. When you get to the restaurant, you find out the price for double cheeseburger has increased from $2.50 to $2.99. You decide to have just one double cheeseburger for lunch. This is best described as a(n):

income effect.

A decrease in the price of pizza will cause a(n):

increase in quantity demanded.

Refer to the figure above. Moving from demand curve D1 to demand curve D2 could be caused by a(n):

increase in the price of a close substitute.

The supply curve illustrates that firms:

increase the quantity supplied of a good when its price rises.

If both supply and demand increase simultaneously, the new equilibrium price is ___________ and the new equilibrium quantity is _________________.

indeterminate; higher

The situation described in the book as "Smart for One, Dumb for All" occurs when:

individuals, when acting rationally, fail to take advantage of all opportunities for social benefit.

A decrease in the demand for bananas with no concurrent change in the supply of bananas will result in a ________ equilibrium price and a(n) ________ equilibrium quantity.

lower; lower

Buyers and sellers of a particular good comprise the:

market for the good.

An outcome is socially optimal if it:

maximizes total economic surplus.

One reason for the ________ slope of the demand curve is that as prices fall ________.

maybe downward; more people find that the price is less than their reservation price.

If the demand for steak increases as income increases, this means that steak is a(n):

normal good.

Refer to the table above. Relative to column C, it appears that column D represents ______.

not a decrease in quantity demanded.

Refer to the figure above. Assume that column A and column B are the initial demand and supply curves. At a price of $50, the market would experience:

not excess demand of 5 units.

As the price of a good rises:

not firms earn larger profits.

A decrease in the price of pizza will cause a(n):

not increase in demand.

Refer to the figure above. In this market, if all buyers' reservation prices for a cup of coffee increased by $1.00;

not the equilibrium price would increase by $1.00.

You have noticed that there is a persistent shortage of teachers in an inner-city school district in your state. Based on this observation, you suspect that:

not the reservation price among teachers is lower than for other professions.

Jessica's marginal cost for producing a pitcher of lemonade is $0.25. Therefore, $0.25 can also be called her:

reservation price.

Refer to the figure above. If the price of the plastic used to make action figures rises, supply will:

shift from Current Supply to Supply A.

"Holding all other relevant factors constant, consumers will purchase more of a good as the price falls." This statement reflects the behavior underlying:

the demand curve.

In general, when the demand curve shifts to the right and supply remains constant then:

the equilibrium quantity will rise.