Econ Chapter 3

Which of the following is NOT a characteristic of a market in equilibrium? Excess supply is zero. All consumers are able to purchase an amount equal to their quantity demanded. Excess demand is zero. The equilibrium price is stable, i.e., there is no pressure for it to change.

All consumers are able to purchase an amount equal to their quantity demanded.

You notice that your grocery store always has day-old bakery products at a reduced price. Why might that be? At the original price, the quantity demanded was greater than the quantity supplied. At the original price, there was a shortage of bakery products. The original price was an equilibrium price because it was established in a free market. At the original price, quantity supplied was greater than quantity demanded.

At the original price, quantity supplied was greater than quantity demanded.

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 not buy the jeans because they will be of lower quality than she expected. Gertie should not buy the jeans because the price is not equal to her reservation price. Gertie should buy the jeans because the price is less than her reservation price. Gertie should buy the jeans because the price is more than her reservation price.

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

Which of following is NOT true of an equilibrium price? Consumers who are willing to pay the equilibrium price can acquire the good. It measures the value of the last unit sold to consumers. It is always a fair and just price. Firms who are willing to accept the equilibrium price can sell what they produce.

It is always a fair and just price.

Which of the following is NOT true of a demand curve? It has negative slope. It shows the amount consumers are willing and able to purchase at various prices, holding other factors constant. It relates the price of an item to the quantity demanded of that item. It shows how an increase in price leads to an increase in quantity demanded of a good.

It shows how an increase in price leads to an increase in quantity demanded of a good.

Assume the demand for sugar decreases while the supply of sugar increases. Which of the following outcomes is certain to occur? The equilibrium price of sugar will rise. The equilibrium quantity of sugar will rise. The equilibrium price of sugar will fall. The equilibrium quantity of sugar will fall.

The equilibrium price of sugar will fall.

Which of the following is NOT a determinant of demand for gasoline? Consumers' incomes. The price of diesel. The price of automobiles. The quantity of gasoline supplied.

The quantity of gasoline supplied.

A movement along a demand curve from one price-quantity combination to another is called: a change in quantity demanded. a shift in the demand curve. a change in demand. a change in quantity supplied.

a change in quantity demanded.

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 excess demand for this concert at the Ticketmaster price. The ticket you bought was under-priced for the market. There is an excess supply of tickets for this concert at the Ticketmaster price. The Ticketmaster price is an equilibrium price.

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

Suppose that both the equilibrium price and quantity of ketchup fall. The most consistent explanation for these observations is: a decrease in demand for ketchup with no change in supply. an increase in demand for ketchup with no change in supply. an increase in demand for ketchup and a decrease in the supply of ketchup. an increase in the supply of ketchup with no change in demand.

a decrease in demand for ketchup with no change in supply.

The entire group of buyers and sellers of a particular good or service makes up: only the demand curve. only the supply curve. a market. the equilibrium.

a market

Minimum wage laws are an example of: mandated equilibrium wages. a price ceiling. a regulated price. comparative advantage for unskilled workers.

a regulated price.

When the supply of a good decreases, consumers will eventually: decrease their demand. increase their preferences for the good. decrease their quantity demanded. increase their quantity demanded.

decrease their quantity demanded.

Suppose that the technology used to manufacture laptops has improved. The likely result would be: an increase in supply of laptops. an increase in quantity supplied of laptops. a decrease in supply of laptops. a decrease in quantity supplied of laptops.

an increase in supply of laptops.

An increase in the demand for GM automobiles results in: a lower equilibrium price for GM automobiles. an increase in the quantity supplied of GM automobiles. an increase in the supply of GM automobiles. a lower equilibrium quantity of GM automobiles.

an increase in the quantity supplied of GM automobiles.

A market comprised of a downward-sloping demand curve that intersects an upward-sloping supply curve is said to be stable because: price will never change. quantity will never change. demand will never change. at any price other than equilibrium, forces in the market move price towards the equilibrium.

at any price other than equilibrium, forces in the market move price towards the equilibrium.

When a slice of pizza at the student union sold for $2, Moe did not purchase any. When the price fell to $1.75, Moe purchased a slice each day for lunch. Moe's reservation price for a slice of pizza must be: less than $1.75. at least $1.75 but less than $2. exactly $1.75. exactly $2.00.

at least $1.75 but less than $2.

When the price of an item increases, buyers tend to purchase less of that item: solely because of the substitution effect. solely because of the income effect. because of both the substitution and the income effects. only if the substitution effect and the income effect do not cancel out each other.

because of both the substitution and the income effects.

As the price of flour (an input into the cookie production process) increases, firms that produce cookies will: increase the supply of cookies. increase the quantity of cookies supplied. decrease the supply of cookies. decrease the quantity of cookies supplied.

decrease the supply of cookies.

Suppose that two recent studies conclude that increased fiber in the diet does not reduce the risk of developing colon cancer as was previously thought. The likely result will be that the: quantity demanded of high-fiber foods will fall. demand for high-fiber foods will decrease. supply of high-fiber foods will increase. price of high-fiber foods will rise.

demand for high-fiber foods will decrease.

In a free market, if the price of a good is below the equilibrium price, then; government needs to set a higher price. suppliers, dissatisfied with growing inventories, will raise the price. demanders, to acquire the good, will bid the price higher. suppliers, dissatisfied with growing inventories, will lower the price.

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

The No Cash on the Table Principle asserts that: in equilibrium, a few unexploited opportunities exist. sometimes tips aren't picked up. in disequilibrium, no opportunities exist. in equilibrium, all opportunities have been exploited.

in equilibrium, all opportunities have been exploited.

A decrease in the price of pizza will cause a(n): increase in demand. increase in quantity demanded. decrease in quantity demanded. decrease in the number of consumers.

increase in quantity demanded.

According to the textbook, government price controls fail because: they are not enforced. legislation cannot repeal basic economic motives. bureaucrats lack accurate market data. firms ignore the restrictions.

legislation cannot repeal basic economic motives.

According to the equilibrium principle: unregulated markets tend to reach equilibrium prices and quantities without government regulation. once a market has reached equilibrium, price will not change. collective action cannot improve on individual action. market equilibrium exploits all opportunities for individual gain, but may not exploit gains possible through collective action.

market equilibrium exploits all opportunities for individual gain, but may not exploit gains possible through collective action.

Buyers and sellers of a particular good comprise the: market for the good. demand for the good. supply for the good. production possibilities curve for the good.

market for the good.

If the demand for a good decreases as income decreases, it is a(n): complementary good. normal good. inferior good. substitute good.

normal good.

Suppose one observes that when the price of peanut butter increases, the demand for jelly increases. One must conclude that: peanut butter and jelly are complements. peanut butter and jelly are substitutes. peanut butter and jelly are normal goods. peanut butter and jelly are inferior goods.

peanut butter and jelly are substitutes.

If the market for sport utility vehicles has excess supply, then one can say that: supply is greater than demand. quantity supplied is greater than quantity demanded. demand is greater than supply. quantity demanded is greater than quantity supplied.

quantity supplied is greater than quantity demanded.

The quantity of Revlon nail polish demanded by Jen decreased after the price of Revlon nail polish increased. Jen decides to find a cheaper brand of nail polish. This is called a(n): substitution effect of a price change. income effect of a price change. decrease in buyer's reservation price. increase in buyer's reservation price.

substitution effect of a price change.

In the market for coffee, for many consumers: tea is a substitute. non-dairy creamer is a substitute. cola beverages are complements. coffee mugs are substitutes.

tea is a substitute.

The demand curve illustrates the fact that consumers: tend to purchase more of a good as its price rises. purchase name brand products more frequently than generic products. tend to purchase more of a good as its price falls. purchase more of a good as their incomes rise.

tend to purchase more of a good as its price falls.

Suppose one could either rent a car or take a train to travel to Chicago from Washington, D.C. If the price of train tickets increases: the demand for train tickets will increase. the demand for rental cars will increase. the demand for train tickets will decrease. the demand for rental cars will decrease.

the demand for rental cars will increase.

In general, when the supply curve shifts to the left and demand is constant then: the market cannot reestablish an equilibrium. the equilibrium price will fall. the equilibrium quantity will rise. the equilibrium price will rise.

the equilibrium price will rise.

Suppose that the price of doughnuts decreases and that doughnut-holes are a by-product of producing doughnuts. One would expect: the supply of doughnuts to decrease. the quantity supplied of doughnuts to decrease. the supply of doughnut-holes to increase. the quantity supplied of doughnut-holes to increase.

the quantity supplied of doughnuts to decrease.

A seller's reservation price is generally equal to: the buyer's reservation price. the seller's opportunity cost. the seller's marginal benefit. the market price.

the seller's opportunity cost.

Efficiency occurs when: a market is in equilibrium. the socially optimal quantity of goods and services is being produced. the individually rational quantity of goods and services is being produced. the government does not interfere with market prices.

the socially optimal quantity of goods and services is being produced.

As coffee becomes more expensive, Joe starts drinking tea, and therefore quantity demanded for coffee decreases. This is called: the income effect. the change in equilibrium. the substitution effect. a shift in the demand curve

the substitution effect.

For two goods X and Y to be classified as substitutes, it must be the case that: X and Y are identical. consumers tend to purchase both items. when the price of X rises, the demand for Y decreases. when the price of X rises, the demand for Y increases.

when the price of X rises, the demand for Y increases.

Supply curves are generally _______ sloping because _______________. downward; more consumers will buy the good if the price falls. upward; of the principle of increasing opportunity costs. downward; it is less expensive to mass-produce goods. upward; of inflation.

upward; of the principle of increasing opportunity costs.

Last summer, real estate prices in your town soared. You started noticing more "For Sale" signs in your neighbors' yards. You conclude that: people don't like to live in your neighborhood anymore. when housing prices rose, they started to exceed some of your neighbors' reservation prices. the demand curve for housing in your town has shifted to the left while supply remained constant. the supply curve for housing in your town has shifted to the right while demand has remained constant.

when housing prices rose, they started to exceed some of your neighbors' reservation prices.