econ test 2

Suppose that the price of cotton clothing is such that the quantity demanded is less than the quantity supplied. As the market process moves to correct this imbalance, the price will _____ and this will cause _______

FALL; the quantity demanded of cotton clothing to increases.

Which of the following raises the equilibrium price of cement?

an increase in the demand for cement

The law of supply states that other things remaining the same, an increase in the price of a kayak leads to

an increase in the quantity of kayaks supplied

The law of supply states that other things remaining the same, an increase in the price of a kayak leads to

an increase in the quantity of kayaks supplied.

Market equilibrium occurs when

at a price where there is neither shortage nor surplus. at a quantity where the social surplus is as large as it can possibly be. both a and c

marginal benefit exceeds marginal cost when

below equilibrium

Assume a competitive market is in equilibrium. There is a decrease in demand and an increase in supply. As a result, the level of equilibrium price is ________, and the level of equilibrium quantity is _______.

decreased; perhaps changed but we can't say if it increases, decreases, or stays the same

anything with consumers shifts

demand

The phrase "decreasing marginal benefit" means that

each additional unit of a good you consume gives you less additional benefit than the previous unit.

Consider the market for peanut butter. If there is an increase in the price of bread (a complement for peanut butter) along with a drought in peanut growing areas, the

equilibrium quantity of peanut butter definitely decreases.

When demand decreases and supply does not change, the equilibrium price ________ and the equilibrium quantity ________.

falls; decreases

A deadweight loss is created

if for the last unit produced, marginal cost is greater than its marginal benefit or if its marginal benefit is greater than its marginal cost

The demand curve is also the

marginal benefit curve.

Over -production implies that for the last unit produced

marginal cost exceeds marginal benefit.

producer is above

price

If the price of carrots is below the equilibrium price, the

quantity demanded of carrots exceeds the quantity supplied and a shortage exists

When there is a surplus of snowboards, the

quantity of snowboards supplied is greater than the quantity of snowboards demanded

If there exists a shortage in the market for snowmobiles, then the price of a snowmobile will tend to

rise

Market equilibrium is a point of tendency. This means that there is a tendency for the price to

rise when there is a shortage and fall when there is a surplus

Suppose that the price of flour (an input used to make bagels) increases; the result of this increase in the price of flour is that the equilibrium price of a bagel will ________ and the equilibrium quantity of bagels will ________. (hint: on scrap paper , draw a diagram of the bagel market prior to answering)

rise; decrease

Suppose the equilibrium price of oranges is $2.00 per pound. What if the current price in the market happens to be below the $2 equilibrium price, then

shortage exists and the price rises to restore equilibrium

The law of demand states that, other things remaining the same, the higher the price of a good, the

smaller is the quantity of the good demanded.

Consider the market for camera film. If more people start using digital cameras, which do not require film

the demand curve for film shifts leftward.

If the demand curve for desktop computers shifts rightward and at the same time the supply curve shifts leftward, then

the equilibrium price definitely rises.

Peanut butter and jelly are complements for many consumers. Consider the market for peanut butter. If there is an increase in the price of jelly, (hint: draw a diagram of the market for peanut butter on scrap paper prior to answering)

the equilibrium quantity of peanut butter will decrease

Consider the market for peanut butter. If there is an increase in the price of bread (a complement for peanut butter) along with a drought in peanut growing areas, (hint: both demand and supply shift in this scenario)

the equilibrium quantity of peanut butter will definitely decrease

A fall in the price of a good causes producers to reduce the quantity of the good they are willing to produce. This fact illustrates

the law of supply.

Which of the following describes the law of demand? When other things remain the same, as

the price of gas falls, the quantity demanded of gas increases.

Consider the market for feather pillows. If there is an increase in the price of feather dusters, a substitute in production for feather pillows, then

the supply curve for feather pillows shifts leftward.

Consider the market for wheat. If there is an improvement in harvesting technology,

the supply curve for wheat shifts rightward.

Suppose that the price of cotton clothing is above the equilibriuim price and begins to fall ; as price falls toward the equilibrium

the surplus of cotton clothing decreases.

Consumer surplus equals

total buyer benefit minus total buyer expenditure.

Assume a competitive market is in equilibrium. There is an increase in demand and an increase in supply. As a result the level of equilibrium price is ________, and the level of equilibrium quantity is _______.

unpredictable without more information; increased