Econ1 #2

Refer to Exhibit 3-2. Which of the following would result in a movement from point B on D2 to point A on D1? a. There was an increase in income (assuming that this is an inferior good) and technology remained constant. b. There was an increase in income (assuming that this is a normal good) and technology remained constant c. There was an increase in income (assuming that this is an inferior good) and technology improved. d. There was an increase in income (assuming that this is a normal good) and technology declined.

A

Refer to Exhibit 4-3. Suppose that the tuition in Exhibit 4-5 is set at $60. There will be a. a shortage at 10 a.m. and a surplus at 8 a.m. b. a surplus at 10 a.m. and a shortage at 8 a.m. c. equilibrium at both 10 a.m. and 8 a.m. because the price is half-way between their individual equilibria. d. none of the above

A

Refer to Figure 3-22. Which of the four graphs represents the market for pizza delivery in a college town as we go from summer to the beginning of the fall semester? a. A b. B c. C d. D

A

"A reduction in gasoline prices caused the demand for gasoline to increase. The lower gas prices also led to an increase in demand for large cars, causing their prices to rise." These statements a. are essentially correct. b. contain one error; the lower gasoline prices would cause an increase in the quantity demanded of gasoline, not an increase in demand. c. contain one error; the lower gasoline prices would increase the quantity demanded of large cars, not the demand. d. contain two errors; the lower gasoline prices would cause the quantity of gasoline demanded (rather than the demand) to increase, and the lower gasoline price would cause an increase in quantity demanded (rather than the demand) for large cars.

B

A price ceiling is a government-mandated a. minimum price below which legal trades cannot be made. b. maximum price above which legal trades cannot be made. c. minimum price above which legal trades cannot be made. d. maximum price below which legal trades cannot be made.

B

A shortage occurs whenever a. quantity demanded exceeds quantity supplied at the equilibrium price. b. price is less than equilibrium price. c. quantity demanded is less than quantity supplied. d. goods are scarce. e. some of the people who need the product are not willing and able to buy it at the equilibrium price.

B

Because of price controls in the former Soviet Union, people often waited in long lines for food and other necessities. Modern economic theory would indicate that, relative to price rationing, waiting in line is a. just as efficient. b. less efficient because the time spent waiting in line imposes an opportunity cost on the buyer that does not generate revenue for the seller. c. more efficient since waiting in line reduces the transaction costs of purchasing goods. d. more efficient since waiting in line reduces the cost of the goods to the consumer.

B

In Figure 3-12, suppose D1 and S1 indicate initial conditions in the market for ice cream. Which of the following changes would tend to shift this market from D1 to D2? a. an increase in the price of milk, an ingredient used to produce ice cream b. an increase in the price of frozen yogurt, a substitute for ice cream c. a decrease in the price of sugar, an ingredient used to produce ice cream d. a decrease in consumer income

B

In Figure 3-9, if D and S represent the demand and supply for gasoline, what is the equilibrium price and quantity? a. price, $1; quantity, 20 b. price, $2; quantity, 30 c. price, $3; quantity, 40 d. price, $4; quantity, 50

B

In the orange market, what impact would an increase in the price of oil that orange growers burn to keep oranges from freezing in the winter have on the market? a. It would shift the supply curve to the right. b. It would shift the supply curve to the left. c. It would shift the demand curve to the left. d. It would shift the demand curve to the right.

B

Oil producers expect that oil prices next year will be higher than oil prices this year. As a result, oil producers are most likely to a. place more oil on the market this year, thus shifting the present supply curve of oil rightward. b. hold some oil off the market this year, thus shifting the present supply curve of oil leftward. c. place more oil on the market this year, thus increasing the quantity supplied of oil at lower but not higher prices. d. hold some oil off the market this year, thus decreasing the quantity supplied of oil at lower but not higher prices.

B

Refer to Exhibit 3-1. Equilibrium price and quantity are a. $2 and 250 units. b. $4 and 250 units. c. $2 and 150 units. d. $6 and 250 units. e. none of the above

B

Refer to Figure 3-22. Which of the four graphs represents the market for winter coats as we progress from winter to spring? a. A b. B c. C d. D

B

Refer to Figure 4-16. Some policymakers have argued that the government should establish a "living wage." A living wage would provide workers a reasonable standard of living in their city or region. If a living wage of $10 per hour is established in the market pictured here, we would expect a. employment will increase to 14 million. b. employment will decrease to 8 million. c. the wage will actually rise to $20 per hour. d. there will be a surplus of 14 million workers.

B

Resource X is necessary to the production of good Y. If the price of resource X falls, a. the supply curve of Y shifts leftward. b. the supply curve of Y shifts rightward. c. the supply curve of Y is unaffected. d. there is a movement down the supply curve of Y. e. there is a movement up the supply curve of Y.

B

The maximum price that consumers are willing to pay for the hundredth unit of a good can be found as a. the height of the supply curve at a quantity of 100. b. the height of the demand curve at a quantity of 100. c. the difference between the height of the supply and demand curves at a quantity of 100. d. none of the above.

B

There is no toll charge to drive on freeway A. If there is freeway congestion at 9 a.m., there will be greater freeway congestion at 11 a.m. if a. the demand to drive on the freeway is the same at both times. b. the demand to drive on the freeway at 11 a.m. is greater than the demand to drive on the freeway at 9 a.m. c. the demand to drive on the freeway at 9 a.m. is greater than the demand to drive on the freeway at 11 a.m. d. fewer people carpool at 11 a.m. than at 9 a.m. e. none of the above.

B

Under rent control, tenants can expect a. lower rent and higher quality housing. b. lower rent and lower quality housing. c. higher rent and a shortage of rental housing. d. higher rent and a surplus of rental housing.

B

When several hurricanes hit Florida in 2004, a number of local governments imposed price controls that prevented sellers from raising their prices for badly needed products like plywood and generators. In the areas where the controls were imposed, they resulted in a. an expanded availability of these badly needed products. b. a reduced availability of these badly needed products. c. an increase in the speed with which people recovered from the hurricanes. d. a more efficient allocation of these goods for which price controls were in effect.

B

An ad in the newspaper claims that the price of milk will increase next week. At the same time, a new and improved pasteurization process makes milk production more efficient. Given these two effects, what can we say about the equilibrium price and quantity of milk? a. Equilibrium quantity will decrease, equilibrium price will increase. b. Equilibrium price will decrease; the effect on quantity is ambiguous. c. Equilibrium price will increase; the effect on quantity is ambiguous. d. Equilibrium quantity will increase; the effect on price is ambiguous

D

Refer to Figure 3-22. Which of the four graphs represents the market for cars as a result of the adoption of new technology on assembly lines? a. A b. B c. C d. D

C

The number of people willing to buy tickets to the Super Bowl is invariably greater than the number of tickets (and seats) available. This is evidence that the price of the tickets is a. higher than the equilibrium price. b. equal to the equilibrium price since the number of tickets bought equals the number sold. c. lower than the equilibrium price. d. higher than the equilibrium price when the demand is inelastic but lower when the demand is elastic.

C

If a demand curve shifts rightward, this means a. quantity demanded is greater only at a particular price. b. quantity demanded is greater at every price. c. buyers are willing and able to purchase more of the good at every price. d. buyers are willing and able to purchase less of the good at every price. e. b and c

E

Two goods are considered substitutes if a. a decrease in the demand for one leads to a decrease in the supply of the other. b. an increase in the demand for one leads to a decrease in the supply of the other. c. an increase in the price of one leads to an increase in the demand for the other. d. a decrease in the price of one leads to an increase in the demand for the other, e. a decrease in the supply of one leads producers to switch to production of the other.

C

When the market for a good is in equilibrium, a. consumer surplus will equal producer surplus. b. the total value created for consumers will equal the total cost of production for business firms. c. all units valued more highly than the opportunity cost of production will be supplied. d. all units that have value will be produced, regardless of their cost of production.

C

A decrease in the price of leather used to make shoes would cause the a. demand for shoes to decrease. b. demand for shoes to increase. c. supply of shoes to decrease. d. supply of shoes to increase.

D

If a supply curve shifts rightward, this means a. suppliers are willing and able to offer less of the good for sale at every price. b. suppliers are willing and able to offer more of the good for sale at every price. c. quantity supplied is greater at every price. d. suppliers are willing and able to offer more of the good for sale only at a particular price. e. b and c

E

Refer to Exhibit 3-14. If price P3 is a price ceiling, then a. the price ceiling is not effective. b. the price at which exchange takes place is P3. c. the price at which exchange takes place is P2. d. there is a shortage in this market. e. both a and c

E

If a major hurricane were to destroy the sugarcane crop in Louisiana, there would be a. a decrease in the supply of sugarcane. b. an increase in the supply of sugarcane. c. a decrease in the demand for sugarcane. d. an increase in the demand for sugarcane.

A

If computers and software are complements, then a. a fall in the price of computers will increase the demand for software and, ceteris paribus, the price of software will rise. b. a rise in the price of computers will decrease the demand for software and, ceteris paribus, the price of software will rise. c. a fall in the price of computers will decrease the demand for software and, ceteris paribus, the price of software will fall. d. a rise in the price of software will increase the demand for computers and, ceteris paribus, the price of computers will rise. e. a fall in the price of software will decrease the demand for computers and, ceteris paribus, the price of computers will fall.

A

If the minimum wage law sets a wage floor above the equilibrium wage in the unskilled labor market, a. the minimum wage will create a surplus of labor. b. the minimum wage will create a shortage of labor. c. the minimum wage will not affect the labor market. d. the labor market will change, but we cannot be certain how.

A

In San Francisco, tickets for professional and college football games are substitutes. An increase in the ticket price for professional football, other things being equal, will a. increase the demand for college football tickets. b. decrease the demand for college football tickets. c. not change the demand for college football tickets. d. decrease the demand for professional football games.

A

Refer to Exhibit 3-14. Price P1 a. can be an effective price ceiling. b. can be an effective price floor. c. is the equilibrium price. d. both a and c e. none of the above

A

A price floor is a government-mandated a. minimum price below which legal trades cannot be made. b. maximum price above which legal trades cannot be made. c. minimum price at which all units of the good must be legally sold. d. minimum price below which legal trades can be made.

A

A technological improvement in producing good A would be graphically illustrated as a shift in the a. supply curve for A to the right. b. supply curve for A to the left. c. demand curve for A to the right. d. demand curve for A to the left.

A

Because the height of the demand curve measures the marginal value of the good to consumers, the fact that a demand curve slopes downward to the right illustrates that a. as more of a product is consumed, consumers will value additional units less. b. as more of a product is consumed, consumers will value additional units more. c. the value of additional units of the good is unrelated to the amount consumed. d. the cost of production for a good generally rises as more of it is produced.

A

Given the demand (D) and supply (S) for gasoline in Figure 3-9, if the price of gasoline were $1 per gallon, a. consumers would wish to purchase more than was being supplied. b. producers would be supplying more than consumers wished to purchase. c. the quantity consumers wished to purchase would equal the quantity that producers wished to supply. d. there would be a tendency for the price of gasoline to fall.

A

Which of the following statements represents a correct and sequentially accurate economic explanation? a. X is an inferior good and Y is a substitute for X. Income rises, the demand for X falls, the price of X falls, and the demand for Y rises. b. X is an inferior good and Y is a substitute for X. Income rises, the demand for X falls, the price of X falls, and the demand for Y falls. c. X is an inferior good and Y is a substitute for X. Income falls, the demand for X rises, the price of X rises, and the demand for Y falls. d. X is an inferior good and Y is a substitute for X. Income rises, the quantity demanded of X rises, the price of X rises, and the demand for Y falls. e. none of the above

B

A cold spell in Florida extensively reduced the orange crop, and as a result, California oranges commanded a higher price. Which of the following statements best explains the situation? a. The supply of Florida oranges fell, causing the supply of California oranges to increase as well as their price. b. The supply of Florida oranges fell, causing the supply of California oranges to decrease and their price to increase. c. The supply of Florida oranges fell, causing their price to increase and the demand for California oranges to increase. d. The demand for Florida oranges was reduced by the freeze, causing an increase in the price of California oranges and a greater demand for them.

C

Assume that corn and soybeans are alternatives that could be grown by most farmers. An increase in the price of corn will a. increase the supply of corn. b. increase the supply of soybeans. c. decrease the supply of soybeans. d. decrease the supply of corn. e. have no effect on the supplies of corn and soybeans.

C

In Figure 3-11, suppose D1 and S1 indicate initial conditions in the market for kitchen cabinets. Which of the following would tend to cause the supply curve to shift from S1 to S2? a. the invention of "folding" plates and cups that take up substantially less storage space in the kitchen b. a decrease in consumer income c. a decrease in the price of wood, a resource used to produce kitchen cabinets d. an increase in the price of steel hinges, a resource used to produce kitchen cabinets

C

In which statement(s) is "supply" used correctly? (I) "An increase in the price of eggs will increase the supply of eggs." (II) "As the cost of producing eggs rises, the supply of eggs will tend to fall." a. in both statements I and II b. in statement I only c. in statement II only d. in neither statements I nor II

C

Economists have argued that rent control is "the best way to destroy a city, other than bombing." Why would economists say this? a. They anticipate that low rents will cause low-income people to move into the city, reducing the quality of life for other people. b. They anticipate that rent control will benefit landlords at the expense of tenants, increasing inequality in the city. c. They anticipate that rent controls will cause a construction boom, which will make the city crowded and more polluted. d. They anticipate that rent control will eliminate the incentive to maintain buildings, leading to a deterioration of the city.

D

In Figure 3-6, suppose D1 and S1 indicate initial conditions in the market for ice cream. Which of the following changes would tend to cause a shift from S1 to S2 in the market for ice cream? a. an increase in the price of sugar, an ingredient used to produce ice cream b. a decrease in the price of frozen yogurt, a substitute for ice cream c. abnormally hot weather that temporarily increases consumer desire for ice cream d. a decrease in the price of milk, an ingredient used to produce ice cream

D

Refer to Exhibit 3-14. If price P1 is a price ceiling, then a. there is a surplus in this market. b. the highest price that can be charged legally in this market is P3. c. the price at which exchange legally takes place is P2. d. the price at which exchange legally takes place is P1. e. both a and b

D

Refer to Exhibit 3-2. Which of the following would result in a movement from point A on D1 to point B on D2? a. There was a decrease in the price of a substitute. b. There was an increase in the price of a complement. c. There was an improvement in production technology. d. There was an increase in the number of buyers.

D

Refer to Figure 3-22. Which of the four graphs represents the market for peanut butter after a major hurricane hits the peanut-growing south? a. A b. B c. C d. D

D

Refer to Figure 4-19. When the price ceiling applies in this market and the supply curve for gasoline shifts from S1 to S2, a. the price will increase to P3. b. a surplus will occur at the new market price of P2. c. the market price will stay at P1 due to the price ceiling. d. a shortage will occur at the price ceiling of P2.

D

Suppose both the equilibrium price and quantity fall for a particular product. Which of the following best explains this situation? a. Supply and demand simultaneously increased and the shift in supply was greater than the shift in demand. b. Supply and demand simultaneously increased and the shift in supply was less than the shift in demand. c. Supply and demand simultaneously decreased and the shift in supply was greater than the shift in demand. d. Supply and demand simultaneously decreased and the shift in supply was less than the shift in demand.

D

Suppose the government decides that every family should own its own home. To bring this about, the government decides to subsidize the home-construction industry by giving the home-construction companies $10,000 for every house that they build. As a result of this, a. the supply curve of new houses would shift leftward, since it now costs $10,000 more for builders to produce a house. b. the demand curve for new houses would shift rightward, since now every family would want to buy a house. c. the demand curve for new houses would shift leftward. d. the supply curve of new houses would shift rightward, since builders would be willing to produce and sell more houses at each given price. e. c and d

D