ECON1A TEST 3
Which of the following events would result in a decrease in equilibrium price and an uncertain change in equilibrium quantity?
An increase in supply and a decrease in demand.
A new study on the health benefits of vitamin C has caused more people to prefer orange juice. At the same time, a freeze in Florida has devastated the orange crop. Given these two effects, what can we say about the equilibrium price and quantity of orange juice?
Equilibrium price will increase; the effect on quantity is ambiguous.
a movement upward to the left along the original demand curve D1.
In Figure 3-3, if the initial demand for margarine were D1, the impact of an increase in the price of margarine from $0.35 to $0.40 per pound on consumer purchases would be illustrated as
a shift in the demand curve from D1 to D2
In Figure 3-5, if the initial demand for margarine were D1, an increase in the price of butter, which is a substitute for margarine, would tend to cause which of the following changes in the market for margarine?
a decrease in the price of milk, an ingredient used to produce ice cream
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?
Supply would increase to S2, price would decrease to P0, and the quantity would increase to S.
In Figure 3-8, if the initial demand and supply for soybeans were D1 and S1, how would a decrease in the cost of producing soybeans affect the market for soybeans?
What would happen to the equilibrium price and quantity of peanut butter if the price of peanuts went up, the price of jelly fell, fewer firms decided to produce peanut butter, and health officials announced that eating peanut butter was good for you?
Price will rise and the effect on quantity is ambiguous.
A price floor set above an equilibrium price tends to cause persistent imbalances in the market because
Quantity supplied exceeds quantity demanded but price cannot fall to remove the surplus.
What will happen to the equilibrium price and quantity of new cars if the price of gasoline rises, the price of steel rises, public transportation becomes cheaper and more comfortable, and auto-workers negotiate higher wages?
Quantity will fall and the effect on price is ambiguous
shortage; equilibrium
Refer to Exhibit 4-2, which shows supply and demand for freeway space at both 8 a.m. and 11 p.m. At a zero money price, there is a __________ of freeway space at 8 a.m. and __________ at 11 p.m.
the value to buyers is less than the cost to sellers.
Refer to Figure 3-21. At the quantity Q3,
from DA to DB.
Refer to Figure 4-12. All else equal, an increase in the income of buyers who consider turkey to be an inferior good would cause a move
400 units would be supplied and demanded
Refer to Figure 4-8. At the equilibrium price,
panel (b) but not panel (a).
Refer to Figure 6-2. A binding price floor is shown in
a surplus of wheat.
Refer to Figure 6-2. In panel (b), there will be
shortage of 20.
Refer to Figure 6-3. If the government imposes a price ceiling of $8 on this market, then there will be a
A price ceiling set at $4 will be binding and will result in a shortage of 6 units.
Refer to Figure 6-6. Which of the following statements is correct?
A price floor set at $7 will be binding and will result in a surplus of 12 units.
Refer to Figure 6-6. Which of the following statements is correct?
How would a decrease in the cost of production affect the market for new washing machines?
Supply would increase, leading to a reduction in price and an increase in quantity sold.
How will an increase in the price of coffee affect the market for cocoa, a substitute good?
The demand for cocoa will increase, leading to an increase in the price of cocoa.
Which of the following is the best illustration of the "invisible hand" in action?
There are always enough gasoline stations on a busy highway, so you don't have to worry about running out of gas because you can't find a gas station.
If a government-imposed price floor legally sets the price of milk above market equilibrium, which of the following will most likely happen?
There will be a surplus of milk.
Economists blame the long lines at gasoline stations in the U.S. in the 1970s on
U.S. government regulations pertaining to the price of gasoline.
If a decrease in the price of good Y causes the demand for good Z to decrease, this indicates that
Y and Z are substitutes.
If air travel and bus travel are substitutes,
a decrease in the price of bus travel will decrease the demand for air travel.
Suppose a new law requires all piercing studios to pass tougher licensing tests and to begin using more costly sterilization methods. Other things constant, this law would cause
a decrease in the supply of piercings and a higher price for piercings.
Assume the demand curve for cookies is downward sloping. If the price of cookies falls from $1.50 to $1.25 per dozen,
a larger quantity of cookies will be demanded.
The demand for seats in 10 a.m. classes at the university is higher than the demand for seats in 8 a.m. classes. The supply is fixed. If the university prices classes at the price required to achieve equilibrium at 10 a.m., there will be
a surplus at 8 a.m.
If an increase in the government-imposed minimum wage pushes the price (wage) of unskilled labor above market equilibrium, which of the following will most likely occur in the unskilled labor market?
a surplus of unskilled labor
Which of the following would most likely cause the supply of wheat to increase?
a technological advance that lowers the cost of producing wheat
Which of the following would increase the supply of laptop computers?
a technological improvement that lowers the cost of producing laptop computers
If cigars and cigarettes are substitute goods, an increase in the price of cigars would result in
an increase in the demand for cigarettes.
Which of the following will most likely result from a destruction of half of the Florida orange crop due to a hard freeze?
an increase in the price of oranges
Which of the following is necessary for the invisible hand of market prices to work properly?
competition and property rights that are well-defined and enforced
If salsa and nacho chips are complements, an increase in the price of nacho chips would
decrease the demand for salsa
An increase in the demand for tattoos will lead to a
higher price and a larger quantity sold.
In which statement(s) are "supply" and "quantity supplied" used correctly? (I) "An increase in the price of computers will increase the quantity supplied of computers." (II) "A technological advance that lowers the cost of producing computers will increase the supply of computers."
in both statements I and II
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."
in statement II only
An increase in the expected future price of a good will cause the current demand for the good to
increase, which is a shift to the right of the demand curve
A price ceiling is a government-mandated
maximum price above which legal trades cannot be made.
According to the law of supply,
more of a good will be offered by suppliers as the price rises.
If equilibrium is present in a market,
quantity demanded equals quantity supplied
Rent controls generally fix the price of rental housing below market equilibrium. Economic analysis suggests these controls
reduce the future supply of rental housing.
An effective minimum wage law can be expected to
reduce the hours worked for some unskilled workers.
A technological improvement in producing good A would be graphically illustrated as a shift in the
supply curve for A to the right.
Consider the market for grapes. An increase in the wage paid to grape pickers will cause the
supply curve for grapes to shift to the left, resulting in a higher equilibrium price for grapes and a decrease in the quantity consumed.
If a price floor is not binding, then
the equilibrium price is above the price floor.
If there is a shortage of parking spaces on campus, economists would argue that it is because
the price of the spaces is below equilibrium
Each point on the demand curve indicates
the quantity demanded at that price.
Producers are willing to offer greater quantities for sale at higher prices because
they have the incentive to pay the increasing opportunity cost of resources necessary to attract them from alternative uses
