Economics
Other things remaining equal, the law of demand says that higher prices will lead to:
a smaller quantity demanded and lower prices to a larger quantity demanded.
The condition that exists when quantity supplied exceeds quantity demanded at the current price is known as __________.
a surplus or excess supply
Market price is determined by _________.
both supply and demand
The table above indicates the demand schedules for four types of consumers: A, B, C, and D and the number of consumers in each group (top row). The quantity demanded by each type of consumer (QA, QB, QC, and QD) is shown for market prices ranging from $10 down to $4. What is the combined quantity demanded at a market price of $4?
10,400
When you think of an arrangement or institution that brings buyers and sellers of a good or service together, what are you thinking of?
A Market
Assume the cost of aluminum used by soft-drink companies increases. Which of the following correctly describes the resulting effects in the market for canned soft drinks? I. The demand for soft drinks decreases. II. The quantity of soft drinks demanded decreases. III. The supply of soft drinks decreases. IV. The quantity of soft drinks supplied decreases.
A. II and III B. IV only C. I and IV D. III only Answer: A. II and III
According to the graph, which point represents an inefficient use of resources?
A. Point G B. Point F C. Point A Answer: B. Point F
Which of the following will cause an outward (rightward) shift in supply?
A. The cost of an input increases. B. A decline in labor productivity. C. A technological improvement. D. A reduction in consumer incomes. Answer: C. A technological improvement.
The market for corn is initially in equilibrium. Suppose that the production of biofuels, which use corn as an input, increase, and at the same time, increases in the price of oil cause farm production costs to rise. Which of the following explains the effect on equilibrium price and quantity in the corn market?
A. The quantity of corn will fall, but the effect on equilibrium price cannot be determined without more information. B. The price of corn will rise, but the effect on equilibrium quantity cannot be determined without more information. C. The quantity of corn will rise, but the effect on equilibrium price cannot be determined without more information. D. The price and quantity of corn will fall. E. The price and quantity of corn will rise. Answer: B. The price of corn will rise, but the effect on equilibrium quantity cannot be determined without more information.
The graph above shows the market for laptop computers. Suppose the price of memory chips used in laptop computers decreases. How will this event impact on the equilibrium quantity and the market price?
A. The supply increases, causing the equilibrium quantity to rise and the market price to fall. B. The supply increases, causing the equilibrium quantity to fall and the market price to rise. C. The quantity supplied increases, causing the equilibrium quantity to rise and the market price to fall. D. The supply decreases, causing the equilibrium quantity to fall and the market price to rise. Answer: A. The supply increases, causing the equilibrium quantity to rise and the market price to fall.
Which of the following represents an inferior good?
A. When consumer income decreases, the demand for aspirin is unchanged. When consumer income increases, the demand for tea increases. B. When consumer income decreases, the demand for steak decreases. C. When consumer income increases, the demand for bologna decreases. Answer: C. When consumer income increases, the demand for bologna decreases.
All of the following will decrease the supply of airline flights except:
A. a rise in the price of jet fuel. B. a technological change that makes airplanes safer and more fuel-efficient. C. an increase in the salaries of pilots. D. a reduction in the number of airline companies offering service. Answer: B. a technological change that makes airplanes safer and more fuel-efficient.
In the previous diagram when the price is $65 per player, there is a _________ of _________ million players per month.
A. shortage; 20 B. surplus; 20 C. shortage; 40 D. surplus; 40 Answer: D surplus; 40
In the previous diagram, when supply decreases, a __________ develops at the original price. Equilibrium price will __________ and equilibrium quantity will __________ as a new equilibrium is established.
A. shortage; rise; fall B. shortage; fall; rise C. surplus; fall; rise D. surplus; rise; fall Answer: A. shortage; rise; fall
At the market equilibrium price:
quantity demanded equals quantity supplied.
Given linear demand curves, if demand and supply both increase but demand increases by a greater amount than supply, then:
the equilibrium price and quantity both increase.
Given linear demand curves, if demand and supply increase by identical amounts, then:
the equilibrium price stays the same and the equilibrium quantity rises.