Macro - Ch. 3

less than

A price ceiling will result in a shortage only if the ceiling price is _____ the equilibrium price.

False

True or False: A "change in quantity demanded" is a shift of the entire demand curve to the right or to the left.

C. Equilibrium

If the equilibrium price in a market is $20, and the government imposes a price ceiling of $25, what will be the resulting market condition? A. A surplus B. A shortage C. Equilibrium

C. Surplus

If the equilibrium price in a market is $20, and the government imposes a price floor of $25, what will be the resulting market condition? A. Shortage B. Equilibrium C. Surplus

a. Demand increases b. Demand increases c. Demand decreases d. Demand decreases e. Cannot be determined

What effect will each of the following have on the demand for small cars such as the Mini Cooper and Fiat 500? a. Small cars become more fashionable: _____. b. The price of large cars rises (with the price of small cars remaining the same): _____. c. Income declines and small cars are an inferior good: _____. d. Consumers anticipate that the price of small cars will decrease substantially in the near future: _____. e. The price of gasoline substantially drops: _____.

a. Supply increases b. Supply decreases c. Supply decreases d. Supply increases e. Supply increases f. Supply decreases g. Supply increases

What effect will each of the following have on the supply of auto tires? a. A technological advance in the methods of producing tires: _____. b. A decline in the number of firms in the tire industry: _____. c. An increase in the price of rubber used in the production of tires: _____. d. The expectation that the equilibrium price of auto tires will be lower in the future than it is now: _____. e. A decline in the price of large tires used for semi trucks and earth-hauling rigs (with no change in the price of auto tires): _____. f. The levying of a per-unit tax on each auto tire sold: _____. g. The granting of a 50-cent-per-unit subsidy for each auto tire produced: _____.

A. Prices change in reaction to a mismatch between quantity demanded and quantity supplied.

For each stock in the stock market, the number of shares sold daily equals the number of shares purchased. That is, the quantity of each firm's shares demanded equals the quantity supplied. Why, then, do the prices of stock shares change? A. Prices change in reaction to a mismatch between quantity demanded and quantity supplied. B. Prices are set at a different level each day by Wall Street traders. C. Prices change due to the whims of those selling stock shares. D. Actually, the prices of stock shares seldom change.

a. increases, decreases b. decreases, decreases c. decreases, increases d. is indeterminate, increases e. increases, increases f. decreases, is indeterminate g. increases, is indeterminate h. is indeterminate, decreases

How will each of the following changes in demand and/or supply affect equilibrium price and equilibrium quantity in a competitive market? That is, do price and quantity rise, fall, or remain unchanged, or are the answers indeterminate because they depend on the magnitudes of the shifts? a. Supply decreases and demand is constant. Price _____ and quantity _____. b. Demand decreases and supply is constant. Price _____ and quantity _____. c. Supply increases and demand is constant. Price _____ and quantity _____. d. Demand increases and supply increases. Price _____ and quantity _____. e. Demand increases and supply is constant. Price _____ and quantity _____. f. Supply increases and demand decreases. Price _____ and quantity _____. g. Demand increases and supply decreases. Price _____ and quantity _____. h. Demand decreases and supply decreases. Price _____ and quantity _____.

demand for good A, increase, increase, increase

If the income of buyers decreases, and good A is an inferior good, the _____ will _____. This will cause the equilibrium price to _____ and the equilibrium quantity to _____.

a. Decrease b. Increase c. Decrease d. Increase

In 2001 an outbreak of hoof-and-mouth disease in Europe led to the burning of millions of cattle carcasses. What impact would you expect this event to have on the following? a. The supply of cattle hides: _____ b. Hide prices: _____ c. The supply of leather goods: _____ d. The price of leather goods: _____

B. Statement B

In which of these two statements are the terms "supply" and "demand" used correctly? 1. "In the corn market, demand often exceeds supply, and supply sometimes exceeds demand." 2. "The price of corn rises and falls in response to changes in supply and demand." A. Statement A B. Statement B

a. P? Increases b. P? Decreases c. Increases Q? d. Decreases Q?

Label each of the following scenarios with the correct combination of price change and quantity change. In some scenarios, it may not be possible from the information given to determine the direction of a particular price change or quantity change. We will symbolize those cases as, respectively, "P?" and "Q?". a. On a hot day, both the demand for lemonade and the supply of lemonade increase. Price: _____ Quantity: _____ b. On a cold day, both the demand for ice cream and the supply of ice cream decrease. Price: _____ Quantity: _____ c. When Hawaii's Mt. Kilauea erupts violently, tourists' demand for sightseeing flights increases but the supply of pilots willing to provide these dangerous flights decreases. Price: _____ Quantity: _____ d. In a hot area of Arizona where a lot of electricity is generated with wind turbines, the demand for electricity falls on windy days as people switch of their air conditioners and enjoy the breeze. But at the same time, the amount of electricity supplied increases as the wind turbines spin faster. Price: _____ Quantity: _____

a surplus

Suppose that in the market for computer memory chips, the equilibrium price is $50 per chip. If the current price is $55 per chip, then there will be _____ of memory chips.

D. An increase in market price will lead to an increase in quantity supplied. - Increasing opportunity costs - Increasing marginal costs D. By adding up the quantities supplied by all individual producers for each price

Which statement is consistent with the law of supply? A. At a zero price, quantity supplied will be infinite. B. A decrease in market price will lead to an increase in quantity supplied. C. An increase in market price will lead to a decrease in quantity supplied. D. An increase in market price will lead to an increase in quantity supplied. Why does the supply curve slope upward? To answer this question, use the choices below to identify the characteristics of an upward-sloping supply curve. - Increasing opportunity costs - Increasing marginal costs - Diminishing marginal unity - A decrease in resource prices - An increase in resource prices - Increasing labor productivity How is the market supply curve derived from the supply curves of individual producers? A. By adding up the prices paid for each unit supplied by producers B. By calculating the average quantity supplied among all producers C. By using the largest quantity supplied among all producers for each price D. By adding up the quantities supplied by all individual producers for each price

- Prices of other goods - Technology - Tastes and preferences - Resource prices i. Movement along the supply curve ii. A shift of the supply curve iii. A shift of the supply curve iv. A shift of the supply curve v. A shift of the supply curve vi. A shift of the supply curve vii. A shift of the supply curve

a. What are the determinants of supply? - Income - Prices of other goods - Technology - Tastes and preferences - Resource prices - Number of producers b. What happens to the supply curve when any of the following determinants change? Indicate whether each of these determinants causes a shift of the supply curve or a movement along the curve. i. Change in market price: _____. ii. Change in factor productivity: _____. iii. Change in producer expectations: _____. iv. Change in the price of other goods: _____. v. Change in technology: _____. vi. Change in resource prices: _____. vii. Change in taxes: _____.