Micro Economics McGrawHil 2021

A shift of the entire supply curve is considered ______.

a change in supply

A movement along the demand curve is considered ______.

a change in the quantity demanded

A change in supply is represented by ______.

a shift in the entire supply curve

If the price of butter increases, the quantity of butter demanded will ______.

decrease

A maximum allowable price specified by law is a _______.

price ceiling

Suppose that as the price of pencils increases, people buy fewer pencils and instead use pens. The resulting reduction in the quantity of pencils demanded is known as the _____ of a price change.

substitution effect Reason: The substitution effect captures the changes in the quantity demanded of a good that results because buyers switch into or out of substitutes as the price of the good changes.

A change in the quantity supplied is represented by

a movement along the supply curve.

If your cousin gets a big raise at work, and as a result, goes out to eat more often, then this suggests that for your cousin restaurant meals are _____.

a normal good

Which of the following factors will lead to an increase in the demand for a good?

An expectation of higher prices in the future A decrease in the price of a complement

Which of the following factors will lead to a decrease in demand?

A decrease in the price of a substitute. A decrease in the population of potential buyers.

True or false: The socially optimal quantity is that level for which the marginal cost and marginal benefit of the good are the same.

True

A shift in the entire demand curve is considered ______.

a change in demand

If bread and peanut butter are complements, then a decrease in the price of peanut butter will lead to:

an increase the price of bread. an increase in the amount of bread that people buy.

The largest dollar amount that a buyer is willing to pay for a good is the

buyer's reservation price. Reason: A buyer's reservation price is the largest dollar amount the buyer would be willing to pay for the good.

An increase in the price of cotton is likely to shift the supply curve for clothing (that uses cotton as an input) to

the left. Reason: An increase in the price of an input will lead to a decrease in supply (a leftward shift).

The socially optimal quantity is

the quantity of a good that maximizes the total economic surplus that results from producing and consuming the good.

Which of the following is likely to lead to a decrease in the current supply of gold?

An announcement that makes suppliers believe that gold prices are going to increase next year.

Which of the following is likely to lead to an increase in the demand for cell phones?

An increase in income (assuming cell phones are a normal good). A decrease in the price of cell phone apps (a complement to cell phones).

A movement along the supply curve is considered ______.

a change in the quantity supplied

If butter and popcorn are complements, then an increase in the price of popcorn will lead to:

a decrease in the equilibrium quantity of butter. a decrease in the equilibrium price of butter.

If Red Bull and Coke are substitutes, then a decrease in the price of Red Bull should lead to:

a decrease in the price of Coke. a decrease in the amount of Coke bought and sold in the market.

If hot dogs and ketchup are complements, then an increase in the price of ketchup will lead to:

a decrease in the price of hot dogs. a decrease in the number of hot dogs bought and sold in the market.

A change in quantity demanded is represented by

a movement along the demand curve.

A supply curve is ______.

a schedule or graph showing the quantity of a good that sellers wish to sell at each price

Economic efficiency occurs when

all goods and services are produced and consumed at their socially optimal levels.

If Hulu Plus and Netflix are substitutes, then an increase in the price of Netflix should lead to _____.

an increase in the number of people who subscribe to Hulu Plus an increase in the price of Hulu Plus

Two goods are complements if

an increase in the price of one good, leads to a decrease (leftward shift) in the demand for the other.

Two goods are substitutes if

an increase in the price of one good, leads to an increase (rightward shift) in the demand for the other.

Given that college professors are an important input to the production of a college education, a decrease in the salaries of college professors should:

decrease college tuition. increase the number of students attending college.

When all goods and services are produced and consumed at their socially optimal levels ______.

economic efficiency is achieved

Failure to achieve economic efficiency means that _____.

everyone in the economy could be made better off total economic surplus is not maximized

Suppose that as the price of movie tickets increases, people stop going to the movies as often because they can no longer afford to do so. This reduction in the quantity of movie tickets demanded is known as the _____ of a price change.

income effect Reason: The income effect captures the change in the quantity demanded of a good that results because a change in the price of a good changes the buyer's purchasing power.

Movements toward efficiency make the total economic pie _____, making it possible for everyone to have a _____ slice.

larger; larger

A change in demand is represented by a ______.

shift in the entire demand curve

If an increase in the price of one good, causes a increase (rightward shift) in the demand for another good, then the two goods are _____.

substitutes

If the demand for apartments decreases when house prices falls, then this suggests that apartments and houses are _____.

substitutes

A schedule or graph showing the quantity of a good that sellers wish to sell at each price is known as a _____.

supply curve

You observe that the price of ice cream has gone up and that less ice cream is being bought and sold. The best explanation for this is that the

supply of ice cream has decreased.

Buyer's surplus is

the difference between a buyer's reservation price and the price the buyer actually pays.

Seller's surplus is

the difference between the price the seller receives and the seller's reservation price.