Microeconomics PART 3

The market economy is often called the price system because:

prices provide information for both buyers and sellers.

im is willing to pay $10 for a slice of pie. The retail price is $5.

Jim has a consumer surplus of $5 per slice.

A decrease in the supply of a good causes a(n):

increase in the equilibrium price and a decrease in equilibrium quantity.

When the supply curve shifts out (to the right) and the demand curve shifts out (to the right), the equilibrium quantity will:

increase.

In the short run, once a market has reached equilibrium:

price and quantity will be stable.

What is the difference between a change in quantity supplied and a change in supply?

A change in the market price affects the quantity supplied, but not the supply.

A price ceiling will most likely result in:

A price ceiling will most likely result in:

Suppose in the market for iPhones, the following two changes take place: (1) the cost of making iPhones rises and (2) customers begin to prefer Android-platform smart phones over iPhones. What happens to equilibrium price and equilibrium quantity?

Equilibrium price is indeterminate and equilibrium quantity falls.

If bagels and doughnuts are substitute goods, then which of the following is likely to occur if the price of bagels is reduced?

The demand curve for doughnuts will shift to the left.

Any given demand or supply curve is based on the ceteris paribus assumption that:

all else is held equal

Butter is a substitute for margarine. If the price of margarine drops, we would expect to see:

both the price of butter and quantity of butter traded fall.

An increase in the price of ice cream causes the demand for sprinkles to decrease. In this case, ice cream and sprinkles are:

complementary goods.

If the price of gasoline decreases from $3 to $1.50, ceteris paribus:

people will buy more gasoline

According to the law of demand, people buy more of a good when:

the price falls.