Microeconomics Test (Chapter 3)
A cold spell in Florida devastates the orange crop. As a result, California oranges command a higher price. Which of the following statements best explains the situation?
The supply of Florida oranges decreases, causing their price to increase and the demand for California oranges to increase.
Which of the following could cause a decrease in consumer demand for product X
a decrease in consumer income
Which would cause a decrease in the quantity of computers supplied
a decrease in the demand for computers
Which change will decrease the demand for a product?
a decrease in the number of buyers
If the price of a product is below the equilibrium price, the result will be
a shortage of the good
If the market price is above the equilibrium price
a surplus will occur and producers will produce less and lower prices
A schedule which shows the various amounts of a product producers are willing and able to produce at each price in a series of possible prices during a specified period of time is called:
supply
Which would be the best example of allocative efficiency? When society devoted resources to the production of
computers with word processors instead of typewriters
"Because of unusually good growing conditions, the supply of strawberries has substantially increased." This statement indicates that
the amount of strawberries that will be available at various prices has increased
Goods X and Y are complements while goods X and Z are substitutes. If the supply of good X increases:
the demand for Y will increase while the demand for Z will decrease
A change in supply means that there is a movement along the existing supply curve
false
A change in the quantity demanded means that there has been a change in demand
false
A government subsidy for the production of a product will tend to decrease supply
false
A price ceiling set by government below the competitive market price of a product will result in a surplus
false
Allocative efficiency means that goods and services are being produced by society in the least costly way
false
Demand is the amount of a good or service that a buyer will purchase at a particular price
false
If price falls, there will be an increase in demand
false
If the market price of a product is below its equilibrium price, the market price will tend to rise because demand will decrease and supply will increase
false
If the supply of a product increases and demand decreases, the equilibrium price and quantity will increase
false
If two goods are complementary, an increase in the price of one will tend to increase the demand for the other.
false
In graphing supply and demand schedules, supply is put on the horizontal axis and demand on the vertical axis.
false
Supply is a schedule that shows the amounts of a product a producer can make in a limited time period.
false
The law of demand states that as price increases, other things being equal, the quantity of the product demanded increases.
false
The substitution effect suggests that, at a lower price, you have the incentive to substitute the more expensive product for similar products that are relatively less expensive.
false
There is no difference between individual demand schedules and the market demand schedule for a product
false
A headline reads "Storms destroy half of the lettuce crop." This situation would lead to a(n):
increase in the price of lettuce and decrease in quantity purchased
When the price of oil declines significantly, the price of gasoline also declines. The latter occurs because of a
increase in the supply of gasoline
An increase in demand and a decrease in supply will
increase price and the effect upon quantity exchanged will be indeterminate
If two goods are substitutes for each other, an increase in the price of one will necessarily
increase the demand for the other
The income of a consumer decreases and the consumer's demand for a particular good increases. It can be concluded that the good is
inferior
Government-set price floors and price ceilings
interfere with the rationing function of price in a free market
When drawing demand and supply curves, economists are assuming that the primary influence on production and purchasing decisions is
price
A maximum price set by the government that is designed to help consumers is a
price ceiling
Assume that the price of video game players falls. What will most likely happen to the equilibrium price and quantity of video games, assuming this market is competitive?
price will increase; quantity will increase
When an economist says that the demand for a product has increased, this means that
quantity demanded is greater at each possible price
The law of supply states that, other things being constant as price increases
quantity supplied increases
A decrease in the price of a product will increase the amount of quantity demanded because
the lower price indicates consumers to use this product instead of other products
When movie ticket prices increase, families tend to spend less time watching movies and more time at home watching videos instead. This best reflects:
the substitution effect
If the quantity supplied of a product is less than the quantity demanded, then
there is a shortage of the product
If the quantity supplied of a product is greater than the quantity demanded for a product, then
there is a surplus of the product
A market is any arrangement that brings together the buyers and sellers of a particular good or service.
true
A surplus indicates that the quantity demanded is less than the quantity supplied at that price.
true
An increase in income will tend to increase the demand for a product
true
An increase in resource prices will tend to decrease supply
true
An increase in the prices of other goods that could be made by producers will tend to decrease the supply of the current good that the producer is making.
true
If consumer tastes or preferences for a product decrease, the demand for the product will tend to decrease.
true
If the demand for a product increases and the supply of the product decreases, the equilibrium price will increase and equilibrium quantity will be indeterminate.
true
The law of diminishing marginal utility is one explanation of why there is an inverse relationship between price and quantity
true
The rationing function of prices is the elimination of shortages and surpluses
true
When two products are substitute goods, the price of one and the demand for the other will tend to move in the same direction.
true
A product market is in equilibrium
where the demand and supply curve intersect
If consumer incomes increase the demand for product Y
will shift to the right if Y is a normal good
Given the following individuals' demand schedules for product X, and assuming these are the only three consumers of X, which set of prices and output levels below will be on the market demand curve for this product
($5,3);($1,18)
A decrease in supply and a decrease in demand will
(d) affect price in an indeterminate way and decrease the quantity exchanged
A competitive market will
achieve an equilibrium price
An increase in supply and an increase in demand will
affect price an indeterminate way and increase the quantity exchanged
A decrease in the supply of a product would most likely be caused by
an increase in business tax
If two products, A and B, are complements, then
an increase in the price of A will decrease the demand for B
If two products, X and Y, are independent goods, then
an increase in the price of Y will have no significant effect on the demand for X
A schedule that shows the various amounts of a product consumers are willing and able to purchase at each price in a series of possible prices during a specified period of time is called
demand
The reason for the law of demand can best be explained in terms of
diminishing marginal utility
The law of demand is illustrated by a demand curve that is
downward sloping
an improvement in production technology for a specific good will cause a(n)
drop in price and increase in quantity demanded
