Test #1 Microeconomics (ch. 3 only)

____ resource prices raise production costs and, assuming a fixed product price, ____ profits

Higher, reduce

equilibrium price and quantity in a market changes when there is a change in ____.

demand AND supply

A buyer's intentions or plans in regard to the purchase of a product is known as:

demand.

A shortage results from an excess of quantity _____.

demanded

The ___ of supply are any factors other than the product's ____ that have an effect on the supply of a good or service and cause the supply sure to shift.

determinants, price

Consumer experience ____ marginal utility the more they consumer of a particular good or service.

diminishing

The relationship between quantity supplied and price is :

direct

_____ ______ is the quantity at which the intentions of buyers and sellers match, so that the quantity demanded and the quantity supplied are equal.

equilibrium quantity

true or false: if the demand for a good increases when consumer incomes rise, then the good is considered "inferior"

false

A price ___ is a legally mandated price imposed above equilibrium price of the price that a free market would establish.

floor

A price ____ is a minimum price fixed by the government, generally imposed above the equilibrium price.

floor

relationship between quantity demanded and price is :

inverse

When two variables are being examined, and one variable moves one way and the other variable moves in the opposite direction, this is called a(n)

inverse relationship

A demand curve shows the plotted:

inverse relationship between price and quantity demanded for a product.

If costs of production rise, the producer has an incentive to produce _____ output.

less

The income effect is best described as ___ ____ increasing the purchasing power of income, enabling consumers to purchase ___ of a product and vice versa.

lower prices, more

The added cost of producing one more unit of output is called ____ cost.

marginal

The demand by a consumer for a good or service essentially reflects the ____ benefit of the food or service, based on the utility received.

marginal

Buyers and sellers are brought together in a ____.

market

Equilibrium price is otherwise known as ___-___ ___.

market-clearing price

The price of ___ goods is determinant of demand.

related

a demand curve measures quantity ... on the horizontal axis and ... on the vertical axis

demanded; price

Change in the number of buyers is a determinant of market ___.

demand

subsitute goods

goods that can take the place of another good

Price and quantity have a ___ relationship.

positive

The fundamental characteristic of demand, other things equal, is that as the price falls, the quantity demand for a product ___.

rises

which of the following has the greatest effect on the quantity supplied that producers are willing and able to supply?

price

____ refers to production of a product, whereas demand refers to the consumption of a product.

Supply

An economist for a bicycle company predicts that, other things equal, a rise in consumer incomes will increase the demand for bikes. This prediction assumes that:

bikes are normal goods.

Buyers are also.... and sellers are also....

buyers= demanders sellers= suppliers

How do improvements in productive technology enable firms to produce more units of output?

by utilizing less resources and lowering costs

The rationing function of prices refers to the:

capacity of a competitive market to equalize quantity demanded and quantity supplied

If a decrease in demand is greater that a decrease in supply, equilibrium price will ___.

fall

If an increase in supply is greater than an increase in demand, the equilibrium quantity will ____.

fall

in general, a firm will ____ the output of a good or service if the price of the good is higher.

increase

if the government of a country subsidizes the production of a good, it:

increases supply AND lowers the cost of production

The vast majority of goods that are not related to one another are called ___ goods.

independent

price floors and ceiling prices:

interfere with the rationing function of prices.

The upward slope of the supply curve reflects the:

law of supply

the law of demand states that, other things equal:

price and quantity demanded are inversely related.

Competition among corn producers forces them to use the best technology and right mix of productive resources; otherwise their costs will be too relative to the market price and they will be unprofitable. This is best described as:

productive efficiency.

If the increase in demand is greater than the increase in supply, the equilibrium quantity will ___.

rise

the law of supply states that as price ___, the quantity supplied (Q) rises; as price ___ the quantity supplied falls.

rises; falls

A change in demand is represented by a ____ the demand curve while a change in quantity demanded is represented by a ____ the demand curve.

shift of; movement along

and improvement in production technology will:

shift the supply curve to the right

A surplus is also known as an excess of ___.

supply.

The income and substitution effects account for:

the downward-sloping demand curve

For every good or service, the quantities demanded by individual consumers at every price are added together to compute:

the market demand curve for a good or service

At the equilibrium price:

there are no pressure on price to either rise or fall

What refers to a particular apportionment of a mix of goods and services most highly valued by society?

Allocative efficiency

what are determinants of demand?

1) consumer taste 2) number of buyers in market 3) consumers income 4) the prices of related goods 5) consumer expectations

Example of determinants of supply?

1)Taxes and subsidies. 2)resource prices 3)technology 4)prices of other goods 5)producer expectations 6)number of sellers in the market

What will not cause the demand for product K to change?

A change in the price of product K

What recalls the meaning of a change in supply?

A change in the schedule and a shift of the curve.

What consists of a large number of independently acting buyers and sellers?

A highly-competitive market.

What describes the law of demand?

All other things being equal, as price increases, quantity demanded decreases, and all other thing being equal, as price decreases, quantity demand increases.

A decrease in the equilibrium price and indeterminate result on equilibrium quantity is a result of which of the following?

An increase in supply and a simultaneous and proportional decrease in demand

which of the following are effects of a decrease in supply while holding demand constant?

An increase in supply reduces equilibrium price but increases equilibrium quantity. In contrast, if supply decreases, equilibrium price rises while equilibrium quantity declines.

What would result in a change of supply?

An increase in the excise tax on cigarettes, an increase in the number of shoe stores at the local mall, and an increase or decrease in the wage rate.

What causes consumers to buy larger quantities of a product at each possible price?

An increase in the number of buyers.

what statements are true?

An increase in the price of a normal good would decrease the demand for a normal good AND a decrease in consumers' income would decrease the demand for a normal good

What scenarios describe the appropriate effects on equilibrium price and quantity due to a decrease in supply while holding everything else constant?

An oil spill causes several fishermen to leave the scrimp business and the equilibrium price of shrimp increases while quantity decreases. A fishing tax is placed on all shrimp and the equilibrium price of shrimp increases while quantity decreases.

What type of goods affect the demand for a product due to a change in their price?

Complementary goods and substitute goods.

Which of the following show the effects on equilibrium price and quantity due to an increase in demand, while holding everything else constant?

Consumers expect the price of shrimp to increase in the future, therefore the equilibrium price and quantity increase now 2. 3-D televisions become popular, therefore the equilibrium price and quantity increase 3. The price of Coke increases, therefore the equilibrium price and quantity of Pepsi increase

What decreases demand?

Falling incomes and the product is a normal good, an unfavorable change in consumer tastes, and a decrease in the price of a substitute good.

What does not exemplify an improvement in technology affecting supply?

Increased subsidies to farmers for producing corn for its conversion to ethanol.

Examples of a market?

Local gas station, NYSE, Craiglist, eBay.

______ benefit is the additional utility gained from consuming one more unit of a good or service.

Marginal

What will cause a change in supply, not quantity supplied?

Number of sellers, producer, technology.

Example of a substitute.

Pepsi and Coke.

What specifically refers to demand?

The buyer side of any market.

From an economic perspective, what is true of a market?

The pursuit of buyers and sellers in making themselves better off, it is a virtual and/or physical institution or space, and buyers and sellers interact in their desire to buy and sell a good or service.

A decrease in demand while holding supply constant results in:

a decrease in both equilibrium price and quantity.

economists use the term "demand" to refer to:

a schedule of various combinations of market prices and amounts/quantities demanded.

consumer expectations are a determinant of ____.

demand

A price _____ is the maximum legal price a seller may charge for a product or service.

ceiling

A ____ good is one that is used together with another good.

complementary

The concept of demand can be summarized by a schedule or curve showing the quantity of a product that would be:

consumed at various possible prices.

consumer=? suppliers=?

consumer= price is an obstacle supplier= price represents revenue

The ____ of ____ incurred by firms when producing a good or service arise from the prices of the inputs that are used to produce said good or service.

costs, production

Other things equal, firms will produce and offer for sale ____ of their product at a high price than at a low price.

more

An inverse relationship between two variable is a ___ relationship.

negative

Price and quantity supplied have a ____ relationship.

positive

in which of the following situations do governments intervene to prevent prices from rising above or following below their equilibrium levels?

prices are too low for firms(sellers) AND prices are too high for consumers(buyers)

The prices of the ____ used in production process help determine the costs of production incurred by firms

resources

When the government provides financial assistance for the production of a good which lowers producers' costs and increases supply, it is called a ____.

subsidy

Products whose demand varies directly with changes in money or income are called normal or ___ goods.

superior

The supply curve measures quantity ___ on the horizontal axis and ____ on the vertical axis.

supplied, price

Market ____ is a schedule or curve showing the various amounts of a product that producers are willing and able to make available for sale at each possible price during a specific price.

supply

Producer expectations of future prices are a determinant of ___.

supply

The number of sellers of competitors in a market is a determinant or shifter in the ___ curve.

supply

True or false: resource costs or changes in these costs to production are responsible for shifts in the supply curve.

true

The supply is an ____ sloping curve.

upward because as price increases the producer will be willing to supply more of the products.

____ resource prices raise production costs and, assuming a fixed product price, ___ profits.

Higher, reduce

if two goods are complements:

a decrease in the price of one will increase the demand for the other.

The price actually paid for a good is not reflected in the demand because demand is merely:

a statement of buyers' intentions regarding the buying of the good (product)

which of the following are effects of an increase in demand, while holding supply constant?

an increase in both equilibrium price and quantity

the demand for a normal good is likely to increase due to ____

an increase in the number of buyers AND a decrease in the price of complementary goods

which of the following decrease demand for any good or service?

falling incomes and the product is a normal good AND a decrease in the price of a substitute good AND an unfavorable change in consumer tastes

A surge in demand while supply remains constant results in an _____ in both equilibrium price and quantity.

increase

As firms leave an industry supply decreases, causing the supply curve to shift to the ___.

left

A price ceiling is the maximum legal price a seller may charge for a product or service where a price at or below the ceiling is ___ and a price above the price ceiling is ____.

legal; illegal

A change in quantity demanded is caused by an increase or decrease in the ____ of the product under consideration and nothing else.

price

The interaction of buyers and sellers determines equilibrium price and equilibrium ____.

price, quantity

Government-set prices cause:

shortages, negative side effects, surpluses, and distortions in resource allocation, and environmental damage.

The number of sellers or competitors in a market is a determinant or shifter of the ___ curve.

supply

the prices of Substitute goods that are used in production is a determinant of ____.

supply

If there is a shortage of product, and the price is free to change:

the price of the product will rise.

What illustrates the relationship between a good and its complement?

When price of lettuce increases, the demand for salad dressing decreases. When the price of tuition decreases, the demand for textbooks increases.

An increase in supply while holding demand constant results in a ____ in equilibrium price, and an ____ in equilibrium quantity.

decrease, increase

And increase in business taxes causes a ____ in supply and will ___ production costs.

decrease, increase