AP Micro Supply and Demand
In a market for a product, why is the price of the product higher at higher output levels?
Because producers' opportunity costs are higher at higher output levels
The supply of coal is fixed because there is only a finite amount in the ground that can be mined.
False
A change in supply is the same as a change in quantity supplied.
False; a change in supply is the same as a change in quantity supplied AT EVERY PRICE
A shift in the demand curve is caused by a change in one of the variables that affects the demand curve and is called a change in the quantity demanded.
False; change in demand
The first step in a three-step process for analyzing the market change is to determine how the change will affect the demand curve.
False; first step is to determine who the change will affect
If the demand for steak falls when a consumer's income rises, then there is evidence that steak is a normal good.
False; inferior good
When excess supply exists in any economic market, the market price will rise until the excess supply is eliminated.
False; market price will decrease
The law of supply states that, when the price of a good rises, the quantity supplied of the good falls.
False; quantity supplied of the good rises
Which of the following will cause an outward shift of the market supply curve?
Improvements in technology
Assume that all employees in an industry receive a raise based on a new labor contract. How will this raise affect the product market for the product these employees manufacture?
Market supply will decrease.
In rental markets where price controls are in place, the law often says that the rent cannot increase as long as the lease is in effect. In these markets, tenants often sublet their apartments for more than the rent they pay. This practice is an example of
a black market
In the hamburger restaurant business, an increase in the price for ground beef represents
a change in the price of inputs
Factors that shift the demand curve include
changes in income, changes in the price of substitutes and complements, and changes in the expected future price
When consumers and producers follow price controls, consumer costs can sometimes be as much as the original equilibrium price, if not more, because
consumers are forced to pay for their rent-seeking activities.
All of the following factors influence how much of a product is supplied to a market except
consumers' income
As the price of apples increases, apple growers will
increase the quantity of apples supplied.
If a bread-baking firm improves its technology by using a new machine that speeds the baking process, the technological improvement will
increase the supply of bread
When income decreases, the demand for inferior goods
increases
When the price of a substitute for good X rises, the demand for good X
increases
The upward-sloping supply curve
is representative of the law of supply, shows that as the price of a good or service increases, the quantity offered for sale generally increases, and illustrates increasing opportunity costs.
If a producer of bread thinks that the price of bread will fall next week, the producer will
sell all the bread this week if possible
If a pretzel firm expects the price of pretzels to rise next week, it will
sell fewer pretzels this week and save the supply for the price increase.
If you expect the price of ice cream to increase next week, your demand curve for ice cream will
shift outward. You will buy more of the good at the lower price today.
The demand curve
shows the relationship between the price of a good and the quantity that the consumer is willing and able to purchase in a given period of time, holding all other factors that influence consumer behavior constant.
Suppose that New York does not recognize the physician licensing laws from other states. This non-recognition shifts New York's
supply of medical services to the left.
Which of the market outcomes is likely to result from price controls on rental housing?
A decrease in the number of building permits for new rental property
What will cause an increase in the market supply?
An increase in the number of producers, assuming the average quantity supplied per producer remains unchanged
Which of the following would cause a decrease in the market supply for ice cream?
An increase in the price of milk
Which of the following is not a step in analyzing how a change in the market affects the supply and demand for a good?
Assuming that both curves will shift
Which of the following items go together?
Change in quantity demanded and movement along a demand curve
In analyzing a supply function and then drawing a supply curve from it, you hold the price of a good constant but change the values of the other variables.
False
Minimum-wage laws specify the highest wage that employers may pay workers.
False
Assume that jelly beans and candy bars are substitute goods. If the price of jelly beans increases, the demand curve for jelly beans will shift inward.
False
Changes in the input prices or technology are represented by a movement along the supply curve and are called changes in quantity supplied.
False
Economists may favor price controls if the controls improve equity.
False
If technological advances are made in an industry, the market supply curve will shift inward.
False
If the government imposes a $2 tax on the sellers of a product, the supply curve shifts inward parallel to itself and intersects the demand curve at a lower price and higher quantity.
False
If the market price of hamburgers increases, the supply curve shifts outward.
False
Price controls benefit markets because they help those with low incomes.
False
What happens to the demand curve for hot dogs when the price of hot dog buns decreases?
The demand curve for hot dogs will shift outward
An increase in the price of Fords will have what likely effect in the market for Chevrolets?
The demand for Chevrolets will increase
Which of the following is not a determinant of an individual's demand for a good?
The number of buyers
If the cost of flour increases, what will be the effect on a baking firm's supply curve for bread?
The supply curve will shift inward due to the change in input prices.
A demand function is a mathematical formula that specifies the relationship between the demand for a good or service and the variables that influence that demand.
True
A movement along the demand curve for a particular good is a response to the change in price of a particular good.
True
A supply function is a mathematical representation of the quantity of a good that a firm is willing to supply the market profitably as a function of all the variables that influence the firm's decision.
True
Assuming that hamburgers and mustard are complements, a decrease in the price of hamburgers would increase the demand for mustard.
True
Factors other than the price of a particular product will shift the supply curve.
True
If an excise tax is imposed on consumers, the market demand curve will shift inward.
True
If sellers expect prices to rise in the future, prices today will rise because sellers might reduce current supply and wait for higher prices.
True
The determinants of market demand include all determinants of individual demand, and, as well, the number of buyers in the market, since the individual demand functions of all of them must be summed to arrive at market demand.
True
The income effect says that when the price of a good increases, consumers buy less of the good because their purchasing power is shrinking in terms of that particular good.
True
The supply curve is a collection of points representing the quantity of a particular good that a producer is willing and able to offer for sale in a given period of time as a function of the price of the particular good.
True
To derive a market demand curve, add the quantity demanded by each individual in the market at each price and construct a new demand schedule.
True
To economists, the Latin phrase ceteris paribus means "all other variables held constant."
True
Which of the following would not cause a shift in the market supply for pizza?
a change in the price of pizza
An increase in the market price of a product, all other things equal, results in
a change of position along the existing supply curve, increasing the quantity supplied.
If the cost of flour decreases, the result(s) for a bread baking firm will be
a decrease in the cost of production, an increase in the supply of bread, and a shift outward in the supply curve for bread.
The legislative intent of minimum-wage laws is to ensure
a minimally adequate standard of living.
An increase in the demand for chocolate bars results in
a price increase and a quantity increase.
A change in price of a particular good indicates all of the following except
a shift in the demand curve
The institution of a minimum wage creates
a surplus of labor
A supply schedule is
a table showing the relationship between the price of a good and the quantity supplied.
In order to find the market quantity demanded,
add the individual quantities demanded by each individual consumer.
On a demand curve,
all nonprice determinants are held constant
Which of the following is not a result of minimum wage laws?
an increase in production
A technological improvement in agriculture makes it possible to grow three times as much wheat per acre as had been possible in the past. The most likely result will be
an increase in the supply of wheat because of the reduced cost of production.
A decrease in the supply of Ford and Chevrolet cars might be caused by
an increase in wages of U.S. car workers.
In a hamburger restaurant, an increase in the price of ground beef causes
an inward shift of the supply curve
The reason that producers supply more to a market at higher prices is that
as the price increases, the producers' opportunity cost of not producing that good increases.
The demand curve is downward-sloping because
as the price of the good rises, the quantity demanded falls
The economic value destroyed by a price control is called
deadweight loss
When the price of a complement for good X rises, the demand for good X
decreases
When the price of bagels decreases, the demand for English muffins
decreases
If the population of a market area increases, all other factors being equal,
demand in the market will increase
A rent control below the equilibrium price will cause
excess demand
The determinants of supply are
factors that influence the quantity of a product that producers choose to put on the market.
When there is excess supply in the corn market, the bidding mechanism pushes down the price of corn. All of the following will occur except
fewer buyers will enter the market.
If the price of bread falls from $3 per loaf to $1.50 per loaf,
households will demand a different quantity of bread.
For most goods, if a consumer's income increases, his / her demand for the goods will
increase
If the pretzel baker expects that pretzel prices will fall at the end of the month, his firm will
increase its supply at the current price.
The market supply of a good or service
is the sum of all individual supply curves for the good or service, is determined by all the determinants of individual supply and by the number of sellers, and reflects a direct relationship between price and quantity supplied.
A price floor that is less than the equilibrium price causes
no change in the market
Suppose a soybean farmer expects a lower price for soybeans at harvest time than the market price at the time of planting. This farmer is likely to
plant fewer acres in soybeans.
Suppose a soybean farmer expects a higher price for soybeans at harvest time than the market price at the time of planting. This farmer is likely to
plant more acres in soybeans to take advantage of the expected higher price.
The relationship between price and quantity supplied is
positive
Shortages result from
price controls below equilibrium
Suppose there is a surplus in the bread market. You could predict that
price will decrease, quantity demanded will rise, and quantity supplied will fall.
When there is excess demand for sugar in the market, the bidding mechanism will
push up the price of sugar
Along a given supply curve for any product,
quantity supplied increases as price increases.
One method that employers could use to pass the costs of a government-imposed minimum wage to their employees would be to
reduce employee vacations, make employees pay for their own medical insurance, and stop the employer contributions to the employees' retirement systems.
The opportunity cost of supplying more of a particular good
rises as the quantity supplied increases.
If Sue demands six packs of gum at seventy-five cents each and John demands four packs of gum at seventy-five cents, the market quantity demanded at that price is
ten
Suppose the equilibrium price for an apartment in a market is $1,500 a month. The government controls the price by imposing a price ceiling of $750. However, the consumer may still pay $1,500 because
tenants may agree to pay an extra $750 "off the books." and the landlord may charge the tenant $750 for a key and central air and heat each month.
The law of demand states, all other things being equal,
that consumers will buy more of a good if the price falls.
Demand is defined by
the behavior of consumers or households.
Excess demand for chocolate bars will cause all of the following except
the bidding mechanism to remain constant
In the absence of a tax wedge,
the consumer surplus and producer surplus would be larger.
A pretzel firm experiences a loss when several of its employees are hurt in an accident and are permanently disabled and can no longer work. This loss means that
the cost of production becomes higher and supply falls.
If a household's income decreases,
the demand for normal goods will decrease, and the demand curve will shift inward.
The tax wedge can be identified as
the difference between the consumer's demand price and the seller's price.
Profit is
the difference between the cost of providing a service or good and the revenue earned by selling the service or good.
When an economist analyzes "market demand" in a particular market, the economist is referring to
the entire demand curve
Households will buy more of a normal good at every price when
the household income increases
If a jeweler sees a fall in the price of gold and gold is an input good to the jeweler's products, with all other factors being equal we would expect
the jeweler to produce more jewelry at each possible price.
In a free market, what processes would eliminate the excess demand in a rental housing market?
the market bidding mechanism
The total quantities of a product that all sellers, collectively, are willing and able to offer at alternative prices is
the market supply curve
Comparative statics is the study of
the movement from one equilibrium to another, the change in competitve equilibrium when when one of the supply or demand determinants changes, and the adjustment mechanism following a change in some factor affecting demand or supply.
Suppose chocolate bars and jelly beans are substitutes for each other. If the price of jelly beans increases, then the new competitive equilibrium for chocolate bars occurs where
the original supply curve intercepts a new demand curve.
Besides the price of substitutes and complements, other determinants of demand include
the price of the product, income, and consumers' tastes.
A tax-distorted demand curve tells us
the prices that the consumer is willing to pay to the producer.
A supply curve is a collection of points on a graph illustrating the relationship between the quantity supplied for a particular product and
the product's price
When the quantity demanded for a particular good exceeds the quantity supplied for that good,
the quantity demanded will decrease as the price increases.
A demand schedule shows
the relationship between the price of a good and the quantity demanded of the good.
Factors that shift the market demand curves are
the same as for the individual demand curves.
When the price of a good rises, consumers will stop buying the more expensive goods and switch to substitutes. This behavior is explained by
the substitution effect
If an excise tax is imposed on a producer,
the supply curve shifts higher, and a smaller quantity is demanded at the higher price.
If the price for a main input for a particular product increases and all other factors are constant,
the supply curve will shift inward
The market supply curve for wheat depends on each of the following except
the tastes and preferences of wheat consumers.
Generally, those people who advocate minimum-wage laws believe
there are some negative effects of the laws but the benefits outweigh the costs.
When there is excess supply in a market,
there is downward pressure on the price
According to the Law of Demand, when the price of a good increases,
there is movement along the demand curve but it does not shift.
The competitive equilibrium point occurs when
there is no tendency to change, there is no excess demand, and there is no excess supply.
When there is excess demand in a market,
there is upward pressure on the price
If the price of inputs for making pizza increases,
there will be less pizza supplied because the costs are increasing.
Suppose the market for automobiles is a national market. If personal income nationwide increases, then (other factors being equal) the market demand for automobiles is likely
to increase
The income effect of an increase in wages will cause an employee to
work fewer hours
The substitution effect of an increase in wages may cause a person to
work more hours