Chapter 3 Homework

Assume the demand curve for product X shifts to the right. This might be caused by A) A decline in income if X is an inferior good B) A decline in the price of Z if X and Z are substitute goods C) A change in consumer tastes that is unfavorable to X D) An increase in the price of Y if X and Y are complementary goods

A) A decline in the income if X is an inferior good

Because successive units of a good produce less and less additional satisfaction, the price must fall to encourage a buyer to purchase more units of the good. This semester is most consistent with which explanation for the law of demand? A) Diminishing marginal utility B) The rationing function of prices C) The substitution effect D) The income effect

A) Diminishing marginal utility

The law of demand states that other things equal, A) Price and quantity demanded are inversely related B) The larger the number of buyers in a market, the lower will be product price C) Price and quantity demanded are directly related D) Consumers will buy more of a product at high prices than at low prices

A) Price and quantity demanded are inversely related

The supply curve shows the relationship between A) Price and quantity supplied B) Production costs and the amount demanded C) Total business revenues and quantity supplied D) Physical inputs of resources and the resulting units of output

A) Price and quantity supplied

The law of supply indicates that other things equal A) Producers will offer more of a product at high prices than at low prices B) The product supply curve is down sloping C) Consumers will purchase less of a good at high prices than at low prices D) Producers will offer more of a product at low prices than at high prices

A) Producers will offer more of a product at high prices than at low prices

When the price of Nike soccer balls fell, Ronaldo purchased more Nike soccer balls, and fewer Adidas soccer balls. Which of the following best explains Ronaldo's decision to buy more Nike soccer balls? A) Substitution effect B) The income effect C) An increase in the demand for Nike soccer balls D) The price effect

A) Substitution effect

Other things equal, if the price of a key resource used to produce product X falls, the A) Supply curve of product X will shift to the right B) Demand curve of product X will shift the right C) Supply curve of product X will shift the left D) Supply curve of product X will not shift

A) Supply curve of product X will shift to the right

Which of the following would most likely increase the demand for gasoline? A) The expectation by consumers that gasoline prices will be higher in the future B) The expectation by consumers that gasoline prices will be lower in the future C) A widespread shift in car ownership form SUV's to hybrid sedans D) A decrease in the price of public transportation

A) The expectation by consumers that gasoline prices will be higher in the future

A surplus of a product will arise when price is A) Above equilibrium with the result that quantity demanded exceeds quantity supplied B) Above equilibrium, with the result that quantity supplied exceeds quantity demanded C) Below equilibrium, with the result that quantity demanded exceeds quantity supplied D) Below equilibrium, with the result that quantity supplied exceeds the quantity demanded

B) Above equilibrium, with the result that quantity supplied exceeds quantity demanded

A government subsidy to the producers of a product A) Reduces product supply B) Increases product supply C) Reduces product demand D) Increases product demand

B) Increases product supply

If there is a surplus of a product, its price A) Is below the equilibrium level B) Is above the equilibrium level C) Will rise in the near future D) Is in equilibrium

B) Is above the equilibrium level

At the equilibrium price A) Quantity supplied may exceed quantity demanded or vice versa B) There are no pressures on price to either rise or fall C) There are forces that cause price to rise D) There are forces that cause the price to fall

B) There are no pressures on price to either rise or fall

A shift to the right in the demand curve for product A can be most reasonably explained by saying that: A) Consumer incomes have declined and consumers have now want to buy less of A at each possible price B) The price for A has increased and, as a result, consumers want to purchase less of it C) Consumer preferences have changed in favor of A so that they now want to buy more at each possible D) The price of A has declined and, as a result, consumers want to purchase more of it

C) Consumer preferences have changed in favor of A so that they now want to buy more at each possible price

An increase in the price of a product will reduce the amount of it purchased because A) The higher price will signal to consumers that the good is of low quality B) The higher price means that real incomes have risen C) Consumers will substitute other products for the one whose price has risen D) Consumers substitute relatively high-priced for relatively low-priced products

C) Consumers will substitute other products for the one whose price has risen

If Z is an inferior good, an increase in money income will shift the A) Supply curve for Z to the left B) Supply curve for the Z to the right C) Demand curve for Z to the left D) Demand curve for Z to the right

C) Demand curve for Z to the left

A market is in equilibrium A) Provided there is no surplus of the product B) At all prices above that shown by the intersection of the supply and demand curves C) If the amount producers want to sell is equal to the amount consumers want to buy D) Whenever the demand curve is down sloping and the supply curve is up sloping

C) If the amount producers want to sell is equal to the amount consumers want to buy

When the price of a product increases, a consumer is able to buy less of it with a given money income. this describes the A) Cost effect B) Inflationary effect C) Income effect D) Substitution effect

C) Income effect

If the demand and supply curves for product X are stable, a government-mandated increase in the price of X will A) Increase the supply of X and decrease the demand for X B) Increase the demand for X and decrease the supply for X C) Increase the quantity supplied of X and decrease the quantity demanded of X D) Decrease the quantity supplied of X and increase the quantity demanded of X

C) Increase the quantity supplied of X and decrease the quantity demanded of X

A market A) Reflects up sloping demand and down sloping supply curves B) Entails the exchange of goods but not services C) Is an institution that brings together buyers and sellers D) Always requires face-to-face contact between buyer and seller

C) Is an institution that brings together buyers and sellers

The demand curve shows the relationship between A) Money income and quantity demanded B) Price and production costs C) Price and quantity demanded D) consumer tastes and quantity demanded

C) Price and quantity demanded

If products C and D are close substitutes, an increase in the price of C will: A) Tend to cause the price of D to fall B) Shift the demand curve for C to the left and the demand curve for D to the right C) Shift the demand curve for D to the right D) Shift the demand curves of both products to the right

C) Shift the demand curve for D to the right

An improvement in production technology will A) Increase equilibrium price B) Shift the supply curve to the left C) Shift the supply curve to the right D) Shift the demand curve to the left

C) Shift the supply curve to the right

When the price of a product rises, consumers with a given money income shift their purchases to other products whose prices are now relatively lower. This statement describes A) Inferior good B) The rationing function of prices C) The substitution effect D) The income effect

C) the substitution effect

If the demand curve for product B shifts to the right as the price of product A declines, then A) Both A and B are inferior goods B) A is a superior good and B is an inferior good C) A is an inferior good and B is an inferior good D) A and B are both complementary goods

D) A and B are both complementary goods

Which of the following will cause the demand curve for product A to shift to the left? A) Population growth that causes an expansion in the number of persons consuming A B) An increase in money income if A is a normal good C) A decrease in the price of complementary product C D) An increase in money income if A is an inferior good

D) An increase in money income if A is an inferior good

An economist for a bicycle company predicts that other things equal, a rise in consumer incomes will increase the demand for bicycles. This prediction assumes that A) There are many goods that are substitutes for bicycles B) There are many goods that are complementary to bicycles C) There are few goods that are substitutes for bicycles D) Bicycles are normal goods

D) Bicycles are normal goods

If X is a normal good, a rise in money income will shift the A) Supply curve for X to the left B) Supply curve for X to the right C) Demand curve for X to the left D) Demand curve for X to the right

D) Demand curve for X to the right

When the price of a product falls, the purchasing power of our money income rises and thus permits consumers to purchase more of a product. This statement describes A) An inferior good B) The rationing function of prices C) The substitution effect D) The income effect

D) The income effect

When the price of almonds fall A) The demand for almonds decreases, ceteris paribus B) The demand for almonds increases, ceteris paribus C) The quantity of almonds demanded decreases, ceteris paribus D) The quantity of almonds demanded increases, ceteris paribus

D) The quantity of almonds demanded increases, ceteris paribus

At the point where the demand and supply curves for a product intersect, A) The selling price and the buying price need not be equal B) The market may, or may not, be in equilibrium C) Either a shortage or a surplus of the product might exist, depending on the degree of competition D) The quantity that consumers want to purchase and the amount producers choose to sell are the same

D) The quantity that consumers want to purchase and the amount producers choose to sell are the same