Chapter 3 part 1
79. Refer to the above data. Equilibrium price will be:
. $2.
82. Refer to the above diagram. The equilibrium price and quantity in this market will be:
A. $1.00 and 200.
114. Refer to the above diagram, which shows demand and supply conditions in the competitive market for product X. If the initial demand and supply curves are D0 and S0, equilibrium price and quantity will be:
A. 0F and 0C, respectively.
30. Which of the following statements is correct?
A. An increase in the price of C will decrease the demand for complementary product D.
39. 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.
111. Which of the following will cause a decrease in market equilibrium price and an increase in equilibrium quantity?
A. an increase in supply.
2. Markets, viewed from the perspective of the supply and demand model:
A. assume many buyers and many sellers of a standardized product.
26. Blu-ray players and Blu-ray discs are:
A. complementary goods.
43. If the demand for steak (a normal good) shifts to the left, the most likely reason is that:
A. consumer incomes have fallen.
54. When an economist says that the demand for a product has increased, this means that:
A. consumers are now willing to purchase more of this product at each possible price.
113. In which of the following instances is the effect on equilibrium price dependent on the magnitude of the shifts in supply and demand?
A. demand rises and supply rises.
83. Refer to the above diagram. A surplus of 160 units would be encountered if the price was:
B. $1.60.
90. Refer to the above diagram. The highest price that buyers will be willing and able to pay for 100 units of this product is:
B. $60.
129. Suppose that in the clothing market, production costs have fallen, but the equilibrium price and quantity purchased have both increased. Based on this information we can conclude that:
B. Demand for clothing has grown faster than the supply of clothing.
112. Which of the following statements is correct?
B. If supply increases and demand decreases, equilibrium price will fall.
32. Which of the following will cause the demand curve for product A to shift to the left?
D. an increase in money income if A is an inferior good.
7. The relationship between quantity supplied and price is _____ and the relationship between quantity demanded and price is ____.
A. direct, inverse
110. Assuming conventional supply and demand curves, changes in the determinants of both supply and demand will:
A. generally alter both equilibrium price and quantity.
125. With a downsloping demand curve and an upsloping supply curve for a product, an increase in consumer income will:
A. increase equilibrium price and quantity if the product is a normal good.
127. Given a downsloping demand curve and an upsloping supply curve for a product, an increase in the price of a substitute good (from the buyer's perspective) will:
A. increase equilibrium price and quantity.
118. Refer to the above diagram, which shows demand and supply conditions in the competitive market for product X. Other things equal, a shift of the supply curve from S0 to S1 might be caused by a(n):
A. increase in the wage rates paid to laborers employed in the production of X.
35. College students living off-campus frequently consume large amounts of ramen noodles and boxed macaroni and cheese. When they finish school and start careers, their consumption of both goods frequently declines. This suggests that ramen noodles and boxed macaroni and cheese are:
A. inferior goods.
62. Refer to the above diagram. An increase in quantity supplied is depicted by a:
A. move from point y to point x.
136. Refer to the above diagram. Rent controls are best illustrated by:
A. price A
3. The law of demand states that, other things equal:
A. price and quantity demanded are inversely related.
65. The supply curve shows the relationship between:
A. price and quantity supplied.
131. In the above market, economists would call a government-set maximum price of $40 a:
A. price ceiling.
120. If the supply of a product decreases and the demand for that product simultaneously increases, then equilibrium:
A. price must rise, but equilibrium quantity may rise, fall, or remain unchanged.
16. The construction of demand and supply curves assumes that the primary variable influencing decisions to produce and purchase goods is:
A. price.
63. The law of supply indicates that, other things equal:
A. producers will offer more of a product at high prices than at low prices.
105. Allocative efficiency is concerned with:
A. producing the combination of goods most desired by society.
74. Other things equal, if the price of a key resource used to produce product X falls, the:
A. product supply curve of X will shift to the right.
69. The location of the product supply curve depends on the:
A. production technology
58. An increase in product price will cause:
A. quantity demanded to decrease.
124. Since their introduction, prices of Blu-ray players have fallen and the quantity purchased has increased. This statement:
A. suggests that the supply of Blu-ray players has increased.
97. If price is above the equilibrium level, competition among sellers to reduce the resulting:
A. surplus will increase quantity demanded and decrease quantity supplied.
50. 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.
59. In moving along a demand curve which of the following is not held constant?
A. the price of the product for which the demand curve is relevant.
10. In presenting the idea of a demand curve, economists presume the most important variable in determining the quantity demanded is:
A. the price of the product itself.
18. 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. the substitution effect
103. Productive efficiency refers to:
A. the use of the least-cost method of production.
60. In which of the following statements are the terms "demand" and "quantity demanded" used correctly?
B. When the price of ice cream rose, the quantity demanded of ice cream fell, and the demand for ice cream toppings fell.
56. Assume that the demand curve for product C is downsloping. If the price of C falls from $2.00 to $1.75:
B. a larger quantity of C will be demanded.
23. Which of the following would not shift the demand curve for beef?
B. a reduction in the price of cattle feed
96. A surplus of a product will arise when price is:
B. above equilibrium with the result that quantity supplied exceeds quantity demanded
20. A recent study found that an increase in the Federal tax on beer (and thus an increase in the price of beer) would reduce the demand for marijuana. We can conclude that:
B. beer and marijuana are complementary goods.
40. Digital cameras and memory cards are:
B. complementary goods.
A price ceiling means that:
B. government is imposing a legal price that is typically below the equilibrium price.
117. Refer to the above diagram, which shows demand and supply conditions in the competitive market for product X. A shift in the demand curve from D0 to D1 might be caused by a(n):
B. increase in the price of complementary good Y.
109. Other things equal, an excise tax on a product will:
B. increase its price.
95. At the current price there is a shortage of a product. We would expect price to:
B. increase, quantity demanded to decrease, and quantity supplied to increase.
122. One can say with certainty that equilibrium price will decline when supply:
B. increases and demand decreases.
77. A government subsidy to the producers of a product:
B. increases product supply.
9. A demand curve:
B. indicates the quantity demanded at each price in a series of prices.
85. If there is a surplus of a product, its price:
B. is above the equilibrium level.
64. The upward slope of the supply curve reflects the:
B. law of supply.
107. The equilibrium price and quantity in a market usually produces allocative efficiency because:
B. marginal benefit and marginal cost are equal at that point.
44. If consumer incomes increase, the demand for product X:
B. may shift either to the right or left.
104. If an economy produces its most wanted goods but uses outdated production methods, it is:
B. not achieving productive efficiency.
137. Refer to the above diagram. A government price support program to aid farmers is best illustrated by:
B. price C.
130. In the above market, economists would call a government-set minimum price of $50 a:
B. price floor.
57. An increase in the quantity demanded means that:
B. price has declined and consumers therefore want to purchase more of the product.
81. Refer to the above data. If price was initially $4 and free to fluctuate, we would expect the:
B. quantity of wheat supplied to decline as a result of the subsequent price change.
102. Camille's Creations and Julia's Jewels both sell beads in a competitive market. If at the market price of $5, both are running out of beads to sell (they can't keep up with the quantity demanded at that price), then we would expect both Camille's and Julia's to:
B. raise their price and increase their quantity supplied.
51. Suppose that tacos and pizza are substitutes, and that soda and pizza are complements. We would expect an increase in the price of pizza to:
B. reduce the demand for soda and increase the demand for tacos.
141. An effective price floor will:
B. result in a product surplus.
41. A decrease in the price of digital cameras will:
B. shift the demand curve for memory cards to the right.
115. Refer to the above diagram, which shows demand and supply conditions in the competitive market for product X. Given D0, if the supply curve moved from S0 to S1, then:
B. supply has decreased and equilibrium quantity has decreased.
36. Other things equal, which of the following might shift the demand curve for gasoline to the left?
B. the development of a low-cost electric automobile
12. The income and substitution effects account for:
B. the downward sloping demand curve.
19. Steve went to his favorite hamburger restaurant with $3, expecting to buy a $2 hamburger and a $1 soda. When he arrived he discovered that hamburgers were on sale for $1, so Steve bought two hamburgers and a soda. Steve's response to the decrease in the price of hamburgers is best explained by:
B. the income effect.
94. If there is a shortage of product X, and the price is free to change:
B. the price of the product will rise
47. In constructing a demand curve for product X:
B. the prices of other goods are assumed constant.
108. Allocative efficiency refers to:
B. the production of the product mix most wanted by society.
55. By an "increase in demand" economists mean that:
B. the quantity demanded at each price in a set of prices is greater.
87. At the equilibrium price
B. there are no pressures on price to either rise or fall.
91. Refer to the above diagram. If this is a competitive market, price and quantity will move toward:
C. $40 and 150, respectively.
22. Which of the following will not cause the demand for product K to change?
C. a change in the price of K
72. If producers must obtain higher prices than before to produce a given level of output, then the following has occurred:
C. a decrease in supply
25. If two goods are complements:
C. a decrease in the price of one will increase the demand for the other.
71. Because of unseasonably cold weather, the supply of oranges has substantially decreased. This statement indicates the:
C. amount of oranges that will be available at various prices has declined.
93. The rationing function of prices refers to the:
C. capacity of a competitive market to equate quantity demanded and quantity supplied.
142. Black markets are associated with:
C. ceiling prices and the resulting product shortages.
153. (Last Word) A major objection to creating a legal market for human organs is that such a market would:
C. commercialize human body parts and thus diminish the special nature of human life.
31. A shift to the right in the demand curve for product A can be most reasonably explained by saying that:
C. consumer preferences have changed in favor of A so that they now want to buy more at each possible price.
11. An increase in the price of a product will reduce the amount of it purchased because:
C. consumers will substitute other products for the one whose price has risen.
126. With a downsloping demand curve and an upsloping supply curve for a product, a decrease in resource prices will:
C. decrease equilibrium price and increase equilibrium quantity
99. Assume in a competitive market that price is initially above the equilibrium level. We can predict that price will:
C. decrease, quantity demanded will increase, and quantity supplied will decrease.
34. If Z is an inferior good, an increase in money income will shift the:
C. demand curve for Z to the left.
45. If products A and B are complements and the price of B decreases the:
C. demand for A will increase and the quantity of B demanded will increase.
(Consider This) Suppose that coffee growers sell 200 million pounds of coffee beans at $2 per pound in 2015, and sell 240 million pounds for $3 per pound in 2016. Based on this information we can conclude that the:
C. demand for coffee beans has increased.
148. (Consider This) Ticket scalping implies that:
C. event sponsors have established ticket prices at below-equilibrium levels.
80. Refer to the above data. If the price in this market was $4:
C. farmers would not be able to sell all their wheat.
86. A market is in equilibrium:
C. if the amount producers want to sell is equal to the amount consumers want to buy.
8. When the price of a product increases, a consumer is able to buy less of it with a given money income. This describes the:
C. income effect.
75. When the price of oil declines significantly, the price of gasoline also declines. The latter occurs because of a(n):
C. increase in the supply of gasoline.
49. An increase in the price of product A will:
C. increase the demand for substitute product
152. (Last Word) A market-based system of buying and selling human organs for transplant would:
C. increase the quantity of organs available for transplant.
15. (Advanced analysis) The equation for the demand curve in the below diagram:
C. is P = 35 .5Q.
1. A market:
C. is an institution that brings together buyers and sellers.
134. Refer to the above diagram. A government-set price floor is best illustrated by:
C. price C
5. The demand curve shows the relationship between:
C. price and quantity demanded.
119. If the supply and demand curves for a product both decrease, then equilibrium:
C. quantity must decline, but equilibrium price may rise, fall, or remain unchanged.
98. If we say that a price is too high to clear the market, we mean that:
C. quantity supplied exceeds quantity demanded.
140. An effective ceiling price will:
C. result in a product shortage.
145. An effective price floor on wheat will:
C. result in a surplus of wheat.
121. Data from the registrar's office at Gigantic State University indicate that over the past twenty years tuition and enrollment have both increased. From this information we can conclude that:
C. school-age population, incomes, and preferences for education have changed over the twenty-year period.
52. Refer to the above diagram. A decrease in demand is depicted by a:
C. shift from D2 to D1.
61. Refer to the above diagram. A decrease in supply is depicted by a:
C. shift from S2 to S1.
46. If products C and D are close substitutes, an increase in the price of C will:
C. shift the demand curve of D to the right.
70. An improvement in production technology will:
C. shift the supply curve to the right.
28. If the price of product L increases, the demand curve for close-substitute product J will:
C. shift to the right.
123. Suppose that in 2007, Ford sold 500,000 Mustangs at an average price of $18,800 per car; in 2008, 600,000 Mustangs were sold at an average price of $19,500 per car. These statements:
C. suggest that the demand for Mustangs increased between 2007 and 2008.
132. If government set a minimum price of $50 in the above market, a:
C. surplus of 21 units would occur.
4. Graphically, the market demand curve is:
C. the horizontal sum of individual demand curves.
106. Allocative efficiency involves determining:
C. the mix of output that will maximize society's satisfaction.
13. When the price of a product rises, consumers shift their purchases to other products whose prices are now relatively lower. This statement describes:
C. the substitution effect.
78. Suppose that corn prices rise significantly. If farmers expect the price of corn to continue rising relative to other crops, then we would expect:
C. the supply to increase as farmers plant more corn.
29. Which of the following is most likely to be an inferior good?
C. used clothing
84. Refer to the above diagram. A shortage of 160 units would be encountered if price was:
D. $0.50.
116. Refer to the above diagram, which shows demand and supply conditions in the competitive market for product X. If supply is S1 and demand D0, then
D. 0F represents a price that would result in a shortage of AC.
27. If the demand curve for product B shifts to the right as the price of product A declines, then:
D. A and B are complementary goods.
146. Which of the following is a consequence of rent controls established to keep housing affordable for the poor?
D. All of these are consequences of rent controls.
128. Over time, the equilibrium price of a gigabyte of computer memory has fallen while the equilibrium quantity purchased has increased. Based on this we can conclude that:
D. Increases in the supply of computer memory have exceeded increases in demand.
21. In the past few years, the demand for donuts has greatly increased. This increase in demand might best be explained by:
D. a change in buyer tastes.
6. Economists use the term "demand" to refer to:
D. a schedule of various combinations of market prices and amounts demanded.
88. Refer to the above diagram. A price of $60 in this market will result in:
D. a surplus of 100 units
66. A firm's supply curve is upsloping because:
D. beyond some point the production costs of additional units of output will rise.
24. 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:
D. bicycles are normal goods.
101. There will be a surplus of a product when:
D. consumers want to buy less than producers offer for sale.
33. If X is a normal good, a rise in money income will shift the:
D. demand curve for X to the right.
151. (Last Word) A market for human organs (rather than the current volunteer-donor system) would be expected to:
D. eliminate the shortage of organs.
42. A normal good is one:
D. for which the consumption varies directly with incomes.
139. A price floor means that:
D. government is imposing a minimum legal price that is typically above the equilibrium price.
100. Assume in a competitive market that price is initially below the equilibrium level. We can predict that price will:
D. increase, quantity demanded will decrease, and quantity supplied will increase.
37. Tennis rackets and ballpoint pens are:
D. independent goods.
138. Price floors and ceiling prices:
D. interfere with the rationing function of prices.
133. If government set a maximum price of $45 in the above market:
D. it would create neither a shortage nor a surplus.
17. One reason that the quantity demanded of a good increases when its price falls is that the:
D. lower price increases the real incomes of buyers, enabling them to buy more.
53. Refer to the above diagram. A decrease in quantity demanded is depicted by a:
D. move from point y to point x.
144. If a legal ceiling price is set above the equilibrium price:
D. neither the equilibrium price nor equilibrium quantity will be affected.
38. The demand for most products varies directly with changes in consumer incomes. Such products are known as:
D. normal goods.
48. An inferior good is:
D. not accurately defined by any of these statements.
147. (Consider This) Ticket scalping refers to:
D. reselling a ticket at a price above its original purchase price.
89. Refer to the above diagram. A price of $20 in this market will result in a:
D. shortage of 100 units.
67. Increasing marginal cost of production explains: A. the law of demand.
D. some firms leaving an industry.
68. A leftward shift of a product supply curve might be caused by:
D. some firms leaving an industry.
76. An increase in the excise tax on cigarettes raises the price of cigarettes by shifting the:
D. supply curve for cigarettes leftward.
149. (Consider This) Suppose that salsa manufacturers sell 2 million bottles at $3.50 in one year, and 3 million bottles at $3 in the next year. Based on this information we can conclude that the:
D. supply of salsa has increased.
14. When the price of a product falls, the purchasing power of our money income rises and thus permits consumers to purchase more of the product. This statement describes:
D. the income effect.
73. In moving along a supply curve which of the following is not held constant?
D. the price of the product for which the supply curve is relevant
92. At the point where the demand and supply curves for a product intersect:
D. the quantity that consumers want to purchase and the amount producers choose to sell are the same.
135. Refer to the above diagram. A government-set price ceiling is best illustrated by:
price A.