Econ 101 chapter 3
If the maximum price a person is willing and able to pay for a good is $50, and consumers' surplus is $20, then it follows that the price the buyer paid for the good is
$30
When the price of a good is $5, the quantity demanded of a good is 30 units, and the quantity supplied of the good is 50 units. For every $1 decrease in the price of this good, quantity demanded rises by 5 units and quantity supplied falls by 5 units. The equilibrium price of this good is ___________and the equilibrium quantity of this good is _________ units.
$3; 40
In the market for good X there are three buyers, Adam, Bill, and Carolyn. Adam buys 3 units of good X at $4, Bill buys 7 units of good X at $4, and Carolyn buys 8 units of good X at $4. One point on the market demand curve for good X consists of a price of _____________ and a quantity demanded of __________________ units.
$4; 18
If consumers' surplus is $30 and the price paid for the good is $50, then the maximum price a buyer is willing and able to pay for the good is
$80.
When the price of a good is $65, the quantity demanded of a good is 80 units, and the quantity supplied of the good is 40 units. For every $10 increase in the price of this good, quantity demanded falls by 10 units and quantity supplied rises by 10 units. The equilibrium price of this good is ___________and the equilibrium quantity of this good is _________ units.
$85; 60
Which of the following statements is true?
A demand schedule is the numerical tabulation of the law of demand.
Which of the following statements is false?
A vertical supply curve graphically represents the law of supply.
Which of the following statements is false?
A vertical supply curve represents a direct relationship between price and quantity supplied.
If price is on the vertical axis and quantity demanded is on the horizontal axis, why is a demand curve downward sloping (left to right)?
Because a demand curve is the graphical representation of the law of demand, which specifies an inverse relationship between price and quantity demanded, ceteris paribus.
Which of the following statements represents a correct and sequentially accurate economic explanation?
Good X is an inferior good and good Y is a substitute for X. Income rises, the demand for X falls, the price of X falls, and the demand for Y falls.
Which of the following statements represents a correct and sequentially accurate economic explanation?
Goods X and Y are substitutes. The price of X falls, the quantity demanded of X rises, and the demand for Y falls.
Labor is a resource that is necessary to produce many goods. "If the price of labor falls," says the economist, "the prices of goods will soon follow." How does this work?
If the price of labor falls, the supply of goods rises, and the prices of those goods fall.
Which of the following illustrates the law of demand?
Jorge buys fewer pencils at $2 per pencil than at $1 per pencil, ceteris paribus.
The "voluntary bumping plan" used by airlines to resolve the problem of overbooked flights was developed by economist
Julian Simon.
At a price of $9.99 per digital book, Danielle buys 3 digital books per month. When the price decreases to $7.99, Danielle buys 4 digital books per month. Jason says that Danielle's demand for digital books has increased. Is Jason correct?
No, Jason is incorrect. Danielle's quantity demanded has increased, but her demand has stayed the same.
At a price of $15 each, Marta buys 4 books per month. When the price increases to $20, Marta buys 3 books per month. Luz says that Marta's demand for books has decreased. Is Luz correct?
No, Luz is incorrect. Marta's quantity demanded has decreased, but her demand has stayed the same.
Jerry has $50,000 in his savings account and the average new car price is $23,000. Does Jerry have a demand for a new car?
Not necessarily. Jerry has the ability to buy a new car, but we don't know if he also has the willingness to buy a new car.
Which of the following is consistent with the law of demand?
People substitute lower-priced goods for higher-priced goods.
Which of the following statements best represents the law of supply?
Price and quantity supplied are directly related, ceteris paribus.
__________ is the number of units that individuals are __________ to buy at a particular price during some time period.
Quantity demanded; willing and able
The price of X was $10 in year 1 and $14 in year 2. Which of the following could be the correct reason for the rise in price?
The demand for X was higher and the supply of X was lower in year 2 than in year 1.
In year 1 the price of good X is $10 and 100 units are bought and sold. In year 2 the price of good X is $13 and 230 units are bought and sold. What of the following could explain this?
The demand for good X was higher in year 2 than in year 1 and the supply of good X was the same in year 2 as in year 1.
Which of the following statements is false?
The shift factors for the supply curve are: income, preferences, prices of related goods, the number of buyers, and expectations of future price.
Suppose that good X is one of the more heavily subsidized industries in the United States. Suppose further that as a result of intense lobbying from health-related concerns, Congress repeals the subsidies on good X. Which of the following scenarios would likely occur?
The supply curve for good X would shift leftward, since it would now cost more to produce each level of output.
If the workers of a firm successfully negotiate an increase in wages, which of the following is most likely to happen?
The supply curve of the product the firm produces shifts leftward.
Which of the following is descriptive of the law of diminishing marginal utility?
The third hamburger consumed provides less utility than the second hamburger consumed.
If the producers' surplus is $50, and the consumers' surplus is $40, then what is the minimum selling price of the good?
There is not enough information to answer the question.
Which of the following is true about the relationship between price and quantity supplied?
There is usually a direct relationship between price and quantity supplied.
When income rises for the buyers of good X, the ____________ curve for good X will shift ________________.
This question cannot be answered unless we know whether good X is a normal good, a neutral good, or an inferior good.
Which of the following will not shift a supply curve?
a change in the good's own price
In the supply-and-demand diagram of the market for peanut butter, the equilibrium point has moved down and to the right. What could have caused this?
a fall in the price of peanuts
A rightward shift in the demand curve for tennis balls would most likely be caused by
a fall in the price of tennis rackets.
An advance in technology in the production of good X causes
a rightward shift in the supply curve for good X.
Consider a point on a market demand curve. The point represents
a single price and the sum of the quantities demanded by all buyers.
At a price above the equilibrium price, there is
a surplus.
Which of the following pairs of goods would be most likely to be complements?
airline tickets and rental cars
A vertical supply curve represents:
an independent relationship between price and quantity supplied.
If Max's demand for hot dogs falls as his income rises, then for Max hot dogs are
an inferior good.
If the price a buyer pays for a good is $50 and the maximum price she would be willing and able to pay is $53, then ____________ is _______________.
consumers' surplus; $3
An increase in the number of sellers of a good will __________________ for that good, ceteris paribus.
decrease equilibrium price and increase equilibrium quantity
If potential buyers of good X expect the price of good X will soon fall, then the current
demand for good X will fall.
Good Y is an inferior good. If the average income of those who buy good Y rises, the _____________ curve for good Y will shift ____________ resulting in a(n) _____________ in the equilibrium price of Y and a(n) ____________ in the equilibrium quantity of Y.
demand; leftward; decrease; decrease
One reason that helps to explain the law of supply is the law of
diminishing marginal returns.
The law of supply states that price and quantity supplied are
directly related, ceteris paribus.
If a market is in disequilibrium, economists would predict that the product's price would __________ to reach equilibrium when the quantity demanded is __________ than the quantity supplied.
fall; less
If the demand for a good falls by less than the supply of the good rises, then the good's equilibrium price will __________ and its equilibrium quantity will __________.
fall; rise
Suppose that for a given good demand decreases and supply increases at the same time. If demand decreases by a greater amount than supply increases, then equilibrium price __________ and equilibrium quantity __________ for that good.
falls; falls
Suppose that for a given good, demand decreases and supply decreases at the same time. If demand decreases by a greater amount than supply decreases, then equilibrium price __________ and equilibrium quantity __________ for that good.
falls; falls
Suppose that for a given good demand increases and supply increases at the same time. If demand increases by a lesser amount than supply increases, then equilibrium price __________ and equilibrium quantity __________ for that good.
falls; rises
In year 1 the average price of X is $10, and in year 2 the average price of X is $23. If consumers buy more units of X in year 2 than in year 1, it follows that
good X buyers have received an increase in income between year 1 and year 2, and good X is a normal good.
The fundamental reason why most supply curves are upward sloping is that
higher production raises the opportunity costs of production and so price must rise to induce more output.
Oil producers expect that oil prices next year will be higher than oil prices this year. As a result, oil producers are most likely to
hold some oil off the market this year, thus shifting the present supply curve of oil leftward.
An increase in the expected price of corn would likely do the following to the current supply and demand for corn:
increase the demand, but decrease the supply.
Given that frozen yogurt and ice cream are substitutes, a shift in preferences in favor of yogurt would be predicted to do all of the following EXCEPT
increase the supply of ice cream.
A decrease in the expected price of corn would likely do the following to the current supply and demand for corn:
increase the supply, but decrease the demand.
Suppose that the government imposes a new $1 per-unit tax on the production of soft drinks. The result would be a(n) ________________ in the equilibrium price of soft drinks and a(n) ______________________in the equilibrium quantity of soft drinks.
increase; decrease
The law of demand states that price and quantity demanded are
inversely related, ceteris paribus.
A market is said to be in disequilibrium if
it exhibits either a surplus or a shortage.
According to the law of demand, the higher the price of an assigned textbook, the _______________ the quantity demanded of assigned textbooks will be, ceteris paribus, and the ______________ likely students will seek out an alternative to the assigned textbook.
lower; more
One can determine the consumers' surplus if the _______________ are known.
maximum buying price and price paid
Which of the following is an example of a service?
medical care
A(n) _______________ good is one in which as income rises or falls, there is no change in the demand for the good.
neutral
As Jamal's income rises, his demand for pizza does not change. It follows that for Jamal, pizza is a(n)
neutral good.
If the demand for computer software rises as incomes rise, then computer software is a (an)
normal good
Which of the following pairs of goods would be most likely to be substitutes?
olive oil and vegetable oil
On a supply-and-demand diagram, quantity demanded equals quantity supplied
only at the single equilibrium price.
One major reason for the law of demand is that
people substitute relatively lower-priced goods for relatively higher-priced goods.
Oil producers expect that oil prices next year will be lower than oil prices this year. As a result, oil producers are most likely to
place more oil on the market this year, thus shifting the present supply curve of oil rightward.
An "increase in the quantity demanded" means that
price has declined and consumers therefore want to purchase more of the good.
A "decrease in the quantity demanded" means that
price has increased and consumers therefore want to purchase less of the good.
What is the definition of producers' surplus?
price received minus minimum selling price
The law of demand states that ____________and quantity demanded are _____________ related, ceteris paribus.
price; inversely
If the demand curve for a good shifts leftward,
quantity demanded is less at each price.
A demand schedule is a numerical tabulation of the ___________________ of a good at different ____________________.
quantity demanded; prices
A change in price will lead to a change in __________ and to a change in __________, while a change in government subsidies will lead to a change in __________ and a change in the number of buyers will lead to a change in __________.
quantity demanded; quantity supplied; supply; demand
If the supply of and demand for a product decrease at the same time, then equilibrium
quantity must decline, but equilibrium price may either rise, fall, or remain unchanged.
A change in price will lead to a change in __________ and to a change in __________, while a change in preferences will lead to a change in __________ and a change in the prices of relevant resources will lead to a change in __________.
quantity supplied; quantity demanded; demand; supply
An increase in the number of buyers in a particular market for a good will result in a ___________________ for that good.
rightward shift in the demand curve
If the demand for a good increases by more than the supply of the good increases, then the good's equilibrium price will __________ and its equilibrium quantity will __________.
rise; rise
If the demand for a good rises by more than the supply of the good falls, then the good's equilibrium price will __________ and its equilibrium quantity will __________.
rise; rise
Suppose that for a given good demand increases and supply decreases at the same time. If demand increases by a lesser amount than supply decreases, then equilibrium price __________ and equilibrium quantity __________ for that good.
rises; falls
At a price below the equilibrium price, there is
shortage
On a supply-and-demand diagram, consider a price for which the horizontal distance to the supply curve is shorter than the horizontal distance to the demand curve. There is a __________ at that price and the current price must be __________ the equilibrium price.
shortage; below
At a price for which quantity demanded exceeds quantity supplied, a __________ is experienced, which pushes the price __________ toward its equilibrium value.
shortage; upward
An increase in the price of good B resulting from a decrease in the supply of B caused an increase in the demand for good C. This indicates that goods B and C are
substitutes.
If a supply curve shifts rightward, this means
suppliers are willing and able to offer more of the good for sale at every price.
The government imposes a $2.50 per-unit tax on the production of good X. As a result the
supply curve for good X shifts leftward and the price of good X rises.
One reads the following in a newspaper: "Today the president and Congress agreed to impose new restrictive quotas on Japanese cars coming into the country." As a result, an economist would predict that the
supply of cars in the country will fall and the (average) price of cars will rise.
Assume that computers and software are complements. If the ____________ computers decreases, the price of computers will _______ and the demand for software will _____________, ceteris paribus.
supply of; rise; decrease
On a supply-and-demand diagram, consider a price for which the horizontal distance to the supply curve exceeds the horizontal distance to the demand curve. There is a __________ at that price and the current price must be __________ the equilibrium price.
surplus; above
At a price for which the quantity supplied exceeds the quantity demanded, a __________ is experienced, which pushes the price __________ toward its equilibrium value.
surplus; downward
A "decrease in demand" means that
the demand curve has shifted to the left.
Demand refers to
the different quantities of a good people are willing and able to buy at different prices.
In moving along a demand curve for good X, which of the following is NOT held constant?
the price of good X
Resource X is necessary to the production of good Y. If the price of resource X rises,
the supply curve of Y shifts leftward.
One reads in the newspaper: "Today the president and Congress enacted a law which adds new requirements that child care providers must meet before they can offer their services for sale." As a result, an economist would predict that
the supply of child care services will decrease, thus raising the price of child care services.
"As the price of apples goes up, the demand for apples goes down." The author of this statement
uses the word "demand" when he should use the words "quantity demanded."
Supply curves are ________________ upward sloping.
usually
Suppose Smith wants one iPhone no matter what the price is between $0 and $350, Jones wants one iPhone no matter what the price is between $0 and $200, and Griffith wants one iPhone no matter what the price is between $0 and $450. In this case, each individual buyer's demand curve will be __________________ and the market demand curve will be __________________.
vertical; downward sloping
On a supply-and-demand diagram, equilibrium is found
where the demand and supply curves intersect.
