ECON 102 EXAM #1

If the market price is above the equilibrium price, which of the following will occur? Quantity demanded will exceed quantity supplied and the market price will eventually fall. Quantity demanded will exceed quantity supplied and the market price will eventually rise. Quantity supplied will exceed quantity demanded and the market price will eventually fall. Quantity supplied will exceed quantity demanded and the market price will eventually rise.

Quantity supplied will exceed quantity demanded and the market price will eventually fall.

The price of coffee has increased, yet evidence suggests the demand for coffee has been stable. A possible explanation is that there has been no change in the supply of coffee. there has been increased use of subsidies in coffee production. wages of workers in coffee production might have decreased. wages of workers in coffee production might have increased.

wages of workers in coffee production might have increased.

Compared to the 1980s, the price of computer chips is much lower today but revenues from computer chips are ________ because demand is elastic. Higher Lower approximately unchanged about $14 trillion higher

Higher

Which of the following could cause an increase in the demand for gasoline? The resolution of a civil war in one of the world's biggest oil producing nations The expectation that the price of gasoline will decrease in the future A new technology that makes the production of gasoline significantly less expensive An approaching hurricane that threatens a major oil refinery in Texas

An approaching hurricane that threatens a major oil refinery in Texas

Marge tutors English students—if she raises rates, her revenues increase. Brad tutors biology students—if he lowers rates, his revenues increase. Which of the following is TRUE? Marge's demand is elastic, and Brad's demand is inelastic. Marge's demand is inelastic, and Brad's demand is elastic. Marge's demand is elastic, and Brad's demand is elastic. Marge's demand is inelastic, and Brad's demand is inelastic.

Marge's demand is inelastic, and Brad's demand is elastic.

Suppose it is widely believed that the price of flat-screen, high-definition televisions will be lower next year. What will happen as a result of such beliefs? The demand for flat-screen TVs will increase now. The demand for flat-screen TVs will increase next year when the prices fall. The demand for flat-screen TVs will decrease now. The demand for flat-screen TVs will not change.

The demand for flat-screen TVs will decrease now.

An increase in demand and a decrease in supply occur in a market. What happens to the equilibrium price and quantity? The equilibrium price decreases; the change in the equilibrium quantity is ambiguous (cannot be determined). The equilibrium price decreases; the equilibrium quantity increases. The equilibrium price increases; the change in the equilibrium quantity is ambiguous (cannot be determined). The equilibrium price increases; the equilibrium quantity decreases.

The equilibrium price increases; the change in the equilibrium quantity is ambiguous (cannot be determined).

Which of the following would cause the current supply of iPods to increase? An economic boom, which increases the amount that people are willing to spend on personal electronics A decrease in the price of songs on iTunes The expectation that the future price of iPods will decrease An increase in the wages offered to manufacturers of iPods

The expectation that the future price of iPods will decrease

Following the release of a new study showing even more benefits to drinking red wine economists expect a shortage of red wine until the price rises. a surplus of red wine until the price falls. that both the price and quantity of red wine will decrease. the supply of red wine will increase immediately.

a shortage of red wine until the price rises.

Imagine a free market in equilibrium. After a sudden increase in demand (but before the price can adjust), the market experiences a shortage. a surplus. no change. a new equilibrium.

a shortage.

After a hurricane in Florida destroys half of the orange crop economists predict an increase in both orange prices and orange sales. a decrease in both orange prices and orange sales. an increase in orange prices and a decrease in orange sales. a decrease in orange prices and an increase in orange sales.

an increase in orange prices and a decrease in orange sales.

An increase in the demand for organic foods will lead to an increase in the price, and hence an increase in the supply of organic foods. an increase in the price, and hence an increase in the quantity supplied of organic foods. a decrease in the price, and hence a decrease in the supply of organic foods. a decrease in the price, and hence a decrease in the quantity supplied of organic foods.

an increase in the price, and hence an increase in the quantity supplied of organic foods.

Economists think that people are self-interested only when monetary incentives are present. because they respond to incentives in predictable ways. only rarely in response to incentives. unless they are being altruistic.

because they respond to incentives in predictable ways.

If the price of swimming pools decreases, we would expect the demand for chlorine, a complement good, to decrease. chlorine, a complement good, to increase. swimming pools to increase. swimming pools to decrease.

chlorine, a complement good, to increase.

A decrease in income causes demand for a normal good to ________, and an increase in income causes demand for an inferior good to ________. decrease; decrease increase; increase decrease; increase increase; decrease

decrease; decrease

Potato chips and popcorn are substitutes. A subsidy for potato chips will ______the demand for popcorn and the quantity of popcorn sold will ______. increase; increase increase; decrease decrease; decrease decrease; increase

decrease; decrease

Presume that spaghetti is an inferior good for most people. As their incomes increase, all other things held constant, the demand for spaghetti will decrease shifting the demand curve to the left. demand for spaghetti will decrease shifting the demand curve to the right. demand for spaghetti will increase shifting the demand curve to the left. demand for spaghetti will increase shifting the demand curve to the right.

demand for spaghetti will decrease shifting the demand curve to the left.

The demand curve for oil is inelastic, meaning that the quantity of oil demanded rises by a lot even when the price of oil increases by only a little. rises by only a little even when the price of oil increases by a lot. falls by a lot even when the price of oil increases by only a little. falls by only a little even when the price of oil increases by a lot.

falls by only a little even when the price of oil increases by a lot.

If Romaine lettuce and Iceberg lettuce are substitutes, an increase in the price of Romaine lettuce will ______ the demand for Iceberg lettuce. reduce increase not shift decrease

increase

Since the demand for illegal drugs is quite inelastic, an increase in the price of illegal drugs increases seller revenues. decreases seller revenues. does not affect seller revenues. the change in revenue depends on supply elasticity.

increases seller revenues.

As trade becomes more widespread, specialization ______, which in turn ______ productivity. decreases; decreases increases; increases decreases; increases increases; decreases

increases; increases

Imagine a free market in which at a price of $10 quantity supplied is 50 units and quantity demanded is 40 units. Equilibrium price in this market is equal to $10. is less than $10. is greater than $10. differs from $10 in an indeterminate direction.

is less than $10.

In a free market setting where quantity supplied is 50 units and quantity demanded is 50 units, price will rise. fall. remain the same. move in an indeterminate direction.

remain the same.

When Angel has a comparative advantage over Blake in cooking, it means that the opportunity cost of cooking is higher for Angel than Blake. the opportunity cost of cooking is lower for Angel than Blake. Angel can cook faster than Blake can. Blake can cook faster than Angel can.

the opportunity cost of cooking is lower for Angel than Blake.