ECON 105 - Chapter 3

Refer to Figure 3-3. At a price of P2 there would be excess demand equal to A) 0. B) Q1 to Q3. C) Q2 to Q4. D) Q1 to Q5. E) Q3 to Q5

A

Refer to Figure 3-5. The price at which there would be a shortage in this market is A) P3. B) both P1 and P3. C) both P2 and P3. D) P2. E) P1.

A

Refer to Figure 3-6. A shift in the supply curve from S2 to S1 might be caused by A) a rise in the costs of producing good X. B) a decrease in the price of X. C) an improvement in the technology of producing good X. D) additional suppliers entering the industry. E) a decrease in demand for X.

A

Ceteris paribus, the position of the demand curve for apples will remain unchanged if there is a change in the A) hourly wage rate of most workers. B) price of pears. C) knowledge regarding the health benefits of eating fresh fruit. D) price of apples. E) income of apple eaters.

D

The time period to which quantity demanded refers when constructing demand curves is A) a moment in time. B) one year. C) a period shorter than one year. D) a long period of time. E) any specified time period.

E

Aeronautical engineers are a factor of production for airplanes. What will happen in the world market for airplanes when there is a worldwide shortage of aeronautical engineers? A) price will increase, quantity exchanged will decrease B) price will decrease, quantity exchanged will increase C) price will increase, quantity exchanged will increase D) price will decrease, quantity exchanged will decrease E) there will be no change in price or quantity exchanged

A

Consider butter and margarine, which are substitutes. When the price of butter falls, the demand curve for margarine is likely to A) shift to the left. B) remain stationary. C) remain stationary, although its price will fall. D) remain stationary, although its price will rise. E) shift to the right.

A

If tastes change so that a particular style of boots is now considered more appealing, the likely result is A) a shift in the demand curve to the right. B) no change in the demand curve. C) a shift in the demand curve to the left. D) a movement up the demand curve. E) a movement down the demand curve.

A

Suppose that a newer way to produce a good is discovered, which reduces production costs for the good. This will cause A) an increase in supply (a rightward shift of the supply curve). B) a decrease in supply (a leftward shift of the supply curve). C) a movement up the supply curve. D) a movement down the supply curve. E) no change in the supply curve, only a change in price

A

Suppose that many coal mines are shut for environmental reasons. This will cause A) a decrease in the supply of coal (a leftward shift of the supply curve). B) a movement down the supply curve. C) an increase in the supply of coal (a rightward shift of the supply curve). D) no change in the supply curve, only a change in price. E) a movement up the supply curve.

A

Suppose that the price of good X increases from $3.00 to $4.00 while the price of good Y increases from $150 to $200. The relative price of X (in terms of Y) A) remained constant. B) has fallen. C) is completely unrelated to the price of good Y. D) has risen. E) cannot be determined from the above data.

A

The positive slope of a supply curve indicates that A) as price goes up, quantity supplied will increase. B) as price goes up, quantity supplied will decrease. C) consumers will want to buy less at higher prices. D) as price goes up, quantity supplied will remain constant. E) if the costs of production increase, the quantity supplied will increase.

A

The ʺlaw of demandʺ hypothesizes that, other things being equal, A) the higher the price, the lower the quantity demanded. B) the lower the price, the greater the demand. C) price and quantity demanded are positively related. D) price and demand vary inversely. E) the higher the income, the higher the quantity demanded.

A

Which of the following would cause a movement along the demand curve for ski-lift tickets, other things being equal? A) an increase in price as the supply curve for lift tickets shifts to the left B) an increase in population C) a rise in average household income D) a change in tastes in favour of skiing E) a rise in the price of ski boots and skis

A

ʺExcess demandʺ can also be described as A) quantity demanded exceeding quantity supplied. B) quantity supplied exceeding quantity demanded. C) the area to the left of the equilibrium price on a supply and demand diagram. D) excess supply. E) the area to the right of the equilibrium price on a supply and demand diagram.

A

A demand curve is a representation of the relationship, ceteris paribus, between quantity demanded and A) wealth. B) price. C) supply. D) preferences. E) income.

B

A variable that is a ʺstockʺ A) is measured per unit of time. B) has meaning only at a point in time. C) has only to do with products where inventory is kept. D) is used only in accounting. E) has the same units as a flow variable.

B

An important assumption underlying a demand schedule is that A) income has little significance to household demand. B) everything else except the productʹs price is being held constant. C) the numbers are not important; the general relationship between the variables is. D) quantity demanded and demand mean the same thing. E) household tastes rarely change.

B

In which statement is the term ʺsupplyʺ used correctly? (1) An increase in the price of leather will cause a decrease in the supply of leather. (2) An increase in the price of leather will cause a decrease in the supply of leather boots. A) both statements B) the second statement only C) neither statement D) the first statement only E) not enough information to tell

B

Refer to Figure 3-5. Ceteris paribus, if supply were to increase, this would lead to A) no change in equilibrium price or quantity. B) a decrease in equilibrium price and an increase in equilibrium quantity. C) an increase in both equilibrium price and quantity. D) a decrease in both equilibrium price and quantity. E) an increase in equilibrium price and a decrease in equilibrium quantity.

B

Refer to Figure 3-6. If the initial demand and supply curves are D1 and S1, and demand shifts to D2, then A) a permanent shortage of X will result. B) if price remained at P2, a shortage of Q1Q3 would exist. C) a surplus of Q1Q3 will occur. D) a shortage will occur at any price above P3. E) all of the above

B

The term ʺquantity suppliedʺ is the amount of a commodity that A) is exchanged between firms and consumers during a given period of time at a given price. B) firms wish to sell at a given price during a given period of time. C) is supplied at a fair market price. D) firms actually sell during a given period of time at a given price. E) households wish firms would sell during a given period of time at a given price.

B

Tickets for music concerts that are sold on the Internet are often sold out within minutes and many unsatisfied customers are unable to get tickets (in the legitimate market). One explanation for this is that A) prices for purchasing digital music have increased. B) the market price for concert tickets may be set below its equilibrium price. C) concert goers are not rational. D) the market price for concert tickets is at its equilibrium level. E) the market price for concert tickets may be set above its equilibrium price.

B

A demand curve represents graphically A) the available quantities at all possible prices for the product. B) a functional statement of the income-quantity relationship. C) the quantity demanded per unit of time at various prices. D) the timeless relationship between quantity demanded and price. E) quantity demanded.

C

Refer to Figure 3-6. If the demand curve shifts from D1 to D2, while supply remains at S1, one could say that A) the price of a good which is a substitute for X must have fallen. B) the price increase has caused an increase in quantity demanded. C) there is now an excess demand at the new price of P1. D) there has been an increase in demand for X. E) the quantity demanded has decreased to Q1 and price has fallen to P2.

D

Suppose that some resource X is necessary to produce some good Y. If the price of X falls A) the demand curve for X shifts to the right. B) the supply curve of good Y is unaffected. C) there is a movement along the supply curve of good Y. D) the supply curve of good Y shifts to the right. E) the supply curve of resource X shifts to the left.

D

Suppose there is a decrease in the quantity supplied of copper at each price. This change would imply A) a shift to the right of the supply curve. B) a movement down the supply curve. C) a movement up the supply curve. D) a shift to the left of the supply curve.

D

The term ʺsupplyʺ in a particular market refers to A) only one point on the supply curve. B) only one entry in a supply schedule. C) the particular quantity supplied at the moment. D) the entire relationship between quantity supplied and price. E) the quantity actually sold to consumers.

D

Which of the following events would cause a change in the quantity supplied of some agricultural commodity but would not cause a change in the supply of that same commodity? A) a technological change B) a change in factor costs C) a change in the number of suppliers of the commodity D) a change in the price of the commodity E) a change in the price of other goods co-produced

D

An increase in the number of firms wanting to provide accounting services will cause a ________ for accounting services. A) leftward shift in the demand curve B) simultaneous shift of both the demand and supply curves C) rightward shift in the demand curve D) leftward shift in the supply curve E) rightward shift in the supply curve

E

Choose the best description of an ʺequilibrium price.ʺ A) The price in the middle of supply and demand. B) The price that producers want to charge. C) The price that consumers are willing to pay. D) The price at which demand for the commodity is equal to supply. E) The price at which quantity demanded of the commodity is equal to the quantity supplied.

E

Quantity demanded is a flow variable, which means that it must be expressed A) in units of the good per year. B) as so much at a specific moment in time. C) in units of the good per day. D) in units of the good per week. E) in units of the good per period of time.

E

Refer to Figure 3-5. If supply and demand were to increase simultaneously, this would lead to A) an increase in equilibrium price and an indeterminate change in equilibrium quantity. B) an increase in both equilibrium price and quantity. C) no change in equilibrium price or quantity. D) a decrease in both equilibrium price and quantity. E) an increase in equilibrium quantity and an indeterminate change in price.

E

Suppose that in Montreal in December, 2012, 10 000 ski helmets were sold at a price of $60 each. And in Montreal in December, 2013, 20 000 ski helmets were sold at a price of $80 each. One possible explanation for the change is that from 2012 to 2013 the ________ curve for ski helmets shifted to the ________. A) demand; left B) supply or demand; right C) supply; right D) supply; left E) demand; right

E

Which of the following best defines quantity demanded? A) The amount, per time period, that is desired at the most recent price. B) The various amounts that a society desires at all relevant prices. C) The amount an individual purchases at its current price. D) The amount an individual purchases at his or her current income. E) The amount, per time period, an individual desires to purchase at any given price

E

A fall in the price of raw milk (which is used in the production of ice cream) will A) have no effect on the supply curve of ice cream but cause a downward movement along the supply curve of ice cream. B) decrease the supply of ice cream, causing the supply curve of ice cream to shift to the left. C) increase the supply of ice cream, causing the supply curve of ice cream to shift to the right. D) decrease the supply of ice cream, causing the supply curve to shift to the right. E) increase the supply of ice cream, causing the supply curve to shift to the left.

C

A rise in the quantity demanded of lemons can be attributed to a A) cold spell which makes people want less lemonade. B) decline in the number of people drinking lemonade. C) rightward shift in the supply curve of lemons. D) decrease in the price of artificial lemon flavouring. E) leftward shift in the supply curve of lemons.

C

Ceteris paribus means A) knowledge gained before the study of evidence is made. B) in a historical context. C) other things being equal. D) among other things. E) and so forth.

C

If the legal beer-drinking age is raised from 18 to 21, the changes to the equilibrium price and quantity of beer are likely to be that A) price falls and quantity rises. B) price rises and quantity falls. C) price falls and quantity falls. D) no change in price or quantity occurs. E) price rises and quantity rises.

C

Refer to Figure 3-3. At a price of P3 there is excess ________ in the market for X and pressure for the price to ________. A) demand; fall B) supply; fall C) demand; rise D) supply; rise

C

Refer to Figure 3-6. If the initial demand and supply curves are D1 and S1, equilibrium price and quantity are represented by point A) D. B) Not shown in the figure. C) A. D) C. E) B

C

The market supply curve for wooden shipping crates would shift to the right A) if a tax is applied to shipping crates. B) if suppliers leave the industry. C) if the prices of inputs fall. D) if a government subsidy for shipping crates is withdrawn. E) if technological conditions for the production of crates deteriorates

C

The quantity exchanged in the market will be below the equilibrium quantity A) only if there is excess supply. B) only if price is below the equilibrium price. C) if there is either excess supply or demand. D) in no imaginable situation. E) only if there is excess demand.

C

The relative price of a good A) is equal to the average price of the good over the last 5 years. B) is always measured in current dollars. C) reflects its price in terms of units of other goods. D) is a measure of the relative share of the consumerʹs income devoted to its purchase. E) is its price in terms of money

C

The term ʺquantity demandedʺ refers to the A) total amount of a good that is actually purchased during a given period of time. B) product of advertising, and is unrelated to price. C) total amount of a good that purchasers wish to purchase at a given price during a given period of time. D) entire relationship between desired purchases and possible prices. E) total amount of a good that people wish to buy, regardless of price.

C

A change in demand is said to take place when there is a A) quantity change. B) movement along the demand curve. C) shift of the supply curve. D) shift of the demand curve. E) price change.

D

A surplus exists in the market when A) supply and demand are equal. B) the supply curve has shifted to the left. C) the quantity demanded exceeds the quantity supplied. D) the quantity demanded is less than the quantity supplied. E) the equilibrium price is too low

D

An equilibrium price can be described as A) an aggregate price. B) the final price. C) a regulated price D) one at which there is neither excess demand nor excess supply. E) the price at which excess demand equals excess supply.

D

At the market-clearing price for a commodity A) there may be excess demand for a product but not excess supply. B) shifts in the supply or demand curves will not cause price changes. C) there will never again be any pressure for prices to change, independent of what happens to demand or supply. D) the quantity supplied of the commodity equals quantity demanded. E) prices will remain unchanged, even if there is excess demand.

D

Consider the following two statements. (1) An increase in the price of eggs will cause a decrease in the demand for eggs. (2) An increase in the price of eggs will cause a decrease in the quantity of milk demanded. In which of these two statements is the term ʺdemandʺ used correctly? A) both statements B) the second statement only C) the first statement only D) neither statement E) more information is needed

D

Four of the five statements below contain a stock and a flow. Which statement describes ONLY stock variables OR flow variables? A) Nancy spends $400 per month on her credit card and has a balance owing of $2567. B) The Canadian Federal government has a debt of approximately $450 billion and an annual deficit of over $25 billion dollars. C) Chris earns $1500 per month and has $4000 in his savings account at the bank. D) The Transit Authority of Mytown collects $22 000 in fares per day and has an operating budget of $2 million per year. E) Country X spends an average of $1 million per year for flood relief and has an emergency services fund of $20 million.

D

If there is no change in the money (absolute) price of steel during a period of 6% inflation, then the A) absolute price of steel has decreased. B) relative price of steel has increased. C) relative price of steel is equal to the absolute price of steel. D) relative price of steel has decreased. E) absolute price of steel has increased.

D

In a market for a good or service, the quantities demanded and supplied are A) both stock variables. B) neither stock nor flow variables. C) a flow variable and a stock variable, respectively. D) both flow variables. E) a stock variable and a flow variable, respectively

D

Refer to Figure 3-3. At a price of P1 there would be excess supply equal to A) Q1 to Q5. B) Q4 to Q5. C) Q1 to Q2. D) Q2 to Q4. E) 0.

D

Refer to Figure 3-5. A price at which there would be a surplus in this market is A) P2. B) both P1 and P3. C) P3. D) P1. E) both P1 and P2.

D