Econ 202 Chapter 4
Suppose the price of bananasbananas increases and the demand for pearspears increasesincreases. You determine that these goods must be ___________ (unrelated, compliments, substitutes)
substitutes
The condition that exists when quantity supplied exceeds quantity demanded at the current price is known as __________. a. a shortage or excess demand b. a surplus or excess supply c. an equilibrium condition d. an auction
a surplus or excess supply
Consider the previous figure and assume that it is the market for health-care services. When the "baby boomer" generation retires, the number of people who require health care increases by 30%, and, as a result, the number of health-care providers also increases, but by only 25%. What is the effect on the price of health-care services over time? a. It decreases because demand increased by less than supply. b. It increases because demand increased by more than supply. c. It increases because demand increased by less than supply. d. It decreases because demand increased by more than supply
it increases because demand increased by more than supply
According to the law of diminishing marginal benefit, as the consumption of a particular good increases: a. total benefit decreases b. marginal benefit decreases c. marginal benefit increases
marginal benefit decreases
Which of the following is not one of the five major factors that shifts the demand curve when it changes? a. Tastes and preferences B. The number of buyers. C. The price of substitute goods D. Prices of inputs used to produce the good
prices of inputs used to produce the good
All of the following scenarios depict the characteristics of substitutes except: a. the price of coffee increases and the demand for tea increases. b. the price of tennis racquets decreases and the demand for golf clubs decreases. c. the price of bacon increases and the demand for eggs decreases. d. the price of automobiles decreases and the demand for public transit decreases.
the price of bacon increases and the demand for eggs decreases
Assume the cost of aluminum used by soft-drink companies increases. Which of the following correctly describes the resulting effects in the market for canned soft drinks? I. The demand for soft drinks decreases. II. The quantity of soft drinks demanded decreases. III. The supply of soft drinks decreases. IV. The quantity of soft drinks supplied decreases. a. I and IV b. II and III c. III only d. IV only
II and III
Other things remaining equal, the law of demand says that higher prices will lead to: a. a smaller quantity demanded and lower prices to a smaller quantity demanded. b. a smaller quantity demanded and lower prices to a larger quantity demanded. c. a larger quantity demanded and lower prices to a larger quantity demanded. d. a larger quantity demanded and lower prices to a smaller quantity demanded.
a smaller quantity demanded and lower prices to a larger quantity demanded
Which of the following will cause an outward (rightward) shift in supply? a. The cost of an input increases. b. A decline in labor productivity. c. A technological improvement. d. A reduction in consumer incomes.
a technological improvement
In the given graph, the horizontal price line intersects the demand curve at a point labeled with a dot. At this intersection, where the quantity demanded of the product is 40 units, the buyers' willingness to pay is equal to the market price of the product. For a quantity below 40 units the buyers' willingness to pay is __________ (above, below, equal) the market price, so the buyers would _________ (loose, gain) by purchasing more of the product. For a quantity above 40 units the buyers' willingness to pay is (equal, below, above) the market price, so the buyers would __________ ( gain, loose) by purchasing more of the product.
above, gain, below, loose
Economists assume that when there is a change in demand and/or supply, that prices reach a new equilibrium: a. after a protracted negotiation process. b. quickly. c. slowly. d. after an adjustment period that varies.
after an adjustment period that varies
Which of the following would not be considered a market by an economist? a. An online auction site such as ebay b. Your corner gas station c. A dating website d. All of the above are examples of a market.
all of the above are examples of a market
In a perfectly competitive market, ___________. a. an increase in price by one seller is associated with an increase in business for him B. differentiated goods and services are sold C. all of the buyers and sellers are price takers D. the market participants do not face any competition
all of the buyers and sellers are price takers
Which of the following is consistent with the law of supply? a. A reduction of the price of salt led to a 5 percent increase in the quantity of salt consumed. b. Fewer passengers chose to travel by airplane after the terrorist strikes of 9/11. c. The state of California has less grape regulation than New York, and grape production is lower in New York. d. An increase in the market price of MP3 players causes an increase in the production of MP3 players.
an increase in the market price of MP3 players causes an increase in the production of MP3 players
Economic models often simplify the real world by holding all things equal and changing one variable to determine the impact of the change. The "all things equal" assumption is also known as: a. ceteris paribus b. isolation c. simplification
ceteris paribus
Consider the previous figure and assume that it is the market for health-care services. When the "baby boomer" generation retires, the number of people who require health care increases by 30%, and, as a result, the number of health-care providers also increases, but by only 25%. What is the effect on the price of health-care services over time? a. It decreases because demand increased by more than supply b. It increases because demand increased by more than supply. c. It increases because demand increased by less than supply. d. It decreases because demand increased by less than supply.
it increases because demand increased by more than supply
Which of the following statements regarding a market are not true? (Check all that apply.) a. It has different types of rules and arrangements for trading. B. It uses prices to allocate goods and services. C. It is a group of people who do not engage in any type of trade. D. It is always located at a specific place.
it is a group of people who do not engage in any type of trade, it is always located at a specific place.
According to the law of diminishing marginal benefit, as the consumption of a particular good increases: a. total benefit decreases at a faster rate b. marginal benefit decreases c. total benefit decreases
marginal benefit decreases
Which of the following is not a characteristic of a market? a. Markets are physical locations where trading occurs B.Voluntary exchanges between economic agents C.Flexible prices D.There are rules and arrangements for trading
markets are physical locations where trading occurs
At the market equilibrium price: a. quantity demanded equals quantity supplied. b. demand equals supply. c. quantity and price are equal. d. everyone can buy the product.
quantity demanded equals quantity supplied
In a price system: a. relative prices do not signal information about changes in market conditions. b. relative prices change constantly to reflect changes in supply and demand. c. relative prices change infrequently due to transactions costs. d. relative prices are set by central planners based on projected supply and demand.
relative prices change constantly to reflect changes in supply and demand
When one of the five major factors changes, causing an increase in demand, the demand curve shifts ________. a. rightward b. leftward c. upward and rightward
rightward
If marginal benefit is positive, but falling, then total benefit: a. falls b. falls at a decreasing rate c. rises at a decreasing rate
rises at a decreasing rate
If marginal benefit is positive, but falling, then total benefit: a. falls at a decreasing rate b. rises at a decreasing rate c. falls
rises at a decreasing rate
Which of the following scenarios represents the concept of diminishing marginal benefit? a. Sam's quantity demanded of apples decreases with an increase in its price. B. Sam's quantity demanded of apples increases with an increase in its supply. C. Sam's willingness to pay for an apple decreases with a decrease in his income. d. Sam's willingness to pay for additional units of apples declines as he receives more of them.
sam's willingness to pay for additional units of apples declines as he receives more of them
In the previous diagram, when supply decreases, a __________ develops at the original price. Equilibrium price will __________ and equilibrium quantity will __________ as a new equilibrium is established. a. shortage; fall; rise b. surplus; fall; rise c. surplus; rise; fall d. shortage; rise; fall
shortage; rise; fall
In the previous diagram, when supply decreases, a __________ develops at the original price. Equilibrium price will __________ and equilibrium quantity will __________ as a new equilibrium is established. a. shortage; rise; fall b. surplus; rise; fall c. shortage; fall; rise d. surplus; fall; rise
shortage; rise; fall
Given linear demand curves, if demand and supply both increase but demand increases by a greater amount than supply, then: a. the equilibrium price increases and the equilibrium quantity decreases. b. the equilibrium price decreases and the equilibrium quantity increases. c. the equilibrium price and quantity both decrease. d. the equilibrium price and quantity both increase.
the equilibrium price and quantity both increase
Given linear demand curves, if demand and supply increase by identical amounts, then: a. the equilibrium price and quantity both increase. b. the equilibrium price and quantity do not change. c. the equilibrium price stays the same and the equilibrium quantity rises. d. the equilibrium price increases but the equilibrium quantity falls.
the equilibrium price stays the same and the equilibrium quantity rises
Given linear demand curves, if demand increases and supply decreases, then __________. a. the effect on the equilibrium price will be ambiguous but equilibrium quantity will increase b. the equilibrium price will decrease but the effect on the equilibrium quantity will be ambiguous c. the equilibrium price will increase but the effect on the equilibrium quantity will be ambiguous d. the effect on the equilibrium price will be ambiguous but equilibrium quantity will decrease
the equilibrium price will increase but the effect on the equilibrium quantity will be ambiguous
The law of demand refers to ____. a. the positive relationship between the consumer's income and the quantity demanded of a commodity B. the negative relationship between the price and the quantity demanded of a commodity c. the positive relationship between the price and the quantity demanded of a commodity D. the negative relationship between the consumer's income and the quantity demanded of a commodity
the negative relationship between the price and the quantity demanded of a commodity
All of the following scenarios depict the characteristics of complements except: a. the price of bacon decreases and the demand for eggs increases. b. the price of coffee increases and the demand for cream increases. c. the price of automobiles decreases and the demand for tires increases. d. the price of tennis racquets increases and the demand for tennis shoes decreases.
the price of coffee increases and the demand for cream increase
The market for corn is initially in equilibrium. Suppose that the production of biofuels, which use corn as an input, increase, and at the same time, increases in the price of oil cause farm production costs to rise. Which of the following explains the effect on equilibrium price and quantity in the corn market? a. The price and quantity of corn will fall. b. The quantity of corn will rise, but the effect on equilibrium price cannot be determined without more information. c. The price and quantity of corn will rise. d. The quantity of corn will fall, but the effect on equilibrium price cannot be determined without more information. e. The price of corn will rise, but the effect on equilibrium quantity cannot be determined without more information.
the price of corn will rise, but the effect on equilibrium quantity cannot be determined without more information
The graph above shows the market for laptop computers. Suppose the price of memory chips used in laptop computers decreases. How will this event impact on the equilibrium quantity and the market price? a. The supply increases, causing the equilibrium quantity to fall and the market price to rise. b. The quantity supplied increases, causing the equilibrium quantity to rise and the market price to fall. c. The supply increases, causing the equilibrium quantity to rise and the market price to fall. d. The supply decreases, causing the equilibrium quantity to fall and the market price to rise.
the supply increases, causing the equilibrium quantity to rise and the market price to fall
If marginal benefit is negative, then: a. total benefit must be negative b. total benefit rises at a decreasing rate c. total benefit falls
total benefit falls
_________ __________ ______________ is when you add the supply schedules of two companies/situations together to get one combined supply schedule.
total supply schedule
Which of the following represents an inferior good? a. When consumer income increases, the demand for bologna decreases. b. When consumer income decreases, the demand for steak decreases. c. When consumer income increases, the demand for tea increases. d. When consumer income decreases, the demand for aspirin is unchanged.
when consumer income increases, the demand for bologna decreases
Are all markets perfectly competitive? a. No, there are other market types where firms have considerable power to control the price. B. Yes, any economic system with a market structure is by definition perfectly competitive. C. No, in other types of markets, sellers offer identical goods and simply accept the market price. D. No, there are also command and control markets that are run by a central government.
no, there are other market types where firms have considerable power to control the price
In which of the following examples, will the demand curve shift to the right? (Check all that apply.) A. Robert's demand for a normal good increases due to a decrease in his income. B. Mike's willingness to buy beer increases due to a decrease in its price. C. Ron's demand for an inferior good increases due to a decrease in his income. d. Jason's demand for butter increases due to a decrease in the price of bread.
ron's demand for an inferior good increases due to a decrease in his income, jason's demand for butter increases due to a decrease in the price of bread
