Econ 222 Chapter 3 Study Guide

Which of the following is an example of a price ceiling? A. Limits on interest rates charged by credit card companies B. Subsidies for apartment rent in major cities C. Minimum-wage laws for unskilled workers D. Price supports for agricultural products

A) Limits on interest rates charged by credit card companies

Which would cause an increase in the supply curve of cell-phone services? A. A decrease in the wages of phone-company workers B. An increase in the price of cell-phone services C. An increase in the taxes paid by cell-phone service providers D. A decrease in a subsidy given to cell-phone service providers

A. A decrease in the wages of phone-company workers

Which of the following would cause a leftward shift in the supply curve for car washes? A. An increase in the number of cars in the city B. A decrease in taxes on car washes C. An increase in the price of car washing equipment D. A decrease in the price of water

A. An increase in the number of cars in the city

If the price of a product decreases, we would expect: A. Demand to increase B. Quantity supplied to decrease C. Supply to decrease D. Quantity supplied to increase

A. Demand to increase

The following are explanations of the Law of Demand, except: A. Expectations effect B. Diminishing marginal utility C. Income effect D. Substitution effect

A. Expectations effect

Suppose that a more efficient way to produce a good is discovered, thus lowering production costs for the good. This will cause a(n): A. Increase in supply B. Decrease in supply C. Increase in quantity supplied D. Decrease in quantity supplied

A. Increase in supply

The market demand schedule or curve for a product shows the relationship between how much of the product buyers are willing and able to buy and the: A. Product's price B. Buyers' incomes C. Cost of producing the product D. Time period, say, from one month to the next

A. Product's price

A black market could arise as a result of: A. The imposition of a legal price floor below the equilibrium price B. The imposition of a legal price ceiling above the equilibrium price C. The imposition of a legal price floor at the equilibrium price D. The imposition of a legal price ceiling below the equilibrium price

A. The imposition of a legal price floor below the equilibrium price

A result of a fall in the price of gasoline, consumers can afford to buy more gasoline for more driving trips. This is an illustration of: A. The income effect B. The substitution effect C. Diminishing marginal utility D. Consumer sovereignty

A. The income effect

In order to derive a market demand curve from individuals' demand curves, we add up the: A. Various individuals' quantities demanded at each price level B. Various prices that each buyer is willing and able to pay C. Incomes of all buyers, assuming that their tastes remain constant D. Total number of buyers in the market at each time period

A. Various individuals' quantities demanded at each price level

Which of the following factors will decrease the current demand for a product? A. An expected increase in the future price of the product B. A decrease in the current price of a substitute product C. A decrease in the current price of a complementary product D. An increase in the current price of a substitute product

B. A decrease in the current price of a substitute product

If the market price is above the equilibrium price: A. A shortage will occur and producers will produce more and lower prices B. A surplus will occur and producers will produce less and lower prices C. A surplus will result and consumers will bid prices up D. Producers will make extremely high profits

B. A surplus will occur and producers will produce less and lower prices

An increase in the price of digital cameras will result in a(n): A. Shift of the demand curve for digital cameras to the left B. Decrease in the demand for digital cameras C. Shift of the demand curve for digital cameras to the right D. Movement up and to the left along the demand curve for digital cameras

B. Decrease in the demand for digital cameras

A news story states that "DVDs lose their appeal as consumers switch to online streaming for movies." In a competitive market for DVDs, this situation would lead to a(n): A. Increase in the price and the quantity sold of DVDs B. Decrease in the price and the quantity sold of DVDs C. Increase in the price and a decrease in the quantity sold of DVDs D. Decrease in the price and an increase in the quantity sold of DVDs

B. Decrease in the price and the quantity sold of DVDs

All markets involve the following elements, except: A. Demand or buyers B. Face-to-face negotiation C. Prices of goods and services D. Supply or sellers

B. Face-to-face negotiation

Which of the following goods would most probably be an inferior good? A. French wines B. Generic beer C. Theater tickets D. Steak

B. Generic beer

A decrease in supply, holding demand constant, will cause: A. Higher prices and a larger quantity sold B. Higher prices and a smaller quantity sold C. Lower prices and a smaller quantity sold D. Lower prices and a larger quantity sold

B. Higher prices and a smaller quantity sold

Which is of the following statements is correct? A. If demand increases, then price will decrease B. If demand decreases, then price will decrease C. If price increases, then demand will decrease D. If price decreases, then demand will decrease

B. If demand decreases, then price will decrease

Two months ago, the Maryville Shirt company sold 2000 shirts at $30 per shirt. Last month the company raised its price to $35 per shirt and sold 3000 shirts. Evidently the company experienced a(n): A. Decrease in demand B. Increase in demand C. Decrease in supply D. Increase in supply

B. Increase in demand

Suppose that goods A and B are close substitutes. If the price of good A falls, then we would expect an: A. Increase in the demand for A and an increase in the quantity of B demanded B. Increase in the demand for A and a decrease in the quantity of B demanded C. Increase in the quantity of A demanded and a decrease in the demand for B D. Increase in the demand for good A as well as for good B

B. Increase in the demand for A and a decrease in the quantity of B demanded

A government will create a surplus in a market when it: A. Sets a price ceiling above the equilibrium price B. Sets a price floor above the equilibrium price C. Sets a price floor below the equilibrium price D. Sets a price ceiling below the equilibrium price

B. Sets a price floor above the equilibrium price

If the price of gasoline increases significantly, then we'd expect the demand curve for large trucks and SUVs to: A. Shift to the right B. Shift to the left C. Become upward-sloping D. Not shift, but there will be a movement along that demand curve

B. Shift to the left

Which of the following is not a determinant of demand for laptop computers? A. Income of buyers of laptop computers B. The cost of inputs for producing laptop computers C. The prices of related goods such as software and iPads D. Expectations about the future price of laptop computers

B. The cost of inputs for producing laptop computers

In order to derive the market supply curve from individual supply curves, we add up the: A. Various prices that individual sellers are charging for the product B. Various quantities that individual sellers want to sell at specific price levels C. Total number of sellers in the market at a given time D. Costs that all individual sellers incur in producing the product

B. Various quantities that individual sellers want to sell at specific price levels

Which of the following is consistent with the law of demand? A. A decrease in the price of tacos causes sellers to want to sell less B. An increase in the people's craving for pizza causes buyers to buy more pizza C. An increase in the price of hamburgers causes buyers to buy fewer hamburgers D. A decrease in the price of egg rolls causes a decrease in the quantity of egg rolls demanded

C. An increase in the price of hamburgers causes buyers to buy fewer hamburgers

A market for a product reaches equilibrium when: A. The actual quantity bought by buyers equals actual quantity sold by sellers B. The price rises further after there is a surplus C. Buyers intend to buy a quantity equal to the quantity that sellers intend to sell D. Price falls further after there is a shortage

C. Buyers intend to buy a quantity equal to the quantity that sellers intend to sell

An increase in demand for oil along with a simultaneous increase in supply of oil will: A. Decrease price and increase quantity B. Increase price and decrease quantity C. Increase quantity, but whether it increases price depends on how much each curve shifts D. Increase price, but whether it increases quantity depends on how much each curve shifts

C. Increase quantity, but whether it increases price depends on how much each curve shifts

An "increase in the quantity supplied" suggests a: A. Rightward shift of the supply curve B. Movement down along the supply curve C. Movement up along the supply curve D. Leftward shift of the supply curve

C. Movement up along the supply curve

Attaining "allocative efficiency" means that: A. The law of increasing opportunity costs has reached a maximum B. The least costly methods are being used to produce a product C. Resources are being devoted to the production of products most desired by society D. The gap between marginal benefits and marginal costs of the product is bigger

C. Resources are being devoted to the production of products most desired by society

Creating a competitive and legal market for human organs for transplant would make the: A. Supply curve vertical for such organs B. Demand curve vertical for such organs C. Supply curve slope upward to the right for such organs D. Demand curve slope upward to the right for such organs

C. Supply curve slope upward to the right for such organs

There is a surplus of tomatoes in the market. This implies that: A. The current price is set above the equilibrium level B. The price will be rising, as a result C. Supply of tomatoes is more than the demand D. Quantity demanded is more than quantity supplied

C. Supply of tomatoes is more than the demand

Other things being equal, the law of demand suggests that as: A. The demand for iPads increases, this will cause the price to increase B. Income increases, the quantity of iPads demanded will increase C. The price of iPads decreases, the quantity demanded will increase D. The price of iPads decreases, the quantity demanded will decrease

C. The price of iPads decreases, the quantity demanded will increase

As a result of a decrease in the price of online streaming movies, consumers download more movies online and buy fewer DVDs. This is an illustration of: A. Consumer sovereignty B. The income effect C. The substitution effect D. Diminishing marginal utility

C. The substitution effect

A decrease in demand and an increase in supply will: A. Affect price in an indeterminate way and decrease the equilibrium quantity B. Increase price and affect the equilibrium quantity in an indeterminate way C. Decrease price and affect the equilibrium quantity in an indeterminate way D. Increase price and increase the equilibrium quantity

C. decrease price and affect the equilibrium quantity in an indeterminate way.

Which of the following will not cause the supply curve to shift? A. A change in the costs of resources needed to produce the good B. A technological change in the production of the good C. A change in the price of the good D. A change in the prices of other goods that producers could be producing

D. A change in the prices of other goods that producers could be producing

When economists describe "a market," they mean: A. A place where stocks and bonds are traded B. A communication network that allow individuals to keep in touch with each other C. A hypothetical place where the production of goods and services takes place D. A system that allows buyers and sellers to interact with one another

D. A system that allows buyers and sellers to interact with one another

A leftward shift of the supply curve for oil in the United States is most likely to result from: A. A decrease in the fees that oil companies must pay for drilling licenses B. An increase in the subsidy for oil exploration and drilling C. A decrease in the world price of oil D. An increase in the costs of exploration and drilling for oil

D. An increase in the costs of exploration and drilling for oil

If there was initially a shortage in the market for a product, then: A. Sellers will drive the price down B. Sellers will drive the price up C. Buyers will drive the price down D. Buyers will drive the price up

D. Buyers will drive the price up

When economists say that the demand for a product has decreased, they mean that: A. The demand curve has shifted to the right B. The product has become particularly scarce for some reason C. The product has become more expensive and thus consumers are buying less of it D. Consumers are now willing and able to buy less of this product at each possible price

D. Consumers are now willing and able to buy less of this product at each possible price

A television station reports that the price of coffee has increased but the quantity traded in the market has decreased. This situation would be caused by a(n): A. Increase in demand B. Increase in supply C. Decrease in demand D. Decrease in supply

D. Decrease in supply

When economists speak of "demand" in a particular market, they refer to: A. The whole demand curve or schedule B. One point on the demand curve C. One price-quantity combination on the demand schedule D. How much of an item buyers want to buy at a given price

D. How much of an item buyers want to buy at a given price

A higher price reduces the quantity demanded for a product because: A. The purchasing power of individuals increases B. The financial assets of individuals increase C. Individuals will buy more of the product and less of its substitutes D. Individuals can afford less of the product and will switch to substitutes

D. Individuals can afford less of the product and will switch to substitutes

A government-set price floor on a product: A. Does not interfere with the rationing function of price in a market system B. Will drive resources away from the production of the product C. Will attract more resources towards the production of the product D. Is intended to benefit the buyers of the product

D. Is intended to benefit the buyers of the product

For most products, purchases tend to fall with decreases in buyers' incomes. Such products are known as: A. Inferior goods B. Direct goods C. Average goods D. Normal goods

D. Normal goods

Which is most likely to be observed in a community where legal ceilings are imposed on residential rents? A. Poor people will be able to find adequate housing B. Homeowners will reduce their own use of housing space, making more available to others C. Those whose needs for housing are most urgent will be able to obtain the space they want D. People moving into the community will have difficulty locating residential space to rent

D. People moving into the community will have difficulty locating residential space to rent

If the price of Pepsi decreases, other factors constant, then we'd expect to see a consequent shift of the demand curve for: A. Coke to the left B. Coke to the right C. Pepsi to the left D. Pepsi to the right

D. Pepsi to the right

All of the following are assumed to be constant when the supply curve for a product is drawn, except the: A. Price of the product B. State of technology C. Number of producers D. Price of inputs used to make the product

D. Price of inputs used to make the product

Which of the following is a determinant of supply? A. Tastes and preferences B. Price of a complementary good C. Consumer income D. Product taxes and subsidies

D. Product taxes and subsidies

There is a shortage in a market for a product when: A. The current price is higher than the equilibrium price B. Supply is less than demand C. Quantity demanded is less than quantity supplied D. Quantity demanded is greater than quantity supplied

D. Quantity demanded is greater than quantity supplied

Plastics manufacturers can make either toys or plastic containers. If the prices and profitability of plastic toys increase, then the: A. Demand for plastic containers will decrease B. Supply of plastic containers will increase C. Demand for plastic containers will increase D. Supply of plastic containers will decrease

D. Supply of plastic containers will decrease

Which of the following statements about ticket scalping is correct? A. On economic grounds, ticket scalping does more harm than good among those who engage in it B. Ticket scalping occurs when the event organizers set the formal price of the tickets higher than the equilibrium price C. The existence of a scalpers' market could mean that the event sponsors/organizers are getting lower sales revenues that what they could have gotten at equilibrium D. Ticket scalping obviously benefits the sellers/scalpers, but is often harmful to the ones buying the tickets

D. Ticket scalping obviously benefits the sellers/scalpers, but is often harmful to the ones buying the tickets

Which statement is true about supply? A. There is an inverse relationship between price and quantity supplied B. Supply refers to the amount of inventory that sellers have in their warehouses C. As price decreases, producers are willing to put more of the good on the market for sale D. To entice producers to offer more of a good on the market for sale, price must rise

D. To entice producers to offer more of a good on the market for sale, price must rise

If an economy is being "productively efficient," then that means the economy is: A. Producing the products most wanted by society B. Fully employing all economic resources C. Maximizing the returns to factors of production D. Using the least costly production techniques

D. Using the least costly production techniques

In understanding and analyzing "demand," we focus on how much of a product the buyers are: A. Only willing to buy B. Actually buying now and in the recent past C. Able to buy with their given income D. Willing and able to buy

D. Willing and able to buy

If a price ceiling is set below the equilibrium price in a market: A. Rationing will be unnecessary B. Surpluses of the commodity will develop C. The quantity demanded will exceed the quantity supplied D. The quantity supplied will exceed the quantity demanded

C) The quantity demanded will exceed the quantity supplied

Which would be a likely cause of an increase in the demand for pizza? A. A reduced desire for take-out and fast-food dining B. A decrease in the price of hamburger sandwiches C. A decrease in the prices of cheese, pepperoni, and mushrooms D. A health report showing eating pizza reduces stress

C. A decrease in the prices of cheese, pepperoni, and mushrooms

Which statement best illustrates the concept of diminishing marginal utility? A. As one consumes more hamburgers per week, one would be willing to pay a higher price for additional hamburgers B. Some consumers will receive less satisfaction from consuming hamburgers than from consuming fried chicken C. A typical consumer will receive less satisfaction from consuming the fourth hamburger than from the third hamburger in a week D. A decrease in the price of hamburgers will cause consumers to buy more hamburgers because they can afford to buy more

C. A typical consumer will receive less satisfaction from consuming the fourth hamburger than from the third hamburger in a week