Econ Multiple Choice Supply demand

Externality

.......is the external effect of a decision

Types of market failure

1. EXTERNALITIES 2. Over production of DEMERIT GOODS 3. Under production of MERIT GOODS 4. Failure to provide Public Goods 5. Abuse of Monopoly power 6. Factor Immobility (Geographic & Occupational)

The demand curve for a normal good shifts leftward if income ________ or the expected future price ________. A) decreases; falls B) increases; rises C) increases; falls D) decreases; rises

A) decreases; falls

140) A decrease in the price of a game of bowling shifts the A) demand curve for bowling balls rightward. B) supply curve of bowling balls leftward. C) supply curve of bowling balls rightward. D) demand curve for bowling balls leftward

A) demand curve for bowling balls rightward.

42) A reduction in the price of a good A) does not shift the good's demand curve leftward but does decrease the quantity demanded. B) shifts the good's demand curve leftward but does not decrease the quantity demanded. C) shifts the good's demand curve leftward and also decreases the quantity demanded. D) neither shifts the good's demand curve leftward nor decreases the quantity demanded.

A) does not shift the good's demand curve leftward but does decrease the quantity demanded.

42) A reduction in the price of a good A) does not shift the good's demand curve leftward but does increase the quantity demanded. B) shifts the good's demand curve leftward but does not decrease the quantity demanded. C) shifts the good's demand curve leftward and also decreases the quantity demanded. D) neither shifts the good's demand curve leftward nor decreases the quantity demanded.

A) does not shift the good's demand curve leftward but does increase the quantity demanded.

141) If a decrease in the price of gasoline increases the demand for large cars, then A) gasoline and large cars are complements in consumption. B) large cars are an inferior good. C) gasoline is an inferior good. D) gasoline and large cars are substitutes in consumption

A) gasoline and large cars are complements in consumption.

35) Inferior goods are those for which demand increases as A) income decreases. B) income increases. C) the price of a substitute rises. D) the price of a substitute falls

A) income decreases.

34) A normal good is a good for which demand A) increases when income increases. B) decreases when population increases. C) increases when population increases. D) decreases when income increases

A) increases when income increases.

The law of demand states that the quantity of a good demanded varies A) inversely with its price. B) directly with population. C) directly with income. D) inversely with the price of substitute goods.

A) inversely with its price.

43) A decrease in quantity demanded caused by an increase in price is represented by a A) movement up and to the left along the demand curve. B) movement down and to the right along the demand curve. C) leftward shift of the demand curve. D) rightward shift of the demand curve

A) movement up and to the left along the demand curve.

150) A technological improvement lowers the cost of producing coffee. At the same time, consumers' preferences for coffee increase. The equilibrium price of coffee will A) rise, fall, or stay the same, depending on the relative size of the shifts in the demand and supply curves. B) remain the same. C) fall. D) rise

A) rise, fall, or stay the same, depending on the relative size of the shifts in the demand and supply curves.

145) The price of jet fuel falls. This fall shifts the A) supply curve of airplane trips rightward. B) demand curve for airplane trips leftward. C) demand curve for airplane trips rightward. D) supply curve of airplane trips leftward.

A) supply curve of airplane trips rightward.

157) Walkmans play cassette tapes. Producers of Walkmans expect that a new technology for producing CD players will be available next year. Walkman Watch asks you to predict the effect of the new technology on the market for Walkmans. You predict that A) the demand curve for Walkmans will shift leftward and the price will fall. B) the price will rise, and so will the quantity demanded. C) the price will fall, and the quantity demanded will increase. D) the demand curve for Walkmans will shift rightward and the price will rise.

A) the demand curve for Walkmans will shift leftward and the price will fall.

Each point on the demand curve reflects A) the highest price consumers are willing and able to pay for that particular unit of a good. B) the highest price sellers will accept for all units they are producing. C) the lowest-cost technology available to produce a good. D) all the wants of a given household.

A) the highest price consumers are willing and able to pay for that particular unit of a good.

A complement is a good A) used in conjunction with another good. B) used instead of another good. C) of lower quality than another good. D) of higher quality than another good

A) used in conjunction with another good.

Which of the following is consistent with the law of demand? A) A decrease in the price of a gallon of milk causes a decrease in the quantity of milk demanded. B) An increase in the price of a soda causes a decrease in the quantity of soda demanded. C) An increase in the price of a tape causes an increase in the quantity of tapes demanded. D) A decrease in the price of juice causes no change in the quantity of juice demanded.

B) An increase in the price of a soda causes a decrease in the quantity of soda demanded.

44) A change in which of the following alters buying plans for cars but does NOT shift the demand curve for cars? A) a 10 percent decrease in the price of car insurance B) a 20 percent increase in the price of a car C) a 5 percent increase in people's income D) an increased preference for walking rather than driving

B) a 20 percent increase in the price of a car

152) CD players rise in price while pre-recorded audio tapes fall in price. The combined effect of these two changes is to create A) a leftward shift of the demand curve for portable audio tape players, such as a Walkman. B) a rightward shift of the demand curve for portable audio tape players, such as a Walkman. C) a rightward shift of the supply curve for portable audio tape players, such as a Walkman. D) a leftward shift of the supply curve of portable audio tape players, such as a Walkman.

B) a rightward shift of the demand curve for portable audio tape players, such as a Walkman.

The law of demand implies that, other things remaining the same, A) as the demand for cheeseburgers increases, the price of a cheeseburger will fall. B) as the price of a cheeseburger rises, the quantity of cheeseburgers demanded will decrease. C) as income increases, the quantity of cheeseburgers demanded will increase. D) as the price of a cheeseburger rises, the quantity of cheeseburgers demanded will increase

B) as the price of a cheeseburger rises, the quantity of cheeseburgers demanded will decrease.

38) An inferior good is a good for which demand A) increases when population increases. B) decreases when income increases. C) decreases when population increases. D) increases when income increase

B) decreases when income increases.

41) A change in the price of a good A) shifts the good's demand curve but does not cause a movement along it. B) does not shift the good's demand curve but does cause a movement along it. C) shifts the good's demand curve and also causes a movement along it. D) neither shifts the good's demand curve nor causes a movement along it

B) does not shift the good's demand curve but does cause a movement along it.

146) If there is surplus of a good, then the quantity demanded ________ the quantity supplied and the price will ________. A) is less than; rise B) is less than; fall C) is greater than; fall D) is greater than; rise

B) is less than; fall

147) Pizza and hamburgers are substitutes for consumers. A fall in the price of a pizza ________ the price of a hamburger and ________ the quantity of hamburgers. A) raises; decreases B) lowers; decreases C) raises; increases D) lowers; increases

B) lowers; decreases

The law of demand states that A) a decrease in the price of a good shifts the demand curve leftward. B) other things remaining the same, the higher the price of a good, the smaller is the quantity demanded. C) other thing remaining the same, the higher the price of a good, the larger is the quantity demanded. D) an increase in the price of a good shifts the demand curve leftward.

B) other things remaining the same, the higher the price of a good, the smaller is the quantity demanded

The demand for a good increases when the price of a substitute ________ and also increases when the price of a complement ________. A) falls; falls B) rises; falls C) rises; rises D) falls; rises

B) rises; falls

142) Gruel is an inferior good. Hence, a decrease in people's incomes A) shifts the supply curve of gruel leftward. B) shifts the demand curve for gruel rightward. C) shifts the demand curve for gruel leftward. D) decreases the quantity of gruel supplied

B) shifts the demand curve for gruel rightward.

The law of demand states that, other things remaining the same, the higher the price of a good, the A) smaller is the demand for the good. B) smaller is the quantity of the good demanded. C) larger is the quantity of the good demanded. D) larger is the demand for the good.

B) smaller is the quantity of the good demanded.

A drop in the price of a compact disc shifts the demand curve for prerecorded tapes leftward. From that you know compact discs and prerecorded tapes are A) normal goods. B) substitutes. C) inferior goods. D) complements.

B) substitutes.

Which of the following influences people's buying plans and varies moving along a demand curve? A) preferences B) the price of the good C) income D) the prices of related goods

B) the price of the good

Private Benefit + External Benefit = ?

Social Benefit

Private Cost + External Cost = ?

Social Cost

Private benefits

are the benefits received by those directly involved in the decision to consume or produce a product e.g. revenues earned, savings to business

Private costs

are the costs borne by those directly involved in the decision to consume or produce a product e.g. cost of borrowing, cost of labor

Every decision has ..... and......

costs and benefits

To work out the profit, private costs are reduced.......

from private benefits. This gives the net private benefit or the profit

The undesirable effect is called a .......

negative externality or an external cost

PES = 0

perfectly inelastic

The favorable effect is called a.......

positive externality or an external benefit

Conflict of interest may occur between stakeholders likely to .................from an activity and stakeholders who will suffer from its externalities

receive positive benefits

Conflict of interest may occur between stakeholders likely to receive positive benefits from an activity and stakeholders who will.......................

suffer from its externalities

Social benefits include..........................

the private and external benefits resulting from a particular business activity e.g. jobs created, rise in tax revenue for government

Social costs are................

the private costs plus the external costs e.g. jobs lost, increased traffic

148) How does an unusually warm winter affect the equilibrium price and quantity of gloves? A) It lowers both the price and the quantity. B) It raises both the price and the quantity. C) It raises the price and decreases the quantity. D) It lowers the price and increases the quantity

A) It lowers both the price and the quantity.

151) Which of the following definitely causes a fall in the equilibrium price? A) a decrease in both demand and supply B) an increase in demand combined with a decrease in supply C) a decrease in demand combined with an increase in supply D) an increase in both demand and supply

A) a decrease in both demand and supply

40) In 2000 there were 200,000 gas grills demanded at a price of $500. In 2001 there were more than 200,000 gas grills demanded at the same price. This increase could be the result any of the following EXCEPT A) an increase in the supply of gas grills. B) an increase in population. C) an increase in income if gas grills are a normal good. D) a fall in the price of natural gas, a complement for a gas grill

A) an increase in the supply of gas grills.

The law of demand implies that if nothing else changes, there is A) a linear relationship between price of a good and the quantity demanded. B) a positive relationship between the price of a good and the quantity demanded. C) a negative relationship between the price of a good and the quantity demanded. D) an exponential relationship between price of a good and the quantity demanded.

C) a negative relationship between the price of a good and the quantity demanded.

Most goods A) have vertical demand curves. B) have vertical supply curves. C) are normal goods. D) are complements to each other.

C) are normal goods.

Which of the following pairs of goods are most likely substitutes? A) compact discs and compact disc players B) lettuce and salad dressing C) cola and lemon lime soda D) peanut butter and gasoline

C) cola and lemon lime soda

A normal good is a good for which A) there are very few complements. B) demand decreases when income increases. C) demand increases when income increases. D) there are few substitutes

C) demand increases when income increases.

37) If a good is an inferior good, then purchases of that good will decrease when A) the demand for it increases. B) population increases. C) income increases. D) the price of a substitute rise

C) income increases

156) The wage rate paid by Walkman producers falls and at the same time the price of raw materials used in the production of Walkmans rises. You predict that the supply curve of Walkmans will A) surely shift leftward. B) surely become steeper. C) shift either leftward or rightward. D) surely shift rightward

C) shift either leftward or rightward.

143) An unusually warm winter A) shifts the supply curve of gloves leftward. B) shifts the demand curve for gloves rightward. C) shifts the demand curve for gloves leftward. D) shifts the supply curve of gloves rightward

C) shifts the demand curve for gloves leftward.

The law of demand implies that demand curves A) shift leftward whenever the price rises. B) shift rightward whenever the price rises. C) slope down. D) slope up.

C) slope down.

People buy more of good 1 when the price of good 2 rises. These goods are A) normal goods. B) complements. C) substitutes. D) inferior goods.

C) substitutes.

154) Wages for workers producing Walkmans and similar products will rise next year. Walkman Watch asks you to predict the effect of this change in next year's market for Walkmans. You predict that the major effect will be that the A) demand curve for a Walkman will shift leftward. B) supply curve for a Walkman will shift rightward. C) supply curve for a Walkman will shift leftward. D) demand curve for a Walkman will shift rightward

C) supply curve for a Walkman will shift leftward.

A substitute is a good A) of higher quality than another good. B) that is not used in place of another good. C) that can be used in place of another good. D) of lower quality than another good.

C) that can be used in place of another good.

If income decreases or the price of a complement rises, A) there is an upward movement along the demand curve for the good. B) there is a downward movement along the demand curve for the good. C) the demand curve for a normal good shifts leftward. D) the demand curve for a normal good shifts rightward

C) the demand curve for a normal good shifts leftward.

If income increases or the price of a complement falls, A) the supply curve of a normal good shifts leftward. B) the supply curve of a normal good shifts rightward. C) the demand curve for a normal good shifts rightward. D) the demand curve for a normal good shifts leftward

C) the demand curve for a normal good shifts rightward.

144) A rise in the price of a good causes producers to supply more of the good. This statement illustrates A) the nature of an inferior good. B) the law of demand. C) the law of supply. D) a change in supply

C) the law of supply.

153) Walkman Watch expects a recession to occur. Knowing that a Walkman is a normal good, you predict that the demand for a Walkman A) will increase. B) might increase or decrease. C) will decrease. D) will remain unchanged.

C) will decrease.

...........may occur between stakeholders likely to receive positive benefits from an activity and stakeholders who will suffer from its externalities

Conflict of interest

45) Which of the following would NOT shift the demand curve for turkey? A) a change in tastes for turkey B) a decrease in the price of ham C) an increase in income D) a change in the price of a turkey

D) a change in the price of a turkey

139) A consumer might consider in-line skates and elbow-pads to be A) unrelated goods. B) substitutes. C) products with upward sloping demand curves. D) complements

D) complements

Suppose people buy more of good 1 when the price of good 2 falls. These goods are A) substitutes. B) inferior. C) normal. D) complements

D) complements

36) By definition, an inferior good is a A) normal substitute good. B) good for which demand decreases when its price rises. C) want that is not expressed by demand. D) good for which demand decreases when income increases

D) good for which demand decreases when income increases

Normal goods are those for which demand decreases as A) the price of a substitute falls. B) the price of a complement falls. C) the good's own price rises. D) income decreases

D) income decreases

As the opportunity cost of a good decreases, people buy A) more of that good but less of its complements. B) less of that good and also less of its complements. C) less of that good but more of its complements. D) more of that good and also more of its complements.

D) more of that good and also more of its complements.

46) When we say demand increases, we mean that there is a A) movement to the right along a demand curve. B) movement to the left along a demand curve. C) leftward shift of the demand curve. D) rightward shift of the demand curve.

D) rightward shift of the demand curve.

155) Producers of Walkmans are able to lower the wage rate that they pay to their workers. Walkman Watch asks you to predict the effect on the Walkmans. You predict that the A) quantity supplied will decrease. B) price will rise. C) supply curve will shift leftward. D) supply curve will shift rightward

D) supply curve will shift rightward

People come to expect that the price of a gallon of gasoline will rise next week. As a result, A) next week's supply of gasoline decreases. B) the price of a gallon of gasoline falls today. C) today's supply of gasoline increases. D) today's demand for gasoline increases

D) today's demand for gasoline increases