Econ Quiz

Leather and beef are jointly produced such that an increase in the production of one results in an equal increase in the production of the other. An increase in the demand for leather will most likely cause

a decrease in the price of beef

Which of the following would most likely result in a decrease in the equilibrium price of oranges? A The weather during this orange-growing season is not as good as it was last year. B The price of apples, a substitute for oranges, is higher this year than last year. C New studies suggest that oranges contain traces of cancer-causing substances due to pesticide residue. D A tree-killing fungus spreads through orange orchards across the country. E Firms in the orange industry launch an effective advertising campaign.

C

Assume the market for a good is in equilibrium. An increase in the market supply of the good will result in

a surplus at the original price of the good, which causes the market price to decrease

If cotton is used to produce towels, an increase in the price of cotton will result in which of the following changes in the towel market? A A decrease in the demand for towels, which leads to a shortage of towels followed by upward pressure on the price of towels B A decrease in the demand for towels, which leads to a surplus of towels followed by downward pressure on the price of towels C A decrease in the supply of towels, which leads to a shortage of towels followed by upward pressure on the price of towels D An increase in the supply of towels, which leads to a surplus of towels followed by downward pressure on the price of towels E An increase in both the demand and supply of towels, which leads to a surplus of towels followed by upward pressure on the price of towels

C

The difference between what consumers are willing to pay for units of a good and the price consumers actually pay for units of the good is called

Consumer surplus

A decrease in raw material prices will change the equilibrium price and quantity in a market in which of the following ways?

Price-Decrease Quantity- Increase

A decrease in the supply of oranges raised the price of oranges in the market. The substitution effect of the price increase will motivate consumers to

increase the quantity of other fruits demanded and decrease the quantity of oranges demanded

Consumer surplus in a market for a good exists because

some consumers would be willing to pay more than the equilibrium price of the good

Consumer surplus exists because of the

willingness of some consumers to pay a price higher than the market price for some units of a good

If a normal good is produced in a competitive market, which of the following combination of events could cause the price of the good to increase and the quantity to decrease?

An increase in the average income of consumers and an increase in the price of a variable input

In a perfectly competitive market, which shift in the supply and demand curves will definitely cause both equilibrium price and quantity to decrease?

Supply Curve-No Shift Demand Curve- Shift to the left

Assume that the market for lemonade is perfectly competitive and currently in equilibrium. Lemons are key ingredients in lemonade. If the price of lemons decreases, how will the lemonade market be affected?

Supply will shift rightward, decreasing the equilibrium price and increasing the equilibrium quantity of lemonade.

The graph above shows the supply and demand curves for artichokes. The surgeon general announces that eating an artichoke a day dramatically reduces one's likelihood of developing cancer. Simultaneously an infestation of the artichoke weevil severely damages the crop. Which of the following will definitely occur as a result?

The price of artichokes will increase.

The market for goldfish is perfectly competitive. From year 1 to year 2, both the price and the quantity of goldfish sold increase. This is most likely caused by

an increase in the demand

Which of the following situations would necessarily lead to an increase in the price of peaches? A The wage paid to peach farm workers rises at the same time that medical researchers find that eating peaches reduces the chances of a person's developing cancer. B While the wages of peach farm workers fall drastically, the peach industry launches a highly successful advertising campaign for peaches. C A breakthrough in technology enables peach farmers to use the same amount of resources as before to produce more peaches per acre. D The prices of apples and oranges fall. E Weather during the growing season is ideal for peach production.

A

Assume that the demand for a certain good is perfectly inelastic and the supply curve of the good is upward sloping. Which of the following occurs in the market for the good if the price of an input used to produce the good increases? A A decrease in both the quantity supplied and the equilibrium amount consumed B A decrease in the quantity supplied and an increase in the equilibrium price C A decrease in the supply and an increase in the equilibrium price D A decrease in both the demand and the equilibrium amount consumed E A decrease in both the quantity demanded and the equilibrium price

C

The difference between the price a consumer would be willing to pay for a cone of ice cream and the actual market price that she pays gives a measure of her

Consumer surplus

Assume that the government increases the unit excise tax on gasoline suppliers and also that people commute longer distances to work as more houses are built in city suburbs. As a result, the equilibrium price and quantity of gasoline will most likely change in which of the following ways?

Price- Increase Quantity- Indeterminate

Which of the following best illustrates the concept of consumer surplus? A A thirsty athlete pays $0.85 for a cold drink when she would have gladly paid $1.50 for the drink. B An individual who is willing to accept a job at $7.50 per hour is offered $7.00 per hour. C An individual pays the sale price of $15.00 for the same shirt that the individual refused to purchase earlier at $18.00. D An individual finds that the price of artichokes, a food she dislikes, has been reduced by 50 percent. E A wood-carver has a marginal cost of $5.00 for a unit of output, but sells that unit at $6.00.

A

If shirts and ties are complements and if the price of shirts increases due to an increase in the price of cotton, which of the following is most likely to occur in the market for ties in the short run? A The equilibrium price and quantity of ties will increase. B The equilibrium price and quantity of ties will decrease. C The equilibrium price of ties will increase and the equilibrium quantity will decrease D The supply of ties will increase. E The demand for ties will increase.

B

The American Heart Association has just issued a report warning consumers about the negative health effects of eating beef. Which of the following changes in the beef market is most likely to occur as a result? A The supply curve will shift to the left, increasing the price of beef. B The demand curve will shift to the left, decreasing the price of beef. C The demand curve will shift to the right, increasing the price of beef. D Neither the supply nor demand curve will shift; only quantity will increase as price decreases. E Neither the supply nor demand curve will shift; only quantity will decrease as prices increases.

B

Which of the following is most likely to occur when a competitive market adjusts from one equilibrium to another? A A decrease in demand will cause the equilibrium price, equilibrium quantity, and total surplus to increase. B An increase in demand will cause the equilibrium price, equilibrium quantity, and producer surplus to increase. C A decrease in supply will cause the equilibrium price to decrease, the equilibrium quantity to increase, and consumer surplus to decrease. D An increase in supply will cause the equilibrium price to increase, the equilibrium quantity to decrease, and consumer surplus to increase. E A decrease in supply and increase in demand will cause the equilibrium quantity to decrease but the equilibrium price to be indeterminate.

B

Which of the following would cause the equilibrium price of good X to increase? A Producers of good X find a new technology that reduces the cost of producing X. B The price of an essential input in the production of good X increases. C Goods X and Y are complements, and the government imposes a tax on good Y. D Good X is a normal good, and the government increases income taxes by 3%. E Good X is an inferior good, and the government decreases income taxes by 10%.

B

Assume that popcorn and movie attendance are complements and that Salty Concession grows corn suitable for popping. Mr Concession will most likely sell a greater quantity of popping corn at a higher price if which of the following occurs? A The wages of farm workers and movie theater employees increase. B A technological improvement results in less expensive and more efficient harvesting of corn. C The introduction of new fat-free potato chips provides new competition in the snack-food market. D The release of three summer movies sets records for movie attendance E New government regulations force movie theaters to hire more security guards at each theater.

D

Assume that consumers consider potatoes to be an inferior good, but consider rice to be a normal good. An increase in consumers' incomes will most likely affect the equilibrium price and quantity of potatoes and rice in which way?

Potatoes: Price-Decrease Quantity-Decrease Rice: Price- Increase Quantity-Increase

If an unusually cold summer destroyed a large portion of the bee population, the equilibrium price and quantity of honey produced by bees will most likely change in which of the following ways?

Price- Increase Quantity- Decrease

If both supply and demand for wheat increase, the equilibrium price and quantity of wheat will most likely change in which way?

Price-Indeterminate Quantity- Increase

If growing corn becomes more profitable than growing wheat, which of the following will occur?

The price of corn will increase

Assume that the market demand for a good is perfectly inelastic, the market supply for the good is perfectly elastic, and the market is in equilibrium. If there is a decrease in the price of a key input used in the production of the good, which of the following will occur?

There will be no change in the producer surplus.

In the absence of market failures, a perfectly competitive market equilibrium is efficient for which of the following reasons? A Consumer surplus is maximized and consumers are better off relative to producers. B Producer surplus is maximized and producers are better off relative to consumers. C Total economic surplus is maximized and all mutually beneficial transactions are exhausted. D Total economic surplus is distributed equally between producers and consumers. E The quantity of output is produced at a constant cost so that every consumer pays the same price.

C

Last year 17 million tons of beans were sold for $300 per ton. This year 17 million tons of beans were sold for $285 per ton. Which change in demand and supply could have caused this outcome?

Demand- Decrease Supply- Increase

Which change in the demand for and the supply of a good will necessarily result in an increase in both the equilibrium price and quantity of the good in a market?

Demand- Increase Supply- No change

Which change in the demand for and the supply of a good would necessarily lead to a decrease in the equilibrium quantity of the good in the market in the short run?

Demand- Decrease Supply- Decrease

Given an increase in the price of material K— which is an input used to produce good X— and an increase in the price of good Y— which is a substitute for good X— which of the following will definitely occur? A The equilibrium price of good X will decrease. B The equilibrium price of good X will increase. C The equilibrium quantity of good X will be unaffected. D The equilibrium quantity of good X will increase. E The equilibrium quantity of good X will decrease.

B

Assume that the market for tomatoes is in equilibrium at a price of $35 per bushel. If the demand for tomatoes decreases, which of the following will occur? A A shortage at $35, creating an increase in price, leading to an increase in quantity supplied B A shortage at $35, leading to an increase in supply and a decrease in price C A surplus at $35, leading to a decrease in price and in quantity supplied D A surplus at $35, leading to a decrease in supply and an increase in price E A surplus at $35, leading to an increase in price and a decrease in quantity demanded

C

Consumer surplus is defined as

the difference between the value that consumers place on a good and the price they pay