Exam #1

For a market to reach equillibrium:

1. consumers need information abut different suppliers' prices 2. firms must be able to monitor inventories 3. firms must be able to change the prices of their goods

In the market for eggs, there is an improvement in packaging technology that leads to fewer broken eggs, and there is also an increase in the price of bacon and sausage (complementary goods) 1-Equilibrium price: 2-Equilibrium quantity:

1. decrease 2. cannot be determined

The role of government in market economies includes:

1. defining and enforcing property rights 2. enforcing contracts 3. punishing dishonest behavior 4. determining rules of commerce

Market disequilibrium results in:

1. either a shortage or a surplus 2. scarcity of resource 3. inefficiency in the production of a good or service

The factors that cause a shift in the supply curve include:

1. expectations about market conditions 2. resource costs and availability 3. the number of sellers 4. technology

When the supply curve shifts to the right,

1. it is called an increase in supply 2. more of a good, service, or resource is produced at all prices

Which of the following are true??

1. A decrease in price is detrimental to consumers since less will be produced 2. A decrease in price is beneficial to consumers because they do not have to pay as much

Which of the following statements are true?

1. An increase in demand shifts the demand curve to the right 2. A decrease in demand shifts the demand curve to the left

For inferior goods,

1. An increase in income decreases demand. 2. A decrease in income increases demand.

Shifts in supply:

1. Can be parallel 2. Occur when there is a change in the nonprice determinants of supply

Which of the following pairs of good represent complements?

1. Guitars and guitar strings 2. Peanut butter and jelly

When the supply curve shifts to the left,

1. Less of a good, service, or resources is produced at all prices 2. It is called a decrease in supply

A tax on demanders:

1. May be included in the purchase price 2. May be paid in addition to the purchase price at the point of sale

An increase in supply occurs when:

1. More of a good, service, or resource is supplied at every price 2. The supply curve shifts to the right

Assume you buy three goods: hamburgers, French fries, and pizza. You always prefer your hamburger with French fries. Also, you consume either hamburgers and French fries together or pizzas at a time. If the price of hamburgers increases, the demand for:

1. Pizza increases 2. French fries decreases

When graphing a supply curve,

1. Price falls on the y-axis 2. Quantity supplied falls on the x-axis

The income effect:

1. Refers to the change in the demand for a good caused by a change in a consumer's purchasing power. 2. Works in the same direction as the substitution effects for normal goods.

Payments (subsidies) or charges (taxes) initially affect the:

1. Supply of output in the market place 2. Quantity traded and the market price of goods and services

Which of the following are non-price determinants of demand?

1. Tastes and preferences 2. Consumer expectations 3. Number of buyers

Two different ways in which we usually express information about the demand for a good, service, or resource are:

1. The demand schedule 2. The demand curve

If the production of a good involves a lower cost:

1. The opportunity cost of producing the good (in terms of other goods that could have been produced) decreases. 2. The opportunity cost of producing other goods (in terms of the amount of this good that could have been produced) increases.

Which of the following are non-price determinants of demand?

1. The prices of complementary goods 2. The prices of substitutes goods

The three main reasons why demand curves are downward-slopping are:

1. The substitution effect 2. Diminishing marginal utility 3. The income effect

A decrease in supply causes:

1. a decrease in the market price 2. the supply curve in the market price

_____ and ____ are usually the result of price controls that do not allow markets to adjust or of unforeseen events that disrupt supply.

1. a shortage 2. a surplus

All other factors held constant, when a non-price determinant of supply changes:

1. an entire new supply relationship is created2. the market adjusts to a new equilibrium price and quantity3. supply curve shifts to the left or right

Other factors remaining constant, if a non-price determinant of supply changes:

1. an entirely new supply relationship is created 2. the supply curve shifts to the left or right 3. the market will not be in equilibrium

Taxes:

1. change market outcomes 2. change the prices that buyers and sellers face

Resources are:

1. land, labor, capital, and entrepreneurial ability 2. factors of production 3. inputs used to produce goods and services

Taxes are generally imposed to:

1. raise revenue to fund government activities 2. discourage people from consuming a particular good or service

Better technology can:

1. result in an increase in supply in the market 2. significantly decrease the cost of producing a good

The two different ways of expressing information about the supply of a good, service, or resource are:

1. supply schedule 2. supply curve

If a nonprime determinant of demand changes:

1. the entire demand curve shifts to the left or right 2. an entirely new demand relationship is created

When a nonprice determinant of supply changes:

1. the entire supply relationship changes 2. the supply curve shifts either to the right or to the left

A change in a nonprime determinant of supply will:

result in a shift of the supply curve

The quantity traded times the tax equals the tax _____.

revenue

A tabular representation of the relationship between the price of a good, service, or resource and the quantities producers are willing and able to supply is known as the supply ______.

schedule

A good once unaffordable to most people can become an item that almost everyone owns when

the market supply increases over time

When the price of smart phones increases:

the quantity of smart phones supplied will increase.

A change in the price of a good will affect:

the quantity of that good supplied to the market

When the price of a good, service, or resource decreases,

the quantity supplied decreases

The quantity traded times the tax equals:

the tax revenue from a tax

When graphing a demand curve, we place price on the ____ and quantity demanded on the ____.

vertical axis; horizontal axis

When both demand and supply change:

we can always determine with confidence how price or quantity will change, but not both.

If tomatoes can be planted more, closely together:

1. the supply of tomatoes will increase 2. the supply curve will shift to the right 3. each acre of land can produce more tomatoes than before

Which of the following is a reason for the government of a country to impose excise taxes on cigarettes?

1. to discourage smoking 2. to increase government revenue

The change in the quantity of a good, service, or resource that consumers, firms, and governments are willing and able to buy due to a change in its price is called:

A change in the quantity demanded

When the demand curve for a good shifts to the left, it implies:

A decrease in the demand for the good.

The demand curve for a good displays:

All the information found in the demand schedule for the good.

When the participants of a market that is in disequilibrium respond to rising prices, the market will return to equilibrium, resulting in:

An elimination of a shortage

Which of the following occurs when the price of a good increases?

An increase in the quantity supplied

When a shortage exists in a competitive market, the price provides incentives for:

Buyers to decrease the quantity of a good or service purchase in the market

The demand curve:

Can be a straight line or a nonlinear curve

A movement along a demand curve is called ____, and a shift in a demand curve is called ____.

Change in quantity demanded; change in demand

In a market:

Competition between suppliers tends to drive prices down, and competition between buyers tend to drive prices up.

The price of a ____ of a good is one of the non-price determinants of its demand.

Complement

Goods, services, or resources that are consumed together are called_____ (complements/substitutes).

Complements

When a demand curve shifts either to the right or to the left, we say there has been a change in _____.

Demand

When income changes, _______ can either increase or decrease.

Demand

When the price of a related good, such as a substitute or a complement, changes,

Demand can increase or decrease

When a shortage is eliminated, the market returns to _____ where the quantity supplied equals the quantity demanded.

Equilibrium

A surplus is sometimes called:

Excess supply

One of the determinants of demand is the anticipation of ____ prices by consumers. (future/current)

Future

As a winter storm approaches, we would expect that the demand for:

Generators increases

A tangible product that consumers, firms, or governments wish to purchase is a:

Good

Market supply is the _____ summation of the quantities supplies by individuals, firms, states, or even nations at each price over a fixed period.

Horizontal

When graphing a demand curve, we always place quantity demanded on the _____ (horizontal/vetical) axis.

Horizontal

When producers expect lower future prices, current supply _____.

Increases

Increasing the quantity of wheat supplied requires that farmers incur increasing costs for water, fertilizer, and other resources, thus _____ (increasing/decreasing) the opportunity cost of growing wheat.

Increasing

Taxes are generally collected from:

Individuals and firms

For _____ goods, an increase in income decreases demand and a decrease in income increases demand.

Inferior

If income increases, the demand for ______ good decreases.

Inferior

Technology refers to:

Knowledge, inventions, and innovations that can potentially increase resource productivity.

A change in demand:

Leads to a shift of the demand curve.

A _____ refers to a group of buyers and sellers who exchange one specific good, service, or resource, not necessarily at a specific place.

Market

Any place where, or mechanism by which, buyers and sellers interact to trade goods, services, or resources is a _____.

Market

The horizontal summation of the quantities supplied by individuals, firms, states, or even nations at each price over a fixed time period represents the ______ ______ curve.

Market Supply

The lowest wage that firms can legally pay employees in the labor market is the _____ wage.

Minimum

Demand will increase if there are:

More buyers

Identify which of the following is an example of shortage.

No snow shovels are available when a blizzard is forecast

For _____ goods, an increase in income increases demand and a decrease in income decreases demand.

Normal

If demand shifts to the right when income increases, we can conclude that the good is:

Normal good

Firms will be willing and able to produce more output only when prices rise because the ______ cost of producing is rising.

Opportunity

By holding all other characteristics that could affect consumptions constant, we are able to isolate and evaluate the effect of a change is _____ on quantity demanded.

Price

The income effect refers to the change in purchasing power when the ____ changes.

Price

When graphing a demand curve, we always place ____ on the vertical axis.

Price

When graphing a demand curve, we place ____ on the y-axis and ____ on the x-axis.

Price; quantity demanded

Any change in technology and the availability and the quality or resources are likely to affect the _____ that producers are willing and able to supply at every price.

Quantity

When we talk about the supply of a good, we are referring to the:

Quantity of the good producers are willing and able to supply at a variety of different prices over a fixed time period, all else held constant.

An example of a price ceiling is:

Rent control

Inputs used to produce goods and services are:

Resources

Price floors are designed to make sure that:

Sellers receive a minimum price that is greater than what would be available at the market equilibrium

To simplify analysis in economics, supply curves are often drawn as:

Sloping lines

Taxes and ____ after the costs or benefits of producing good and services.

Subsidies

A payment made by the government that does not necessarily require and exchange of economic activity in return is called a:

Subsidy

If the price of chicken increase and, as a result, you buy more pork and less chicken (even though the price of pork hasn't changed), then chicken and pork are

Substitutes

When more or less of a good, service, or resource is supplied a every price, there is:

a shift of the supply curve to the right or left

A market is:

a system where buyers and sellers interact to trade goods, services, or resources.

The demand for a good changes when the non-price ____ of demand changes.

determinant

The supply curve shifts in response to changes in non-price _____ of supply.

determinants

The price of a good and the quantity supplied are:

directly related

A tax:

does not change any nonprime determinant of demand of a good

The quantity supplied of a good, service, or resource equals the quantity demanded at the _____ quantity.

equilibrium

A shortage is sometimes called

excess demand

An $1.01 tax on every pack of cigarettes sold, is an example of a(n) ______ tax.

excise

Consider the market for labor. ______ are the demanders of labor, and ______ are the suppliers of labor.

firms; workers

Incentives faced by both buyers and sellers change in the face of a price ______.

floor

The non-price determinants or other factors that affect demand are:

held constant for any given demand curve

The non-price determinants or other factors that affect supply are:

held constant for any given supply curve

Shortages and surpluses are represented by the:

horizontal distance between the quantity demanded and the quantity supplied.

The role of government in market economies includes all the following except:

identifying new markets

A tax on producers ______ (increases/decreases) the cost of producing.

increase

When a shortage occurs in a competitive market, there is an incentive for suppliers to ______ (increase/decrease) the quantity of a good or service supplied to the market.

increase

A tax ______ (increases/decreases) the cost of goods sold.

increases

A tax on producers:

increases the cost of goods sold and shifts the supply curve to the left

A characteristics of demand for a good, service, or resource other than its own market price is:

a non-price determinant of demand

The supply curve will shift to the right or left when:

a non-price determinant of supply changes

Which of the following will shift the demand curve for hamburgers?

1. A change in the price of submarine sandwiches, a substitute 2. A change in the price of French fries, a complement

For normal goods

1. A decrease in income decreases demand 2. An increase in income increases demand

In the market for new automobiles (a normal good), there is a decrease in the average incomes earned by the general population, but there is an increase in the wages paid to automobile workers. 1-Equilibrium price: 2-Equilibrium quantity:

1- cannot be determined 2- decrease

In the market for avocados, there is a change in preferences in favor of using guacamole instead of salsa, and changes in climate result in an exceptionally large harvest of avocados this year. 1-Equilibrium price: 2-Equilibrium quantity:

1- cannot be determined 2- increase

______ refers to the quantity of output firms are willing and able to provide to the market at different prices, all else held constant.

Supply

When the number of sellers increases,

Supply increases

The supply schedule displays the supply in a ______ form, showing the different prices and their corresponding quantities supplied.

Table

When more of a good is consumed at all prices, we say that:

The demand for the good has increased.

When considering how changes in tastes and preferences or demographics affect demand, we tend to evaluate:

The entire market

The overall or total demand for a good, service, or resource is:

The market demand

Other things held constant, the demand curve will shift when:

The non-price determinants of demand change

When the number of sellers in a market changes,

The supply curve shifts

When drawing a supply curve, we always place price on the _____ axis and quantity on the _____ axis.

Vertical; Horizontal

When we graph the relationship between price and quantity demanded:

We call the result a demand curve, but demand curves are often drawn as straight lines.

The income effect, the substitution effect, and diminishing marginal utility explain:

Why the quantity demanded will fall when prices rise.

A change in quantity demanded is caused by:

a change in a good's own price.

A change in the quantity demanded at each price is:

a change in demand

An excise tax is a tax on:

a good or service that depends on the units sold.

A decrease in demand is shown by:

a leftward shift of the demand curve.

A binding price floor is:

a minimum legal price set above the equilibrium price

The demand schedule represents the relationship between the price of a good, service, or resource

and the quantity that individuals and firms are willing and able to buy, all else held constant, in table form.

Shortages:

are usually the product of price controls

According to the principle of diminishing marginal productivity:

at least one input of production is fixed, the marginal productivity of additional variable resources will eventually fall, all else held constant.

A maximum legal price that is set below the equilibrium price is a _____ price ceiling.

binding

The change in price or quantity will be indeterminate when:

both demand and supply change

We can determine how price or quantity will change, but not both, when:

both demand and supply change

The taxes and subsidies that are under consideration in analyzing supply applies to _______ (business/consumers).

businesses

A surplus occurs when:

quantity demande < quantity supplied

Non-price determinants are held ______ for any given supply curve.

constant

A tax paid at the time of sale is explicitly paid by:

consumers

The supply ______ displays in a graph the information found in the supply schedule.

curve

When less of a good, service, or resource is supplied at every price, there is a:

leftward shift of the supply curve

In economics, supply and demand curves that are neither perfectly elastic nor perfectly inelastic are often illustrated as:

linear curves

When a market is in equilibrium, the price that consumers pay and that producers receive exactly balances the _____ benefit and marginal cost of consuming and producing a good or service.

marginal

The _______ demand represents the horizontal summation of individual demand curves.

market

Sellers are:

market participants who are willing and able to sell goods, services, or resources

The equilibrium price is also known as the:

market-clearing price

The _____ wage is the most common form of price floor.

minimum

When we say in economics that there is an increase in supply, we mean that:

more output is being supplied at every price, all else held constant.

A minimum legal price that is not set above the equilibrium price is a ____ price floor.

non-binding

Along a demand curve, all else is held constant except the good's own ____.

price

Other factors remaining constant, when the ______ of a good increases, the quantity supplied increases.

price

Other things remaining constant, when a good's ______ falls, its quantity supplied falls.

price

When the ______ of a good changes, the quantity demanded changes.

price

A shortage persists when:

price is not allowed to adjust upward.

The anticipated future outcomes, including prices, that sellers associate with the production of a good, service, or resource are explanations of the _______.

seller

A _____ is an intangible product or action that consumers, firms, or governments wish to purchase.

service

An increase in tax rates on consumers is likely to:

shift the demand curve

Taxes and subsidies that are placed on businesses are likely to:

shift the supply curve

A situation in which the quantity of output demanded is greater than the quantity of output supplied at the current market price is called a _______.

shortage

Suppliers have an incentive to increase quantity supplied when there is a _____ in a competitive market.

shortage

When a _____ exists in a competitive market, buyers want to purchase more of a good or service than is supplied.

shortage

A ____ to producers lowers the cost of producing.

subsidy

The law of supply states that a change in the price of a good, service, or resource changes the quantity _____ of the good, service, or resource, everything else remaining constant.

supplied

A graphical representation of the relationship between the price of a good, service, or resource and the quantities producers are willing and able to supply is known as the _____ curve.

supply

Taxes and subsidies that are placed on businesses are likely to shift the _____ curve.

supply

The law of ____ tells us that higher prices result in higher quantities being supplied.

supply

The size of the producer subsidy will influence the size of the shift in _____.

supply

If wood prices fall, the:

supply of wooden toys will increase

Suppose that tomato producers expect prices to fall in the future. This will likely cause current:

supply to increase

A payment made to the government that is the result of economic activity is called a ______.

tax

One way to reduce the quantity demanded for cigars would be to impose a _____ on cigars.

tax

To pay for needed services, governments often ______ economic activity.

tax

By changing the prices that buyers and sellers face in the market:

taxes change the market outcome

When a farmer continues to add pounds of fertilizer to the fixed farmtarea that she has, eventually:

the additional output for each pound of fertilizer will fall.

When the government imposes a new tax (or increases an existing tax),

the amount that consumers pay increases

In the presence of a tax on suppliers,

the cost producing the good or service increases