macro exam 1

determinants of demand:

Consumer tastes and preferences Number of buyers Income Prices of related goods Consumer expectations

T/F: Households sell finished products to businesses

False

T/F: Money must be issued by a government for people to accept it.

False

T/F: a "change in quantity demanded" is a shift of the entire demand curve to the right or to the left.

False

Shops stock and sell the goods their customers want but the government levies a sales tax on each transaction in order to fund elementary schools, public libraries, and welfare programs for the poor. Is this a command system? a market system? or a laissez-faire system?

Market system

determinants of supply:

Resource prices Technology Number of sellers Taxes and subsidies Prices of other goods Producer expectations

opportunity cost is...

what we need to give up to get something else

A woman who wants to start a flower shop finds she cannot do so unless the central government has already decided to allow a flower shop in her area. Is this a command system? a market system? or a laissez-faire system?

Command system

What effect will each of the following have on the demand for small automobiles such as the Mini-Cooper and Fiat 500?

A. Small automobiles become more fashionable.

What effect will each of the following have on the supply of auto tires?

A. a technological advance in the methods of producing tires: Increase B. a decline in the number of firms in the tire industry: Decrease C. an increase in the prices of rubber used in the production of tires: Decrease D. the expectation that the equilibrium price of auto tires will be lower in the future than currently: Increase E. a decline in the price of large tires used for semi trucks and earth-hauling rigs, a substitute in production. (with no change in the price of auto tires): Increase F. the levying of a per-unit tax on each auto tire sold: Decrease G. the granting of a 50-cent-per-unit subsidy for each auto tire produced: Increase

The only taxes levied by the government are to pay for national defense, law enforcement, and a legal system designed to enforce contracts between private citizens. Is this a command system? a market system? or a laissez-faire system?

Laissez-faire

Suppose that in the market for computer memory chips, the equilibrium price is $50 per chip. If the current price is $55 per chip, then there will be ______________ of memory chips.

a surplus

the demand and supply curve both shift to the right but the demand curve shifts more. What's the result?

both the equilibrium price and quantity will increase

If the price of pick-up trucks was to increase, then....

demand of gasoline would decrease

A price ceiling will result in a shortage only if the ceiling price is ____________ the equilibrium price.

less than

how does supply and demand determine equilibrium price and quantity?

price makes quantity demanded equal to quantity supplied