managerial economics - midterm study guide
Which would cause an increase in the demand for product A? A decrease in the price of product A A decrease in the price of a complementary product B An increase in the cost of producing product A A decrease in the number of suppliers of product B
A decrease in the price of a complementary product B
As a result of the decrease in the price of hamburger, consumers buy more hamburger and fewer frankfurters. This is an illustration of: Consumer sovereignty The income effect The substitution effect Changing tastes and preferences
The substitution effect
When the price of one fruit increases, consumers buy more of another fruit. This situation is an illustration of: The income effect The substitution effect Diminishing marginal utility The rationing function of prices
The substitution effect
Which will not cause the supply curve to shift? A change in resource costs A technological change A change in the price of the good A change in the prices of other goods
A change in the price of the good
An increase in the supply of wheat in the United States is most likely to result from: A decrease in the amount of subsidies that wheat farmers receive from the government A change in farming technology that improves the soil for wheat An increase in the cost of machinery for harvesting wheat An increase in the price of wheat
A change in farming technology that improves the soil for wheat
Which would have no effect on the demand for motorcycles? A change in tastes A change in the prices of cars A change in the cost of steel Correct answer A change in the price of gas
A change in the cost of steel
Which is consistent with the law of demand? An increase in the price of ice cream causes an increase in the quantity of ice cream demanded A decrease in the price of bagels causes an increase in the quantity of bagels demanded A decrease in the price of muffins causes a decrease in the quantity of muffins demanded An increase in the price of candy bars causes no change in the quantity of candy bars demanded
A decrease in the price of bagels causes an increase in the quantity of bagels demanded
If two goods are close substitutes: Consumers will always buy the one that has the lower price A fall in the price of one will decrease the demand for the other An increase in the price of one causes the demand for the other to decrease A decrease in the price of one causes an increase in the demand for the other
A fall in the price of one will decrease the demand for the other
Assume that the demand schedule for product C is downsloping. If the price of C falls from $2.00 to $1.75: The demand for C will fall The demand for C will rise A larger quantity of C will be demanded A smaller quantity of C will be demanded
A larger quantity of C will be demanded
When economists describe "a market," they mean: A place where stocks and bonds are traded Information networks that allow individuals to keep in touch with each other A hypothetical place where the production of goods and services takes place A mechanism which coordinates actions of consumers and producers to establish equilibrium prices and quantities
A mechanism which coordinates actions of consumers and producers to establish equilibrium prices and quantities
A point on a demand curve indicates: The ratio of the selling price to the buying price A particular price and the corresponding quantity demanded by consumers A combination of two consumer goods which buyers will choose at given prices A situation where the buying and selling decisions of consumers and producers are consistent
A particular price and the corresponding quantity demanded by consumers
Which would cause an increase in the supply of a product at a given price? An increase in the price of the product An increase in the costs of producing a substitute product An increase in the costs of producing a complementary product A reduction in the cost of resources to produce the product
A reduction in the cost of resources to produce the product
Any improvement in overall production technology that permits more output to be produced with the same amount of inputs causes: A movement up the supply curve, resulting in both a higher equilibrium quantity and price A rightward shift of the supply curve so that more is offered at each price No movement of the supply curve but a fall in price and a decrease in quantity supplied A leftward shift of the supply curve so that less is offered for sale at each price
A rightward shift of the supply curve so that more is offered at each price
If average income increases, ceteris paribus, then there will be: A shift of the demand curve. A movement along the demand curve A movement along and a shift in the demand curve No effect on the demand curve, because income is not a ceteris paribus condition
A shift of the demand curve.
Other things equal, which may cause an increase in the price of used houses? An increase in property taxes An increase in mortgage interest rates An increase in construction costs for new houses A decrease in the population of first-time homebuyers
An increase in construction costs for new houses
The price of pork can be increased by: A decrease in the cost of feed for pork producers Decreased advertising of pork An increase in the cost of beef A subsidy to pork producers
An increase in the cost of beef
A leftward shift of the supply curve for oil in the United States is most likely to result from: A decrease in the price which oil companies must pay for drilling licenses An increase in the costs of exploration and drilling for oil Opening of new areas for oil exploration in the United States A decrease in the world price of oil
An increase in the costs of exploration and drilling for oil
Which would cause an increase in quantity supplied of product A? An improvement in technology affecting the production of A An increase in the price of product B, a complement in the production of A A decrease in the price of resources used in producing A An increase in the price of A
An increase in the price of A
Which factor will increase the demand for a product? An unfavorable report on the value of the product An increase in the price of a substitute product An increase in the price of a complementary product A decrease in the number of buyers
An increase in the price of a substitute product
Which would cause a leftward shift in the supply curve for car washes? An increase in the number of cars on the street An increase in the price of car washing equipment An increase in youth unemployment A decrease in the price of water
An increase in the price of car washing equipment
Which would be a likely cause of an increase in the price of pizza? A decreased interest in take-out and fast-food dining A decrease in the price of hamburgers, a substitute food An increase in the price of cheese, a complement A health report showing eating pizza reduces stress
An increase in the price of cheese, a complement and A health report showing eating pizza reduces stress
If two goods are close substitutes: An increase in the price of one will decrease the demand for the other An increase in the price of one will increase the demand for the other A decrease in the price of one will increase the demand for the other A decrease in the price of one will have no effect on the demand for the other
An increase in the price of one will increase the demand for the other
Which would most likely cause a rightward shift in the demand curve for the New York Times newspaper? A decrease in the costs of printing An increase in the price of the New York Daily News An improvement in cable television in the New York area A decrease in the size of the population in the New York area
An increase in the price of the New York Daily News
Which would cause a leftward shift in the supply curve for telephone service? A decrease in the price of telephones An improvement in telephone technology An increase in the wage of telephone workers An increase in consumer incomes in the economy
An increase in the wage of telephone workers
A market demand schedule for a product indicates that: As the product's price falls, consumers buy less of the good As a product's price falls, consumers buy more of the product. There is a direct relationship between price and quantity demanded There is an upward-sloping (direct) relationship between price and quantity demanded
As a product's price falls, consumers buy more of the product.
Which are not generally considered to be complementary goods? Gasoline and motor oil Beef and chicken Beer and pretzels Razors and razor blades
Beef and chicken
Which is a determinant of the demand for housing? The price of lumber Wages for electricians The price of housing Changes in the expected future price of housing
Changes in the expected future price of housing
If service stations raise the price of gasoline and experience a decrease in demand for automobile tires, then gasoline and tires are: Substitute goods Economic goods Inferior goods Complementary goods
Complementary goods
If the price of gasoline increases and car dealers experience a decrease in demand for sport utility vehicles, then gasoline and sport utility vehicles are: Substitutes Complements Inferior goods Unrelated goods
Complements
People demand more of product X when the price of product Y decreases. This means X and Y are: Complements Substitutes Not related Both inexpensive
Complements
If the price of hamburger buns increases, the demand for ground beef is predicted to: Increase Decrease Remain constant Shift to the right
Decrease
The law of demand is illustrated by a demand curve that is: Vertical Horizontal Upward sloping Downward sloping
Downward sloping
An inferior good is one: That doesn't work That costs too much That won't be purchased at any price For which demand increases as income decreases
For which demand increases as income decreases
A normal good is one: Which all people like Which all normal people like For which demand increases when price decreases For which demand increases when income increases
For which demand increases when income increases
Which goods would usually be an inferior good? French wines Generic beer Theater tickets Steak
Generic beer
Suppose that a more efficient way to produce a good is discovered, thus lowering production costs for the good. This will cause a(n): Increase in supply, or a rightward shift of the supply curve Decrease in supply, or a leftward shift of the supply curve Increase in quantity supplied, or movement down the supply curve Decrease in quantity supplied, or movement up the supply curve
Increase in supply, or a rightward shift of the supply curve
Suppose that goods A and B are close substitutes and the price of good B falls. We would then expect an: Increase in the demand for good A and the quantity demanded for good B Increase in the demand for good A and a decrease in the quantity demanded for good B Increase in the quantity demanded of good B and a decrease in the demand for good A Increase in the demand for goods A and B
Increase in the quantity demanded of good B and a decrease in the demand for good A
A fall in the price of milk, used in the production of ice cream, will: Decrease the supply of ice cream, causing the supply curve of ice cream to shift to the left Increase the supply of ice cream, causing the supply curve of ice cream to shift to the right Cause a downward movement along the supply curve of ice cream Have no effect on the supply of ice cream
Increase the supply of ice cream, causing the supply curve of ice cream to shift to the right
If an increase in consumer incomes causes the demand curve for product Z to shift to the left, then it can be said that product Z is a(n): Normal good Luxury good Inferior good Inexpensive good
Inferior good
For some products, purchases tend to decrease as the buyer's income increases. Such products are known as: Common goods Inferior goods Inverse goods Normal goods
Inferior goods
If the demand curve for textbooks shifts to the left: More will be purchased at each possible price More will be demanded at lower prices More will be demanded at the same prices Less will be purchased at each possible price
Less will be purchased at each possible price
An improvement in the technology of production for a specific good is expected to cause: Higher prices and increased quantity sold Lower prices and increased quantity sold Lower prices and decreased quantity sold Higher prices and decreased quantity sold
Lower prices and increased quantity sold
If the demand curve for computers increases: More will be purchased at each possible price More will be demanded at lower prices More will be demanded at the same prices Less will be purchased at each possible price
More will be purchased at each possible price and More will be demanded at the same prices
A "decrease in the quantity supplied" suggests a: Rightward shift of the supply curve Movement up along the supply curve Movement down along the supply curve Leftward shift of the supply curve
Movement down along the supply curve
On a graph, an increase in quantity demanded is represented by a: Leftward shift of the demand curve Rightward shift of the demand curve Movement upward and to the left along the demand curve Movement downward and to the right along the demand curve
Movement downward and to the right along the demand curve
If an increase in consumer incomes causes the demand curve for product Q to shift to the right, then it can be said that product Q is a(n): Normal good Luxury good Inferior good Inexpensive good
Normal good
For most products, purchases tend to rise with increases in buyers' incomes, and to fall with decreases in buyers' incomes. Such products are known as: Inferior goods Direct goods Average goods Normal goods
Normal goods
Which is a determinant of demand? Production costs Amount of economic resources Number of buyers Technology
Number of buyers
Which of the following goods are not close substitutes? Peanut butter and jelly Margarine and butter Beef and chicken Tea and coffee
PB&J
Refer to the above graph with three demand curves. An "increase in quantity demanded" would be illustrated by a change from:
Point 4 to point 1
All of the following would affect the position of the supply curve for cranberries, except the: Popularity of cranberry drinks Price of agricultural land for cranberries Cost of fertilizers for cranberry production Development of a new pest control for cranberries
Popularity of cranberry drinks
The demand curve is a representation of the relationship between the quantity of a product demanded and: Supply Wealth Price Income
Price
Which is a determinant of supply? Tastes and preferences Production (resource) costs Consumer income Number of consumers
Production (resource) costs
If the supply schedule for a product has an upward slope and the price of that product declines from $100 to $75, the: Supply of the product will shift to the left Supply of the product will shift to the right Quantity supplied of the product will decline Quantity supplied of the product will increase
Quantity supplied of the product will decline
If the price of a product increases, we would expect: Demand to decrease Quantity supplied to increase Supply to decrease Quantity demanded to increase
Quantity supplied to increase
A decrease in supply: Refers to a leftward shift in the supply curve Refers to a downward movement along a supply curve Has the same meaning as the phrase "a decrease in quantity supplied" Is likely to result from the decrease in the price of a productive resource
Refers to a leftward shift in the supply curve
If a change in tastes is in favor of a commodity, that will mean a: Shift in the whole demand curve to the right Shift in the whole demand curve to the left Movement down the demand curve Movement up the demand curve
Shift in the whole demand curve to the right
A decrease in demand is shown graphically by a: Downward movement along the demand curve Decrease in the cost of production Shift of the demand curve to the left Movement up along the demand curve
Shift of the demand curve to the left
An increase in demand is shown graphically by a: Shift of the demand curve to the left Movement up along the existing curve Shift of the demand curve to the right Movement down the existing curve
Shift of the demand curve to the right
If product Y is an inferior good, an increase in consumer incomes will: Result in a surplus of product Y Not affect the sales of product Y Shift the demand curve for product Y to the left Shift the demand curve for product Y to the right
Shift the demand curve for product Y to the left
If the price of K declines, the demand curve for the complementary product J will: Remain unchanged Shift to the right Decrease Shift to the left
Shift to the right
An increase in the price of product G will result in a(n): Increase in the demand for G Decrease in the demand for G Larger quantity of G demanded Smaller quantity of G demanded
Smaller quantity of G demanded
An increase in the price of product B resulted in an increase in the demand for product C. This indicates that products B and C are: Complementary goods Substitute goods Inferior goods Normal goods
Substitute goods
If the price of beef rose and the demand for chicken increased, then beef and chicken are: Complementary goods Consumer goods Inferior goods Substitute goods
Substitute goods
A schedule which shows the various amounts of a product producers are willing and able to produce at each price in a series of possible prices during a specified period of time is called: Quantity supplied Quantity demanded Supply Demand
Supply
A plastics manufacturer can make either toys or containers. If the demand for toys increases, then the: Demand for containers will decrease Supply of containers will increase Demand for containers will increase Supply of containers will decrease
Supply of containers will decrease
Which is not a determinant of demand? Income The cost of inputs in production The prices of related goods Future price expectations
The cost of inputs in production
When economists say that the demand for a product has decreased, they mean that: The demand curve has shifted to the left The product has become particularly scarce for some reason The product price has increased and as a consequence consumers are buying less of the product Consumers are now willing and able to purchase more of this product at each possible price
The demand curve has shifted to the left
Which is not a determinant of supply? The existing state of technology used by the firm The cost of resources used in production The level of government taxes and subsidies The market price of the good
The market price of the good
In a competitive market for corn, the law of demand indicates that, other things equal, as: The demand for corn decreases, the price will increase Income decreases, the quantity of corn demanded will increase The price of corn rises, the quantity of corn demanded will fall The price of corn decreases, the quantity of corn demanded will decrease
The price of corn rises, the quantity of corn demanded will fall
Other things remaining constant, the only way to move along a given supply curve for a product is for: The product's price to increase or decrease Correct answer The price of resources used to produce the product to increase or decrease The number of sellers to increase or decrease Technological changes to occur
The product's price to increase or decrease
Suppose that the demand curve for wheat is downward sloping and the price per bushel increases from $4.50 to $5.50. We would expect: The demand for wheat to increase Producers to reduce the number of bushels produced The quantity demanded of wheat to decrease The quantity demanded of wheat to increase
The quantity demanded of wheat to decrease
Which statement is true? There is an inverse relationship between product price and quantity supplied There is some price at which quantity supplied of a product is negative As product price decreases, producers are willing to put more of the good on the market for sale To entice producers to offer more of a product on the market for sale, product price must rise
To entice producers to offer more of a product on the market for sale, product price must rise
The law of supply is illustrated by a supply curve that is: Vertical Horizontal Upward sloping Downward sloping
Upward sloping