Chapter 11, 12, 13 - Assignment Essays

question

The assumptions of perfect competition imply that?

answer

individuals in the market accept the market price as given.

question

price takers are individuals in a market who?

answer

have no ability to affect the price of a good in a market.

question

Perfect competition is characterized by:

answer

the inability of any one firm to influence price.

question

Which statement is NOT characteristic of perfect competition?

answer

There are many producers; one firm has a 25% market share, and all of the remaining firms have a market share of less than 2% each.

question

A firm's total output times the price at which it sells that output is _____ revenue.

answer

total

question

Total revenue is a firm's:

answer

total output times the price of that output.

question

If a perfectly competitive firm increases production from 10 units to 11 units and the market price is $20 per unit, total revenue for 11 units is:

answer

$220.

question

If a perfectly competitive firm decreases production from 11 units to 10 units and the market price is $20 per unit, total revenue for 10 units is:

answer

$200.

question

The difference between total revenue and total cost is:

answer

economic profit or loss.

question

In a perfectly competitive industry, the market demand curve is usually:

answer

downward-sloping.

question

Marginal revenue:

answer

equals the market price in perfect competition.

question

The marginal revenue received by a firm in a perfectly competitive market:

answer

is equal to its average revenue.

question

A perfectly competitive firm will maximize profits when the:

answer

marginal revenue equals marginal cost.

question

The equilibrium price of a guidebook is $35 in the perfectly competitive guidebook industry. Our firm produces 10,000 guidebooks for an average total cost

answer

produce more guidebooks because the next guidebook produced will increase profit by $5.

question

The slope of the total revenue curve is:

answer

equal to marginal revenue and is constant under perfect competition.

question

The slope of the total cost curve is:

answer

marginal cost.

question

For a firm in a perfectly competitive market, _____ revenue equals _____.

answer

marginal; market price

question

If a perfectly competitive firm sells 10 units of output at $30 per unit, its marginal revenue is:

answer

$30.

question

Price in a perfectly competitive industry:

answer

is always equal to marginal revenue for the firm.

question

Marginal revenue is a firm's:

answer

ratio of the change in total revenue to the change in output.

question

If a firm in perfect competition sells 10 units of output at $5 per unit, its marginal revenue is:

answer

$5.

question

If a perfectly competitive firm sells 300 units of output at $1 per unit, its marginal revenue is:

answer

$1.

question

In perfect competition:

answer

price and marginal revenue are the same.

question

The profit-maximizing level of output for a perfectly competitive firm in the short run occurs where _____ equals _____.

answer

marginal cost; price

question

If the price is greater than average total cost at the profit-maximizing quantity of output in the short run, a perfectly competitive firm will:

answer

produce at a profit.

question

In the short run, a perfectly competitive firm produces output and earns an economic profit if:

answer

P > ATC.

question

In the short run, a perfectly competitive firm produces output and earns ZERO economic profit if:

answer

P = ATC.

question

In the short run, if P = ATC, a perfectly competitive firm:

answer

produces output and earns zero economic profit.

question

In the short run, if P > ATC, a perfectly competitive firm:

answer

produces output and earns an economic profit.

question

In perfectly competitive markets, if the price is _____, the firm will _____.

answer

greater than ATC; make an economic profit

question

A farmer, in the short run, produces 100 bushels of wheat. Farmer's average total cost per bushel is $1.75, total revenue is $450, and total fixed costs are $100. Farmer's:

answer

economic profit per bushel is $2.75.

question

A monopoly is a market characterized by a:

answer

single seller.

question

Which statement about the differences between monopoly and perfect competition is INCORRECT?

answer

Monopoly profits can continue in the long run because the monopoly produces more and charges a higher price than does a comparable perfectly competitive industry.

question

_____ firms have the MOST market power.

answer

Monopoly

question

A monopolist is likely to produce _____ and charge _____ than is a comparable perfectly competitive firm.

answer

less; more

question

In contrast with perfect competition, a monopolist:

answer

may have economic profits in the long run.

question

Because of monopoly, consumers experience _____ than they do with perfect competition.

answer

higher prices

question

The ability of a monopolist to raise the price of a product above the competitive level by reducing the output is known as:

answer

market power.

question

Conditions that keep new firms out of a monopoly market are:

answer

barriers to entry.

question

A natural monopoly exists whenever a single firm:

answer

has economies of scale over the entire range of production that is relevant to its market.

question

Which factor is NOT a barrier to entry?

answer

diseconomies of scale

question

The demand curve facing a monopolist is:

answer

downward sloping, unlike the horizontal demand curve facing a perfectly competitive firm.

question

Which statement is TRUE?

answer

MR = MC is a profit-maximizing rule for any firm

question

The demand curve for a monopoly is:

answer

the industry demand curve.

question

One of the major differences between a monopolist and a purely competitive firm is that the monopolist has a _____ demand curve, while the purely competitive firm has a _____ demand curve.

answer

downward-sloping; perfectly elastic

question

The demand curve for a monopoly is:

answer

above the MR curve.

question

Suppose that a monopoly computer chip maker increases production from 10 microchips to 11 microchips. If the market price declines from $30 per unit to $29 per unit, marginal revenue for the eleventh unit is:

answer

$19.

question

A downward-sloping demand curve will ensure that _____ is TRUE for a monopoly.

answer

P > MR

question

Which statement is TRUE?

answer

The profit-maximizing solution occurs where MR = MC.

question

An increase in the fixed costs of a monopoly firm would _____ price and _____ quantity in the short run.

answer

not change; not change

question

In the short run:

answer

some inputs are fixed and some inputs are variable.

question

The _____ is the increase in output that is produced when a firm hires an additional worker.

answer

marginal product

question

The total product curve:

answer

will become flatter as output increases if there are diminishing returns to the variable input.

question

The term diminishing returns refers to a:

answer

decrease in the extra output due to the use of an additional unit of a variable input when all other inputs are held constant.

question

In economics, the short run is defined as:

answer

the period in which some inputs are considered to be fixed in quantity.

question

A fixed input is one:

answer

whose quantity cannot be changed in the short run.

question

The long run is a planning period:

answer

over which a firm can consider all inputs as variable.

question

Diminishing marginal returns occur when:

answer

each additional unit of a variable factor adds less to total output than the previous unit.

question

A planning period during which all of a firm's resources are variable is the _____ run.

answer

long

question

In the short run, the costs associated with variable inputs are _____, and the costs associated with _____ inputs are _____.

answer

variable; fixed; fixed

question

The sum of fixed and variable costs is _____ cost.

answer

total

question

The total cost curve is:

answer

positively sloped

question

The fixed cost curve is:

answer

horizontal.

question

Marginal cost is the change in _____ cost resulting from a one-unit change in _____.

answer

total; output

question

The curve that shows the additional cost of each additional unit of output is called the _____ curve.

answer

marginal cost

question

Marginal cost is the:

answer

increase in total cost when one more unit of output is produced.

question

Average variable cost is:

answer

total variable cost divided by output.

question

Average variable cost is the ratio of:

answer

variable cost to the quantity of output.

question

Average total cost is:

answer

total cost divided by quantity.

question

Average variable cost is:

answer

total variable cost divided by quantity.

question

Average variable cost is the ratio of:

answer

variable cost to the quantity of output.

question

Variable cost divided by the quantity of output produced is _____ cost.

answer

average variable

question

If marginal cost is GREATER than average total cost, then average total cost is:

answer

rising.

question

If marginal cost is LESS than average total cost, then _____ cost is _____.

answer

average total; decreasing

question

Which topic is studied in macroeconomics?

answer

recessions

question

The basic concern of microeconomics is to:

answer

study the choices people make.

question

Scarcity in economics means that:

answer

we often do not have sufficient resources to achieve our objectives.

question

If resources are scarce, it means that they:

answer

are insufficient to provide enough goods and services to satisfy all human material wants and needs.

question

When we are forced to make choices, we are facing the concept of:

answer

scarcity.

question

Scarcity exists when:

answer

individuals can have more of one good but only by giving up something else.

question

A resource is anything that:

answer

can be used in production.

question

The opportunity cost of something is:

answer

what is given up to acquire it.

question

Margo spends $30,000 on one year's college tuition. The opportunity cost of spending one year in college for Margo is:

answer

whatever she would have purchased with the $30,000 plus whatever she would have earned had she not been in college.

question

The BEST measure of the opportunity cost of any choice is:

answer

whatever you have given up to make that choice, even if no monetary costs are involved.

question

The economic way of thinking entails:

answer

making choices at the margin.

question

A choice made _____ is a choice whether to do a little more or a little less of an activity.

answer

at the margin

question

The BEST example of making a choice at the margin is whether to:

answer

eat another slice of pizza.

question

Marginal analysis:

answer

is used primarily when deciding how much of an activity should be done.

question

Which question is an example of marginal analysis?

answer

What additional output does a family business produce when it hires one more worker?

question

A simplified version of reality that is used to clarify economic situations is called a(n):

answer

model.

question

If an economy is producing a level of output that is on its production possibility frontier, the economy has:

answer

no idle resources and is using resources efficiently.

question

Technological improvements will:

answer

shift the production possibility frontier outward.

question

All points inside the production possibility frontier represent:

answer

inefficient production points.

question

All points on the production possibility frontier are:

answer

efficient.

question

All points outside the production possibility frontier are:

answer

infeasible.

question

The production possibility frontier is bowed out because:

answer

resources are not equally suited for the production of both goods.

question

The opportunity cost of production:

answer

is what you give up to produce the good.

question

Economists usually assume that production is subject to increasing opportunity costs because:

answer

not all resources are equally suited to producing every good.

question

The production possibility frontier will shift outward because of:

answer

better technology that improves worker productivity

question

The law of demand states that, other things equal, as the price:

answer

increases, the quantity demanded will decrease.

question

A negative relationship between quantity demanded and price is called the law of:

answer

demand.

question

Which statement illustrates the law of demand?

answer

Consumers buy more personal computers because prices have fallen.

question

A decrease in the price of a good will result in:

answer

an increase in the quantity demanded.

question

Which factor would result solely in a movement along the demand curve for a particular good?

answer

a change in the price of that good

question

When the economy suffers a downturn and the incomes of many people decrease, vacationers are more likely to take car trips than to fly. Which statement provides one possible explanation for this phenomenon?

answer

Air travel is a normal good and travel by car is an inferior good.

question

If goods A and B are substitutes, a decrease in the price of good B will:

answer

decrease the demand for good A.

question

If goods A and Z are complements, an increase in the price of good Z will:

answer

decrease the demand for good A.

question

Which factor will NOT cause an increase in demand for good X?

answer

a decrease in the price of good X

question

Which statement is TRUE of a normal good?

answer

When income increases, the demand for the good increases.

question

Which statement is TRUE of an inferior good?

answer

When income increases, demand decreases.

question

If people demand more of product A when the price of B falls, then A and B are:

answer

complements.

question

If the demand for tires goes down when the price of gas goes up, then tires and gas are:

answer

complements.

question

An announcement that smoking will harm your ability to think clearly will MOST likely result in:

answer

a decrease in the demand for cigarettes.

question

For most goods, purchases tend to rise with increases in buyers' incomes and to fall with decreases in buyers' incomes. Such goods are known as:

answer

normal.

question

An inferior good is one for which a(n) _____ in buyers' incomes causes a(n) _____.

answer

increase; decrease in demand

question

An increase in the demand for gasoline today caused by concerns that gasoline prices will be higher tomorrow is most likely attributable to a change in:

answer

consumer expectations.

question

The demand curve for running shoes has shifted to the right. What could have caused it?

answer

an increased enthusiasm among the population for running as exercise

question

Which factor will NOT cause an increase in the supply of cornflakes?

answer

an increase in the price of cornflakes

question

When the price of desks increases, the:

answer

quantity supplied increases.

question

A decrease in supply of good X means:

answer

a shift to the left of the entire supply curve for good X.

question

The primary difference between a change in supply and a change in the quantity supplied is that:

answer

a change in quantity supplied is a movement along the supply curve, while a change in supply is a shift in the supply curve.

question

If the price of a commodity increases, you can usually expect the:

answer

quantity supplied to increase.

question

Which influence does NOT shift the supply curve?

answer

people deciding that they want to buy more of the product

question

Which factor will NOT cause an increase in the supply of good X?

answer

an increase in the price of inputs used to produce good X

question

Which factor would cause an INCREASE in the supply of a good?

answer

an increase in the number of sellers

question

Which factor would cause an INCREASE in the supply of a good?

answer

a decrease in the price of resources used in production

question

Which factor would cause a DECREASE in the supply of a good?

answer

an increase in the price of goods that are used in production

question

Which factor would NOT cause the supply curve to shift?

answer

a change in the price of the good

question

Market equilibrium occurs when:

answer

there is no incentive for prices to change in the market, quantity demanded equals quantity supplied, and the market clears.

question

The market equilibrium is found at the:

answer

price where quantity demanded equals quantity supplied.

question

Suppose the equilibrium price of good Y is $5 and the equilibrium quantity is 150 units. Supply in this market is upward sloping. If the price of good Y is $12:

answer

there will be an excess supply of good Y.

question

Excess supply occurs when the:

answer

price is above the equilibrium price.

question

If in a competitive market the quantity supplied exceeds the quantity demanded, we expect prices to:

answer

fall.

question

If the quantity of housing supplied in a community is greater than the quantity of houses demanded, the existing price:

answer

is above the market equilibrium price.

question

If the supply and demand curves intersect at a price of $47, then any price above that would result in:

answer

a shortage.

question

If the supply and demand curves intersect at a price of $14, then any price below that would result in:

answer

a shortage.

question

Which factor ALWAYS results in an increase in price and quantity?

answer

an increase in demand with no change in supply

question

The market price of airline flights increased recently.

answer

demand increased.

question

If supply is upward sloping, a shift of a demand curve to the right, all other things unchanged, will:

answer

increase equilibrium price and quantity.

question

If supply is upward sloping, a decrease in demand with no change in supply will lead to a(n) _____ in equilibrium quantity and a(n) _____ in equilibrium price.

answer

decrease; decrease

question

Given a supply curve that is positively sloped and a demand curve for a normal good that is negatively sloped, an increase in income will result in:

answer

an increase in equilibrium price and quantity.

question

In the market for corn tortilla chips, what would cause a price increase?

answer

A fungus kills much of the corn crop in Nebraska.

question

The market for lemonade is in equilibrium and the price of lemons rises. In the lemonade market _____ will _____, _____ the price and _____ the quantity.

answer

supply; decrease; increasing; decreasing

question

Consider the market for corn. What happens if there is an increased demand for corn tortillas and, at the same time, a new corn seed becomes available that dramatically increases the yield per acre?

answer

The change in price is indeterminate; quantity increases.

question

Suppose the local real estate market is in equilibrium. A recession causes local household incomes to decline. At the same time, construction of a large subdivision of new homes has just been completed. Given these two changes and assuming that real estate is a normal good, we can predict that the price of real estate will _____ and the quantity of real estate bought and sold will _____.

answer

fall; rise or fall

question

Suppose that supply increases and demand decreases. What is the MOST likely effect on price and quantity?

answer

The price will decrease, but quantity may increase, decrease, or stay the same.

1 of 146

question

The assumptions of perfect competition imply that?

answer

individuals in the market accept the market price as given.

question

price takers are individuals in a market who?

answer

have no ability to affect the price of a good in a market.

question

Perfect competition is characterized by:

answer

the inability of any one firm to influence price.

question

Which statement is NOT characteristic of perfect competition?

answer

There are many producers; one firm has a 25% market share, and all of the remaining firms have a market share of less than 2% each.

question

A firm's total output times the price at which it sells that output is _____ revenue.

answer

total

question

Total revenue is a firm's:

answer

total output times the price of that output.

question

If a perfectly competitive firm increases production from 10 units to 11 units and the market price is $20 per unit, total revenue for 11 units is:

answer

$220.

question

If a perfectly competitive firm decreases production from 11 units to 10 units and the market price is $20 per unit, total revenue for 10 units is:

answer

$200.

question

The difference between total revenue and total cost is:

answer

economic profit or loss.

question

In a perfectly competitive industry, the market demand curve is usually:

answer

downward-sloping.

question

Marginal revenue:

answer

equals the market price in perfect competition.

question

The marginal revenue received by a firm in a perfectly competitive market:

answer

is equal to its average revenue.

question

A perfectly competitive firm will maximize profits when the:

answer

marginal revenue equals marginal cost.

question

The equilibrium price of a guidebook is $35 in the perfectly competitive guidebook industry. Our firm produces 10,000 guidebooks for an average total cost

answer

produce more guidebooks because the next guidebook produced will increase profit by $5.

question

The slope of the total revenue curve is:

answer

equal to marginal revenue and is constant under perfect competition.

question

The slope of the total cost curve is:

answer

marginal cost.

question

For a firm in a perfectly competitive market, _____ revenue equals _____.

answer

marginal; market price

question

If a perfectly competitive firm sells 10 units of output at $30 per unit, its marginal revenue is:

answer

$30.

question

Price in a perfectly competitive industry:

answer

is always equal to marginal revenue for the firm.

question

Marginal revenue is a firm's:

answer

ratio of the change in total revenue to the change in output.

question

If a firm in perfect competition sells 10 units of output at $5 per unit, its marginal revenue is:

answer

$5.

question

If a perfectly competitive firm sells 300 units of output at $1 per unit, its marginal revenue is:

answer

$1.

question

In perfect competition:

answer

price and marginal revenue are the same.

question

The profit-maximizing level of output for a perfectly competitive firm in the short run occurs where _____ equals _____.

answer

marginal cost; price

question

If the price is greater than average total cost at the profit-maximizing quantity of output in the short run, a perfectly competitive firm will:

answer

produce at a profit.

question

In the short run, a perfectly competitive firm produces output and earns an economic profit if:

answer

P > ATC.

question

In the short run, a perfectly competitive firm produces output and earns ZERO economic profit if:

answer

P = ATC.

question

In the short run, if P = ATC, a perfectly competitive firm:

answer

produces output and earns zero economic profit.

question

In the short run, if P > ATC, a perfectly competitive firm:

answer

produces output and earns an economic profit.

question

In perfectly competitive markets, if the price is _____, the firm will _____.

answer

greater than ATC; make an economic profit

question

A farmer, in the short run, produces 100 bushels of wheat. Farmer's average total cost per bushel is $1.75, total revenue is $450, and total fixed costs are $100. Farmer's:

answer

economic profit per bushel is $2.75.

question

A monopoly is a market characterized by a:

answer

single seller.

question

Which statement about the differences between monopoly and perfect competition is INCORRECT?

answer

Monopoly profits can continue in the long run because the monopoly produces more and charges a higher price than does a comparable perfectly competitive industry.

question

_____ firms have the MOST market power.

answer

Monopoly

question

A monopolist is likely to produce _____ and charge _____ than is a comparable perfectly competitive firm.

answer

less; more

question

In contrast with perfect competition, a monopolist:

answer

may have economic profits in the long run.

question

Because of monopoly, consumers experience _____ than they do with perfect competition.

answer

higher prices

question

The ability of a monopolist to raise the price of a product above the competitive level by reducing the output is known as:

answer

market power.

question

Conditions that keep new firms out of a monopoly market are:

answer

barriers to entry.

question

A natural monopoly exists whenever a single firm:

answer

has economies of scale over the entire range of production that is relevant to its market.

question

Which factor is NOT a barrier to entry?

answer

diseconomies of scale

question

The demand curve facing a monopolist is:

answer

downward sloping, unlike the horizontal demand curve facing a perfectly competitive firm.

question

Which statement is TRUE?

answer

MR = MC is a profit-maximizing rule for any firm

question

The demand curve for a monopoly is:

answer

the industry demand curve.

question

One of the major differences between a monopolist and a purely competitive firm is that the monopolist has a _____ demand curve, while the purely competitive firm has a _____ demand curve.

answer

downward-sloping; perfectly elastic

question

The demand curve for a monopoly is:

answer

above the MR curve.

question

answer

$19.

question

A downward-sloping demand curve will ensure that _____ is TRUE for a monopoly.

answer

P > MR

question

Which statement is TRUE?

answer

The profit-maximizing solution occurs where MR = MC.

question

An increase in the fixed costs of a monopoly firm would _____ price and _____ quantity in the short run.

answer

not change; not change

question

In the short run:

answer

some inputs are fixed and some inputs are variable.

question

The _____ is the increase in output that is produced when a firm hires an additional worker.

answer

marginal product

question

The total product curve:

answer

will become flatter as output increases if there are diminishing returns to the variable input.

question

The term diminishing returns refers to a:

answer

decrease in the extra output due to the use of an additional unit of a variable input when all other inputs are held constant.

question

In economics, the short run is defined as:

answer

the period in which some inputs are considered to be fixed in quantity.

question

A fixed input is one:

answer

whose quantity cannot be changed in the short run.

question

The long run is a planning period:

answer

over which a firm can consider all inputs as variable.

question

Diminishing marginal returns occur when:

answer

each additional unit of a variable factor adds less to total output than the previous unit.

question

A planning period during which all of a firm's resources are variable is the _____ run.

answer

long

question

In the short run, the costs associated with variable inputs are _____, and the costs associated with _____ inputs are _____.

answer

variable; fixed; fixed

question

The sum of fixed and variable costs is _____ cost.

answer

total

question

The total cost curve is:

answer

positively sloped

question

The fixed cost curve is:

answer

horizontal.

question

Marginal cost is the change in _____ cost resulting from a one-unit change in _____.

answer

total; output

question

The curve that shows the additional cost of each additional unit of output is called the _____ curve.

answer

marginal cost

question

Marginal cost is the:

answer

increase in total cost when one more unit of output is produced.

question

Average variable cost is:

answer

total variable cost divided by output.

question

Average variable cost is the ratio of:

answer

variable cost to the quantity of output.

question

Average total cost is:

answer

total cost divided by quantity.

question

Average variable cost is:

answer

total variable cost divided by quantity.

question

Average variable cost is the ratio of:

answer

variable cost to the quantity of output.

question

Variable cost divided by the quantity of output produced is _____ cost.

answer

average variable

question

If marginal cost is GREATER than average total cost, then average total cost is:

answer

rising.

question

If marginal cost is LESS than average total cost, then _____ cost is _____.

answer

average total; decreasing

question

Which topic is studied in macroeconomics?

answer

recessions

question

The basic concern of microeconomics is to:

answer

study the choices people make.

question

Scarcity in economics means that:

answer

we often do not have sufficient resources to achieve our objectives.

question

If resources are scarce, it means that they:

answer

are insufficient to provide enough goods and services to satisfy all human material wants and needs.

question

When we are forced to make choices, we are facing the concept of:

answer

scarcity.

question

Scarcity exists when:

answer

individuals can have more of one good but only by giving up something else.

question

A resource is anything that:

answer

can be used in production.

question

The opportunity cost of something is:

answer

what is given up to acquire it.

question

Margo spends $30,000 on one year's college tuition. The opportunity cost of spending one year in college for Margo is:

answer

whatever she would have purchased with the $30,000 plus whatever she would have earned had she not been in college.

question

The BEST measure of the opportunity cost of any choice is:

answer

whatever you have given up to make that choice, even if no monetary costs are involved.

question

The economic way of thinking entails:

answer

making choices at the margin.

question

A choice made _____ is a choice whether to do a little more or a little less of an activity.

answer

at the margin

question

The BEST example of making a choice at the margin is whether to:

answer

eat another slice of pizza.

question

Marginal analysis:

answer

is used primarily when deciding how much of an activity should be done.

question

Which question is an example of marginal analysis?

answer

What additional output does a family business produce when it hires one more worker?

question

A simplified version of reality that is used to clarify economic situations is called a(n):

answer

model.

question

If an economy is producing a level of output that is on its production possibility frontier, the economy has:

answer

no idle resources and is using resources efficiently.

question

Technological improvements will:

answer

shift the production possibility frontier outward.

question

All points inside the production possibility frontier represent:

answer

inefficient production points.

question

All points on the production possibility frontier are:

answer

efficient.

question

All points outside the production possibility frontier are:

answer

infeasible.

question

The production possibility frontier is bowed out because:

answer

resources are not equally suited for the production of both goods.

question

The opportunity cost of production:

answer

is what you give up to produce the good.

question

Economists usually assume that production is subject to increasing opportunity costs because:

answer

not all resources are equally suited to producing every good.

question

The production possibility frontier will shift outward because of:

answer

better technology that improves worker productivity

question

The law of demand states that, other things equal, as the price:

answer

increases, the quantity demanded will decrease.

question

A negative relationship between quantity demanded and price is called the law of:

answer

demand.

question

Which statement illustrates the law of demand?

answer

Consumers buy more personal computers because prices have fallen.

question

A decrease in the price of a good will result in:

answer

an increase in the quantity demanded.

question

Which factor would result solely in a movement along the demand curve for a particular good?

answer

a change in the price of that good

question

answer

Air travel is a normal good and travel by car is an inferior good.

question

If goods A and B are substitutes, a decrease in the price of good B will:

answer

decrease the demand for good A.

question

If goods A and Z are complements, an increase in the price of good Z will:

answer

decrease the demand for good A.

question

Which factor will NOT cause an increase in demand for good X?

answer

a decrease in the price of good X

question

Which statement is TRUE of a normal good?

answer

When income increases, the demand for the good increases.

question

Which statement is TRUE of an inferior good?

answer

When income increases, demand decreases.

question

If people demand more of product A when the price of B falls, then A and B are:

answer

complements.

question

If the demand for tires goes down when the price of gas goes up, then tires and gas are:

answer

complements.

question

An announcement that smoking will harm your ability to think clearly will MOST likely result in:

answer

a decrease in the demand for cigarettes.

question

For most goods, purchases tend to rise with increases in buyers' incomes and to fall with decreases in buyers' incomes. Such goods are known as:

answer

normal.

question

An inferior good is one for which a(n) _____ in buyers' incomes causes a(n) _____.

answer

increase; decrease in demand

question

An increase in the demand for gasoline today caused by concerns that gasoline prices will be higher tomorrow is most likely attributable to a change in:

answer

consumer expectations.

question

The demand curve for running shoes has shifted to the right. What could have caused it?

answer

an increased enthusiasm among the population for running as exercise

question

Which factor will NOT cause an increase in the supply of cornflakes?

answer

an increase in the price of cornflakes

question

When the price of desks increases, the:

answer

quantity supplied increases.

question

A decrease in supply of good X means:

answer

a shift to the left of the entire supply curve for good X.

question

The primary difference between a change in supply and a change in the quantity supplied is that:

answer

a change in quantity supplied is a movement along the supply curve, while a change in supply is a shift in the supply curve.

question

If the price of a commodity increases, you can usually expect the:

answer

quantity supplied to increase.

question

Which influence does NOT shift the supply curve?

answer

people deciding that they want to buy more of the product

question

Which factor will NOT cause an increase in the supply of good X?

answer

an increase in the price of inputs used to produce good X

question

Which factor would cause an INCREASE in the supply of a good?

answer

an increase in the number of sellers

question

Which factor would cause an INCREASE in the supply of a good?

answer

a decrease in the price of resources used in production

question

Which factor would cause a DECREASE in the supply of a good?

answer

an increase in the price of goods that are used in production

question

Which factor would NOT cause the supply curve to shift?

answer

a change in the price of the good

question

Market equilibrium occurs when:

answer

there is no incentive for prices to change in the market, quantity demanded equals quantity supplied, and the market clears.

question

The market equilibrium is found at the:

answer

price where quantity demanded equals quantity supplied.

question

Suppose the equilibrium price of good Y is $5 and the equilibrium quantity is 150 units. Supply in this market is upward sloping. If the price of good Y is $12:

answer

there will be an excess supply of good Y.

question

Excess supply occurs when the:

answer

price is above the equilibrium price.

question

If in a competitive market the quantity supplied exceeds the quantity demanded, we expect prices to:

answer

fall.

question

If the quantity of housing supplied in a community is greater than the quantity of houses demanded, the existing price:

answer

is above the market equilibrium price.

question

If the supply and demand curves intersect at a price of $47, then any price above that would result in:

answer

a shortage.

question

If the supply and demand curves intersect at a price of $14, then any price below that would result in:

answer

a shortage.

question

Which factor ALWAYS results in an increase in price and quantity?

answer

an increase in demand with no change in supply

question

The market price of airline flights increased recently.

answer

demand increased.

question

If supply is upward sloping, a shift of a demand curve to the right, all other things unchanged, will:

answer

increase equilibrium price and quantity.

question

If supply is upward sloping, a decrease in demand with no change in supply will lead to a(n) _____ in equilibrium quantity and a(n) _____ in equilibrium price.

answer

decrease; decrease

question

Given a supply curve that is positively sloped and a demand curve for a normal good that is negatively sloped, an increase in income will result in:

answer

an increase in equilibrium price and quantity.

question

In the market for corn tortilla chips, what would cause a price increase?

answer

A fungus kills much of the corn crop in Nebraska.

question

The market for lemonade is in equilibrium and the price of lemons rises. In the lemonade market _____ will _____, _____ the price and _____ the quantity.

answer

supply; decrease; increasing; decreasing

question

Consider the market for corn. What happens if there is an increased demand for corn tortillas and, at the same time, a new corn seed becomes available that dramatically increases the yield per acre?

answer

The change in price is indeterminate; quantity increases.

question

answer

fall; rise or fall

question

Suppose that supply increases and demand decreases. What is the MOST likely effect on price and quantity?

answer

The price will decrease, but quantity may increase, decrease, or stay the same.

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