Microeconomics Assignment 2 Part 2

A normal good is one:
A. whose amount demanded will increase as its price increases.
B. whose amount demanded will increase as its price decreases.
C. whose demand curve will shift leftward as incomes rise.
D. for which the consumption varies directly with income.

A price ceiling means that:
A. government is imposing a legal price that is typically below the equilibrium price.
B. government wants to stop a deflationary spiral.
C. there is currently a surplus of the relevant product.
D. government is imposing a legal price that is typically above the equilibrium price.

A price floor means that:
A. inflation is severe in this particular market.
B. government is imposing a minimum legal price that is typically above the equilibrium price.
C. sellers are artificially restricting supply to raise price.
D. government is imposing a maximum legal price that is typically below the equilibrium price.

A product market is in equilibrium:
A. where the demand and supply curves intersect.
B. whenever there is no shortage of the product.
C. when consumers want to buy more of the product than producers offer for sale.
D. whenever there is no surplus of the product.

An effective ceiling price will:
A. induce new firms to enter the industry.
B. clear the market.
C. result in a product surplus.
D. result in a product shortage.

An effective price floor will:
A. result in a product surplus.
B. force some firms in this industry to go out of business.
C. result in a product shortage.
D. clear the market.

An improvement in production technology will:
A. increase equilibrium price.
B. shift the demand curve to the left.
C. shift the supply curve to the left.
D. shift the supply curve to the right.

An increase in product price will cause:
A. quantity demanded to decrease.
B. quantity supplied to decrease.
C. quantity demanded to increase.
D. the supply curve to shift to the left.

An increase in the quantity demanded means that:
A. given supply, the price of the product can be expected to decline.
B. the demand curve has shifted to the right.
C. the demand curve has shifted to the left.
D. price has declined and consumers therefore want to purchase more of the product.

An inferior good is:
A. one whose price and quantity demanded vary directly.
B. not accurately defined by any of these statements.
C. one that has not been approved by the Federal Food and Drug Administration.
D. one whose demand curve will shift rightward as incomes rise.

An increase in the price of a product will reduce the amount of it purchased because:
A. the higher price means that real incomes have risen.
B. supply curves are upsloping.
C. consumers substitute relatively high-priced for relatively low-priced products.
D. consumers will substitute other products for the one whose price has risen.

Answer the question on the basis of the given supply and demand data for wheat: Refer to the data. Equilibrium price will be:
A. $2.
B. $3.
C. $4.
D. $1.

Black markets are associated with:
A. price floors and the resulting product shortages.
B. ceiling prices and the resulting product surpluses.
C. price floors and the resulting product surpluses.
D. ceiling prices and the resulting product shortages.

At the point where the demand and supply curves for a product intersect:
A. either a shortage or a surplus of the product might exist, depending on the degree of competition.
B. the quantity that consumers want to purchase and the amount producers choose to sell are the same.
C. the selling price and the buying price need not be equal.
D. the market may, or may not, be in equilibrium.

Because of unseasonably cold weather, the supply of oranges has substantially decreased. This statement indicates the:
A. price of oranges will fall.
B. amount of oranges that will be available at various prices has declined.
C. demand for oranges will necessarily rise.
D. equilibrium quantity of oranges will rise.

By an "increase in demand," economists mean that:
A. a leftward shift of the demand curve has occurred.
B. the quantity demanded at each price in a set of prices is smaller.
C. product price has fallen so consumers move down to a new point on the demand curve.
D. the quantity demanded at each price in a set of prices is greater.

Economists use the term "demand" to refer to:
A. a particular price-quantity combination on a stable demand curve.
B. the total amount spent on a particular commodity over a fixed time period.
C. an upsloping line on a graph that relates consumer purchases and product price.
D. a schedule of various combinations of market prices and amounts/quantities demanded.

Given a downsloping demand curve and an upsloping supply curve for a product, an increase in the price of a substitute good (from the buyer's perspective) will:
A. decrease equilibrium price and increase equilibrium quantity.
B. increase equilibrium price and quantity.
C. increase equilibrium price and decrease equilibrium quantity.
D. decrease equilibrium price and quantity.

If X is a normal good, a rise in money income will shift the:
A. supply curve for X to the left.
B. demand curve for X to the right.
C. supply curve for X to the right.
D. demand curve for X to the left.

If Z is an inferior good, an increase in money income will shift the:
A. demand curve for Z to the left.
B. supply curve for Z to the right.
C. supply curve for Z to the left.
D. demand curve for Z to the right.

If products A and B are complements and the price of B decreases, the:
A. demand for A will decline and the demand for B will increase.
B. amount of B purchased will increase, but the demand curve for A will not shift.
C. demand for A will increase and the quantity of B demanded will increase.
D. demand curves for both A and B will shift to the left.

If products C and D are close substitutes, an increase in the price of C will:
A. tend to cause the price of D to fall.
B. shift the demand curve of C to the left and the demand curve of D to the right.
C. shift the demand curves of both products to the right.
D. shift the demand curve of D to the right.

If the price of product L increases, the demand curve for close-substitute product J will:
A. shift to the right.
B. shift downward toward the horizontal axis.
C. shift to the left.
D. remain unchanged.

If there is a shortage of product X, and the price is free to change:
A. the price of the product will decline.
B. fewer resources will be allocated to the production of this good.
C. the supply curve will shift to the left and the demand curve to the right, eliminating the shortage.
D. the price of the product will rise.

If there is a surplus of a product, its price:
A. is below the equilibrium level.
B. will rise in the near future.
C. is above the equilibrium level.
D. is in equilibrium.

If two goods are complements:
A. an increase in the price of one will increase the demand for the other.
B. they are consumed independently.
C. a decrease in the price of one will increase the demand for the other.
D. they are necessarily inferior goods.

In moving along a demand curve, which of the following is not held constant?
A. The price of the product for which the demand curve is relevant.
B. Prices of complementary goods.
C. Price expectations.
D. Consumer incomes.

In moving along a supply curve, which of the following is not held constant?
A. The price of the product for which the supply curve is relevant.
B. The number of firms producing this good.
C. Expectations about the future price of the product.
D. Techniques used in producing this product.

In the past few years, the demand for donuts has greatly increased. This increase in demand might best be explained by:
A. an increase in the price of coffee.
B. a change in buyer tastes.
C. an increase in the cost of making donuts.
D. consumers expecting donut prices to fall.

Increasing marginal cost of production explains:
A. why the demand curve is downsloping.
B. why the supply curve is upsloping.
C. the law of demand.
D. the income effect.

Productive efficiency refers to:
A. the full employment of all available resources.
B. the use of the least-cost method of production.
C. production at some point inside of the production possibilities curve.
D. the production of the product mix most wanted by society.

The law of demand states that, other things equal:
A. price and quantity demanded are directly related.
B. consumers will buy more of a product at high prices than at low prices.
C. the larger the number of buyers in a market, the lower will be product price.
D. price and quantity demanded are inversely related.

The law of supply indicates that, other things equal:
A. producers will offer more of a product at low prices than at high prices.
B. producers will offer more of a product at high prices than at low prices.
C. consumers will purchase less of a good at high prices than at low prices.
D. the product supply curve is downsloping.