question
market
answer
process of buyers and sellers exchanging goods and services
question
competitive market
answer
a market where the many buyers and sellers have little market power - each buyer's or seller's effect on market price is negligible
question
which of the following is a market?
a. garage sale
b. restaurant
c. NY stock exchange
d. ebay auction
e. all of the above
a. garage sale
b. restaurant
c. NY stock exchange
d. ebay auction
e. all of the above
answer
e. all the above
question
in a competitive market,
a. there are a number of buyers and sellers
b. no single buyer or seller can appreciably affect the market price
c. sellers offer similar products
d. all the above are true
a. there are a number of buyers and sellers
b. no single buyer or seller can appreciably affect the market price
c. sellers offer similar products
d. all the above are true
answer
d. all the above
question
buyers determine the _____ side of the market; sellers determine the _________ side of the market
a. demand; demand
b. demand; supply
c. supply; demand
d. supply; supply
a. demand; demand
b. demand; supply
c. supply; demand
d. supply; supply
answer
b. demand; supply
question
law of demand
answer
the quantity of a good or service demanded varies INVERSELY (negatively) with its price, ceteris paribus
question
individual demand schedule
answer
schedule that shows the relationship between price and quantity demanded
question
individual demand curve
answer
graph shows inverse relationship between price and quantity demanded
question
market demand curve
answer
horizontal summation of individual demand curves
question
if the demand for milk is downward sloping, then an increase in the price of milk will result in an
a. increase in the demand for milk
b. decrease in the demand for milk
c. increase in the quantity of milk demanded
d. decrease in the quantity of milk demanded
e. decrease in the supply of milk
a. increase in the demand for milk
b. decrease in the demand for milk
c. increase in the quantity of milk demanded
d. decrease in the quantity of milk demanded
e. decrease in the supply of milk
answer
d. decrease in the quantity of milk demanded
question
which of the following is true?
a. the law of demand states that when the price of a good falls (rises), the quantity demanded of rises (falls), ceteris paribus
b. an individual demand curve is a graph of the relationship between the price and the quantity demanded
c. the market demand curve shows the amount of a good that all buyers in the market would be willing and able to buy at various prices
d. all of the above
a. the law of demand states that when the price of a good falls (rises), the quantity demanded of rises (falls), ceteris paribus
b. an individual demand curve is a graph of the relationship between the price and the quantity demanded
c. the market demand curve shows the amount of a good that all buyers in the market would be willing and able to buy at various prices
d. all of the above
answer
d. all of above
question
which of the following is true?
a. the relationship between price and quantity demanded is inverse or negative
b. the market demand curve is the vertical summation of individual demand curves
c. a change in a good's price causes a movement along its demand curve
d. all the above
e. a and c
a. the relationship between price and quantity demanded is inverse or negative
b. the market demand curve is the vertical summation of individual demand curves
c. a change in a good's price causes a movement along its demand curve
d. all the above
e. a and c
answer
e. a and c
question
change in quantity demanded
answer
a change in a good's own price leads to a change in quantity demanded, a movement along the demand curve
question
shift in demand curve
answer
change in a variable other than the price of the good itself that affects a consumer's willingness to buy
question
determinants of demand:
answer
prices of related goods
consumer income
number of buyers
taste
expectations
consumer income
number of buyers
taste
expectations
question
substitutes
answer
goods are subs if an increase in the PRICE of one good causes an increase in the DEMAND of the other (positive)
question
complements
answer
goods are comps if an increase in the price of one good leads to the decrease in the demand for the other (inverse)
question
Income has a ______ relationship with demand for goods
answer
positive
question
normal good
answer
income increases, demand increases for the good, and vice versa
question
inferior good
answer
income increases, demand decreases for good, and vice versa
question
change in the number of buyers
answer
more population, more demand
question
change in taste
answer
taste can be influenced by advertising, promotion, news stories, behavior of popular figures, etc. change in occupation, health, and age can change taste also
question
change in expectations
answer
expect future price raise, current demand increases
expect future price decrease, current demand decreases
expect income raise, more willing to spend, and vice versa
expect future price decrease, current demand decreases
expect income raise, more willing to spend, and vice versa
question
which of the following would be most likely to increase the demand for jelly?
a. an increase in the price of peanut butter, often used w jelly
b. increase in income; jelly is a normal good
c. decrease in the price of jelly
d. medical research finds that daily consumption of jelly makes people live 10 years less
a. an increase in the price of peanut butter, often used w jelly
b. increase in income; jelly is a normal good
c. decrease in the price of jelly
d. medical research finds that daily consumption of jelly makes people live 10 years less
answer
b. increase in income; jelly is a normal good
not c because change in price of the actual good is change in quantity demanded
not c because change in price of the actual good is change in quantity demanded
question
which of the following would NOT cause a change in the demand for cheese?
a. increase in the price of crackers, eaten w cheese
b. increase in the income of cheese consumers
c. increase in the population of cheese lovers
d. increase in the price of cheese
a. increase in the price of crackers, eaten w cheese
b. increase in the income of cheese consumers
c. increase in the population of cheese lovers
d. increase in the price of cheese
answer
d. increase in price of cheese
question
whenever the price of good A decreases, the demand for good B increases. goods A and B appear to be
a. complements
b. substitutes
c. inferior goods
d. normal goods
e. inverse goods
a. complements
b. substitutes
c. inferior goods
d. normal goods
e. inverse goods
answer
a. complements
question
whenever the price of good A increases, the demand for good B increases as well. goods A and B appear to be
a. complements
b. substitutes
c. inferior goods
d. normal goods
e. inverse goods
a. complements
b. substitutes
c. inferior goods
d. normal goods
e. inverse goods
answer
b. substitutes
question
the difference between a change in quantity demanded and a change in demand is that a change in
a. quantity demanded is caused by a change in a good's own price, while a change in demand is caused by a change in some other variable, such as income, tastes, or expectations
b. demand is caused by a change in a good's own price, while a change in quantity demanded is caused by a change in some other variable like income or taste
c. quantity demanded is a change in the amount people actually buy, while a change in demand is a change in the amount they want to buy
d. this is a trick question. a change in demand and a change in quantity demanded are the same thing
a. quantity demanded is caused by a change in a good's own price, while a change in demand is caused by a change in some other variable, such as income, tastes, or expectations
b. demand is caused by a change in a good's own price, while a change in quantity demanded is caused by a change in some other variable like income or taste
c. quantity demanded is a change in the amount people actually buy, while a change in demand is a change in the amount they want to buy
d. this is a trick question. a change in demand and a change in quantity demanded are the same thing
answer
a. quantity demanded change in good's own price, change in demand is caused by change in another variable
question
suppose CNN announces that bad weather in central america has greatly reduced the number of cocoa bean plants and for this reason the price of chocolate is expected to rise soon. As a result,
a. the current market demand for chocolate will decrease
b. the current market demand for chocolate will increase
c. the current quantity demanded for chocolate will decrease
d. no change will occur in the current market for chocolate
a. the current market demand for chocolate will decrease
b. the current market demand for chocolate will increase
c. the current quantity demanded for chocolate will decrease
d. no change will occur in the current market for chocolate
answer
b. current market demand for chocolate will increase
question
if incomes are rising, in the market for an inferior good,
a. demand will rise
b. demand will fall
c. supply will rise
d. supply will fall
a. demand will rise
b. demand will fall
c. supply will rise
d. supply will fall
answer
b. demand will fall
question
law of supply
answer
the higher (lower) the price of the good, the greater (smaller) the quantity supplied, ceteris paribus
price goes up, supply goes up, and vice versa
price goes up, supply goes up, and vice versa
question
an upward-sloping supply curve shows that
a. buyers are willing to pay more for particularly scarce products
b. sellers expand production as the product price falls
c. sellers are willing to increase production of their goods if they receive higher prices for them
d. buyers are willing to buy more as the product price falls.
a. buyers are willing to pay more for particularly scarce products
b. sellers expand production as the product price falls
c. sellers are willing to increase production of their goods if they receive higher prices for them
d. buyers are willing to buy more as the product price falls.
answer
c. sellers are willing to increase production of their goods if they receive higher prices for them
question
along a supply curve,
a. supply changes as price changes
b. quantity supplied changes as price changes
c. supply changes technology changes
d. quantity supplied changes as technology changes
a. supply changes as price changes
b. quantity supplied changes as price changes
c. supply changes technology changes
d. quantity supplied changes as technology changes
answer
b. quantity supplied changes as price changes
question
a supply curve illustrates a _________ relationship between ___________ and ___________.
a. direct; price; supply
b. direct; price; quantity demanded
c. direct; price; quantity supplied
d. introverted; price; quantity demanded
e. inverse; price; quantity supplied
a. direct; price; supply
b. direct; price; quantity demanded
c. direct; price; quantity supplied
d. introverted; price; quantity demanded
e. inverse; price; quantity supplied
answer
c. direct; price; quantity supplied
question
which of the following is true?
a. the law of supply states that the higher (lower) the price of a good, the greater (smaller) the quantity supplied
b. the relationship between price and quantity supplied is positive because profit opportunities are greater at higher prices and because the higher production costs of increased output mean that suppliers will require higher prices.
c. the market supply curve is a graph of the amount of goods that suppliers are willing and able to supply various prices.
d. all of the above
a. the law of supply states that the higher (lower) the price of a good, the greater (smaller) the quantity supplied
b. the relationship between price and quantity supplied is positive because profit opportunities are greater at higher prices and because the higher production costs of increased output mean that suppliers will require higher prices.
c. the market supply curve is a graph of the amount of goods that suppliers are willing and able to supply various prices.
d. all of the above
answer
d. all of the above
question
shifts in supply: "SPENT"
answer
Seller's input prices
Prices of related goods
Expectations
Number of sellers
Technology
Prices of related goods
Expectations
Number of sellers
Technology
question
change in seller's input prices
answer
if input prices rise, it increases cost of producing the output of a good, so the supply curve would shift left (negative relationship)
question
change in prices of related goods
answer
substitutes in production: decrease in price in the wheat market causes an increase in supply (rightward shift) in the corn market (negative relationship)
complements in production: increase in price of beef, so increase in quantity supplied of beef, and so they increase the supply of leather also (positive rel.)
complements in production: increase in price of beef, so increase in quantity supplied of beef, and so they increase the supply of leather also (positive rel.)
question
change in expectations (supply)
answer
If producers expect higher prices in the future, they will supply less so as to take advantage of the future profit
question
change in the number of sellers
answer
if there are more sellers, there is an increase in supply
question
change in technology
answer
technology can lower cost of production, which increases supply
question
all of the following factors will affect the supply of shoes except one. which will not affect the supply of shoes?
a. higher wages for shoe factory workers
b. higher prices for leather
c. a technological improvement that reduces waste of leather
d. an increase in consumer income
a. higher wages for shoe factory workers
b. higher prices for leather
c. a technological improvement that reduces waste of leather
d. an increase in consumer income
answer
d. increase in consumer income
question
the difference between a change in quantity supplied and a change in supply is that a change in
a. quantity supplied is caused by a change in a good's own price, while a change in supply is caused by a change in some other variable, such as input prices, prices of related goods, expectations, or taxes
b. supply is caused by a change in a good's own price, while a change in quantity supplied is caused by a change in some other variable
c. quantity supplied is a change in the amount people want to sell, while a change in supply is a change in the amount they actually sell
d. supply and a change in the quantity supplied are the same thing
a. quantity supplied is caused by a change in a good's own price, while a change in supply is caused by a change in some other variable, such as input prices, prices of related goods, expectations, or taxes
b. supply is caused by a change in a good's own price, while a change in quantity supplied is caused by a change in some other variable
c. quantity supplied is a change in the amount people want to sell, while a change in supply is a change in the amount they actually sell
d. supply and a change in the quantity supplied are the same thing
answer
a. quantity supplied is caused by a change in a good's own price, while a change in supply is caused by a change in some other variable, such as input prices, prices of related goods, expectations, or taxes
question
a supplier of product informs a seller of a 25% increase in price. which variable determining the position of the supply curve has changed, and what effect does it have on supply?
a. future expectations; supply decreases
b. future expectations; supply increases
c. input prices; supply decreases
d. input prices; supply increases
e. technology; supply increases
a. future expectations; supply decreases
b. future expectations; supply increases
c. input prices; supply decreases
d. input prices; supply increases
e. technology; supply increases
answer
c. input prices; supply decreases
question
which of the following is NOT a determinant of supply?
a. input prices
b. technology
c. tastes
d. expectations
e. prices of related goods
a. input prices
b. technology
c. tastes
d. expectations
e. prices of related goods
answer
c. tastes
question
a leftward shift in supply could be cause by
a. an improvement in productive technology
b. a decrease in income
c. some firms leaving the industry
d. a fall in the price of inputs to the industry
a. an improvement in productive technology
b. a decrease in income
c. some firms leaving the industry
d. a fall in the price of inputs to the industry
answer
c. some firms leaving the industry
question
market equilibrium
answer
the point at which the market supply and market demand curves intersect
question
equilibrium price
answer
the price at the intersection of the market supply and demand curves; at this price, the quantity demanded equals the quantity supplied
question
equilibrium quantity
answer
the quantity at the intersection of the market supply and demand curves; at the equilibrium quantity, the quantity demanded equals the quantity supplied
question
surplus
answer
a situation where quantity supplied exceeds quantity demanded: sellers have incentive to cut price
question
shortage
answer
a situation where quantity demanded exceeds quantity supplied: incentive to raise price
question
a market will experience a ___________ in a situation where quantity supplied exceeds quantity demanded and a ___________ in a situation where quantity demanded exceeds quantity supplied.
a. shortage; shortage
b. surplus; surplus
c. shortage; surplus
d. surplus; shortage
a. shortage; shortage
b. surplus; surplus
c. shortage; surplus
d. surplus; shortage
answer
d. surplus; shortage
question
the price of a good will tend to rise when
a. a temporary shortage at the current price occurs (assuming no price controls are imposed)
b. a temporary surplus at the current price occurs (assuming no price control)
c. demand decreases
d. supply increases
a. a temporary shortage at the current price occurs (assuming no price controls are imposed)
b. a temporary surplus at the current price occurs (assuming no price control)
c. demand decreases
d. supply increases
answer
a. temporary shortage at current price
question
which of the following is true?
a. the intersection of the supply and demand curves shows the equilibrium price and equilibrium quantity in a market
b. a surplus is a situation where quantity supplied exceeds quantity demanded
c. a shortage is a situation where quantity demanded exceeds quantity supplied
d. shortages and surpluses set in motion actions by many buyers and sellers that will move the market toward the equilibrium price and quantity unless otherwise prevented
e. all of the above
a. the intersection of the supply and demand curves shows the equilibrium price and equilibrium quantity in a market
b. a surplus is a situation where quantity supplied exceeds quantity demanded
c. a shortage is a situation where quantity demanded exceeds quantity supplied
d. shortages and surpluses set in motion actions by many buyers and sellers that will move the market toward the equilibrium price and quantity unless otherwise prevented
e. all of the above
answer
e. all of the above
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