question
What do economists mean when they use the Latin expression ceteris paribus?
answer
All else equal.
question
Use the point drawing tool to show an increase in demand given the combination of price and quantity-demanded shown at point A.
answer
Draw a point to the right of the original demand curve
question
The law of demand is the assertion that...
answer
the quantity demanded of a product is inversely related to its price.
question
An increase in the price of a product causes a decrease in quantity demanded because of the income and substitution effects. More specifically...
answer
the substitution effect is the decrease in quantity demanded because the product is more expensive relative to other goods and the income effect is the decrease in quantity demanded owing to the decline in consumers' purchasing power.
question
From the list below, select the variable that will cause the demand curve to shift:
answer
Consumer income
question
Orange soda is considered to be a normal good.
Use the line drawing tool to show how a decrease in consumer income affects the demand for orange soda. Label this new line 'D2'.
Use the line drawing tool to show how a decrease in consumer income affects the demand for orange soda. Label this new line 'D2'.
answer
Draw a line below the original demand curve
question
Jiffy peanut butter and Smucker's Strawberry jam are considered to be complementary goods.
Use the line drawing tool to show how an increase in the price of Jiffy peanut butter affects the demand for Smucker's Strawberry jam. Label this new line 'D2'.
Use the line drawing tool to show how an increase in the price of Jiffy peanut butter affects the demand for Smucker's Strawberry jam. Label this new line 'D2'.
answer
Draw a line below the original demand curve
question
The Toyota Prius is a gasoline-electric hybrid car that gets 54 miles to the gallon. An article in the Wall Street Journal notes that sales of the Prius have been hurt by low gasoline prices and that: "Americans are now more likely to trade in a hybrid or an electric vehicle for an SUV...."
Does the article indicate that gasoline-powered cars and gasoline are substitutes or complements? Briefly explain.
Does the article indicate that gasoline-powered cars and gasoline are substitutes or complements? Briefly explain.
answer
Complements, because they are used together.
question
The Toyota Prius is a gasoline-electric hybrid car that gets 54 miles to the gallon. An article in the Wall Street Journal notes that sales of the Prius have been hurt by low gasoline prices and that: "Americans are now more likely to trade in a hybrid or an electric vehicle for an SUV...."
Does it indicate that gasoline-powered cars and hybrids are substitutes or complements?
Does it indicate that gasoline-powered cars and hybrids are substitutes or complements?
answer
Substitutes, because the more consumers buy of one good, the less they will buy of the other good.
question
State whether each of the following events will result in a movement along the demand curve for McDonald's Big Mac hamburgers or whether it will cause the curve to shift.
The price of Burger King's Whopper hamburger increases. This will cause...
The price of Burger King's Whopper hamburger increases. This will cause...
answer
demand for McDonald's Big Mac hamburgers to increase.
question
State whether each of the following events will result in a movement along the demand curve for McDonald's Big Mac hamburgers or whether it will cause the curve to shift.
McDonald's eliminates $1.00 off coupons. This will cause
McDonald's eliminates $1.00 off coupons. This will cause
answer
a movement along the demand curve for McDonald's Big Mac hamburgers.
question
State whether each of the following events will result in a movement along the demand curve for McDonald's Big Mac hamburgers or whether it will cause the curve to shift.
KFC raises the price of a bucket of fried chicken. This will...
KFC raises the price of a bucket of fried chicken. This will...
answer
shift the demand for McDonald's Big Mac hamburgers to the right.
question
State whether each of the following events will result in a movement along the demand curve for McDonald's Big Mac hamburgers or whether it will cause the curve to shift.
The U.S. economy enters a period of rapid growth in incomes. This will cause
The U.S. economy enters a period of rapid growth in incomes. This will cause
answer
demand for McDonald's Big Mac hamburgers to shift to the left if they are inferior goods.
question
Imagine that the curves shown in the accompanying figure represent two demand curves for traditional wings (basket of six) at Buffalo Wild Wings. Further assume that wings are a normal good.
The movement from point A to B on D1 is caused by...
The movement from point A to B on D1 is caused by...
answer
a decrease in the price of baskets of traditional wings.
question
Imagine that the curves shown in the accompanying figure represent two demand curves for traditional wings (basket of six) at Buffalo Wild Wings. Further assume that wings are a normal good.
Indicate which of the following could cause a movement from point A to C. (Check all that apply.)
Indicate which of the following could cause a movement from point A to C. (Check all that apply.)
answer
A decline in vegetarianism.
A rise in the number of buyers.
A rise in the number of buyers.
question
Consider the following two uses of the word "demand" in news articles:
i. An article in the Wall Street Journal noted that an "increase in the price of oil quickly reduces demand for oil."
ii. A different article in the Wall Street Journal noted: "Electric cars are poised to reduce U.S. gasoline demand by 5% over the next two decades...."
Do you agree with how the first Wall Street Journal article uses the word "demand"?
i. An article in the Wall Street Journal noted that an "increase in the price of oil quickly reduces demand for oil."
ii. A different article in the Wall Street Journal noted: "Electric cars are poised to reduce U.S. gasoline demand by 5% over the next two decades...."
Do you agree with how the first Wall Street Journal article uses the word "demand"?
answer
No, a change in the price of oil affects the quantity of oil demanded, not the demand for oil.
question
Consider the following two uses of the word "demand" in news articles:
i. An article in the Wall Street Journal noted that an "increase in the price of oil quickly reduces demand for oil."
ii. A different article in the Wall Street Journal noted: "Electric cars are poised to reduce U.S. gasoline demand by 5% over the next two decades...."
Do you agree with how the second Wall Street Journal article uses the word "demand"?
i. An article in the Wall Street Journal noted that an "increase in the price of oil quickly reduces demand for oil."
ii. A different article in the Wall Street Journal noted: "Electric cars are poised to reduce U.S. gasoline demand by 5% over the next two decades...."
Do you agree with how the second Wall Street Journal article uses the word "demand"?
answer
Yes, the article is correct in its use of the word "demand."
question
On the diagram to the right, a movement from
A to B represents a...
A to B represents a...
answer
change in quantity demanded.
question
Which of the following would cause a
shift in the demand curve from point A to point B?
shift in the demand curve from point A to point B?
answer
An increase in income (normal good).
A decrease in income (inferior good).
An increase in the price of a substitute good.
All of the above.
A decrease in income (inferior good).
An increase in the price of a substitute good.
All of the above.
question
The diagram in panel b is an example of...
answer
a demand curve.
question
According to the law of demand,
answer
there is an inverse relationship between price and quantity demanded.
question
The distinction between a normal and an inferior good is...
answer
when income increases, demand for a normal good increases while demand for an inferior good falls.
question
Consider the market for Ping golf clubs.
Suppose the price of memberships at local golf courses increases.
Use the line drawing tool to show how this affects the demand for Ping golf clubs by drawing a new demand curve. Assume memberships at local golf courses and Ping golf clubs are complements. Properly label this line.
Suppose the price of memberships at local golf courses increases.
Use the line drawing tool to show how this affects the demand for Ping golf clubs by drawing a new demand curve. Assume memberships at local golf courses and Ping golf clubs are complements. Properly label this line.
answer
Draw a line below the original demand curve
question
Instead, suppose the price of tennis rackets
increases. If tennis rackets and golf clubs are substitutes, then the demand for Ping golf clubs will _________.
increases. If tennis rackets and golf clubs are substitutes, then the demand for Ping golf clubs will _________.
answer
increase
question
________ is used to describe how changes in price affect a consumer's purchasing power, and ________ is used to describe how a change in price affects the quantity demanded of a good by making it more or less expensive than substitute goods.
answer
The income effect; the substitution effect
question
The difference between a change in supply and a change in the quantity supplied is that the latter is...
answer
produced by a change in the product's own price while the former is caused by a variety of variables other than the product's price.
question
From the list below, select the variable that will cause the supply curve to shift:
answer
The cost of raw materials
question
Below are four supply curve diagrams, each of which represents a change in supply or a change in quantity supplied.
To take advantage of high prices for snow shovels during a snowy winter, Alexander Shovels, Inc., decides to increase output.
To take advantage of high prices for snow shovels during a snowy winter, Alexander Shovels, Inc., decides to increase output.
answer
4 (quantity supplied shifts up from point A to point B)
question
Below are four supply curve diagrams, each of which represents a change in supply or a change in quantity supplied.
The success of Nike and Adidas athletic shoes leads more firms to begin producing athletic shoes.
The success of Nike and Adidas athletic shoes leads more firms to begin producing athletic shoes.
answer
3 (supply curve shifts to the right from S1 to S2)
question
Below are four supply curve diagrams, each of which represents a change in supply or a change in quantity supplied.
In the six months following the Japanese earthquake and tsunami in 2011, production of automobiles in Japan declined by 20 percent.
In the six months following the Japanese earthquake and tsunami in 2011, production of automobiles in Japan declined by 20 percent.
answer
1 (supply curve shifts to the left from S1 to S2)
question
Suppose that the curves in the figure to the right represent two supply curves for traditional wings (basket of six) at Buffalo Wild Wings.
The movement from point A to B on S1 is caused by...
The movement from point A to B on S1 is caused by...
answer
an increase in the price of baskets of traditional wings.
question
Indicate which of the following would cause a movement from point A to C. (Check all that apply.)
answer
A decrease in the prices of substitutes in production.
An increase in the number of sellers.
An increase in the number of sellers.
question
In many cities, firms that own office buildings can renovate them for use as residential apartments. According to a news story, in many cities "residential rents are surpassing office rents."
The response to an increase in residential rents would be...
The response to an increase in residential rents would be...
answer
a decrease in the supply of office space, shifting it to the left.
question
On the diagram to the right, a movement from
B to C represents a...
B to C represents a...
answer
change in supply.
question
According to the law of supply...
answer
A. there is a positive relationship between price and quantity supplied.
C. as the price of a product increases, firms will supply more of it to the market.
D. A and C only
C. as the price of a product increases, firms will supply more of it to the market.
D. A and C only
question
The diagram in panel b is an example of...
answer
a supply curve.
question
What do economists mean by market equilibrium?
answer
A market outcome where quantity supplied is equal to quantity demanded.
question
When economists speak of a shortage, they mean a situation in which...
answer
A. some consumers are unable to make a purchase at the current price.
B. the quantity demanded exceeds quantity supplied.
C. the market price is below the equilibrium price.
D. all of the above.
B. the quantity demanded exceeds quantity supplied.
C. the market price is below the equilibrium price.
D. all of the above.
question
Consider the market for gasoline, illustrated in the figure to the right.
The equilibrium quantity of gasoline is ___ million gallons (enter a numeric response using a real number rounded to two decimal places) and the equilibrium price is _______ per gallon.
If instead the market price were $3.25, then there would be a __________ of ___ million gallons.
The equilibrium quantity of gasoline is ___ million gallons (enter a numeric response using a real number rounded to two decimal places) and the equilibrium price is _______ per gallon.
If instead the market price were $3.25, then there would be a __________ of ___ million gallons.
answer
5 million; $2.50; surplus; 3
question
In the diagram, point A provides the _____, point B the _____, and point C the _____.
answer
equilibrium price; market equilibrium; equilibrium quantity
question
Assume the figure to the right illustrates the market for houses for sale in a small city.
Suppose the market price of houses is $175,000. How large will the resulting surplus be?
At a price of $175,000, there will be ______ surplus houses. (Enter your response as a whole number.)
What is the equilibrium price of houses?
The equilibrium price is ___________. (Enter your response as a whole number.)
Suppose the market price of houses is $175,000. How large will the resulting surplus be?
At a price of $175,000, there will be ______ surplus houses. (Enter your response as a whole number.)
What is the equilibrium price of houses?
The equilibrium price is ___________. (Enter your response as a whole number.)
answer
200; $150,000
question
Consider the market for LCD TVs.
The market equilibrium is where...
The market equilibrium is where...
answer
supply equals demand.
question
In this example, the equilibrium price is _______ and the equilibrium quantity is _______ LCD TVs. (Enter your responses as whole numbers.)
Suppose instead that the price of LCD TVs is $800. This will result in a __________, which will place ___________ pressure on the price.
Suppose instead that the price of LCD TVs is $800. This will result in a __________, which will place ___________ pressure on the price.
answer
$1400; 5000; shortage; upward
question
The figure to the right illustrates the U.S. market for rugs made in a particular foreign country.
Suppose the market price of rugs is $1,250.
At a price of $1,250, there will be a ____________ of rugs.
To reach an equilibrium, the price of rugs in this market must ________.
Suppose the market price of rugs is $1,250.
At a price of $1,250, there will be a ____________ of rugs.
To reach an equilibrium, the price of rugs in this market must ________.
answer
shortage; rise
question
If a surplus exists in a market, we know that the actual price is...
answer
above the equilibrium price, and the quantity supplied is greater than the quantity demanded.
question
If a shortage exists in a market, we know that the actual price is...
answer
below the equilibrium price, and the quantity demanded is greater than the quantity supplied.
question
Refer to the diagram:
1.) Use the line drawing tool to draw a demand curve that shifts to the left. Label this line 'D2'.
2.) Use the line drawing tool to draw a supply curve that shifts to the left by more than the demand line. Label this line 'S2'.
3.) Use the point drawing tool to identify the new point of equilibrium. Label this point.
With these shifts, the equilibrium price will
____________.
1.) Use the line drawing tool to draw a demand curve that shifts to the left. Label this line 'D2'.
2.) Use the line drawing tool to draw a supply curve that shifts to the left by more than the demand line. Label this line 'S2'.
3.) Use the point drawing tool to identify the new point of equilibrium. Label this point.
With these shifts, the equilibrium price will
____________.
answer
increase
question
Marginal benefit is...
answer
the additional benefit from consuming one more unit.
question
Why is the demand curve referred to as a marginal benefit curve?
answer
It shows the willingness of consumers to purchase a product at different prices.
question
Marginal cost is....
answer
the additional cost of producing one more unit.
question
Why is the supply curve referred to as a marginal cost curve?
answer
It shows the willingness of firms to supply a product at different prices.
question
Consumer surplus is...
answer
the difference between the highest price a consumer is willing to pay and the price the consumer actually pays.
question
How does consumer surplus change as the equilibrium price of a good rises or falls?
As the price of a good rises, consumer surplus ________________, and as the price of a good falls, consumer surplus _____________.
As the price of a good rises, consumer surplus ________________, and as the price of a good falls, consumer surplus _____________.
answer
decreases; increases
question
Producer surplus is....
answer
the difference between the lowest price a firm would be willing to accept and the price it actually receives.
question
How does producer surplus change as the equilibrium price of a good rises or falls?
As the price of a good rises, producer surplus ______________, and as the price of a good falls, producer surplus _____________.
As the price of a good rises, producer surplus ______________, and as the price of a good falls, producer surplus _____________.
answer
increases; decreases
question
Suppose that a frost in Florida reduces the size of the orange crop, which causes the supply curve to shift to the left (from Supply1 to Supply2).
As a result, consumer surplus....
As a result, consumer surplus....
answer
decreases by areas B, C, and D.
question
Suppose that a frost in Florida reduces the size of the orange crop, which causes the supply curve to shift to the left (from Supply1 to Supply2).
Producer surplus...
Producer surplus...
answer
increases by area B and decreases by areas F and G.
question
An article in the Wall Street Journal discussed research at Ohio State University that may lead to producing carbon black—an important input in automobile tire making—out of eggshells, tomato skins, and other food waste. According to the article, this research could lead to a reduction in the cost of producing tires.
Refer to the graph at right, and the shaded areas designated by letters A through N. Assume that S0 is the initial supply curve.
These falling costs result in a consumer surplus in the market for tires represented by areas...
Refer to the graph at right, and the shaded areas designated by letters A through N. Assume that S0 is the initial supply curve.
These falling costs result in a consumer surplus in the market for tires represented by areas...
answer
A, B, C, D, E, F, G, H, I.
question
An article in the Wall Street Journal discussed research at Ohio State University that may lead to producing carbon black—an important input in automobile tire making—out of eggshells, tomato skins, and other food waste. According to the article, this research could lead to a reduction in the cost of producing tires.
Refer to the graph at right, and the shaded areas designated by letters A through N. Assume that S0 is the initial supply curve.
These falling costs result in a loss of producer surplus equal to areas....
Refer to the graph at right, and the shaded areas designated by letters A through N. Assume that S0 is the initial supply curve.
These falling costs result in a loss of producer surplus equal to areas....
answer
D, F, G.
question
An article in the Wall Street Journal discussed research at Ohio State University that may lead to producing carbon black—an important input in automobile tire making—out of eggshells, tomato skins, and other food waste. According to the article, this research could lead to a reduction in the cost of producing tires.
Refer to the graph at right, and the shaded areas designated by letters A through N. Assume that S0 is the initial supply curve.
There is a gain of producer surplus equal to areas...
Refer to the graph at right, and the shaded areas designated by letters A through N. Assume that S0 is the initial supply curve.
There is a gain of producer surplus equal to areas...
answer
K, L, M.
question
An article in the Wall Street Journal discussed research at Ohio State University that may lead to producing carbon black—an important input in automobile tire making—out of eggshells, tomato skins, and other food waste. According to the article, this research could lead to a reduction in the cost of producing tires.
Refer to the graph at right, and the shaded areas designated by letters A through N. Assume that S0 is the initial supply curve.
The actual net change in producer surplus...
Refer to the graph at right, and the shaded areas designated by letters A through N. Assume that S0 is the initial supply curve.
The actual net change in producer surplus...
answer
depends on the actual size of the loss and gain.
question
The Apply the Concept states that the value of the area representing consumer surplus from Uber's service was $2.88 billion per year for the four cities involved in the study. Use the information from the graph in the Apply the Concept to show how this value was calculated.
Consumer surplus is equal to...
Consumer surplus is equal to...
answer
the area of the blue triangle, which is one-half times a base of 111 million times a height of $51.87.
question
Economic efficiency...
answer
A. is a market outcome in which the sum of consumer surplus and producer surplus is at a maximum.
B.
is a market outcome in which the marginal benefit to consumers of the last unit produced is equal to its marginal cost of production.
D. both a and b.
B.
is a market outcome in which the marginal benefit to consumers of the last unit produced is equal to its marginal cost of production.
D. both a and b.
question
Economists define economic efficiency in this way...
answer
A. to help policymakers understand the negative consequences of price floors.
B. to help policymakers understand the negative consequences of taxes.
C. to illustrate the benefits of a competitive market equilibrium.
D. to help policymakers understand the negative consequences of price ceilings.
E. all of the above.
B. to help policymakers understand the negative consequences of taxes.
C. to illustrate the benefits of a competitive market equilibrium.
D. to help policymakers understand the negative consequences of price ceilings.
E. all of the above.
question
Deadweight loss is the reduction in economic surplus resulting from a market not being in competitive equilibrium. In the diagram, deadweight loss is equal to the area(s):
answer
C & E.
question
The market supply and market demand curves for a magazine highlighting events and happenings for a metropolitan area are illustrated in the figure to the right.
If the magazine publisher charges a weekly subscription price of $4.00, what will be the resulting deadweight loss, if any?
Deadweight loss will be _________ thousand. (Enter your response rounded to two decimal places.)
If the magazine publisher charges a weekly subscription price of $4.00, what will be the resulting deadweight loss, if any?
Deadweight loss will be _________ thousand. (Enter your response rounded to two decimal places.)
answer
$4.50
question
Economic surplus is the sum of consumer surplus and producer surplus.
answer
True
question
When the government imposes price floors or price ceilings....
answer
some people win, some people lose, and there is a loss of economic efficiency.
question
Why is the demand curve referred to as a marginal benefit curve?
answer
It shows the willingness of consumers to purchase a product at different prices.
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