Chpt 3

Refer to the above diagram. If this is a competitive market, price and quantity will move toward:

$40 and 150 respectively.

Refer to the above table. Suppose that demand is represented by columns (3) and (2) and supply is represented by columns (3) and (5). If the price were artificially set at $6, a:

a shortage of 40 units would occur

Refer to the above table. In relation to column (3), a change from column (5) to column (4) would indicate a(n):

decrease in supply.

In the above market, economists would call a government-set maximum price of $40 a

price ceiling

A decrease in the price of digital cameras will:

shift the demand curve for memory cards to the right.

If we say that a price is too high to clear the market, we mean that:

quantity supplied exceeds quantity demanded.

Allocative efficiency is concerned with:

producing the combination of goods most desired by society.

Refer to the above diagram. The equilibrium price and quantity in this market will be:

$1.00 and 200.

If the demand for steak (a normal good) shifts to the left, the most likely reason is that:

consumer incomes have fallen

Assume that the demand schedule for product C is downsloping. If the price of C falls from $2.00 to $1.75:

a larger quantity of C will be demanded.

An economist for a bicycle company predicts that, other things equal, a rise in consumer incomes will increase the demand for bicycles. This prediction is based on the assumption that:

bicycles are normal goods

A ceiling price in a competitive market will result in persistent surpluses of a product

False

In the following question(s) you are asked to determine, other things equal, the effects of a given change in a determinant of demand or supply for product X upon (1) the demand (D) for, or supply (S) of, X, (2) the equilibrium price (P) of X and (3) the equilibrium quantity (Q) of X.

Refer to the above. An increase in the price of a product that is a complement to X will:

decrease D, decrease P, and decrease Q.

Producing a good in the least costly way is known as allocative efficiency

False

The demand curve shows the relationship between

price and quantity demanded.

Refer to the above diagram. A decrease in supply is depicted by a:

shift from S2 to S1

An effective price floor will

result in a product surplus.

An increase in the price of product A will:

increase the demand for substitute product B.

An increase in the price of product A will:

$8 and 60 units.

If the demand curve for product B shifts to the right as the price of product A declines, then:

A and B are complementary goods

Refer to the above diagram, in which S1 and D1 represent the original supply and demand curves and S2 and D2 the new curves. In this market the indicated shift in supply may have been caused by

the development of more efficient machinery for producing this commodity.

An increase in the price of a product will reduce the amount of it purchased because:

consumers will substitute other products for the one whose price has risen.

The income and substitution effects account for:

the downward sloping demand curve

If the supply of a product decreases and the demand for that product simultaneously increases, then equilibrium

price must rise, but equilibrium quantity may rise, fall, or remain unchanged.

If the supply and demand curves for a product both decrease, then equilibrium:

quantity must decline, but equilibrium price may rise, fall, or remain unchanged.

A firm’s supply curve is upsloping because:

beyond some point the production costs of additional units of output will rise.

The law of demand states that:

price and quantity demanded are inversely related.

Consumers buy more of normal goods as their incomes rise.

True

In the following question(s) you are asked to determine, other things equal, the effects of a given change in a determinant of demand or supply for product X upon (1) the demand (D) for, or supply (S) of, X, (2) the equilibrium price (P) of X and (3) the equilibrium quantity (Q) of X.

Refer to the above. An increase in income, if X is a normal good, will:

increase D, increase P, and increase Q

If a legal ceiling price is set above the equilibrium price:

neither the equilibrium price nor equilibrium quantity will be affected

Refer to the above diagram. A shortage of 160 units would be encountered if price was:

$.50

An increase in demand accompanied by an increase in supply will increase the equilibrium quantity but the effect on equilibrium price will be indeterminate.

True

Which of the above diagrams illustrate(s) the effect of a decline in the price of personal computers on the market for software?

A only

Which of the following statements is correct?

An increase in the price of C will decrease the demand for complementary product D

In the following question(s) you are asked to determine, other things equal, the effects of a given change in a determinant of demand or supply for product X upon (1) the demand (D) for, or supply (S) of, X, (2) the equilibrium price (P) of X and (3) the equilibrium quantity (Q) of X.

Refer to the above. An improvement in the technology used to produce X will:

increase S, decrease P, and increase Q

Economists use the term "demand" to refer to:

a schedule of various combinations of market prices and amounts demanded.

The construction of demand and supply curves assumes that the primary variable influencing decisions to produce and purchase goods is

price

Refer to the above table. In relation to column (3), a change from column (2) to column (1) would indicate a(n):

increase in demand

Refer to the above diagram. A government-set price ceiling is best illustrated by:

price A

In the following question(s) you are asked to determine, other things equal, the effects of a given change in a determinant of demand or supply for product X upon (1) the demand (D) for, or supply (S) of, X, (2) the equilibrium price (P) of X and (3) the equilibrium quantity (Q) of X.

Refer to the above. An increase in the tastes and preferences for X will:

increase D, increase P, and increase Q.

The demand curve for a product might shift as the result of a change in

All of the above

In the following question(s) you are asked to determine, other things equal, the effects of a given change in a determinant of demand or supply for product X upon (1) the demand (D) for, or supply (S) of, X, (2) the equilibrium price (P) of X and (3) the equilibrium quantity (Q) of X.

Refer to the above. An increase in the prices of resources used to produce X will:

decrease S, increase P, and decrease Q.

An increase in demand means that:

the demand curve has shifted to the right.

Refer to the above diagram, which shows demand and supply conditions in the competitive market for product X. Given D0, if the supply curve moved from S0 to S1, then:

supply has decreased and equilibrium quantity has decreased

Which of the following will not cause the demand for product K to change?

a change in the price of K