Which statement is consistent with the law of demand? – A reduction in market price will lead to a decrease in quantity demanded. – A reduction in market price will lead to an increase in quantity demanded. – An increase in market price will lead to an increase in quantity demanded. – At a zero price quantity demanded will be equal to zero. |
– A reduction in market price will lead to an increase in quantity demanded. |
Which of the following characteristics lead to a downward-sloping demand curve? Select all that apply. – Increasing opportunity costs – Increasing marginal benefit – Diminishing preferences for a particular good – A decline in the price of a related good – An increase in purchasing power as market price decreases – Diminishing marginal utility |
– An increase in purchasing power as market price decreases – Diminishing marginal utility |
How is a market demand curve derived from individual demand curves? – Add up quantities demanded by all individual consumers for each price – Calculate the average quantity demanded among all consumers – Add up prices paid for each unit demanded by individuals – Use the largest quantity demanded among all consumers for each price |
– Add up quantities demanded by all individual consumers for each price |
Which statement is consistent with the law of supply? – An increase in market price will lead to an increase in quantity supplied. – At a zero price quantity supplied will be infinite. – A reduction in market price will lead to an increase in quantity supplied. – An increase in market price will lead to a decrease in quantity supplied. |
– An increase in market price will lead to an increase in quantity supplied. |
Which of the following characteristics leads to a upward-sloping supply curve? Select all that apply. – Increasing opportunity costs – Increasing marginal costs – Diminishing marginal utility – A decrease in resource prices – An increase in resource prices – Increasing labor productivity |
– Increasing opportunity costs – Increasing marginal costs |
How do you derive a market supply curve from individual supply curves? – Calculate the average quantity supplied among all producers – Add up quantities supplied by all individual producers for each price – Add up prices paid for each unit supplied by producers – Use the largest quantity supplied among all producers for each price |
– Add up quantities supplied by all individual producers for each price |
In 2001 an outbreak of hoof-and-mouth disease in Europe led to the burning of millions of cattle carcasses. What impact do you think this had on the following? – increase a. The supply of cattle hides: b. Hide prices: c. The supply of leather goods: d. The price of leather goods: |
a.) decrease b.) increase c.) decrease d.) increase |
What effect will each of the following have on the demand for small automobiles such as the Mini-Cooper and Fiat 500? – increase a. Small automobiles become more fashionable: . b. The price of large automobiles rises (with the price of small autos remaining the same): . c. Income declines and small autos are an inferior good: . d. Consumers anticipate that the price of small autos will greatly come down in the near future: . e. The price of gasoline substantially drops: . |
a.) – increase b.) – increase c.) – increase d.) – decrease e.) – cannot be determined |
What effect will each of the following have on the supply of auto tires? (Keeping all else constant) – Increase a. A technological advance in the methods of producing tires: . b. A decline in the number of firms in the tire industry: . c. An increase in the prices of rubber used in the production of tires: . d. The expectation that the equilibrium price of auto tires will be lower in the future than currently: . e. A decline in the price of large tires used for semi trucks and earth-hauling rigs, a substitute in production. (with no change in the price of auto tires): . f. The levying of a per-unit tax on each auto tire sold: . g. The granting of a 50-cent-per-unit subsidy for each auto tire produced: . |
a.) – Increase b.) – Decrease c.) – Decrease d.) – Increase e.) – Increase f.) – Decrease g.) – Increase |
Suppose that in the market for computer memory chips, the equilibrium price is $50 per chip. If the current price is $55 per chip, then there will be ________ of memory chips. – surplus |
– surplus |
A price ceiling will result in a shortage only if the ceiling price is _________ the equilibrium price. – less than |
– less than |
How will each of the following changes in demand and/or supply affect equilibrium price and equilibrium quantity in a competitive market; that is, do price and quantity increase or decrease, or are the answers indeterminate because they depend on the magnitudes of the shifts? – Increases a. Supply decreases and demand is constant.
Price: b. Demand decreases and supply is constant.
Price: c. Supply increases and demand is constant.
Price: d. Demand increases and supply increases.
Price: e. Demand increases and supply is constant.
Price: f. Supply increases and demand decreases.
Price: g. Demand increases and supply decreases.
Price: h. Demand decreases and supply decreases.
Price: |
a.) – Increases – Decreases b.) – Decreases – Decreases c.) – Decreases – Increases d.) – Indeterminate – Increases e.) – Increases – Increases f.) – Decreases – Indeterminate g.) – Increases – Indeterminate h.) – Indeterminate – Decreases |
Will the equilibrium price of orange juice increase or decrease in each of the following situations? – increase a. A medical study reporting that orange juice reduces cancer is released at the same time that a freak storm destroys half of the orange crop in Florida: ___________ . b. The prices of all beverages except orange juice fall by half while unexpectedly perfect weather in Florida results in an orange crop that is 20 percent larger than normal:__________ . |
a.) – increase b.) – decrease |
A price ceiling will result in a shortage only if the ceiling price is _________ the equilibrium price. – greater than |
– less than |
Econ Chapter 3 – Test Questions
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