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a market |
is an institution that brings together buyers and sellers |
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the law of demand states that |
price and quantity demanded are inversely related |
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the demand curve shows the relationship between |
price and quantity demanded |
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economists use the term demanded to refer to |
a schedule of various combinations of market prices and amounts demanded |
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the relationship between quantity supplied and price is _____ and the relationship between quantity demanded and price is ______. |
direct, inverse |
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when the price of a product rises, consumers shift their purchases to other products whose prices are now relatively lower. This statement descrives |
the substitution effet |
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which of the following will not causes the demand for product K to change? |
a change in the price of k |
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which of the following would not shift the demand curve for beef |
a reduction in the price of cattle feed |
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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 |
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a rightward shift in the demand curve for product C might be caused by |
a decrease in the price of a product that is complementary to C |
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if the price of product L increases, the demand curve for close substitute product J will |
shift to the right |
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a shift to the right in the demand curve for product A can be most reasonably explained by saying that |
consumer preferences have changed in favor of A so that they now want to buy more at each possible price |
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which of the following will cause the demand curve for product A to shift to the left |
an increase in money income if A is an inferior good |
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if X is a normal good, a rise in money income will shift the |
demand curve for the X to the right |
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other things equal, which of the following might shift the demand curve for gasoline to the left |
the development of a low cost electric automobile |
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an increase in consumer incomes will |
increase the demand for a normal good |
|
assume the demand curve for product X shifts to the right. this might be caused by |
a decline in income if X is an inferior good |
|
the demand curve for a product might shif as the result of a change in |
all of the above |
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suppose an excise tax is imposed on product X. we would expect this tax to |
decrease the demand for complementary good Y and increase the demand for substitute product Z |
|
a decrease in demand is depicted by a |
shift from D2 to D1 |
|
a decrease in quantity demanded (as distinct from a decrease in demand) is depicted by a |
move from point y to point x |
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when an economist says that the demand for a product has increased, this means that |
consumers are now willing to purchase more of this product at each possible price |
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"in the corn market, demand often exceeds QS and QS sometimes QD." "the price of corn rises and falls in response to changes in supply and demand." in which o these two statements are the terms demand and supply being used correctly |
in the second statement |
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by an increase in demand we mean that |
the quantity demanded at each price in a set of prices is greater |
|
the term quantity demanded |
refers to the amount of a product that will be purchased at some specific price |
|
in consumers are willing to pay a higher price than previously for each level of output, we can say that the following has occurred |
an increase in demand |
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a decrease in the demand for recreational fishing boats might be caused by an increase in the |
price of outboard motors |
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an increase in demand means that |
the demand curve has shifted to the right |
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an increase in the quantity demanded means that |
price has declined and consumers therefore want to purchase more of the product |
|
a decrease in supply is depicted by a |
shift from S2 to S1 |
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an increase in quantity supplied is depicted by a |
move from point y to point x |
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the law of supply indicates that |
producers will offer more of a product at high prices than they will at low prices |
|
the supply curve shows the relationship between |
price and quantity supplied |
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a leftward shift of a product supply curve might be caused by |
some firms leaving an industry |
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an improvement in production technology will |
shift the supply curve to the right |
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if producers must obtain higher prices than previously to produce various levels of output, the following has occurred |
a decrease in supply |
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the location of the supply curve of a product depends on |
the technology used to produce it, the prices of resources used in its production, the number of sellers |
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assume product A is an input in the production of product B. In turn product B is a complement to product C. we can expect a decrease in the price of A to |
increase the supply of B and increase the demand for C |
|
assume a drought in the great plains reduces the supply of wheat. noting that wheat is a basic ingredient in the production of bread and that potatoes are a consumer substitute for bread, we would expect the price of wheat to |
rise, the supply of bread to decrease, and the demand for potatoes to increase |
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other things equal, if the price of a key resource used to produce product X falls, the |
product supply curve of X will shift to the right |
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an increase in the excise tax on cigarettes raises the price of cigarettes by shifting the |
demand curve for cigarettes leftward |
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a government subsidy to the producers of a product |
increases product supply |
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suppose that at prices of $5, $4, $3, $2, and $1 for product Z, the corresponding quantities supplied are 3, 4, 5, 6, and 7 units, respectively. which of the following would increae the quantities supplied of Z to, say, 6, 8, 10, 12, and 14 units at these prices? |
improved technology for producing Z |
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(1) (2) (3) (4) (5) refer to the above table. If demand is represented by columns (3) and (2) and supply is represented by columns (3) and (5), equilibrium price and quantity will be: |
$8 and 60 units |
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(1) (2) (3) (4) (5) refer to the above table. If demand is represented by columns (3) and (1) and supply is represented by columns (3) and (4), equilibrium price and quantity will be: |
$9 and 60 units |
|
(1) (2) (3) (4) (5) 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 |
|
(1) (2) (3) (4) (5) 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 |
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(1) (2) (3) (4) (5) 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 $9, a |
a surplus of 20 units would occur |
|
(1) (2) (3) (4) (5) 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 |
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if a product is in surplus supply, its price |
is above the equilibrium level |
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the rationing function of prices refers to the |
capacity of a competitive market to equate the quantity demanded and the quantity supplied |
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other things equal, an excise tax on a product will |
increase its price |
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assuming conventional supply and demand curves, changes in determinants of supply and demand will |
in all likelihood alter both equilibrium price and quantity |
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which of the following will cause a decrease in market equilibrium price and an increase in equilibrium quantity |
an increase in supply |
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suppose in each of four successive years producers sell more of their product and at lower prices. this could be explained |
in terms of a stable demand curve and increasing supply |
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other things equal, the provision of a per unit subsidy for a product will |
increase its supply |
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which of the following statements is correct |
if supply increases and demand decrease, equilibrium price will fall |
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in which of the following instances will the effect on equilibrium price be dependent on the magnitude of the shifts in supply and demand |
demand rises and supply falls |
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price floors and ceiling prices |
both cause surpluses |
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a desire to buy a product is the only requirement needed for demand to exist |
false |
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marginal utility describes the decreasing satisfaction a consumer receives with the purchase of each additional unit |
false |
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a demand curve illustrates the quantity demanded at all possible prices at a given time |
true |
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the law of demand states that more of a product will be purchased at low prices than at high ones |
true |
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a supply curve is a graph that shows the various quantities supplied at a single market price |
false |
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productivity will decrease if workers are unmotivated |
true |
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if producers expect lower prices in the future, they may withhold some of the supply |
false |
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when more suppliers enter the market, the market supply will typically decline |
false |
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the theory of production deals with the relationship between the factors of production and the output of goods and services |
true |
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the law of variable proportions states that in the short run, output will not change as one production input is varied while the others remain constant |
false |
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the production function describes the relationship of changes in output to different amounts of a single input while other inputs are held constant |
true |
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an increase in output as each new input is added, as in the addition fo a worker, describes Stage I of stages of production |
true |
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fixed cost is the cost that a business incurs even if there are no employees and no production takes place |
true |
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the number of items sold multiplied by the average price of each item yields the total revenue of a business |
true |
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the law of supply states that suppliers will normally offer less for sale at higher prices and more for sale at lower prices |
false |
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the market supply curve shows the quantities offered at various prices by all firms that offer the product for sale in a given market |
true |
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an increase in the cost of inputs can cause the supply curve to shift to the left |
true |
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a supply curve is likely to be elastic for products that can be made quickly without huge amounts of capital and skilled labor |
true |
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the introduction of technology usually has no effect on supply |
false |
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the mix of variable costs and fixed costs that a business faces affects the way the business operates |
true |
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marginal cost is the change in total revenue when one more unit of output is sold |
false |
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the four important measures of cost are: total cost, fixed cost, variable cost, and marginal cost |
true |
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the profit-maximizing quantity of output occurs when marginal cost is exactly equal to total revenue |
false |
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marginal analysis compares the additional benefits of an action to its additional costs |
true |
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economists often use an economic model to help analyze behavior and predict outcomes |
false |
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market equilibrium is the situation in which the quantity of output supplied is equal to the quantity demanded |
true |
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the amount of a price change disaffected by the elasticity of both the supply and demand curves |
true |
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if the price of an item is too high in a competitive market, a shortage appears until the price goes down |
false |
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perfect competition is not necessary for the theory of competitive pricing to be practical |
true |
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market situations lacking one or more of the characteristics of perfect competition are called imperfect competition |
true |
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perfect competition requires a market structure with freedom for firms to enter or leave the market |
true |
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oligopoly is a market structure with one very large firm |
false |
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a government monopoly is monopoly based on ownership or control of a manufacturing method or process |
false |
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the monopolist does not use an equilibrium price to determine prices |
true |
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the us government intervenes in the economy to reduce the costs of imperfect competition |
true |
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the government can "internalize an externality" by using the tax system |
true |
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a condition of perfect competition is characterized by product differentation |
false |
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the monopolistic competitor operates in a market with many well-informed buyers and sellers |
true |
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nonprice competition is the use of advertising, giveaways, and other promotional campaigns to win customers |
true |
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smaller firms have the advantage of economies of scale over large firms |
false |
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market failure can occur when resources do not move freely from one industry to another |
true |
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economists describe an unintended side effect of a business activity as an externality |
true |
|
the united states government uses taxes to reduce the effects of negative externalities |
true |
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corporations selling stock to the public must disclose their financial and operating information to both the public and the securities and exchange commission |
true |
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for most products and services, increased price results in |
demand for few products |
|
an increase in the price of milk causes a decrease in the demand for cereal. the two products are |
complements |
|
advertising, fashion trends, and new product introductions serve to |
create consumer demand |
|
because a modest price increase has little or no effect, the demand for the product is |
inelastic |
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a business doubled the price of a product in order to increase profits. which of the following scenarios might thave occurred? |
a dramatic decline in revenues demonstrated the elasticity of the product |
|
a demand schedule shows |
a listing of the various quantities demanded of a particular product at all prices that might prevail in the market |
|
consumers’ willingness to replace a costly item with a less costly item is an example of |
the substitute effect |
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an increase in the price of cameras results in a decrease in the demand for film. the two products are |
complements |
|
when a consumer’s need for a product is not urgent, demand tends to be |
elastic |
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when a manufacturer of pain medication reduced the price of medication by 30%, profits declined by almost exactly 30%. demand for the product is |
unit elastic |
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all of the following can change the market supply curve EXCEPT |
C |
|
the supply of a product normally decreases if |
taxes on the product increase |
|
when employees are getting in each other’s way, the firm is operating |
in stage II of production |
|
when producers offer fewer products for sale at each and every price, |
the supply curve has shifted to the left |
|
the theory of production deals with the relationship between the factors of production and |
the output of goods and services |
|
rent payments and property taxes would be counted as |
fixed costs |
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many businesses are engaging in e-commerce because |
fixed costs are minimal |
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which of the following is NOT a reason why prices effectively perform the allocation function |
prices remain surprisingly stable despite unexpected events |
|
in a market economy, a high price is signal for |
producers to supply more and consumers to buy less |
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at a given price, a surplus occurs when |
the quantity supplied is greater than the quantity demanded |
|
the federal minimum wage law demonstrates |
a societal choice for economic equity over efficiency |
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when economic or political conditions are unstable |
the demand for gold increases |
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prices enable a market economy to adjust to unexpected events by |
adjusting consumption and production |
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all of the following are characteristics of allocation by rationing EXCEPT |
efficiency |
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if a competitive market is at equilibrium, and if there is a sudden increase in demand, then a temporary |
shortage will occur and the price will increase |
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the theory of competitive pricing |
is a set of ideal conditions and outcomes |
|
deficiency payments are part of a federal program to assist |
farmers |
|
perfect competition is characterized by all of the following EXCEPT |
sellers acting together to set prices |
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a monopoly that is based on the ownership or control of a manufacturing method, process, or other scientific advance is a |
technological monopoly |
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the government is involved in the us economy for all of the following reasons except |
promote the development of market externalities |
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under perfect competition |
no seller sells a product above the prevailing market price |
|
when a major car company lowers its prices, other car makers will probably |
lower their prices |
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