Chapter 3 Concept Quiz

D. The price of coffee A change in the price of coffee will cause a change in the quantity demanded of coffee. A change in any of the non-price determinants of demand, for example a change in consumer income, will cause a shift of the demand curve.

D. The price in coffee The law of supply states that, all other things being equal, the quantity supplied increases when the price rises, and the quantity supplied falls when the price falls. Therefore, the price of coffee will cause a change in the quantity supplied of coffee.

C. Inverse The law of demand states that, all other things being equal, quantity demanded falls when prices rise, and quantity demanded rises when prices fall.

A. Direct The law of supply states that, all other things being equal, quantity supplied rises when prices rise, and quantity supplied falls when prices fall.

B. Overall supply will decrease. Change in the cost of inputs is one determinant of supply that will cause supply to shift. If the prices of inputs increase, a firm's profit margins fall. Lower profit margins make the firm less willing to supply the good; therefore, supply will decrease.

B. have some control over price. If a firm produces a specialized product such as a particular type of burger or computer game, it affords the firm the opportunity to charge a higher price than charged by its competitors for a similar good.

D. set by market supply and demand. In a competitive market, the goods and services sold are similar and there are many buyers and sellers. Where there are many buyers and sellers of a similar good or service, the price and quantity sold are determined by the market rather than any one person or business.

B. are able to influence the price of their product. When sellers produce goods and services that are different from their competitors, they gain some control over the price that they charge.

C. a surplus. A surplus occurs whenever the quantity supplied is greater than the quantity demanded. At price levels above $10, this market experiences a surplus, since quantity supplied is greater than the quantity demanded for all prices above $10.

B. a shortage. A shortage occurs whenever the quantity supplied is less than the quantity demanded. At price levels below $10, this market experiences a shortage, since quantity supplied is less than quantity demanded for all prices below $10.

A. prices and quantity demanded move in opposite directions. The demand curve is a graph of the relationship between the prices on the demand schedule and the quantity demanded at those prices. Because prices and quantity demanded move in opposite directions, the demand curve slopes downward.

C. Quantity supplied is equal to quantity demanded. When a market is in equilibrium, supply and demand are balanced. This is represented graphically by the point at which the demand curve and supply curve and supply curve interest. According to the law of supply and demand, market prices adjust to bring the quantity supplied and the quantity demanded into balance, or equilibrium.

B. prices and quantity supplied move in the same directions. The supply curve is a graph of the relationship between the prices on the supply schedule and the quantity supplied at those prices. Because prices and quantity supplied move in the same direction the supply curve slopes upward.

B. overall demand for burgers will decrease. A change in the price of a related good causes a shift of the demand curve for the other good. Complements are two goods used together.

C. Graph C Substitutes are two goods that are used in place of one another. Since Coca Cola and Pepsi are substitutes in consumption, a fall in the price of Coca Cola will result in a leftward shift, or decrease, of the demand for Pepsi, which leads to fall in demand for Pepsi and a lower price.

B. Price must rise. Whenever the quantity demanded exceeds the quantity supplied, the market price experiences upward pressure. As the price rises, suppliers continue to increase the quantity that they supply and buyers demand and increasingly smaller quantity until the market clears and quantity supplied is equal to quantity demanded.

B. A local cable company Monopolies exist when a single company supplies the entire market for a particular good or service. A local cable company functions like a monopoly, since it supplies cable for the entire local market.

C. A corn farmer at a farmer's market The market for corn best fits the description of a competitive market because corn farmers sell similar goods and there are many sellers and buyers in the market for corn.

A. Significant government intervention

D. An improvement in the technology used in the production of tobacco A rightward shift of the tobacco supply curve means there is an increase in the supply of tobacco. An improvement in technology allows a producer to increase output with the same resources or to produce a given level of output with fewer resources.