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.
answer
- A reduction in market price will lead to an increase in quantity demanded.
question
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
answer
- An increase in purchasing power as market price decreases
- Diminishing marginal utility
question
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
answer
- Add up quantities demanded by all individual consumers for each price
question
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.
answer
- An increase in market price will lead to an increase in quantity supplied.
question
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
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
answer
- Add up quantities supplied by all individual producers for each price
question
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
- decrease
a. The supply of cattle hides:
b. Hide prices:
c. The supply of leather goods:
d. The price of leather goods:
answer
a.) decrease
b.) increase
c.) decrease
d.) increase
question
What effect will each of the following have on the demand for small automobiles such as the Mini-Cooper and Fiat 500?
- increase
- decrease
- no change
- cannot be determined
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: .
answer
a.) - increase
b.) - increase
c.) - increase
d.) - decrease
e.) - cannot be determined
question
What effect will each of the following have on the supply of auto tires? (Keeping all else constant)
- Increase
- Decrease
- No change
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: .
answer
a.) - Increase
b.) - Decrease
c.) - Decrease
d.) - Increase
e.) - Increase
f.) - Decrease
g.) - Increase
question
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
- shortage
- equilibrium quantity
answer
- surplus
question
A price ceiling will result in a shortage only if the ceiling price is _________ the equilibrium price.
- less than
- greater than
- equal to
answer
- less than
question
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
- Decreases
- Indeterminate
a. Supply decreases and demand is constant.
Price:
Quantity
b. Demand decreases and supply is constant.
Price:
Quantity:
c. Supply increases and demand is constant.
Price:
Quantity:
d. Demand increases and supply increases.
Price:
Quantity:
e. Demand increases and supply is constant.
Price:
Quantity:
f. Supply increases and demand decreases.
Price:
Quantity:
g. Demand increases and supply decreases.
Price:
Quantity:
h. Demand decreases and supply decreases.
Price:
Quantity:
answer
a.)
- Increases
- Decreases
b.)
- Decreases
- Decreases
c.)
- Decreases
- Increases
d.)
- Indeterminate
- Increases
e.)
- Increases
- Increases
f.)
- Decreases
- Indeterminate
g.)
- Increases
- Indeterminate
h.)
- Indeterminate
- Decreases
question
Will the equilibrium price of orange juice increase or decrease in each of the following situations?
- increase
- decrease
- indeterminate
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:__________ .
answer
a.) - increase
b.) - decrease
question
A price ceiling will result in a shortage only if the ceiling price is _________ the equilibrium price.
- greater than
- less than
- faster than
- equal to
answer
- less than
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