Econ Test 3.

An effective price floor will: clear the market. result in a product shortage. result in a product surplus. force some firms in this industry to go out of business.

A firm's supply curve is upsloping because: mass production economies are associated with larger levels of output. the expansion of production necessitates the use of qualitatively inferior inputs. consumers envision a positive relationship between price and quality. beyond some point the production costs of additional units of output will rise.

An improvement in production technology will: increase equilibrium price. shift the supply curve to the right. shift the demand curve to the left. shift the supply curve to the left.

Black markets are associated with: price floors and the resulting product surpluses. ceiling prices and the resulting product shortages. price floors and the resulting product shortages. ceiling prices and the resulting product surpluses.

A price floor means that: inflation is severe in this particular market. sellers are artificially restricting supply to raise price. government is imposing a minimum legal price that is typically above the equilibrium price. government is imposing a maximum legal price that is typically below the equilibrium price.

In which of the following instances is the effect on equilibrium price dependent on the magnitude of the shifts in supply and demand? Demand rises and supply rises. Demand rises and supply falls. Supply rises and demand falls. Supply falls and demand remains constant.

The law of demand states that, other things equal: the larger the number of buyers in a market, the lower will be product price. price and quantity demanded are inversely related. consumers will buy more of a product at high prices than at low prices. price and quantity demanded are directly related.

If the supply of a product decreases and the demand for that product simultaneously increases, then equilibrium: price must rise and equilibrium quantity must fall. price and equilibrium quantity must both increase. price and equilibrium quantity must both decline. price must rise, but equilibrium quantity may rise, fall, or remain unchanged.

In the past few years, the demand for donuts has greatly increased. This increase in demand might best be explained by: an increase in the price of coffee. an increase in the cost of making donuts. consumers expecting donut prices to fall. a change in buyer tastes.

A leftward shift of a product supply curve might be caused by: an increase in consumer incomes. some firms leaving an industry. an improvement in the relevant technique of production. a decline in the prices of needed inputs.

Because of unseasonably cold weather, the supply of oranges has substantially decreased. This statement indicates the: demand for oranges will necessarily rise. price of oranges will fall. amount of oranges that will be available at various prices has declined. equilibrium quantity of oranges will rise.

Allocative efficiency is concerned with: producing every good with the least-cost combination of inputs. achieving the full employment of all available resources. reducing the concavity of the production possibilities curve. producing the combination of goods most desired by society.

Which of the following will cause a decrease in market equilibrium price and an increase in equilibrium quantity? An increase in supply. An increase in demand. A decrease in supply. A decrease in demand.

If there is a shortage of product X, and the price is free to change: the price of the product will decline. the price of the product will rise. the supply curve will shift to the left and the demand curve to the right, eliminating the shortage. fewer resources will be allocated to the production of this good.

An economist for a bicycle company predicts that, other things equal, a rise in consumer incomes will increase the demand for bicycles. This prediction assumes that: bicycles are normal goods. there are many goods that are complementary to bicycles. there are many goods that are substitutes for bicycles. there are few goods that are substitutes for bicycles.

A price ceiling means that: government is imposing a legal price that is typically above the equilibrium price. there is currently a surplus of the relevant product. government is imposing a legal price that is typically below the equilibrium price. government wants to stop a deflationary spiral.

Assuming conventional supply and demand curves, changes in the determinants of both supply and demand will generally: alter equilibrium quantity but not equilibrium price. have no effect on equilibrium price or quantity. alter equilibrium price but not equilibrium quantity. alter both equilibrium price and quantity.

The law of supply indicates that, other things equal: producers will offer more of a product at low prices than at high prices. consumers will purchase less of a good at high prices than at low prices. producers will offer more of a product at high prices than at low prices. the product supply curve is downsloping.

An increase in the quantity demanded means that: given supply, the price of the product can be expected to decline. price has declined and consumers therefore want to purchase more of the product. the demand curve has shifted to the right. the demand curve has shifted to the left.

College students living off-campus frequently consume large amounts of ramen noodles and boxed macaroni and cheese. When they finish school and start careers, their consumption of both goods frequently declines. This suggests that ramen noodles and boxed macaroni and cheese are: complementary goods. substitute goods. inferior goods. normal goods.

Which of the following would most likely increase the demand for gasoline? A widespread shift in car ownership from SUVs to hybrid sedans. The expectation by consumers that gasoline prices will be higher in the future. A decrease in the price of public transportation. The expectation by consumers that gasoline prices will be lower in the future.

A recent study found that an increase in the federal tax on beer (and thus an increase in the price of beer) would reduce the demand for marijuana. We can conclude that: beer and marijuana are complementary goods. marijuana is an inferior good. beer is an inferior good. beer and marijuana are substitute goods.

Since their introduction, prices of Blu-ray players have fallen and the quantity purchased has increased. This statement: suggests that the demand for Blu-ray players has increased. suggests that the supply of Blu-ray players has increased. constitutes an exception to the law of demand in that they suggest an upward-sloping demand curve. constitutes an exception to the law of supply in that they suggest a downward-sloping supply curve.

A surplus of a product will arise when price is: below equilibrium, with the result that quantity demanded exceeds quantity supplied. above equilibrium, with the result that quantity demanded exceeds quantity supplied. below equilibrium, with the result that quantity supplied exceeds quantity demanded. above equilibrium, with the result that quantity supplied exceeds quantity demanded.

In 2007, the price of oil increased, which in turn caused the price of natural gas to rise. This can best be explained by saying that oil and natural gas are: complementary goods and the higher price for oil decreased the supply of natural gas. complementary goods and the higher price for oil increased the demand for natural gas. substitute goods and the higher price for oil decreased the supply of natural gas. substitute goods and the higher price for oil increased the demand for natural gas.

A market is in equilibrium: at all prices above that shown by the intersection of the supply and demand curves. whenever the demand curve is downsloping and the supply curve is upsloping. provided there is no surplus of the product. if the amount producers want to sell is equal to the amount consumers want to buy.

Productive efficiency refers to: the use of the least-cost method of production. the production of the product mix most wanted by society. production at some point inside of the production possibilities curve. the full employment of all available resources.

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 left. product supply curve of X will shift to the right. product demand curve of X will shift to the right. product supply curve of X will not shift.

A government subsidy to the producers of a product: increases product demand. reduces product demand. reduces product supply. increases product supply.

When an economist says that the demand for a product has increased, this means that: the product has become particularly scarce for some reason. product price has fallen and, as a consequence, consumers are buying a larger quantity of the product. the demand curve has shifted to the left. consumers are now willing to purchase more of this product at each possible price.