Assume the demand curve for cookies is downward sloping. If the price of cookies falls from $1.50 to $1.25 per dozen,
a. a larger quantity of cookies will be demanded.
b. a smaller quantity of cookies will be demanded.
c. the demand for cookies will fall.
a. a larger quantity of cookies will be demanded.
The difference between the amount consumers would be willing to pay and the amount they actually pay for a good is called
a. income elasticity of demand.
b. the substitution effect.
c. price elasticity of demand.
d. consumer surplus.
d. consumer surplus.
Suppose Katie, Kendra, and Kristen each purchase a particular type of cell phone at a price of $80. Katie's willingness to pay was $100, Kendra's willingness to pay was $95, and Kristen's willingness to pay was $80. Consumer surplus for the three individu
b. $35.
Which of the following would be the best example of consumer surplus?
a. When Sue purchases a candy bar for $.50, she uses a $20 bill to pay for it.
b. Fred buys a car for $4,000, the maximum amount that he would be willing to pay for it.
c. Jane pays $30
c. Jane pays $30 a month for phone service even though it is worth $70 to her.
In which statement(s) is "demand" used correctly?
(I) "An increase in the price of hot dogs will reduce the demand for hot dogs."
(II) "An increase in the price of hot dogs will reduce the demand for hot dog buns."
a. in neither statements I nor II
b. in
d. in statement II only
In San Francisco, tickets for professional and college football games are substitutes. An increase in the ticket price for professional football, other things being equal, will
a. not change the demand for college football tickets.
b. decrease the demand
d. increase the demand for college football tickets.
If a decrease in the price of good Y causes the demand for good Z to decrease, this indicates that
a. Y and Z are complements.
b. Y and Z are substitutes.
c. the demand for Y is elastic, but the demand for Z is inelastic.
d. Y and Z are unrelated.
b. Y and Z are substitutes.
The opportunity cost of production differs from an accounting definition of a firm's costs because it includes
a. expenditures the firm undertakes for research and development.
b. the firm's revenue as a cost.
c. the direct monetary cost of purchasing res
d. the opportunity cost of assets and financial resources owned by the firm.
An important assumption that is made when constructing a supply schedule is
a. firms always want to sell a certain amount of a product.
b. supply is too important to be left to the marketplace.
c. only price and quantity matter in determining supply.
d. a
d. all other determinants of supply are held constant.
Which of the following is least likely to increase the demand for new tires?
a. an increase in consumer income
b. a decrease in the price of tires
c. an increase in the number of miles people drive per year
d. a decrease in the price of cars
b. a decrease in the price of tires
If Harry is paid $25,000 to sell his crop of tomatoes even though he would have been willing to have sold the crop for as little as $20,000, this indicates that
a. Harry received no producer surplus from the transaction.
b. Harry received $5,000 of produc
b. Harry received $5,000 of producer surplus from the transaction.
Corn and soybeans are alternatives that could be grown by most farmers. If government subsidies for ethanol lead to higher corn prices, this will
a. have no effect on the supplies of corn and soybeans.
b. increase the supply of soybeans.
c. decrease the s
c. decrease the supply of soybeans.
In the orange market, what impact would an increase in the price of oil that orange growers burn to keep oranges from freezing in the winter have on the market?
a. It would shift the supply curve to the left.
b. It would shift the demand curve to the righ
a. It would shift the supply curve to the left.
If the United Auto Workers union can obtain a substantial wage increase for auto workers, there will be
a. an increase in the supply of automobiles, which is a shift to the left of the supply curve.
b. a decrease in the supply of automobiles, which is a s
b. a decrease in the supply of automobiles, which is a shift to the left of the supply curve.
Suppose the demand for nachos increases. What will happen to producer surplus in the market for nachos?
a. It may increase, decrease, or remain unchanged.
b. It increases.
c. It remains unchanged.
d. It decreases.
b. It increases.
Which of the following will reduce the supply of motorcycles?
a. a technological improvement reducing the production costs of motorcycles
b. a government study that reveals motorcycle riders, on average, live 10 years longer than those who don't ride moto
c. an increase in taxes imposed on motorcycle producers
Which of the following occurs when a shortage occurs in the market for a good?
a. Quantity demanded exceeds quantity supplied and the market mechanism pushes the price up, which in turn encourages more production and less consumption.
b. Quantity demanded
a. Quantity demanded exceeds quantity supplied and the market mechanism pushes the price up, which in turn encourages more production and less consumption.
If a surplus exists in a market we know that the actual price is
a. above equilibrium price and quantity supplied is greater than quantity demanded.
b. below equilibrium price and quantity supplied is greater than quantity demanded.
c. above equilibrium p
a. above equilibrium price and quantity supplied is greater than quantity demanded.
Suppliers recognize there is a shortage in the market for their product when they notice that
a. production exceeds new orders for the product.
b. the quantity supplied exceeds the quantity demanded.
c. inventories are falling.
d. the quantity demanded is
c. inventories are falling.
Which of the following is true of the interaction of supply and demand?
a. As the price increases, the quantity demanded and the quantity supplied will increase.
b. As the price increases, the quantity demanded will decrease and the quantity supplied will
b. As the price increases, the quantity demanded will decrease and the quantity supplied will increase.
When there is excess demand for a product in a market,
a. price will tend to fall.
b. price must be above the equilibrium price.
c. producers will reduce output and sales will fall.
d. price must be below the equilibrium price.
d. price must be below the equilibrium price.
When economists say that market equilibrium is consistent with economic efficiency, they mean
a. consumers and producers have made decisions without properly taking into account the market price.
b. some units have been produced that cost more than the be
c. all units creating more benefit than cost have been produced.
Last year, 1,000 cases of bottled water were sold at $5; this year, 1,200 cases were sold at $7. These data could be explained by the
a. supply curve shifting to the left, with no change in demand.
b. supply and demand curves shifting to the right.
c. dem
c. demand curve shifting to the right, with no change in supply.
A decrease in supply will cause
a. an increase in demand.
b. a decrease in demand.
c. an increase in quantity demanded.
d. a decrease in quantity demanded.
e. a decrease in equilibrium price.
d. a decrease in quantity demanded.
A new hormone will increase the amount of milk each cow produces. If this hormone is adopted by many dairies, what will be the effect on the milk market?
a. An increase in supply, higher equilibrium price, and lower equilibrium quantity.
b. A decrease in
e. An increase in supply, lower equilibrium price, and higher equilibrium quantity.
A technological breakthrough lowers the cost of manufacturing VCRs. As a result, the market changes to a new equilibrium because of
a. a shortage of VCRs.
b. an upward movement along the demand curve for VCRs.
c. a rightward shift in the supply curve for
c. a rightward shift in the supply curve for VCRs.
Suppose prices for new homes have risen and sales of new homes have also risen. We can conclude that
a. the law of demand has been violated.
b. new firms have entered the construction industry.
c. construction firms must be facing higher costs.
d. the dem
d. the demand for new homes has risen.
Assume that supply increases slightly and demand increases greatly. Which of the following will happen?
a. Equilibrium price will fall and equilibrium quantity will fall.
b. Equilibrium price will rise and equilibrium quantity will rise.
c. Equilibrium pr
b. Equilibrium price will rise and equilibrium quantity will rise.
If there is an increase in both the supply and demand for a good, which of the following will definitely occur?
a. The equilibrium quantity will increase.
b. The price of the good will increase.
c. The equilibrium quantity will decrease.
d. The price of t
a. The equilibrium quantity will increase.
Assume a new technology further reduces the cost of producing calculators. Also assume that consumers have cut back on their scheduled purchases in anticipation of even more cost-saving developments. As a result, we can expect
a. a decrease in output but
d. a decrease in price but no predictable change in output.