Deck 2: Demand, supply, and Equilibrium Prices

Full screen (f)
exit full mode
Question
DSL and broadband internet service would be considered an example of:

A)substitute goods.
B)giffen goods.
C)inferior goods.
D)complementary goods.
Use Space or
up arrow
down arrow
to flip the card.
Question
If the price of salmon increases relative to the price of cod,the demand for:

A)cod will decrease.
B)cod will increase.
C)salmon will decrease.
D)salmon will increase.
Question
Which of the following would not cause the supply curve for gasoline to shift?

A)A change in the wages paid to gas station attendants.
B)A change in the number of gas stations.
C)A change in the incomes of drivers.
D)A change in the cost of refining oil.
Question
"Supply" is best defined as the relationship between:

A)the current price of a good and the quantity supplied at that price.
B)the price of a good or service and the quantity supplied by producers at each price during a period of time.
C)the cost of producing a good and the price consumers are willing to pay for it.
D)the quantity supplied and the price people are willing to pay for a good.
Question
All else held constant,an increase in foreign imports of cameras would cause the supply of cameras in the United States to:

A)increase.
B)stay the same.
C)decrease.
D)cannot be determined with the information given.
Question
Referring to the previous question,all else constant,a one unit increase in the price of good Y would cause the quantity demanded of good X to:

A)decrease by 2 units.
B)increase by 2 units.
C)decrease by 1 unit.
D)decrease by 5 units.
Question
All else constant,as more firms substitute alternative materials,e.g.,plastic,for copper,the market price of copper would be expected to:

A)increase.
B)stay the same.
C)decrease.
D)cannot be determined with the information given.
Question
Assume the demand function for good X can be written as Qd = 80 - 3Px - 6Py + 10I,where Px = the price of X,Py is the price of Y and I is consumer income.If the price of Y decreases by 5 dollars,what would the reduction in Px have to be in order to keep the quantity demanded of X unchanged by the change in the price of Y?

A)decreased by 10 dollars
B)decreased by 5 dollars
C)decreased by 2.5 dollars
D)decreased by 1 dollar
Question
In the market for cell phones,all of the following would cause the supply of cell phones to change except:

A)an improvement in the technology used to produce cell phones.
B)an increase in the cost of labor used to produce cell phones.
C)a change in cell phone producers' expectations.
D)an increase in the number of buyers in the market for cell phones.
Question
In the market for French wines,an increase in demand is illustrated by:

A)a movement up the demand curve.
B)a movement down the demand curve.
C)a shift of the demand curve to the left.
D)a shift of the demand curve to the right.
Question
A home theater system and an HD television would be considered an example of:

A)substitute goods.
B)giffen goods.
C)inferior goods.
D)complementary goods.
Question
If movies on DVD for home rental and movies seen at a theater are substitutes,and the price of movies seen at a theater increases,the demand for movies on DVD will:

A)increase.
B)stay the same.
C)decrease.
D)cannot be determined.
Question
All else constant,all of the following would cause the demand curve for a good to shift except:

A)a change in the cost of producing the good.
B)a change in the price of a related good.
C)a change in consumer's incomes.
D)a change in the number of buyers.
Question
An increase in the number of buyers in the market for LED TVs would cause the market demand curve for LED TVs to:

A)shift right.
B)shift left.
C)stay the same because market demand doesn't depend on the number of buyers.
D)shift left or right depending on whether the new buyers purchase more or less than existing customers at each price.
Question
Many people consider hot dogs to be an inferior good.For such people,all else held constant,a decrease in income would cause their demand for hot dogs to:

A)increase.
B)stay the same.
C)decrease.
D)cannot be determined with the information given.
Question
Assume the demand function for good X can be written as Qd = 80 - 3Px + 2Py + 10I,where Px = the price of X,Py = the price of good Y,and I = Consumer income.According to this equation:

A)a rise in the price of Y would cause the demand for X to decrease.
B)X and Y are complements
C)X is an inferior good.
D)X and Y are substitutes.
Question
"Demand" is best defined as the relationship between:

A)the price of a good and the quantity consumers are willing and able to buy at each price level.
B)the current price of a good and the quantity demanded at that price.
C)the quantity supplied and the price people are willing to pay for a good.
D)the amount of income someone has and the price he is willing to pay for a good.
Question
All of the following are non-price factors that influence demand except:

A)tastes and preferences.
B)quantity supplied.
C)income.
D)the prices of related goods.
Question
Which of the following is not considered a factor that influences supply?

A)Technology.
B)Production taxes and subsidies.
C)The number of buyers.
D)Resource prices.
Question
According to the case for analysis (Demand and Supply in the Copper Industry)in the text,all of the following can lead to a decline in the price of copper except:

A)steady production uninterrupted by labor strikes or natural disasters.
B)substitution away from copper to other materials such as aluminum and plastic.
C)an increase in mining of higher grade materials.
D)a surge in demand from foreign importers.
Question
Assume the Congress approves increased drilling for oil in the U.S.to address the current energy shortage.People who are in favor of this policy argue that,ceteris paribus,this would cause:

A)an increase in the equilibrium price and quantity of oil.
B)a decrease in the equilibrium price and quantity of oil.
C)a decrease in equilibrium price and increase in the equilibrium quantity of oil.
D)an increase in equilibrium price and a decrease in the equilibrium quantity of oil.
Question
Assume an auto firm's factories are capable of producing both large and small cars and are operating at full capacity.Assume the price of large cars increases due to a shift in consumers' preferences toward large cars and away from smaller cars.What would reasonably be expected to happen to the equilibrium price and quantity of the firm's small cars?

A)Equilibrium price would increase and equilibrium quantity would decrease.
B)Equilibrium price and quantity would both decrease.
C)Equilibrium price would decrease and equilibrium quantity would increase.
D)Equilibrium price and quantity would both increase.
Question
Assume declining profits in the market for Internet service force several firms in the area to drop out of the market.Which of the following best describes the effect of the reduction in the number of service providers and the subsequent adjustment of the market to the new equilibrium price and quantity?

A)Quantity supplied would decrease, creating excess supply at the initial equilibrium price. Demand would then decrease until quantity demanded and quantity supplied are once again equal.
B)Quantity supplied would decrease, creating excess demand at the initial equilibrium price. Demand would then decrease until quantity demanded and quantity supplied are once again equal.
C)Supply would increase, creating excess demand at the initial equilibrium price. Price would then rise, causing quantity demanded to decrease and quantity supplied to increase until a new equilibrium is reached.
D)Supply would decrease, creating excess demand at the initial equilibrium price. Price would then rise, causing quantity demanded to decrease and quantity supplied to increase until a new equilibrium is reached.
Question
In the market for a normal good,what is the ultimate market reaction of suppliers to an increase in the incomes of consumers?

A)Suppliers do not react, because a change in income shifts the demand curve, not the supply curve.
B)The supply curve shifts to the right.
C)The supply curve shifts to the left.
D)Quantity supplied increases as the equilibrium moves along the supply curve due to a rise in the demand.
Question
All else constant,a large decrease in the number of people who want to own sport utility vehicles (SUVs)because of their poor fuel efficiency could be expected to cause:

A)an increase in the supply of SUVs.
B)a decrease in the equilibrium price of gasoline.
C)an increase in the equilibrium price of SUVs.
D)an increase in the supply of gasoline.
Question
Assume wages paid by a firm to its workers decrease.What will be the reaction of consumers as the market moves to its new equilibrium?

A)Quantity demanded will decrease.
B)Quantity demanded will increase.
C)The demand curve will shift to the left.
D)There will be no reaction by consumers, since input prices determine supply, not demand.
Question
Referring to the previous question,which of the following best describes the adjustment to the new market equilibrium?

A)Price would fall, causing quantity supplied to decrease until the new equilibrium is reached.
B)Price would rise, causing quantity supplied to increase until the new equilibrium is reached.
C)Price would fall, causing quantity supplied to increase until the new equilibrium is reached.
D)Price would rise, causing quantity supplied to decrease until the new equilibrium is reached.
Question
Referring to the previous question,what will happen to the equilibrium price and quantity of cars?

A)They will stay the same as domestic producers replace the cars once imported.
B)The shortage will cause the equilibrium price to increase and equilibrium quantity will decrease.
C)The surplus will cause equilibrium price to decrease and equilibrium quantity to increase.
D)The shift in the demand curve will cause equilibrium price to increase and quantity to increase.
Question
All else constant,an increase in the number of buyers in the market for cell phone service would cause:

A)equilibrium price and quantity to increase.
B)equilibrium price and quantity to decrease.
C)equilibrium price to increase and equilibrium quantity to decrease.
D)equilibrium price to decrease and equilibrium quantity to increase.
Question
Which of the following would cause a change in supply,as opposed to a change in quantity supplied,in the market for used homes?

A)A decrease in the price of rental housing.
B)A decrease in the mortgage rates.
C)An increase in the incomes of home buyers.
D)An increase in the number of buyers in the market for used homes.
Question
Assume declining profits in the market for Internet service force several firms in the area to drop out of the market.All else constant,this would cause the:

A)equilibrium price and quantity to decrease.
B)equilibrium price and quantity to increase.
C)equilibrium price to increase and equilibrium quantity to decrease.
D)equilibrium price to decrease and equilibrium quantity to increase.
Question
Which of the following statements is correct?

A)A change in demand or supply can only be caused by a change in price.
B)A simultaneous decrease in demand and increase in supply will result in an increase in equilibrium price and uncertain effect on quantity.
C)If price is currently above equilibrium, market adjustments will result in a decrease in price and quantity supplied.
D)An increase in supply invariably leads to a shortage in the affected market.
Question
Assume the supply function for good X can be written as Qs = -100 + 27Px - 5Py - 1.8W,where Px = the price of X,Py = the price of good Y,and W = Wage index for workers in industry X.According to this equation:

A)X and Y are substitutes in production.
B)X and Y are complements in production.
C)a decrease in wages would cause a decrease in the quantity supplied at each price.
D)each one unit increase in price causes quantity supplied to increase by 73 units.
Question
Referring to the previous question,all else constant,a 5 unit increase in the wage index would cause:

A)quantity supplied to increase by 9 units and be shown by a movement up the supply curve.
B)quantity supplied to decrease by 9 units and be shown by a movement down the supply curve.
C)quantity supplied to increase by 9 units and be shown by a rightward shift of the supply curve.
D)quantity supplied to decrease by 9 units and be shown by a leftward shift of the supply curve.
Question
Assume the auto market is initially in equilibrium with imports from Japan taking up a significant share of the market.Now assume a quota on imports of Japanese cars is established.What will occur at the initial equilibrium price to signal market participants regarding the change that has taken place?

A)A surplus is created by an increase in supply.
B)A surplus is created by a decrease in demand.
C)A shortage is created by an increase in demand.
D)A shortage is created by a decrease in supply.
Question
As the price of milk increases,what happens at the original equilibrium in the market for cereal that signals market participants that the original equilibrium must change? (Milk and cereal are complements.)

A)A surplus is created by an increase in supply.
B)A surplus is created by a decrease in demand.
C)A shortage is created by an increase in demand.
D)A shortage is created by a decrease in supply.
Question
Assume there is an improvement in the technology used to produce Blu-ray disc players.What could be expected to happen to the equilibrium price and quantity in the market for Blu-ray disc players?

A)Equilibrium price would increase and equilibrium quantity would decrease.
B)Equilibrium price and quantity would both decrease.
C)Equilibrium price would decrease and equilibrium quantity would increase.
D)Equilibrium price and quantity would both increase.
Question
As the price of milk increases,what would reasonably be expected to happen to the equilibrium price and equilibrium quantity of cereal? (Milk and cereal are complements.)

A)Equilibrium price would increase and equilibrium quantity would decrease.
B)Equilibrium price and quantity would both decrease.
C)Equilibrium price would decrease and equilibrium quantity would increase.
D)Equilibrium price and quantity would both increase.
Question
Assume the income of consumers of good X (a normal good)increases.What occurs at the initial equilibrium price for X that signals market participants that the equilibrium price must change?

A)A surplus is created by an increase in supply.
B)A surplus is created by a decrease in demand.
C)A shortage is created by an increase in demand.
D)A shortage is created by a decrease in supply.
Question
Assume that in the market for plasma TVs there is an increase in supply.The result will be:

A)an increase in equilibrium price and quantity.
B)a decrease in equilibrium price and quantity.
C)an increase in equilibrium quantity and uncertain effect on equilibrium price.
D)a decrease in equilibrium price and increase in equilibrium quantity.
Question
Assume there is a simultaneous increase in home foreclosures and a decrease in consumer incomes.Based on this information we can conclude,with certainty,that in the market for used single-family homes equilibrium:

A)price will increase.
B)price will decrease.
C)quantity will increase.
D)quantity will decrease.
Question
Assume the demand function for good X can be written as
Qd = 80 - 3Px + 2Py + 10I
where Px = the price of X,
Py = the price of good Y,and
I = Consumer income.
This equation implies that X and Y are substitutes.
Question
In order to import German goods into the United States,U.S.importers must buy those goods with German currency,i.e.,Euros.Assume,all else constant,there is a decrease in the price of U.S.-made cars compared to the price of German cars.Based on this information,we can conclude,with certainty,that in the market for Euros (where the price of Euros is measured in dollars),this would cause:

A)an increase in the equilibrium price of Euros.
B)a decrease in the equilibrium price of Euros.
C)an increase in the equilibrium quantity of Euros.
D)a decrease in the equilibrium quantity of Euros.
Question
Which of the following best describes the influence of successful advertising on the market for aspirin?

A)The market demand curve shifts to the right, creating a shortage at the original equilibrium price.
B)Individuals' demand curves shift to the right, but the market demand curve remains at its original position.
C)The market supply curve shifts to the right, creating a surplus at the original equilibrium price.
D)The market supply curve for aspirin shifts to the right, causing equilibrium price to decrease.
Question
Assume there is a reduction in the shipments of petroleum products due to political tension in the Persian Gulf.In a market economy,which consumers would get the reduced supplies of gas?

A)The consumers who value gasoline the most and are able to pay for it.
B)Wealthy consumers.
C)Lower income consumers.
D)Who gets the gasoline would be a random process. Those who arrive at the service station first will get the gasoline, regardless what its price is.
Question
Assume the costs of production in the U.S.auto industry are rising and,at the same time,the prices of Japanese-made autos are decreasing.What would reasonably be expected to happen to the equilibrium price and quantity of U.S.-made autos?

A)Price will increase; quantity cannot be determined.
B)Price will decrease; quantity cannot be determined.
C)Quantity will increase; price cannot be determined.
D)Quantity will decrease; price cannot be determined.
Question
In the run up to the war in Iraq that began in 2003,one of the many concerns raised was that a war could result in a decrease in the supply of oil.At the same time,the U.S.economy was having a hard time recovering from the recession of 2001 and,as a result,incomes of many consumers had decreased (due to layoffs,wage cuts,and so forth).All else constant,it was reasonable to predict,with certainty,that the combination of these two factors would cause the equilibrium:

A)quantity of oil to decrease.
B)quantity of oil to increase.
C)price of oil to increase.
D)price of oil to decrease.
Question
Assume goods X and Y are substitutes.An increase in the price of X would cause the demand for Y to increase.
Question
Assume goods X and Y are complements.A decrease in the price of X would cause the demand for Y to increase.
Question
File-sharing programs such as Napster,Kazaa,and iMesh make it possible for individuals to exchange music files over the Internet.On September 3,2003,Universal Music Group announced plans to reduce the wholesale price of music CDs it distributes by an average of 25-30 percent.Which of the following statements is correct regarding the combined effects of the development of file-sharing programs and Universal Music Group's price change in the market for new music CDs?

A)The equilibrium quantity of CDs would increase; the effect on equilibrium price is uncertain.
B)The equilibrium quantity of CDs would decrease; the effect on equilibrium price is uncertain.
C)The equilibrium price of CDs would increase; the effect on equilibrium quantity is uncertain.
D)The equilibrium price of CDs would decrease; the effect on equilibrium quantity is uncertain.
Question
Assume there is a simultaneous decrease in the incomes of people in the market for new homes and a decrease in the wages paid to carpenters,plumbers,and electricians.All else constant,we can predict,with certainty,that in the market for new homes the equilibrium:

A)quantity of new homes will decrease.
B)quantity of new homes will increase.
C)price of new homes will decrease.
D)price of new homes will increase.
Question
File-sharing programs such as Napster,Kazaa,and iMesh make it possible for individuals to exchange music files over the Internet.All else constant,which of the following statements best describes how the development of these programs has affected the retail market for new music CDs?

A)Demand for CDs has decreased, causing equilibrium price and quantity to decrease.
B)Demand for CDs has increased, causing equilibrium price and quantity to increase.
C)Demand for CDs has decreased, causing equilibrium price to decrease and equilibrium quantity to increase.
D)Demand for CDs has increased, causing equilibrium price to increase and equilibrium quantity to decrease.
Question
A "change in demand" is caused only by a change in the price of the good.
Question
"Demand" refers to the relationship between the price of a good and the quantity consumers are willing and able to buy at each price.
Question
Assuming there is a rise in supply of copper,if the market for copper is allowed to adjust,the ultimate result will be:

A)an increase in price and an increase in the quantity demanded.
B)an increase in price and an increase in the quantity supplied.
C)a decrease in price and an increase in the quantity demanded.
D)a decrease in price and an increase in the quantity supplied.
Question
Assume the technology for producing personal computers improves and,at the same time,individuals discover new uses for personal computers so that there is greater utilization of personal computers.Which of the following will happen to equilibrium price and equilibrium quantity?

A)Price will increase; quantity cannot be determined.
B)Price will decrease; quantity cannot be determined.
C)Quantity will increase; price cannot be determined.
D)Quantity will decrease; price cannot be determined.
Question
On September 3,2003,Universal Music Group announced plans to reduce the wholesale price of music CDs it distributes by an average of 25-30 percent.All else constant (i.e.,ignoring the effects of file-sharing programs),how would this change affect the retail market for new music CDs?

A)Demand for CDs would increase, causing equilibrium price and quantity to increase.
B)The supply of CDs would increase, causing equilibrium price to decrease and equilibrium quantity to increase.
C)Demand for CDs would decrease, causing equilibrium price and quantity to decrease.
D)The supply of CDs would decrease, causing equilibrium price to increase and equilibrium quantity to decrease.
Question
Assume there is a reduction in the shipments of petroleum products due to political tension in the Persian Gulf.Which of the following would not be expected to happen?

A)Oil companies would "ration" their supplies of gasoline by raising price.
B)There would be a shortage of the original equilibrium price.
C)Quantity demanded would decrease.
D)The demand curve would shift to the left.
Question
Assume the cost of certain inputs used to produce artificial Christmas trees increases and,at the same time,the economy moves into a recession,causing the incomes of consumers to decrease.Which of the following will happen to the equilibrium price and quantity of artificial Christmas trees? (Assume artificial Christmas trees are normal goods.)

A)Price will increase; quantity cannot be determined.
B)Price will decrease; quantity cannot be determined.
C)Quantity will increase; price cannot be determined.
D)Quantity will decrease; price cannot be determined.
Question
Assume there is a simultaneous decrease in the cost of batteries used in hybrid cars and a shift in consumer preferences toward more fuel-efficient vehicles.Based on this,we can conclude,with certainty,that in the market for hybrid cars,equilibrium:

A)price will decrease.
B)price will increase.
C)quantity will decrease.
D)quantity will increase.
Question
When price is greater than the market equilibrium price,a shortage is created.
Question
Rent controls have the effect of keeping prices under control and maintaining an adequate supply of affordable housing for lower income people.
Question
The market demand for a good is determined by horizontally summing the demand curves of individual consumers.
Question
Prices of related goods are a determinant of demand but not supply.
Question
Assume the market for used single-family homes is initially in equilibrium.All else constant,an increase in home foreclosures would cause equilibrium price and quantity to decrease.
Question
A decrease in the incomes of people who buy canoes would cause the demand for canoes to decrease.
Question
All else constant,an increase in the price of a good will cause the quantity supplied to increase.
Question
An increase in the price of fuel and fertilizer used for corn would cause farmers to increase corn production in an effort to make up for lost profits.
Question
Assume the demand function for good X can be written as
Qd = 80 - 3Px - 2Py + 10I
where Px = the price of X,
Py = the price of good Y,and
I = Consumer income.
This equation implies that X and Y are complements.
Question
When the supply of a good increases,the quantity supplied at each price is increasing as well.
Question
Assume the supply function for good X can be written as
Qs = -100 + 27Px - 5Py - 1.8W
where Px = the price of X,
Py = the price of good Y,and
W = Wage index for workers in industry X.
This equation implies that X and Y are substitutes in production.
Question
Assume the market for cell phone service is initially in equilibrium.An increase in supply would cause a surplus at the initial equilibrium price.The market adjustment would then involve a decrease in price which would in turn cause quantity demanded to increase and quantity supplied to decrease until equilibrium is reestablished.
Question
Assume the supply function for good X can be written as
Qs = -100 + 27Px - 5Py - 1.8W
where Px = the price of X,
Py = the price of good Y,and
W = Wage index for workers in industry X.
This equation implies that X and Y are complements in production.
Question
Federal subsidies to farmers can have the effect of creating a surplus in the market for certain crops.
Question
When market price is higher than the equilibrium price,a surplus is created.This will put downward pressure on price,causing quantity demanded to increase and quantity supplied to decrease until equilibrium is reestablished.
Question
Assume X is an inferior good.If the incomes of people who buy X increase,demand for X will increase as well,but by a smaller percentage than the increase in income.
Question
All else constant,an increase in the incomes of consumers in the market for diamonds would cause the supply of diamonds to increase.
Question
The supply of a good is a function of price and the demand for the good.
Question
Consider the market for air travel.A simultaneous increase in the price of fuel and another terrorist attack on United States soil would cause the equilibrium quantity of air travel to go down,but have an uncertain effect on equilibrium price.
Question
Assume that in an effort to help consumers,the government decides to reduce the amount of taxes it imposes on sellers of gasoline,that is,sellers are required to pay the government a smaller fee for each gallon of gas they sell.In the market for gas,this would have the effect of causing an increase in the supply of gas and a decrease in equilibrium price.
Unlock Deck
Sign up to unlock the cards in this deck!
Unlock Deck
Unlock Deck
1/94
auto play flashcards
Play
simple tutorial
Full screen (f)
exit full mode
Deck 2: Demand, supply, and Equilibrium Prices
1
DSL and broadband internet service would be considered an example of:

A)substitute goods.
B)giffen goods.
C)inferior goods.
D)complementary goods.
A
2
If the price of salmon increases relative to the price of cod,the demand for:

A)cod will decrease.
B)cod will increase.
C)salmon will decrease.
D)salmon will increase.
B
3
Which of the following would not cause the supply curve for gasoline to shift?

A)A change in the wages paid to gas station attendants.
B)A change in the number of gas stations.
C)A change in the incomes of drivers.
D)A change in the cost of refining oil.
C
4
"Supply" is best defined as the relationship between:

A)the current price of a good and the quantity supplied at that price.
B)the price of a good or service and the quantity supplied by producers at each price during a period of time.
C)the cost of producing a good and the price consumers are willing to pay for it.
D)the quantity supplied and the price people are willing to pay for a good.
Unlock Deck
Unlock for access to all 94 flashcards in this deck.
Unlock Deck
k this deck
5
All else held constant,an increase in foreign imports of cameras would cause the supply of cameras in the United States to:

A)increase.
B)stay the same.
C)decrease.
D)cannot be determined with the information given.
Unlock Deck
Unlock for access to all 94 flashcards in this deck.
Unlock Deck
k this deck
6
Referring to the previous question,all else constant,a one unit increase in the price of good Y would cause the quantity demanded of good X to:

A)decrease by 2 units.
B)increase by 2 units.
C)decrease by 1 unit.
D)decrease by 5 units.
Unlock Deck
Unlock for access to all 94 flashcards in this deck.
Unlock Deck
k this deck
7
All else constant,as more firms substitute alternative materials,e.g.,plastic,for copper,the market price of copper would be expected to:

A)increase.
B)stay the same.
C)decrease.
D)cannot be determined with the information given.
Unlock Deck
Unlock for access to all 94 flashcards in this deck.
Unlock Deck
k this deck
8
Assume the demand function for good X can be written as Qd = 80 - 3Px - 6Py + 10I,where Px = the price of X,Py is the price of Y and I is consumer income.If the price of Y decreases by 5 dollars,what would the reduction in Px have to be in order to keep the quantity demanded of X unchanged by the change in the price of Y?

A)decreased by 10 dollars
B)decreased by 5 dollars
C)decreased by 2.5 dollars
D)decreased by 1 dollar
Unlock Deck
Unlock for access to all 94 flashcards in this deck.
Unlock Deck
k this deck
9
In the market for cell phones,all of the following would cause the supply of cell phones to change except:

A)an improvement in the technology used to produce cell phones.
B)an increase in the cost of labor used to produce cell phones.
C)a change in cell phone producers' expectations.
D)an increase in the number of buyers in the market for cell phones.
Unlock Deck
Unlock for access to all 94 flashcards in this deck.
Unlock Deck
k this deck
10
In the market for French wines,an increase in demand is illustrated by:

A)a movement up the demand curve.
B)a movement down the demand curve.
C)a shift of the demand curve to the left.
D)a shift of the demand curve to the right.
Unlock Deck
Unlock for access to all 94 flashcards in this deck.
Unlock Deck
k this deck
11
A home theater system and an HD television would be considered an example of:

A)substitute goods.
B)giffen goods.
C)inferior goods.
D)complementary goods.
Unlock Deck
Unlock for access to all 94 flashcards in this deck.
Unlock Deck
k this deck
12
If movies on DVD for home rental and movies seen at a theater are substitutes,and the price of movies seen at a theater increases,the demand for movies on DVD will:

A)increase.
B)stay the same.
C)decrease.
D)cannot be determined.
Unlock Deck
Unlock for access to all 94 flashcards in this deck.
Unlock Deck
k this deck
13
All else constant,all of the following would cause the demand curve for a good to shift except:

A)a change in the cost of producing the good.
B)a change in the price of a related good.
C)a change in consumer's incomes.
D)a change in the number of buyers.
Unlock Deck
Unlock for access to all 94 flashcards in this deck.
Unlock Deck
k this deck
14
An increase in the number of buyers in the market for LED TVs would cause the market demand curve for LED TVs to:

A)shift right.
B)shift left.
C)stay the same because market demand doesn't depend on the number of buyers.
D)shift left or right depending on whether the new buyers purchase more or less than existing customers at each price.
Unlock Deck
Unlock for access to all 94 flashcards in this deck.
Unlock Deck
k this deck
15
Many people consider hot dogs to be an inferior good.For such people,all else held constant,a decrease in income would cause their demand for hot dogs to:

A)increase.
B)stay the same.
C)decrease.
D)cannot be determined with the information given.
Unlock Deck
Unlock for access to all 94 flashcards in this deck.
Unlock Deck
k this deck
16
Assume the demand function for good X can be written as Qd = 80 - 3Px + 2Py + 10I,where Px = the price of X,Py = the price of good Y,and I = Consumer income.According to this equation:

A)a rise in the price of Y would cause the demand for X to decrease.
B)X and Y are complements
C)X is an inferior good.
D)X and Y are substitutes.
Unlock Deck
Unlock for access to all 94 flashcards in this deck.
Unlock Deck
k this deck
17
"Demand" is best defined as the relationship between:

A)the price of a good and the quantity consumers are willing and able to buy at each price level.
B)the current price of a good and the quantity demanded at that price.
C)the quantity supplied and the price people are willing to pay for a good.
D)the amount of income someone has and the price he is willing to pay for a good.
Unlock Deck
Unlock for access to all 94 flashcards in this deck.
Unlock Deck
k this deck
18
All of the following are non-price factors that influence demand except:

A)tastes and preferences.
B)quantity supplied.
C)income.
D)the prices of related goods.
Unlock Deck
Unlock for access to all 94 flashcards in this deck.
Unlock Deck
k this deck
19
Which of the following is not considered a factor that influences supply?

A)Technology.
B)Production taxes and subsidies.
C)The number of buyers.
D)Resource prices.
Unlock Deck
Unlock for access to all 94 flashcards in this deck.
Unlock Deck
k this deck
20
According to the case for analysis (Demand and Supply in the Copper Industry)in the text,all of the following can lead to a decline in the price of copper except:

A)steady production uninterrupted by labor strikes or natural disasters.
B)substitution away from copper to other materials such as aluminum and plastic.
C)an increase in mining of higher grade materials.
D)a surge in demand from foreign importers.
Unlock Deck
Unlock for access to all 94 flashcards in this deck.
Unlock Deck
k this deck
21
Assume the Congress approves increased drilling for oil in the U.S.to address the current energy shortage.People who are in favor of this policy argue that,ceteris paribus,this would cause:

A)an increase in the equilibrium price and quantity of oil.
B)a decrease in the equilibrium price and quantity of oil.
C)a decrease in equilibrium price and increase in the equilibrium quantity of oil.
D)an increase in equilibrium price and a decrease in the equilibrium quantity of oil.
Unlock Deck
Unlock for access to all 94 flashcards in this deck.
Unlock Deck
k this deck
22
Assume an auto firm's factories are capable of producing both large and small cars and are operating at full capacity.Assume the price of large cars increases due to a shift in consumers' preferences toward large cars and away from smaller cars.What would reasonably be expected to happen to the equilibrium price and quantity of the firm's small cars?

A)Equilibrium price would increase and equilibrium quantity would decrease.
B)Equilibrium price and quantity would both decrease.
C)Equilibrium price would decrease and equilibrium quantity would increase.
D)Equilibrium price and quantity would both increase.
Unlock Deck
Unlock for access to all 94 flashcards in this deck.
Unlock Deck
k this deck
23
Assume declining profits in the market for Internet service force several firms in the area to drop out of the market.Which of the following best describes the effect of the reduction in the number of service providers and the subsequent adjustment of the market to the new equilibrium price and quantity?

A)Quantity supplied would decrease, creating excess supply at the initial equilibrium price. Demand would then decrease until quantity demanded and quantity supplied are once again equal.
B)Quantity supplied would decrease, creating excess demand at the initial equilibrium price. Demand would then decrease until quantity demanded and quantity supplied are once again equal.
C)Supply would increase, creating excess demand at the initial equilibrium price. Price would then rise, causing quantity demanded to decrease and quantity supplied to increase until a new equilibrium is reached.
D)Supply would decrease, creating excess demand at the initial equilibrium price. Price would then rise, causing quantity demanded to decrease and quantity supplied to increase until a new equilibrium is reached.
Unlock Deck
Unlock for access to all 94 flashcards in this deck.
Unlock Deck
k this deck
24
In the market for a normal good,what is the ultimate market reaction of suppliers to an increase in the incomes of consumers?

A)Suppliers do not react, because a change in income shifts the demand curve, not the supply curve.
B)The supply curve shifts to the right.
C)The supply curve shifts to the left.
D)Quantity supplied increases as the equilibrium moves along the supply curve due to a rise in the demand.
Unlock Deck
Unlock for access to all 94 flashcards in this deck.
Unlock Deck
k this deck
25
All else constant,a large decrease in the number of people who want to own sport utility vehicles (SUVs)because of their poor fuel efficiency could be expected to cause:

A)an increase in the supply of SUVs.
B)a decrease in the equilibrium price of gasoline.
C)an increase in the equilibrium price of SUVs.
D)an increase in the supply of gasoline.
Unlock Deck
Unlock for access to all 94 flashcards in this deck.
Unlock Deck
k this deck
26
Assume wages paid by a firm to its workers decrease.What will be the reaction of consumers as the market moves to its new equilibrium?

A)Quantity demanded will decrease.
B)Quantity demanded will increase.
C)The demand curve will shift to the left.
D)There will be no reaction by consumers, since input prices determine supply, not demand.
Unlock Deck
Unlock for access to all 94 flashcards in this deck.
Unlock Deck
k this deck
27
Referring to the previous question,which of the following best describes the adjustment to the new market equilibrium?

A)Price would fall, causing quantity supplied to decrease until the new equilibrium is reached.
B)Price would rise, causing quantity supplied to increase until the new equilibrium is reached.
C)Price would fall, causing quantity supplied to increase until the new equilibrium is reached.
D)Price would rise, causing quantity supplied to decrease until the new equilibrium is reached.
Unlock Deck
Unlock for access to all 94 flashcards in this deck.
Unlock Deck
k this deck
28
Referring to the previous question,what will happen to the equilibrium price and quantity of cars?

A)They will stay the same as domestic producers replace the cars once imported.
B)The shortage will cause the equilibrium price to increase and equilibrium quantity will decrease.
C)The surplus will cause equilibrium price to decrease and equilibrium quantity to increase.
D)The shift in the demand curve will cause equilibrium price to increase and quantity to increase.
Unlock Deck
Unlock for access to all 94 flashcards in this deck.
Unlock Deck
k this deck
29
All else constant,an increase in the number of buyers in the market for cell phone service would cause:

A)equilibrium price and quantity to increase.
B)equilibrium price and quantity to decrease.
C)equilibrium price to increase and equilibrium quantity to decrease.
D)equilibrium price to decrease and equilibrium quantity to increase.
Unlock Deck
Unlock for access to all 94 flashcards in this deck.
Unlock Deck
k this deck
30
Which of the following would cause a change in supply,as opposed to a change in quantity supplied,in the market for used homes?

A)A decrease in the price of rental housing.
B)A decrease in the mortgage rates.
C)An increase in the incomes of home buyers.
D)An increase in the number of buyers in the market for used homes.
Unlock Deck
Unlock for access to all 94 flashcards in this deck.
Unlock Deck
k this deck
31
Assume declining profits in the market for Internet service force several firms in the area to drop out of the market.All else constant,this would cause the:

A)equilibrium price and quantity to decrease.
B)equilibrium price and quantity to increase.
C)equilibrium price to increase and equilibrium quantity to decrease.
D)equilibrium price to decrease and equilibrium quantity to increase.
Unlock Deck
Unlock for access to all 94 flashcards in this deck.
Unlock Deck
k this deck
32
Which of the following statements is correct?

A)A change in demand or supply can only be caused by a change in price.
B)A simultaneous decrease in demand and increase in supply will result in an increase in equilibrium price and uncertain effect on quantity.
C)If price is currently above equilibrium, market adjustments will result in a decrease in price and quantity supplied.
D)An increase in supply invariably leads to a shortage in the affected market.
Unlock Deck
Unlock for access to all 94 flashcards in this deck.
Unlock Deck
k this deck
33
Assume the supply function for good X can be written as Qs = -100 + 27Px - 5Py - 1.8W,where Px = the price of X,Py = the price of good Y,and W = Wage index for workers in industry X.According to this equation:

A)X and Y are substitutes in production.
B)X and Y are complements in production.
C)a decrease in wages would cause a decrease in the quantity supplied at each price.
D)each one unit increase in price causes quantity supplied to increase by 73 units.
Unlock Deck
Unlock for access to all 94 flashcards in this deck.
Unlock Deck
k this deck
34
Referring to the previous question,all else constant,a 5 unit increase in the wage index would cause:

A)quantity supplied to increase by 9 units and be shown by a movement up the supply curve.
B)quantity supplied to decrease by 9 units and be shown by a movement down the supply curve.
C)quantity supplied to increase by 9 units and be shown by a rightward shift of the supply curve.
D)quantity supplied to decrease by 9 units and be shown by a leftward shift of the supply curve.
Unlock Deck
Unlock for access to all 94 flashcards in this deck.
Unlock Deck
k this deck
35
Assume the auto market is initially in equilibrium with imports from Japan taking up a significant share of the market.Now assume a quota on imports of Japanese cars is established.What will occur at the initial equilibrium price to signal market participants regarding the change that has taken place?

A)A surplus is created by an increase in supply.
B)A surplus is created by a decrease in demand.
C)A shortage is created by an increase in demand.
D)A shortage is created by a decrease in supply.
Unlock Deck
Unlock for access to all 94 flashcards in this deck.
Unlock Deck
k this deck
36
As the price of milk increases,what happens at the original equilibrium in the market for cereal that signals market participants that the original equilibrium must change? (Milk and cereal are complements.)

A)A surplus is created by an increase in supply.
B)A surplus is created by a decrease in demand.
C)A shortage is created by an increase in demand.
D)A shortage is created by a decrease in supply.
Unlock Deck
Unlock for access to all 94 flashcards in this deck.
Unlock Deck
k this deck
37
Assume there is an improvement in the technology used to produce Blu-ray disc players.What could be expected to happen to the equilibrium price and quantity in the market for Blu-ray disc players?

A)Equilibrium price would increase and equilibrium quantity would decrease.
B)Equilibrium price and quantity would both decrease.
C)Equilibrium price would decrease and equilibrium quantity would increase.
D)Equilibrium price and quantity would both increase.
Unlock Deck
Unlock for access to all 94 flashcards in this deck.
Unlock Deck
k this deck
38
As the price of milk increases,what would reasonably be expected to happen to the equilibrium price and equilibrium quantity of cereal? (Milk and cereal are complements.)

A)Equilibrium price would increase and equilibrium quantity would decrease.
B)Equilibrium price and quantity would both decrease.
C)Equilibrium price would decrease and equilibrium quantity would increase.
D)Equilibrium price and quantity would both increase.
Unlock Deck
Unlock for access to all 94 flashcards in this deck.
Unlock Deck
k this deck
39
Assume the income of consumers of good X (a normal good)increases.What occurs at the initial equilibrium price for X that signals market participants that the equilibrium price must change?

A)A surplus is created by an increase in supply.
B)A surplus is created by a decrease in demand.
C)A shortage is created by an increase in demand.
D)A shortage is created by a decrease in supply.
Unlock Deck
Unlock for access to all 94 flashcards in this deck.
Unlock Deck
k this deck
40
Assume that in the market for plasma TVs there is an increase in supply.The result will be:

A)an increase in equilibrium price and quantity.
B)a decrease in equilibrium price and quantity.
C)an increase in equilibrium quantity and uncertain effect on equilibrium price.
D)a decrease in equilibrium price and increase in equilibrium quantity.
Unlock Deck
Unlock for access to all 94 flashcards in this deck.
Unlock Deck
k this deck
41
Assume there is a simultaneous increase in home foreclosures and a decrease in consumer incomes.Based on this information we can conclude,with certainty,that in the market for used single-family homes equilibrium:

A)price will increase.
B)price will decrease.
C)quantity will increase.
D)quantity will decrease.
Unlock Deck
Unlock for access to all 94 flashcards in this deck.
Unlock Deck
k this deck
42
Assume the demand function for good X can be written as
Qd = 80 - 3Px + 2Py + 10I
where Px = the price of X,
Py = the price of good Y,and
I = Consumer income.
This equation implies that X and Y are substitutes.
Unlock Deck
Unlock for access to all 94 flashcards in this deck.
Unlock Deck
k this deck
43
In order to import German goods into the United States,U.S.importers must buy those goods with German currency,i.e.,Euros.Assume,all else constant,there is a decrease in the price of U.S.-made cars compared to the price of German cars.Based on this information,we can conclude,with certainty,that in the market for Euros (where the price of Euros is measured in dollars),this would cause:

A)an increase in the equilibrium price of Euros.
B)a decrease in the equilibrium price of Euros.
C)an increase in the equilibrium quantity of Euros.
D)a decrease in the equilibrium quantity of Euros.
Unlock Deck
Unlock for access to all 94 flashcards in this deck.
Unlock Deck
k this deck
44
Which of the following best describes the influence of successful advertising on the market for aspirin?

A)The market demand curve shifts to the right, creating a shortage at the original equilibrium price.
B)Individuals' demand curves shift to the right, but the market demand curve remains at its original position.
C)The market supply curve shifts to the right, creating a surplus at the original equilibrium price.
D)The market supply curve for aspirin shifts to the right, causing equilibrium price to decrease.
Unlock Deck
Unlock for access to all 94 flashcards in this deck.
Unlock Deck
k this deck
45
Assume there is a reduction in the shipments of petroleum products due to political tension in the Persian Gulf.In a market economy,which consumers would get the reduced supplies of gas?

A)The consumers who value gasoline the most and are able to pay for it.
B)Wealthy consumers.
C)Lower income consumers.
D)Who gets the gasoline would be a random process. Those who arrive at the service station first will get the gasoline, regardless what its price is.
Unlock Deck
Unlock for access to all 94 flashcards in this deck.
Unlock Deck
k this deck
46
Assume the costs of production in the U.S.auto industry are rising and,at the same time,the prices of Japanese-made autos are decreasing.What would reasonably be expected to happen to the equilibrium price and quantity of U.S.-made autos?

A)Price will increase; quantity cannot be determined.
B)Price will decrease; quantity cannot be determined.
C)Quantity will increase; price cannot be determined.
D)Quantity will decrease; price cannot be determined.
Unlock Deck
Unlock for access to all 94 flashcards in this deck.
Unlock Deck
k this deck
47
In the run up to the war in Iraq that began in 2003,one of the many concerns raised was that a war could result in a decrease in the supply of oil.At the same time,the U.S.economy was having a hard time recovering from the recession of 2001 and,as a result,incomes of many consumers had decreased (due to layoffs,wage cuts,and so forth).All else constant,it was reasonable to predict,with certainty,that the combination of these two factors would cause the equilibrium:

A)quantity of oil to decrease.
B)quantity of oil to increase.
C)price of oil to increase.
D)price of oil to decrease.
Unlock Deck
Unlock for access to all 94 flashcards in this deck.
Unlock Deck
k this deck
48
Assume goods X and Y are substitutes.An increase in the price of X would cause the demand for Y to increase.
Unlock Deck
Unlock for access to all 94 flashcards in this deck.
Unlock Deck
k this deck
49
Assume goods X and Y are complements.A decrease in the price of X would cause the demand for Y to increase.
Unlock Deck
Unlock for access to all 94 flashcards in this deck.
Unlock Deck
k this deck
50
File-sharing programs such as Napster,Kazaa,and iMesh make it possible for individuals to exchange music files over the Internet.On September 3,2003,Universal Music Group announced plans to reduce the wholesale price of music CDs it distributes by an average of 25-30 percent.Which of the following statements is correct regarding the combined effects of the development of file-sharing programs and Universal Music Group's price change in the market for new music CDs?

A)The equilibrium quantity of CDs would increase; the effect on equilibrium price is uncertain.
B)The equilibrium quantity of CDs would decrease; the effect on equilibrium price is uncertain.
C)The equilibrium price of CDs would increase; the effect on equilibrium quantity is uncertain.
D)The equilibrium price of CDs would decrease; the effect on equilibrium quantity is uncertain.
Unlock Deck
Unlock for access to all 94 flashcards in this deck.
Unlock Deck
k this deck
51
Assume there is a simultaneous decrease in the incomes of people in the market for new homes and a decrease in the wages paid to carpenters,plumbers,and electricians.All else constant,we can predict,with certainty,that in the market for new homes the equilibrium:

A)quantity of new homes will decrease.
B)quantity of new homes will increase.
C)price of new homes will decrease.
D)price of new homes will increase.
Unlock Deck
Unlock for access to all 94 flashcards in this deck.
Unlock Deck
k this deck
52
File-sharing programs such as Napster,Kazaa,and iMesh make it possible for individuals to exchange music files over the Internet.All else constant,which of the following statements best describes how the development of these programs has affected the retail market for new music CDs?

A)Demand for CDs has decreased, causing equilibrium price and quantity to decrease.
B)Demand for CDs has increased, causing equilibrium price and quantity to increase.
C)Demand for CDs has decreased, causing equilibrium price to decrease and equilibrium quantity to increase.
D)Demand for CDs has increased, causing equilibrium price to increase and equilibrium quantity to decrease.
Unlock Deck
Unlock for access to all 94 flashcards in this deck.
Unlock Deck
k this deck
53
A "change in demand" is caused only by a change in the price of the good.
Unlock Deck
Unlock for access to all 94 flashcards in this deck.
Unlock Deck
k this deck
54
"Demand" refers to the relationship between the price of a good and the quantity consumers are willing and able to buy at each price.
Unlock Deck
Unlock for access to all 94 flashcards in this deck.
Unlock Deck
k this deck
55
Assuming there is a rise in supply of copper,if the market for copper is allowed to adjust,the ultimate result will be:

A)an increase in price and an increase in the quantity demanded.
B)an increase in price and an increase in the quantity supplied.
C)a decrease in price and an increase in the quantity demanded.
D)a decrease in price and an increase in the quantity supplied.
Unlock Deck
Unlock for access to all 94 flashcards in this deck.
Unlock Deck
k this deck
56
Assume the technology for producing personal computers improves and,at the same time,individuals discover new uses for personal computers so that there is greater utilization of personal computers.Which of the following will happen to equilibrium price and equilibrium quantity?

A)Price will increase; quantity cannot be determined.
B)Price will decrease; quantity cannot be determined.
C)Quantity will increase; price cannot be determined.
D)Quantity will decrease; price cannot be determined.
Unlock Deck
Unlock for access to all 94 flashcards in this deck.
Unlock Deck
k this deck
57
On September 3,2003,Universal Music Group announced plans to reduce the wholesale price of music CDs it distributes by an average of 25-30 percent.All else constant (i.e.,ignoring the effects of file-sharing programs),how would this change affect the retail market for new music CDs?

A)Demand for CDs would increase, causing equilibrium price and quantity to increase.
B)The supply of CDs would increase, causing equilibrium price to decrease and equilibrium quantity to increase.
C)Demand for CDs would decrease, causing equilibrium price and quantity to decrease.
D)The supply of CDs would decrease, causing equilibrium price to increase and equilibrium quantity to decrease.
Unlock Deck
Unlock for access to all 94 flashcards in this deck.
Unlock Deck
k this deck
58
Assume there is a reduction in the shipments of petroleum products due to political tension in the Persian Gulf.Which of the following would not be expected to happen?

A)Oil companies would "ration" their supplies of gasoline by raising price.
B)There would be a shortage of the original equilibrium price.
C)Quantity demanded would decrease.
D)The demand curve would shift to the left.
Unlock Deck
Unlock for access to all 94 flashcards in this deck.
Unlock Deck
k this deck
59
Assume the cost of certain inputs used to produce artificial Christmas trees increases and,at the same time,the economy moves into a recession,causing the incomes of consumers to decrease.Which of the following will happen to the equilibrium price and quantity of artificial Christmas trees? (Assume artificial Christmas trees are normal goods.)

A)Price will increase; quantity cannot be determined.
B)Price will decrease; quantity cannot be determined.
C)Quantity will increase; price cannot be determined.
D)Quantity will decrease; price cannot be determined.
Unlock Deck
Unlock for access to all 94 flashcards in this deck.
Unlock Deck
k this deck
60
Assume there is a simultaneous decrease in the cost of batteries used in hybrid cars and a shift in consumer preferences toward more fuel-efficient vehicles.Based on this,we can conclude,with certainty,that in the market for hybrid cars,equilibrium:

A)price will decrease.
B)price will increase.
C)quantity will decrease.
D)quantity will increase.
Unlock Deck
Unlock for access to all 94 flashcards in this deck.
Unlock Deck
k this deck
61
When price is greater than the market equilibrium price,a shortage is created.
Unlock Deck
Unlock for access to all 94 flashcards in this deck.
Unlock Deck
k this deck
62
Rent controls have the effect of keeping prices under control and maintaining an adequate supply of affordable housing for lower income people.
Unlock Deck
Unlock for access to all 94 flashcards in this deck.
Unlock Deck
k this deck
63
The market demand for a good is determined by horizontally summing the demand curves of individual consumers.
Unlock Deck
Unlock for access to all 94 flashcards in this deck.
Unlock Deck
k this deck
64
Prices of related goods are a determinant of demand but not supply.
Unlock Deck
Unlock for access to all 94 flashcards in this deck.
Unlock Deck
k this deck
65
Assume the market for used single-family homes is initially in equilibrium.All else constant,an increase in home foreclosures would cause equilibrium price and quantity to decrease.
Unlock Deck
Unlock for access to all 94 flashcards in this deck.
Unlock Deck
k this deck
66
A decrease in the incomes of people who buy canoes would cause the demand for canoes to decrease.
Unlock Deck
Unlock for access to all 94 flashcards in this deck.
Unlock Deck
k this deck
67
All else constant,an increase in the price of a good will cause the quantity supplied to increase.
Unlock Deck
Unlock for access to all 94 flashcards in this deck.
Unlock Deck
k this deck
68
An increase in the price of fuel and fertilizer used for corn would cause farmers to increase corn production in an effort to make up for lost profits.
Unlock Deck
Unlock for access to all 94 flashcards in this deck.
Unlock Deck
k this deck
69
Assume the demand function for good X can be written as
Qd = 80 - 3Px - 2Py + 10I
where Px = the price of X,
Py = the price of good Y,and
I = Consumer income.
This equation implies that X and Y are complements.
Unlock Deck
Unlock for access to all 94 flashcards in this deck.
Unlock Deck
k this deck
70
When the supply of a good increases,the quantity supplied at each price is increasing as well.
Unlock Deck
Unlock for access to all 94 flashcards in this deck.
Unlock Deck
k this deck
71
Assume the supply function for good X can be written as
Qs = -100 + 27Px - 5Py - 1.8W
where Px = the price of X,
Py = the price of good Y,and
W = Wage index for workers in industry X.
This equation implies that X and Y are substitutes in production.
Unlock Deck
Unlock for access to all 94 flashcards in this deck.
Unlock Deck
k this deck
72
Assume the market for cell phone service is initially in equilibrium.An increase in supply would cause a surplus at the initial equilibrium price.The market adjustment would then involve a decrease in price which would in turn cause quantity demanded to increase and quantity supplied to decrease until equilibrium is reestablished.
Unlock Deck
Unlock for access to all 94 flashcards in this deck.
Unlock Deck
k this deck
73
Assume the supply function for good X can be written as
Qs = -100 + 27Px - 5Py - 1.8W
where Px = the price of X,
Py = the price of good Y,and
W = Wage index for workers in industry X.
This equation implies that X and Y are complements in production.
Unlock Deck
Unlock for access to all 94 flashcards in this deck.
Unlock Deck
k this deck
74
Federal subsidies to farmers can have the effect of creating a surplus in the market for certain crops.
Unlock Deck
Unlock for access to all 94 flashcards in this deck.
Unlock Deck
k this deck
75
When market price is higher than the equilibrium price,a surplus is created.This will put downward pressure on price,causing quantity demanded to increase and quantity supplied to decrease until equilibrium is reestablished.
Unlock Deck
Unlock for access to all 94 flashcards in this deck.
Unlock Deck
k this deck
76
Assume X is an inferior good.If the incomes of people who buy X increase,demand for X will increase as well,but by a smaller percentage than the increase in income.
Unlock Deck
Unlock for access to all 94 flashcards in this deck.
Unlock Deck
k this deck
77
All else constant,an increase in the incomes of consumers in the market for diamonds would cause the supply of diamonds to increase.
Unlock Deck
Unlock for access to all 94 flashcards in this deck.
Unlock Deck
k this deck
78
The supply of a good is a function of price and the demand for the good.
Unlock Deck
Unlock for access to all 94 flashcards in this deck.
Unlock Deck
k this deck
79
Consider the market for air travel.A simultaneous increase in the price of fuel and another terrorist attack on United States soil would cause the equilibrium quantity of air travel to go down,but have an uncertain effect on equilibrium price.
Unlock Deck
Unlock for access to all 94 flashcards in this deck.
Unlock Deck
k this deck
80
Assume that in an effort to help consumers,the government decides to reduce the amount of taxes it imposes on sellers of gasoline,that is,sellers are required to pay the government a smaller fee for each gallon of gas they sell.In the market for gas,this would have the effect of causing an increase in the supply of gas and a decrease in equilibrium price.
Unlock Deck
Unlock for access to all 94 flashcards in this deck.
Unlock Deck
k this deck
locked card icon
Unlock Deck
Unlock for access to all 94 flashcards in this deck.