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Terms in this set (24)
Assume that the price in a market is currently below the equilibrium price. Explain exactly why that situation will change by putting the steps in the correct order.
A. The steps repeat until there is a new equilibrium
B. There is a shortage since quantity demanded is greater than quantity supplied
C. A new equilibrium is reached
with a larger quantity exchanged and a higher price
D. The shortage becomes smaller
E. Some buyers are willing to pay more for a good and sellers can raise prices while still selling all of their supply
F. Quantity demanded begins to decrease and quantity supplied increases
G. Prices begin to rise
B
E
G
F
D
A
C
Assume that tastes change so that tennis is no longer as desirable to
play as it is now. What would happen to the market for tennis balls?
a. Demand increases, the equilibrium quantity is larger, and the price is higher.
b. Demand decreases, the equilibrium quantity is smaller, and the price is lower.
c. Demand increases, the equilibrium quantity is smaller, and the price is lower.
d. Demand decreases, the equilibrium quantity is larger, and the price is higher.
b
Okra
was $13.00 per bushel in 2015, and 1.5 million bushels were sold. Okra was $14.00 per bushel in 2016, and 2.0 million bushels were sold. "If in both cases the okra market was in equilibrium, this must be an example of an exception to the law of demand."
a. true
b. false
b
An increase in the price of the good
A movement along a demand curve¸ no change in demand
An increase in income for a normal good
Shift the demand curve to the right and an increase in demand
A decrease in the price of a substitute good
Shift the demand curve to the left and a decrease in demand
Expectations of falling income in the near future
Shift the demand curve to the left and a decrease in demand. (If the good is normal.)
Expectations of rising prices in the near future
Shift the demand curve to the right and an increase in demand now.
Since 1950, the labor force participation rate of women with young children has been increasing dramatically. In accordance with this trend,
one would predict that there has been _______________.
a. An increase in the demand for child care services
b. An increase in the quantity demanded of child care services
c. A decrease in the demand for child care services
d. A decrease in the quantity demanded of child care services
a
"Falling oil prices have caused a sharp decrease in the supply of oil." Speaking precisely, this quotation is
_______.
a. Correct; a decrease in price always causes a decrease in supply.
b. Incorrect; a decrease in price causes an increase in supply, not a decrease in supply.
c. Incorrect; a decrease in price causes an increase in the quantity supplied, not a decrease in supply.
d. Incorrect; a decrease in price causes a decrease in the quantity supplied, not a decrease in supply.
d
An increase in the prices
of inputs will cause the equilibrium price to ______________ and the equilibrium quantity to ______________.
a. Increase, increase
b. Increase, decrease
c. Decrease, decrease
d. Decrease, increase
b
New technology lowering the costs of production will cause the equilibrium price to ______________ and the equilibrium quantity to ______________.
a. Increase, increase
b. Increase, decrease
c.
Decrease, decrease
d. Decrease, increase
d
An increase in the price of a substitute good will cause the equilibrium price of its substitute to ______________ and the equilibrium quantity to ______________.
a. Increase, increase
b. Increase, decrease
c. Decrease, decrease
d. Decrease, increase
a
A decrease in the
price of a complementary good will cause its complement's equilibrium price to ______________ and the equilibrium quantity to ______________.
a. Increase, increase
b. Increase, decrease
c. Decrease, decrease
d. Decrease, increase
c
If (1) the cost of manufacturing computers decreases and (2) at the same time the quality improves, making computers more useful for households, which of the following is
most likely to happen?
a. Equilibrium price will increase, equilibrium quantity will increase
b. Equilibrium price may increase or decrease; equilibrium quantity will increase
c. Equilibrium price will decrease; equilibrium quantity will decrease
d. Equilibrium price may increase or decrease; equilibrium quantity will decrease
b
"The winds of the recent hurricanes in Florida are bringing significant
financial gain to California orange growers. Due to the extensive damage to the Florida orange crop, many oranges were destroyed. The ones remaining were just as good as the previous oranges. California oranges are commanding their highest prices ever." If Florida and California oranges are substitute goods, which of the following statements best explains the economics of the quotation?
a. The demand for Florida oranges has been reduced, causing their prices to fall and therefore increasing
the demand for the substitute California oranges.
b. The supply of Florida oranges has decreased, causing the supply of California oranges to increase and their prices to rise.
c. The demand for Florida oranges has been reduced by the hurricanes, causing a greater demand for the California oranges and an increase in their price.
d. The supply of Florida oranges has decreased, causing their price to increase and the demand for the California oranges to increase also.
d
"Many Coca-Cola bottlers increased the price of Coke because the price of corn syrup (an important ingredient in Coke production) has increased." Other things constant, this most recent change in the market for Coca-Cola can best be explained as which of the following?
a. A decrease in demand with supply relatively unchanged
b. A decrease in supply with demand relatively unchanged
c. An increase in supply with demand
relatively unchanged
d. An increase in demand with supply relatively unchanged
b
If income decreases and, at the same time, a new technology is discovered that lowers the cost of producing the good, which of the following will happen?
a. The equilibrium quantity will increase. The equilibrium price will increase.
b. Cannot tell the change in equilibrium quantity. The equilibrium price will
decrease.
c. The equilibrium quantity will decrease. The equilibrium price will increase.
d. Cannot tell the change in equilibrium quantity. Cannot tell the change in equilibrium price.
b
Christmas card sales increase during the last three months of the year, and the sale of fresh strawberries in the North increase during the early summer months. However, the equilibrium price movement of these two
commodities is quite different during their peak sales seasons. Christmas cards increase in price when the equilibrium quantity increases, whereas strawberries decrease in price when the equilibrium quantity increases. Why does this difference occur?
a. Demand for Christmas cards increases; supply of strawberries increases
b. Demand for Christmas cards increases; supply of strawberries decreases
c. Demand for Christmas cards decreases; supply of strawberries increases
d. Demand for
Christmas cards decreases; supply of strawberries decreases
a
Oil-based products are a significant part of the materials used to build sailboats. What is likely to happen in the market for new sailboats and in the market for sails, if the price of oil begins to rise?
a. Equilibrium quantity will be larger in both; Equilibrium price will be higher in both.
b. Equilibrium quantity will be lower for sailboats
and higher for sails; Equilibrium price will be higher for both.
c. Equilibrium quantity will be lower for sailboats and sails; Equilibrium price will be higher for sailboats and the change in equilibrium price for sails is ambiguous.
d. Equilibrium quantity will be higher for sailboats and lower for sails; Equilibrium price will be higher for sailboats but lower for sails.
c
Oprah Winfrey made comments
about the possibility of contracting mad-cow disease from eating beef. Some observers said that those comments had negative effects on the beef market. In the same period of time, changes in rate of production may have been the real culprit. If only Oprah's comments affected the market, then the equilibrium price would have ______________ and the equilibrium quantity would have ______________.
a. Decreased, decreased
b. Increased, increased
c. Decreased, increased
d. Increased,
decreased
a
Oprah Winfrey made comments about the possibility of contracting mad-cow disease from eating beef. Some observers said that those comments had negative effects on the beef market. In the same period of time, changes in rate of production may have been the real culprit. If the "over-production" affected the market, then the equilibrium price would have ______________ and the equilibrium quantity would
have ______________.
a. Decreased, decreased
b. Increased, increased
c. Decreased, increased
d. Increased, decreased
c
Health insurance makes medical care more affordable for individuals. What will happen to the equilibrium price of medical care as a result of better health care coverage and why?
a. Price decreases because demand increases
b. Price decreases because supply increases
c. Price
increases because supply decreases
d. Price increases because demand increases
d
What would be the initial change in the market for beer if a city suddenly restricted the number of bar licenses they permitted? (Note: A bar requires a licenses to operate.)
a. Supply would decrease and there would be a shortage
b. Supply would decrease and there would be a surplus
c. Demand would increase and there
would be a shortage
d. Demand would increase and there would be a surplus
a
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