Chapter 3 questions Flashcards
When a slice of pizza at the student union sold for $2, Moe did not purchase any. When the price fell to $1.75, Moe purchased a slice each day for lunch. Moe’s reservation price for a slice of pizza must be:
a. less than $1.75.
b. at least $1.75 but less than $2.
c. exactly $1.75.
d. exactly $2.00
b. at least $1.75 but less than $2.
One reason for the ________ slope of the demand curve is that as prices fall ________.
a. upward; people expect goods to be of lower quality.
b. upward; more people purchase the good.
c. downward; more people find that the price is less than their reservation price.
d. downward; fewer people find that the price equals their reservation price.
c. downward; more people find that the price is less than their reservation price.
A seller’s reservation price is generally equal to:
a. the buyer’s reservation price.
b. the seller’s average cost.
c. the seller’s marginal cost.
d. the market price.
c. the seller’s marginal cost.
A seller’s reservation price is generally equal to marginal cost.
Supply curves are generally _______ sloping because _______________
a. downward; more consumers will buy the good if the price falls
b. upward; of the principle of increasing opportunity costs.
c. downward; it is less expensive to mass produce goods.
d. upward; of inflation.
b. upward; of the principle of increasing opportunity costs.
As the price of cookies increases, firms that produce cookies will:
a. increase the supply of cookies.
b. increase the quantity of cookies supplied.
c. decrease the supply of cookies.
d. decrease the quantity of cookies supplied
b. increase the quantity of cookies supplied.
An increase in price causes a movement along the supply curve (up and to the right).
Which of the following would cause an increase in quantity supplied of wheat?
a. The price farmers receive for their wheat rises.
b. The price of fertilizer farmers’ use in their fields decreases.
c. The price firms pay for liability insurance falls.
d. New, better technology for farming is introduced.
a. The price farmers receive for their wheat rises.
An increase in price causes a movement up and along the supply curve.
An increase in the quantity demanded of tea occurs whenever
a. the population of tea drinkers grows.
b. the price of coffee rises.
c. tea drinkers receive an increase in their incomes.
d. the price of the tea falls.
d. the price of the tea falls.
If bagels and donuts are substitutes, then a decrease in the price of donuts will result in:
a. An increase in the demand for donuts.
b. A decrease in the demand for donuts.
c. An increase in the demand for bagels.
d. A decrease in the demand for bagels.
d. A decrease in the demand for bagels.
Peanut butter and jelly are complements. A decrease in the price of one will result in:
a. A decrease in the demand for the other.
b. A decrease in the quantity demanded of the other.
c. An increase in the demand for the other.
d. An increase in the quantity demanded of the other.
c. An increase in the demand for the other.
Assume consumers eat either rice or pasta for dinner every night. If the price of rice increases, then one would expect to see:
a. an increase in the quantity of pasta demanded.
b. an increase in the demand for pasta.
c. a decrease in the quantity of pasta demanded.
d. a decrease in the demand for pasta.
b. an increase in the demand for pasta.
Whenever the quantity demanded is not equal to the quantity supplied, the quantity that is actually sold in the market is:
a. the quantity demanded.
b. the quantity supplied.
c. the smaller of the quantity demanded and the quantity supplied.
d. the greater of the quantity demanded and the quantity supplied.
c. the smaller of the quantity demanded and the quantity supplied.
In disequilibrium, there is either excess demand or excess supply because the smaller-quantity side of the market determines the quantity sold.
Which of the following is a determinant of supply?
a. Consumer tastes or preferences
b. The prices of the factors of production
c. Income
d. Number of buyers
b. The prices of the factors of production
Assume that steel is used to produce monkey wrenches. Ceteris paribus, if the price of steel rises, then:
a. The supply curve for monkey wrenches will shift to the left.
b. The supply curve for monkey wrenches will shift to the right.
c. There will be a leftward movement along the initial supply curve for monkey wrenches.
d. There will be a rightward movement along the initial supply curve for monkey wrenches.
a. The supply curve for monkey wrenches will shift to the left.
When steel prices increase, the costs to produce monkey wrenches increase. As costs increase, profit margins decrease, making it less profitable to produce monkey wrenches at all price levels.
What will happen to the equilibrium price and quantity of beef if the price of chickenfeed (and therefore the price of chicken) increases?
a. Both will increase.
b. Both will fall.
c. Equilibrium price will increase and quantity will fall.
d. Equilibrium price will fall and quantity will increase.
a. Both will increase.
An increase in the price of chickenfeed shifts the supply curve of chickens to the left, resulting in an increase in the equilibrium price of chickens. Assuming that chicken is a substitute for beef, the increase in the price of chickens will shift the demand curve for beef to the right, increasing both the equilibrium price and the equilibrium quantity of beef.
What will happen to the equilibrium price and quantity of fish if fish oils are found to help prevent heart disease?
a. Both will increase.
b. Both will fall.
c. Equilibrium price will increase and quantity will fall.
d. Equilibrium price will fall and quantity will increase.
a. Both will increase.
What will happen to the equilibrium price and quantity of beef if the price of chicken feed decreases? (Assume that chicken and beef are substitutes.)
a. Both will decrease.
b. Both will increase.
c. Equilibrium price will decrease and equilibrium quantity will increase.
d. Equilibrium price will increase and equilibrium quantity will decrease.
a. Both will decrease.
A decrease in the price of chicken feed shifts the supply curve of chickens to the right and will decrease the equilibrium price of chickens. Chicken is a substitute for beef in this instance so the decrease in the price of chickens will shift the demand curve for beef to the left. Both the equilibrium price and the equilibrium quantity of beef will decrease.
What will happen to the equilibrium quantity and equilibrium price of potatoes if population increases and a new higher-yielding variety of potato plant is developed?
a. Equilibrium quantity and equilibrium price will decrease.
b. Equilibrium quantity may increase or decrease and equilibrium price will increase.
c. Equilibrium quantity will increase and equilibrium price may increase or decrease.
d. Equilibrium quantity and equilibrium price will increase.
c. Equilibrium quantity will increase and equilibrium price may increase or decrease.
The population increase causes a rightward shift in the demand curve for potatoes while the development of the higher-yielding variety causes a rightward shift in the supply curve for potatoes. The equilibrium quantity of potatoes goes up but the equilibrium price may go either down or up.
Suppose wildfires in California destroy a number of major wineries. At the same time, suppose consumers’ incomes fall. If wine is a normal good, then how will both of these factors (the destruction of the wineries and the decrease in consumers’ incomes) affect the equilibrium price and quantity of wine?
The equilibrium price of wine _____________________ and the equilibrium quantity of wine _______________.
The equilibrium price of wine could either increase or decrease, and the equilibrium quantity of wine will decrease.
Suppose the price of butter, a complement to bread, increases. At the same time, suppose the price of flour, a key ingredient to the production of bread, falls. How will both of these factors (the increase in the price of butter and the decrease in the price of flour) affect the equilibrium price and quantity of bread?
The equilibrium price of bread _____________, and the equilibrium quantity of bread ________________.
The equilibrium price of bread will decrease , and the equilibrium quantity of bread could either increase or decrease .
