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Economics Unit 1 Exam > Economics Module 3 > Flashcards

Economics Module 3 Flashcards

1
Q

How will an increase in the price of DVDs affect the demand for DVD players? Why?

A

Demand for DVD players decreases

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2
Q

What will happen to current purchases if people expect lower prices in the future? What will happen with expectations of higher incomes?

A

Demand decreases; demand increases

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3
Q

“Some people predict, however, that the prices of chocolate will increase drastically in about three years because of some unhealthy crops.” Given this expectation for the future, what will happen to the demand for chocolate now? What will the demand do?

A

Increase as consumers buy more now to avoid higher prices later

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4
Q

Consider the markets for ball-point pens and the market for “rollerball” pens. Suppose that, due to an increased cost of the metal that is used in “rollerball” pens, the prices of “rollerball” pens and ball-point pens increase. There are no other changes. This is true because the two products have a unique relationship. What is the likely relationship between “rollerball” pens and ball-point pens? What are they?

A

Substitute goods

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5
Q

Consider the markets for ball-point pens and “rollerball” pens. Suppose that, due to an increased cost of the metal that is used in “rollerball” pens, the prices of “rollerball” pens increase. There are no other changes. What would happen to the demand schedules of both products? The demand curve for ball-point pens would ______________ ; the demand curve for “rollerball” pens would ______________.

A

increase; not change

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6
Q

A decrease in income will cause which of the following to happen to the demand for used cars? Assume used cars are inferior goods.

A

The demand for used cars will increase.

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7
Q

An increase in the number of potential buyers will most likely cause which of the following?

A

An increase in demand

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8
Q

How does a decrease in input costs affect suppliers?

A

Supply increases

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9
Q

Which of the following does not cause a change in demand?

A

Price of the good

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10
Q

Match the economic change to its associated effect on demand, supply, quantity demanded, or quantity supplied.

A

Change in technology - supply

Price of the good sold by a firm - quantity supply

Number of sellers - supply

Tastes and preferences - demand

Price of related goods - demand and supply

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11
Q

An increase in the cost of an input will cause which of the following?

A

A decrease in supply and a shift to the left of the supply curve

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12
Q

Expectations of lower prices in the near future may cause some producers to do what?

A

Increase the supply of the good now

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13
Q

Six months ago, the cost of an important input in an industry increased. Then, three months later another change occurred. Production engineers invented a new method that uses fewer raw materials for the same level of production. If these were the only two events that influenced production in the last six months, what has been the influence on the supply?

A

The event of six months ago caused added costs to production and then lowered supply. The event of three months ago allowed more to be produced at each price, so the supply increased. Overall, the shift in supply is uncertain.

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14
Q

Consider the market for peaches. Suppose that the conditions for growing peaches in the southeast become unfavorable, and many of the southeastern peach farmers decide to leave the industry and look for other jobs. With this migration of farmers, what will happen to the supply of peaches from the southeast?

A

decrease

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15
Q

Using the information provided in the previous question, in which direction will the demand curve for peaches shift? The information is repeated for you below:
Consider the market for peaches. Suppose that the conditions for growing peaches in the southeast become unfavorable, and many of the southeastern peach farmers decide to leave the industry and look for other jobs.

A

not change

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16
Q

Consider an increase in the number of potential buyers. Select whether this change will affect either the supply or demand of apples and whether this change will cause it to increase, decrease or not change.

A

demand, increase

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17
Q

Consider a decrease in the cost of land used in apple orchards. Select whether this change will affect either the supply of apples or the demand for apples and whether this change will cause it to increase, decrease or not change.

A

supply, increase

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18
Q

Suppose the U.S. supply and demand schedules for computers manufactured in Japan are in the table below. What is the equilibrium price?

A

$11

quantity demand and quantity supply are the same

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19
Q

Suppose that a change in U.S. attitudes toward goods made abroad reduces the quantity demanded at each price by a half-million computers per year. What is the new equilibrium price?

A

$9

original table values at $9:
quantity demanded- 2.25
quantity supplied- 1.75

table values after reduction of half a million quantity demanded at $9:
quantity demanded- 1.75
quantity supplied- 1.75

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20
Q

Suppose that a tariff is established on computers made abroad. The equilibrium price will ______________ and the equilibrium quantity will ______________. ​[

A

Increase; decrease

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21
Q

Assume that the tariff posed in the previous question still holds. How will that same tariff affect the market for domestic computers? The equilibrium price of domestic computers will ______________ and the equilibrium quantity of domestic computers will ______________.

A

Increase; increase

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22
Q

Indicate how an increase in tastes for apples will affect the equilibrium price and the equilibrium quantity in the market for apples.

A

Increase; increase

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23
Q

Indicate how a decrease in the cost of producing oranges (a substitute for apples) will affect the equilibrium price and the equilibrium quantity in the market for apples.

A

Decrease; decrease

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24
Q

Recently, stores have been reporting increased sales of DVD players and a reduction in their prices. In accordance with this trend, one might predict that there has been a(n) ______________ in demand and a(n) ______________ in supply.

A

No change; increase

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25
Q

What does a single point on the supply curve represent? ​[Image description: The graph shows the market for rolls of film. Vertical axis is price and horizontal axis is rolls of film/week. There is a linear upward-sloping supply curve and a downward-sloping demand curve. The two curves intersect at a price of about 1.07 and a quantity of 100 rolls of film/week.]

A

The cost, at the current level of production, of producing one more roll of film

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26
Q

What does a single point on the demand curve represent? ​[Image description: The graph shows the market for rolls of film. Vertical axis is price and horizontal axis is rolls of film/week. There is a linear upward-sloping supply curve and a downward-sloping demand curve. The two curves intersect at a price of about 1.07 and a quantity of 100 rolls of film/week.]

A

The value of consuming one more roll of film

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27
Q

At what level of output is each additional roll of film worth more to consumers than it costs to produce? ​

A

50

left side of the supply and demand graph

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28
Q

What would the demand curve look like if quantity demanded was very dependent on price (i.e., Q_{D} changed a lot for a small change in P)? Would the value of b be a high or low number?

A

The demand curve would be flat and the value of b would be high.

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29
Q

What would the demand curve look like if quantity demanded was not very dependent on price (i.e., Q_{D} changed very little given a small change in P)? Would the value of b be a high or low number?

A

The demand curve would be steep and the value of b would be low.

30
Q

Following the example for a normal good, how we can represent the demand for an inferior good in algebraic form?

A

Q(D) = a – bP - cI

31
Q

How can we represent the demand for an inferior good when income increases in graphical form?

A

Let income increase to I(New). The demand curve will shift to the left by c units.

32
Q

Following the given example of a substitute, how we can represent the demand for a complementary good in algebraic form?

A

Q(D) = a – bP – dP(Complement)

33
Q

How can we represent the demand for a good when the price of a complementary good increases in graphical form?

A

Let the price of the complementary good increase to P[Complement (New)]. The demand curve for the original good shifts to the left by d units.

34
Q

What would the supply curve look like if quantity supplied was very dependent on price,and changed by a large amount for a small change in price? Would the value of b’ be a high or a low number?

A

The supply curve would be flatter and the value of b’ would be high.

35
Q

What would the supply curve look like if quantity supplied was not very dependent on price, so that it changed very little even with a large change in price? Would the value of b’ be a high or a low number?

A

The supply curve would be steeper and the value of b’ would be low.

36
Q

How can we graphically represent a change in supply if there is a technological improvement in production of the good?

A

The supply curve would be flatter.

37
Q

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 decreases, the equilibrium quantity is smaller, and the price is lower.

38
Q

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

false

39
Q

Since 1950, the labor force participation rate of women with young children has increased dramatically. In accordance with this trend, one would predict that there has been _______________.

A

An increase in the demand for child care services

40
Q

“Falling oil prices have caused a sharp decrease in the supply of oil.” Speaking precisely, this quotation is _______.

A

Incorrect; a decrease in price causes a decrease in the quantity supplied, not a decrease in supply.

41
Q

An increase in the prices of inputs will cause the equilibrium price to ______________ and the equilibrium quantity to ______________.

A

Increase; decrease

42
Q

New technology lowering the costs of production will cause the equilibrium price to ______________ and the equilibrium quantity to ______________.

A

Decrease; increase

43
Q

An increase in the price of a substitute (in consumption) good will cause the equilibrium price of its substitute to ______________ and the equilibrium quantity to ______________.

A

Increase; increase

44
Q

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

45
Q

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 may increase or decrease; equilibrium quantity will increase

46
Q

“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 supply of Florida oranges has decreased, causing their price to increase and the demand for the California oranges to increase also.

47
Q

“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 supply with demand relatively unchanged

48
Q

If income decreases and, at the same time, a new technology is discovered that lowers the cost of producing a normal good, which of the following will happen?

A

Cannot tell the change in equilibrium quantity. The equilibrium price will decrease.

49
Q

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

50
Q

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 lower for sailboats and sails; Equilibrium price will be higher for sailboats and the change in equilibrium price for sails is ambiguous.

51
Q

At what level of output is the market producing too little from a point of view of efficiency?

A

50

supply is less than demand

52
Q

What quantity shows the market as being most allocatively efficient?

A

100

at equilibrium price and quantity

53
Q

At what level of output is the marginal cost greater than the marginal benefit?

A

150

supply was greater than demand

54
Q

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

55
Q

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; increased

56
Q

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 increases because demand increases

57
Q

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 license to operate.)

A

Supply would decrease and there would be a shortage

58
Q

Continuing from 4.27, what would be the next two steps that follow after the shortage?

A

Consumers will pay a higher price and producers will be able to raise their price while still selling all of their inventory.

59
Q

Continuing from 4.28, how will this new equilibrium compare to the initial equilibrium?

A

Equilibrium price will be higher and equilibrium quantity will be lower.

60
Q

What is the new equilibrium after the blight?

A

A price somewhere between $2.50 and $3.00.

higher equilibrium price

61
Q

What do you think would happen in the market for non-wheat flour, given the changes in demand, supply, and equilibrium in the wheat flour market described above?

A

Flour and wheat-free flour are substitute goods, meaning consumers who are unwilling to pay more for flour may demand wheat-free flour, increasing its price and quantity supplied.

62
Q

The reason people bought more toilet paper at the beginning of the COVID-19 pandemic was due to:

A

an increase in demand

63
Q

Assume toilet paper production costs didn’t change and prices are allowed to change. If there is an increase in demand for toilet paper, how would the supply side of the market be affected as the market adjusts to a new equilibrium?

A

Increase in quantity supplied.

64
Q

In times of emergency or natural disaster, sometimes it is illegal to raise prices (“price gouging”). If there is an increase in demand for toilet paper and prices are not allowed to rise, the result will be a(n) _______ of toilet paper.

A

shortage

65
Q

If consumers anticipate shortages of a good, how might they react when they see a stock of that good on the shelves of a grocery store?

A

Buy a lot more of the good than they need today and hoard it.

66
Q

Assuming raising prices is illegal, how can grocery stores prevent people from buying more toilet paper than they need in an effort to make sure everyone has a chance to buy?

A

Impose quantity buying restrictions on customers.

67
Q

What action is the government most likely to use to prevent the hoarding and arbitrage (reselling goods at a higher price) of consumer goods like toilet paper that are in high demand during an emergency?

A

Make it illegal to price gouge and resell goods at higher prices.

68
Q

In Figure 5, a move from point A to point B can be best explained by:

A

A shift left in demand along a stationary supply curve.

Gasoline demand was reduced when the the great recession forced everyone to not go out as much

69
Q

In Figure 6, a move from point A to Point B can best be explained by:

A

A shift right in supply along a stationary demand curve.

Venezuela put more oil into the market

70
Q

In Figure 7, a move from point A to point B can best be explained by:

A

A shift right in demand along a stationary supply curve.

People go out more during Summer, using more gasoline

Economics Unit 1 Exam (5 decks)

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