Micro ECON Chapter 3 – Flashcards
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The phrase "demand has increased" means that
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A) there has been an upward movement along a demand curve
B) a demand curve has shifted to the right.
C) there has been a downward movement along a demand curve.
D) a demand curve has shifted to the left.
Correct Answer B
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A demand curve shows the relationship between
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A) the quantity that consumers are willing and able to buy and the quantity that sellers are willing and able to offer.
B) the amount of a product sellers are willing to sell at a particular price and the amount consumers are willing to buy at that price.
C) the price of a product and the quantity of the product demanded.
D) the price of a produce and the demand for the product.
Correct Answer C
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If a decrease in income leads to an increase in the demand for macaroni, then macaroni is
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A) a normal good.
B) an inferior good.
C) a neutral good.
D) a necessity.
Correct Answer B
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Refer to Figure 3-1. An increase in the price of a substitute would be represented by a movement from
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A) D2 to D1.
B) B to A.
C) D1 to D2.
D) A to B.
Correct Answer C
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Refer to Figure 3-1. An increase in the price of a complement would be represented by a movement from
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A) D1 to D2.
B) B to A.
C) A to B.
D) D2 to D1.
Correct Answer D
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Refer to Figure 3-2. An increase in the expected future price of the product would be represented by a movement from
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A) A to B.
B) S2 to S1.
C) S1 to S2.
D) B to A.
Correct Answer B
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Which of the following would cause a decrease in the supply of peanut butter?
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A) a decrease in the price of peanut butter
B) an increase in the technology used to produce peanut butter
C) an increase the price of peanuts
D) a decrease in the price of jelly (assuming that peanut butter and jelly are complements)
Correct Answer C
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George Gnat subscribes to a monthly pest control service for his home. Last week the owner of the service informed George that he will have to raise his monthly service fee because of increases in the price of gasoline used by his workers on their service trips. How is the market for pest control services affected by this?
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A) There is a decrease in the demand for pest control services.
B) There is a decrease in the quantity supplied of pest control services.
C) There is a decrease in the supply of pest control services.
D) There is an increase in the supply of pest control services.
Correct Answer C
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A decrease in the price of pork will result in
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A) a larger quantity of pork supplied.
B) an increase in the supply of pork.
C) a smaller quantity of pork supplied.
D) a decrease in the demand for pork.
Correct Answer C
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If in the market for bananas the supply curve has shifted to the right, then
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A) the quantity of bananas supplied has decreased.
B) the supply of bananas increased.
C) the supply of bananas has decreases.
D) the quantity of bananas supplied has increased.
Correct Answer B
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Refer to Figure 3-5. At a price of $0,
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A) there would be a surplus of 8 units.
B) there would be a shortage of 0 units.
C) there would be a shortage of 8 units.
D) there would be a surplus of 0 units.
Correct Answer C
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Assume there is a surplus in the market for hybrid automobiles. Which of the following statements correctly describes this situation?
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A) the surplus will cause an increase in the equilibrium price of hybrid automobiles.
B) The supply of hybrid automobiles is greater than the demand for hybrid automobiles.
C) Some consumers will be unable to obtain hybrid automobiles at the market price and will have an incentive to offer to buy the product at a higher price.
D) The price of hybrid automobiles will fall in response to the surplus; as the price falls the quantity demanded will increase and the quantity supplied will decrease.
Correct Answer D
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Refer to Figure 3-6. The figure above represents the market for coffee grinders. Assume that the market price is $21. Which of the following statement is true?
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A) There is a shortage that will cause the price to decrease; quantity demanded will then increase and quantity supplied will decrease until the price equals $25.
B) There will be a shortage that will cause the price to increase; demand will then decrease and supply will increase until the price equals $25.
C) There is a shortage that will cause the price to increase; quantity demanded will then decrease and quantity supplied will increase until the price equals $25.
D) There is a shortage that will cause the price to increase; quantity supplied will then decrease and quantity demanded will increase until the price equals $25.
Correct Answer C
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If the demand for letters written by Abraham Lincoln is higher than the demand for letters written by John Wilkes Booth, what would have to be true for the market equilibrium prices for these letters to be equal?
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A) If the demand for Lincoln letters is greater than the demand for Booth letters, the market equilibrium price for Lincoln letters will always be greater than the market equilibrium price for Booth letters.
B) The supply of Lincoln letters would have to be less than the supply of Booth letters.
C) The supply of Booth letters would have to be less than the supply of Lincoln letters
D) The supply of Lincoln letters and the supply of Booth letters would have to be equal.
Correct Answer C
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Refer to Figure 3-4. If the price is $20,
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A) there would be a shortage of 600 units.
B) the market is in equilibrium.
C) quantity demanded is zero.
D) there would be a surplus of 600 units.
Correct Answer B
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Which of the following describes a characteristic of a perfectly competitive market?
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A) There are many buyers but few sellers.
B) Equilibrium is achieved when demand for the product sold in the market equals the supply.
C) There are many buyers and sellers.
D) There are many sellers but few buyer
Correct Answer C
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Refer to Figure 3-4. If the price is $25,
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A) there would be a surplus of 300 units.
B) there would be a surplus of 200 units.
C) there would be a shortage of 200 units.
D) there would be a shortage of 300 units.
Correct Answer A
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At a product's equilibrium price
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A) any buyer who is willing and able to pay the price will find a seller for the product.
B) not all sellers who are willing to accept the price will find buyers for their products.
C) anyone who needs the product will be able to buy the product, regardless of ability to pay.
D) the federal government will provide the product to anyone who cannot afford it.
Correct Answer A
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Hurricane Katrina damaged a large portion of refining and pipeline capacity when it swept through the Gulf coast states in August 2005. As a result of this, many gasoline distributors were not able to maintain normal deliveries. At the pre-hurricane equilibrium price (i.e., at the initial equilibrium price), we would expect to see
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A) a surplus of gasoline.
B) an increase in the demand for gasoline.
C) a shortage of gasoline.
D) the quantity demanded equal to the quantity supplied.
Correct Answer C
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Refer to Figure 3-4. At a price of $20, how many units will be supplied?
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A) 500
B) 400
C) 600
D) 800
Correct Answer C
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Refer to Figure 3-4. At a price of $25, how many units will be sold?
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A) 800
B) 600
C) 400
D) 500
Correct Answer D
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Which of the following is evidence of a shortage of chocolate?
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A) The equilibrium price of chocolate falls due to a decrease in demand.
B) The price of chocolate is raised in order to increase sales.
C) Firms lower the price of chocolate.
D) The quantity of chocolate demanded is greater than the quantity supplied.
Correct Answer D
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Refer to Figure 3-5. In a free market such as that depicted above, a shortage is eliminated by
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A) a price increase, increasing the supply and decreasing the demand.
B) a price decrease, decreasing the quantity supplied and increasing the quantity demanded.
C) a price decrease, decreasing the supply and increasing the demand.
D) a price increase, increasing the quantity supplied and decreasing the quantity demanded.
Correct Answer D
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Refer to Figure 3-6. The figure above represents the market for coffee grinders. Assume that the price of coffee grinders is $50. At this price:
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A) the supply exceeds the demand by 90. Some producers will have an incentive to offer to sell coffee grinders at a lower price.
B) there is a surplus equal to 90 coffee grinders that will be eliminated when the price falls to $25.
C) there is a surplus equal to 90 coffee grinders and the price of coffee grinders will fall until demand is equal to supply.
D) the quantity supplied exceeds the quantity supplied by 100. The price will eventually fall to $25 where quantity demanded will equal quantity supplied.
Correct Answer B
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Refer to Figure 3-5. At a price of $5,
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A) there would be a shortage of 6 units.
B) there would be a scarcity of 4 units.
C) there would be a surplus of 4 units.
D) there would be a shortage of 4 units.
Correct Answer D
