A shortage occurs when
demand is greater than supply
the equilibrium price is too high
quantity demanded exceeds quantity supplied
quantity supplied exceeds quantity demanded
price is above the eauilibrium.
If the market for Sport Utility Cehicles had excess supply, then one can say that
supply is greater than demand
quantity supplied is greater than quantity demended
demand is greater than supply
supply is greater than quantity demanded
quantity demanded is greater than quantity supplied
an equilibrium
excess demand of 5 units
excess supply of 70 units.
excess demand of 65 units.
excess supply of 5 units.
A movement along a demand curve from one price-quantity combination to another is called
a change in quantity demanded
a shift in the demand curve
a change in demand
a change in quantity supplied
a change in supply
An increase in the quantity demanded of tea occurs whenever
the population of tea drinkers grows
the price of coffee rises
tea drinkers receive an increase in their incomes
the price of lemons falls
the price of the tea falls
Suppose one could rent a car or take the train to go to Chicago from Washington, D.C.
If the price of train tickets increases
the demand for train tickets will increase
the demand for rental cars will increase
the demand for train tickets will decrease
the demand for rental cars will decrease
the quantity demanded of train tickets will increase
A shift to either the left or right of a demand curve is called
a change in quantity demanded
a movement along a demand curve
a change in demand
a change in quantity supplied
a change in supply
Assume the market is originally at point W. Movement to point X is a combination of
an increase in quantity supplied and an increase in demand.
an increase in supply and an increase in demand.
an increase in supply and an increase in quantity demanded.
a decrease in supply and an increase in quantity demanded.
an increase in supply and a decrease in quantity demanded.
Assume the market is originally at point Z. Movement to point W is a combination of
a decrease in quantity supplied and an increase in demand.
a decrease in supply and a decrease in demand.
an increase in supply and an increase in quantity demanded.
a decrease in quantity supplied and a decrease in demand.
a decrease in supply and a decrease in quantity demanded.
In the market for coffee, for some consumers
tea is a substitute
non-dairy creamer is a substitute
cola beverages are complements
coffee mugs are substitutes
espresso is a complement
In the market for office workers
there are no substitutes because each human is unique
computers and desks are complements
an increase in wages will increase the number of workers demanded
changes in wages cannot affect the number of workers because each one is
necessary.
a decrease in wages will shift the demand for workers to the left.
The demand curve illustrates the fact that consumers
tend to purchase more of a good as its price rises
purchase name brand products more frequently than generic products
tend to purchase more of a good as its price falls
purchase more of a good as their incomes fall.
purchase more of a good as their incomes rise
Which of the following is NOT true of a demand curve?
It has negative slope.
It shows the amount consumers are willing and able to purchase at various prices,
holding other factors constant.
It relates the price of an item to the quantity demanded of that item.
It shows how an increase in price leads to an increase in quantity demanded of a good.
It shows that consumers tend to purchase less of a good as its price rises.
Ademand curve is ______ sloping because _________ .
downward; of increasing opportunity costs.
upward; people prefer to purchase high quality consumer goods.
downward; reservation prices tend to fall over time.
upward; people are upwardly mobile.
downward; fewer people are willing to buy the item at higher prices.
an increase in quantity demanded
an increase in demand
a decrease in quantity sypplied
an increase in quantity supplied
a change in supply
Based on above figure, the price elasticity of demand at point D is
5/2.
1/2.
2/5.
2
1/10.
At point D, demand is
price inelastic
price elastic
unitary elastic.
perfectly price elastic
perfectly price inelastic
If the consumers can easily switch to a close substitute when the price of a good
increases, demand for that good is likely to be
elastec.
inelastic.
unitary elastic.
perfectly inelastic.
none of the above.
The company that owns all of the vending machines on your campus has doubled the
price of a can of soda. They notice that they are selling approximately 25% fewer sodas.
Price elasticity of demand for sodas from the campus vending machines is
Inelastic.
Unitary elastic
Wlastic.
Infinite.
Zero.
Generally speaking, demand for a good will be more inelastic
if few substitutes exist
when the good represents a large share of the consumer’s budget
in the long run.
when many substitutes exist
if the price change is great.
Satellite TV is a close substitute for cable TV. In the 1990′s small satellite TV units
were developed that made it more practical for individual consumers to subscribe to
Satellite TV service. This caused the price elasticity of demand for cable TV service to
become more inelastic
become less elastic
become more elastic
become smaller in absolute value
shift to the left.
Demand tends to be _______ in the short run than in the long run.
more elastic
move inelastic
more volatile
less important
None of the above
In 1985 a desert community stopped pumping from a 1000 foot well because it had run
dry. In 2005 the price of water doubled. The community then drilled the well deeper
and started pumping again. In this community,
the supply of water is perfectly inelastic because it is a finite resource
water production faces increasing opportunity costs
markets cannot reach equilibrium because there is a persistent shortage of water
the quantity supplied of water is greater than the quantity demanded
higher water prices can reduce quantity demanded, but cannot increase quantity supplied
Based on above figure, if the price increases from $2.00 to $2.50.
total revenue would increase
total revenue would stay the same
total revenue would decrese
the change in total revenue, if any, would depend on the supply curve
total revenue would fall to less than total expenditures
To increase total revenues, firms with _______ demand should lower price and
firms with _______ demand should increase price.
elastic; elastic
elastic; inelastic
inelastic; elastic
inelastic; inelastic
elastic; unitary elastic
The correct mathematical statement of the price elasticity of demand is
If the elasticity of demand for the latest American Idol CD is 1.4, this means
few substitutes exist
a 1% increase in the price leads to a 14% reduction in quantity demanded
a 10% decrease in the price leads to a 140% increase in quantity demanded
a 5% increase in the price leads to a 7% decrease in quantity demanded
a 5% increase in the price leads to a 7% increase in quantity demanded
If the quantity demanded of a good is Q when the price for the good is P, the price
elasticity of demand for that good at that point is
none of the above
The price elasticity of demand for water is higher in the summer than in the winter. Why?
Winter is longer than summer, and price elasticity is lower over longer time
horizons.
Winter is longer than summer, and price elasticity is higher over longer tie horizons.
Winter water use tends to be for necessities like cleaning and cooking, and summer
water use tends to be for non-necessities, like gardening and recreation.
People are more likely to take vacations in the summer, and so use water at home.
People take more showers in the summer because it is hotter.
Which one of the following goods or services should have the lowest price elasticity of
demand based on the share of income decoted to the good or servies?
Owning a home
Renting an apartment
A new car
Dining at a resaurant
Toothpicks
average variable; average total; minimum
marginal; average total; minimum
marginal; average variable; maximum
average variable; marginal; maximum
average variable; marginal; minimum
Which of the following is NOT true of a perfectly competitive firm?
It faces a perfectly elastic demand curve
It is unable to influence the market price of the good it sells
It seeks to maximize revenue
Relative to the size of the market, the firm is small
The firm’s only decision is how much output to produce
Based on above figure, suppose a law is passed requiring restaurants to charge no more
than $25 per meal. This law would
decrease both producer and consumer surplus by forcing restaurants to shut down.
unambiguously increase consumer surplus and not change producer surplus.
drive producer surplus to zero and maximize consumer surplus.
unambiguously reduce producer surplus, but not force restaurants to shou down.
not change the restaurants’ output decisions.
In the IS-LM framework, discuss verbally and graphically the interest elasticity of
speculative demand for money and fiscal policy effects.(25%)
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