a.
increase the price of salsa.
b.
decrease the demand for salsa.
c.
increase the demand for salsa.
d.
have no effect on the demand for salsa.
97. An increase in the expected future price of a good will cause the current demand for the good to
a.
decrease, which is a shift to the left of the demand curve.
b.
decrease, which is a shift to the right of the demand curve.
c.
increase, which is a shift to the left of the demand curve.
d.
increase, which is a shift to the right of the demand curve.
98. A decrease in the expected future price of a good will cause the current demand for the good to
a.
decrease, which is a shift to the left of the demand curve.
b.
decrease, which is a shift to the right of the demand curve.
c.
increase, which is a shift to the left of the demand curve.
d.
increase, which is a shift to the right of the demand curve.
99. The current demand for automobiles would decrease if
a.
the price of gasoline fell.
b.
consumer income rose.
c.
consumers suddenly believed the price of automobiles would be sharply lower in the near
future.
d.
consumers suddenly believed the price of automobiles would be sharply higher in the near
future.
100. Suppose all of the major computer manufacturers announced that beginning next month there would
be major price reductions on their computers. This would cause the current demand for computers to
a.
increase.
b.
decrease.
c.
remain unchanged.
d.
increase if the demand for computers was relatively inelastic, but decrease if the demand
for computers was relatively elastic.
101. Which of the following will decrease the demand for coffee?
a.
the discovery that caffeine can cause heart problems
b.
an increase in the price of coffee
c.
an increase in the price of tea, a substitute for coffee
d.
a decrease in the prices of coffee makers and coffee cups, complements to coffee
102. The total economic cost of producing a good or service is called the
a.
comparative value of construction.
b.
social consequence of resources.
c.
marginal valuation of output.
d.
opportunity cost of production.
103. The opportunity cost of production differs from an accounting definition of a firm’s costs because it
includes
a.
expenditures the firm undertakes for research and development.
b.
the opportunity cost of assets and financial resources owned by the firm.
c.
the direct monetary cost of purchasing resources.
d.
the firm’s revenue as a cost.
104. Profit can be defined as the
a.
difference between the sales revenue of a business firm and the opportunity cost of the
resources required to produce the goods supplied by the firm.
b.
difference between a company’s income and direct monetary costs of production.
c.
difference between the price of a product and the consumer’s valuation of the good.
d.
amount of total revenue earned by the firm minus its payments to stockholders.
105. When a firm is earning economic profit, this indicates the firm is
a.
increasing the value of the resources that it is using.
b.
reducing the value of the resources that it is using.
c.
supplying the market with a low quality product.
d.
creating less value for consumers than another firm that is currently earning losses.
106. Profits and losses play an important role in helping
a.
to signal to government which businesses are suffering losses so that they can be
subsidized.
b.
consumers decide which products they value the most by looking at each firm’s profit.
c.
to allocate scarce resources in a manner that maximizes the value created to society.
d.
ensure that the total profits in the economy exactly equal the total losses.
107. To be economically successful, the entrepreneur must
a.
combine resources in a manner that increases their value.
b.
produce a good that consumers value less than the resources used to produce it.
c.
use only personal financial capital to avoid the interest payments that would have to be
paid if the money is borrowed from the bank.
d.
transform or rearrange resources to maximize the entrepreneur’s cost of production.
108. According to the law of supply,
a.
producers are willing to supply larger amounts of a good as its price increases.
b.
a direct relationship exists between the price of a good and the amount buyers choose to
buy.
c.
an inverse relationship exists between the price of a good and the amount buyers wish to
buy.
d.
an inverse relationship exists between the price of a good and the amount producers
supply.
109. According to the law of supply,
a.
more of a good is desired by consumers as the price falls.
b.
less of a good is desired by consumers as the price rises.
c.
more of a good will be offered by suppliers as the price rises.
d.
less of a good will be offered by suppliers as the price rises.
110. According to the law of supply, as the price of a good increases,
a.
buyers will buy more of the good.
b.
buyers will buy less of the good.
c.
sellers will produce more of the good.
d.
sellers will produce less of the good.
111. The height of the supply curve at a quantity of 100 represents the
a.
total value of all 100 units to consumers.
b.
minimum price required to induce a producer to supply the hundredth unit.
c.
equilibrium price of the good regardless of the position of the demand curve.
d.
profit derived by producers from the sale of the hundredth unit.
112. Suppose the demand for nachos increases. What will happen to producer surplus in the market for
nachos?
a.
It increases.
b.
It decreases.
c.
It remains unchanged.
d.
It may increase, decrease, or remain unchanged.
113. Suppose the demand for tacos decreases. What will happen to producer surplus in the market for
tacos?
a.
It increases.
b.
It decreases.
c.
It remains unchanged.
d.
It may increase, decrease, or remain unchanged.
Table 3-2
SELLER
COST
DALE
$1,500
JILL
$1,200
DENISE
$1,000
CATHERINE
$750
JACKSON
$500
114. Refer to Table 3-2. If the market price is $1,000, the producer surplus in the market is
a.
$700.
b.
$750.
c.
$2,250.
d.
$3,700.
115. Refer to Table 3-2. If the market price is $1,100, the combined total cost of all participating sellers is
a.
$3,700.
b.
$2,700.
c.
$2,250.
d.
$1,500.
116. Refer to Table 3-2. If the price is $1,000,
a.
Denise is an eager supplier.
b.
Catherine is an eager supplier.
c.
Dale’s producer surplus is $500.
d.
All of the above are correct.
117. Refer to Table 3-2. If the price is $775, who would be willing to supply the product?
a.
Dale and Jill
b.
Dale, Jill and Denise
c.
Denise, Catherine and Jackson
d.
Catherine and Jackson
118. Refer to Table 3-2. Suppose each of the five sellers can supply at most one unit of the good; then the
market quantity supplied is exactly 3 if the price is
a.
$670.
b.
$770.
c.
$970.
d.
$1,170.
119. Which of the following events would increase producer surplus?
a.
Sellers’ costs stay the same and the price of the good increases.
b.
Sellers’ costs increase and the price of the good stays the same.
c.
Sellers’ costs increase and the price of the good decreases.
d.
All of the above are correct.
120. Which of the following events would decrease producer surplus?
a.
Sellers’ costs stay the same and the price of the good increases.
b.
Sellers’ costs increase and the price of the good stays the same.
c.
Sellers’ costs decrease and the price of the good increases.
d.
All of the above are correct.
121. Graphically, the area that represents the difference between the market price and the minimum price
required to induce suppliers to produce a good is called
a.
consumer surplus.
b.
producer surplus.
c.
marginal cost.
d.
triangular arbitrage.
122. Liam is willing to cut lawns for a minimum of $200 a week. He is, however, paid $250 for the same
service by a lawn maintenance company. This is an example of
a.
consumer surplus.
b.
employment discrimination.
c.
producer surplus.
d.
the derivation of accounting profit.
123. If Mateo is paid $25,000 to sell his crop of tomatoes even though he would have been willing to have
sold the crop for as little as $20,000, this indicates that
a.
Mateo received no producer surplus from the transaction.
b.
Mateo received $5,000 of producer surplus from the transaction.
c.
Mateo received $20,000 of producer surplus from the transaction.
d.
Mateo received $25,000 of producer surplus from the transaction.
124. Ceteris paribus, an increase in the price of a good will cause the
a.
quantity demanded of the good to increase.
b.
quantity supplied of the good to decrease.
c.
producer surplus derived from the good to increase.
d.
supply of the good to decrease.
125. Ceteris paribus, a decrease in the price of a good will cause the
a.
quantity demanded of the good to decrease.
b.
quantity supplied of the good to increase.
c.
producer surplus derived from the good to decrease.
d.
supply of the good to decrease.
126. If the quantity of a good supplied is highly sensitive to the price of the good, this is illustrated by a
a.
demand curve that is relatively flat (more horizontal).
b.
demand curve that is relatively steep (more vertical).
c.
supply curve that is relatively flat (more horizontal).
d.
supply curve that is relatively steep (more vertical).
127. If the quantity of a good supplied is not very sensitive to the price of the good, this is illustrated by a
a.
demand curve that is relatively flat (more horizontal).
b.
demand curve that is relatively steep (more vertical).
c.
supply curve that is relatively flat (more horizontal).
d.
supply curve that is relatively steep (more vertical).
128. If the quantity of a good supplied is highly sensitive to the price of the good, economists say the
supply of the good is relatively
a.
inelastic.
b.
elastic.
c.
robust.
d.
inverse.
129. If the quantity of a good supplied is not very sensitive to the price of the good, economists say the
supply of the good is relatively
a.
inelastic.
b.
elastic.
c.
robust.
d.
inverse.
130. If the supply of a good is relatively elastic, this means that the quantity supplied of the good is
a.
not very sensitive to the price of the good.
b.
highly sensitive to the price of the good.
c.
unrelated to the price of the good.
d.
none of the above.
131. If the supply of a good is relatively inelastic, this means that the quantity supplied of the good is
a.
not very sensitive to the price of the good.
b.
highly sensitive to the price of the good.
c.
unrelated to the price of the good.
d.
none of the above.
132. If a large percentage increase in the price of a good results in a small percentage increase in the
quantity supplied of the good, supply is said to be
a.
horizontal.
b.
relatively inelastic.
c.
relatively elastic.
d.
income proof.
133. If a small percentage increase in the price of a good results in a rather large percentage increase in the
quantity supplied of the good, supply is said to be
a.
vertical.
b.
relatively inelastic.
c.
relatively elastic.
d.
robust.
134. If price rises, what happens to supply of a product?
a.
It increases.
b.
It decreases.
c.
It does not change.
d.
Uncertain—economic theory has no answer to this question.
135. If price rises, what happens to quantity supplied of a product?
a.
It increases.
b.
It decreases.
c.
It does not change.
d.
Quantity supplied is constant, but supply increases.
136. Corn and soybeans are alternatives that could be grown by most farmers. If government subsidies for
ethanol lead to higher corn prices, this will
a.
increase the supply of corn.
b.
increase the supply of soybeans.
c.
decrease the supply of soybeans.
d.
decrease the supply of corn.
e.
have no effect on the supplies of corn and soybeans.
137. Farmers can choose to produce eggs or milk. If there is an increase in the price of milk then what will
be the effect in the egg market?
a.
The quantity of eggs demanded will increase.
b.
Egg demand will decrease.
c.
Egg supply will increase.
d.
Egg supply will decrease.
138. When economists say the supply of a product has decreased, they mean that
a.
the supply curve has shifted to the left.
b.
the product price has decreased, and as a consequence, suppliers are producing less of the
product.
c.
producers are now willing to sell more of this product at each possible price.
d.
the supply curve has shifted to the right.
139. When economists say the supply of a product has increased, they mean the
a.
supply curve has shifted to the right.
b.
price of the product has risen, and consequently, suppliers are producing more of it.
c.
supply curve has shifted to the left.
d.
amount of the product that consumers are willing to purchase at various prices has
increased.
140. When economists say the quantity supplied of a product has increased, they mean the
a.
supply curve has shifted to the left.
b.
supply curve has shifted to the right.
c.
price of the product has risen, and consequently, suppliers are producing more of it.
d.
price of the product has fallen, and consequently, suppliers are producing less of it.
141. When economists say the quantity supplied of a product has decreased, they mean the
a.
supply curve has shifted to the left.
b.
supply curve has shifted to the right.
c.
price of the product has risen, and consequently, suppliers are producing more of it.
d.
price of the product has fallen, and consequently, suppliers are producing less of it.
142. In which statement(s) is “supply” used correctly?
(I) “An increase in the price of flour will increase the supply of flour.”
(II) “As the cost of producing flour rises, the supply of flour will tend to fall.”
a.
in both statements I and II
b.
in statement I only
c.
in statement II only
d.
in neither statements I nor II
143. In which statement(s) are “supply” and “quantity supplied” used correctly?
(I) “An increase in the price of toasters will increase the quantity supplied of toasters.”
(II) “A technological advance that lowers the cost of producing toasters will increase the supply of
toasters.”
a.
in both statements I and II
b.
in statement I only
c.
in statement II only
d.
in neither statements I nor II
144. Other things constant, which of the following would most likely cause the supply of garden hoses to
decrease?
a.
an increase in the price of plastic used to make garden hoses
b.
a technological advance that lowers the cost of producing garden hoses
c.
the occurrence of a very dry year with little rain
d.
a decrease in the price of grass seed
145. A decrease in the price of leather used to make shoes would cause the
a.
demand for shoes to decrease.
b.
demand for shoes to increase.
c.
supply of shoes to decrease.
d.
supply of shoes to increase.
146. In the orange market, what impact would an increase in the price of oil that orange growers burn to
keep oranges from freezing in the winter have on the market?
a.
It would shift the supply curve to the right.
b.
It would shift the supply curve to the left.
c.
It would shift the demand curve to the left.
d.
It would shift the demand curve to the right.
147. How will an increase in lumber prices influence the home construction market?
a.
The demand for newly constructed homes will increase.
b.
The demand for newly constructed homes will decrease.
c.
The supply of newly constructed homes will increase.
d.
The supply of newly constructed homes will decrease.
148. If the United Auto Workers union can obtain a substantial wage increase for auto workers, there will
be
a.
a decrease in the supply of automobiles, which is a shift to the right of the supply curve.
b.
a decrease in the supply of automobiles, which is a shift to the left of the supply curve.
c.
an increase in the supply of automobiles, which is a shift to the right of the supply curve.
d.
an increase in the supply of automobiles, which is a shift to the left of the supply curve.
149. Graphically, what impact would an increase in the price of jet fuel have on the market for air travel?
a.
It would shift the supply curve for air travel to the right.
b.
It would shift the supply curve for air travel to the left.
c.
It would shift the demand curve for air travel to the right.
d.
It would shift the demand curve for air travel to the left.
150. Which of the following would most likely increase the supply of beef?
a.
lower prices of grains used to feed cattle
b.
lower prices for chicken, a substitute for beef
c.
new medical research suggesting that beef causes more serious health problems than was
previously thought
d.
an increase in the cost of transporting beef products to the consumer market
151. How will a reduction in the price of cotton influence the market for blue jeans?
a.
The cost of producing blue jeans will fall, and the supply curve for blue jeans will shift to
the left.
b.
The cost of producing blue jeans will fall, and the supply curve for blue jeans will shift to
the right.
c.
The cost of producing blue jeans will rise, and the supply curve for blue jeans will shift to
the left.