Study sets, textbooks, questions
Upgrade to remove ads
Econ Ch. 3 Test
Terms in this set (56)
In economics, the concept of demand is defined as the desire to own something
combined with the ability to pay for it
According to the law of demand, when the price of pizza goes up,
consumers will buy less pizza
Juanita has noticed that the price of bagels has gone up. Because of this, she has decided to buy a less expensive yogurt every morning for her breakfast. This is an example of the
Marty just finished creating a market demand schedule for his hardware store. Which of the following is he most likely trying to determine?
How many tools are sold to all consumers in the market at various prices
If Timo responds to a sharp increase in his transportation costs by buying fewer clothes, he is demonstrating
The income effect
"Ceteris paribus" means demand will change when price changes
In general, a decrease in consumer income will have what effect on demand for normal goods?
It will cause demand to fall
The increasing age of the American population is an example of how
changing demographics can cause demand shifts
Which of the following is the best example of substitute for movie tickets?
Rentals of on-demand programming
A change in demand for one good will have what effect on its complement?
Shana continues to buy a necessary medicine even though prices for the medicine rise sharply. Shana's behavior shows how
The law of demand eliminates elasticity
Suppose demand for a product is highly elastic. What will likely happen to a company's total revenue if it raises the price of that product?
Suppose the price of a good rises. In general, how does the percentage of your budget you spend on that good affect the elasticity of your demand for goods overall?
The higher the percentage of your budget a good represents, the more elastic your overall demand
Why does demand generally become more elastic over time?
People have time to find substitutes and change behaviors
Do higher prices lead to increased revenues for a company?
The law of supply declares which of the following?
Supply falls as price falls
What does a firm's supply schedule show?
Which of the following typically happens as prices for a good service rises?
What does it mean to say that supply is unitary elastic?
The percentage change in price and in supply are the same
Consider each of these business activities. For which do you think supply would be the most elastic in the short term?
Which of the following would be an example of a fixed cost on a farm?
Mortgage on the land
To increase marginal return, a company might consider
Purchasing more machinery
In general, it is a bad move for a company to produce more of a good or service if, by doing so,
marginal cost exceeds marginal revenue
In determining the optimal level of output, a firm should aim for the
In which of the following situations would a business be wise to shut its factory?
When fixed costs exceed revenue
What is the effect of lower input costs?
Decreased marginal cost
How do subsidies help producers?
They decrease costs
Which of the following government actions would increase the supply of cars in the United States?
The removal of car mileage regulations
Which factor would shift the supply curve for ethanol in the United States to the right?
A trade agreement with Brazil opening US markets to imported ethanol
A new film company's decision to locate its operations in the film-production center of Southern California is most similar to which of the following?
A firm locating close to the inputs of its products
If a business owner becomes aware of a shortage in the market for the good or service he or she produces, he or she is likely to
Increase supply more and raise the price
What role does the profit incentive play when there is a surplus of a good?
It encourages producers to lower their prices
Which of the following describes a way that the minimum wage and rent control are similar?
Both involve government intervention in the marketplace
Which of the following explains why agricultural price supports are inconsistent with free-market principles?
They allow government to influence farmers' decisions about what and how much to produce
Which of the following explains what typically happens when a market is thrown into disequilibrium?
It moves toward a new equilibrium point as a results of the laws of supply and demand
What action by the government would most likely increase the supply of gasoline in the short term?
Reduced taxes on the refining of gasoline
How has the Internet dramatically reduced search costs?
By eliminating the need to travel to stores to shop
How would a bicycle producer likely react to a shortage of its product?
By raising prices and increasing supply
If the cost of gasoline increases sharply and continues to rise, how does this development affect the demand curve for cars?
The demand curve for gas-guzzlers shifts to the left, and the demand curve for fuel-effificent cars shifts to the right
In the aftermath of a hurricane, clean water became scarce, and the price of bottled water skyrocketed. This is an example of the role of price in
A shift in the demand curve has led to a shortage of rice. How can this problem be resolved most quickly?
By increasing the price of rice
Which of the following is the best argument against the rationing system used in the United States during World War II?
In the free market, firms meet consumer demand through a price-based system that ensures that land, labor, and capital go to the uses consumers value most highly. This explains why in a free market resources
Are allocated efficiently
Which of the following is an example of imperfect information?
a firm receives faulty data from stores on consumer demand for its product
PowerPoint Questions: If James and his friends experience the substitution effect, they will respond to a rise in the price of their favorite post-game snack by
Choosing another snack food instead of their favorite snack
The owner of a sandwich shop surveyed her customers on how often they came in, which sandwiches they preferred, and what quantity of sandwiches they ordered. She then added up the quantities demanded by all her consumers at each price. What did she create?
A market demand schedule
The difference between a market demand curve and an individual demand curve is that the market demand curve
Provides data about many consumers
What happens to demand when we drop the ceteris paribus rule?
The entire demand curve can shift
Which answer best describes a normal good?
A good consumers demand more of as their income increases
The closing of a major factory in a city is likely to affect which non-price determinants of demand most strongly in the short term?
Describe your demand for a product if you buy the same amount of it or just a small amount less after a large price increase.
Which of the following is an example of inelastic demand?
Priya wants to go to the season-opening game. Tickets to another game cost less, but she still buys tickets for the opener.
How does elasticity affect potential revenue for a firm?
If demand for a good is elastic, raising the price must increase revenue
Which factor causes firms to increase production when the price of a good or service goes up?
Desire for profits
Which variables does a supply schedule show?
Quantity supplied and price
Which of the following explains why firms differ in elasticity of supply in the short term?
Ease of changing quantity supplied quickly
Sets with similar terms
Unit 2 Economics Test
History Ch 3B
Econ Topic 3.1-3.4 Study Questions
Economics Unit 2
Other sets by this creator
Econ 3.1-3.3 Quiz
The grammar of verse and prosody
English Roots (part 3)
Other Quizlet sets
Systematic Theology Test #1
SS - Great Depression/New Deal Review
New words - Pack 8 - awords