Mcgraw hill chapter 3 test

The horizontal axis of a graph which shows a market demand curve indicates the:

quantities which consumers will be willing and able to buy at various prices.

When the price of a product increases, a consumer is able to buy less of it with a given money income. This describes:

the income effect.

When the price of one fruit increases, consumers buy more of another fruit. This situation is an illustration of:

the substitution effect.

The income and substitution effects account for:

the downward sloping demand curve

A demand curve:

shows the relationship between price and quantity demanded.

indicates the quantity demanded at each price in a series of prices.

graphs as a downsloping line.

has all of the above characteristics.

Graphically, the market demand curve is:

the horizontal sum of individual demand curves.

The table below shows the market demand for a bushel of wheat in a market where there are just three buyers (data are hypothetical).

17 bushels at $6 and 37 bushels at $5

The law of supply:

is reflected in all of the above.

Graphically, the market supply curve is:

the horizontal sum of individual producers' supply curves.

Assume a drought in the Great Plains reduces the supply of wheat. Noting that wheat is a basic ingredient in the production of bread and that potatoes are a consumer substitute for bread, we would expect the price of wheat to:

rise, the supply of bread to decrease, and the demand for potatoes to increase.

At any above-equilibrium price:

quantity supplied exceeds quantity demanded.

At the point where the demand and supply curves for a product intersect:

the quantity which consumers want to purchase and the amount producers choose to sell are the same.

Refer to the above data. If the price in this market was $14

farmers would not be able to sell all of their wheat.

Refer to the above data. If price was initially $14, we would expect:

the quantity of wheat supplied to decline as a result of the subsequent price change.

Refer to the above diagram. A shortage of 160 units would be encountered if price was:

$.50.

Refer to the diagram. A price of $2.00 in this market will result in:

a surplus of 10 million gallons of milk per week.

With allocative efficiency:

there is production of that particular mix of goods and services most wanted by society.

Refer to the above diagram, in which S1 and D1 represent the original supply and demand curves and S2 and D2 the new curves. In this market the indicated shift in supply may have been caused by:

the development of more efficient machinery for producing this commodity.

the development of more efficient machinery for producing this commodity.

an increase in incomes if the product is a normal good.

If peanut butter and grape jelly are complementary products, which diagram above illustrates the effect on the peanut butter market as a result of a decrease in the price of grape jelly?

a

We observe a market in which the price has risen and the quantity sold has risen as well. This could be caused by a(n):

increase in demand

Which would be an example of a government price ceiling?

limits on interest rates charged by credit card companies

An effective price floor on wheat will:

result in a surplus of wheat.

A technological advance in the methods of producing tires

increases

A decline in the number of firms in the tire industry

decrease

An increase in the price of rubber used in the production of tires

Decrease

The expectation that the equilibrium price of auto tires will be lower in the future than currently

increase

A decline in the price of the large tires used for semi trucks and earth-hauling rigs (with no change in the price of auto tires)

increase

The levying of a per-unit tax on each auto tire sold

decrease

The granting of a 50-cent-per-unit subsidy for each auto tire produced

increase

What effect will each of the following have on the demand for small automobiles such as the Mini-Cooper and Smart car?

a. Small automobiles become more fashionable. Increase correct

b. The price of large automobiles rises (with the price of small autos remaining the same). Increase correct

c. Income declines and small autos are an inferior good. Increase correct

d. Consumers anticipate that the price of small autos will greatly come down in the near future. Decrease correct

e. The price of gasoline substantially drops. Cannot be determined correct