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Test #1 Microeconomics (ch. 3 only)

Substitution in production is a determinant of ____.
supply
A price _____ is the maximum legal price a seller may charge for a product or service.
ceiling
Consumer experience ____ marginal utility the more they consumer of a particular good or service.
diminishing
From an economic perspective, what is true of a market?
The pursuit of buyers and sellers in making themselves better off, it is a virtual and/or physical institution or space, and buyers and sellers interact in their desire to buy and sell a good or service.
A buyer’s intentions or plans in regard to the purchase of a product is known as:
demand.
What are determinants of supply?
Taxes and subsidies, technology, and resource prices.
Price and quantity supplied have a ____ relationship.
positive
A surge in demand while supply remains constant results in an _____ in both equilibrium price and quantity.
increase
If costs of production rise, the producer has an incentive to produce _____ output.
less
What describes the law of demand?
All other things being equal, as price increases, quantity demanded decreases, and all other thing being equal, as price decreases, quantity demand increases.
Buyers and sellers are brought together in a ____.
market
What does not exemplify an improvement in technology affecting supply?
Increased subsidies to farmers for producing corn for its conversion to ethanol.
Producer expectations of future prices are a determinant of ___.
supply
Equilibrium price is otherwise known as ___-___ ___.
market-clearing price
Other things equal, firms will produce and offer for sale ____ of their product at a high price than at a low price.
more
What type of goods affect the demand for a product due to a change in their price?
Complementary goods and substitute goods.
A price ___ is a legally mandated price imposed above equilibrium price of the price that a free market would establish.
floor
Example of a substitute.
Pepsi and Coke.
What is a determinant of demand?
Number of buyers, prices of related goods, consumer tastes, changes in income, consumer expectations.
The ___ of supply are any factors other than the product’s ____ that have an effect on the supply of a good or service and cause the supply sure to shift.
determinants, price
Quantity demanded is illustrated on the ____ axis, while price is illustrated on the _____ axis.
Horizontal (x), vertical (y)
Market ____ is a schedule or curve showing the various amounts of a product that producers are willing and able to make available for sale at each possible price during a specific price.
supply
The number of buyers is a determinant of market ___.
demand
The supply curve measures quantity ___ on the horizontal axis and ____ on the vertical axis.
supplied, price
And increase in business taxes causes a ____ in supply and will ___ production costs.
decrease, increase
What would result in a change of supply?
An increase in the excise tax on cigarettes, an increase in the number of shoe stores at the local mall, and an increase or decrease in the wage rate.
The number of sellers of competitors in a market is a determinant or shifter in the ___ curve.
supply
The vast majority of goods that are not related to one another are called ___ goods.
independent
A shortage results from an excess of quantity _____.
demanded
An increase in supply while holding demand constant results in a ____ in equilibrium price, and an ____ in equilibrium quantity.
decrease, increase
Government may place legal limits on price when it is determined that prices are unfairly ____ for buyers or unfairly ____ for sellers.
high, low
A decrease in demand while holding supply constant results in:
a decrease in both equilibrium price and quantity.
Products whose demand varies directly with changes in money or income are called normal or ___ goods.
superior
Example of determinants of supply?
Taxes and subsidies.
____ resource prices raise production costs and, assuming a fixed product price, ___ profits.
Higher, reduce
The added cost of producing one more unit of output is called ____ cost.
marginal
Products that have decreased demand when consumer incomes rise and increased demand when consumer incomes fall are called ____ ___.
inferior goods.
A surplus is also known as an excess of ___.
supply.
When the government provides financial assistance for the production of a good which lowers producers’ costs and increases supply, it is called a ____.
subsidy
The income effect is best described as ___ ____ increasing the purchasing power of income, enabling consumers to purchase ___ of a product and vice versa.
lower prices, more
The interaction of buyers and sellers determines equilibrium price and equilibrium ____.
quantity
Competition among corn producers forces them to use the best technology and right mix of productive resources; otherwise their costs will be too relative to the market price and they will be unprofitable. This is best described as:
productive efficiency.
The number of sellers or competitors in a market is a determinant or shifter of the ___ curve.
supply
What will cause a change in supply, not quantity supplied?
Number of sellers, producer, technology.
The supply is an ____ sloping curve.
upward
What illustrates the relationship between a good and its complement?
When price of lettuce increases, the demand for salad dressing decreases. When the price of tuition decreases, the demand for textbooks increases.
An inverse relationship between two variable is a ___ relationship.
negative
What consists of a large number of independently acting buyers and sellers?
A competitive market.
The ____ of ____ incurred by firms when producing a good or service arise from the prices of the inputs that are used to produce said good or service.
costs, production
What specifically refers to demand?
The buyer side of any market.
What scenarios describe the appropriate effects on equilibrium price and quantity due to a decrease in supply while holding everything else constant?
An oil spill causes several fishermen to leave the scrimp business and the equilibrium price of shrimp increases while quantity decreases. A fishing tax is placed on all shrimp and the equilibrium price of shrimp increases while quantity decreases.
Price and quantity have a ___ relationship.
positive
Government-set prices cause:
shortages, negative side effects, surpluses, and distortions in resource allocation, and environmental damage.
What refers to a particular apportionment of a mix of goods and services most highly valued by society?
Allocative efficiency
A demand curve shows the plotted:
inverse relationship between price and quantity demanded for a product.
One of the determinants of demand is ____ expectations.
consumer
Examples of a market?
Local gas station, NYSE, Craiglist, eBay.
What decreases demand?
Falling incomes and the product is a normal good, an unfavorable change in consumer tastes, and a decrease in the price of a substitute good.
If a decrease in demand is greater that a decrease in supply, equilibrium price will ___.
fall
The supply curve illustrates the relationship between:
price and quantity supplied.
The concept of demand can be summarized by a schedule or curve showing the quantity of a product that would be:
consumed at various possible prices.
If an increase in supply is larger than a decrease in demand, the equilibrium quantity will ____.
increase
____ resource prices raise production costs and, assuming a fixed product price, ____ profits
Higher, reduce
The demand by a consumer for a good or service essentially reflects the ____ benefit of the food or service, based on the utility received.
marginal
What causes consumers to buy larger quantities of a product at each possible price?
An increase in the number of buyers.
The fundamental characteristic of demand, other things equal, is that as the price falls, the quantity demand for a product ___.
rises
A change in quantity demanded is caused by an increase or decrease in the ____ of the product under consideration and nothing else.
price
What recalls the meaning of a change in supply?
A change in the schedule and a shift of the curve.
____ refers to production of a product, whereas demand refers to the consumption of a product.
Supply
______ benefit is the additional utility gained from consuming one more unit of a good or service.
Marginal
The relationship between quantity supplied and price is :
direct
relationship between quantity demanded and price is :
inverse
price floors and ceiling prices:
interfere with the rationing function of prices.
if two goods are complements:
a decrease in the price of one will increase the demand for the other.
If there is a shortage of product, and the price is free to change:
the price of the product will rise.
An economist for a bicycle company predicts that, other things equal, a rise in consumer incomes will increase the demand for bikes. This prediction assumes that:
bikes are normal goods.
The income and substitution effects account for:
the downward-sloping demand curve
The rationing function of prices refers to the:
capacity of a competitive market to equalize quantity demanded and quantity supplied
What will not cause the demand for product K to change?
A change in the price of product K
The upward slope of the supply curve reflects the:
law of supply
At the equilibrium price:
there are no pressure on price to either rise or fall
economists use the term “demand” to refer to:
a schedule of various combinations of market prices and amounts/quantities demanded.
and improvement in production technology will:
shift the supply curve to the right
the law of demand states that, other things equal:
price and quantity demanded are inversely related.

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