1.An ad in the newspaper claims that the price of milk will increase next week. At the same time, a new and improved pasteurization process makes milk production more efficient. Given these two effects, what can we say about the equilibrium price and quantity of milk? a. Equilibrium price will increase; the effect on quantity is ambiguous. b. Equilibrium price will decrease; the effect on quantity is ambiguous. c. Equilibrium quantity will increase; the effect on price is ambiguous. d. Equilibrium quantity will decrease, equilibrium price will increase. 2.Adam Smith's invisible hand principle stresses a. the potential of government regulation as a means of bringing the self interest of individuals into harmony with the economic welfare of society. b. that benevolence is a powerful motivator that encourages individuals to engage in productive economic activity. c. the tendency of the competitive market process to direct self-interested individuals into activities that enhance the economic welfare of society. d. the tendency of self-interested individuals to pursue activities that benefit themselves but harm the overall economic welfare of society. 3.Which of the following occurs if there is excess demand in a free and unregulated market? a. Quantity demanded exceeds quantity supplied and the market mechanism pushes the price down, which encourages more production and less consumption. b. Quantity demanded exceeds quantity supplied and the market mechanism pushes the price up, which in turn encourages more production and less consumption. c. Quantity supplied exceeds quantity demanded and the price falls, which encourages more production and less consumption. d. Quantity supplied exceeds quantity demanded and the price rises, which encourages more production and less consumption. 4.An advertisement announces that the price of wine will drastically increase next month. Therefore, this month we would expect a. both the price and quantity of wine sold to decrease. b. the price to increase and the quantity of wine sold to decrease. c. both the price and quantity of wine sold to increase. d. the price to decrease and the quantity of wine sold to increase. 5.Which of the following best represents the effects of a decrease in the price of tomato juice, other things being equal? a. A leftward shift in the demand curve for tomato juice. b. A downward movement along the demand curve for tomato juice. c. A rightward shift in the demand curve for tomato juice. d. An upward movement along the demand curve for tomato juice. 6.The law of demand indicates that as the price of a good decreases, a. consumers buy less of it. b. producers sell less of it. c. producers sell more of it. d. consumers buy more of it. 7.If coffee and cream are complements, an increase in the price of coffee will cause a. the demand for cream to increase. b. no change in the demand for cream; only quantity demanded would be affected. c. the demand for cream to fall. d. the demand for coffee to fall. 8.How would a decrease in the cost of production affect the market for new washing machines? a. Supply would increase, leading to an increase in price and an increase in quantity sold. b. Supply would decrease, leading to a reduction in price and a reduction in quantity sold. c. Supply would decrease, leading to an increase in price and a reduction in quantity sold. d. Supply would increase, leading to a reduction in price and an increase in quantity sold. 9.When economists say the quantity supplied of a product has decreased, they mean the a. supply curve has shifted to the right. b. price of the product has fallen, and consequently, suppliers are producing less of it. c. price of the product has risen, and consequently, suppliers are producing more of it. d. supply curve has shifted to the left. 10.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. inverse. b. robust. c. elastic. d. inelastic

1.An ad in the newspaper claims that the price of milk will increase next week. At the same time, a new and improved pasteurization process makes milk production more efficient. Given these two effects, what can we say about the equilibrium price and quantity of milk? a. Equilibrium price will increase; the effect on quantity is ambiguous. b. Equilibrium price will decrease; the effect on quantity is ambiguous. c. Equilibrium quantity will increase; the effect on price is ambiguous. d. Equilibrium quantity will decrease, equilibrium price will increase. 2.Adam Smith's invisible hand principle stresses a. the potential of government regulation as a means of bringing the self interest of individuals into harmony with the economic welfare of society. b. that benevolence is a powerful motivator that encourages individuals to engage in productive economic activity. c. the tendency of the competitive market process to direct self-interested individuals into activities that enhance the economic welfare of society. d. the tendency of self-interested individuals to pursue activities that benefit themselves but harm the overall economic welfare of society. 3.Which of the following occurs if there is excess demand in a free and unregulated market? a. Quantity demanded exceeds quantity supplied and the market mechanism pushes the price down, which encourages more production and less consumption. b. Quantity demanded exceeds quantity supplied and the market mechanism pushes the price up, which in turn encourages more production and less consumption. c. Quantity supplied exceeds quantity demanded and the price falls, which encourages more production and less consumption. d. Quantity supplied exceeds quantity demanded and the price rises, which encourages more production and less consumption. 4.An advertisement announces that the price of wine will drastically increase next month. Therefore, this month we would expect a. both the price and quantity of wine sold to decrease. b. the price to increase and the quantity of wine sold to decrease. c. both the price and quantity of wine sold to increase. d. the price to decrease and the quantity of wine sold to increase. 5.Which of the following best represents the effects of a decrease in the price of tomato juice, other things being equal? a. A leftward shift in the demand curve for tomato juice. b. A downward movement along the demand curve for tomato juice. c. A rightward shift in the demand curve for tomato juice. d. An upward movement along the demand curve for tomato juice. 6.The law of demand indicates that as the price of a good decreases, a. consumers buy less of it. b. producers sell less of it. c. producers sell more of it. d. consumers buy more of it. 7.If coffee and cream are complements, an increase in the price of coffee will cause a. the demand for cream to increase. b. no change in the demand for cream; only quantity demanded would be affected. c. the demand for cream to fall. d. the demand for coffee to fall. 8.How would a decrease in the cost of production affect the market for new washing machines? a. Supply would increase, leading to an increase in price and an increase in quantity sold. b. Supply would decrease, leading to a reduction in price and a reduction in quantity sold. c. Supply would decrease, leading to an increase in price and a reduction in quantity sold. d. Supply would increase, leading to a reduction in price and an increase in quantity sold. 9.When economists say the quantity supplied of a product has decreased, they mean the a. supply curve has shifted to the right. b. price of the product has fallen, and consequently, suppliers are producing less of it. c. price of the product has risen, and consequently, suppliers are producing more of it. d. supply curve has shifted to the left. 10.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. inverse. b. robust. c. elastic. d. inelastic

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Related questions

Question

	a.	Equilibrium price will increase; the effect on quantity is ambiguous.
	b.	Equilibrium price will decrease; the effect on quantity is ambiguous.
	c.	Equilibrium quantity will increase; the effect on price is ambiguous.
	d.	Equilibrium quantity will decrease, equilibrium price will increase.

2.Adam Smith's invisible hand principle stresses

	a.	the potential of government regulation as a means of bringing the self interest of individuals into harmony with the economic welfare of society.
	b.	that benevolence is a powerful motivator that encourages individuals to engage in productive economic activity.
	c.	the tendency of the competitive market process to direct self-interested individuals into activities that enhance the economic welfare of society.
	d.	the tendency of self-interested individuals to pursue activities that benefit themselves but harm the overall economic welfare of society.

3.Which of the following occurs if there is excess demand in a free and unregulated market?

	a.	Quantity demanded exceeds quantity supplied and the market mechanism pushes the price down, which encourages more production and less consumption.
	b.	Quantity demanded exceeds quantity supplied and the market mechanism pushes the price up, which in turn encourages more production and less consumption.
	c.	Quantity supplied exceeds quantity demanded and the price falls, which encourages more production and less consumption.
	d.	Quantity supplied exceeds quantity demanded and the price rises, which encourages more production and less consumption.

4.An advertisement announces that the price of wine will drastically increase next month. Therefore, this month we would expect

	a.	both the price and quantity of wine sold to decrease.
	b.	the price to increase and the quantity of wine sold to decrease.
	c.	both the price and quantity of wine sold to increase.
	d.	the price to decrease and the quantity of wine sold to increase.

5.Which of the following best represents the effects of a decrease in the price of tomato juice, other things being equal?

	a.	A leftward shift in the demand curve for tomato juice.
	b.	A downward movement along the demand curve for tomato juice.
	c.	A rightward shift in the demand curve for tomato juice.
	d.	An upward movement along the demand curve for tomato juice.

6.The law of demand indicates that as the price of a good decreases,

	a.	consumers buy less of it.
	b.	producers sell less of it.
	c.	producers sell more of it.
	d.	consumers buy more of it.

7.If coffee and cream are complements, an increase in the price of coffee will cause

	a.	the demand for cream to increase.
	b.	no change in the demand for cream; only quantity demanded would be affected.
	c.	the demand for cream to fall.
	d.	the demand for coffee to fall.

8.How would a decrease in the cost of production affect the market for new washing machines?

	a.	Supply would increase, leading to an increase in price and an increase in quantity sold.
	b.	Supply would decrease, leading to a reduction in price and a reduction in quantity sold.
	c.	Supply would decrease, leading to an increase in price and a reduction in quantity sold.
	d.	Supply would increase, leading to a reduction in price and an increase in quantity sold.

9.When economists say the quantity supplied of a product has decreased, they mean the

	a.	supply curve has shifted to the right.
	b.	price of the product has fallen, and consequently, suppliers are producing less of it.
	c.	price of the product has risen, and consequently, suppliers are producing more of it.
	d.	supply curve has shifted to the left.

10.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.	inverse.
	b.	robust.
	c.	elastic.
	d.	inelastic

Definition Video Definition Point where the demand and supply curves intersect. At the equilibrium price the quantity supplied of a good is equal to the quantity demanded. When the market is not in equilibrium, market surplus or market shortage occurs. The region that is above the price equilibrium indicates market surplus and the region below the price equilibrium indicates market shortage. Video

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