ch07 - File: Ch07; CHAPTER 7: Perfect Competition Each...

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File: Ch07; CHAPTER 7: Perfect Competition Each question contains a code showing the section of the chapter text from which it was taken. The codes for this chapter are: Code Section 1 The Basics of Supply and Demand 2 Competitive Equilibrium 3 Market Efficiency 4 International Trade MULTIPLE CHOICE 1. Demand is given by Q D = 100 – P and supply by Q S = .5P – 20. Equilibrium price and output under perfect competition are a) P = $60 and Q = 10 units. b) P = $80 and Q = 20 units. c) P = $70 and Q = 30 units. d) P = $100 and Q = 30 units. e) None of the above answers is correct. ANSWER: b SECTION: 1 2. If for some reason the price of a good is above the equilibrium price, then a) Finding inventories building up, suppliers will cut output, and lower prices. b) Finding inventories depleted, suppliers will increase output and lower prices. c) The demand curve shifts to the right until equilibrium is established at the existing price. d) The supply curve shifts to the left until equilibrium is established at the existing price. e) Consumers will bid down the good’s price, but there will be no reduction in output. ANSWER: a SECTION: 1 3. When there is an increase in demand, a) The supply curve will shift to the right to meet the demand increase. b) There is a movement toward a higher price along the demand curve. c) The demand curve shifts to the right. d) Market output will increase and market price will tend to decline. e) None of the above answers is correct. ANSWER: c SECTION: 1 7-1
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Perfect Competition 4. Normally, an increase in the supply of a good (a shift in the supply curve) will cause a) A shift in the demand curve for the good. b) The cost of producing the good to increase. c) The price of the good to fall. d) Total consumption of the good to increase. e) Answers c and d are both correct. ANSWER: e SECTION: 1 5. Over the last 3 months, the price and quantity sold of coal have fallen. Which of the following events is consistent with this observation (everything else equal)? a) The price of oil fell. b) Coal miners received large wage increases. c) Coal producers installed more efficient coal mining equipment. d) New mine operators entered the coal industry. e) The supply of coal fell. ANSWER: a SECTION: 1 6. The price of fresh fish rose and the quantity sold fell. Which of the following events is consistent with this observation (everything else equal)? a) Consumers developed a taste for fish. b) The price of meat rose. c) Fishermen have learned to catch fish more efficiently. d) Fresh fish catches have been down in recent months. e) The supply of fresh fish increased. ANSWER: d SECTION: 1 7. The supply curve of eggs will shift down and to the right if a) A virus kills millions of chickens. b)
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This note was uploaded on 03/11/2012 for the course ECON 333 taught by Professor Barkley during the Fall '08 term at CSU Fullerton.

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ch07 - File: Ch07; CHAPTER 7: Perfect Competition Each...

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