21) Suppose consumer tastes and preferences shift from pizza to tacos. In the short run case these changing tastes will result in pizza restaurants ________ pizza prices and taco restaurants ________ taco prices. A) increasing; decreasing B) decreasing; increasing C) decreasing; decreasing D) increasing; increasing 22) Suppose consumer tastes and preferences shift from tacos to pizzas. In the short run these changing tastes will result in pizza restaurants ________ pizza prices and taco restaurants ________ taco prices. A) increasing; decreasing B) decreasing; increasing C) decreasing; decreasing D) increasing; increasing 23) The short run in macroeconomics is the period in which A) prices change significantly. B) no contracts or agreements exist to fix prices. C) demand determines output. D) the demand curve is vertical. Recall the Application about the behavior of prices in retail catalogs to answer the following question(s). Economist Anil Kashyap of the University of Chicago examined the prices of 12 selected goods from L.L. Bean REI and The Orvis Company Inc. Kashyap tracked the prices from the companies’ catalogs which were reissued every six months. 24) Recall the application. This Application examines the concept of A) the wealth effect. B) sticky prices. C) consumer spending habits. D) stagflation. 25) Recall the application. Even though the catalogs listed in the Application were reissued every six months the prices which were tracked in these retail catalogs A) were typically fixed for a year or more. B) changed every month. C) tended to fall during periods of high inflation. D) were not listed due to low rates of inflation. 26) Recall the application. The prices which were tracked in the retail catalogs exemplified the macroeconomic concept of the short run a period of time in which A) price changes are significant because the aggregate supply curve is vertical. B) prices never change because the aggregate demand curve is vertical. C) prices change frequently because of changes in aggregate supply. D) prices don’t change very much implying that the aggregate supply curve is relatively flat. 27) The price system always works instantaneously. 28) Prices of industrial products and wages tend to be the most “flexible.” 29) For most firms the biggest cost of doing business is wages. 30) The price system works in an economy on a day-to-day basis to match the desires of consumers with the output from producers.
