Question 1

When quantity demanded of a good is less than the quantity supplied at the prevailing market price,

Accepted Answer

A) the market is in equilibrium 
B) the price of the good tends to rise 
C) the price of the good tends to fall 
D) the demand curve shifts rightward until the surplus is eliminated 
E) the supply curve shifts leftward until the shortage is eliminated 
A) the market is in equilibrium 
B) the price of the good tends to rise 
C) the price of the good tends to fall 
D) the demand curve shifts rightward until the surplus is eliminated 
E) the supply curve shifts leftward until the shortage is eliminated

Question 2

Two goods are considered substitutes only if a(n)

Accepted Answer

A) decrease in the demand for one leads to a decrease in the supply of the other 
B) increase in the demand for one leads to a decrease in the supply of the other 
C) increase in the price of one leads to an increase in the demand for the other 
D) decrease in the price of one leads to an increase in the demand for the other 
E) decrease in the supply of one leads producers to switch to production of the other 
A) decrease in the demand for one leads to a decrease in the supply of the other 
B) increase in the demand for one leads to a decrease in the supply of the other 
C) increase in the price of one leads to an increase in the demand for the other 
D) decrease in the price of one leads to an increase in the demand for the other 
E) decrease in the supply of one leads producers to switch to production of the other

Question 3

The law of demand says that as the price of a good rises,

Accepted Answer

A) buyers recognize that price may be even higher in the future, and so they buy now 
B) buyers purchase less in hopes that the price will fall in the future 
C) buyers purchase less, in part because their real income has fallen 
D) buyers purchase more, in part because the price of a substitute has risen 
E) buyers purchase more, in part because it has higher status at a higher price 
A) buyers recognize that price may be even higher in the future, and so they buy now 
B) buyers purchase less in hopes that the price will fall in the future 
C) buyers purchase less, in part because their real income has fallen 
D) buyers purchase more, in part because the price of a substitute has risen 
E) buyers purchase more, in part because it has higher status at a higher price

Question 4

Which of the following best defines supply?

Accepted Answer

A) the amount of a good that producers want to sell at a particular price 
B) the amount of a good that consumers will buy 
C) the amount of a good that producers are willing and able to sell at each possible price, other things constant 
D) the amount of a good that producers are willing to sell at each possible price, other things constant 
E) the amount of a good that producers are willing and able to buy at each possible price, other things constant 
A) the amount of a good that producers want to sell at a particular price 
B) the amount of a good that consumers will buy 
C) the amount of a good that producers are willing and able to sell at each possible price, other things constant 
D) the amount of a good that producers are willing to sell at each possible price, other things constant 
E) the amount of a good that producers are willing and able to buy at each possible price, other things constant

Question 5

If the supply curves for the following goods were plotted, they all would slope upward except one.Which is the exception?

Accepted Answer

A) red Corvettes 
B) yogurt 
C) diamond rings 
D) original copies of the Mona Lisa 
E) wine from Greece 
A) red Corvettes 
B) yogurt 
C) diamond rings 
D) original copies of the Mona Lisa 
E) wine from Greece

Question 6

In which of the following situations will the equilibrium price of wheat increase and the change in the equilibrium quantity of wheat be indeterminate?

Accepted Answer

A) if supply and demand both decline 
B) if supply and demand both rise 
C) if supply declines and demand rises 
D) if supply rises and demand declines 
E) if supply remains constant and demand rises 
A) if supply and demand both decline 
B) if supply and demand both rise 
C) if supply declines and demand rises 
D) if supply rises and demand declines 
E) if supply remains constant and demand rises

Question 7

The income effect refers to the impact of a change in

Accepted Answer

A) income on the price of a good 
B) the general price level caused by a change in the price of another good 
C) the price of a good on real income 
D) the price of a substitute for the good under consideration 
E) demand when income changes 
A) income on the price of a good 
B) the general price level caused by a change in the price of another good 
C) the price of a good on real income 
D) the price of a substitute for the good under consideration 
E) demand when income changes

Question 8

Rent controls can result in

Accepted Answer

A) deteriorating or abandoned buildings 
B) strong incentives to oust protected tenants 
C) payments to motivate tenants to move out 
D) benefits to rich people who get a windfall from low rents 
E) All of the answers are correct. 
A) deteriorating or abandoned buildings 
B) strong incentives to oust protected tenants 
C) payments to motivate tenants to move out 
D) benefits to rich people who get a windfall from low rents 
E) All of the answers are correct.

Question 9

Which of the following statements about markets is not true?

Accepted Answer

A) A market is an impersonal mechanism. 
B) Markets coordinate the independent decisions of buyers and sellers. 
C) Markets reduce the transaction costs of exchange. 
D) More specialized markets are generally found in urban areas. 
E) All markets provide the same amounts of information. 
A) A market is an impersonal mechanism. 
B) Markets coordinate the independent decisions of buyers and sellers. 
C) Markets reduce the transaction costs of exchange. 
D) More specialized markets are generally found in urban areas. 
E) All markets provide the same amounts of information.

Question 10

Exhibit 4-14   Refer to exhibit 4-14.An increase in consumer income will cause which of the following to happen if baby formula is an inferior good?

Accepted Answer

A) demand shift from D2 to D1 
B) movement from b to a on demand curve D1 
C) demand shift from D1 to D2 
D) movement from d to c on demand curve D2 
E) none of the above 
A) demand shift from D2 to D1 
B) movement from b to a on demand curve D1 
C) demand shift from D1 to D2 
D) movement from d to c on demand curve D2 
E) none of the above

Question 11

Exhibit 4-15   Refer to exhibit 4-15.An increase in the price of baby formula will cause which of the following to occur?

Accepted Answer

A) a movement from a to b on supply curve S1 
B) supply shift from S2 to S1 
C) a movement from d to c on supply curve S2 
D) supply shift from S1 to S2 
E) a movement from b to a on supply curve S1 
A) a movement from a to b on supply curve S1 
B) supply shift from S2 to S1 
C) a movement from d to c on supply curve S2 
D) supply shift from S1 to S2 
E) a movement from b to a on supply curve S1

Question 12

The effect of an increase in consumer income on equilibrium price and quantity of Florida orange juice (a normal good)is

Accepted Answer

A) to increase equilibrium price and quantity 
B) to decrease equilibrium price and quantity 
C) to increase equilibrium price and decrease equilibrium quantity 
D) to increase equilibrium quantity and decrease equilibrium price 
E) that equilibrium price and quantity remain constant 
A) to increase equilibrium price and quantity 
B) to decrease equilibrium price and quantity 
C) to increase equilibrium price and decrease equilibrium quantity 
D) to increase equilibrium quantity and decrease equilibrium price 
E) that equilibrium price and quantity remain constant

Question 13

Exhibit 4-2   Consider Exhibit 4-2.Which of the following represents a decrease in supply?

Accepted Answer

A) a movement from C to D 
B) a movement from D to B 
C) a movement from C to F 
D) a movement from F to E 
E) none of the above represents an increase in the quantity supplied 
A) a movement from C to D 
B) a movement from D to B 
C) a movement from C to F 
D) a movement from F to E 
E) none of the above represents an increase in the quantity supplied

Question 14

Which of the following events would increase the supply of tomatoes?

Accepted Answer

A) the introduction of mechanized tomato pickers, which raises the cost of production 
B) an increase in wages for the tomato pickers 
C) a decrease in the cost of fertilizer for the tomato plants 
D) unseasonably hot, dry weather in the tomato-growing regions of the nation 
E) a decrease in the price of pasta products 
A) the introduction of mechanized tomato pickers, which raises the cost of production 
B) an increase in wages for the tomato pickers 
C) a decrease in the cost of fertilizer for the tomato plants 
D) unseasonably hot, dry weather in the tomato-growing regions of the nation 
E) a decrease in the price of pasta products

Question 15

Along a given demand curve, a decrease in supply will typically

Accepted Answer

A) decrease price, but the change in quantity could be in either direction 
B) increase price and decrease the quantity 
C) decrease price but leave quantity unchanged 
D) decrease both quantity and price 
E) increase both quantity and price 
A) decrease price, but the change in quantity could be in either direction 
B) increase price and decrease the quantity 
C) decrease price but leave quantity unchanged 
D) decrease both quantity and price 
E) increase both quantity and price

Question 16

For which of the following would the income effect of a price change be greatest?

Accepted Answer

A) ballpoint pens 
B) air travel to Australia 
C) chewing gum 
D) haircuts 
E) college textbooks 
A) ballpoint pens 
B) air travel to Australia 
C) chewing gum 
D) haircuts 
E) college textbooks

Question 17

In the market for chewing gum, the current price is 50 cents per pack and 100, 000 packs are sold.Which of the following events would lead to a new equilibrium price of 60 cents and quantity of 90, 000 packs?

Accepted Answer

A) an increase in the price of other kinds of candy 
B) an increase in the price of the ingredients used to make chewing gum 
C) a decrease in the number of young people in the population 
D) an agreement by workers in the chewing gum industry to work for lower wages 
E) an increase in income 
A) an increase in the price of other kinds of candy 
B) an increase in the price of the ingredients used to make chewing gum 
C) a decrease in the number of young people in the population 
D) an agreement by workers in the chewing gum industry to work for lower wages 
E) an increase in income

Question 18

Suppose demand increases and supply increases.Which of the following will happen?

Accepted Answer

A) equilibrium price will increase 
B) equilibrium price will decrease 
C) equilibrium quantity will increase 
D) equilibrium quantity will decrease 
E) neither the equilibrium price nor the equilibrium quantity will change 
A) equilibrium price will increase 
B) equilibrium price will decrease 
C) equilibrium quantity will increase 
D) equilibrium quantity will decrease 
E) neither the equilibrium price nor the equilibrium quantity will change

Question 19

The law of demand states that

Accepted Answer

A) there is a positive relationship between price and quantity demanded 
B) price is the only factor that influences the quantity that people are willing and able to buy 
C) price and quantity demanded are inversely related 
D) the demand curve shifts whenever the price of a good changes 
E) by producing a product, firms create a demand for it 
A) there is a positive relationship between price and quantity demanded 
B) price is the only factor that influences the quantity that people are willing and able to buy 
C) price and quantity demanded are inversely related 
D) the demand curve shifts whenever the price of a good changes 
E) by producing a product, firms create a demand for it

Question 20

Exhibit 4-5   Consider Exhibit 4-5.Which of the following statements is most likely correct regarding the market for corn?

Accepted Answer

A) In 2008 the quantity purchased exceeded the quantity sold. 
B) In 2008 the corn market was not in equilibrium. 
C) The weather for corn production was probably better in 2010 than in 2009. 
D) Between 2010 and 2011 both the supply and demand for corn must have increased. 
E) Between 2009 and 2010 the demand for corn decreased. 
A) In 2008 the quantity purchased exceeded the quantity sold. 
B) In 2008 the corn market was not in equilibrium. 
C) The weather for corn production was probably better in 2010 than in 2009. 
D) Between 2010 and 2011 both the supply and demand for corn must have increased. 
E) Between 2009 and 2010 the demand for corn decreased.

Exam 4: Demand, Supply, and Markets

When quantity demanded of a good is less than the quantity supplied at the prevailing market price,

Two goods are considered substitutes only if a(n)

The law of demand says that as the price of a good rises,

Which of the following best defines supply?

If the supply curves for the following goods were plotted, they all would slope upward except one.Which is the exception?

In which of the following situations will the equilibrium price of wheat increase and the change in the equilibrium quantity of wheat be indeterminate?

The income effect refers to the impact of a change in

Rent controls can result in

Which of the following statements about markets is not true?

Exhibit 4-14 Refer to exhibit 4-14.An increase in consumer income will cause which of the following to happen if baby formula is an inferior good?

Exhibit 4-15 Refer to exhibit 4-15.An increase in the price of baby formula will cause which of the following to occur?

The effect of an increase in consumer income on equilibrium price and quantity of Florida orange juice (a normal good)is

Exhibit 4-2 Consider Exhibit 4-2.Which of the following represents a decrease in supply?

Which of the following events would increase the supply of tomatoes?

Along a given demand curve, a decrease in supply will typically

For which of the following would the income effect of a price change be greatest?

In the market for chewing gum, the current price is 50 cents per pack and 100, 000 packs are sold.Which of the following events would lead to a new equilibrium price of 60 cents and quantity of 90, 000 packs?

Suppose demand increases and supply increases.Which of the following will happen?

The law of demand states that

Exhibit 4-5 Consider Exhibit 4-5.Which of the following statements is most likely correct regarding the market for corn?

The Art and Science of Economic Analysis

Appendix--Understanding Graphs

Economic Tools and Economics Systems

Economic Decision Makers

Elasticity of Demand and Supply

Appendix--Price Elasticity and Tax Incidence

Consumer Choice and Demand

Appendix--Indifference Curves and Utility Maximization

Production and Cost in the Firm

A--Perfect Competition

B--Perfect Competition

A--Monopoly

B--Monopoly

Monopolistic Competition and Oligopoly

Resource Markets

Labor Markets and Labor Unions

Capital, Interest, and Corporate Finance

Transaction Costs, Imperfect Information, and Behavioral Economics

Economic Regulation and Antitrust Policy

Public Goods and Public Choice

Externalities and the Environment

Income Distribution and Poverty

International Trade

International Finance

Economic Development

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