Question 1

A change in income will

Accepted Answer

A) affect the demand for candy through the income effect of a price change 
B) affect the quantity demanded of candy through the income effect of a price change 
C) shift the demand curve for candy 
D) have no effect on the demand for candy, because income is assumed constant along a demand curve 
E) affect quantity demanded only if candy is a normal good 
A) affect the demand for candy through the income effect of a price change 
B) affect the quantity demanded of candy through the income effect of a price change 
C) shift the demand curve for candy 
D) have no effect on the demand for candy, because income is assumed constant along a demand curve 
E) affect quantity demanded only if candy is a normal good

Question 2

If there is a shortage in the market for jeans,

Accepted Answer

A) producers' inventories will increase 
B) the price should begin to rise 
C) the demand curve will shift to restore equilibrium in the market 
D) the supply curve will shift to restore equilibrium in the market 
E) producers expect government to impose a price ceiling 
A) producers' inventories will increase 
B) the price should begin to rise 
C) the demand curve will shift to restore equilibrium in the market 
D) the supply curve will shift to restore equilibrium in the market 
E) producers expect government to impose a price ceiling

Question 3

Which of the following would cause both the equilibrium price and equilibrium quantity of cookies to decrease?

Accepted Answer

A) a rise in the price of milk (a complement) 
B) a rise in consumer incomes 
C) a rise in the price of cookie dough 
D) a drop in the price of cookie dough 
E) a rise in the price of crackers (a substitute) 
A) a rise in the price of milk (a complement) 
B) a rise in consumer incomes 
C) a rise in the price of cookie dough 
D) a drop in the price of cookie dough 
E) a rise in the price of crackers (a substitute)

Question 4

If a decrease in the price of good A causes an increase in the demand for good B, then A and B must be complements.

Accepted Answer

A) True 
 B)False

Question 5

If both supply and demand increase, then the change in equilibrium quantity is indeterminate.

Accepted Answer

A) True 
 B)False

Question 6

Assume that supply increases slightly and demand increases greatly.Which of the following will happen?

Accepted Answer

A) equilibrium price will fall and equilibrium quantity will rise 
B) equilibrium price will rise and equilibrium quantity will fall 
C) equilibrium price will rise and equilibrium quantity will rise 
D) equilibrium price will fall and equilibrium quantity will fall 
E) neither equilibrium price nor equilibrium quantity will change 
A) equilibrium price will fall and equilibrium quantity will rise 
B) equilibrium price will rise and equilibrium quantity will fall 
C) equilibrium price will rise and equilibrium quantity will rise 
D) equilibrium price will fall and equilibrium quantity will fall 
E) neither equilibrium price nor equilibrium quantity will change

Question 7

A decrease in the price of a good will cause a leftward shift of the demand curve, if it is a normal good.

Accepted Answer

A) True 
 B)False

Question 8

A demand curve shows how quantity demanded changes as the price changes.It implies that

Accepted Answer

A) only a change in price can shift a demand curve 
B) everything else that affects demand is assumed to be constant 
C) quantity demanded is unrelated to price 
D) economists are concerned only with money 
E) it is impossible to show how anything but price affects demand 
A) only a change in price can shift a demand curve 
B) everything else that affects demand is assumed to be constant 
C) quantity demanded is unrelated to price 
D) economists are concerned only with money 
E) it is impossible to show how anything but price affects demand

Question 9

Which of the following is the best example of substitutes?

Accepted Answer

A) coffee and cream 
B) videotapes and VCRs 
C) money and biscuits 
D) tortillas and salsa 
E) hiking boots and athletic shoes 
A) coffee and cream 
B) videotapes and VCRs 
C) money and biscuits 
D) tortillas and salsa 
E) hiking boots and athletic shoes

Question 10

If good B is a complement to good A, then a rise in the price of B

Accepted Answer

A) increases the quantity demanded of A 
B) decreases the demand for A 
C) increases the demand for A 
D) decreases the quantity demanded of A 
E) will cause the demand for B to increase 
A) increases the quantity demanded of A 
B) decreases the demand for A 
C) increases the demand for A 
D) decreases the quantity demanded of A 
E) will cause the demand for B to increase

Question 11

If demand for personal computers increases as a result of an increase in income,

Accepted Answer

A) personal computers must be a normal good 
B) personal computers must be an inferior good 
C) personal computers must be a complement 
D) the substitutes for personal computers must be inferior goods 
E) the substitution effect is larger than the income effect 
A) personal computers must be a normal good 
B) personal computers must be an inferior good 
C) personal computers must be a complement 
D) the substitutes for personal computers must be inferior goods 
E) the substitution effect is larger than the income effect

Question 12

Exhibit 4-2   Consider Exhibit 4-2.Which of the following represents an increase in the quantity supplied?

Accepted Answer

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

Question 13

Exhibit 4-12   Refer to Exhibit 4-12.A shift from supply curve S to supply curve S' could be caused by a(n)

Accepted Answer

A) decrease in consumer income 
B) increase in the current price of the product 
C) patent application that restricts the use of a particular production technology 
D) several competing producers going out of business 
E) supplier expecting higher product prices in the future 
A) decrease in consumer income 
B) increase in the current price of the product 
C) patent application that restricts the use of a particular production technology 
D) several competing producers going out of business 
E) supplier expecting higher product prices in the future

Question 14

For a renter, the income effect of an increase in apartment rents will

Accepted Answer

A) have a greater effect than the income effect of an increase in the price of chewing gum 
B) have no impact on the demand curve for apartments, because everything except price is assumed constant 
C) have less of an effect than the income effect of an increase in the price of chewing gum 
D) be almost negligible, because housing is a necessity 
E) occur only when income increases 
A) have a greater effect than the income effect of an increase in the price of chewing gum 
B) have no impact on the demand curve for apartments, because everything except price is assumed constant 
C) have less of an effect than the income effect of an increase in the price of chewing gum 
D) be almost negligible, because housing is a necessity 
E) occur only when income increases

Question 15

If the tea harvest is bad in a particular year, the supply of tea will

Accepted Answer

A) decrease, its price will decrease, and the quantity demanded of coffee will increase 
B) decrease, its price will increase, and the quantity demanded of coffee will increase 
C) decrease, its price will increase, and the quantity demanded of coffee will decrease 
D) decrease, its price will decrease, and the quantity demanded of coffee will decrease 
E) increase, its price will increase, and the quantity demanded of coffee will increase 
A) decrease, its price will decrease, and the quantity demanded of coffee will increase 
B) decrease, its price will increase, and the quantity demanded of coffee will increase 
C) decrease, its price will increase, and the quantity demanded of coffee will decrease 
D) decrease, its price will decrease, and the quantity demanded of coffee will decrease 
E) increase, its price will increase, and the quantity demanded of coffee will increase

Question 16

Which of the following would not shift the demand curve for pork?

Accepted Answer

A) an increase in the price of beef 
B) an increase in the price of pork 
C) an increase in the incomes of pork consumers 
D) a widespread advertising campaign for pork 
E) a finding that consumption of beef increases the risk of heart attack 
A) an increase in the price of beef 
B) an increase in the price of pork 
C) an increase in the incomes of pork consumers 
D) a widespread advertising campaign for pork 
E) a finding that consumption of beef increases the risk of heart attack

Question 17

There are three consumers in the market for playing cards: Don, John, and Ron.At a price of $2 per pack, the quantities demanded by each are 3, 2, and 1, respectively.At a price of $1.50 per pack, the quantities demanded by each are 4, 5, and 3, respectively.Which of the following is true?

Accepted Answer

A) The market demand curve for playing cards does not obey the law of demand. 
B) The price decrease causes the quantity demanded in this market to increase by 6. 
C) The price decrease causes John's demand curve to shift the most. 
D) At a price of $1 per pack, the quantity demanded in this market must be 20. 
E) Don's behavior does not obey the law of demand. 
A) The market demand curve for playing cards does not obey the law of demand. 
B) The price decrease causes the quantity demanded in this market to increase by 6. 
C) The price decrease causes John's demand curve to shift the most. 
D) At a price of $1 per pack, the quantity demanded in this market must be 20. 
E) Don's behavior does not obey the law of demand.

Question 18

Economists emphasize the importance of equilibrium in markets because

Accepted Answer

A) trading in markets can only occur at the equilibrium price and quantity 
B) the behavior of buyers and sellers will automatically guide the market toward the equilibrium price and quantity 
C) all buyers and sellers are better off at the equilibrium point than any other price and quantity combination 
D) it represents a compromise between sellers hoping for low prices and buyers searching for high prices 
E) it is the only price-quantity combination that guarantees that the poorest members of society can purchase the good or service 
A) trading in markets can only occur at the equilibrium price and quantity 
B) the behavior of buyers and sellers will automatically guide the market toward the equilibrium price and quantity 
C) all buyers and sellers are better off at the equilibrium point than any other price and quantity combination 
D) it represents a compromise between sellers hoping for low prices and buyers searching for high prices 
E) it is the only price-quantity combination that guarantees that the poorest members of society can purchase the good or service

Question 19

Exhibit 4-2   Consider Exhibit 4-2 which shows 3 supply curves for milk.Which of the following would shift the supply curve for milk from S1 to S2?

Accepted Answer

A) an increase in the price cattle feed 
B) the expectation of a lower price in the near future 
C) an increase in the price of milk 
D) a decrease in the price of beef 
E) a decrease in the number of dairy farmers 
A) an increase in the price cattle feed 
B) the expectation of a lower price in the near future 
C) an increase in the price of milk 
D) a decrease in the price of beef 
E) a decrease in the number of dairy farmers

Question 20

A decrease in demand for a good could mean that

Accepted Answer

A) consumers are willing to pay a higher price for each quantity of the good 
B) consumers are willing to buy larger quantities of the good at each price 
C) the demand curve has undergone a parallel shift to the right 
D) the demand curve has undergone a nonparallel shift to the right 
E) the demand curve has shifted to the left 
A) consumers are willing to pay a higher price for each quantity of the good 
B) consumers are willing to buy larger quantities of the good at each price 
C) the demand curve has undergone a parallel shift to the right 
D) the demand curve has undergone a nonparallel shift to the right 
E) the demand curve has shifted to the left

Exam 4: Demand, Supply, and Markets

A change in income will

If there is a shortage in the market for jeans,

Which of the following would cause both the equilibrium price and equilibrium quantity of cookies to decrease?

If a decrease in the price of good A causes an increase in the demand for good B, then A and B must be complements.

If both supply and demand increase, then the change in equilibrium quantity is indeterminate.

Assume that supply increases slightly and demand increases greatly.Which of the following will happen?

A decrease in the price of a good will cause a leftward shift of the demand curve, if it is a normal good.

A demand curve shows how quantity demanded changes as the price changes.It implies that

Which of the following is the best example of substitutes?

If good B is a complement to good A, then a rise in the price of B

If demand for personal computers increases as a result of an increase in income,

Exhibit 4-2 Consider Exhibit 4-2.Which of the following represents an increase in the quantity supplied?

Exhibit 4-12 Refer to Exhibit 4-12.A shift from supply curve S to supply curve S' could be caused by a(n)

For a renter, the income effect of an increase in apartment rents will

If the tea harvest is bad in a particular year, the supply of tea will

Which of the following would not shift the demand curve for pork?

There are three consumers in the market for playing cards: Don, John, and Ron.At a price of $2 per pack, the quantities demanded by each are 3, 2, and 1, respectively.At a price of $1.50 per pack, the quantities demanded by each are 4, 5, and 3, respectively.Which of the following is true?

Economists emphasize the importance of equilibrium in markets because

Exhibit 4-2 Consider Exhibit 4-2 which shows 3 supply curves for milk.Which of the following would shift the supply curve for milk from S1 to S2?

A decrease in demand for a good could mean that

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

Filters

Exhibit 4-2 Consider Exhibit 4-2 which shows 3 supply curves for milk.Which of the following would shift the supply curve for milk from S₁ to S₂?