Question 1

The difference between normal and inferior goods is that

Accepted Answer

A) normal goods are of better quality than inferior goods 
B) an increase in price will shift the demand curve for a normal good rightward and the demand curve for an inferior good leftward 
C) if the price of a normal good increases, individuals who buy it are poorer; for inferior goods, the opposite is true 
D) an inferior good is something that will not be demanded until quantities of the normal good have been exhausted 
E) an increase in income will shift the demand curve for a normal good rightward and the demand curve for an inferior good leftward 
A) normal goods are of better quality than inferior goods 
B) an increase in price will shift the demand curve for a normal good rightward and the demand curve for an inferior good leftward 
C) if the price of a normal good increases, individuals who buy it are poorer; for inferior goods, the opposite is true 
D) an inferior good is something that will not be demanded until quantities of the normal good have been exhausted 
E) an increase in income will shift the demand curve for a normal good rightward and the demand curve for an inferior good leftward

Question 2

Exhibit 4-15   Refer to exhibit 4-15.The discovery that breast milk offers greater health protection to babies than baby formula will cause which of the following to happen?

Accepted Answer

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

Question 3

A surplus of shoes will cause

Accepted Answer

A) a decrease in the supply of shoes 
B) a decrease in the demand for shoes 
C) both a decrease in the supply of shoes and an increase in the demand for shoes 
D) a decrease in the price of shoes, through a shift of either the supply curve or the demand curve 
E) a decrease in the price of shoes 
A) a decrease in the supply of shoes 
B) a decrease in the demand for shoes 
C) both a decrease in the supply of shoes and an increase in the demand for shoes 
D) a decrease in the price of shoes, through a shift of either the supply curve or the demand curve 
E) a decrease in the price of shoes

Question 4

Suppose there are only two goods, apples and oranges.What happens if the price of each good increases by 15 percent?

Accepted Answer

A) The consumer will substitute apples for oranges. 
B) The consumer will substitute oranges for apples. 
C) There is no substitution effect because relative prices have remained constant. 
D) Demand for both goods increases. 
E) Demand for both goods decreases. 
A) The consumer will substitute apples for oranges. 
B) The consumer will substitute oranges for apples. 
C) There is no substitution effect because relative prices have remained constant. 
D) Demand for both goods increases. 
E) Demand for both goods decreases.

Question 5

If the price of a haircut (a normal good)increases, other things constant, the

Accepted Answer

A) demand for haircuts increases 
B) demand for haircuts decreases 
C) quantity demanded of haircuts decreases 
D) quantity demanded of haircuts increases 
E) demand for haircuts, or quantity demanded of haircuts decreases; they are the same thing 
A) demand for haircuts increases 
B) demand for haircuts decreases 
C) quantity demanded of haircuts decreases 
D) quantity demanded of haircuts increases 
E) demand for haircuts, or quantity demanded of haircuts decreases; they are the same thing

Question 6

Suppliers recognize there is a shortage in the market for their product when they notice that

Accepted Answer

A) the quantity supplied exceeds the quantity demanded 
B) the quantity demanded is falling 
C) inventories are falling 
D) production exceeds new orders for the product 
E) government economists announce a shortage exists 
A) the quantity supplied exceeds the quantity demanded 
B) the quantity demanded is falling 
C) inventories are falling 
D) production exceeds new orders for the product 
E) government economists announce a shortage exists

Question 7

The most important characteristic of the equilibrium price is that it

Accepted Answer

A) guarantees that producers earn profit 
B) clears the market, leaving neither a surplus nor a shortage 
C) maximizes the quantity demanded 
D) minimizes the quantity demanded 
E) guarantees that all buyers who desire the product will get it 
A) guarantees that producers earn profit 
B) clears the market, leaving neither a surplus nor a shortage 
C) maximizes the quantity demanded 
D) minimizes the quantity demanded 
E) guarantees that all buyers who desire the product will get it

Question 8

The demand for a product is the amount that

Accepted Answer

A) buyers purchase in the market 
B) buyers are willing to purchase at a given price 
C) sellers are willing to sell at a particular price 
D) buyers are willing and able to purchase at alternative prices 
E) buyers are able to purchase at a specific price 
A) buyers purchase in the market 
B) buyers are willing to purchase at a given price 
C) sellers are willing to sell at a particular price 
D) buyers are willing and able to purchase at alternative prices 
E) buyers are able to purchase at a specific price

Question 9

Which of the following is most likely to be an inferior good?

Accepted Answer

A) airline travel 
B) restaurant meals 
C) a subscription to the Wall Street Journal 
D) soft drinks 
E) used clothing 
A) airline travel 
B) restaurant meals 
C) a subscription to the Wall Street Journal 
D) soft drinks 
E) used clothing

Question 10

Exhibit 4-14   Refer to exhibit 4-14.The discovery that breast milk provides more protection against disease than baby formula will cause which of the following to happen?

Accepted Answer

A) a movement from a to b on demand curve D1 
B) a demand shift from D1 to D2 
C) movement from c to d on demand curve D2 
D) demand shift from D2 to D1 
E) either a or b 
A) a movement from a to b on demand curve D1 
B) a demand shift from D1 to D2 
C) movement from c to d on demand curve D2 
D) demand shift from D2 to D1 
E) either a or b

Question 11

Exhibit 4-15   Refer to exhibit 4-15.A decrease in the price of baby formula will cause which of the following to happen?

Accepted Answer

A) supply shift from S2 to S1 
B) movement from c to d on supply curve S2 
C) supply shift from S1 to S2 
D) movement from b to a on supply curve S1 
E) none of the above 
A) supply shift from S2 to S1 
B) movement from c to d on supply curve S2 
C) supply shift from S1 to S2 
D) movement from b to a on supply curve S1 
E) none of the above

Question 12

Over the last few years, demand for DVDs has increased, and yet their equilibrium price has fallen.Which of the following best explains this situation?

Accepted Answer

A) When the price falls, the quantity supplied increases. 
B) There has been a shortage of DVDs. 
C) The supply of DVDs must have decreased. 
D) The demand curve for DVDs slopes upward, so an increase in demand leads to a lower price. 
E) The supply of DVDs must have increased more than the demand for DVDs increased. 
A) When the price falls, the quantity supplied increases. 
B) There has been a shortage of DVDs. 
C) The supply of DVDs must have decreased. 
D) The demand curve for DVDs slopes upward, so an increase in demand leads to a lower price. 
E) The supply of DVDs must have increased more than the demand for DVDs increased.

Question 13

Exhibit 4-3   If the price of the good described in Exhibit 4-3 is $1.60, then there is a

Accepted Answer

A) shortage of 30 units 
B) surplus of 30 units 
C) shortage of 20 units 
D) surplus of 20 units 
E) surplus of 10 units 
A) shortage of 30 units 
B) surplus of 30 units 
C) shortage of 20 units 
D) surplus of 20 units 
E) surplus of 10 units

Question 14

As the baby boom ended, fewer families had young children and, as a consequence, the

Accepted Answer

A) demand curve for preschool services shifted outward 
B) demand curve for preschool services shifted inward 
C) supply curve for preschool services shifted outward 
D) supply curve for preschool services shifted inward 
E) supply and demand curves for preschool services remained constant 
A) demand curve for preschool services shifted outward 
B) demand curve for preschool services shifted inward 
C) supply curve for preschool services shifted outward 
D) supply curve for preschool services shifted inward 
E) supply and demand curves for preschool services remained constant

Question 15

Exhibit 4-14   Refer to exhibit 4-14.An increase in the price of baby formula would cause which of the following to happen?

Accepted Answer

A) demand shift from D1 to D2 
B) move on demand curve D1 from a to b 
C) demand shift from D2 to D1 
D) move on demand curve D2 from d to c 
E) move from b on demand curve D1 to c on demand curve D2 
A) demand shift from D1 to D2 
B) move on demand curve D1 from a to b 
C) demand shift from D2 to D1 
D) move on demand curve D2 from d to c 
E) move from b on demand curve D1 to c on demand curve D2

Question 16

Which of the following will not shift the market supply curve for corn?

Accepted Answer

A) a change in the price of corn 
B) a change in the price of soybeans 
C) a change in the price of herbicides and pesticides 
D) a change in storage technology 
E) a change in the number of acres planted in corn 
A) a change in the price of corn 
B) a change in the price of soybeans 
C) a change in the price of herbicides and pesticides 
D) a change in storage technology 
E) a change in the number of acres planted in corn

Question 17

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 higher price in the near future 
C) an increase in the price of milk 
D) an increase 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 higher price in the near future 
C) an increase in the price of milk 
D) an increase in the price of beef 
E) a decrease in the number of dairy farmers

Question 18

In what way is consumer demand different from consumer wants?

Accepted Answer

A) Demand is only for necessities. 
B) Demand is only for luxuries. 
C) Demand takes into account the ability to pay. 
D) Consumer wants are only for luxuries. 
E) Consumer wants are only for necessities. 
A) Demand is only for necessities. 
B) Demand is only for luxuries. 
C) Demand takes into account the ability to pay. 
D) Consumer wants are only for luxuries. 
E) Consumer wants are only for necessities.

Question 19

An increase in supply will cause a(n)

Accepted Answer

A) increase in demand 
B) decrease in demand 
C) increase in quantity demanded 
D) decrease in equilibrium quantity demanded 
E) increase in equilibrium price 
A) increase in demand 
B) decrease in demand 
C) increase in quantity demanded 
D) decrease in equilibrium quantity demanded 
E) increase in equilibrium price

Question 20

Exhibit 4-1   Consider Exhibit 4-1 which shows 3 demand curves for corn flakes.Which of the following would be most likely to shift the demand curve from D2 to D1?

Accepted Answer

A) a report that eating corn flakes decrreases the risk of cancer 
B) an increase in consumer incomes if corn flakes is a normal good 
C) an increase in the price of oatmeal which many consumers consider to be a substitute for corn flakes 
D) an increase in the price milk which many consumers consider to be complement for corn flakes 
E) a widely anticipated recession 
A) a report that eating corn flakes decrreases the risk of cancer 
B) an increase in consumer incomes if corn flakes is a normal good 
C) an increase in the price of oatmeal which many consumers consider to be a substitute for corn flakes 
D) an increase in the price milk which many consumers consider to be complement for corn flakes 
E) a widely anticipated recession

Exam 4: Demand, Supply, and Markets

The difference between normal and inferior goods is that

Exhibit 4-15 Refer to exhibit 4-15.The discovery that breast milk offers greater health protection to babies than baby formula will cause which of the following to happen?

A surplus of shoes will cause

Suppose there are only two goods, apples and oranges.What happens if the price of each good increases by 15 percent?

If the price of a haircut (a normal good)increases, other things constant, the

Suppliers recognize there is a shortage in the market for their product when they notice that

The most important characteristic of the equilibrium price is that it

The demand for a product is the amount that

Which of the following is most likely to be an inferior good?

Exhibit 4-14 Refer to exhibit 4-14.The discovery that breast milk provides more protection against disease than baby formula will cause which of the following to happen?

Exhibit 4-15 Refer to exhibit 4-15.A decrease in the price of baby formula will cause which of the following to happen?

Over the last few years, demand for DVDs has increased, and yet their equilibrium price has fallen.Which of the following best explains this situation?

Exhibit 4-3 If the price of the good described in Exhibit 4-3 is $1.60, then there is a

As the baby boom ended, fewer families had young children and, as a consequence, the

Exhibit 4-14 Refer to exhibit 4-14.An increase in the price of baby formula would cause which of the following to happen?

Which of the following will not shift the market supply curve for corn?

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?

In what way is consumer demand different from consumer wants?

An increase in supply will cause a(n)

Exhibit 4-1 Consider Exhibit 4-1 which shows 3 demand curves for corn flakes.Which of the following would be most likely to shift the demand curve from D2 to D1?

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?

Exhibit 4-1 Consider Exhibit 4-1 which shows 3 demand curves for corn flakes.Which of the following would be most likely to shift the demand curve from D₂ to D₁?