Question 1

A shortage occurs whenever

Accepted Answer

A) quantity demanded exceeds quantity supplied at the equilibrium price 
B) price is less than equilibrium price 
C) quantity demanded is less than quantity supplied 
D) goods are scarce 
E) some of the people who need the product are not willing and able to buy it at the equilibrium price 
A) quantity demanded exceeds quantity supplied at the equilibrium price 
B) price is less than equilibrium price 
C) quantity demanded is less than quantity supplied 
D) goods are scarce 
E) some of the people who need the product are not willing and able to buy it at the equilibrium price

Question 2

Suppose you drink more tea because the price of coffee has increased.Which of the following best explains your action?

Accepted Answer

A) the law of supply 
B) tea and coffee are complements 
C) the substitution effect 
D) the income effect 
E) your nominal income has increased 
A) the law of supply 
B) tea and coffee are complements 
C) the substitution effect 
D) the income effect 
E) your nominal income has increased

Question 3

If pretzels are a normal good, the income effect of a price change means that

Accepted Answer

A) as income increases, the quantity demanded increases along the demand curve for pretzels 
B) as income increases, the demand curve for pretzels shifts rightward 
C) as income increases, the demand curve for pretzels shifts leftward 
D) as the price of pretzels increases, the real income of individuals who demand pretzels decreases, so the quantity demanded of pretzels decreases 
E) as the price of pretzels increases, income increases 
A) as income increases, the quantity demanded increases along the demand curve for pretzels 
B) as income increases, the demand curve for pretzels shifts rightward 
C) as income increases, the demand curve for pretzels shifts leftward 
D) as the price of pretzels increases, the real income of individuals who demand pretzels decreases, so the quantity demanded of pretzels decreases 
E) as the price of pretzels increases, income increases

Question 4

Exhibit 4-4   Refer to Exhibit 4-4.Which of the following would cause a shift of demand from D' to D?

Accepted Answer

A) an increase in the price of a substitute good 
B) an increase in the number of consumers 
C) a decrease in the price of a complementary good 
D) a decline in consumers' incomes if it is a normal good 
E) an increase in consumers' incomes if it is a normal good 
A) an increase in the price of a substitute good 
B) an increase in the number of consumers 
C) a decrease in the price of a complementary good 
D) a decline in consumers' incomes if it is a normal good 
E) an increase in consumers' incomes if it is a normal good

Question 5

Supply curves generally slope upward because of all of the following reasons except one.Which is the exception?

Accepted Answer

A) Producers are willing to offer more of a good at higher prices. 
B) A higher price attracts resources from less-valued uses. 
C) Producers must be compensated for the rising opportunity cost of additional output. 
D) Producers have a greater incentive to sell more as the price increases. 
E) The price of a good usually must fall to induce an increase in quantity supplied. 
A) Producers are willing to offer more of a good at higher prices. 
B) A higher price attracts resources from less-valued uses. 
C) Producers must be compensated for the rising opportunity cost of additional output. 
D) Producers have a greater incentive to sell more as the price increases. 
E) The price of a good usually must fall to induce an increase in quantity supplied.

Question 6

The equilibrium point represents the only price-quantity combination in a market that

Accepted Answer

A) causes both buyers and sellers to agree to a price increase 
B) causes both buyers and sellers to agree to a price decrease 
C) exactly matches the independent plans of buyers and sellers 
D) allows buyers to purchase what they want 
E) allows sellers to earn a profit 
A) causes both buyers and sellers to agree to a price increase 
B) causes both buyers and sellers to agree to a price decrease 
C) exactly matches the independent plans of buyers and sellers 
D) allows buyers to purchase what they want 
E) allows sellers to earn a profit

Question 7

Which of the following will cause the demand curve for a good to shift to the left?

Accepted Answer

A) an increase in the price of the good 
B) a decrease in the price of the good 
C) a decrease in the price of a complementary good 
D) an expectation of a future price decline 
E) an increase in the price of a substitute good 
A) an increase in the price of the good 
B) a decrease in the price of the good 
C) a decrease in the price of a complementary good 
D) an expectation of a future price decline 
E) an increase in the price of a substitute good

Question 8

A rightward shift of a demand curve represents a decrease in demand.

Accepted Answer

A) True 
 B)False

Question 9

Tickets to the Michigan-Notre Dame football game are usually sold out in advance of game day.This suggests that

Accepted Answer

A) the price of the tickets must be very high or else people would not consider them valuable 
B) the price is set below the equilibrium level 
C) the football stadium is relatively small 
D) everyone who attends the game will enjoy it 
E) the price is determined primarily by the fixed supply of tickets 
A) the price of the tickets must be very high or else people would not consider them valuable 
B) the price is set below the equilibrium level 
C) the football stadium is relatively small 
D) everyone who attends the game will enjoy it 
E) the price is determined primarily by the fixed supply of tickets

Question 10

Which of the following will cause the demand curve for a normal good to shift to the right?

Accepted Answer

A) a decrease in income 
B) an increase in the price of a complementary good 
C) a decrease in the price of the good 
D) an increase in the price of a substitute good 
E) an expectation of a future price decline 
A) a decrease in income 
B) an increase in the price of a complementary good 
C) a decrease in the price of the good 
D) an increase in the price of a substitute good 
E) an expectation of a future price decline

Question 11

The income effect of an increase in the price of backpacks (a normal good)is a(n)

Accepted Answer

A) decrease in the demand for backpacks 
B) decrease in the quantity demanded of backpacks 
C) increase in the demand for backpacks 
D) increase in the quantity demanded of backpacks 
E) new demand curve because everything else is no longer constant 
A) decrease in the demand for backpacks 
B) decrease in the quantity demanded of backpacks 
C) increase in the demand for backpacks 
D) increase in the quantity demanded of backpacks 
E) new demand curve because everything else is no longer constant

Question 12

As the use of DVDs becomes more widespread, we would expect all of the following except one.Which is the exception?

Accepted Answer

A) The prices of CDs will decrease. 
B) The demand curve for CD players will shift leftward. 
C) The supply curve of CD players will shift rightward. 
D) The demand curve for CDs will shift leftward. 
E) Firms will move their resources away from CD production to DVD production. 
A) The prices of CDs will decrease. 
B) The demand curve for CD players will shift leftward. 
C) The supply curve of CD players will shift rightward. 
D) The demand curve for CDs will shift leftward. 
E) Firms will move their resources away from CD production to DVD production.

Question 13

Exhibit 4-9   Exhibit 4-9 shows a demand curve for dog ownership.If your local government passes an anti-dog-litter law that raises the personal cost of owning a dog from C to C', the quantity of dogs demanded will

Accepted Answer

A) drop to zero 
B) stay the same 
C) decrease 
D) increase 
E) The answer can only be determined with numbers to analyze. 
A) drop to zero 
B) stay the same 
C) decrease 
D) increase 
E) The answer can only be determined with numbers to analyze.

Question 14

Which of the following explains the relationship between price and the quantity supplied?

Accepted Answer

A) When expanding output, firms will incur greater total costs. 
B) As the price of a commodity falls, producers will find it more profitable to use higher-priced inputs in their production process. 
C) As a result of rising production costs, firms can increase profits by expanding output only if the price of output increases. 
D) To expand output, firms must hire more resources, which are always of poorer quality. 
E) Consumers want more at lower prices. 
A) When expanding output, firms will incur greater total costs. 
B) As the price of a commodity falls, producers will find it more profitable to use higher-priced inputs in their production process. 
C) As a result of rising production costs, firms can increase profits by expanding output only if the price of output increases. 
D) To expand output, firms must hire more resources, which are always of poorer quality. 
E) Consumers want more at lower prices.

Question 15

If supply increases, then quantity demanded decreases.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following is correct when a price is set below a market's equilibrium price?

Accepted Answer

A) quantity demanded exceeds quantity supplied at the set price 
B) quantity demanded is less than quantity supplied at the set price 
C) quantity demanded is equal to quantity supplied at the set price 
D) at the set price there is a surplus 
E) the market price is less than the ceiling price 
A) quantity demanded exceeds quantity supplied at the set price 
B) quantity demanded is less than quantity supplied at the set price 
C) quantity demanded is equal to quantity supplied at the set price 
D) at the set price there is a surplus 
E) the market price is less than the ceiling price

Question 17

Suppose the current equilibrium price of pizza is $5.If the government decides the price of pizza cannot rise above $4, the result of this policy would be

Accepted Answer

A) a shortage 
B) a surplus 
C) that the market would remain in equilibrium but with a larger quantity bought and sold than at $5 
D) at the $4 price, the quantity sold would be greater than the quantity bought 
E) a shift of demand to the right 
A) a shortage 
B) a surplus 
C) that the market would remain in equilibrium but with a larger quantity bought and sold than at $5 
D) at the $4 price, the quantity sold would be greater than the quantity bought 
E) a shift of demand to the right

Question 18

Attempts are being made to develop a biodegradable plastic using agricultural produce such as potatoes.If these attempts are successful, what will happen to the equilibrium price and quantity of potatoes?

Accepted Answer

A) Price will increase and quantity decrease. 
B) Price will increase and quantity increase. 
C) Price will decrease and quantity increase. 
D) Price will decrease and quantity decrease. 
E) No change in equilibrium price and quantity will occur. 
A) Price will increase and quantity decrease. 
B) Price will increase and quantity increase. 
C) Price will decrease and quantity increase. 
D) Price will decrease and quantity decrease. 
E) No change in equilibrium price and quantity will occur.

Question 19

If we say that demand has increased, we mean that there has been

Accepted Answer

A) a leftward movement along the demand curve 
B) a rightward movement along the demand curve 
C) a leftward shift of the demand curve 
D) a rightward shift of the demand curve 
E) an increase in the slope of the demand curve 
A) a leftward movement along the demand curve 
B) a rightward movement along the demand curve 
C) a leftward shift of the demand curve 
D) a rightward shift of the demand curve 
E) an increase in the slope of the demand curve

Question 20

What is the effect of a decrease in the price of potato chips on the market for pretzels?

Accepted Answer

A) Both equilibrium price and equilibrium quantity rise. 
B) Both equilibrium price and equilibrium quantity fall. 
C) Equilibrium price rises and equilibrium quantity falls. 
D) Equilibrium price falls and equilibrium quantity rises. 
E) Equilibrium price and equilibrium quantity remain unchanged. 
A) Both equilibrium price and equilibrium quantity rise. 
B) Both equilibrium price and equilibrium quantity fall. 
C) Equilibrium price rises and equilibrium quantity falls. 
D) Equilibrium price falls and equilibrium quantity rises. 
E) Equilibrium price and equilibrium quantity remain unchanged.

Exam 4: Demand, Supply, and Markets

A shortage occurs whenever

Suppose you drink more tea because the price of coffee has increased.Which of the following best explains your action?

If pretzels are a normal good, the income effect of a price change means that

Exhibit 4-4 Refer to Exhibit 4-4.Which of the following would cause a shift of demand from D' to D?

Supply curves generally slope upward because of all of the following reasons except one.Which is the exception?

The equilibrium point represents the only price-quantity combination in a market that

Which of the following will cause the demand curve for a good to shift to the left?

A rightward shift of a demand curve represents a decrease in demand.

Tickets to the Michigan-Notre Dame football game are usually sold out in advance of game day.This suggests that

Which of the following will cause the demand curve for a normal good to shift to the right?

The income effect of an increase in the price of backpacks (a normal good)is a(n)

As the use of DVDs becomes more widespread, we would expect all of the following except one.Which is the exception?

Exhibit 4-9 Exhibit 4-9 shows a demand curve for dog ownership.If your local government passes an anti-dog-litter law that raises the personal cost of owning a dog from C to C', the quantity of dogs demanded will

Which of the following explains the relationship between price and the quantity supplied?

If supply increases, then quantity demanded decreases.

Which of the following is correct when a price is set below a market's equilibrium price?

Suppose the current equilibrium price of pizza is $5.If the government decides the price of pizza cannot rise above $4, the result of this policy would be

Attempts are being made to develop a biodegradable plastic using agricultural produce such as potatoes.If these attempts are successful, what will happen to the equilibrium price and quantity of potatoes?

If we say that demand has increased, we mean that there has been

What is the effect of a decrease in the price of potato chips on the market for pretzels?

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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