Question 1

Assume two goods are substitutes.Ceteris paribus,a decrease in the price of one good will cause the equilibrium price of the other good to

Accepted Answer

A) Increase and the equilibrium quantity of the other good to increase. 
B) Increase and the equilibrium quantity of the other good to decrease. 
C) Decrease and the equilibrium quantity of the other good to increase. 
D) Decrease and the equilibrium quantity of the other good to decrease. 
A) Increase and the equilibrium quantity of the other good to increase. 
B) Increase and the equilibrium quantity of the other good to decrease. 
C) Decrease and the equilibrium quantity of the other good to increase. 
D) Decrease and the equilibrium quantity of the other good to decrease.

Question 2

Markets require a physical location to permit sellers to supply money to buyers for goods and services.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following is purchased in a product market?

Accepted Answer

A) Cell phone service. 
B) Undeveloped farmland in Texas. 
C) Crude oil. 
D) The skills of an X-ray technician. 
A) Cell phone service. 
B) Undeveloped farmland in Texas. 
C) Crude oil. 
D) The skills of an X-ray technician.

Question 4

The law of supply implies that

Accepted Answer

A) Supply curves are flat. 
B) Supply curves are upward-sloping to the right. 
C) Supply curves are downward-sloping to the right. 
D) A change in a determinant of demand shifts the supply curve. 
A) Supply curves are flat. 
B) Supply curves are upward-sloping to the right. 
C) Supply curves are downward-sloping to the right. 
D) A change in a determinant of demand shifts the supply curve.

Question 5

Government goods are delivered "free," which means that they are costless.

Accepted Answer

A) True 
 B)False

Question 6

In a market economy,which of the following determines the answer to the WHAT to produce question?

Accepted Answer

A) Direct negotiations between consumers and government. 
B) Prices and profit. 
C) Government directives. 
D) A democratic vote by all consumers. 
A) Direct negotiations between consumers and government. 
B) Prices and profit. 
C) Government directives. 
D) A democratic vote by all consumers.

Question 7

Market demand is determined by all of the following except

Accepted Answer

A) The number of potential sellers. 
B) Income. 
C) Tastes. 
D) Expectations about future income. 
A) The number of potential sellers. 
B) Income. 
C) Tastes. 
D) Expectations about future income.

Question 8

"Demand" is a statement of actual purchases.

Accepted Answer

A) True 
 B)False

Question 9

Suppose there are a series of forest fires that affect the lumber industry while,at the same time,consumers demand more wooden furniture.The wooden furniture market would experience

Accepted Answer

A) An increase in price and an indeterminate change in quantity. 
B) An increase in price and an increase in quantity. 
C) An increase in quantity and an indeterminate change in price. 
D) A decrease in price and an indeterminate change in quantity. 
A) An increase in price and an indeterminate change in quantity. 
B) An increase in price and an increase in quantity. 
C) An increase in quantity and an indeterminate change in price. 
D) A decrease in price and an indeterminate change in quantity.

Question 10

An increase in the price of one good can cause the demand for another good to increase if the goods are complements.

Accepted Answer

A) True 
 B)False

Question 11

A market in which final goods and services are exchanged is a

Accepted Answer

A) Public goods market. 
B) Product market. 
C) Factor market. 
D) Labor market. 
A) Public goods market. 
B) Product market. 
C) Factor market. 
D) Labor market.

Question 12

If a price is below equilibrium,

Accepted Answer

A) A shortage will cause the price to fall and the quantity supplied to decrease. 
B) A shortage will cause the price to rise and the quantity supplied to increase. 
C) A surplus will cause the price to fall and the quantity supplied to decrease. 
D) A surplus will cause the price to fall and the quantity supplied to increase. 
A) A shortage will cause the price to fall and the quantity supplied to decrease. 
B) A shortage will cause the price to rise and the quantity supplied to increase. 
C) A surplus will cause the price to fall and the quantity supplied to decrease. 
D) A surplus will cause the price to fall and the quantity supplied to increase.

Question 13

An increase in the price of gasoline above equilibrium will

Accepted Answer

A) Shift the gasoline supply curve to the right. 
B) Shift the gasoline demand curve to the right. 
C) Cause a surplus of gasoline. 
D) Cause a shortage of gasoline. 
A) Shift the gasoline supply curve to the right. 
B) Shift the gasoline demand curve to the right. 
C) Cause a surplus of gasoline. 
D) Cause a shortage of gasoline.

Question 14

When economists talk about "optimal outcomes" in the marketplace,they mean that

Accepted Answer

A) The allocation of resources by the market is perfect. 
B) All the consumer desires are satisfied and business profits are maximized. 
C) The allocation of resources by the market is likely to be the best possible,given scarce resources and income constraints. 
D) Everyone who wants a good or service can have it. 
A) The allocation of resources by the market is perfect. 
B) All the consumer desires are satisfied and business profits are maximized. 
C) The allocation of resources by the market is likely to be the best possible,given scarce resources and income constraints. 
D) Everyone who wants a good or service can have it.

Question 15

Ceteris paribus means

Accepted Answer

A) Holding everything constant except for the variables you are interested in examining. 
B) Allowing the free market to decide,not government. 
C) Changing prices to see how demand or supply shifts. 
D) Holding constant the determinant of demand or supply that you are interested in examining. 
A) Holding everything constant except for the variables you are interested in examining. 
B) Allowing the free market to decide,not government. 
C) Changing prices to see how demand or supply shifts. 
D) Holding constant the determinant of demand or supply that you are interested in examining.

Question 16

What is a market surplus,and how does the market attempt to resolve a surplus?

Accepted Answer

At a price higher than equilibrium,a sur

Question 17

Who participates in markets?

Accepted Answer

A) Business firms. 
B) Business firms and consumers. 
C) Consumers and government agencies. 
D) All of the choices are correct. 
A) Business firms. 
B) Business firms and consumers. 
C) Consumers and government agencies. 
D) All of the choices are correct.

Question 18

In most markets,the equilibrium price is achieved

Accepted Answer

A) Through detailed databases. 
B) Using an equilibrium price formula. 
C) Through government mandate. 
D) Through trial and error. 
A) Through detailed databases. 
B) Using an equilibrium price formula. 
C) Through government mandate. 
D) Through trial and error.

Question 19

One of the two reasons why we are driven to buy and sell goods and services in the market is that most of us are incapable of producing everything we want to consume.

Accepted Answer

A) True 
 B)False

Question 20

Ceteris paribus,which of the following would you expect to have no effect on the demand curve for new automobiles?

Accepted Answer

A) A rise in the price of gasoline. 
B) Consumer expectations that the price of new automobiles will be lower next year. 
C) Consumer expectations that a significant recession will develop and last for a year. 
D) An increase in the price of new automobiles. 
A) A rise in the price of gasoline. 
B) Consumer expectations that the price of new automobiles will be lower next year. 
C) Consumer expectations that a significant recession will develop and last for a year. 
D) An increase in the price of new automobiles.

Exam 3: Supply and Demand

Assume two goods are substitutes.Ceteris paribus,a decrease in the price of one good will cause the equilibrium price of the other good to

Markets require a physical location to permit sellers to supply money to buyers for goods and services.

Which of the following is purchased in a product market?

The law of supply implies that

Government goods are delivered "free," which means that they are costless.

In a market economy,which of the following determines the answer to the WHAT to produce question?

Market demand is determined by all of the following except

"Demand" is a statement of actual purchases.

Suppose there are a series of forest fires that affect the lumber industry while,at the same time,consumers demand more wooden furniture.The wooden furniture market would experience

An increase in the price of one good can cause the demand for another good to increase if the goods are complements.

A market in which final goods and services are exchanged is a

If a price is below equilibrium,

An increase in the price of gasoline above equilibrium will

When economists talk about "optimal outcomes" in the marketplace,they mean that

Ceteris paribus means

What is a market surplus,and how does the market attempt to resolve a surplus?

Who participates in markets?

In most markets,the equilibrium price is achieved

One of the two reasons why we are driven to buy and sell goods and services in the market is that most of us are incapable of producing everything we want to consume.

Ceteris paribus,which of the following would you expect to have no effect on the demand curve for new automobiles?

Economics: the Core Issues

The Useconomy: a Global View

The Role of Government

National Income Accounting

Unemployment

Inflation

The Business Cycle

Aggregate Demand

Self-Adjustment or Instability

Fiscal Policy

Deficits and Debt

Money and Banks

The Federal Reserve System

Monetary Policy

Supply-Side Policy: Short-Run Options

Growth and Productivity: Long-Run Possibilities

Theory Versus Reality

Consumer Choice

Elasticity

The Costs of Production

The Competitive Firm

Competitive Markets

Monopoly

Oligopoly

Monopolistic Competition

Natural Monopolies: Deregulation

Environmental Protection

The Farm Problem

The Labor Market

Labor Unions

Financial Markets

Taxes: Equity Versus Efficiency

Transfer Payments: Welfare and Social Security

International Trade

International Finance

Global Poverty

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