Question 1

Consumers' surplus is the difference between the maximum price the buyer is willing and able to pay for a good and the actual price paid.

Accepted Answer

A) True 
 B)False

Question 2

Explain why the price of a good tends to rise when there is a shortage of the good. Give a hypothetical numerical example to help support your answer.

Accepted Answer

Shortages always occur at prices that ar

Question 3

Exhibit 3-14
  
-Refer to Exhibit 3-14. At a price of $13,there is a ____________ unit ____________ of good X.

Accepted Answer

A)  140; shortage 
B)  160; shortage 
C)  140; surplus 
D)  20; surplus 
E)  100; surplus 
A)  140; shortage 
B)  160; shortage 
C)  140; surplus 
D)  20; surplus 
E)  100; surplus

Question 4

Exhibit 3-15
  
-Refer to Exhibit 3-15.In Exhibit 3-15,at fee F? there is a

Accepted Answer

A)  shortage of (Q3 - Q1) doctors. 
B)  surplus of (Q3 - Q1) doctors. 
C)  surplus of (Q2 - Q1) doctors. 
D)  shortage of (Q2 - Q1) doctors. 
A)  shortage of (Q3 - Q1) doctors. 
B)  surplus of (Q3 - Q1) doctors. 
C)  surplus of (Q2 - Q1) doctors. 
D)  shortage of (Q2 - Q1) doctors.

Question 5

Suppose the government decides that every family should own its own home.To bring this about,the government decides to subsidize the home-construction industry by giving the home-construction companies $10,000 for every house that they build.As a result of this,

Accepted Answer

A)  the supply curve of new houses would shift leftward, since it now costs $10,000 more for builders to produce a house. 
B)  the demand curve for new houses would shift rightward, since now every family would want to buy a house. 
C)  the demand curve for new houses would shift leftward. 
D)  the supply curve of new houses would shift rightward, since builders would be willing to produce and sell more houses at each given price. 
E)  c and d 
A)  the supply curve of new houses would shift leftward, since it now costs $10,000 more for builders to produce a house. 
B)  the demand curve for new houses would shift rightward, since now every family would want to buy a house. 
C)  the demand curve for new houses would shift leftward. 
D)  the supply curve of new houses would shift rightward, since builders would be willing to produce and sell more houses at each given price. 
E)  c and d

Question 6

The law of demand states that price and quantity demanded are

Accepted Answer

A)  directly related, ceteris paribus. 
B)  inversely related, ceteris paribus. 
C)  independent. 
D)  positively related, ceteris paribus. 
A)  directly related, ceteris paribus. 
B)  inversely related, ceteris paribus. 
C)  independent. 
D)  positively related, ceteris paribus.

Question 7

In general,all markets equilibrate at the same speed.

Accepted Answer

A) True 
 B)False

Question 8

A rightward shift in the demand curve for tennis balls could be caused by

Accepted Answer

A)  a fall in the price of tennis balls. 
B)  a fall in the price of tennis rackets. 
C)  a rise in the price of tennis lessons. 
D)  a fall in income, assuming tennis balls are a normal good. 
A)  a fall in the price of tennis balls. 
B)  a fall in the price of tennis rackets. 
C)  a rise in the price of tennis lessons. 
D)  a fall in income, assuming tennis balls are a normal good.

Question 9

A shortage in the bread market can cause the price of bread to rise.

Accepted Answer

A) True 
 B)False

Question 10

Exhibit 3-9
  
-Refer to Exhibit 3-9.A wave of immigrants who love to consume X enters the country.You expect a movement in the market for X from

Accepted Answer

A)  S1 to S2. 
B)  D2 to D1. 
C)  D1 to D2. 
D)  S2 to S1. 
A)  S1 to S2. 
B)  D2 to D1. 
C)  D1 to D2. 
D)  S2 to S1.

Question 11

Exhibit 3-5
  
-Refer to Exhibit 3-5.In the market shown,if equilibrium was originally at point Z and the new equilibrium is now at point V,this change may have been caused by

Accepted Answer

A)  a decrease in consumers' income (assuming that this is an inferior good) and a simultaneous decline in technology in the production of this good. 
B)  an increase in consumers' income (assuming that this is an inferior good) and a simultaneous improvement in technology in the production of this good. 
C)  a decrease in consumers' income (assuming that this is an inferior good) and no change in supply. 
D)  an increase in consumers' income (assuming that this is an inferior good) and no change in supply. 
A)  a decrease in consumers' income (assuming that this is an inferior good) and a simultaneous decline in technology in the production of this good. 
B)  an increase in consumers' income (assuming that this is an inferior good) and a simultaneous improvement in technology in the production of this good. 
C)  a decrease in consumers' income (assuming that this is an inferior good) and no change in supply. 
D)  an increase in consumers' income (assuming that this is an inferior good) and no change in supply.

Question 12

Exhibit 3-10
  
-Refer to Exhibit 3-10.$20 is the

Accepted Answer

A)  equilibrium price. 
B)  market-clearing price. 
C)  price at which there is neither a surplus nor a shortage. 
D)  all of the above 
A)  equilibrium price. 
B)  market-clearing price. 
C)  price at which there is neither a surplus nor a shortage. 
D)  all of the above

Question 13

If a demand curve shifts rightward,this means

Accepted Answer

A)  quantity demanded is greater only at one particular price. 
B)  quantity demanded is greater at every price. 
C)  buyers are willing and able to purchase more of the good at every price. 
D)  buyers are willing and able to purchase less of the good at every price. 
E)  b and c 
A)  quantity demanded is greater only at one particular price. 
B)  quantity demanded is greater at every price. 
C)  buyers are willing and able to purchase more of the good at every price. 
D)  buyers are willing and able to purchase less of the good at every price. 
E)  b and c

Question 14

A change in price will lead to a change in __________ and to a change in __________,while a change in government subsidies will lead to a change in __________ and a change in the number of buyers will lead to a change in __________.

Accepted Answer

A)  quantity demanded; quantity supplied; supply; demand 
B)  demand; quantity supplied; supply; quantity demanded 
C)  quantity demanded; supply; quantity supplied; demand 
D)  quantity supplied; quantity demanded; demand; supply 
E)  quantity demanded; demand; quantity supplied; supply 
A)  quantity demanded; quantity supplied; supply; demand 
B)  demand; quantity supplied; supply; quantity demanded 
C)  quantity demanded; supply; quantity supplied; demand 
D)  quantity supplied; quantity demanded; demand; supply 
E)  quantity demanded; demand; quantity supplied; supply

Question 15

An increase in supply is graphically represented by a leftward shift of the supply curve.

Accepted Answer

A) True 
 B)False

Question 16

In year 1 the average price of X is $10,and in year 2 the average price of X is $23.Still,consumers buy more units of X in year 2 than in year 1.It follows that

Accepted Answer

A)  the law of supply does not hold for good X. 
B)  demand for good X could be higher in year 2 than in year 1. 
C)  supply of good X could be less in year 2 than in year 1. 
D)  good X buyers have received an increase in income between year 1 and year 2, and good X is a normal good. 
E)  b and d 
A)  the law of supply does not hold for good X. 
B)  demand for good X could be higher in year 2 than in year 1. 
C)  supply of good X could be less in year 2 than in year 1. 
D)  good X buyers have received an increase in income between year 1 and year 2, and good X is a normal good. 
E)  b and d

Question 17

Which of the following is true about the relationship between price and quantity supplied?

Accepted Answer

A)  There is always a direct relationship. 
B)  There is always an inverse relationship. 
C)  There is usually a direct relationship. 
D)  There is usually an inverse relationship. 
A)  There is always a direct relationship. 
B)  There is always an inverse relationship. 
C)  There is usually a direct relationship. 
D)  There is usually an inverse relationship.

Question 18

Exhibit 3-6
  
-Refer to Exhibit 3-6.If an increase in income causes the demand for good X to shift from D? to D?,then good X is

Accepted Answer

A)  a normal good. 
B)  an inferior good. 
C)  a substitute good. 
D)  a complementary good. 
E)  a neutral good. 
A)  a normal good. 
B)  an inferior good. 
C)  a substitute good. 
D)  a complementary good. 
E)  a neutral good.

Question 19

Which of the following statements best represents the law of supply?

Accepted Answer

A)  Price and quantity supplied are inversely related. 
B)  Price and quantity supplied are directly related. 
C)  Price and quantity supplied are inversely related, ceteris paribus. 
D)  Price and quantity supplied are directly related, ceteris paribus. 
E)  Price and supply are directly related, ceteris paribus. 
A)  Price and quantity supplied are inversely related. 
B)  Price and quantity supplied are directly related. 
C)  Price and quantity supplied are inversely related, ceteris paribus. 
D)  Price and quantity supplied are directly related, ceteris paribus. 
E)  Price and supply are directly related, ceteris paribus.

Question 20

A vertical supply curve represents:

Accepted Answer

A)  an inverse relationship between price and quantity supplied. 
B)  an independent relationship between price and quantity supplied. 
C)  an independent relationship between price and supply. 
D)  a direct relationship between price and quantity supplied. 
E)  a direct relationship between price and supply. 
A)  an inverse relationship between price and quantity supplied. 
B)  an independent relationship between price and quantity supplied. 
C)  an independent relationship between price and supply. 
D)  a direct relationship between price and quantity supplied. 
E)  a direct relationship between price and supply.

Exam 3: Supply and Demand: Theory

Consumers' surplus is the difference between the maximum price the buyer is willing and able to pay for a good and the actual price paid.

Explain why the price of a good tends to rise when there is a shortage of the good. Give a hypothetical numerical example to help support your answer.

Exhibit 3-14 -Refer to Exhibit 3-14. At a price of $13,there is a ____________ unit ____________ of good X.

Exhibit 3-15 -Refer to Exhibit 3-15.In Exhibit 3-15,at fee F? there is a

Suppose the government decides that every family should own its own home.To bring this about,the government decides to subsidize the home-construction industry by giving the home-construction companies $10,000 for every house that they build.As a result of this,

The law of demand states that price and quantity demanded are

In general,all markets equilibrate at the same speed.

A rightward shift in the demand curve for tennis balls could be caused by

A shortage in the bread market can cause the price of bread to rise.

Exhibit 3-9 -Refer to Exhibit 3-9.A wave of immigrants who love to consume X enters the country.You expect a movement in the market for X from

Exhibit 3-5 -Refer to Exhibit 3-5.In the market shown,if equilibrium was originally at point Z and the new equilibrium is now at point V,this change may have been caused by

Exhibit 3-10 -Refer to Exhibit 3-10.$20 is the

If a demand curve shifts rightward,this means

A change in price will lead to a change in __________ and to a change in __________,while a change in government subsidies will lead to a change in __________ and a change in the number of buyers will lead to a change in __________.

An increase in supply is graphically represented by a leftward shift of the supply curve.

In year 1 the average price of X is $10,and in year 2 the average price of X is $23.Still,consumers buy more units of X in year 2 than in year 1.It follows that

Which of the following is true about the relationship between price and quantity supplied?

Exhibit 3-6 -Refer to Exhibit 3-6.If an increase in income causes the demand for good X to shift from D? to D?,then good X is

Which of the following statements best represents the law of supply?

A vertical supply curve represents:

What Economics Is About

Production Possibilities Frontier Framework

Prices: Free, Controlled, and Relative

Supply, Demand, and Price: Applications

Macroeconomic Measurements: Prices and Unemployment

Macroeconomic Measurements: GDP and Real GDP

Aggregate Demand and Aggregate Supply

Classical Macroeconomics and the Self Regulating Economy

Keynesian Macroeconomics and Economic Instability: A Critique of the Self-Regulating Economy

Fiscal Policy and the Federal Budget

Money, Banking,and the Financial System

The Federal Reserve System

Money and the Economy

Monetary Policy

Expectations Theory and the Economy

Economic Growth: Resources, Technology, Ideas, and Institutions

The Financial Crisis of 2007-2009

Debates in Macroeconomics Over the Role and Effects of Government

Elasticity

Consumer Choice: Maximizing Utility and Behavioral Economics

Production and Costs

Perfect Competition

Monopoly

Monopolistic Competition, Oligopoly, and Game Theory

Government and Product Markets: Antitrust and Regulation

Factor Markets: With Emphasis on the Labor Market

Wages,Unions,and Labor

The Distribution of Income and Poverty

Interest, Rent, and Profit

Market Failure: Externalities, Public Goods, and Asymmetric Information

Public Choice and Special-Interest-Group Politics

Building Theories to Explain Everyday Life: From Observations to Questions to Theories to Predictions

International Trade

International Finance

Globalization and International Impacts on the Economy

The Economic Case For and Against Government: Five Topics Considered

Stocks, Bonds, Futures, and Options

Agriculture: Problems, Policies, and Unintended Effects

Filters

Exhibit 3-14 -Refer to Exhibit 3-14. At a price of $13,there is a unit of good X.

A change in price will lead to a change in and to a change in ,while a change in government subsidies will lead to a change in and a change in the number of buyers will lead to a change in .