Question 1

The price of X was $10 in year 1 and $14 in year 2.Which of the following could be the correct reason for the rise in price?

Accepted Answer

A)  The demand for X was higher in year 2 than in year 1, ceteris paribus. 
B)  The supply of X was lower in year 2 than in year 1, ceteris paribus. 
C)  The demand was higher, and the supply was lower, in year 2 than in year 1. 
D)  a and b 
E)  a, b, and c 
A)  The demand for X was higher in year 2 than in year 1, ceteris paribus. 
B)  The supply of X was lower in year 2 than in year 1, ceteris paribus. 
C)  The demand was higher, and the supply was lower, in year 2 than in year 1. 
D)  a and b 
E)  a, b, and c

Question 2

Exhibit 3-13
  
-Refer to Exhibit 3-13. Fill in blanks (E)and (F)respectively with the market quantity demanded at each given price.

Accepted Answer

A)  12; 6.75 
B)  25; 19 
C)  75; 64 
D)  48; 27 
E)  none of the above 
A)  12; 6.75 
B)  25; 19 
C)  75; 64 
D)  48; 27 
E)  none of the above

Question 3

Exhibit 3-11
  
-Refer to Exhibit 3-11. Fill in blanks (A)and (B)respectively with "Exchange" or "No Exchange" to indicate whether or not exchange would take place at the given prices.

Accepted Answer

A)  Exchange; Exchange 
B)  Exchange; No Exchange 
C)  No Exchange; Exchange 
D)  No Exchange; No Exchange 
A)  Exchange; Exchange 
B)  Exchange; No Exchange 
C)  No Exchange; Exchange 
D)  No Exchange; No Exchange

Question 4

Which of the following statements is false?

Accepted Answer

A)  A change in the price of good X will usually change the quantity supplied of good X, ceteris paribus. 
B)  A change in the number of sellers of a good can change the supply of that good. 
C)  Price and quantity supplied are directly related. 
D)  A vertical supply curve represents a direct relationship between price and quantity supplied. 
A)  A change in the price of good X will usually change the quantity supplied of good X, ceteris paribus. 
B)  A change in the number of sellers of a good can change the supply of that good. 
C)  Price and quantity supplied are directly related. 
D)  A vertical supply curve represents a direct relationship between price and quantity supplied.

Question 5

In the supply-and-demand diagram of the market for peanut butter,the equilibrium point has moved down and to the right.What could have caused this?

Accepted Answer

A)  a fall in the price of peanuts 
B)  a rise in the price of peanuts 
C)  a rise in income, assuming that peanut butter is an inferior good 
D)  a shift in preferences toward peanut butter 
A)  a fall in the price of peanuts 
B)  a rise in the price of peanuts 
C)  a rise in income, assuming that peanut butter is an inferior good 
D)  a shift in preferences toward peanut butter

Question 6

A demand curve is the graphical representation of the law of demand.

Accepted Answer

A) True 
 B)False

Question 7

Good Y is an inferior good.If the average income of those who buy good Y rises,the _____________ curve for good Y will shift ____________ resulting in a(n)_____________ in the equilibrium price of Y and a(n)____________ in the equilibrium quantity of Y.

Accepted Answer

A)  supply; rightward; decrease; increase. 
B)  demand; leftward; decrease; decrease 
C)  demand; rightward; increase; increase 
D)  supply; leftward; increase; decrease 
E)  supply; leftward; increase; increase 
A)  supply; rightward; decrease; increase. 
B)  demand; leftward; decrease; decrease 
C)  demand; rightward; increase; increase 
D)  supply; leftward; increase; decrease 
E)  supply; leftward; increase; increase

Question 8

Exhibit 3-4
  
-Refer to Exhibit 3-4.At a price of $6 _______________ units will be exchanged.

Accepted Answer

A)  5 
B)  10 
C)  15 
D)  20 
A)  5 
B)  10 
C)  15 
D)  20

Question 9

What is the definition of producers' surplus?

Accepted Answer

A)  price received minus maximum selling price 
B)  maximum selling price minus price received 
C)  price received minus minimum selling price 
D)  highest price minus lowest price 
E)  none of the above 
A)  price received minus maximum selling price 
B)  maximum selling price minus price received 
C)  price received minus minimum selling price 
D)  highest price minus lowest price 
E)  none of the above

Question 10

If the producers' surplus is $50,and the consumers' surplus is $40,then what is the minimum selling price of the good?

Accepted Answer

A)  $10 
B)  $40 
C)  $50 
D)  $90 
E)  There is not enough information to answer the question. 
A)  $10 
B)  $40 
C)  $50 
D)  $90 
E)  There is not enough information to answer the question.

Question 11

Exhibit 3-11
  
-Refer to Exhibit 3-12. Fill in blanks (C)and (D)respectively with the market quantity supplied at each given price.

Accepted Answer

A)  17.75; 21.00 
B)  47; 52 
C)  50; 55 
D)  71; 84 
E)  none of the above 
A)  17.75; 21.00 
B)  47; 52 
C)  50; 55 
D)  71; 84 
E)  none of the above

Question 12

Exhibit 3-5
  
-Refer to Exhibit 3-5. In the market shown,if equilibrium was originally at point W and is now at point X,the new equilibrium price is __________ it was originally and the new equilibrium quantity is ____________ it was originally.

Accepted Answer

A)  greater than; greater than 
B)  less than; greater than 
C)  greater than; less than 
D)  less than; less than 
A)  greater than; greater than 
B)  less than; greater than 
C)  greater than; less than 
D)  less than; less than

Question 13

One point on a market supply curve represents $4 and 100 units quantity supplied.If there are three suppliers,and at a price of $4 one of the suppliers supplies 23 units,then which of the following combinations of price and quantity supplied might hold for the other two suppliers?

Accepted Answer

A)  At $4, quantity supplied could be 40 units for one supplier and 27 for the other. 
B)  At $4, quantity supplied could be 33 units for one supplier and 27 for the other. 
C)  At $4, quantity supplied could be 40 units for one supplier and 37 for the other. 
D)  At $4, quantity supplied could be 77 units for one supplier and 10 for the other. 
E)  There is not enough information to answer this question. 
A)  At $4, quantity supplied could be 40 units for one supplier and 27 for the other. 
B)  At $4, quantity supplied could be 33 units for one supplier and 27 for the other. 
C)  At $4, quantity supplied could be 40 units for one supplier and 37 for the other. 
D)  At $4, quantity supplied could be 77 units for one supplier and 10 for the other. 
E)  There is not enough information to answer this question.

Question 14

The law of diminishing marginal utility helps to explain the direct relationship between price and quantity supplied.

Accepted Answer

A) True 
 B)False

Question 15

The law of supply states that price and quantity supplied are

Accepted Answer

A)  inversely related, ceteris paribus. 
B)  directly related, ceteris paribus. 
C)  not related. 
D)  fixed. 
A)  inversely related, ceteris paribus. 
B)  directly related, ceteris paribus. 
C)  not related. 
D)  fixed.

Question 16

Economists use the terms neutral good and normal good interchangeably.

Accepted Answer

A) True 
 B)False

Question 17

Exhibit 3-9
  
-Refer to Exhibit 3-9.A severe recession has sharply decreased the incomes of consumers.Knowing that X is a normal good,you expect a movement in the market for X from

Accepted Answer

A)  A to B. 
B)  E to F. 
C)  F to E. 
D)  B to A. 
A)  A to B. 
B)  E to F. 
C)  F to E. 
D)  B to A.

Question 18

Exhibit 3-3
  
-Refer to Exhibit 3-3.A movement from point W to point Z would have been the result of

Accepted Answer

A)  a reduction in the price of good Y. 
B)  an increase in the number of buyers in the area where good Y is being sold. 
C)  a decrease in business taxes paid by the producers of good Y. 
D)  a decrease in the number of buyers in the area where good Y is being sold. 
E)  an increase in the price of good Y. 
A)  a reduction in the price of good Y. 
B)  an increase in the number of buyers in the area where good Y is being sold. 
C)  a decrease in business taxes paid by the producers of good Y. 
D)  a decrease in the number of buyers in the area where good Y is being sold. 
E)  an increase in the price of good Y.

Question 19

Exhibit 3-3
  
-Refer to Exhibit 3-3.A movement from point Z to point W would have been the result of

Accepted Answer

A)  a reduction in the price of good Y. 
B)  an increase in taxes paid by the producers of good Y. 
C)  a decline in technology in the production of good Y. 
D)  an increase in the number of buyers of good Y. 
A)  a reduction in the price of good Y. 
B)  an increase in taxes paid by the producers of good Y. 
C)  a decline in technology in the production of good Y. 
D)  an increase in the number of buyers of good Y.

Question 20

If the demand for computer software rises as incomes rise,then computer software is a (an)

Accepted Answer

A)  inferior good 
B)  substitute (good) for computers 
C)  normal good 
D)  complement (good) for computers 
E)  c and d 
A)  inferior good 
B)  substitute (good) for computers 
C)  normal good 
D)  complement (good) for computers 
E)  c and d

Exam 3: Supply and Demand: Theory

The price of X was $10 in year 1 and $14 in year 2.Which of the following could be the correct reason for the rise in price?

Exhibit 3-13 -Refer to Exhibit 3-13. Fill in blanks (E)and (F)respectively with the market quantity demanded at each given price.

Exhibit 3-11 -Refer to Exhibit 3-11. Fill in blanks (A)and (B)respectively with "Exchange" or "No Exchange" to indicate whether or not exchange would take place at the given prices.

Which of the following statements is false?

In the supply-and-demand diagram of the market for peanut butter,the equilibrium point has moved down and to the right.What could have caused this?

A demand curve is the graphical representation of the law of demand.

Good Y is an inferior good.If the average income of those who buy good Y rises,the _____________ curve for good Y will shift ____________ resulting in a(n)_____________ in the equilibrium price of Y and a(n)____________ in the equilibrium quantity of Y.

Exhibit 3-4 -Refer to Exhibit 3-4.At a price of $6 _______________ units will be exchanged.

What is the definition of producers' surplus?

If the producers' surplus is $50,and the consumers' surplus is $40,then what is the minimum selling price of the good?

Exhibit 3-11 -Refer to Exhibit 3-12. Fill in blanks (C)and (D)respectively with the market quantity supplied at each given price.

Exhibit 3-5 -Refer to Exhibit 3-5. In the market shown,if equilibrium was originally at point W and is now at point X,the new equilibrium price is __________ it was originally and the new equilibrium quantity is ____________ it was originally.

One point on a market supply curve represents $4 and 100 units quantity supplied.If there are three suppliers,and at a price of $4 one of the suppliers supplies 23 units,then which of the following combinations of price and quantity supplied might hold for the other two suppliers?

The law of diminishing marginal utility helps to explain the direct relationship between price and quantity supplied.

The law of supply states that price and quantity supplied are

Economists use the terms neutral good and normal good interchangeably.

Exhibit 3-9 -Refer to Exhibit 3-9.A severe recession has sharply decreased the incomes of consumers.Knowing that X is a normal good,you expect a movement in the market for X from

Exhibit 3-3 -Refer to Exhibit 3-3.A movement from point W to point Z would have been the result of

Exhibit 3-3 -Refer to Exhibit 3-3.A movement from point Z to point W would have been the result of

If the demand for computer software rises as incomes rise,then computer software is a (an)

What Economics Is About

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Good Y is an inferior good.If the average income of those who buy good Y rises,the _______ curve for good Y will shift resulting in a(n)_ in the equilibrium price of Y and a(n)______ in the equilibrium quantity of Y.

Exhibit 3-5 -Refer to Exhibit 3-5. In the market shown,if equilibrium was originally at point W and is now at point X,the new equilibrium price is it was originally and the new equilibrium quantity is __ it was originally.