Question 1

The explanation for the law of demand involves:

Accepted Answer

A)  suppliers' ability to substitute inputs. 
B)  consumers' ability to substitute different goods. 
C)  the government's ability to set prices. 
D)  the market's ability to equate supply and demand. 
A)  suppliers' ability to substitute inputs. 
B)  consumers' ability to substitute different goods. 
C)  the government's ability to set prices. 
D)  the market's ability to equate supply and demand.

Question 2

Which of the following would be expected to cause the quantity of wool supplied to decrease?

Accepted Answer

A)  A decrease in the price of wool 
B)  A decrease in the number of wool producers 
C)  An increase in the cost of raising sheep 
D)  An increase in wages paid to workers in the wool industry 
A)  A decrease in the price of wool 
B)  A decrease in the number of wool producers 
C)  An increase in the cost of raising sheep 
D)  An increase in wages paid to workers in the wool industry

Question 3

An increase in the number of firms causes the price firms are able to charge to fall, which results in a movement along the market supply curve.

Accepted Answer

A) True 
 B)False

Question 4

Refer to the graph showing the demand for books. If the price is changed from $12.00 to $4.00, the quantity demanded increases by:

Accepted Answer

A)  2 books. 
B)  4 books. 
C)  6 books. 
D)  8 books. 
A)  2 books. 
B)  4 books. 
C)  6 books. 
D)  8 books.

Question 5

When the number of Alaskan fishermen increased, salmon prices fell to record lows. This could be shown graphically by a shift in the:

Accepted Answer

A)  demand curve right. 
B)  supply curve left. 
C)  demand curve left. 
D)  supply curve right. 
A)  demand curve right. 
B)  supply curve left. 
C)  demand curve left. 
D)  supply curve right.

Question 6

When airlines were deregulated, airfares declined by 30 percent. Deregulation is an example of political forces:

Accepted Answer

A)  letting the market move toward equilibrium, reducing excess supply. 
B)  letting the market move toward equilibrium, reducing excess demand. 
C)  making the market move away from equilibrium, creating excess supply. 
D)  making the market move away from equilibrium, creating excess demand. 
A)  letting the market move toward equilibrium, reducing excess supply. 
B)  letting the market move toward equilibrium, reducing excess demand. 
C)  making the market move away from equilibrium, creating excess supply. 
D)  making the market move away from equilibrium, creating excess demand.

Question 7

Refer to the following graphs:   Which curve depicts the market demand from the following individual demand tables? $$\begin{array} { | c | r | r | r | } 
\hline \text { Price } &  { \text { D1 } } & { \text { D2 } } & { \text { D3 } } \
\hline 10 & 10 & 15 & 10 \
\hline 12 & 8 & 11 & 5 \
\hline 14 & 6 & 7 & 6 \
\hline 16 & 4 & 3 & 7 \
\hline 18 & 2 & 6 & 6 \
\hline
\end{array}$$

Accepted Answer

A)  I 
B)  II 
C)  III 
D)  IV 
A)  I 
B)  II 
C)  III 
D)  IV

Question 8

The law of demand states that the quantity demanded of a good is inversely related to the price of that good. Therefore, as the price of a good goes:

Accepted Answer

A)  up, the quantity demanded also goes up. 
B)  up, the quantity demanded goes down. 
C)  down, the quantity demanded goes down. 
D)  down, the quantity demanded stays the same. 
A)  up, the quantity demanded also goes up. 
B)  up, the quantity demanded goes down. 
C)  down, the quantity demanded goes down. 
D)  down, the quantity demanded stays the same.

Question 9

To derive a market demand curve from individual demand curves, it would be necessary to:

Accepted Answer

A)  take the maximum quantity of each demand curve as the market quantity demanded at each price. 
B)  sum the curves horizontally, adding quantities demanded at each price. 
C)  take the demand curve that is the furthest to the right as the market demand curve. 
D)  multiply the quantities demanded on each demand curve at each price to find the market quantity demanded at each price. 
A)  take the maximum quantity of each demand curve as the market quantity demanded at each price. 
B)  sum the curves horizontally, adding quantities demanded at each price. 
C)  take the demand curve that is the furthest to the right as the market demand curve. 
D)  multiply the quantities demanded on each demand curve at each price to find the market quantity demanded at each price.

Question 10

The statement, "Assuming that if it is rational for one person to stand at a football game to get a better view then it is rational for everyone to stand at a football game to get a better view" is an example of:

Accepted Answer

A)  economic reasoning. 
B)  the fallacy of division. 
C)  the fallacy of composition. 
D)  the ceteris paribus assumption. 
A)  economic reasoning. 
B)  the fallacy of division. 
C)  the fallacy of composition. 
D)  the ceteris paribus assumption.

Question 11

Refer to the graphs shown. Assume the graph reflects demand in the egg market. Which arrow best captures the impact of increased consumer concern about cholesterol on the egg market?

Accepted Answer

A)  A 
B)  B 
C)  C 
D)  D 
A)  A 
B)  B 
C)  C 
D)  D

Question 12

Refer to the graph showing the supply of books. A shift from S0 to S1 would most likely occur for what reason?

Accepted Answer

A)  A decrease in the number of suppliers in the market 
B)  An increase in taxes levied on producers of books 
C)  An increase in the price of books 
D)  A decrease in the cost of producing books 
A)  A decrease in the number of suppliers in the market 
B)  An increase in taxes levied on producers of books 
C)  An increase in the price of books 
D)  A decrease in the cost of producing books

Question 13

Refer to the graph shown. Suppose that at a price of $5.00, firm A is willing and able to supply 4 units and firm B is willing and able to supply 4 units. Which of the following statements is then true?

Accepted Answer

A)  Curve S0 shows the quantity supplied of firm A and firm B combined. 
B)  Curve S1 shows the quantity supplied of firm A and firm B combined. 
C)  The addition of firm B to the market causes a movement upward and to the right along S0. 
D)  The addition of firm B to the market causes a movement upward and to the right along S1. 
A)  Curve S0 shows the quantity supplied of firm A and firm B combined. 
B)  Curve S1 shows the quantity supplied of firm A and firm B combined. 
C)  The addition of firm B to the market causes a movement upward and to the right along S0. 
D)  The addition of firm B to the market causes a movement upward and to the right along S1.

Question 14

Refer to the graphs shown. The arrow that best shows an increase in supply is:

Accepted Answer

A)  W. 
B)  X. 
C)  Y. 
D)  Z. 
A)  W. 
B)  X. 
C)  Y. 
D)  Z.

Question 15

The point at which the supply curve and the demand curve intersect is called:

Accepted Answer

A)  equilibrium, because quantity demanded equals quantity supplied so there is no tendency for price to change. 
B)  equilibrium, because quantity demanded exceeds quantity supplied so there is a shortage. 
C)  equilibrium, because quantity supplied exceeds quantity demanded so there is a surplus. 
D)  irrelevant, because real-world prices never reach this point. 
A)  equilibrium, because quantity demanded equals quantity supplied so there is no tendency for price to change. 
B)  equilibrium, because quantity demanded exceeds quantity supplied so there is a shortage. 
C)  equilibrium, because quantity supplied exceeds quantity demanded so there is a surplus. 
D)  irrelevant, because real-world prices never reach this point.

Question 16

Refer to the graphs shown. The arrow that would best illustrate the impact on consumers of reducing sales tax on a good paid by suppliers is:

Accepted Answer

A)  A. 
B)  B. 
C)  C. 
D)  D. 
A)  A. 
B)  B. 
C)  C. 
D)  D.

Question 17

According to the law of supply, what will motivate firms to increase their quantity supplied of a product?

Accepted Answer

A)  Production cost 
B)  Fixed cost 
C)  Price 
D)  Supply 
A)  Production cost 
B)  Fixed cost 
C)  Price 
D)  Supply

Question 18

Which of the following is not likely to change the supply of laptops?

Accepted Answer

A)  An increase in consumers' incomes 
B)  A technological breakthrough that makes it much less costly to produce computer chips 
C)  A decrease in the wage paid to electrical engineers 
D)  An increase in taxes on computer chips paid by producers 
A)  An increase in consumers' incomes 
B)  A technological breakthrough that makes it much less costly to produce computer chips 
C)  A decrease in the wage paid to electrical engineers 
D)  An increase in taxes on computer chips paid by producers

Question 19

The following graph shows the supply of movie downloads. If price changes from $4.00 to $2.00 then:

Accepted Answer

A)  market quantity supplied will increase by 7. 
B)  market quantity supplied will decrease by 12. 
C)  Charlie will stop supplying any of this product. 
D)  Charlie, Barry, and Ann will proportionally reduce the quantity that they each supply. 
A)  market quantity supplied will increase by 7. 
B)  market quantity supplied will decrease by 12. 
C)  Charlie will stop supplying any of this product. 
D)  Charlie, Barry, and Ann will proportionally reduce the quantity that they each supply.

Question 20

The more the current price exceeds the equilibrium price, the:

Accepted Answer

A)  greater the resulting shortage will be. 
B)  smaller the resulting shortage will be. 
C)  greater the resulting surplus will be. 
D)  smaller the resulting surplus will be. 
A)  greater the resulting shortage will be. 
B)  smaller the resulting shortage will be. 
C)  greater the resulting surplus will be. 
D)  smaller the resulting surplus will be.

Exam 4: Supply and Demand

The explanation for the law of demand involves:

Which of the following would be expected to cause the quantity of wool supplied to decrease?

An increase in the number of firms causes the price firms are able to charge to fall, which results in a movement along the market supply curve.

Refer to the graph showing the demand for books. If the price is changed from $12.00 to $4.00, the quantity demanded increases by:

When the number of Alaskan fishermen increased, salmon prices fell to record lows. This could be shown graphically by a shift in the:

When airlines were deregulated, airfares declined by 30 percent. Deregulation is an example of political forces:

Refer to the following graphs: Which curve depicts the market demand from the following individual demand tables? Price D1 D2 D3 10 10 15 10 12 8 11 5 14 6 7 6 16 4 3 7 18 2 6 6

The law of demand states that the quantity demanded of a good is inversely related to the price of that good. Therefore, as the price of a good goes:

To derive a market demand curve from individual demand curves, it would be necessary to:

The statement, "Assuming that if it is rational for one person to stand at a football game to get a better view then it is rational for everyone to stand at a football game to get a better view" is an example of:

Refer to the graphs shown. Assume the graph reflects demand in the egg market. Which arrow best captures the impact of increased consumer concern about cholesterol on the egg market?

Refer to the graph showing the supply of books. A shift from S0 to S1 would most likely occur for what reason?

Refer to the graph shown. Suppose that at a price of $5.00, firm A is willing and able to supply 4 units and firm B is willing and able to supply 4 units. Which of the following statements is then true?

Refer to the graphs shown. The arrow that best shows an increase in supply is:

The point at which the supply curve and the demand curve intersect is called:

Refer to the graphs shown. The arrow that would best illustrate the impact on consumers of reducing sales tax on a good paid by suppliers is:

According to the law of supply, what will motivate firms to increase their quantity supplied of a product?

Which of the following is not likely to change the supply of laptops?

The following graph shows the supply of movie downloads. If price changes from $4.00 to $2.00 then:

The more the current price exceeds the equilibrium price, the:

Economics and Economic Reasoning

The Production Possibility Model, Trade, and Globalization

Economic Institutions

Using Supply and Demand

Describing Supply and Demand: Elasticities

Taxation and Government Intervention

Market Failure Versus Government Failure

Comparative Advantage, Exchange Rates, and Globalization

International Trade Policy

Production and Cost Analysis I

Production and Cost Analysis II

Perfect Competition

Monopoly and Monopolistic Competition

Oligopoly and Antitrust Policy

Real-World Competition and Technology

Work and the Labor Market

Who Gets What the Distribution of Income

The Logic of Individual Choice: the Foundation of Supply and Demand

Game Theory, Strategic Decision Making, and Behavioral Economics

Thinking Like a Modern Economist

Behavioral Economics and Modern Economic Policy

Microeconomic Policy, Economic Reasoning, and Beyond

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