Question 1

The Invisible Hand Principle suggests that

Accepted Answer

A) market prices direct individuals to produce more goods. 
B) individuals pursuing their own interests detract from the economic well-being of society. 
C) there should be stronger governmental initiatives to ensure cooperation for the betterment of society. 
D) market forces tend to channel the actions of self-interested individuals into activities that promote the general betterment of society. 
A) market prices direct individuals to produce more goods. 
B) individuals pursuing their own interests detract from the economic well-being of society. 
C) there should be stronger governmental initiatives to ensure cooperation for the betterment of society. 
D) market forces tend to channel the actions of self-interested individuals into activities that promote the general betterment of society.

Question 2

Suppose both the equilibrium price and quantity fall for a particular product. Which of the following best explains this situation?

Accepted Answer

A) Supply and demand simultaneously increased and the shift in supply was greater than the shift in demand. 
B) Supply and demand simultaneously increased and the shift in supply was less than the shift in demand. 
C) Supply and demand simultaneously decreased and the shift in supply was greater than the shift in demand. 
D) Supply and demand simultaneously decreased and the shift in supply was less than the shift in demand. 
A) Supply and demand simultaneously increased and the shift in supply was greater than the shift in demand. 
B) Supply and demand simultaneously increased and the shift in supply was less than the shift in demand. 
C) Supply and demand simultaneously decreased and the shift in supply was greater than the shift in demand. 
D) Supply and demand simultaneously decreased and the shift in supply was less than the shift in demand.

Question 3

Which of the following will cause a decrease in the demand for peanut butter?

Accepted Answer

A) an increase in the supply of peanut butter 
B) an increase in the price of peanut butter 
C) a doubling of the price of bread 
D) a drought in Georgia that destroyed 30 percent of the peanut crop 
E) an increase in consumer income 
A) an increase in the supply of peanut butter 
B) an increase in the price of peanut butter 
C) a doubling of the price of bread 
D) a drought in Georgia that destroyed 30 percent of the peanut crop 
E) an increase in consumer income

Question 4

Which of the following will lead to a decrease in supply of a good?

Accepted Answer

A) an increase in the price of the good 
B) an increase in consumer incomes 
C) an increase in the price of an important resource used to produce the good 
D) a technological advance that lowers the cost of producing the good 
A) an increase in the price of the good 
B) an increase in consumer incomes 
C) an increase in the price of an important resource used to produce the good 
D) a technological advance that lowers the cost of producing the good

Question 5

Kayla decides that she would pay as much as $400 for a new refrigerator. She buys the refrigerator and realizes consumer surplus of $75. How much did Kayla pay for her refrigerator?

Accepted Answer

A) $75 
B) $325 
C) $400 
D) $475 
A) $75 
B) $325 
C) $400 
D) $475

Question 6

Suppose the demand for nachos increases. What will happen to producer surplus in the market for nachos?

Accepted Answer

A) It increases. 
B) It decreases. 
C) It remains unchanged. 
D) It may increase, decrease, or remain unchanged. 
A) It increases. 
B) It decreases. 
C) It remains unchanged. 
D) It may increase, decrease, or remain unchanged.

Question 7

How will an increase in lumber prices influence the home construction market?

Accepted Answer

A) The demand for newly constructed homes will increase. 
B) The demand for newly constructed homes will decrease. 
C) The supply of newly constructed homes will increase. 
D) The supply of newly constructed homes will decrease. 
A) The demand for newly constructed homes will increase. 
B) The demand for newly constructed homes will decrease. 
C) The supply of newly constructed homes will increase. 
D) The supply of newly constructed homes will decrease.

Question 8

Figure 3-21  
-Refer to Figure 3-21. At the quantity Q3,

Accepted Answer

A) the market is in equilibrium. 
B) consumer surplus is maximized. 
C) the sum of consumer surplus and producer surplus is maximized. 
D) the value to buyers is less than the cost to sellers. 
A) the market is in equilibrium. 
B) consumer surplus is maximized. 
C) the sum of consumer surplus and producer surplus is maximized. 
D) the value to buyers is less than the cost to sellers.

Question 9

If a small percentage increase in the price of a good results in a rather large percentage reduction in the quantity demanded of the good, demand is said to be

Accepted Answer

A) vertical. 
B) relatively inelastic. 
C) relatively elastic. 
D) robust. 
A) vertical. 
B) relatively inelastic. 
C) relatively elastic. 
D) robust.

Question 10

If the demand for coffee makers increases,

Accepted Answer

A) the quantity demanded will decrease. 
B) equilibrium price will increase and equilibrium quantity will decrease. 
C) equilibrium price will decrease and equilibrium quantity will increase. 
D) quantity supplied will increase. 
E) quantity supplied will decrease. 
A) the quantity demanded will decrease. 
B) equilibrium price will increase and equilibrium quantity will decrease. 
C) equilibrium price will decrease and equilibrium quantity will increase. 
D) quantity supplied will increase. 
E) quantity supplied will decrease.

Question 11

Market prices provide information to consumers, helping them coordinate their activities so long as

Accepted Answer

A) competition is present and buyers and sellers are free to choose mutually agreeable prices. 
B) prices are not allowed to rise too high, causing a shortage. 
C) prices are legally kept equal in all markets, preventing unfair price increases in markets with shortages and unfair price decreases when a market surplus is present. 
D) the government carefully screens producers and effectively keeps inefficient producers out of the market. 
A) competition is present and buyers and sellers are free to choose mutually agreeable prices. 
B) prices are not allowed to rise too high, causing a shortage. 
C) prices are legally kept equal in all markets, preventing unfair price increases in markets with shortages and unfair price decreases when a market surplus is present. 
D) the government carefully screens producers and effectively keeps inefficient producers out of the market.

Question 12

Adam Smith's invisible hand principle stresses

Accepted Answer

A) that benevolence is a powerful motivator that encourages individuals to engage in productive economic activity. 
B) the tendency of the competitive market process to direct self-interested individuals into activities that enhance the economic welfare of society. 
C) the potential of government regulation as a means of bringing the self interest of individuals into harmony with the economic welfare of society. 
D) the tendency of self-interested individuals to pursue activities that benefit themselves but harm the overall economic welfare of society. 
A) that benevolence is a powerful motivator that encourages individuals to engage in productive economic activity. 
B) the tendency of the competitive market process to direct self-interested individuals into activities that enhance the economic welfare of society. 
C) the potential of government regulation as a means of bringing the self interest of individuals into harmony with the economic welfare of society. 
D) the tendency of self-interested individuals to pursue activities that benefit themselves but harm the overall economic welfare of society.

Question 13

If an increase in the price of peaches reduces the demand for cream, this indicates that peaches and cream are

Accepted Answer

A) normal goods. 
B) inferior goods. 
C) complements. 
D) substitutes. 
A) normal goods. 
B) inferior goods. 
C) complements. 
D) substitutes.

Question 14

Assume that supply increases greatly and demand increases slightly. Which of the following will happen?

Accepted Answer

A) Equilibrium price will fall and equilibrium quantity will rise. 
B) Equilibrium price will rise and equilibrium quantity will fall. 
C) Equilibrium price will rise and equilibrium quantity will rise. 
D) Equilibrium price will fall and equilibrium quantity will fall. 
E) Neither equilibrium price nor equilibrium quantity will change. 
A) Equilibrium price will fall and equilibrium quantity will rise. 
B) Equilibrium price will rise and equilibrium quantity will fall. 
C) Equilibrium price will rise and equilibrium quantity will rise. 
D) Equilibrium price will fall and equilibrium quantity will fall. 
E) Neither equilibrium price nor equilibrium quantity will change.

Question 15

Which of the following would most likely shift the supply curve to the left for Wii video games?

Accepted Answer

A) an increase in the price of Wii video games 
B) a decrease in the price of computer chips used to make Wii games 
C) a decrease in the demand for Wii games 
D) an increase in the price of electronic components used to produce the Wii games 
A) an increase in the price of Wii video games 
B) a decrease in the price of computer chips used to make Wii games 
C) a decrease in the demand for Wii games 
D) an increase in the price of electronic components used to produce the Wii games

Question 16

If DeShawn only pays $25,000 to purchase a new car even though he would have been willing to pay as much as $35,000 for the car, this indicates that

Accepted Answer

A) DeShawn is an irrational consumer. 
B) The seller earned a $10,000 profit on the sale of the car. 
C) DeShawn reaped $10,000 of consumer surplus from the transaction. 
D) The seller received $10,000 worth of producer surplus on the transaction. 
A) DeShawn is an irrational consumer. 
B) The seller earned a $10,000 profit on the sale of the car. 
C) DeShawn reaped $10,000 of consumer surplus from the transaction. 
D) The seller received $10,000 worth of producer surplus on the transaction.

Question 17

Figure 3-23  
-Refer to Figure 3-23. The movement from point A to point B on the graph would be caused by

Accepted Answer

A) an increase in price. 
B) a decrease in price. 
C) a decrease in the price of a substitute good. 
D) an increase in income. 
A) an increase in price. 
B) a decrease in price. 
C) a decrease in the price of a substitute good. 
D) an increase in income.

Question 18

If an increase in the price of good X causes the demand for good Y to decrease, this indicates that

Accepted Answer

A) X and Y are complements. 
B) X and Y are substitutes. 
C) X and Y are unrelated. 
D) the demand for X is elastic, but the demand for Y is inelastic. 
A) X and Y are complements. 
B) X and Y are substitutes. 
C) X and Y are unrelated. 
D) the demand for X is elastic, but the demand for Y is inelastic.

Question 19

When there is excess supply of a product in a market,

Accepted Answer

A) price will tend to rise. 
B) price must be above the equilibrium price. 
C) producers will expand output and sales will rise. 
D) price must be below the equilibrium price. 
A) price will tend to rise. 
B) price must be above the equilibrium price. 
C) producers will expand output and sales will rise. 
D) price must be below the equilibrium price.

Question 20

Just before Valentine's Day, the price of roses increases dramatically. This is because

Accepted Answer

A) self-interested individuals try to charge more for a good than consumers are willing to pay. 
B) demand increases while the supply of roses remains relatively constant. 
C) the supply curve of roses is highly elastic. 
D) the demand for roses is relatively inelastic most of the year, but becomes more elastic as demand increases. 
A) self-interested individuals try to charge more for a good than consumers are willing to pay. 
B) demand increases while the supply of roses remains relatively constant. 
C) the supply curve of roses is highly elastic. 
D) the demand for roses is relatively inelastic most of the year, but becomes more elastic as demand increases.

The Invisible Hand Principle suggests that

Suppose both the equilibrium price and quantity fall for a particular product. Which of the following best explains this situation?

Which of the following will cause a decrease in the demand for peanut butter?

Which of the following will lead to a decrease in supply of a good?

Kayla decides that she would pay as much as $400 for a new refrigerator. She buys the refrigerator and realizes consumer surplus of $75. How much did Kayla pay for her refrigerator?

Suppose the demand for nachos increases. What will happen to producer surplus in the market for nachos?

How will an increase in lumber prices influence the home construction market?

Figure 3-21 -Refer to Figure 3-21. At the quantity Q₃,

If a small percentage increase in the price of a good results in a rather large percentage reduction in the quantity demanded of the good, demand is said to be

If the demand for coffee makers increases,

Market prices provide information to consumers, helping them coordinate their activities so long as

Adam Smith's invisible hand principle stresses

If an increase in the price of peaches reduces the demand for cream, this indicates that peaches and cream are

Assume that supply increases greatly and demand increases slightly. Which of the following will happen?

Which of the following would most likely shift the supply curve to the left for Wii video games?

If DeShawn only pays $25,000 to purchase a new car even though he would have been willing to pay as much as $35,000 for the car, this indicates that

Figure 3-23 -Refer to Figure 3-23. The movement from point A to point B on the graph would be caused by

If an increase in the price of good X causes the demand for good Y to decrease, this indicates that

When there is excess supply of a product in a market,

Just before Valentine's Day, the price of roses increases dramatically. This is because

The Economic Approach

Some Tools of the Economist

Supply and Demand: Applications and Extensions

Difficult Cases for the Market, and the Role of Government

The Economics of Political Action

Taking the Nations Economic Pulse

Economic Fluctuations, Unemployment, and Inflation

An Introduction to Basic Macroeconomic Markets

Dynamic Change, Economic Fluctuations, and the Ad-As Model

Fiscal Policy: the Keynesian View and the Historical Development of Macroeconomics

Fiscal Policy, Incentives, and Secondary Effects

Money and the Banking System

Modern Macroeconomics and Monetary Policy

Stabilization Policy, Output, and Employment

Creating an Environment for Growth and Prosperity

Institutions, Policies, and Cross-Country Differences in Income and Growth

Gaining From International Trade

International Finance and the Foreign Exchange Market

Filters

Exam 3: Demand, Supply, and the Market Process

The Invisible Hand Principle suggests that

Suppose both the equilibrium price and quantity fall for a particular product. Which of the following best explains this situation?

Which of the following will cause a decrease in the demand for peanut butter?

Which of the following will lead to a decrease in supply of a good?

Kayla decides that she would pay as much as $400 for a new refrigerator. She buys the refrigerator and realizes consumer surplus of $75. How much did Kayla pay for her refrigerator?

Suppose the demand for nachos increases. What will happen to producer surplus in the market for nachos?

How will an increase in lumber prices influence the home construction market?

Figure 3-21 -Refer to Figure 3-21. At the quantity Q3,

If a small percentage increase in the price of a good results in a rather large percentage reduction in the quantity demanded of the good, demand is said to be

If the demand for coffee makers increases,

Market prices provide information to consumers, helping them coordinate their activities so long as

Adam Smith's invisible hand principle stresses

If an increase in the price of peaches reduces the demand for cream, this indicates that peaches and cream are

Assume that supply increases greatly and demand increases slightly. Which of the following will happen?

Which of the following would most likely shift the supply curve to the left for Wii video games?

If DeShawn only pays $25,000 to purchase a new car even though he would have been willing to pay as much as $35,000 for the car, this indicates that

Figure 3-23 -Refer to Figure 3-23. The movement from point A to point B on the graph would be caused by

If an increase in the price of good X causes the demand for good Y to decrease, this indicates that

When there is excess supply of a product in a market,

Just before Valentine's Day, the price of roses increases dramatically. This is because

The Economic Approach

Some Tools of the Economist

Supply and Demand: Applications and Extensions

Difficult Cases for the Market, and the Role of Government

The Economics of Political Action

Taking the Nations Economic Pulse

Economic Fluctuations, Unemployment, and Inflation

An Introduction to Basic Macroeconomic Markets

Dynamic Change, Economic Fluctuations, and the Ad-As Model

Fiscal Policy: the Keynesian View and the Historical Development of Macroeconomics

Fiscal Policy, Incentives, and Secondary Effects

Money and the Banking System

Modern Macroeconomics and Monetary Policy

Stabilization Policy, Output, and Employment

Creating an Environment for Growth and Prosperity

Institutions, Policies, and Cross-Country Differences in Income and Growth

Gaining From International Trade

International Finance and the Foreign Exchange Market

Filters

Figure 3-21 -Refer to Figure 3-21. At the quantity Q₃,