Question 1

If the demand for a good decreased, what would be the effect on the equilibrium price and quantity?

Accepted Answer

A) Price would increase, and quantity would decrease. 
B) Price would decrease, and quantity would decrease. 
C) Price would increase, and quantity would increase. 
D) Price would decrease, and quantity would increase. 
A) Price would increase, and quantity would decrease. 
B) Price would decrease, and quantity would decrease. 
C) Price would increase, and quantity would increase. 
D) Price would decrease, and quantity would increase.

Question 2

If price rises, what happens to the quantity demanded for a product?

Accepted Answer

A) It increases. 
B) It decreases. 
C) It does not change. 
D) Uncertain--economic theory has no answer to this question. 
A) It increases. 
B) It decreases. 
C) It does not change. 
D) Uncertain--economic theory has no answer to this question.

Question 3

Suppose demand increases and supply decreases. Which of the following will happen?

Accepted Answer

A) Equilibrium price will rise, fall, or stay the same while equilibrium quantity will decrease. 
B) Equilibrium price will rise, fall, or stay the same while equilibrium quantity will increase. 
C) Equilibrium quantity will rise, fall, or stay the same and equilibrium price will increase. 
D) Equilibrium quantity will rise, fall, or stay the same while equilibrium price will decrease. 
E) The change in equilibrium price and quantity cannot be determined. 
A) Equilibrium price will rise, fall, or stay the same while equilibrium quantity will decrease. 
B) Equilibrium price will rise, fall, or stay the same while equilibrium quantity will increase. 
C) Equilibrium quantity will rise, fall, or stay the same and equilibrium price will increase. 
D) Equilibrium quantity will rise, fall, or stay the same while equilibrium price will decrease. 
E) The change in equilibrium price and quantity cannot be determined.

Question 4

A recent study suggested that moderate wine drinking may actually benefit one's health. If this information leads to an increased demand for wine, we would expect

Accepted Answer

A) both the price and quantity of wine sold to increase. 
B) both the price and quantity of wine sold to decrease. 
C) the price to decrease and the quantity of wine sold to increase. 
D) the price to increase and the quantity of wine sold to decrease. 
A) both the price and quantity of wine sold to increase. 
B) both the price and quantity of wine sold to decrease. 
C) the price to decrease and the quantity of wine sold to increase. 
D) the price to increase and the quantity of wine sold to decrease.

Question 5

An increase in demand will cause

Accepted Answer

A) an increase in supply. 
B) a decrease in supply. 
C) an increase in quantity supplied. 
D) a decrease in quantity supplied. 
E) a decrease in equilibrium price. 
A) an increase in supply. 
B) a decrease in supply. 
C) an increase in quantity supplied. 
D) a decrease in quantity supplied. 
E) a decrease in equilibrium price.

Question 6

The invisible hand principle indicates that competitive markets can help promote the efficient use of resources

Accepted Answer

A) only if buyers and sellers really care, personally, about economic efficiency. 
B) even when each market participant cares only about their own self interest rather than about the overall efficiency of resource use. 
C) even if business firms fail to produce goods efficiently. 
D) if, and only if, businesses recognize their social obligation to keep costs low and use resources wisely. 
A) only if buyers and sellers really care, personally, about economic efficiency. 
B) even when each market participant cares only about their own self interest rather than about the overall efficiency of resource use. 
C) even if business firms fail to produce goods efficiently. 
D) if, and only if, businesses recognize their social obligation to keep costs low and use resources wisely.

Question 7

If there is an increase in both the supply and demand for a good, which of the following will definitely occur?

Accepted Answer

A) The price of the good will increase. 
B) The price of the good will decrease. 
C) The equilibrium quantity will increase. 
D) The equilibrium quantity will decrease. 
A) The price of the good will increase. 
B) The price of the good will decrease. 
C) The equilibrium quantity will increase. 
D) The equilibrium quantity will decrease.

Question 8

A decrease in the price of leather used to make shoes would cause the

Accepted Answer

A) demand for shoes to decrease. 
B) demand for shoes to increase. 
C) supply of shoes to decrease. 
D) supply of shoes to increase. 
A) demand for shoes to decrease. 
B) demand for shoes to increase. 
C) supply of shoes to decrease. 
D) supply of shoes to increase.

Question 9

If there is a decrease in demand for picture frames, we would expect

Accepted Answer

A) both the price and quantity sold to increase. 
B) both the price and quantity sold to decrease. 
C) the price to decrease and the quantity sold to increase. 
D) the price to increase and the quantity sold to decrease. 
A) both the price and quantity sold to increase. 
B) both the price and quantity sold to decrease. 
C) the price to decrease and the quantity sold to increase. 
D) the price to increase and the quantity sold to decrease.

Question 10

How would a decrease in the price of the feed grains used to feed cattle affect the market for beef?

Accepted Answer

A) The demand for beef would increase, increasing beef prices. 
B) The demand for beef would decrease, decreasing beef prices. 
C) The supply of beef would increase, decreasing beef prices. 
D) The supply of beef would decrease, increasing beef prices. 
A) The demand for beef would increase, increasing beef prices. 
B) The demand for beef would decrease, decreasing beef prices. 
C) The supply of beef would increase, decreasing beef prices. 
D) The supply of beef would decrease, increasing beef prices.

Question 11

If you were a government official and wanted to raise the price of wheat, which of the following actions would you take?

Accepted Answer

A) Take wheat from government storage and sell it. 
B) Encourage farmers to use more fertilizer. 
C) Lower the price of rye. 
D) Subsidize purchases of farm equipment. 
E) Encourage farmers to grow less wheat. 
A) Take wheat from government storage and sell it. 
B) Encourage farmers to use more fertilizer. 
C) Lower the price of rye. 
D) Subsidize purchases of farm equipment. 
E) Encourage farmers to grow less wheat.

Question 12

A decrease in the price of milk will

Accepted Answer

A) increase the demand for milk. 
B) reduce the demand for milk. 
C) reduce the demand for orange juice, a substitute for milk. 
D) do both a and c 
A) increase the demand for milk. 
B) reduce the demand for milk. 
C) reduce the demand for orange juice, a substitute for milk. 
D) do both a and c

Question 13

The difference between the amount consumers would be willing to pay and the amount they actually pay for a good is called

Accepted Answer

A) price elasticity of demand. 
B) consumer surplus. 
C) the substitution effect. 
D) income elasticity of demand. 
A) price elasticity of demand. 
B) consumer surplus. 
C) the substitution effect. 
D) income elasticity of demand.

Question 14

Assume that black beans and rice are consistently in the diet of one particular family. How could you tell if these goods were complements, substitutes, or unrelated goods?

Accepted Answer

A) If the price of black beans rose and the consumption of rice remained the same, they would be substitutes. 
B) If the price of black beans rose and the consumption of rice increased, they would be substitutes. 
C) If the price of black beans rose and the consumption of rice decreased, they would be substitutes. 
D) If the price of black beans rose and the consumption of both goods remained the same, they would be complements. 
A) If the price of black beans rose and the consumption of rice remained the same, they would be substitutes. 
B) If the price of black beans rose and the consumption of rice increased, they would be substitutes. 
C) If the price of black beans rose and the consumption of rice decreased, they would be substitutes. 
D) If the price of black beans rose and the consumption of both goods remained the same, they would be complements.

Question 15

When economists say the quantity demanded of a product has increased, they mean the

Accepted Answer

A) demand curve has shifted to the left. 
B) demand curve has shifted to the right. 
C) price of the product has fallen, and consequently, consumers are buying more of it. 
D) price of the product has risen, and consequently, consumers are buying less of it. 
A) demand curve has shifted to the left. 
B) demand curve has shifted to the right. 
C) price of the product has fallen, and consequently, consumers are buying more of it. 
D) price of the product has risen, and consequently, consumers are buying less of it.

Question 16

Figure 3-12  
-In Figure 3-12, suppose D1 and S1 indicate initial conditions in the market for ice cream. Which of the following changes would tend to shift this market from D1 to D2?

Accepted Answer

A) an increase in the price of milk, an ingredient used to produce ice cream 
B) an increase in the price of frozen yogurt, a substitute for ice cream 
C) a decrease in the price of sugar, an ingredient used to produce ice cream 
D) a decrease in consumer income 
A) an increase in the price of milk, an ingredient used to produce ice cream 
B) an increase in the price of frozen yogurt, a substitute for ice cream 
C) a decrease in the price of sugar, an ingredient used to produce ice cream 
D) a decrease in consumer income

Question 17

A new hormone will increase the amount of milk each cow produces. If this hormone is adopted by many dairies, what will be the effect on the milk market?

Accepted Answer

A) An increase in supply, higher equilibrium price, and lower equilibrium quantity. 
B) A decrease in supply, lower equilibrium price, and lower equilibrium quantity. 
C) An increase in supply, lower equilibrium price, and higher equilibrium quantity. 
D) An increase in supply, higher equilibrium price, and higher equilibrium quantity. 
E) A decrease in supply, lower equilibrium price, and higher equilibrium quantity. 
A) An increase in supply, higher equilibrium price, and lower equilibrium quantity. 
B) A decrease in supply, lower equilibrium price, and lower equilibrium quantity. 
C) An increase in supply, lower equilibrium price, and higher equilibrium quantity. 
D) An increase in supply, higher equilibrium price, and higher equilibrium quantity. 
E) A decrease in supply, lower equilibrium price, and higher equilibrium quantity.

Question 18

A decrease in the expected future price of a good will cause the current demand for the good to

Accepted Answer

A) decrease, which is a shift to the left of the demand curve. 
B) decrease, which is a shift to the right of the demand curve. 
C) increase, which is a shift to the left of the demand curve. 
D) increase, which is a shift to the right of the demand curve. 
A) decrease, which is a shift to the left of the demand curve. 
B) decrease, which is a shift to the right of the demand curve. 
C) increase, which is a shift to the left of the demand curve. 
D) increase, which is a shift to the right of the demand curve.

Question 19

When competition is present and property rights protected and enforced, market prices will

Accepted Answer

A) discourage profit-seeking business firms from producing efficiently. 
B) direct entrepreneurs toward production of goods that are inferior in quality. 
C) encourage self-interested individuals to develop skills that are expected to be valuable in the future. 
D) always decrease. 
A) discourage profit-seeking business firms from producing efficiently. 
B) direct entrepreneurs toward production of goods that are inferior in quality. 
C) encourage self-interested individuals to develop skills that are expected to be valuable in the future. 
D) always decrease.

Question 20

If price rises, what happens to the demand for a product?

Accepted Answer

A) It increases. 
B) It decreases. 
C) It does not change. 
D) Uncertain--economic theory has no answer to this question. 
A) It increases. 
B) It decreases. 
C) It does not change. 
D) Uncertain--economic theory has no answer to this question.

If the demand for a good decreased, what would be the effect on the equilibrium price and quantity?

If price rises, what happens to the quantity demanded for a product?

Suppose demand increases and supply decreases. Which of the following will happen?

A recent study suggested that moderate wine drinking may actually benefit one's health. If this information leads to an increased demand for wine, we would expect

An increase in demand will cause

The invisible hand principle indicates that competitive markets can help promote the efficient use of resources

If there is an increase in both the supply and demand for a good, which of the following will definitely occur?

A decrease in the price of leather used to make shoes would cause the

If there is a decrease in demand for picture frames, we would expect

How would a decrease in the price of the feed grains used to feed cattle affect the market for beef?

If you were a government official and wanted to raise the price of wheat, which of the following actions would you take?

A decrease in the price of milk will

The difference between the amount consumers would be willing to pay and the amount they actually pay for a good is called

Assume that black beans and rice are consistently in the diet of one particular family. How could you tell if these goods were complements, substitutes, or unrelated goods?

When economists say the quantity demanded of a product has increased, they mean the

Figure 3-12 -In Figure 3-12, suppose D₁ and S₁ indicate initial conditions in the market for ice cream. Which of the following changes would tend to shift this market from D₁ to D₂?

A new hormone will increase the amount of milk each cow produces. If this hormone is adopted by many dairies, what will be the effect on the milk market?

A decrease in the expected future price of a good will cause the current demand for the good to

When competition is present and property rights protected and enforced, market prices will

If price rises, what happens to the demand for a product?

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

If the demand for a good decreased, what would be the effect on the equilibrium price and quantity?

If price rises, what happens to the quantity demanded for a product?

Suppose demand increases and supply decreases. Which of the following will happen?

A recent study suggested that moderate wine drinking may actually benefit one's health. If this information leads to an increased demand for wine, we would expect

An increase in demand will cause

The invisible hand principle indicates that competitive markets can help promote the efficient use of resources

If there is an increase in both the supply and demand for a good, which of the following will definitely occur?

A decrease in the price of leather used to make shoes would cause the

If there is a decrease in demand for picture frames, we would expect

How would a decrease in the price of the feed grains used to feed cattle affect the market for beef?

If you were a government official and wanted to raise the price of wheat, which of the following actions would you take?

A decrease in the price of milk will

The difference between the amount consumers would be willing to pay and the amount they actually pay for a good is called

Assume that black beans and rice are consistently in the diet of one particular family. How could you tell if these goods were complements, substitutes, or unrelated goods?

When economists say the quantity demanded of a product has increased, they mean the

Figure 3-12 -In Figure 3-12, suppose D1 and S1 indicate initial conditions in the market for ice cream. Which of the following changes would tend to shift this market from D1 to D2?

A new hormone will increase the amount of milk each cow produces. If this hormone is adopted by many dairies, what will be the effect on the milk market?

A decrease in the expected future price of a good will cause the current demand for the good to

When competition is present and property rights protected and enforced, market prices will

If price rises, what happens to the demand for a product?

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 3-12 -In Figure 3-12, suppose D₁ and S₁ indicate initial conditions in the market for ice cream. Which of the following changes would tend to shift this market from D₁ to D₂?