Question 1

When economists say the supply of a product has decreased, they mean that

Accepted Answer

A)  the supply curve has shifted to the left. 
B)  the product price has decreased, and as a consequence, suppliers are producing less of the product. 
C)  producers are now willing to sell more of this product at each possible price. 
D)  the supply curve has shifted to the right. 
A)  the supply curve has shifted to the left. 
B)  the product price has decreased, and as a consequence, suppliers are producing less of the product. 
C)  producers are now willing to sell more of this product at each possible price. 
D)  the supply curve has shifted to the right. A

Question 2

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. C

Question 3

Which of the following would most likely increase the supply of beef?

Accepted Answer

A)  lower prices of grains used to feed cattle 
B)  lower prices for chicken, a substitute for beef 
C)  new medical research suggesting that beef causes more serious health problems than was previously thought 
D)  an increase in the cost of transporting beef products to the consumer market 
A)  lower prices of grains used to feed cattle 
B)  lower prices for chicken, a substitute for beef 
C)  new medical research suggesting that beef causes more serious health problems than was previously thought 
D)  an increase in the cost of transporting beef products to the consumer market A

Question 4

An increase in the price of metal raises the cost of manufacturing dishwashers. As a result, the market changes to a new equilibrium because of

Accepted Answer

A)  a surplus of dishwashers. 
B)  an increase in the demand for dishwashers. 
C)  a leftward shift in the demand curve for dishwashers. 
D)  a leftward shift in the supply curve for dishwashers. 
A)  a surplus of dishwashers. 
B)  an increase in the demand for dishwashers. 
C)  a leftward shift in the demand curve for dishwashers. 
D)  a leftward shift in the supply curve for dishwashers.

Question 5

Figure 3-17.
-Refer to Figure 3-15. When the price rises from P1 to P2, which area represents the increase in producer surplus to existing producers?

Accepted Answer

A)  BCE 
B)  ACF 
C)  DEF 
D)  ABED 
A)  BCE 
B)  ACF 
C)  DEF 
D)  ABED

Question 6

"The operator of the tunnel that links Britain and France, Eurotunnel, said that commercial and tourist traffic using its car and coach shuttle service had fallen sharply in 2004, leading to a drop in operating revenues of 4%. Eurotunnel's chief executive, Jean-Louis Raymond, blamed cut-throat competition from budget airlines." (news story, January 2005)
A) If Mr. Raymond is correct, are the services of airlines and Eurotunnel substitutes or complements?
B) Use demand and supply analysis to explain how lower airfares between Paris and London impact the market for the shuttle services of Eurotunnel.

Accepted Answer

A.substitutes
B.The lower airf

Question 7

Suppose Katie, Kendra, and Kristen each purchase a particular type of cell phone at a price of $80. Katie's willingness to pay was $100, Kendra's willingness to pay was $95, and Kristen's willingness to pay was $80. Consumer surplus for the three individuals is

Accepted Answer

A)  $15. 
B)  $20. 
C)  $35. 
D)  $80. 
A)  $15. 
B)  $20. 
C)  $35. 
D)  $80.

Question 8

According to the law of supply, as the price of a good falls,

Accepted Answer

A)  buyers will buy more of the good. 
B)  buyers will buy less of the good. 
C)  sellers will produce more of the good. 
D)  sellers will produce less of the good. 
A)  buyers will buy more of the good. 
B)  buyers will buy less of the good. 
C)  sellers will produce more of the good. 
D)  sellers will produce less of the good.

Question 9

In Atlanta, tickets for professional and college football games are substitutes. An increase in the ticket price for professional football, other things being equal, will

Accepted Answer

A)  increase the demand for college football tickets. 
B)  decrease the demand for college football tickets. 
C)  not change the demand for college football tickets. 
D)  decrease the demand for professional football games. 
A)  increase the demand for college football tickets. 
B)  decrease the demand for college football tickets. 
C)  not change the demand for college football tickets. 
D)  decrease the demand for professional football games.

Question 10

A recent editorial in a local newspaper argues, "Consumers need to know more about products than just their price. They need to know how these prices are determined, who owns the businesses, and the wages of the workers." Is the editorial writer correct? Why or why not?

Accepted Answer

What is missing from the editorial is a

Question 11

If the quantity of a good supplied is not very sensitive to the price of the good, this is illustrated by a

Accepted Answer

A)  demand curve that is relatively flat (more horizontal). 
B)  demand curve that is relatively steep (more vertical). 
C)  supply curve that is relatively flat (more horizontal). 
D)  supply curve that is relatively steep (more vertical). 
A)  demand curve that is relatively flat (more horizontal). 
B)  demand curve that is relatively steep (more vertical). 
C)  supply curve that is relatively flat (more horizontal). 
D)  supply curve that is relatively steep (more vertical).

Question 12

Which of the following most accurately describes the invisible hand concept?

Accepted Answer

A)  Wise central planning by government is necessary for the efficient use of resources. 
B)  In a democratic setting, majority rule will result in the efficient use of resources. 
C)  In a market setting, when individuals pursue their own interests, they simultaneously tend to promote the public interest. 
D)  In a market setting, when individuals pursue their own interests, they tend to engage in activities that lower the overall economic welfare of society. 
A)  Wise central planning by government is necessary for the efficient use of resources. 
B)  In a democratic setting, majority rule will result in the efficient use of resources. 
C)  In a market setting, when individuals pursue their own interests, they simultaneously tend to promote the public interest. 
D)  In a market setting, when individuals pursue their own interests, they tend to engage in activities that lower the overall economic welfare of society.

Question 13

According to economic theory, which of the following would most likely cause the demand curve for hamburgers to decrease?

Accepted Answer

A)  a drop in the price of hot dogs 
B)  an increase in the price of hamburgers 
C)  a drop in the price of hamburgers 
D)  a technological advance that reduces the cost of making frozen hamburger patties. 
A)  a drop in the price of hot dogs 
B)  an increase in the price of hamburgers 
C)  a drop in the price of hamburgers 
D)  a technological advance that reduces the cost of making frozen hamburger patties.

Question 14

How will consumers generally react to an increase in the price of butter?

Accepted Answer

A)  They will purchase a larger quantity of butter. 
B)  They will substitute other goods like margarine for the more expensive butter. 
C)  They will reduce their purchases of substitute goods like margarine. 
D)  They will continue purchasing the same quantity of butter at the higher price. 
A)  They will purchase a larger quantity of butter. 
B)  They will substitute other goods like margarine for the more expensive butter. 
C)  They will reduce their purchases of substitute goods like margarine. 
D)  They will continue purchasing the same quantity of butter at the higher price.

Question 15

Assume that supply increases slightly and demand increases greatly. 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 16

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 17

Which of the following will reduce the supply of motorcycles?

Accepted Answer

A)  an increase in the population age 16 to 35, the primary consumers of motorcycles 
B)  an increase in taxes imposed on motorcycle producers 
C)  a technological improvement reducing the production costs of motorcycles 
D)  a government study that reveals motorcycle riders, on average, live 10 years longer than those who don't ride motorcycles 
A)  an increase in the population age 16 to 35, the primary consumers of motorcycles 
B)  an increase in taxes imposed on motorcycle producers 
C)  a technological improvement reducing the production costs of motorcycles 
D)  a government study that reveals motorcycle riders, on average, live 10 years longer than those who don't ride motorcycles

Question 18

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 19

Which of the following has enhanced the ability of investors, without any special business skills, to benefit from the ownership of corporate America?

Accepted Answer

A)  the increased availability of mutual funds that make it possible for even small investors to purchase a diverse stock portfolio at a low cost 
B)  an increased tendency of small investors to buy and sell stock frequently, using stock tips from investment experts 
C)  the virtual disappearance of business failures among corporations with publicly traded stock shares 
D)  all of the above 
A)  the increased availability of mutual funds that make it possible for even small investors to purchase a diverse stock portfolio at a low cost 
B)  an increased tendency of small investors to buy and sell stock frequently, using stock tips from investment experts 
C)  the virtual disappearance of business failures among corporations with publicly traded stock shares 
D)  all of the above

Question 20

"A reduction in gasoline prices caused the demand for gasoline to increase. The lower gas prices also led to an increase in demand for large cars, causing their prices to rise." These statements

Accepted Answer

A)  are essentially correct. 
B)  contain one error; the lower gasoline prices would cause an increase in the quantity demanded of gasoline, not an increase in demand. 
C)  contain one error; the lower gasoline prices would increase the quantity demanded of large cars, not the demand. 
D)  contain two errors; the lower gasoline prices would cause the quantity of gasoline demanded (rather than the demand) to increase, and the lower gasoline price would cause an increase in quantity demanded (rather than the demand) for large cars. 
A)  are essentially correct. 
B)  contain one error; the lower gasoline prices would cause an increase in the quantity demanded of gasoline, not an increase in demand. 
C)  contain one error; the lower gasoline prices would increase the quantity demanded of large cars, not the demand. 
D)  contain two errors; the lower gasoline prices would cause the quantity of gasoline demanded (rather than the demand) to increase, and the lower gasoline price would cause an increase in quantity demanded (rather than the demand) for large cars.

When economists say the supply of a product has decreased, they mean that

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

Which of the following would most likely increase the supply of beef?

An increase in the price of metal raises the cost of manufacturing dishwashers. As a result, the market changes to a new equilibrium because of

Figure 3-17. -Refer to Figure 3-15. When the price rises from P₁ to P₂, which area represents the increase in producer surplus to existing producers?

Suppose Katie, Kendra, and Kristen each purchase a particular type of cell phone at a price of $80. Katie's willingness to pay was $100, Kendra's willingness to pay was $95, and Kristen's willingness to pay was $80. Consumer surplus for the three individuals is

According to the law of supply, as the price of a good falls,

In Atlanta, tickets for professional and college football games are substitutes. An increase in the ticket price for professional football, other things being equal, will

A recent editorial in a local newspaper argues, "Consumers need to know more about products than just their price. They need to know how these prices are determined, who owns the businesses, and the wages of the workers." Is the editorial writer correct? Why or why not?

If the quantity of a good supplied is not very sensitive to the price of the good, this is illustrated by a

Which of the following most accurately describes the invisible hand concept?

According to economic theory, which of the following would most likely cause the demand curve for hamburgers to decrease?

How will consumers generally react to an increase in the price of butter?

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

Adam Smith's invisible hand principle stresses

Which of the following will reduce the supply of motorcycles?

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

Which of the following has enhanced the ability of investors, without any special business skills, to benefit from the ownership of corporate America?

"A reduction in gasoline prices caused the demand for gasoline to increase. The lower gas prices also led to an increase in demand for large cars, causing their prices to rise." These statements

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

Consumer Choice and Elasticity

Costs and the Supply of Goods

Price Takers and the Competitive Process

Price-Searcher Markets With Low Entry Barriers

Price-Searcher Markets With High Entry Barriers

The Supply of and Demand for Productive Resources

Earnings, Productivity, and the Job Market

Investment, the Capital Market, and the Wealth of Nations

Income Inequality and Poverty

Gaining From International Trade

Filters

Exam 3: Demand, Supply, and the Market Process

When economists say the supply of a product has decreased, they mean that

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

Which of the following would most likely increase the supply of beef?

An increase in the price of metal raises the cost of manufacturing dishwashers. As a result, the market changes to a new equilibrium because of

Figure 3-17. -Refer to Figure 3-15. When the price rises from P1 to P2, which area represents the increase in producer surplus to existing producers?

Suppose Katie, Kendra, and Kristen each purchase a particular type of cell phone at a price of $80. Katie's willingness to pay was $100, Kendra's willingness to pay was $95, and Kristen's willingness to pay was $80. Consumer surplus for the three individuals is

According to the law of supply, as the price of a good falls,

In Atlanta, tickets for professional and college football games are substitutes. An increase in the ticket price for professional football, other things being equal, will

A recent editorial in a local newspaper argues, "Consumers need to know more about products than just their price. They need to know how these prices are determined, who owns the businesses, and the wages of the workers." Is the editorial writer correct? Why or why not?

If the quantity of a good supplied is not very sensitive to the price of the good, this is illustrated by a

Which of the following most accurately describes the invisible hand concept?

According to economic theory, which of the following would most likely cause the demand curve for hamburgers to decrease?

How will consumers generally react to an increase in the price of butter?

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

Adam Smith's invisible hand principle stresses

Which of the following will reduce the supply of motorcycles?

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

Which of the following has enhanced the ability of investors, without any special business skills, to benefit from the ownership of corporate America?

"A reduction in gasoline prices caused the demand for gasoline to increase. The lower gas prices also led to an increase in demand for large cars, causing their prices to rise." These statements

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

Consumer Choice and Elasticity

Costs and the Supply of Goods

Price Takers and the Competitive Process

Price-Searcher Markets With Low Entry Barriers

Price-Searcher Markets With High Entry Barriers

The Supply of and Demand for Productive Resources

Earnings, Productivity, and the Job Market

Investment, the Capital Market, and the Wealth of Nations

Income Inequality and Poverty

Gaining From International Trade

Filters

Figure 3-17. -Refer to Figure 3-15. When the price rises from P₁ to P₂, which area represents the increase in producer surplus to existing producers?