Question 1

Figure 3-4  
-Figure 3-4 shows conditions in the market for beef. A reduction in the price of the grain used to feed cattle results in

Accepted Answer

A)  the supply curve for beef shifting to the left resulting in higher beef prices and a lower quantity sold. 
B)  the supply curve for beef shifting to the right resulting in lower beef prices and a higher quantity sold. 
C)  the demand curve for beef shifting to the left resulting in lower beef prices and a lower quantity sold. 
D)  the demand curve for beef shifting to the right resulting in higher beef prices and a higher quantity sold. 
A)  the supply curve for beef shifting to the left resulting in higher beef prices and a lower quantity sold. 
B)  the supply curve for beef shifting to the right resulting in lower beef prices and a higher quantity sold. 
C)  the demand curve for beef shifting to the left resulting in lower beef prices and a lower quantity sold. 
D)  the demand curve for beef shifting to the right resulting in higher beef prices and a higher quantity sold.

Question 2

The variation in the rate of return one can expect from ownership of stocks will generally be smaller if

Accepted Answer

A)  all of the funds are invested in a specific sector of the economy such as the automobile industry. 
B)  a diverse set of stocks is held over a lengthy period of time such as 30 or 40 years. 
C)  all of the funds are invested in a single stock. 
D)  the funds are invested for a relatively short period of time. 
A)  all of the funds are invested in a specific sector of the economy such as the automobile industry. 
B)  a diverse set of stocks is held over a lengthy period of time such as 30 or 40 years. 
C)  all of the funds are invested in a single stock. 
D)  the funds are invested for a relatively short period of time.

Question 3

In which statement(s) are "supply" and "quantity supplied" used correctly? (I) "An increase in the price of toasters will increase the quantity supplied of toasters."
(II) "A technological advance that lowers the cost of producing toasters will increase the supply of toasters."

Accepted Answer

A)  in both statements I and II 
B)  in statement I only 
C)  in statement II only 
D)  in neither statements I nor II 
A)  in both statements I and II 
B)  in statement I only 
C)  in statement II only 
D)  in neither statements I nor II

Question 4

Figure 3-19  
-Refer to Figure 3-19. Sellers whose costs are less than price are represented by which line segment?

Accepted Answer

A)  AC 
B)  CE 
C)  BC 
D)  CD 
A)  AC 
B)  CE 
C)  BC 
D)  CD

Question 5

Two students are walking by a department store window that has on display a $400 dress. The English major declares, "I want that dress but can't afford it." The economics major replies, "No, you don't." Explain the logic of this reply.

Accepted Answer

This is a version of the old economics j

Question 6

Figure 3-5  
-In Figure 3-5, if the initial demand for margarine were D1, an increase in the price of butter, which is a substitute for margarine, would tend to cause which of the following changes in the market for margarine?

Accepted Answer

A)  a shift in the demand curve from D1 to D2 
B)  a shift in the demand curve from D2 to D1 
C)  a movement along demand curve D1 from a to b 
D)  a movement along demand curve D1 from b to a 
A)  a shift in the demand curve from D1 to D2 
B)  a shift in the demand curve from D2 to D1 
C)  a movement along demand curve D1 from a to b 
D)  a movement along demand curve D1 from b to a

Question 7

When there is excess demand for a product in a market,

Accepted Answer

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

Question 8

Table 3-2
  
-Refer to Table 3-2. If the market price is $1,000, the producer surplus in the market is

Accepted Answer

A)  $700. 
B)  $750. 
C)  $2,250. 
D)  $3,700. 
A)  $700. 
B)  $750. 
C)  $2,250. 
D)  $3,700.

Question 9

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 10

Suppose demand decreases 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 11

Which of the following is necessary for the invisible hand of market prices to work properly?

Accepted Answer

A)  buyers and sellers who generally tend to disregard their own self-interest 
B)  democratic political procedures and highly regulated markets 
C)  price controls that restrict the movement of market prices 
D)  competition and property rights that are well-defined and enforced 
A)  buyers and sellers who generally tend to disregard their own self-interest 
B)  democratic political procedures and highly regulated markets 
C)  price controls that restrict the movement of market prices 
D)  competition and property rights that are well-defined and enforced

Question 12

A question on an economics exam asks, "What happens in the market for jelly when the price of peanut butter increases?" Allison, an excellent student, shows the demand for jelly increasing. Is she necessarily wrong? Why or why not?

Accepted Answer

If we consider Allison's answer wrong, w

Question 13

Which of the following is a risk that investors undertake when purchasing stocks?

Accepted Answer

A)  An individual stock can rise and fall unpredictably. 
B)  Nearly all stocks in the stock market may rise or fall together, when expectations about the entire economy change. 
C)  Both a and b are true. 
D)  Neither a nor b is true. 
A)  An individual stock can rise and fall unpredictably. 
B)  Nearly all stocks in the stock market may rise or fall together, when expectations about the entire economy change. 
C)  Both a and b are true. 
D)  Neither a nor b is true.

Question 14

If the interest rate were 5 percent, how much would people be willing to pay for a stock that was certain to yield a $10 per share stream of net earnings continuously in the future?

Accepted Answer

A)  $10 
B)  $20 
C)  $200 
D)  $400 
E)  $2,000 
A)  $10 
B)  $20 
C)  $200 
D)  $400 
E)  $2,000

Question 15

Which of the following would most likely increase the price of automobiles?

Accepted Answer

A)  a decrease in the price of steel used to produce automobiles 
B)  an increase in the price of gasoline 
C)  a decrease in consumer income 
D)  the United Auto Workers union obtaining a substantial wage increase for auto workers 
A)  a decrease in the price of steel used to produce automobiles 
B)  an increase in the price of gasoline 
C)  a decrease in consumer income 
D)  the United Auto Workers union obtaining a substantial wage increase for auto workers

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

Use the figure below to answer the following question(s).
Figure 3-3  
-In Figure 3-3, if the initial demand for margarine were D1, the impact of a decrease in the price of butter, a substitute good for margarine, would be illustrated as

Accepted Answer

A)  a shift in the demand curve to D2. 
B)  a shift in the demand curve to D3. 
C)  a movement downward to the right along the original demand curve D1. 
D)  none of the above. 
A)  a shift in the demand curve to D2. 
B)  a shift in the demand curve to D3. 
C)  a movement downward to the right along the original demand curve D1. 
D)  none of the above.

Question 18

Which of the following would increase the price of fitness equipment?

Accepted Answer

A)  a reduction in consumer income 
B)  a major study indicating that a 30-minute workout each day improved health more than was previously thought to be the case 
C)  a decrease in the price of steel used to produce the equipment 
D)  all of the above 
A)  a reduction in consumer income 
B)  a major study indicating that a 30-minute workout each day improved health more than was previously thought to be the case 
C)  a decrease in the price of steel used to produce the equipment 
D)  all of the above

Question 19

If an investor's primary stock holding is currently Exxon Mobil, the purchase of which of the following stocks would provide the investor with the largest reduction in risk?

Accepted Answer

A)  BP / Amoco. 
B)  Shell Oil Corporation. 
C)  General Motors. 
D)  Texaco. 
A)  BP / Amoco. 
B)  Shell Oil Corporation. 
C)  General Motors. 
D)  Texaco.

Question 20

Investment in a broad portfolio of stocks is most attractive for

Accepted Answer

A)  short-term investors. 
B)  long-term investors. 
C)  investors seeking a steady rate of return. 
D)  investors who will need the funds for other purposes in about 10 years. 
A)  short-term investors. 
B)  long-term investors. 
C)  investors seeking a steady rate of return. 
D)  investors who will need the funds for other purposes in about 10 years.

Figure 3-4 -Figure 3-4 shows conditions in the market for beef. A reduction in the price of the grain used to feed cattle results in

The variation in the rate of return one can expect from ownership of stocks will generally be smaller if

In which statement(s) are "supply" and "quantity supplied" used correctly? (I) "An increase in the price of toasters will increase the quantity supplied of toasters." (II) "A technological advance that lowers the cost of producing toasters will increase the supply of toasters."

Figure 3-19 -Refer to Figure 3-19. Sellers whose costs are less than price are represented by which line segment?

Two students are walking by a department store window that has on display a $400 dress. The English major declares, "I want that dress but can't afford it." The economics major replies, "No, you don't." Explain the logic of this reply.

Figure 3-5 -In Figure 3-5, if the initial demand for margarine were D₁, an increase in the price of butter, which is a substitute for margarine, would tend to cause which of the following changes in the market for margarine?

When there is excess demand for a product in a market,

Table 3-2 -Refer to Table 3-2. If the market price is $1,000, the producer surplus in the market is

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

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

Which of the following is necessary for the invisible hand of market prices to work properly?

A question on an economics exam asks, "What happens in the market for jelly when the price of peanut butter increases?" Allison, an excellent student, shows the demand for jelly increasing. Is she necessarily wrong? Why or why not?

Which of the following is a risk that investors undertake when purchasing stocks?

If the interest rate were 5 percent, how much would people be willing to pay for a stock that was certain to yield a $10 per share stream of net earnings continuously in the future?

Which of the following would most likely increase the price of automobiles?

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?

Use the figure below to answer the following question(s). Figure 3-3 -In Figure 3-3, if the initial demand for margarine were D₁, the impact of a decrease in the price of butter, a substitute good for margarine, would be illustrated as

Which of the following would increase the price of fitness equipment?

If an investor's primary stock holding is currently Exxon Mobil, the purchase of which of the following stocks would provide the investor with the largest reduction in risk?

Investment in a broad portfolio of stocks is most attractive for

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

Figure 3-4 -Figure 3-4 shows conditions in the market for beef. A reduction in the price of the grain used to feed cattle results in

The variation in the rate of return one can expect from ownership of stocks will generally be smaller if

In which statement(s) are "supply" and "quantity supplied" used correctly? (I) "An increase in the price of toasters will increase the quantity supplied of toasters." (II) "A technological advance that lowers the cost of producing toasters will increase the supply of toasters."

Figure 3-19 -Refer to Figure 3-19. Sellers whose costs are less than price are represented by which line segment?

Two students are walking by a department store window that has on display a $400 dress. The English major declares, "I want that dress but can't afford it." The economics major replies, "No, you don't." Explain the logic of this reply.

Figure 3-5 -In Figure 3-5, if the initial demand for margarine were D1, an increase in the price of butter, which is a substitute for margarine, would tend to cause which of the following changes in the market for margarine?

When there is excess demand for a product in a market,

Table 3-2 -Refer to Table 3-2. If the market price is $1,000, the producer surplus in the market is

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

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

Which of the following is necessary for the invisible hand of market prices to work properly?

A question on an economics exam asks, "What happens in the market for jelly when the price of peanut butter increases?" Allison, an excellent student, shows the demand for jelly increasing. Is she necessarily wrong? Why or why not?

Which of the following is a risk that investors undertake when purchasing stocks?

If the interest rate were 5 percent, how much would people be willing to pay for a stock that was certain to yield a $10 per share stream of net earnings continuously in the future?

Which of the following would most likely increase the price of automobiles?

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?

Use the figure below to answer the following question(s). Figure 3-3 -In Figure 3-3, if the initial demand for margarine were D1, the impact of a decrease in the price of butter, a substitute good for margarine, would be illustrated as

Which of the following would increase the price of fitness equipment?

If an investor's primary stock holding is currently Exxon Mobil, the purchase of which of the following stocks would provide the investor with the largest reduction in risk?

Investment in a broad portfolio of stocks is most attractive for

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 3-5 -In Figure 3-5, if the initial demand for margarine were D₁, an increase in the price of butter, which is a substitute for margarine, would tend to cause which of the following changes in the market for margarine?

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?

Use the figure below to answer the following question(s). Figure 3-3 -In Figure 3-3, if the initial demand for margarine were D₁, the impact of a decrease in the price of butter, a substitute good for margarine, would be illustrated as