Question 1

Which of the following about stock prices is true?

Accepted Answer

A)  The buyer of a firm's stock is purchasing a fractional share in the firm's future net revenues. 
B)  When investors believe that a business decision by the management of a firm will increase the firm's future earnings, the price of the firm's stock will tend to rise. 
C)  Changing stock prices provide the board of directors and managers of a firm with a strong incentive to make good decisions and undertake productive projects. 
D)  All of the above are true. 
A)  The buyer of a firm's stock is purchasing a fractional share in the firm's future net revenues. 
B)  When investors believe that a business decision by the management of a firm will increase the firm's future earnings, the price of the firm's stock will tend to rise. 
C)  Changing stock prices provide the board of directors and managers of a firm with a strong incentive to make good decisions and undertake productive projects. 
D)  All of the above are true.

Question 2

Andre decides that he would pay as much as $3,000 for a new laptop computer. He buys the computer and realizes consumer surplus of $700. How much did Andre pay for his computer?

Accepted Answer

A)  $700 
B)  $2,300 
C)  $3,000 
D)  $3,700 
A)  $700 
B)  $2,300 
C)  $3,000 
D)  $3,700

Question 3

In which statement(s) is "demand" used correctly? (I) "An increase in the price of hamburgers will reduce the demand for hamburgers."
(II) "An increase in the price of hamburgers will reduce the demand for hamburger buns."

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

The price elasticity of demand for a good or service is determined primarily by the

Accepted Answer

A)  size of the consumer surplus. 
B)  availability of substitutes for the good. 
C)  incomes of consumers. 
D)  availability of complementary goods. 
A)  size of the consumer surplus. 
B)  availability of substitutes for the good. 
C)  incomes of consumers. 
D)  availability of complementary goods.

Question 5

An important assumption that is made when constructing a demand schedule is that

Accepted Answer

A)  only price and quantity matter in determining demand. 
B)  people always want a certain amount of a product. 
C)  demand is too important to be left to the economists. 
D)  all other determinants of demand are held constant. 
E)  demand has a positive slope. 
A)  only price and quantity matter in determining demand. 
B)  people always want a certain amount of a product. 
C)  demand is too important to be left to the economists. 
D)  all other determinants of demand are held constant. 
E)  demand has a positive slope.

Question 6

Use the figure below to answer the following question(s).
Figure 3-14  
-Refer to Figure 3-14. The gasoline market was initially in equilibrium at point e. Other things constant, an increase in the popularity and use of Sport Utility Vehicles (SUVs) that consume more gasoline per mile driven than most other types of cars would likely move the equilibrium in this market toward point

Accepted Answer

A)  r. 
B)  s. 
C)  t. 
D)  u. 
A)  r. 
B)  s. 
C)  t. 
D)  u.

Question 7

A shortage occurs whenever

Accepted Answer

A)  quantity demanded exceeds quantity supplied at the equilibrium price. 
B)  price is less than equilibrium price. 
C)  quantity demanded is less than quantity supplied. 
D)  goods are scarce. 
E)  some of the people who need the product are not willing and able to buy it at the equilibrium price. 
A)  quantity demanded exceeds quantity supplied at the equilibrium price. 
B)  price is less than equilibrium price. 
C)  quantity demanded is less than quantity supplied. 
D)  goods are scarce. 
E)  some of the people who need the product are not willing and able to buy it at the equilibrium price.

Question 8

Sebastian drinks Mountain Dew. He can buy as many cans of Mountain Dew as he wishes at a price of $0.50 per can. On a particular day, he is willing to pay $0.95 for the first can, $0.80 for the second can, $0.60 for the third can, and $0.40 for the fourth can. Assume Sebastian is rational in deciding how many cans to buy. His consumer surplus is

Accepted Answer

A)  $0.50. 
B)  $0.85. 
C)  $1.05. 
D)  $1.20. 
A)  $0.50. 
B)  $0.85. 
C)  $1.05. 
D)  $1.20.

Question 9

Assume that supply decreases greatly and demand decreases 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 10

Profit can be defined as the

Accepted Answer

A)  difference between the sales revenue of a business firm and the opportunity cost of the resources required to produce the goods supplied by the firm. 
B)  difference between a company's income and direct monetary costs of production. 
C)  difference between the price of a product and the consumer's valuation of the good. 
D)  amount of total revenue earned by the firm minus its payments to stockholders. 
A)  difference between the sales revenue of a business firm and the opportunity cost of the resources required to produce the goods supplied by the firm. 
B)  difference between a company's income and direct monetary costs of production. 
C)  difference between the price of a product and the consumer's valuation of the good. 
D)  amount of total revenue earned by the firm minus its payments to stockholders.

Question 11

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 12

The stock price of a firm is primarily a reflection of the

Accepted Answer

A)  firm's current net earnings per share. 
B)  firm's expected future net earnings per share. 
C)  discounted value of the firm's expected future net earnings per share. 
D)  firm's current net earnings per share multiplied by the interest rate. 
E)  book value of the firm. 
A)  firm's current net earnings per share. 
B)  firm's expected future net earnings per share. 
C)  discounted value of the firm's expected future net earnings per share. 
D)  firm's current net earnings per share multiplied by the interest rate. 
E)  book value of the firm.

Question 13

Prices direct economic activity in a market economy by

Accepted Answer

A)  influencing the actions of buyers and sellers. 
B)  reducing scarcity of the goods and services produced. 
C)  eliminating the need for government intervention. 
D)  allocating goods and services in the most equitable way. 
A)  influencing the actions of buyers and sellers. 
B)  reducing scarcity of the goods and services produced. 
C)  eliminating the need for government intervention. 
D)  allocating goods and services in the most equitable way.

Question 14

The random walk theory implies that stock prices

Accepted Answer

A)  go down, then up, and then down again. 
B)  follow systematic trends. 
C)  can be forecast accurately by experts who are knowledgeable about how the stock market works. 
D)  will change as the result of unexpected factors that are virtually impossible to forecast accurately. 
A)  go down, then up, and then down again. 
B)  follow systematic trends. 
C)  can be forecast accurately by experts who are knowledgeable about how the stock market works. 
D)  will change as the result of unexpected factors that are virtually impossible to forecast accurately.

Question 15

Which of the following would most likely cause the supply of wheat to increase?

Accepted Answer

A)  a decrease in the price of corn, a substitute for wheat 
B)  a technological advance that lowers the cost of producing wheat 
C)  an increase in the cost of producing wheat 
D)  a change in consumer preferences, causing them to prefer plain white bread to whole-wheat bread 
A)  a decrease in the price of corn, a substitute for wheat 
B)  a technological advance that lowers the cost of producing wheat 
C)  an increase in the cost of producing wheat 
D)  a change in consumer preferences, causing them to prefer plain white bread to whole-wheat bread

Question 16

Which of the following would lead to an increase in the demand for fast food in Chicago?

Accepted Answer

A)  An increase in Chicago's population 
B)  A decrease in average consumer income in Chicago. 
C)  A front page newspaper article in Chicago stating that fast food is very bad for your health. 
D)  A decrease in the average price charged by sit-down restaurants. 
A)  An increase in Chicago's population 
B)  A decrease in average consumer income in Chicago. 
C)  A front page newspaper article in Chicago stating that fast food is very bad for your health. 
D)  A decrease in the average price charged by sit-down restaurants.

Question 17

The market for new issues of stock is called the

Accepted Answer

A)  primary market. 
B)  secondary market. 
C)  The New York Stock Exchange (NYS
E) . 
D)  The Chicago Board of Trade. 
A)  primary market. 
B)  secondary market. 
C)  The New York Stock Exchange (NYS
E) . 
D)  The Chicago Board of Trade.

Question 18

Figure 3-7  
-In Figure 3-7, suppose D1 and S1 indicate the initial conditions in the market for ice cream. Which of the following changes would tend to cause the shift from D1 to D2 in the market for ice cream?

Accepted Answer

A)  a decrease in the price of sugar, an ingredient used to produce ice cream 
B)  an increase in the price of frozen yogurt, a substitute for ice cream 
C)  abnormally cold weather that decreased consumer desire for ice cream 
D)  an increase in the price of milk, an ingredient used to produce ice cream 
A)  a decrease in the price of sugar, an ingredient used to produce ice cream 
B)  an increase in the price of frozen yogurt, a substitute for ice cream 
C)  abnormally cold weather that decreased consumer desire for ice cream 
D)  an increase in the price of milk, an ingredient used to produce ice cream

Question 19

Suppose a new law requires all piercing studios to pass tougher licensing tests and to begin using more costly sterilization methods. Other things constant, this law would cause

Accepted Answer

A)  an increase in the supply of piercings and a lower price for piercings. 
B)  an increase in the supply of piercings and a higher price for piercings. 
C)  a decrease in the supply of piercings and a higher price for piercings. 
D)  a decrease in the supply of piercings and a lower price for piercings. 
A)  an increase in the supply of piercings and a lower price for piercings. 
B)  an increase in the supply of piercings and a higher price for piercings. 
C)  a decrease in the supply of piercings and a higher price for piercings. 
D)  a decrease in the supply of piercings and a lower price for piercings.

Question 20

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.

Which of the following about stock prices is true?

Andre decides that he would pay as much as $3,000 for a new laptop computer. He buys the computer and realizes consumer surplus of $700. How much did Andre pay for his computer?

In which statement(s) is "demand" used correctly? (I) "An increase in the price of hamburgers will reduce the demand for hamburgers." (II) "An increase in the price of hamburgers will reduce the demand for hamburger buns."

The price elasticity of demand for a good or service is determined primarily by the

An important assumption that is made when constructing a demand schedule is that

A shortage occurs whenever

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

Profit can be defined as the

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

The stock price of a firm is primarily a reflection of the

Prices direct economic activity in a market economy by

The random walk theory implies that stock prices

Which of the following would most likely cause the supply of wheat to increase?

Which of the following would lead to an increase in the demand for fast food in Chicago?

The market for new issues of stock is called the

Figure 3-7 -In Figure 3-7, suppose D₁ and S₁ indicate the initial conditions in the market for ice cream. Which of the following changes would tend to cause the shift from D₁ to D₂ in the market for ice cream?

Suppose a new law requires all piercing studios to pass tougher licensing tests and to begin using more costly sterilization methods. Other things constant, this law would cause

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

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

Which of the following about stock prices is true?

Andre decides that he would pay as much as $3,000 for a new laptop computer. He buys the computer and realizes consumer surplus of $700. How much did Andre pay for his computer?

In which statement(s) is "demand" used correctly? (I) "An increase in the price of hamburgers will reduce the demand for hamburgers." (II) "An increase in the price of hamburgers will reduce the demand for hamburger buns."

The price elasticity of demand for a good or service is determined primarily by the

An important assumption that is made when constructing a demand schedule is that

A shortage occurs whenever

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

Profit can be defined as the

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

The stock price of a firm is primarily a reflection of the

Prices direct economic activity in a market economy by

The random walk theory implies that stock prices

Which of the following would most likely cause the supply of wheat to increase?

Which of the following would lead to an increase in the demand for fast food in Chicago?

The market for new issues of stock is called the

Figure 3-7 -In Figure 3-7, suppose D1 and S1 indicate the initial conditions in the market for ice cream. Which of the following changes would tend to cause the shift from D1 to D2 in the market for ice cream?

Suppose a new law requires all piercing studios to pass tougher licensing tests and to begin using more costly sterilization methods. Other things constant, this law would cause

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

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 3-7 -In Figure 3-7, suppose D₁ and S₁ indicate the initial conditions in the market for ice cream. Which of the following changes would tend to cause the shift from D₁ to D₂ in the market for ice cream?