Question 1

Profits and losses play an important role in helping

Accepted Answer

A)  to signal to government which businesses are suffering losses so that they can be subsidized. 
B)  consumers decide which products they value the most by looking at each firm's profit. 
C)  to allocate scarce resources in a manner that maximizes the value created to society. 
D)  ensure that the total profits in the economy exactly equal the total losses. 
A)  to signal to government which businesses are suffering losses so that they can be subsidized. 
B)  consumers decide which products they value the most by looking at each firm's profit. 
C)  to allocate scarce resources in a manner that maximizes the value created to society. 
D)  ensure that the total profits in the economy exactly equal the total losses.

Question 2

Which of the following is a function performed by market prices?

Accepted Answer

A)  Market prices communicate information to buyers and sellers. 
B)  Market prices coordinate the decisions of buyers and sellers. 
C)  Market prices motivate entrepreneurs to produce those products that are currently most desired relative to their costs of production. 
D)  All of the above are functions performed by market prices. 
A)  Market prices communicate information to buyers and sellers. 
B)  Market prices coordinate the decisions of buyers and sellers. 
C)  Market prices motivate entrepreneurs to produce those products that are currently most desired relative to their costs of production. 
D)  All of the above are functions performed by market prices.

Question 3

A decrease in the price of a good would

Accepted Answer

A)  increase the demand for the good. 
B)  increase the quantity demanded for the good. 
C)  decrease the demand for the good. 
D)  decrease the quantity supplied of the good. 
A)  increase the demand for the good. 
B)  increase the quantity demanded for the good. 
C)  decrease the demand for the good. 
D)  decrease the quantity supplied of the good.

Question 4

If price rises, what happens to supply of 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 5

The random walk theory of stock prices indicates that

Accepted Answer

A)  if they are willing to do a little research, even beginning investors will be able to pick the stocks that will increase most in price in the future. 
B)  managed mutual funds will persistently earn a higher rate of return than indexed funds. 
C)  current stock prices already reflect information about factors influencing future stock prices that can be forecast with any degree of accuracy. 
D)  stock market investors can expect to earn a steady real rate of return of about 7 percent annually. 
A)  if they are willing to do a little research, even beginning investors will be able to pick the stocks that will increase most in price in the future. 
B)  managed mutual funds will persistently earn a higher rate of return than indexed funds. 
C)  current stock prices already reflect information about factors influencing future stock prices that can be forecast with any degree of accuracy. 
D)  stock market investors can expect to earn a steady real rate of return of about 7 percent annually.

Question 6

When the quantity demanded and quantity supplied in a market are equal, the market is said to be in

Accepted Answer

A)  fixation. 
B)  excess supply. 
C)  equilibrium. 
D)  excess demand. 
A)  fixation. 
B)  excess supply. 
C)  equilibrium. 
D)  excess demand.

Question 7

Figure 3-17.
-Refer to Figure 3-16. When the price is P2, producer surplus is

Accepted Answer

A)  A. 
B)  A + C. 
C)  A + B + C. 
D)  D + E. 
A)  A. 
B)  A + C. 
C)  A + B + C. 
D)  D + E.

Question 8

Which of the following would reduce the supply of baseball hats?

Accepted Answer

A)  An increase in the demand for baseball hats. 
B)  A new tax imposed on the producers of baseball hats. 
C)  A reduction in the price of cloth used to make baseball hats. 
D)  All of the above. 
A)  An increase in the demand for baseball hats. 
B)  A new tax imposed on the producers of baseball hats. 
C)  A reduction in the price of cloth used to make baseball hats. 
D)  All of the above.

Question 9

Figure 3-2  
-Given the supply and demand conditions illustrated in Figure 3-2, the equilibrium price of steak is

Accepted Answer

A)  $2 per pound. 
B)  $4 per pound. 
C)  $6 per pound. 
D)  $8 per pound. 
A)  $2 per pound. 
B)  $4 per pound. 
C)  $6 per pound. 
D)  $8 per pound.

Question 10

Which of the following will decrease the demand for coffee?

Accepted Answer

A)  the discovery that caffeine can cause heart problems 
B)  an increase in the price of coffee 
C)  an increase in the price of tea, a substitute for coffee 
D)  a decrease in the prices of coffee makers and coffee cups, complements to coffee 
A)  the discovery that caffeine can cause heart problems 
B)  an increase in the price of coffee 
C)  an increase in the price of tea, a substitute for coffee 
D)  a decrease in the prices of coffee makers and coffee cups, complements to coffee

Question 11

If the quantity of a good supplied is highly sensitive to the price of the good, economists say the supply of the good is relatively

Accepted Answer

A)  inelastic. 
B)  elastic. 
C)  robust. 
D)  inverse. 
A)  inelastic. 
B)  elastic. 
C)  robust. 
D)  inverse.

Question 12

Graphically, the area that represents the difference between the market price and the minimum price required to induce suppliers to produce a good is called

Accepted Answer

A)  consumer surplus. 
B)  producer surplus. 
C)  marginal cost. 
D)  triangular arbitrage. 
A)  consumer surplus. 
B)  producer surplus. 
C)  marginal cost. 
D)  triangular arbitrage.

Question 13

Which of the following will reduce the risk accompanying equity (stock) investments?

Accepted Answer

A)  the purchase of shares of a mutual fund that holds the stocks of many diverse corporations 
B)  the purchasing and holding of equities over a lengthy period of time 
C)  the purchase of shares in firms doing business in a wider variety of industries and markets 
D)  all of the above 
A)  the purchase of shares of a mutual fund that holds the stocks of many diverse corporations 
B)  the purchasing and holding of equities over a lengthy period of time 
C)  the purchase of shares in firms doing business in a wider variety of industries and markets 
D)  all of the above

Question 14

"My broker studies the stock market and the management of specific firms. When he advises me to buy, I listen because he is an expert." Analyze this view.

Accepted Answer

Current stock prices already reflect the

Question 15

Suppose demand decreases and supply increases. 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 16

Which of the following is true of the interaction of supply and demand?

Accepted Answer

A)  As the price increases, the quantity demanded and the quantity supplied will increase. 
B)  As the price increases, the quantity demanded and the quantity supplied will decrease. 
C)  As the price increases, the quantity demanded increases and the quantity supplied will decrease. 
D)  As the price increases, the quantity demanded will decrease and the quantity supplied will increase. 
E)  As the price increases, neither the quantity demanded nor quantity supplied will change. 
A)  As the price increases, the quantity demanded and the quantity supplied will increase. 
B)  As the price increases, the quantity demanded and the quantity supplied will decrease. 
C)  As the price increases, the quantity demanded increases and the quantity supplied will decrease. 
D)  As the price increases, the quantity demanded will decrease and the quantity supplied will increase. 
E)  As the price increases, neither the quantity demanded nor quantity supplied will change.

Question 17

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 18

The efficiency of market organization is dependent on which of the following?

Accepted Answer

A)  well-regulated supply and demand 
B)  the availability of low cost resources and high tariffs on foreign imports 
C)  competitive markets and well-defined and enforced private property rights 
D)  Government establishment of the invisible hand principle and the inelasticity of certain goods. 
A)  well-regulated supply and demand 
B)  the availability of low cost resources and high tariffs on foreign imports 
C)  competitive markets and well-defined and enforced private property rights 
D)  Government establishment of the invisible hand principle and the inelasticity of certain goods.

Question 19

A movement along a demand curve

Accepted Answer

A)  is called a change in demand. 
B)  is the result of a change in the price of the good. 
C)  can be caused by many things. 
D)  means the product is inelastic. 
A)  is called a change in demand. 
B)  is the result of a change in the price of the good. 
C)  can be caused by many things. 
D)  means the product is inelastic.

Question 20

Historically, which of the following has had the highest average annual rate of return?

Accepted Answer

A)  corporate bonds 
B)  money market mutual funds 
C)  corporate stocks 
D)  U.S. Treasury bonds 
A)  corporate bonds 
B)  money market mutual funds 
C)  corporate stocks 
D)  U.S. Treasury bonds

Profits and losses play an important role in helping

Which of the following is a function performed by market prices?

A decrease in the price of a good would

If price rises, what happens to supply of a product?

The random walk theory of stock prices indicates that

When the quantity demanded and quantity supplied in a market are equal, the market is said to be in

Figure 3-17. -Refer to Figure 3-16. When the price is P₂, producer surplus is

Which of the following would reduce the supply of baseball hats?

Figure 3-2 -Given the supply and demand conditions illustrated in Figure 3-2, the equilibrium price of steak is

Which of the following will decrease the demand for coffee?

If the quantity of a good supplied is highly sensitive to the price of the good, economists say the supply of the good is relatively

Graphically, the area that represents the difference between the market price and the minimum price required to induce suppliers to produce a good is called

Which of the following will reduce the risk accompanying equity (stock) investments?

"My broker studies the stock market and the management of specific firms. When he advises me to buy, I listen because he is an expert." Analyze this view.

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

Which of the following is true of the interaction of supply and demand?

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

The efficiency of market organization is dependent on which of the following?

A movement along a demand curve

Historically, which of the following has had the highest average annual rate of return?

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

Profits and losses play an important role in helping

Which of the following is a function performed by market prices?

A decrease in the price of a good would

If price rises, what happens to supply of a product?

The random walk theory of stock prices indicates that

When the quantity demanded and quantity supplied in a market are equal, the market is said to be in

Figure 3-17. -Refer to Figure 3-16. When the price is P2, producer surplus is

Which of the following would reduce the supply of baseball hats?

Figure 3-2 -Given the supply and demand conditions illustrated in Figure 3-2, the equilibrium price of steak is

Which of the following will decrease the demand for coffee?

If the quantity of a good supplied is highly sensitive to the price of the good, economists say the supply of the good is relatively

Graphically, the area that represents the difference between the market price and the minimum price required to induce suppliers to produce a good is called

Which of the following will reduce the risk accompanying equity (stock) investments?

"My broker studies the stock market and the management of specific firms. When he advises me to buy, I listen because he is an expert." Analyze this view.

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

Which of the following is true of the interaction of supply and demand?

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

The efficiency of market organization is dependent on which of the following?

A movement along a demand curve

Historically, which of the following has had the highest average annual rate of return?

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 3-16. When the price is P₂, producer surplus is