Question 1

How would a decrease in the cost of production affect the market for video games?

Accepted Answer

A)  Supply would decrease, leading to an increase in price and a reduction in quantity sold. 
B)  Supply would decrease, leading to a reduction in price and a reduction in quantity sold. 
C)  Supply would increase, leading to an increase in price and an increase in quantity sold. 
D)  Supply would increase, leading to a reduction in price and an increase in quantity sold. 
A)  Supply would decrease, leading to an increase in price and a reduction in quantity sold. 
B)  Supply would decrease, leading to a reduction in price and a reduction in quantity sold. 
C)  Supply would increase, leading to an increase in price and an increase in quantity sold. 
D)  Supply would increase, leading to a reduction in price and an increase in quantity sold.

Question 2

When property rights are well defined and markets are competitive,

Accepted Answer

A)  the total gains from trade (the combined area of producer and consumer surplus) are maximized at the market equilibrium. 
B)  the market equilibrium is consistent with economic efficiency in that all units creating more benefit than cost have been produced. 
C)  the market will automatically move toward the price and quantity where the quantity supplied and the quantity demanded are in balance. 
D)  all of the above are true. 
A)  the total gains from trade (the combined area of producer and consumer surplus) are maximized at the market equilibrium. 
B)  the market equilibrium is consistent with economic efficiency in that all units creating more benefit than cost have been produced. 
C)  the market will automatically move toward the price and quantity where the quantity supplied and the quantity demanded are in balance. 
D)  all of the above are true.

Question 3

To the extent that current profits are directly related to future profits, a high price/earnings ratio would indicate that stocks are

Accepted Answer

A)  inexpensive. 
B)  expensive. 
C)  going to increase in value in the future. 
D)  most likely to fall in value if interest rates decline. 
A)  inexpensive. 
B)  expensive. 
C)  going to increase in value in the future. 
D)  most likely to fall in value if interest rates decline.

Question 4

Suppose both the equilibrium price and quantity rise 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.

Question 5

Market prices are

Accepted Answer

A)  conveyors of information. 
B)  determined by the interactions of supply and demand in voluntary exchange. 
C)  indicators of the relative scarcity of resources and products. 
D)  all of the above. 
A)  conveyors of information. 
B)  determined by the interactions of supply and demand in voluntary exchange. 
C)  indicators of the relative scarcity of resources and products. 
D)  all of the above.

Question 6

Liam is willing to cut lawns for a minimum of $200 a week. He is, however, paid $250 for the same service by a lawn maintenance company. This is an example of

Accepted Answer

A)  consumer surplus. 
B)  employment discrimination. 
C)  producer surplus. 
D)  the derivation of accounting profit. 
A)  consumer surplus. 
B)  employment discrimination. 
C)  producer surplus. 
D)  the derivation of accounting profit.

Question 7

Consider the market for grapes. An increase in the wage paid to grape pickers will cause the

Accepted Answer

A)  demand curve for grapes to shift to the right, resulting in a higher equilibrium price for grapes and a reduction in the quantity consumed. 
B)  demand curve for grapes to shift to the left, resulting in a lower equilibrium price for grapes and an increase in the quantity consumed. 
C)  supply curve for grapes to shift to the left, resulting in a lower equilibrium price for grapes and a decrease in the quantity consumed. 
D)  supply curve for grapes to shift to the left, resulting in a higher equilibrium price for grapes and a decrease in the quantity consumed. 
A)  demand curve for grapes to shift to the right, resulting in a higher equilibrium price for grapes and a reduction in the quantity consumed. 
B)  demand curve for grapes to shift to the left, resulting in a lower equilibrium price for grapes and an increase in the quantity consumed. 
C)  supply curve for grapes to shift to the left, resulting in a lower equilibrium price for grapes and a decrease in the quantity consumed. 
D)  supply curve for grapes to shift to the left, resulting in a higher equilibrium price for grapes and a decrease in the quantity consumed.

Question 8

Corn and soybeans are alternatives that could be grown by most farmers. If government subsidies for ethanol lead to higher corn prices, this will

Accepted Answer

A)  increase the supply of corn. 
B)  increase the supply of soybeans. 
C)  decrease the supply of soybeans. 
D)  decrease the supply of corn. 
E)  have no effect on the supplies of corn and soybeans. 
A)  increase the supply of corn. 
B)  increase the supply of soybeans. 
C)  decrease the supply of soybeans. 
D)  decrease the supply of corn. 
E)  have no effect on the supplies of corn and soybeans.

Question 9

Which of the following events would increase producer surplus?

Accepted Answer

A)  Sellers' costs stay the same and the price of the good increases. 
B)  Sellers' costs increase and the price of the good stays the same. 
C)  Sellers' costs increase and the price of the good decreases. 
D)  All of the above are correct. 
A)  Sellers' costs stay the same and the price of the good increases. 
B)  Sellers' costs increase and the price of the good stays the same. 
C)  Sellers' costs increase and the price of the good decreases. 
D)  All of the above are correct.

Question 10

Figure 3-18  
-Refer to Figure 3-18. Which area represents consumer surplus at a price of P1?

Accepted Answer

A)  ABD 
B)  ACF 
C)  BCDE 
D)  DEF 
A)  ABD 
B)  ACF 
C)  BCDE 
D)  DEF

Question 11

Which of the following is true of profits and losses?

Accepted Answer

A)  Profits direct entrepreneurs toward production of goods that are highly valued relative to their cost, while losses direct them away from wealth-reducing activities. 
B)  Profits indicate that the firm is charging prices that are too high, while losses indicate that the firm needs to raise its prices. 
C)  Profits indicate that the consumer is getting a bad deal, while losses indicate that the consumer values the product highly relative to its cost. 
D)  Profits indicate that the suppliers of resources are underpaid, while losses indicate they are overpaid. 
A)  Profits direct entrepreneurs toward production of goods that are highly valued relative to their cost, while losses direct them away from wealth-reducing activities. 
B)  Profits indicate that the firm is charging prices that are too high, while losses indicate that the firm needs to raise its prices. 
C)  Profits indicate that the consumer is getting a bad deal, while losses indicate that the consumer values the product highly relative to its cost. 
D)  Profits indicate that the suppliers of resources are underpaid, while losses indicate they are overpaid.

Question 12

Which of the following does the law of demand specifically imply?

Accepted Answer

A)  If the product price increases, quantity demanded will decrease. 
B)  If consumer income increases, quantity demanded will increase. 
C)  If the product price increases, quantity demanded will increase. 
D)  If consumer income increases, quantity demanded will decrease. 
E)  If supply increases, demand will increase. 
A)  If the product price increases, quantity demanded will decrease. 
B)  If consumer income increases, quantity demanded will increase. 
C)  If the product price increases, quantity demanded will increase. 
D)  If consumer income increases, quantity demanded will decrease. 
E)  If supply increases, demand will increase.

Question 13

Figure 3-22        
-Refer to Figure 3-22. Which of the four graphs illustrates an increase in quantity supplied?

Accepted Answer

A)  A 
B)  B 
C)  C 
D)  D 
A)  A 
B)  B 
C)  C 
D)  D

Question 14

Which of the following is the best description of the effects of an increase in the supply of bread?

Accepted Answer

A)  Consumers will pay more for bread. 
B)  Bread prices will fall, and bread sales will rise. 
C)  A permanent surplus of bread will remain on the market. 
D)  Bakers will have higher marginal costs. 
A)  Consumers will pay more for bread. 
B)  Bread prices will fall, and bread sales will rise. 
C)  A permanent surplus of bread will remain on the market. 
D)  Bakers will have higher marginal costs.

Question 15

Producers are willing to offer greater quantities for sale at higher prices because

Accepted Answer

A)  they have the incentive to pay the increasing opportunity cost of resources necessary to attract them from alternative uses 
B)  they will decrease their profits by expanding production at higher prices 
C)  the government orders them to do so 
D)  lower prices attract new firms, which have higher costs of production 
E)  they hire superior quality, higher-priced resources as production expands 
A)  they have the incentive to pay the increasing opportunity cost of resources necessary to attract them from alternative uses 
B)  they will decrease their profits by expanding production at higher prices 
C)  the government orders them to do so 
D)  lower prices attract new firms, which have higher costs of production 
E)  they hire superior quality, higher-priced resources as production expands

Question 16

Jamal buys a new jacket for $50. If his willingness to pay is ____, he receives consumer surplus of $15 on his purchase

Accepted Answer

A)  $15. 
B)  $35. 
C)  $50. 
D)  $65. 
A)  $15. 
B)  $35. 
C)  $50. 
D)  $65.

Question 17

Kayla decides that she would pay as much as $400 for a new refrigerator. She buys the refrigerator and realizes consumer surplus of $75. How much did Kayla pay for her refrigerator?

Accepted Answer

A)  $75 
B)  $325 
C)  $400 
D)  $475 
A)  $75 
B)  $325 
C)  $400 
D)  $475

Question 18

How will a reduction in the price of cotton influence the market for blue jeans?

Accepted Answer

A)  The cost of producing blue jeans will fall, and the supply curve for blue jeans will shift to the left. 
B)  The cost of producing blue jeans will fall, and the supply curve for blue jeans will shift to the right. 
C)  The cost of producing blue jeans will rise, and the supply curve for blue jeans will shift to the left. 
D)  The cost of producing blue jeans will rise, and the supply curve for blue jeans will shift to the right. 
A)  The cost of producing blue jeans will fall, and the supply curve for blue jeans will shift to the left. 
B)  The cost of producing blue jeans will fall, and the supply curve for blue jeans will shift to the right. 
C)  The cost of producing blue jeans will rise, and the supply curve for blue jeans will shift to the left. 
D)  The cost of producing blue jeans will rise, and the supply curve for blue jeans will shift to the right.

Question 19

Isabella buys a new camera for $80. She receives consumer surplus of $35 on her purchase if her willingness to pay is

Accepted Answer

A)  $35. 
B)  $45. 
C)  $80. 
D)  $115. 
A)  $35. 
B)  $45. 
C)  $80. 
D)  $115.

Question 20

When there is excess supply of a product in a market,

Accepted Answer

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

How would a decrease in the cost of production affect the market for video games?

When property rights are well defined and markets are competitive,

To the extent that current profits are directly related to future profits, a high price/earnings ratio would indicate that stocks are

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

Market prices are

Liam is willing to cut lawns for a minimum of $200 a week. He is, however, paid $250 for the same service by a lawn maintenance company. This is an example of

Consider the market for grapes. An increase in the wage paid to grape pickers will cause the

Corn and soybeans are alternatives that could be grown by most farmers. If government subsidies for ethanol lead to higher corn prices, this will

Which of the following events would increase producer surplus?

Figure 3-18 -Refer to Figure 3-18. Which area represents consumer surplus at a price of P₁?

Which of the following is true of profits and losses?

Which of the following does the law of demand specifically imply?

Figure 3-22 -Refer to Figure 3-22. Which of the four graphs illustrates an increase in quantity supplied?

Which of the following is the best description of the effects of an increase in the supply of bread?

Producers are willing to offer greater quantities for sale at higher prices because

Jamal buys a new jacket for $50. If his willingness to pay is ____, he receives consumer surplus of $15 on his purchase

Kayla decides that she would pay as much as $400 for a new refrigerator. She buys the refrigerator and realizes consumer surplus of $75. How much did Kayla pay for her refrigerator?

How will a reduction in the price of cotton influence the market for blue jeans?

Isabella buys a new camera for $80. She receives consumer surplus of $35 on her purchase if her willingness to pay is

When there is excess supply of a product in a market,

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

How would a decrease in the cost of production affect the market for video games?

When property rights are well defined and markets are competitive,

To the extent that current profits are directly related to future profits, a high price/earnings ratio would indicate that stocks are

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

Market prices are

Liam is willing to cut lawns for a minimum of $200 a week. He is, however, paid $250 for the same service by a lawn maintenance company. This is an example of

Consider the market for grapes. An increase in the wage paid to grape pickers will cause the

Corn and soybeans are alternatives that could be grown by most farmers. If government subsidies for ethanol lead to higher corn prices, this will

Which of the following events would increase producer surplus?

Figure 3-18 -Refer to Figure 3-18. Which area represents consumer surplus at a price of P1?

Which of the following is true of profits and losses?

Which of the following does the law of demand specifically imply?

Figure 3-22 -Refer to Figure 3-22. Which of the four graphs illustrates an increase in quantity supplied?

Which of the following is the best description of the effects of an increase in the supply of bread?

Producers are willing to offer greater quantities for sale at higher prices because

Jamal buys a new jacket for $50. If his willingness to pay is ____, he receives consumer surplus of $15 on his purchase

Kayla decides that she would pay as much as $400 for a new refrigerator. She buys the refrigerator and realizes consumer surplus of $75. How much did Kayla pay for her refrigerator?

How will a reduction in the price of cotton influence the market for blue jeans?

Isabella buys a new camera for $80. She receives consumer surplus of $35 on her purchase if her willingness to pay is

When there is excess supply of a product in a market,

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 3-18 -Refer to Figure 3-18. Which area represents consumer surplus at a price of P₁?