Question 1

If an economy is being "productively eﬃcient," then that means the economy is

Accepted Answer

A)  producing the products most wanted by society. 
B)  fully employing all economic resources. 
C)  maximizing the returns to factors of production. 
D)  using the least costly production techniques. 
A)  producing the products most wanted by society. 
B)  fully employing all economic resources. 
C)  maximizing the returns to factors of production. 
D)  using the least costly production techniques.

Question 2

Assume that the graphs show a competitive market for the product stated in the question.   Select the graph above that best shows the change in the market speciﬁed in the following
Situation: the market for chicken, when the price of a substitute, such as beef, decreases.

Accepted Answer

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

Question 3

$$\begin{array} { | c | c | c | c | c | } 
\hline ( 1 ) & ( 2 ) & ( 3 ) & ( 4 ) & ( 5 ) \
Q _ { d } & Q _ { d } & \text { Price } & Q _ { S } & Q _ { S } \
\hline 50 & 40 & \$ 10 & 70 & 80 \
\hline 60 & 50 & 9 & 60 & 70 \
\hline 80 & 60 & 8 & 50 & 60 \
\hline 90 & 70 & 7 & 40 & 50 \
\hline 100 & 80 & 6 & 30 & 40 \
\hline
\end{array}$$ Refer to the table. Suppose that demand is represented by columns (3) and (2) and supply is represented by columns (3) and (5). If the price were arti?cially set at $9,

Accepted Answer

A)  the market would clear. 
B)  a surplus of 20 units would occur. 
C)  a shortage of 20 units would occur. 
D)  demand would change from columns (3) and (2) to columns (3) and (1). 
A)  the market would clear. 
B)  a surplus of 20 units would occur. 
C)  a shortage of 20 units would occur. 
D)  demand would change from columns (3) and (2) to columns (3) and (1).

Question 4

A shift to the right in the demand curve for product A can be most reasonably explained by saying that

Accepted Answer

A)  consumer incomes have declined, and consumers now want to buy less of A at each possible price. 
B)  the price of A has increased and, as a result, consumers want to purchase less of it. 
C)  consumer preferences have changed in favor of A so they now want to buy more at each possible price. 
D)  the price of A has declined and, as a result, consumers want to purchase more of it. 
A)  consumer incomes have declined, and consumers now want to buy less of A at each possible price. 
B)  the price of A has increased and, as a result, consumers want to purchase less of it. 
C)  consumer preferences have changed in favor of A so they now want to buy more at each possible price. 
D)  the price of A has declined and, as a result, consumers want to purchase more of it.

Question 5

For most products, purchases tend to fall with decreases in buyers' incomes. Such products are known as

Accepted Answer

A)  inferior goods. 
B)  direct goods. 
C)  average goods. 
D)  normal goods. 
A)  inferior goods. 
B)  direct goods. 
C)  average goods. 
D)  normal goods.

Question 6

In a competitive market illustrated by the diagram above, a price ceiling of $25 per unit will result in

Accepted Answer

A)  the market staying at an equilibrium price of $15. 
B)  a surplus of 200 units. 
C)  a shortage of 200 units. 
D)  a shortage of 150 units. 
A)  the market staying at an equilibrium price of $15. 
B)  a surplus of 200 units. 
C)  a shortage of 200 units. 
D)  a shortage of 150 units.

Question 7

The following are explanations of the Law of Demand, except

Accepted Answer

A)  expectations effect. 
B)  diminishing marginal utility. 
C)  income effect. 
D)  substitution effect. 
A)  expectations effect. 
B)  diminishing marginal utility. 
C)  income effect. 
D)  substitution effect.

Question 8

Which of the following statements about ticket scalping is correct?

Accepted Answer

A)  Scalping tends to be prevalent when there is a surplus of tickets. 
B)  Scalping tends to be prevalent when there is a shortage of tickets. 
C)  Scalping beneﬁts only one party-the sellers-but not the buyers. 
D)  Scalping beneﬁts only one party-the buyers-but not the sellers. 
A)  Scalping tends to be prevalent when there is a surplus of tickets. 
B)  Scalping tends to be prevalent when there is a shortage of tickets. 
C)  Scalping beneﬁts only one party-the sellers-but not the buyers. 
D)  Scalping beneﬁts only one party-the buyers-but not the sellers.

Question 9

Which of the following would most likely increase the demand for gasoline?

Accepted Answer

A)  the expectation by consumers that gasoline prices will be higher in the future 
B)  the expectation by consumers that gasoline prices will be lower in the future 
C)  a widespread shift in car ownership from SUVs to hybrid sedans 
D)  a decrease in the price of public transportation 
A)  the expectation by consumers that gasoline prices will be higher in the future 
B)  the expectation by consumers that gasoline prices will be lower in the future 
C)  a widespread shift in car ownership from SUVs to hybrid sedans 
D)  a decrease in the price of public transportation

Question 10

As a result of a decrease in the price of online streaming movies, consumers download more movies online and buy fewer DVDs. This is an illustration of

Accepted Answer

A)  consumer sovereignty. 
B)  the income effect. 
C)  the substitution effect. 
D)  diminishing marginal utility. 
A)  consumer sovereignty. 
B)  the income effect. 
C)  the substitution effect. 
D)  diminishing marginal utility.

Question 11

When economists say that the demand for a product has decreased, they mean that

Accepted Answer

A)  the demand curve has shifted to the right. 
B)  the product has become particularly scarce for some reason. 
C)  the product has become more expensive and thus consumers are buying less of it. 
D)  consumers are now willing and able to buy less of this product at each possible price. 
A)  the demand curve has shifted to the right. 
B)  the product has become particularly scarce for some reason. 
C)  the product has become more expensive and thus consumers are buying less of it. 
D)  consumers are now willing and able to buy less of this product at each possible price.

Question 12

With a downsloping demand curve and an upsloping supply curve for a product, placing an excise tax on this product will

Accepted Answer

A)  increase equilibrium price and quantity. 
B)  decrease equilibrium price and quantity. 
C)  decrease equilibrium price and increase equilibrium quantity. 
D)  increase equilibrium price and decrease equilibrium quantity. 
A)  increase equilibrium price and quantity. 
B)  decrease equilibrium price and quantity. 
C)  decrease equilibrium price and increase equilibrium quantity. 
D)  increase equilibrium price and decrease equilibrium quantity.

Question 13

(Consider This) Suppose that coffee growers sell 200 million pounds of coffee beans at $2 per pound in 2015 and 240 million pounds for $3 per pound in 2016. Based on this information, we can
Conclude that the

Accepted Answer

A)  law of supply has been violated. 
B)  law of demand has been violated. 
C)  demand for coffee beans has increased. 
D)  supply of coffee beans has increased. 
A)  law of supply has been violated. 
B)  law of demand has been violated. 
C)  demand for coffee beans has increased. 
D)  supply of coffee beans has increased.

Question 14

If there is a surplus of a product, its price

Accepted Answer

A)  is below the equilibrium level. 
B)  is above the equilibrium level. 
C)  will rise in the near future. 
D)  is in equilibrium. 
A)  is below the equilibrium level. 
B)  is above the equilibrium level. 
C)  will rise in the near future. 
D)  is in equilibrium.

Question 15

A headline reads, "Lumber Prices Up Sharply." In a competitive market, this situation would lead to a(n)

Accepted Answer

A)  increase in the price and quantity of new homes. 
B)  decrease in the price and quantity of new homes. 
C)  increase in the price of new homes and decrease in quantity. 
D)  decrease in the price of new homes and increase in quantity. 
A)  increase in the price and quantity of new homes. 
B)  decrease in the price and quantity of new homes. 
C)  increase in the price of new homes and decrease in quantity. 
D)  decrease in the price of new homes and increase in quantity.

Question 16

An increase in product price will cause

Accepted Answer

A)  quantity demanded to decrease. 
B)  quantity supplied to decrease. 
C)  quantity demanded to increase. 
D)  the supply curve to shift to the left. 
A)  quantity demanded to decrease. 
B)  quantity supplied to decrease. 
C)  quantity demanded to increase. 
D)  the supply curve to shift to the left.

Question 17

(Last Word) According to recent research, which of the following best explains rising tuition costs over the past several years?

Accepted Answer

A)  increased federal subsidies for student loans 
B)  increased spending on faculty salaries 
C)  increased spending on technological infrastructure, including digital classrooms and internet connectivity 
D)  widespread closing of colleges and universities, leading to a dramatic reduction in the supply of higher education 
A)  increased federal subsidies for student loans 
B)  increased spending on faculty salaries 
C)  increased spending on technological infrastructure, including digital classrooms and internet connectivity 
D)  widespread closing of colleges and universities, leading to a dramatic reduction in the supply of higher education

Question 18

Which of the diagrams illustrate(s) the effect of a decrease in incomes on the market for second- hand clothing?

Accepted Answer

A)  A and C 
B)  A only 
C)  B only 
D)  C only 
A)  A and C 
B)  A only 
C)  B only 
D)  C only

Question 19

Markets, viewed from the perspective of the supply and demand model,

Accepted Answer

A)  assume many buyers and many sellers of a standardized product. 
B)  assume market power so that buyers and sellers bargain with one another. 
C)  do not exist in the real-world economy. 
D)  are approximated by markets in which a single seller determines price. 
A)  assume many buyers and many sellers of a standardized product. 
B)  assume market power so that buyers and sellers bargain with one another. 
C)  do not exist in the real-world economy. 
D)  are approximated by markets in which a single seller determines price.

Question 20

At the current price, there is a shortage of a product. We would expect price to

Accepted Answer

A)  increase, quantity demanded to increase, and quantity supplied to decrease. 
B)  increase, quantity demanded to decrease, and quantity supplied to increase. 
C)  increase, quantity demanded to increase, and quantity supplied to increase. 
D)  decrease, quantity demanded to increase, and quantity supplied to decrease. 
A)  increase, quantity demanded to increase, and quantity supplied to decrease. 
B)  increase, quantity demanded to decrease, and quantity supplied to increase. 
C)  increase, quantity demanded to increase, and quantity supplied to increase. 
D)  decrease, quantity demanded to increase, and quantity supplied to decrease.

Exam 3: Demand, Supply, and Market Equilibrium

If an economy is being "productively eﬃcient," then that means the economy is

Assume that the graphs show a competitive market for the product stated in the question. Select the graph above that best shows the change in the market speciﬁed in the following Situation: the market for chicken, when the price of a substitute, such as beef, decreases.

(1) (2) (3) (4) (5) Price 50 40 \ 10 70 80 60 50 9 60 70 80 60 8 50 60 90 70 7 40 50 100 80 6 30 40 Refer to the table. Suppose that demand is represented by columns (3) and (2) and supply is represented by columns (3) and (5). If the price were arti?cially set at $9,

A shift to the right in the demand curve for product A can be most reasonably explained by saying that

For most products, purchases tend to fall with decreases in buyers' incomes. Such products are known as

In a competitive market illustrated by the diagram above, a price ceiling of $25 per unit will result in

The following are explanations of the Law of Demand, except

Which of the following statements about ticket scalping is correct?

Which of the following would most likely increase the demand for gasoline?

As a result of a decrease in the price of online streaming movies, consumers download more movies online and buy fewer DVDs. This is an illustration of

When economists say that the demand for a product has decreased, they mean that

With a downsloping demand curve and an upsloping supply curve for a product, placing an excise tax on this product will

(Consider This) Suppose that coffee growers sell 200 million pounds of coffee beans at $2 per pound in 2015 and 240 million pounds for $3 per pound in 2016. Based on this information, we can Conclude that the

If there is a surplus of a product, its price

A headline reads, "Lumber Prices Up Sharply." In a competitive market, this situation would lead to a(n)

An increase in product price will cause

(Last Word) According to recent research, which of the following best explains rising tuition costs over the past several years?

Which of the diagrams illustrate(s) the effect of a decrease in incomes on the market for second- hand clothing?

Markets, viewed from the perspective of the supply and demand model,

At the current price, there is a shortage of a product. We would expect price to

The Market System and the Circular Flow

Market Failures Caused by Externalities Asymmetric Information

Public Goods, Public Choice, and Government Failure

An Introduction to Macroeconomics

Measuring Domestic Output and National Income

Economic Growth

Business Cycles, Unemployment, and Inflation

Basic Macroeconomic Relationships

The Aggregate Expenditures Model

Aggregate Demand and Aggregate Supply

Fiscal Policy, Deficits, and Debt

Money, Banking, and Financial Institutions

Money Creation

Interest Rates and Monetary Policy

Financial Economics

Extending the Analysis of Aggregate Supply

Current Issues in Macro Theory and Policy

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

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