Question 1

According to the concept of diminishing marginal utility, consumers will purchase more of a good when the price falls because

Accepted Answer

A)  substitutes are relatively more expensive. 
B)  consumers' real income has increased. 
C)  the marginal beneﬁt of additional units of the good now outweigh the marginal cost. 
D)  the good is now perceived as having higher quality. 
A)  substitutes are relatively more expensive. 
B)  consumers' real income has increased. 
C)  the marginal beneﬁt of additional units of the good now outweigh the marginal cost. 
D)  the good is now perceived as having higher quality.

Question 2

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

Accepted Answer

A)  a shortage of 200 units. 
B)  a surplus of 200 units. 
C)  a surplus of 250 units. 
D)  a shortage of 250 units. 
A)  a shortage of 200 units. 
B)  a surplus of 200 units. 
C)  a surplus of 250 units. 
D)  a shortage of 250 units.

Question 3

A decrease in the demand for recreational ﬁshing boats might be caused by an increase in the

Accepted Answer

A)  income of sports ﬁshers. 
B)  price of outboard motors. 
C)  size and number of ﬁsh available. 
D)  price of sailing boats. 
A)  income of sports ﬁshers. 
B)  price of outboard motors. 
C)  size and number of ﬁsh available. 
D)  price of sailing boats.

Question 4

A price ceiling means that

Accepted Answer

A)  there is currently a surplus of the relevant product. 
B)  government is imposing a legal price that is typically below the equilibrium price. 
C)  government wants to stop a deﬂationary spiral. 
D)  government is imposing a legal price that is typically above the equilibrium price. 
A)  there is currently a surplus of the relevant product. 
B)  government is imposing a legal price that is typically below the equilibrium price. 
C)  government wants to stop a deﬂationary spiral. 
D)  government is imposing a legal price that is typically above the equilibrium price.

Question 5

(Advanced analysis) The demand for commodity X is represented by the equation P = 10 - 0.2Q and supply by the equation P = 2 + 0.2Q. If demand changes from P = 10 - 0.2Q to P = 7 - 0.3Q, the new
Equilibrium price is

Accepted Answer

A)  $2. 
B)  $4. 
C)  $6. 
D)  $7. 
A)  $2. 
B)  $4. 
C)  $6. 
D)  $7.

Question 6

The law of supply indicates that, other things equal,

Accepted Answer

A)  producers will offer more of a product at high prices than at low prices. 
B)  the product supply curve is downsloping. 
C)  consumers will purchase less of a good at high prices than at low prices. 
D)  producers will offer more of a product at low prices than at high prices. 
A)  producers will offer more of a product at high prices than at low prices. 
B)  the product supply curve is downsloping. 
C)  consumers will purchase less of a good at high prices than at low prices. 
D)  producers will offer more of a product at low prices than at high prices.

Question 7

The market demand schedule or curve for a product shows the relationship between how much of the product buyers are willing and able to buy and the

Accepted Answer

A)  product's price. 
B)  buyers' incomes. 
C)  cost of producing the product. 
D)  available supply of the product. 
A)  product's price. 
B)  buyers' incomes. 
C)  cost of producing the product. 
D)  available supply of the product.

Question 8

All of the following are assumed to be constant when the supply curve for a product is drawn, except the

Accepted Answer

A)  price of the product. 
B)  production technology used by the ﬁrm. 
C)  number of producers. 
D)  price of inputs used to make the product. 
A)  price of the product. 
B)  production technology used by the ﬁrm. 
C)  number of producers. 
D)  price of inputs used to make the product.

Question 9

Other things equal, which of the following might shift the demand curve for gasoline to the left?

Accepted Answer

A)  the discovery of vast new oil reserves in Montana 
B)  the development of a low-cost electric automobile 
C)  an increase in the price of train and air transportation 
D)  a large decline in the price of automobiles 
A)  the discovery of vast new oil reserves in Montana 
B)  the development of a low-cost electric automobile 
C)  an increase in the price of train and air transportation 
D)  a large decline in the price of automobiles

Question 10

A decrease in the price of digital cameras will

Accepted Answer

A)  cause the demand curve for memory cards to become vertical. 
B)  shift the demand curve for memory cards to the right. 
C)  shift the demand curve for memory cards to the left. 
D)  not affect the demand for memory cards. 
A)  cause the demand curve for memory cards to become vertical. 
B)  shift the demand curve for memory cards to the right. 
C)  shift the demand curve for memory cards to the left. 
D)  not affect the demand for memory cards.

Question 11

The demand for most products varies directly with changes in consumer incomes. Such products are known as

Accepted Answer

A)  complementary goods. 
B)  competitive goods. 
C)  inferior goods. 
D)  normal goods. 
A)  complementary goods. 
B)  competitive goods. 
C)  inferior goods. 
D)  normal goods.

Question 12

Steve went to his favorite hamburger restaurant with $3, expecting to buy a $2 hamburger and a $1 soda. When he arrived, he discovered that hamburgers were on sale for $1 each, so Steve bought
Two hamburgers and a soda. Steve's response to the decrease in the price of hamburgers is best
Explained by

Accepted Answer

A)  the substitution effect. 
B)  the income effect. 
C)  the price effect. 
D)  a rightward shift in the demand curve for hamburgers. 
A)  the substitution effect. 
B)  the income effect. 
C)  the price effect. 
D)  a rightward shift in the demand curve for hamburgers.

Question 13

One reason that the quantity demanded of a good increases when its price falls is that the

Accepted Answer

A)  price decline shifts the supply curve to the left. 
B)  lower price shifts the demand curve to the left. 
C)  lower price shifts the demand curve to the right. 
D)  lower price increases the real incomes of buyers, enabling them to buy more. 
A)  price decline shifts the supply curve to the left. 
B)  lower price shifts the demand curve to the left. 
C)  lower price shifts the demand curve to the right. 
D)  lower price increases the real incomes of buyers, enabling them to buy more.

Question 14

$$\begin{array} { | c | c | c | } 
\hline \text { Quantity Demanded } & \text { Price } & \text { Quantity Supplied } \
\hline 5 & \$ 7 & 9 \
\hline 6 & 6 & 8 \
\hline 7 & 5 & 7 \
\hline 8 & 4 & 6 \
\hline 9 & 3 & 5 \
\hline 10 & 2 & 4 \
\hline 11 & 1 & 3 \
\hline
\end{array}$$ Refer to the above table. If demand decreased by 4 units at each price and supply decreased by 2 units at each price, what would the new equilibrium price and quantity be?

Accepted Answer

A)  $3 and 5 units 
B)  $4 and 4 units 
C)  $5 and 5 units 
D)  $6 and 6 units 
A)  $3 and 5 units 
B)  $4 and 4 units 
C)  $5 and 5 units 
D)  $6 and 6 units

Question 15

At the equilibrium price,

Accepted Answer

A)  quantity supplied may exceed quantity demanded or vice versa. 
B)  there are no pressures on price to either rise or fall. 
C)  there are forces that cause price to rise. 
D)  there are forces that cause price to fall. 
A)  quantity supplied may exceed quantity demanded or vice versa. 
B)  there are no pressures on price to either rise or fall. 
C)  there are forces that cause price to rise. 
D)  there are forces that cause price to fall.

Question 16

All markets involve the following elements, except

Accepted Answer

A)  demand or buyers. 
B)  face-to-face negotiation. 
C)  prices of goods and services. 
D)  supply or sellers. 
A)  demand or buyers. 
B)  face-to-face negotiation. 
C)  prices of goods and services. 
D)  supply or sellers.

Question 17

When economists speak of "demand" in a particular market, they refer to

Accepted Answer

A)  the whole demand curve or schedule. 
B)  one point on the demand curve. 
C)  one price-quantity combination on the demand schedule. 
D)  how much of an item buyers want to buy at a given price. 
A)  the whole demand curve or schedule. 
B)  one point on the demand curve. 
C)  one price-quantity combination on the demand schedule. 
D)  how much of an item buyers want to buy at a given price.

Question 18

Refer to the diagram, which shows demand and supply conditions in the competitive market for product X. If supply is S1 and demand D0, then

Accepted Answer

A)  at any price above G a shortage would occur. 
B)  F represents a price that would result in a surplus of AC. 
C)  a surplus of GH would occur. 
D)  F represents a price that would result in a shortage of AC. 
A)  at any price above G a shortage would occur. 
B)  F represents a price that would result in a surplus of AC. 
C)  a surplus of GH would occur. 
D)  F represents a price that would result in a shortage of AC.

Question 19

Suppose that corn prices rise signiﬁcantly. If farmers expect the price of corn to continue rising relative to other crops, then we would expect

Accepted Answer

A)  the supply of ethanol, a corn-based product, to increase. 
B)  consumer demand for wheat to fall. 
C)  the supply to increase as farmers plant more corn. 
D)  the supply to fall as farmers plant more of other crops. 
A)  the supply of ethanol, a corn-based product, to increase. 
B)  consumer demand for wheat to fall. 
C)  the supply to increase as farmers plant more corn. 
D)  the supply to fall as farmers plant more of other crops.

Question 20

In order to derive a market demand curve from individuals' demand curves, we add up the

Accepted Answer

A)  various individuals' quantities demanded at each price level. 
B)  various prices that each buyer is willing and able to pay. 
C)  incomes of all buyers, assuming that their tastes remain constant. 
D)  total number of buyers in the market at each time period. 
A)  various individuals' quantities demanded at each price level. 
B)  various prices that each buyer is willing and able to pay. 
C)  incomes of all buyers, assuming that their tastes remain constant. 
D)  total number of buyers in the market at each time period.

Exam 3: Demand, Supply, and Market Equilibrium

According to the concept of diminishing marginal utility, consumers will purchase more of a good when the price falls because

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

A decrease in the demand for recreational ﬁshing boats might be caused by an increase in the

A price ceiling means that

(Advanced analysis) The demand for commodity X is represented by the equation P = 10 - 0.2Q and supply by the equation P = 2 + 0.2Q. If demand changes from P = 10 - 0.2Q to P = 7 - 0.3Q, the new Equilibrium price is

The law of supply indicates that, other things equal,

The market demand schedule or curve for a product shows the relationship between how much of the product buyers are willing and able to buy and the

All of the following are assumed to be constant when the supply curve for a product is drawn, except the

Other things equal, which of the following might shift the demand curve for gasoline to the left?

A decrease in the price of digital cameras will

The demand for most products varies directly with changes in consumer incomes. Such products are known as

One reason that the quantity demanded of a good increases when its price falls is that the

Quantity Demanded Price Quantity Supplied 5 \ 7 9 6 6 8 7 5 7 8 4 6 9 3 5 10 2 4 11 1 3 Refer to the above table. If demand decreased by 4 units at each price and supply decreased by 2 units at each price, what would the new equilibrium price and quantity be?

At the equilibrium price,

All markets involve the following elements, except

When economists speak of "demand" in a particular market, they refer to

Refer to the diagram, which shows demand and supply conditions in the competitive market for product X. If supply is S1 and demand D0, then

Suppose that corn prices rise signiﬁcantly. If farmers expect the price of corn to continue rising relative to other crops, then we would expect

In order to derive a market demand curve from individuals' demand curves, we add up the

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

Filters