Question 1

A market that is achieving allocative efficiency also is assumed to be achieving productive efficiency.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following statements is correct?

Accepted Answer

A) If supply decreases and demand increases, equilibrium price will rise. 
B) If supply decreases and demand decreases, equilibrium quantity will rise. 
C) If supply decreases and demand decreases, equilibrium price will fall. 
D) If supply decreases and demand increases, equilibrium quantity will rise. 
E) If supply decreases and demand remains constant, equilibrium price is indeterminate. 
A) If supply decreases and demand increases, equilibrium price will rise. 
B) If supply decreases and demand decreases, equilibrium quantity will rise. 
C) If supply decreases and demand decreases, equilibrium price will fall. 
D) If supply decreases and demand increases, equilibrium quantity will rise. 
E) If supply decreases and demand remains constant, equilibrium price is indeterminate.

Question 3

Graphically, the market demand curve is

Accepted Answer

A) steeper than any individual demand curve that is part of it. 
B) greater than the sum of the individual demand curves. 
C) the horizontal sum of individual demand curves. 
D) the vertical sum of individual demand curves. 
A) steeper than any individual demand curve that is part of it. 
B) greater than the sum of the individual demand curves. 
C) the horizontal sum of individual demand curves. 
D) the vertical sum of individual demand curves.

Question 4

In cases where sellers have a fixed number of units of a product to sell, the supply curve will be horizontal.

Accepted Answer

A) True 
 B)False

Question 5

Refer to the diagram. The equilibrium price and quantity in this market will be

Accepted Answer

A) $1.00 and 200. 
B) $1.60 and 130. 
C) $0.50 and 130. 
D) $1.60 and 290. 
A) $1.00 and 200. 
B) $1.60 and 130. 
C) $0.50 and 130. 
D) $1.60 and 290.

Question 6

What is a price ceiling and what are its economic effects?

Accepted Answer

A price ceiling is an artificial price s

Question 7

Suppose that at prices of $1, $2, $3, $4, and $5 for product Z, the corresponding quantities supplied are 3, 4, 5, 6, and 7 units, respectively. Which of the following would increase the quantities supplied of Z to, say, 6, 8, 10, 12, and 14 units at these prices?

Accepted Answer

A) improved technology for producing Z 
B) an increase in the prices of the resources used to make Z 
C) an increase in the excise tax on product Z 
D) increases in the incomes of the buyers of Z 
A) improved technology for producing Z 
B) an increase in the prices of the resources used to make Z 
C) an increase in the excise tax on product Z 
D) increases in the incomes of the buyers of Z

Question 8

If the newspapers report that there is a shortage of strawberries, it must mean that the current price of strawberries is below the equilibrium price.

Accepted Answer

A) True 
 B)False

Question 9

Refer to the diagram. A government price support program to aid farmers is best illustrated by

Accepted Answer

A) quantity E. 
B) price C. 
C) price A. 
D) price B. 
A) quantity E. 
B) price C. 
C) price A. 
D) price B.

Question 10

A primary advantage of Uber to government-regulated taxis is that

Accepted Answer

A) Uber riders are guaranteed lower fares. 
B) Uber drivers are required to meet more stringent safety standards. 
C) Uber's dynamic pricing avoids the inefficiencies caused by regulated taxi fares. 
D) the greater monopoly for rides increases profits for both Uber and regular taxi drivers. 
A) Uber riders are guaranteed lower fares. 
B) Uber drivers are required to meet more stringent safety standards. 
C) Uber's dynamic pricing avoids the inefficiencies caused by regulated taxi fares. 
D) the greater monopoly for rides increases profits for both Uber and regular taxi drivers.

Question 11

When the government pushes for expanded use of corn, such as requiring ethanol from corn to be used as an additive to gasoline, the impact in the market is that the supply of corn decreases.

Accepted Answer

A) True 
 B)False

Question 12

A decrease in supply of X increases the equilibrium price of X, which reduces the demand for X and automatically returns the price of X to its initial level.

Accepted Answer

A) True 
 B)False

Question 13

If the demand curve for product B shifts to the right as the price of product A declines, then

Accepted Answer

A) both A and B are inferior goods. 
B) A is a superior good and B is an inferior good. 
C) A is an inferior good and B is a superior good. 
D) A and B are complementary goods. 
A) both A and B are inferior goods. 
B) A is a superior good and B is an inferior good. 
C) A is an inferior good and B is a superior good. 
D) A and B are complementary goods.

Question 14

A product market is in equilibrium

Accepted Answer

A) whenever there is no surplus of the product. 
B) whenever there is no shortage of the product. 
C) when consumers want to buy more of the product than producers offer for sale. 
D) where the demand and supply curves intersect. 
A) whenever there is no surplus of the product. 
B) whenever there is no shortage of the product. 
C) when consumers want to buy more of the product than producers offer for sale. 
D) where the demand and supply curves intersect.

Question 15

A market is in equilibrium

Accepted Answer

A) provided there is no surplus of the product. 
B) at all prices above that shown by the intersection of the supply and demand curves. 
C) if the amount producers want to sell is equal to the amount consumers want to buy. 
D) whenever the demand curve is downsloping and the supply curve is upsloping. 
A) provided there is no surplus of the product. 
B) at all prices above that shown by the intersection of the supply and demand curves. 
C) if the amount producers want to sell is equal to the amount consumers want to buy. 
D) whenever the demand curve is downsloping and the supply curve is upsloping.

Question 16

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

Accepted Answer

A) demand has increased. 
B) demand has decreased. 
C) supply will increase. 
D) supply will decrease. 
A) demand has increased. 
B) demand has decreased. 
C) supply will increase. 
D) supply will decrease.

Question 17

If two goods are substitutes, a decline in the price of one will cause a decrease in the demand for the other.

Accepted Answer

A) True 
 B)False

Question 18

Use supply and demand analysis to explain what is most likely to happen to price and quantity in a market for a crop such as lettuce, tomatoes, or oranges, when extreme weather destroys a large portion of the crop.

Accepted Answer

The supply of the crop will de

Question 19

Answer the question based on the given supply and demand data for wheat.   If price was initially $4 and free to fluctuate, we would expect the

Accepted Answer

A) quantity supplied to continue to exceed the quantity demanded. 
B) quantity of wheat supplied to decline as a result of the subsequent price change. 
C) quantity of wheat demanded to fall as a result of the subsequent price change. 
D) price of wheat to rise. 
A) quantity supplied to continue to exceed the quantity demanded. 
B) quantity of wheat supplied to decline as a result of the subsequent price change. 
C) quantity of wheat demanded to fall as a result of the subsequent price change. 
D) price of wheat to rise.

Question 20

A market that achieves productive efficiency is necessarily producing the quantity of goods most desired by society.

Accepted Answer

A) True 
 B)False

Exam 3: Demand, Supply, and Market Equilibrium

A market that is achieving allocative efficiency also is assumed to be achieving productive efficiency.

Which of the following statements is correct?

Graphically, the market demand curve is

In cases where sellers have a fixed number of units of a product to sell, the supply curve will be horizontal.

Refer to the diagram. The equilibrium price and quantity in this market will be

What is a price ceiling and what are its economic effects?

Suppose that at prices of $1, $2, $3, $4, and $5 for product Z, the corresponding quantities supplied are 3, 4, 5, 6, and 7 units, respectively. Which of the following would increase the quantities supplied of Z to, say, 6, 8, 10, 12, and 14 units at these prices?

If the newspapers report that there is a shortage of strawberries, it must mean that the current price of strawberries is below the equilibrium price.

Refer to the diagram. A government price support program to aid farmers is best illustrated by

A primary advantage of Uber to government-regulated taxis is that

When the government pushes for expanded use of corn, such as requiring ethanol from corn to be used as an additive to gasoline, the impact in the market is that the supply of corn decreases.

A decrease in supply of X increases the equilibrium price of X, which reduces the demand for X and automatically returns the price of X to its initial level.

If the demand curve for product B shifts to the right as the price of product A declines, then

A product market is in equilibrium

A market is in equilibrium

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

If two goods are substitutes, a decline in the price of one will cause a decrease in the demand for the other.

Use supply and demand analysis to explain what is most likely to happen to price and quantity in a market for a crop such as lettuce, tomatoes, or oranges, when extreme weather destroys a large portion of the crop.

Answer the question based on the given supply and demand data for wheat. If price was initially $4 and free to fluctuate, we would expect the

A market that achieves productive efficiency is necessarily producing the quantity of goods most desired by society.

Limits, Alternatives, and Choices

The Market System and the Circular Flow

Market Failures Caused by Externalities Asymmetric Information

Public Goods, Public Choice, and Government Failure

Elasticity

Utility Maximization

Behavioral Economics

Businesses and the Costs of Production

Pure Competition in the Short Run

Pure Competition in the Long Run

Pure Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Technology, RD, and Efficiency

The Demand for Resources

Wage Determination

Rent, Interest, and Profit

Natural Resource and Energy Economics

Public Finance: Expenditures and Taxes

Antitrust Policy and Regulation

Agriculture: Economics and Policy

Income Inequality, Poverty, and Discrimination

Health Care

Immigration

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

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