Question 1

Surpluses cause prices to fall while shortages cause prices to rise.

Accepted Answer

A) True 
 B)False

Question 2

Assuming that wine is a normal good, an increase in consumer income, other things being equal, will:

Accepted Answer

A) cause an upward movement along the demand curve for wine. 
B) shift the demand curve for wine to the left. 
C) cause a downward movement along the demand curve for wine. 
D) shift the demand curve for wine to the right. 
A) cause an upward movement along the demand curve for wine. 
B) shift the demand curve for wine to the left. 
C) cause a downward movement along the demand curve for wine. 
D) shift the demand curve for wine to the right.

Question 3

Suppose the prices of petroleum products, including gasoline and fuel oil, fell sharply. Which of the following would most likely occur as the result of the lower prices of petroleum products?

Accepted Answer

A) A reduction in the consumption of gasoline. 
B) An increase in demand for solar heating systems. 
C) An increase in demand for smaller, more efficient automobiles. 
D) A reduction in the demand for home insulation products. 
A) A reduction in the consumption of gasoline. 
B) An increase in demand for solar heating systems. 
C) An increase in demand for smaller, more efficient automobiles. 
D) A reduction in the demand for home insulation products.

Question 4

The price of a good will fall when:

Accepted Answer

A) there is a shortage of the good. 
B) there is a surplus of the good. 
C) demand for the good increases. 
D) the supply of the good decreases. 
A) there is a shortage of the good. 
B) there is a surplus of the good. 
C) demand for the good increases. 
D) the supply of the good decreases.

Question 5

Which of the following pairs is the best example of complements?

Accepted Answer

A) Coffee and tea. 
B) DVDs and tapes. 
C) Hiking boots and athletic shoes. 
D) Tortillas and salsa. 
A) Coffee and tea. 
B) DVDs and tapes. 
C) Hiking boots and athletic shoes. 
D) Tortillas and salsa.

Question 6

When the price of a good is above its equilibrium price, a:

Accepted Answer

A) surplus puts upward pressure on the price. 
B) surplus puts downward pressure on the price. 
C) shortage puts upward pressure on the price. 
D) shortage puts downward pressure on the price. 
A) surplus puts upward pressure on the price. 
B) surplus puts downward pressure on the price. 
C) shortage puts upward pressure on the price. 
D) shortage puts downward pressure on the price.

Question 7

Which of the following is closest to the definition of demand?

Accepted Answer

A) People's willingness to supply goods at specific prices. 
B) People's willingness to buy goods and services at given prices. 
C) People's expectations of lower prices of goods and services. 
D) Producer's expectations of selling more goods. 
E) The interaction of people's willingness to buy and sell goods. 
A) People's willingness to supply goods at specific prices. 
B) People's willingness to buy goods and services at given prices. 
C) People's expectations of lower prices of goods and services. 
D) Producer's expectations of selling more goods. 
E) The interaction of people's willingness to buy and sell goods.

Question 8

If the price of hot dogs increases, what will happen in the market for potato chips, a complementary good?

Accepted Answer

A) Demand will increase. 
B) Quantity demanded will increase. 
C) Demand will decrease. 
D) Quantity demanded will decrease. 
E) Supply will decrease. 
A) Demand will increase. 
B) Quantity demanded will increase. 
C) Demand will decrease. 
D) Quantity demanded will decrease. 
E) Supply will decrease.

Question 9

According to the law of supply, price and quantity supplied are inversely related, ceteris paribus .

Accepted Answer

A) True 
 B)False

Question 10

When economists say the demand for a product has increased, they mean the:

Accepted Answer

A) demand curve has shifted to the right. 
B) price of the product has fallen, and consequently, consumers are buying more of it. 
C) cost of producing the product has risen. 
D) amount of the product that consumers are willing to purchase at various prices has decreased. 
A) demand curve has shifted to the right. 
B) price of the product has fallen, and consequently, consumers are buying more of it. 
C) cost of producing the product has risen. 
D) amount of the product that consumers are willing to purchase at various prices has decreased.

Question 11

An increase in demand is reflected as a rightward (outward)shift of the demand curve and is caused by an increase in price.

Accepted Answer

A) True 
 B)False

Question 12

The price of a good will fall if:

Accepted Answer

A) there is an excess demand of the good. 
B) demand and supply of the good are the same. 
C) there is an excess supply of the good. 
D) the price is below the equilibrium price. 
E) the price is near the equilibrium price. 
A) there is an excess demand of the good. 
B) demand and supply of the good are the same. 
C) there is an excess supply of the good. 
D) the price is below the equilibrium price. 
E) the price is near the equilibrium price.

Question 13

Suppose there are 100 consumers with identical individual demand curves. When the price of a movie ticket is $8, the quantity demanded for each person is 5. When the price is $4, the quantity demanded for each person is 9. Assuming the law of demand holds, which of the following choices is the most likely quantity demanded in the market when the price is $6?

Accepted Answer

A) 700 
B) 1,200 
C) 400 
D) 1,000 
E) 100 
A) 700 
B) 1,200 
C) 400 
D) 1,000 
E) 100

Question 14

Which of the following would lead to an increase in the demand for computer software?

Accepted Answer

A) A decrease in the price of computer software. 
B) A decrease in the price of personal computers. 
C) An decrease in the cost of producing computer software. 
D) An decrease in personal income. 
A) A decrease in the price of computer software. 
B) A decrease in the price of personal computers. 
C) An decrease in the cost of producing computer software. 
D) An decrease in personal income.

Question 15

There is a technological advance in the production of digital watches. This will cause:

Accepted Answer

A) demand to increase. 
B) supply to increase. 
C) demand to decrease. 
D) supply to decrease. 
E) the price to increase. 
A) demand to increase. 
B) supply to increase. 
C) demand to decrease. 
D) supply to decrease. 
E) the price to increase.

Question 16

Which of the following goods are most likely to be substitutes?

Accepted Answer

A) potato chips and chip dip 
B) bread and peanut butter 
C) ketchup and French fries 
D) bananas and apples 
A) potato chips and chip dip 
B) bread and peanut butter 
C) ketchup and French fries 
D) bananas and apples

Question 17

The law of supply states that an increase in supply is represented graphically as a rightward shift of the supply curve.

Accepted Answer

A) True 
 B)False

Question 18

Market equilibrium is:

Accepted Answer

A) defined as the condition in which there is neither a shortage or surplus. 
B) defined as the condition under which the separately formulated plans of buyers and sellers exactly mesh when tested in the market. 
C) represented graphically by the intersection of the supply and demand curves. 
D) all of these. 
A) defined as the condition in which there is neither a shortage or surplus. 
B) defined as the condition under which the separately formulated plans of buyers and sellers exactly mesh when tested in the market. 
C) represented graphically by the intersection of the supply and demand curves. 
D) all of these.

Question 19

Which of the following could cause the supply of carrots to decrease?

Accepted Answer

A) Consumers' incomes decrease. 
B) There is a technological advance in carrot production. 
C) Fertilizer costs increase. 
D) The number of farmers growing carrots increases. 
E) The price of carrots decreases. 
A) Consumers' incomes decrease. 
B) There is a technological advance in carrot production. 
C) Fertilizer costs increase. 
D) The number of farmers growing carrots increases. 
E) The price of carrots decreases.

Question 20

Assuming that travel from New York to Los Angeles is a normal good, a decrease in consumer income, other things being equal, will:

Accepted Answer

A) decrease the quantity demanded of travel to Los Angeles. 
B) increase the demand for travel to Los Angeles. 
C) decrease the demand for travel to Los Angeles. 
D) increase the quantity of travel to Los Angeles demanded. 
A) decrease the quantity demanded of travel to Los Angeles. 
B) increase the demand for travel to Los Angeles. 
C) decrease the demand for travel to Los Angeles. 
D) increase the quantity of travel to Los Angeles demanded.

Exam 3: Market Demand and Supply

Surpluses cause prices to fall while shortages cause prices to rise.

Assuming that wine is a normal good, an increase in consumer income, other things being equal, will:

Suppose the prices of petroleum products, including gasoline and fuel oil, fell sharply. Which of the following would most likely occur as the result of the lower prices of petroleum products?

The price of a good will fall when:

Which of the following pairs is the best example of complements?

When the price of a good is above its equilibrium price, a:

Which of the following is closest to the definition of demand?

If the price of hot dogs increases, what will happen in the market for potato chips, a complementary good?

According to the law of supply, price and quantity supplied are inversely related, ceteris paribus .

When economists say the demand for a product has increased, they mean the:

An increase in demand is reflected as a rightward (outward)shift of the demand curve and is caused by an increase in price.

The price of a good will fall if:

Which of the following would lead to an increase in the demand for computer software?

There is a technological advance in the production of digital watches. This will cause:

Which of the following goods are most likely to be substitutes?

The law of supply states that an increase in supply is represented graphically as a rightward shift of the supply curve.

Market equilibrium is:

Which of the following could cause the supply of carrots to decrease?

Assuming that travel from New York to Los Angeles is a normal good, a decrease in consumer income, other things being equal, will:

Introducing the Economic Way of Thinking

Production Possibilities, Opportunity Cost, and Economic Growth

Markets in Action

Gross Domestic Product

Business Cycles and Unemployment

Inflation

The Keynesian Model

The Keynesian Model in Action

Aggregate Demand and Supply

Fiscal Policy

The Public Sector

Federal Deficits, Surpluses, and the National Debt

Money and the Federal Reserve System

Money Creation

Monetary Policy

The Phillips Curve and Expectations Theory

International Trade and Finance

Economies in Transition

Growth and the Less-Developed Countries

Applying Graphs to Economics

Consumer Surplus, Producer Surplus, and Market Efficiency

the Self-Correcting Aggregate Demand and Supply Model

Policy Disputes Using the Self-Correcting Aggregate Demand and Supply Model

Filters