Question 1

Assume that the equilibrium price for a good is $5. If the market price is $10, a:

Accepted Answer

A) shortage causes the price to decline toward $5. 
B) surplus causes the price to rise above $10. 
C) shortage causes the price to rise above $10. 
D) surplus causes the price to decline toward $5. 
A) shortage causes the price to decline toward $5. 
B) surplus causes the price to rise above $10. 
C) shortage causes the price to rise above $10. 
D) surplus causes the price to decline toward $5.

Question 2

Travel by bus and pawn-shop services would be expected to be examples of:

Accepted Answer

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

Question 3

Exhibit 3-14 Supply and demand curves   In Exhibit 3-14, assume that the price of compact discs is $5 each. This price is:

Accepted Answer

A) an equilibrium price. 
B) not an equilibrium price because there is an excess quantity supplied at a price of $5. 
C) not an equilibrium price because there is an excess quantity demanded at a price of $5. 
D) not an equilibrium price because the quantity supplied of compact discs is greater than the quantity demanded. 
A) an equilibrium price. 
B) not an equilibrium price because there is an excess quantity supplied at a price of $5. 
C) not an equilibrium price because there is an excess quantity demanded at a price of $5. 
D) not an equilibrium price because the quantity supplied of compact discs is greater than the quantity demanded.

Question 4

The development of new technology typically:

Accepted Answer

A) shifts the supply curve to the right. 
B) reduces profits. 
C) results in a downward movement along a supply curve. 
D) increases costs of production. 
E) shifts the demand curve to the right. 
A) shifts the supply curve to the right. 
B) reduces profits. 
C) results in a downward movement along a supply curve. 
D) increases costs of production. 
E) shifts the demand curve to the right.

Question 5

If butter is a substitute for margarine, then an increase in the price of butter would be most likely to cause:

Accepted Answer

A) a rightward shift of demand for margarine. 
B) a leftward shift of demand for margarine. 
C) the quantity demanded for margarine to increase. 
D) the quantity demanded for margarine to decline. 
E) a decline in the price of margarine. 
A) a rightward shift of demand for margarine. 
B) a leftward shift of demand for margarine. 
C) the quantity demanded for margarine to increase. 
D) the quantity demanded for margarine to decline. 
E) a decline in the price of margarine.

Question 6

If the price of coffee decreases, the demand curve for tea (a substitute good)will:

Accepted Answer

A) remain unchanged. 
B) shift to the right. 
C) shift to the left. 
D) do none of these 
A) remain unchanged. 
B) shift to the right. 
C) shift to the left. 
D) do none of these

Question 7

Exhibit 3-1 Market Demand   In Exhibit 3-2, which of the following could not have caused the shift in the demand curve from D1 to D2?

Accepted Answer

A) Decrease in the number of consumers. 
B) Increase in expected future prices. 
C) Increase in the price of a substitute. 
D) Decrease in the price of a complement. 
E) Increase in income. 
A) Decrease in the number of consumers. 
B) Increase in expected future prices. 
C) Increase in the price of a substitute. 
D) Decrease in the price of a complement. 
E) Increase in income.

Question 8

Exhibit 3-16 Supply and demand curves for chairs   In Exhibit 3-16, if the market price of chairs is initially $15, a movement toward equilibrium would require:

Accepted Answer

A) no change, because an equilibrium already exists. 
B) the price to fall below $15 and both the quantity supplied and the quantity demanded to fall. 
C) the price to remain the same, but the supply curve to shift to the left. 
D) the price to fall below $15, the quantity supplied to fall, and the quantity demanded to rise. 
A) no change, because an equilibrium already exists. 
B) the price to fall below $15 and both the quantity supplied and the quantity demanded to fall. 
C) the price to remain the same, but the supply curve to shift to the left. 
D) the price to fall below $15, the quantity supplied to fall, and the quantity demanded to rise.

Question 9

The fact that price and quantity demanded are related negatively illustrates the:

Accepted Answer

A) law of supply. 
B) law of quantity supply. 
C) law of demand. 
D) law of quantity demanded. 
E) point that some facts are unobservable. 
A) law of supply. 
B) law of quantity supply. 
C) law of demand. 
D) law of quantity demanded. 
E) point that some facts are unobservable.

Question 10

Tickets to the Indiana-Purdue basketball game are usually sold out in advance of game day. This suggests:

Accepted Answer

A) the price of the tickets must be very high or else people would not consider them valuable. 
B) the price is set below the equilibrium level. 
C) the Indiana basketball stadium is relatively small. 
D) everyone who attends the game will enjoy it. 
A) the price of the tickets must be very high or else people would not consider them valuable. 
B) the price is set below the equilibrium level. 
C) the Indiana basketball stadium is relatively small. 
D) everyone who attends the game will enjoy it.

Question 11

Assuming that wheat and corn can both be grown on the same type of land, a decrease in the price of corn, other things being equal, will cause a(n):

Accepted Answer

A) downward movement along the supply curve for wheat. 
B) upward movement along the supply curve for wheat. 
C) rightward shift in the supply curve for wheat. 
D) leftward shift in the supply curve for wheat. 
A) downward movement along the supply curve for wheat. 
B) upward movement along the supply curve for wheat. 
C) rightward shift in the supply curve for wheat. 
D) leftward shift in the supply curve for wheat.

Question 12

In general, supply curves slope upward because:

Accepted Answer

A) increases in the price of a good result in lower opportunity costs. 
B) rising prices provide producers with a greater profit incentive. 
C) consumers buy a greater quantity. 
D) technology improves the ability of firms to produce more at each possible price. 
A) increases in the price of a good result in lower opportunity costs. 
B) rising prices provide producers with a greater profit incentive. 
C) consumers buy a greater quantity. 
D) technology improves the ability of firms to produce more at each possible price.

Question 13

If movies are an inferior good, movie attendance will rise when consumer incomes fall.

Accepted Answer

A) True 
 B)False

Question 14

The law of demand is graphically demonstrated by a(n):

Accepted Answer

A) perfectly vertical demand curve. 
B) perfectly horizontal demand curve. 
C) downward-sloping demand curve. 
D) upward-sloping demand curve. 
E) curved demand line. 
A) perfectly vertical demand curve. 
B) perfectly horizontal demand curve. 
C) downward-sloping demand curve. 
D) upward-sloping demand curve. 
E) curved demand line.

Question 15

If there is an increase in income, which of the following is true ?

Accepted Answer

A) The demand for complementary goods decreases. 
B) The demand for substitute goods decreases. 
C) The demand for normal goods decreases. 
D) The demand for normal goods increases. 
E) The supply for all goods decreases. 
A) The demand for complementary goods decreases. 
B) The demand for substitute goods decreases. 
C) The demand for normal goods decreases. 
D) The demand for normal goods increases. 
E) The supply for all goods decreases.

Question 16

Assuming compact discs and cassettes are substitute goods, a decrease in the price of cassettes will cause the demand curve for compact discs to:

Accepted Answer

A) shift to the left as consumers switch from buying discs to cassettes. 
B) shift to the right as consumers switch from buying discs to cassettes. 
C) shift to the left as producers increase cassette production and reduce disc production. 
D) remain unchanged since discs and cassettes are sold in separate markets. 
A) shift to the left as consumers switch from buying discs to cassettes. 
B) shift to the right as consumers switch from buying discs to cassettes. 
C) shift to the left as producers increase cassette production and reduce disc production. 
D) remain unchanged since discs and cassettes are sold in separate markets.

Question 17

The " ceteris paribus " clause in the law of demand does not allow which of the following factors to change?

Accepted Answer

A) Consumer tastes and preferences. 
B) The prices of other goods. 
C) Expectations. 
D) All of these. 
A) Consumer tastes and preferences. 
B) The prices of other goods. 
C) Expectations. 
D) All of these.

Question 18

To finance medical care, the federal government raises the tax per pack paid by sellers of cigarettes. Other things being equal, the price of cigarettes rises because of a(n):

Accepted Answer

A) upward movement along the supply curve for cigarettes. 
B) rightward shift of the supply curve for cigarettes. 
C) upward movement along the demand curve for cigarettes. 
D) leftward shift of the supply curve for cigarettes. 
A) upward movement along the supply curve for cigarettes. 
B) rightward shift of the supply curve for cigarettes. 
C) upward movement along the demand curve for cigarettes. 
D) leftward shift of the supply curve for cigarettes.

Question 19

When economists say the quantity supplied of a product has decreased, they mean the:

Accepted Answer

A) supply curve has shifted to the left. 
B) supply curve has shifted to the right. 
C) price of the product has risen, and consequently, suppliers are producing more of it. 
D) price of the product has fallen, and consequently, suppliers are producing less of it. 
A) supply curve has shifted to the left. 
B) supply curve has shifted to the right. 
C) price of the product has risen, and consequently, suppliers are producing more of it. 
D) price of the product has fallen, and consequently, suppliers are producing less of it.

Question 20

A rightward shift in the demand curve is called a(an):

Accepted Answer

A) decrease in output. 
B) decrease in demand. 
C) increase in demand. 
D) increase in income. 
A) decrease in output. 
B) decrease in demand. 
C) increase in demand. 
D) increase in income.

Exam 3: Market Demand and Supply

Assume that the equilibrium price for a good is $5. If the market price is $10, a:

Travel by bus and pawn-shop services would be expected to be examples of:

Exhibit 3-14 Supply and demand curves In Exhibit 3-14, assume that the price of compact discs is $5 each. This price is:

The development of new technology typically:

If butter is a substitute for margarine, then an increase in the price of butter would be most likely to cause:

If the price of coffee decreases, the demand curve for tea (a substitute good)will:

Exhibit 3-1 Market Demand In Exhibit 3-2, which of the following could not have caused the shift in the demand curve from D1 to D2?

Exhibit 3-16 Supply and demand curves for chairs In Exhibit 3-16, if the market price of chairs is initially $15, a movement toward equilibrium would require:

The fact that price and quantity demanded are related negatively illustrates the:

Tickets to the Indiana-Purdue basketball game are usually sold out in advance of game day. This suggests:

Assuming that wheat and corn can both be grown on the same type of land, a decrease in the price of corn, other things being equal, will cause a(n):

In general, supply curves slope upward because:

If movies are an inferior good, movie attendance will rise when consumer incomes fall.

The law of demand is graphically demonstrated by a(n):

If there is an increase in income, which of the following is true ?

Assuming compact discs and cassettes are substitute goods, a decrease in the price of cassettes will cause the demand curve for compact discs to:

The " ceteris paribus " clause in the law of demand does not allow which of the following factors to change?

To finance medical care, the federal government raises the tax per pack paid by sellers of cigarettes. Other things being equal, the price of cigarettes rises because of a(n):

When economists say the quantity supplied of a product has decreased, they mean the:

A rightward shift in the demand curve is called a(an):

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

Exhibit 3-1 Market Demand In Exhibit 3-2, which of the following could not have caused the shift in the demand curve from D₁ to D₂?