Question 1

Which of the following does the law of demand specifically imply?

Accepted Answer

A)  If the product price increases, quantity demanded will decrease. 
B)  If consumer income increases, quantity demanded will increase. 
C)  If the product price increases, quantity demanded will increase. 
D)  If consumer income increases, quantity demanded will decrease. 
E)  If supply increases, demand will increase. 
A)  If the product price increases, quantity demanded will decrease. 
B)  If consumer income increases, quantity demanded will increase. 
C)  If the product price increases, quantity demanded will increase. 
D)  If consumer income increases, quantity demanded will decrease. 
E)  If supply increases, demand will increase.

Question 2

Figure 3-2  
Given the supply and demand conditions illustrated in Figure 3-2, the equilibrium price of steak is

Accepted Answer

A)  $2 per pound. 
B)  $4 per pound. 
C)  $6 per pound. 
D)  $8 per pound. 
A)  $2 per pound. 
B)  $4 per pound. 
C)  $6 per pound. 
D)  $8 per pound.

Question 3

In which statement(s) are "demand" and "quantity demanded" used correctly? (I) "An increase in the price of coffee will reduce the quantity demanded of coffee."
(II) "An increase in the price of coffee will reduce the demand for cream used in coffee."

Accepted Answer

A)  in both statements I and II 
B)  in statement I only 
C)  in statement II only 
D)  in neither statements I nor II 
A)  in both statements I and II 
B)  in statement I only 
C)  in statement II only 
D)  in neither statements I nor II

Question 4

Assume that supply decreases greatly and demand decreases slightly. Which of the following will happen?

Accepted Answer

A)  Equilibrium price will fall and equilibrium quantity will rise. 
B)  Equilibrium price will rise and equilibrium quantity will fall. 
C)  Equilibrium price will rise and equilibrium quantity will rise. 
D)  Equilibrium price will fall and equilibrium quantity will fall. 
E)  Neither equilibrium price nor equilibrium quantity will change. 
A)  Equilibrium price will fall and equilibrium quantity will rise. 
B)  Equilibrium price will rise and equilibrium quantity will fall. 
C)  Equilibrium price will rise and equilibrium quantity will rise. 
D)  Equilibrium price will fall and equilibrium quantity will fall. 
E)  Neither equilibrium price nor equilibrium quantity will change.

Question 5

Assume that corn and soybeans are alternatives that could be grown by most farmers. An increase in the price of corn will

Accepted Answer

A)  increase the supply of corn. 
B)  increase the supply of soybeans. 
C)  decrease the supply of soybeans. 
D)  decrease the supply of corn. 
E)  have no effect on the supplies of corn and soybeans. 
A)  increase the supply of corn. 
B)  increase the supply of soybeans. 
C)  decrease the supply of soybeans. 
D)  decrease the supply of corn. 
E)  have no effect on the supplies of corn and soybeans.

Question 6

Consumer surplus

Accepted Answer

A)  is the difference between total willingness to pay and the total amount actually paid. 
B)  guarantees that the market value of a good in money is equal to the total economic value of the good. 
C)  is always negative because of diminishing marginal utility. 
D)  is the total area under a consumer's demand curve. 
A)  is the difference between total willingness to pay and the total amount actually paid. 
B)  guarantees that the market value of a good in money is equal to the total economic value of the good. 
C)  is always negative because of diminishing marginal utility. 
D)  is the total area under a consumer's demand curve.

Question 7

Figure 3-15  
Refer to Figure 3-15. Which area represents producer surplus when the price is P 2?

Accepted Answer

A)  BCE 
B)  ACF 
C)  ABED 
D)  AFEB 
A)  BCE 
B)  ACF 
C)  ABED 
D)  AFEB

Question 8

Which of the following would decrease the price of packaged hot dogs?

Accepted Answer

A)  an increase in the price of hot dog buns, a complement to packaged hot dogs 
B)  a decrease in the price of hamburger meat, a substitute for packaged hot dogs 
C)  a technological advance that lowers the cost of producing packaged hot dogs 
D)  all of the above 
A)  an increase in the price of hot dog buns, a complement to packaged hot dogs 
B)  a decrease in the price of hamburger meat, a substitute for packaged hot dogs 
C)  a technological advance that lowers the cost of producing packaged hot dogs 
D)  all of the above

Question 9

Suppose demand increases and supply increases. Which of the following will happen?

Accepted Answer

A)  Equilibrium price will rise, fall, or stay the same while equilibrium quantity will decrease. 
B)  Equilibrium price will rise, fall, or stay the same while equilibrium quantity will increase. 
C)  Equilibrium quantity will rise, fall, or stay the same and equilibrium price will increase. 
D)  Equilibrium quantity will rise, fall, or stay the same while equilibrium price will decrease. 
E)  The change in equilibrium price and quantity cannot be determined. 
A)  Equilibrium price will rise, fall, or stay the same while equilibrium quantity will decrease. 
B)  Equilibrium price will rise, fall, or stay the same while equilibrium quantity will increase. 
C)  Equilibrium quantity will rise, fall, or stay the same and equilibrium price will increase. 
D)  Equilibrium quantity will rise, fall, or stay the same while equilibrium price will decrease. 
E)  The change in equilibrium price and quantity cannot be determined.

Question 10

Figure 3-23  
Refer to Figure 3-23. The movement from point A to point B on the graph would be caused by

Accepted Answer

A)  an increase in price. 
B)  a decrease in price. 
C)  a decrease in the price of a substitute good. 
D)  an increase in income. 
A)  an increase in price. 
B)  a decrease in price. 
C)  a decrease in the price of a substitute good. 
D)  an increase in income.

Question 11

Use the figure below to answer the following question(s).
Figure 3-13
 
Refer to Figure 3-13. The market for margarine was initially in equilibrium at point e. Other things constant, a decrease in the price of butter, a close substitute for margarine, would likely move the equilibrium in this market toward point

Accepted Answer

A)  r. 
B)  s. 
C)  t. 
D)  u. 
A)  r. 
B)  s. 
C)  t. 
D)  u.

Question 12

How would a decrease in consumer income affect the market for new furniture?

Accepted Answer

A)  Demand would decrease, leading to an increase in price and a reduction in quantity sold. 
B)  Demand would decrease, leading to a reduction in price and a reduction in quantity sold. 
C)  Demand would increase, leading to an increase in price and an increase in quantity sold. 
D)  Demand would increase, leading to a reduction in price and an increase in quantity sold. 
A)  Demand would decrease, leading to an increase in price and a reduction in quantity sold. 
B)  Demand would decrease, leading to a reduction in price and a reduction in quantity sold. 
C)  Demand would increase, leading to an increase in price and an increase in quantity sold. 
D)  Demand would increase, leading to a reduction in price and an increase in quantity sold.

Question 13

Price is important in a market economy because it

Accepted Answer

A)  eliminates imbalances between supply and demand. 
B)  serves as the rationing mechanism for the limited supplies of goods and services. 
C)  coordinates the choices of consumers and producers and brings them into harmony. 
D)  is all of the above. 
A)  eliminates imbalances between supply and demand. 
B)  serves as the rationing mechanism for the limited supplies of goods and services. 
C)  coordinates the choices of consumers and producers and brings them into harmony. 
D)  is all of the above.

Question 14

Two products that serve similar purposes for a consumer would be referred to as

Accepted Answer

A)  substitutes. 
B)  complements. 
C)  inferior goods. 
D)  unrelated goods. 
A)  substitutes. 
B)  complements. 
C)  inferior goods. 
D)  unrelated goods.

Question 15

John advertises his used car for $3,000 in the newspaper. He would be willing to sell his used car for as low as $2,000. He is offered $2,600 for it from a buyer and accepts it. In this trade, John receives

Accepted Answer

A)  producer surplus of $3,000. 
B)  producer surplus of $2,600. 
C)  producer surplus of $600. 
D)  consumer surplus of $400. 
A)  producer surplus of $3,000. 
B)  producer surplus of $2,600. 
C)  producer surplus of $600. 
D)  consumer surplus of $400.

Question 16

Figure 3-23  
Refer to Figure 3-23. The movement from point A to point B on the graph would be caused by

Accepted Answer

A)  an increase in price. 
B)  a decrease in price. 
C)  a decrease in the price of a substitute good. 
D)  an increase in income. 
A)  an increase in price. 
B)  a decrease in price. 
C)  a decrease in the price of a substitute good. 
D)  an increase in income.

Question 17

Suppose demand increases and supply increases. Which of the following will happen?

Accepted Answer

A)  Equilibrium price will rise, fall, or stay the same while equilibrium quantity will decrease. 
B)  Equilibrium price will rise, fall, or stay the same while equilibrium quantity will increase. 
C)  Equilibrium quantity will rise, fall, or stay the same and equilibrium price will increase. 
D)  Equilibrium quantity will rise, fall, or stay the same while equilibrium price will decrease. 
E)  The change in equilibrium price and quantity cannot be determined. 
A)  Equilibrium price will rise, fall, or stay the same while equilibrium quantity will decrease. 
B)  Equilibrium price will rise, fall, or stay the same while equilibrium quantity will increase. 
C)  Equilibrium quantity will rise, fall, or stay the same and equilibrium price will increase. 
D)  Equilibrium quantity will rise, fall, or stay the same while equilibrium price will decrease. 
E)  The change in equilibrium price and quantity cannot be determined.

Question 18

"The operator of the tunnel that links Britain and France, Eurotunnel , said that commercial and tourist traffic using its car and coach shuttle service had fallen sharply in 2004, leading to a drop in operating revenues of 4%. Eurotunnel's chief executive, Jean-Louis Raymond, blamed cut-throat competition from budget airlines." (news story, January 2005) 
a. If Mr. Raymond is correct, are the services of airlines and Eurotunnel substitutes or complements? 
b. Use demand and supply analysis to explain how lower airfares between Paris and London impact the market for the shuttle services of Eurotunnel.

Accepted Answer

a. substitutes 
b. The lower a

Question 19

If the demand for a good increases, which of the following will generally occur in a market setting?

Accepted Answer

A)  The price of the good will decrease. 
B)  The supply of the good will increase. 
C)  The quantity supplied will increase. 
D)  Producer profits will fall. 
A)  The price of the good will decrease. 
B)  The supply of the good will increase. 
C)  The quantity supplied will increase. 
D)  Producer profits will fall.

Question 20

Figure 3-17  
Refer to Figure 3-17. When the price is P 2, consumer surplus is

Accepted Answer

A)  A. 
B)  B. 
C)  A + B. 
D)  A + B + C. 
A)  A. 
B)  B. 
C)  A + B. 
D)  A + B + C.

Which of the following does the law of demand specifically imply?

Figure 3-2 Given the supply and demand conditions illustrated in Figure 3-2, the equilibrium price of steak is

In which statement(s) are "demand" and "quantity demanded" used correctly? (I) "An increase in the price of coffee will reduce the quantity demanded of coffee." (II) "An increase in the price of coffee will reduce the demand for cream used in coffee."

Assume that supply decreases greatly and demand decreases slightly. Which of the following will happen?

Assume that corn and soybeans are alternatives that could be grown by most farmers. An increase in the price of corn will

Consumer surplus

Figure 3-15 Refer to Figure 3-15. Which area represents producer surplus when the price is P ₂?

Which of the following would decrease the price of packaged hot dogs?

Suppose demand increases and supply increases. Which of the following will happen?

Figure 3-23 Refer to Figure 3-23. The movement from point A to point B on the graph would be caused by

How would a decrease in consumer income affect the market for new furniture?

Price is important in a market economy because it

Two products that serve similar purposes for a consumer would be referred to as

John advertises his used car for $3,000 in the newspaper. He would be willing to sell his used car for as low as $2,000. He is offered $2,600 for it from a buyer and accepts it. In this trade, John receives

Figure 3-23 Refer to Figure 3-23. The movement from point A to point B on the graph would be caused by

Suppose demand increases and supply increases. Which of the following will happen?

If the demand for a good increases, which of the following will generally occur in a market setting?

Figure 3-17 Refer to Figure 3-17. When the price is P ₂, consumer surplus is

The Economic Approach

Some Tools of the Economist

Supply and Demand: Applications and Extensions

Difficult Cases for the Market, and the Role of Government

The Economics of Political Action

Consumer Choice and Elasticity

Costs and the Supply of Goods

Price Takers and the Competitive Process

Price-Searcher Markets With Low Entry Barriers

Price-Searcher Markets With High Entry Barriers

The Supply of and Demand for Productive Resources

Earnings, Productivity, and the Job Market

Investment, the Capital Market, and the Wealth of Nations

Income Inequality and Poverty

Applying the Basics: Special Topics in Economics

Filters

Exam 3: Demand, Supply, and the Market Process

Which of the following does the law of demand specifically imply?

Figure 3-2 Given the supply and demand conditions illustrated in Figure 3-2, the equilibrium price of steak is

In which statement(s) are "demand" and "quantity demanded" used correctly? (I) "An increase in the price of coffee will reduce the quantity demanded of coffee." (II) "An increase in the price of coffee will reduce the demand for cream used in coffee."

Assume that supply decreases greatly and demand decreases slightly. Which of the following will happen?

Assume that corn and soybeans are alternatives that could be grown by most farmers. An increase in the price of corn will

Consumer surplus

Figure 3-15 Refer to Figure 3-15. Which area represents producer surplus when the price is P 2?

Which of the following would decrease the price of packaged hot dogs?

Suppose demand increases and supply increases. Which of the following will happen?

Figure 3-23 Refer to Figure 3-23. The movement from point A to point B on the graph would be caused by

How would a decrease in consumer income affect the market for new furniture?

Price is important in a market economy because it

Two products that serve similar purposes for a consumer would be referred to as

John advertises his used car for $3,000 in the newspaper. He would be willing to sell his used car for as low as $2,000. He is offered $2,600 for it from a buyer and accepts it. In this trade, John receives

Figure 3-23 Refer to Figure 3-23. The movement from point A to point B on the graph would be caused by

Suppose demand increases and supply increases. Which of the following will happen?

If the demand for a good increases, which of the following will generally occur in a market setting?

Figure 3-17 Refer to Figure 3-17. When the price is P 2, consumer surplus is

The Economic Approach

Some Tools of the Economist

Supply and Demand: Applications and Extensions

Difficult Cases for the Market, and the Role of Government

The Economics of Political Action

Consumer Choice and Elasticity

Costs and the Supply of Goods

Price Takers and the Competitive Process

Price-Searcher Markets With Low Entry Barriers

Price-Searcher Markets With High Entry Barriers

The Supply of and Demand for Productive Resources

Earnings, Productivity, and the Job Market

Investment, the Capital Market, and the Wealth of Nations

Income Inequality and Poverty

Applying the Basics: Special Topics in Economics

Filters

Figure 3-15 Refer to Figure 3-15. Which area represents producer surplus when the price is P ₂?

Figure 3-17 Refer to Figure 3-17. When the price is P ₂, consumer surplus is