Question 1

Which of the following would lead to an increase in the demand for gasoline in Universityville, a typical college town?

Accepted Answer

A)  the local bus service beginning to offer free bus transportation to students 
B)  homecoming weekend when many former alumni visit the local college 
C)  a large protest by a campus environmental group urging people to walk or ride their bikes rather than drive 
D)  an increase in the tuition charged by the local college, which reduces student enrollment 
A)  the local bus service beginning to offer free bus transportation to students 
B)  homecoming weekend when many former alumni visit the local college 
C)  a large protest by a campus environmental group urging people to walk or ride their bikes rather than drive 
D)  an increase in the tuition charged by the local college, which reduces student enrollment

Question 2

If consumer tastes are changing more in favor of the consumption of a particular good the

Accepted Answer

A)  market demand curve will shift to the left. 
B)  consumer will move up a given demand curve, decreasing the quantity demanded. 
C)  consumer would move down a given demand curve, decreasing the quantity demanded. 
D)  consumer would move down a given demand curve, increasing the quantity demanded. 
E)  market demand curve would shift to the right. 
A)  market demand curve will shift to the left. 
B)  consumer will move up a given demand curve, decreasing the quantity demanded. 
C)  consumer would move down a given demand curve, decreasing the quantity demanded. 
D)  consumer would move down a given demand curve, increasing the quantity demanded. 
E)  market demand curve would shift to the right.

Question 3

Suppose the demand for nachos increases. What will happen to producer surplus in the market for nachos?

Accepted Answer

A)  It increases. 
B)  It decreases. 
C)  It remains unchanged. 
D)  It may increase, decrease, or remain unchanged. 
A)  It increases. 
B)  It decreases. 
C)  It remains unchanged. 
D)  It may increase, decrease, or remain unchanged.

Question 4

When a conflict arises in a major oil-exporting area of the world, such as the Middle East, the price of gasoline already in the storage tanks at local gas stations usually increases. Which of the following best explains this occurrence?

Accepted Answer

A)  Gas station owners anticipate consumers will buy more gasoline as gasoline prices increase. 
B)  Gas station owners are attempting to repeal the laws of supply and demand. 
C)  Gas station owners anticipate higher replacement costs for their supply of gasoline and, therefore, raise their prices in response to this higher expected cost. 
D)  A decline in consumer demand generally causes gas station owners to raise their prices. 
A)  Gas station owners anticipate consumers will buy more gasoline as gasoline prices increase. 
B)  Gas station owners are attempting to repeal the laws of supply and demand. 
C)  Gas station owners anticipate higher replacement costs for their supply of gasoline and, therefore, raise their prices in response to this higher expected cost. 
D)  A decline in consumer demand generally causes gas station owners to raise their prices.

Question 5

Use the figure below to answer the following question(s).
Figure 3-8
 
In Figure 3-8, if the initial demand and supply for soybeans were D 1 and S 1, how would a decrease in the cost of producing soybeans affect the market for soybeans?

Accepted Answer

A)  Demand would increase to D 2, price would increase to P 2, and the quantity would increase to S . 
B)  Supply would increase to S 2, price would decrease to P 0, and the quantity would increase to S . 
C)  Both demand and supply would increase so the price would remain at P 1, but the quantity would increase to T . 
D)  None of the above would occur. 
A)  Demand would increase to D 2, price would increase to P 2, and the quantity would increase to S . 
B)  Supply would increase to S 2, price would decrease to P 0, and the quantity would increase to S . 
C)  Both demand and supply would increase so the price would remain at P 1, but the quantity would increase to T . 
D)  None of the above would occur.

Question 6

Economists maintain that the price of a product has no effect on demand. How can this be true?

Accepted Answer

When constructing the demand curve, pric

Question 7

When an unusually bad frost reduces the apple crop in Washington state, the price of canned apple juice may rise immediately in supermarkets, even though the juice on the shelves was made from last year's plentiful crop. The invisible hand theory tells us that the profit-seeking merchants who raise their prices in such situations

Accepted Answer

A)  are hurting the economy, since the juice now on the shelves was produced at a lower cost. 
B)  are profiting by rationing the juice, which is now more scarce to the consumers willing to pay the most for the now more limited supply. 
C)  are ignoring the motivating function of prices, which the invisible hand theory holds should be set according to the cost paid by the merchant. 
D)  will not actually profit since they are ignoring a basic economic rule: Only raise prices when consumer demand increases. 
A)  are hurting the economy, since the juice now on the shelves was produced at a lower cost. 
B)  are profiting by rationing the juice, which is now more scarce to the consumers willing to pay the most for the now more limited supply. 
C)  are ignoring the motivating function of prices, which the invisible hand theory holds should be set according to the cost paid by the merchant. 
D)  will not actually profit since they are ignoring a basic economic rule: Only raise prices when consumer demand increases.

Question 8

If equilibrium is present in a market,

Accepted Answer

A)  there is generally either a shortage or a surplus. 
B)  quantity demanded equals quantity supplied. 
C)  quantity demanded exceeds quantity supplied. 
D)  quantity supplied exceeds quantity demanded. 
A)  there is generally either a shortage or a surplus. 
B)  quantity demanded equals quantity supplied. 
C)  quantity demanded exceeds quantity supplied. 
D)  quantity supplied exceeds quantity demanded.

Question 9

Which of the following is not a function of prices in a market system?

Accepted Answer

A)  Prices have the crucial job of balancing supply and demand. 
B)  Prices send signals to buyers and sellers to help them make rational economic decisions. 
C)  Prices coordinate economic activity. 
D)  Prices ensure an equitable distribution of goods and services among consumers. 
A)  Prices have the crucial job of balancing supply and demand. 
B)  Prices send signals to buyers and sellers to help them make rational economic decisions. 
C)  Prices coordinate economic activity. 
D)  Prices ensure an equitable distribution of goods and services among consumers.

Question 10

Figure 3-19  
Refer to Figure 3-19. Buyers who value this good more than price are represented by which line segment?

Accepted Answer

A)  AC 
B)  CE 
C)  BC 
D)  CD 
A)  AC 
B)  CE 
C)  BC 
D)  CD

Question 11

Saccharin and aspartame are both low-calorie substitutes for sugar. If saccharin is found to cause cancer,

Accepted Answer

A)  the price of aspartame will increase. 
B)  the price of sugar will decrease. 
C)  the price of saccharin will increase. 
D)  the demand curves for aspartame and sugar will shift leftward. 
E)  aspartame and sugar will be complements. 
A)  the price of aspartame will increase. 
B)  the price of sugar will decrease. 
C)  the price of saccharin will increase. 
D)  the demand curves for aspartame and sugar will shift leftward. 
E)  aspartame and sugar will be complements.

Question 12

Which of the following would most likely decrease the price of beef?

Accepted Answer

A)  lower prices of grains used to produce cattle feed 
B)  higher prices for chicken, a substitute for beef 
C)  a cow disease that destroys millions of cattle (and makes their meat unfit for consumption) before they are ready for market 
D)  an increase in consumer income 
A)  lower prices of grains used to produce cattle feed 
B)  higher prices for chicken, a substitute for beef 
C)  a cow disease that destroys millions of cattle (and makes their meat unfit for consumption) before they are ready for market 
D)  an increase in consumer income

Question 13

An increase in demand will cause

Accepted Answer

A)  an increase in supply. 
B)  a decrease in supply. 
C)  an increase in quantity supplied. 
D)  a decrease in quantity supplied. 
E)  a decrease in equilibrium price. 
A)  an increase in supply. 
B)  a decrease in supply. 
C)  an increase in quantity supplied. 
D)  a decrease in quantity supplied. 
E)  a decrease in equilibrium price.

Question 14

According to the invisible hand principle, competitive markets generally

Accepted Answer

A)  bring the self-interest of individuals into harmony with the efficient allocation of resources, even though centralized planning of economic activities is absent. 
B)  bring the self-interest of individuals into harmony with the efficient allocation of resources when the behavior of individuals is directed by democratic centralized planning. 
C)  require central direction; otherwise, the actions of self-interested individuals will conflict with the general interests of society. 
D)  promote the economic welfare of self-interested producers at the expense of unorganized groups such as consumers and taxpayers. 
A)  bring the self-interest of individuals into harmony with the efficient allocation of resources, even though centralized planning of economic activities is absent. 
B)  bring the self-interest of individuals into harmony with the efficient allocation of resources when the behavior of individuals is directed by democratic centralized planning. 
C)  require central direction; otherwise, the actions of self-interested individuals will conflict with the general interests of society. 
D)  promote the economic welfare of self-interested producers at the expense of unorganized groups such as consumers and taxpayers.

Question 15

Which of the following is a function performed by market prices?

Accepted Answer

A)  Market prices communicate information to buyers and sellers. 
B)  Market prices coordinate the decisions of buyers and sellers. 
C)  Market prices motivate entrepreneurs to produce those products that are currently most desired relative to their costs of production. 
D)  All of the above are functions performed by market prices. 
A)  Market prices communicate information to buyers and sellers. 
B)  Market prices coordinate the decisions of buyers and sellers. 
C)  Market prices motivate entrepreneurs to produce those products that are currently most desired relative to their costs of production. 
D)  All of the above are functions performed by market prices.

Question 16

If cable TV service and satellite TV service are substitutes,

Accepted Answer

A)  a decrease in the price of cable will decrease the demand for satellite TV. 
B)  an increase in the price of cable will decrease the demand for satellite TV. 
C)  an increase in the price of cable will generally have no effect on the demand for satellite TV. 
D)  an increase in the price of cable will shift the demand curve for satellite TV to the left. 
A)  a decrease in the price of cable will decrease the demand for satellite TV. 
B)  an increase in the price of cable will decrease the demand for satellite TV. 
C)  an increase in the price of cable will generally have no effect on the demand for satellite TV. 
D)  an increase in the price of cable will shift the demand curve for satellite TV to the left.

Question 17

For a typical product, an increase in consumer income will cause the market demand for the product to

Accepted Answer

A)  decrease, which is a shift to the left of the demand curve. 
B)  decrease, which is a shift to the right of the demand curve. 
C)  increase, which is a shift to the left of the demand curve. 
D)  increase, which is a shift to the right of the demand curve. 
A)  decrease, which is a shift to the left of the demand curve. 
B)  decrease, which is a shift to the right of the demand curve. 
C)  increase, which is a shift to the left of the demand curve. 
D)  increase, which is a shift to the right of the demand curve.

Question 18

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 19

Suppose demand increases and supply decreases. 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 20

Assume that black beans and rice are consistently in the diet of one particular family. How could you tell if these goods were complements, substitutes, or unrelated goods?

Accepted Answer

A)  If the price of black beans rose and the consumption of rice remained the same, they would be substitutes. 
B)  If the price of black beans rose and the consumption of rice increased, they would be substitutes. 
C)  If the price of black beans rose and the consumption of rice decreased, they would be substitutes. 
D)  If the price of black beans rose and the consumption of both goods remained the same, they would be complements. 
A)  If the price of black beans rose and the consumption of rice remained the same, they would be substitutes. 
B)  If the price of black beans rose and the consumption of rice increased, they would be substitutes. 
C)  If the price of black beans rose and the consumption of rice decreased, they would be substitutes. 
D)  If the price of black beans rose and the consumption of both goods remained the same, they would be complements.

Which of the following would lead to an increase in the demand for gasoline in Universityville, a typical college town?

If consumer tastes are changing more in favor of the consumption of a particular good the

Suppose the demand for nachos increases. What will happen to producer surplus in the market for nachos?

When a conflict arises in a major oil-exporting area of the world, such as the Middle East, the price of gasoline already in the storage tanks at local gas stations usually increases. Which of the following best explains this occurrence?

Use the figure below to answer the following question(s). Figure 3-8 In Figure 3-8, if the initial demand and supply for soybeans were D ₁ and S ₁, how would a decrease in the cost of producing soybeans affect the market for soybeans?

Economists maintain that the price of a product has no effect on demand. How can this be true?

If equilibrium is present in a market,

Which of the following is not a function of prices in a market system?

Figure 3-19 Refer to Figure 3-19. Buyers who value this good more than price are represented by which line segment?

Saccharin and aspartame are both low-calorie substitutes for sugar. If saccharin is found to cause cancer,

Which of the following would most likely decrease the price of beef?

An increase in demand will cause

According to the invisible hand principle, competitive markets generally

Which of the following is a function performed by market prices?

If cable TV service and satellite TV service are substitutes,

For a typical product, an increase in consumer income will cause the market demand for the product to

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

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

Assume that black beans and rice are consistently in the diet of one particular family. How could you tell if these goods were complements, substitutes, or unrelated goods?

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 would lead to an increase in the demand for gasoline in Universityville, a typical college town?

If consumer tastes are changing more in favor of the consumption of a particular good the

Suppose the demand for nachos increases. What will happen to producer surplus in the market for nachos?

When a conflict arises in a major oil-exporting area of the world, such as the Middle East, the price of gasoline already in the storage tanks at local gas stations usually increases. Which of the following best explains this occurrence?

Use the figure below to answer the following question(s). Figure 3-8 In Figure 3-8, if the initial demand and supply for soybeans were D 1 and S 1, how would a decrease in the cost of producing soybeans affect the market for soybeans?

Economists maintain that the price of a product has no effect on demand. How can this be true?

If equilibrium is present in a market,

Which of the following is not a function of prices in a market system?

Figure 3-19 Refer to Figure 3-19. Buyers who value this good more than price are represented by which line segment?

Saccharin and aspartame are both low-calorie substitutes for sugar. If saccharin is found to cause cancer,

Which of the following would most likely decrease the price of beef?

An increase in demand will cause

According to the invisible hand principle, competitive markets generally

Which of the following is a function performed by market prices?

If cable TV service and satellite TV service are substitutes,

For a typical product, an increase in consumer income will cause the market demand for the product to

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

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

Assume that black beans and rice are consistently in the diet of one particular family. How could you tell if these goods were complements, substitutes, or unrelated goods?

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

Use the figure below to answer the following question(s). Figure 3-8 In Figure 3-8, if the initial demand and supply for soybeans were D ₁ and S ₁, how would a decrease in the cost of producing soybeans affect the market for soybeans?