Question 1

If the demand for a good increased, what would be the effect on the equilibrium price and quantity?

Accepted Answer

A)  Price would increase, and quantity would decrease. 
B)  Price would decrease, and quantity would decrease. 
C)  Price would increase, and quantity would increase. 
D)  Price would decrease, and quantity would increase. 
A)  Price would increase, and quantity would decrease. 
B)  Price would decrease, and quantity would decrease. 
C)  Price would increase, and quantity would increase. 
D)  Price would decrease, and quantity would increase.

Question 2

The curve that shows the relationship between the price of a good and the quantity that consumers are willing to purchase at each price is the

Accepted Answer

A)  supply curve. 
B)  demand curve. 
C)  production possibilities curve. 
D)  consumption curve. 
A)  supply curve. 
B)  demand curve. 
C)  production possibilities curve. 
D)  consumption curve.

Question 3

Suppose all of the major computer manufacturers announced that beginning next month there would be major price reductions on their computers. This would cause the current demand for computers to

Accepted Answer

A)  increase. 
B)  decrease. 
C)  remain unchanged. 
D)  increase if the demand for computers was relatively inelastic, but decrease if the demand for computers was relatively elastic. 
A)  increase. 
B)  decrease. 
C)  remain unchanged. 
D)  increase if the demand for computers was relatively inelastic, but decrease if the demand for computers was relatively elastic.

Question 4

A demand curve for concert tickets would show the

Accepted Answer

A)  number of tickets the box office is willing to sell at various prices. 
B)  number of people who need tickets. 
C)  quantity of people who want to buy these concert tickets. 
D)  number of tickets that will be purchased at various prices. 
A)  number of tickets the box office is willing to sell at various prices. 
B)  number of people who need tickets. 
C)  quantity of people who want to buy these concert tickets. 
D)  number of tickets that will be purchased at various prices.

Question 5

Suppose prices for new homes have risen and sales of new homes have also risen. We can conclude that

Accepted Answer

A)  the demand for new homes has risen. 
B)  the law of demand has been violated. 
C)  new firms have entered the construction industry. 
D)  construction firms must be facing higher costs. 
A)  the demand for new homes has risen. 
B)  the law of demand has been violated. 
C)  new firms have entered the construction industry. 
D)  construction firms must be facing higher costs.

Question 6

(I) The height of the demand curve for a commodity indicates the maximum amount the consumer would be willing to pay for each unit of the good. (II) The height of the supply curve for a commodity indicates the minimum price the seller would accept for each unit of the good.

Accepted Answer

A)  I is true; II is false. 
B)  I is false; II is true. 
C)  Both I and II are false. 
D)  Both I and II are true. 
A)  I is true; II is false. 
B)  I is false; II is true. 
C)  Both I and II are false. 
D)  Both I and II are true.

Question 7

When the quantity demanded and quantity supplied in a market are equal, the market is said to be in

Accepted Answer

A)  fixation. 
B)  excess supply. 
C)  equilibrium. 
D)  excess demand. 
A)  fixation. 
B)  excess supply. 
C)  equilibrium. 
D)  excess demand.

Question 8

Which of the following will decrease the demand for coffee?

Accepted Answer

A)  the discovery that caffeine can cause heart problems 
B)  an increase in the price of coffee 
C)  an increase in the price of tea, a substitute for coffee 
D)  a decrease in the prices of coffee makers and coffee cups, complements to coffee 
A)  the discovery that caffeine can cause heart problems 
B)  an increase in the price of coffee 
C)  an increase in the price of tea, a substitute for coffee 
D)  a decrease in the prices of coffee makers and coffee cups, complements to coffee

Question 9

If cigars and cigarettes are substitute goods, an increase in the price of cigars would result in

Accepted Answer

A)  an increase in the demand for cigarettes. 
B)  a decrease in the price of cigarettes. 
C)  a decrease in the demand for cigarettes. 
D)  a decrease in the demand for cigars. 
A)  an increase in the demand for cigarettes. 
B)  a decrease in the price of cigarettes. 
C)  a decrease in the demand for cigarettes. 
D)  a decrease in the demand for cigars.

Question 10

A terrible storm wipes out 70 percent of the peanut crop. Explain and show graphically how this will affect the market for peanut butter and the market for jelly, a complementary good.

Accepted Answer

Higher peanut prices will shift the supp

Question 11

Assume that supply increases slightly and demand increases greatly. 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 12

Which of the following most accurately describes the invisible hand concept?

Accepted Answer

A)  Wise central planning by government is necessary for the efficient use of resources. 
B)  In a democratic setting, majority rule will result in the efficient use of resources. 
C)  In a market setting, when individuals pursue their own interests, they simultaneously tend to promote the public interest. 
D)  In a market setting, when individuals pursue their own interests, they tend to engage in activities that lower the overall economic welfare of society. 
A)  Wise central planning by government is necessary for the efficient use of resources. 
B)  In a democratic setting, majority rule will result in the efficient use of resources. 
C)  In a market setting, when individuals pursue their own interests, they simultaneously tend to promote the public interest. 
D)  In a market setting, when individuals pursue their own interests, they tend to engage in activities that lower the overall economic welfare of society.

Question 13

Figure 3-15  
Refer to Figure 3-15. Which area represents the increase in producer surplus when the price rises from P 1 to P 2 due to new producers entering the market?

Accepted Answer

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

Question 14

If the supply of a good is relatively inelastic, this means that the quantity supplied of the good is

Accepted Answer

A)  not very sensitive to the price of the good. 
B)  highly sensitive to the price of the good. 
C)  unrelated to the price of the good. 
D)  none of the above. 
A)  not very sensitive to the price of the good. 
B)  highly sensitive to the price of the good. 
C)  unrelated to the price of the good. 
D)  none of the above.

Question 15

Figure 3-19  
Refer to Figure 3-19. Sellers whose costs are greater than price are represented by segment

Accepted Answer

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

Question 16

Figure 3-19  
Refer to Figure 3-19. Sellers whose costs are less 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 17

If we observe an increase in the price of a good and an increase in the amount of the good bought and sold, this could be explained by

Accepted Answer

A)  an increase in the supply of the good. 
B)  an increase in the demand for the good. 
C)  a decrease in the demand for the good. 
D)  a decrease in the supply of the good. 
A)  an increase in the supply of the good. 
B)  an increase in the demand for the good. 
C)  a decrease in the demand for the good. 
D)  a decrease in the supply of the good.

Question 18

Figure 3-12  
In Figure 3-12, suppose D 1 and S 1 indicate initial conditions in the market for ice cream. Which of the following changes would tend to shift this market from D 1 to D 2?

Accepted Answer

A)  an increase in the price of milk, an ingredient used to produce ice cream 
B)  an increase in the price of frozen yogurt, a substitute for ice cream 
C)  a decrease in the price of sugar, an ingredient used to produce ice cream 
D)  a decrease in consumer income 
A)  an increase in the price of milk, an ingredient used to produce ice cream 
B)  an increase in the price of frozen yogurt, a substitute for ice cream 
C)  a decrease in the price of sugar, an ingredient used to produce ice cream 
D)  a decrease in consumer income

Question 19

Suppose both the equilibrium price and quantity rise for a particular product. Which of the following best explains this situation?

Accepted Answer

A)  Supply and demand simultaneously increased and the shift in supply was greater than the shift in demand. 
B)  Supply and demand simultaneously increased and the shift in supply was less than the shift in demand. 
C)  Supply and demand simultaneously decreased and the shift in supply was greater than the shift in demand. 
D)  Supply and demand simultaneously decreased and the shift in supply was less than the shift in demand. 
A)  Supply and demand simultaneously increased and the shift in supply was greater than the shift in demand. 
B)  Supply and demand simultaneously increased and the shift in supply was less than the shift in demand. 
C)  Supply and demand simultaneously decreased and the shift in supply was greater than the shift in demand. 
D)  Supply and demand simultaneously decreased and the shift in supply was less than the shift in demand.

Question 20

Which of the following would most likely cause both a decrease in the price of plasma screen TVs and a decrease in the number sold?

Accepted Answer

A)  an increase in the supply of plasma screen TVs 
B)  an increase in the demand for plasma screen TVs 
C)  a decrease in the supply of plasma screen TVs 
D)  a decrease in the demand for plasma screen TVs 
A)  an increase in the supply of plasma screen TVs 
B)  an increase in the demand for plasma screen TVs 
C)  a decrease in the supply of plasma screen TVs 
D)  a decrease in the demand for plasma screen TVs

If the demand for a good increased, what would be the effect on the equilibrium price and quantity?

The curve that shows the relationship between the price of a good and the quantity that consumers are willing to purchase at each price is the

Suppose all of the major computer manufacturers announced that beginning next month there would be major price reductions on their computers. This would cause the current demand for computers to

A demand curve for concert tickets would show the

Suppose prices for new homes have risen and sales of new homes have also risen. We can conclude that

(I) The height of the demand curve for a commodity indicates the maximum amount the consumer would be willing to pay for each unit of the good. (II) The height of the supply curve for a commodity indicates the minimum price the seller would accept for each unit of the good.

When the quantity demanded and quantity supplied in a market are equal, the market is said to be in

Which of the following will decrease the demand for coffee?

If cigars and cigarettes are substitute goods, an increase in the price of cigars would result in

A terrible storm wipes out 70 percent of the peanut crop. Explain and show graphically how this will affect the market for peanut butter and the market for jelly, a complementary good.

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

Which of the following most accurately describes the invisible hand concept?

Figure 3-15 Refer to Figure 3-15. Which area represents the increase in producer surplus when the price rises from P ₁ to P ₂ due to new producers entering the market?

If the supply of a good is relatively inelastic, this means that the quantity supplied of the good is

Figure 3-19 Refer to Figure 3-19. Sellers whose costs are greater than price are represented by segment

Figure 3-19 Refer to Figure 3-19. Sellers whose costs are less than price are represented by which line segment?

If we observe an increase in the price of a good and an increase in the amount of the good bought and sold, this could be explained by

Figure 3-12 In Figure 3-12, suppose D ₁ and S ₁ indicate initial conditions in the market for ice cream. Which of the following changes would tend to shift this market from D ₁ to D ₂?

Suppose both the equilibrium price and quantity rise for a particular product. Which of the following best explains this situation?

Which of the following would most likely cause both a decrease in the price of plasma screen TVs and a decrease in the number sold?

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

If the demand for a good increased, what would be the effect on the equilibrium price and quantity?

The curve that shows the relationship between the price of a good and the quantity that consumers are willing to purchase at each price is the

Suppose all of the major computer manufacturers announced that beginning next month there would be major price reductions on their computers. This would cause the current demand for computers to

A demand curve for concert tickets would show the

Suppose prices for new homes have risen and sales of new homes have also risen. We can conclude that

(I) The height of the demand curve for a commodity indicates the maximum amount the consumer would be willing to pay for each unit of the good. (II) The height of the supply curve for a commodity indicates the minimum price the seller would accept for each unit of the good.

When the quantity demanded and quantity supplied in a market are equal, the market is said to be in

Which of the following will decrease the demand for coffee?

If cigars and cigarettes are substitute goods, an increase in the price of cigars would result in

A terrible storm wipes out 70 percent of the peanut crop. Explain and show graphically how this will affect the market for peanut butter and the market for jelly, a complementary good.

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

Which of the following most accurately describes the invisible hand concept?

Figure 3-15 Refer to Figure 3-15. Which area represents the increase in producer surplus when the price rises from P 1 to P 2 due to new producers entering the market?

If the supply of a good is relatively inelastic, this means that the quantity supplied of the good is

Figure 3-19 Refer to Figure 3-19. Sellers whose costs are greater than price are represented by segment

Figure 3-19 Refer to Figure 3-19. Sellers whose costs are less than price are represented by which line segment?

If we observe an increase in the price of a good and an increase in the amount of the good bought and sold, this could be explained by

Figure 3-12 In Figure 3-12, suppose D 1 and S 1 indicate initial conditions in the market for ice cream. Which of the following changes would tend to shift this market from D 1 to D 2?

Suppose both the equilibrium price and quantity rise for a particular product. Which of the following best explains this situation?

Which of the following would most likely cause both a decrease in the price of plasma screen TVs and a decrease in the number sold?

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 the increase in producer surplus when the price rises from P ₁ to P ₂ due to new producers entering the market?

Figure 3-12 In Figure 3-12, suppose D ₁ and S ₁ indicate initial conditions in the market for ice cream. Which of the following changes would tend to shift this market from D ₁ to D ₂?