Question 1

If an increase in the price of peaches reduces the demand for cream, this indicates that peaches and cream are

Accepted Answer

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

Question 2

Which of the following would be the best example of consumer surplus?

Accepted Answer

A)  Jane pays $30 a month for phone service even though it is worth $70 to her. 
B)  Sam refuses to pay $10 for a haircut because it is only worth $8 to him. 
C)  Fred buys a car for $4,000, the maximum amount that he would be willing to pay for it. 
D)  When Sue purchases a candy bar for $.50, she uses a $20 bill to pay for it. 
A)  Jane pays $30 a month for phone service even though it is worth $70 to her. 
B)  Sam refuses to pay $10 for a haircut because it is only worth $8 to him. 
C)  Fred buys a car for $4,000, the maximum amount that he would be willing to pay for it. 
D)  When Sue purchases a candy bar for $.50, she uses a $20 bill to pay for it.

Question 3

According to the law of supply, as the price of a good falls,

Accepted Answer

A)  buyers will buy more of the good. 
B)  buyers will buy less of the good. 
C)  sellers will produce more of the good. 
D)  sellers will produce less of the good. 
A)  buyers will buy more of the good. 
B)  buyers will buy less of the good. 
C)  sellers will produce more of the good. 
D)  sellers will produce less of the good.

Question 4

A recent editorial in a local newspaper argues, "Consumers need to know more about products than just their price. They need to know how these prices are determined, who owns the businesses, and the wages of the workers." Is the editorial writer correct? Why or why not?

Accepted Answer

What is missing from the editorial is a

Question 5

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 6

Which of the following would most likely increase the demand for peanut butter?

Accepted Answer

A)  a decrease in the price of jelly, a good that is often used with peanut butter 
B)  the discovery that excessive consumption of peanut butter is harmful to one's health 
C)  crop failures that raise the price of peanuts 
D)  the invention of a new product that consumers think is a good substitute for peanut butter 
A)  a decrease in the price of jelly, a good that is often used with peanut butter 
B)  the discovery that excessive consumption of peanut butter is harmful to one's health 
C)  crop failures that raise the price of peanuts 
D)  the invention of a new product that consumers think is a good substitute for peanut butter

Question 7

Use the table below to choose the correct answer. The table is a schedule of the supply and demand for ground hamburger meat (both given in thousands of pounds per month).
 
The equilibrium market price of ground hamburger meat would be

Accepted Answer

A)  $1 per pound. 
B)  $2 per pound. 
C)  $2.50 per pound. 
D)  $3 per pound. 
A)  $1 per pound. 
B)  $2 per pound. 
C)  $2.50 per pound. 
D)  $3 per pound.

Question 8

When Adam Smith said economic activity was directed by an "invisible hand," he was referring to the fact that

Accepted Answer

A)  competitive markets motivate altruistic individuals to pursue productive activities that only serve their private interests. 
B)  when economic activity is directed by competitive markets, the actions of self-interested individuals will generally serve the public interest. 
C)  invisible forces will lead to economic chaos unless wise central planning directs economic activity. 
D)  scarcity is largely the result of invisible forces that would be eliminated if individuals were free to pursue their own self-interests. 
A)  competitive markets motivate altruistic individuals to pursue productive activities that only serve their private interests. 
B)  when economic activity is directed by competitive markets, the actions of self-interested individuals will generally serve the public interest. 
C)  invisible forces will lead to economic chaos unless wise central planning directs economic activity. 
D)  scarcity is largely the result of invisible forces that would be eliminated if individuals were free to pursue their own self-interests.

Question 9

When property rights are well defined and markets are competitive,

Accepted Answer

A)  the total gains from trade (the combined area of producer and consumer surplus) are maximized at the market equilibrium. 
B)  the market equilibrium is consistent with economic efficiency in that all units creating more benefit than cost have been produced. 
C)  the market will automatically move toward the price and quantity where the quantity supplied and the quantity demanded are in balance. 
D)  all of the above are true. 
A)  the total gains from trade (the combined area of producer and consumer surplus) are maximized at the market equilibrium. 
B)  the market equilibrium is consistent with economic efficiency in that all units creating more benefit than cost have been produced. 
C)  the market will automatically move toward the price and quantity where the quantity supplied and the quantity demanded are in balance. 
D)  all of the above are true.

Question 10

Figure 3-19  
Refer to Figure 3-19. If the government mandated a price increase from Pe to a higher price, then

Accepted Answer

A)  total surplus would decrease. 
B)  consumer surplus would increase. 
C)  total surplus would increase, since producer surplus would increase. 
D)  total surplus would remain unchanged. 
A)  total surplus would decrease. 
B)  consumer surplus would increase. 
C)  total surplus would increase, since producer surplus would increase. 
D)  total surplus would remain unchanged.

Question 11

If the demand for a good is relatively elastic, this means that consumer purchases of the good are

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)  unaffected by changes in the income level of consumers. 
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)  unaffected by changes in the income level of consumers.

Question 12

A recent study suggested that moderate wine drinking may actually benefit one's health. If this information leads to an increased demand for wine, we would expect

Accepted Answer

A)  both the price and quantity of wine sold to increase. 
B)  both the price and quantity of wine sold to decrease. 
C)  the price to decrease and the quantity of wine sold to increase. 
D)  the price to increase and the quantity of wine sold to decrease. 
A)  both the price and quantity of wine sold to increase. 
B)  both the price and quantity of wine sold to decrease. 
C)  the price to decrease and the quantity of wine sold to increase. 
D)  the price to increase and the quantity of wine sold to decrease.

Question 13

If the supply of a good decreased, 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 14

Which of the following will lead to a decrease in supply of a good?

Accepted Answer

A)  an increase in the price of the good 
B)  an increase in consumer incomes 
C)  an increase in the price of an important resource used to produce the good 
D)  a technological advance that lowers the cost of producing the good 
A)  an increase in the price of the good 
B)  an increase in consumer incomes 
C)  an increase in the price of an important resource used to produce the good 
D)  a technological advance that lowers the cost of producing the good

Question 15

Figure 3-19  
Refer to Figure 3-19. Buyers who value this good 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 16

Which of the following would most likely shift the supply curve to the left for Wii video games?

Accepted Answer

A)  an increase in the price of Wii video games 
B)  a decrease in the price of computer chips used to make Wii games 
C)  a decrease in the demand for Wii games 
D)  an increase in the price of electronic components used to produce the Wii games 
A)  an increase in the price of Wii video games 
B)  a decrease in the price of computer chips used to make Wii games 
C)  a decrease in the demand for Wii games 
D)  an increase in the price of electronic components used to produce the Wii games

Question 17

Two products that are usually consumed jointly 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 18

According to the law of supply, as the price of a good decreases

Accepted Answer

A)  buyers will buy more of the good. 
B)  sellers will produce more of the good. 
C)  buyers will buy less of the good. 
D)  sellers will produce less of the good. 
A)  buyers will buy more of the good. 
B)  sellers will produce more of the good. 
C)  buyers will buy less of the good. 
D)  sellers will produce less of the good.

Question 19

If the number of consumers in a market increases, the market demand curve will

Accepted Answer

A)  decrease, which is a shift to the left of the demand curve. 
B)  increase, which is a shift to the right of the demand curve. 
C)  not shift, but rather this will just cause a movement along the demand curve. 
D)  do none of the above. 
A)  decrease, which is a shift to the left of the demand curve. 
B)  increase, which is a shift to the right of the demand curve. 
C)  not shift, but rather this will just cause a movement along the demand curve. 
D)  do none of the above.

Question 20

Which of the following is the most likely effect of lower apple juice prices on the price and quantity purchased of orange juice, a substitute product?

Accepted Answer

A)  The price of orange juice will increase, and the quantity purchased will fall. 
B)  The price of orange juice will fall, and the quantity purchased will increase. 
C)  The price of orange juice will increase, and the quantity purchased will increase. 
D)  The price of orange juice will fall, and the quantity purchased will fall. 
A)  The price of orange juice will increase, and the quantity purchased will fall. 
B)  The price of orange juice will fall, and the quantity purchased will increase. 
C)  The price of orange juice will increase, and the quantity purchased will increase. 
D)  The price of orange juice will fall, and the quantity purchased will fall.

If an increase in the price of peaches reduces the demand for cream, this indicates that peaches and cream are

Which of the following would be the best example of consumer surplus?

According to the law of supply, as the price of a good falls,

A recent editorial in a local newspaper argues, "Consumers need to know more about products than just their price. They need to know how these prices are determined, who owns the businesses, and the wages of the workers." Is the editorial writer correct? Why or why not?

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

Which of the following would most likely increase the demand for peanut butter?

Use the table below to choose the correct answer. The table is a schedule of the supply and demand for ground hamburger meat (both given in thousands of pounds per month). The equilibrium market price of ground hamburger meat would be

When Adam Smith said economic activity was directed by an "invisible hand," he was referring to the fact that

When property rights are well defined and markets are competitive,

Figure 3-19 Refer to Figure 3-19. If the government mandated a price increase from P_e to a higher price, then

If the demand for a good is relatively elastic, this means that consumer purchases of the good are

A recent study suggested that moderate wine drinking may actually benefit one's health. If this information leads to an increased demand for wine, we would expect

If the supply of a good decreased, what would be the effect on the equilibrium price and quantity?

Which of the following will lead to a decrease in supply of a good?

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

Which of the following would most likely shift the supply curve to the left for Wii video games?

Two products that are usually consumed jointly would be referred to as

According to the law of supply, as the price of a good decreases

If the number of consumers in a market increases, the market demand curve will

Which of the following is the most likely effect of lower apple juice prices on the price and quantity purchased of orange juice, a substitute product?

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 an increase in the price of peaches reduces the demand for cream, this indicates that peaches and cream are

Which of the following would be the best example of consumer surplus?

According to the law of supply, as the price of a good falls,

A recent editorial in a local newspaper argues, "Consumers need to know more about products than just their price. They need to know how these prices are determined, who owns the businesses, and the wages of the workers." Is the editorial writer correct? Why or why not?

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

Which of the following would most likely increase the demand for peanut butter?

Use the table below to choose the correct answer. The table is a schedule of the supply and demand for ground hamburger meat (both given in thousands of pounds per month). The equilibrium market price of ground hamburger meat would be

When Adam Smith said economic activity was directed by an "invisible hand," he was referring to the fact that

When property rights are well defined and markets are competitive,

Figure 3-19 Refer to Figure 3-19. If the government mandated a price increase from Pe to a higher price, then

If the demand for a good is relatively elastic, this means that consumer purchases of the good are

A recent study suggested that moderate wine drinking may actually benefit one's health. If this information leads to an increased demand for wine, we would expect

If the supply of a good decreased, what would be the effect on the equilibrium price and quantity?

Which of the following will lead to a decrease in supply of a good?

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

Which of the following would most likely shift the supply curve to the left for Wii video games?

Two products that are usually consumed jointly would be referred to as

According to the law of supply, as the price of a good decreases

If the number of consumers in a market increases, the market demand curve will

Which of the following is the most likely effect of lower apple juice prices on the price and quantity purchased of orange juice, a substitute product?

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 3-19 Refer to Figure 3-19. If the government mandated a price increase from P_e to a higher price, then