Question 1

A technological breakthrough lowers the cost of manufacturing VCRs. As a result, the market changes to a new equilibrium because of

Accepted Answer

A)  an upward movement along the demand curve for VCRs. 
B)  a rightward shift in the demand curve for VCRs. 
C)  a rightward shift in the supply curve for VCRs. 
D)  a shortage of VCRs. 
A)  an upward movement along the demand curve for VCRs. 
B)  a rightward shift in the demand curve for VCRs. 
C)  a rightward shift in the supply curve for VCRs. 
D)  a shortage of VCRs.

Question 2

Jeff buys a new shirt for $50. If his willingness to pay is ____, he receives consumer surplus of $15 on his purchase

Accepted Answer

A)  $15. 
B)  $35. 
C)  $50. 
D)  $65. 
A)  $15. 
B)  $35. 
C)  $50. 
D)  $65.

Question 3

Which of the following best explains the source of consumer surplus for good A?

Accepted Answer

A)  Many consumers pay prices that are greater than the equilibrium price of good A. 
B)  Many consumers would be willing to pay more than the market price for good A. 
C)  Many consumers think the market price of good A is greater than its cost. 
D)  Many consumers think the demand for good A is elastic. 
A)  Many consumers pay prices that are greater than the equilibrium price of good A. 
B)  Many consumers would be willing to pay more than the market price for good A. 
C)  Many consumers think the market price of good A is greater than its cost. 
D)  Many consumers think the demand for good A is elastic.

Question 4

If an economic action generates more costs than benefits, the action

Accepted Answer

A)  by definition increases the nation's economic welfare. 
B)  should not be undertaken from an efficiency standpoint. 
C)  should be undertaken from an efficiency standpoint. 
D)  is desirable from a public welfare standpoint, even though many individuals will be harmed. 
A)  by definition increases the nation's economic welfare. 
B)  should not be undertaken from an efficiency standpoint. 
C)  should be undertaken from an efficiency standpoint. 
D)  is desirable from a public welfare standpoint, even though many individuals will be harmed.

Question 5

Figure 3-18  
Refer to Figure 3-18. Which area represents the increase in consumer surplus when the price falls from P 1 to P 2?

Accepted Answer

A)  ABD 
B)  ACF 
C)  DEF 
D)  BCFD 
A)  ABD 
B)  ACF 
C)  DEF 
D)  BCFD

Question 6

Other things constant, a decrease in consumer income will

Accepted Answer

A)  decrease the demand for large-screen television sets. 
B)  increase the demand for large-screen television sets. 
C)  cause a movement along the demand curve for large-screen television sets, but it will not shift the demand curve. 
D)  have no impact on the quantity demanded or the demand curve for large-screen television sets. 
A)  decrease the demand for large-screen television sets. 
B)  increase the demand for large-screen television sets. 
C)  cause a movement along the demand curve for large-screen television sets, but it will not shift the demand curve. 
D)  have no impact on the quantity demanded or the demand curve for large-screen television sets.

Question 7

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 8

Which of the following is true of profits and losses?

Accepted Answer

A)  Profits direct entrepreneurs toward production of goods that are highly valued relative to their cost, while losses direct them away from wealth-reducing activities. 
B)  Profits indicate that the firm is charging prices that are too high, while losses indicate that the firm needs to raise its prices. 
C)  Profits indicate that the consumer is getting a bad deal, while losses indicate that the consumer values the product highly relative to its cost. 
D)  Profits indicate that the suppliers of resources are underpaid, while losses indicate they are overpaid. 
A)  Profits direct entrepreneurs toward production of goods that are highly valued relative to their cost, while losses direct them away from wealth-reducing activities. 
B)  Profits indicate that the firm is charging prices that are too high, while losses indicate that the firm needs to raise its prices. 
C)  Profits indicate that the consumer is getting a bad deal, while losses indicate that the consumer values the product highly relative to its cost. 
D)  Profits indicate that the suppliers of resources are underpaid, while losses indicate they are overpaid.

Question 9

Which of the following would most likely cause the price of wheat to decline?

Accepted Answer

A)  an increase in the production costs of corn, a substitute for wheat 
B)  a decrease in the price of soybeans, a substitute for wheat 
C)  an increase in the price of fertilizer, a resource used to produce wheat 
D)  a sandwich craze among Americans, causing increased demand for whole-wheat bread 
A)  an increase in the production costs of corn, a substitute for wheat 
B)  a decrease in the price of soybeans, a substitute for wheat 
C)  an increase in the price of fertilizer, a resource used to produce wheat 
D)  a sandwich craze among Americans, causing increased demand for whole-wheat bread

Question 10

Corn and soybeans are alternatives that could be grown by most farmers. If government subsidies for ethanol lead to higher corn prices, this 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 11

How would a decrease in the cost of production affect the market for new washing machines?

Accepted Answer

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

Question 12

An important assumption that is made when constructing a supply schedule is

Accepted Answer

A)  only price and quantity matter in determining supply. 
B)  firms always want to sell a certain amount of a product. 
C)  supply is too important to be left to the marketplace. 
D)  all other determinants of supply are held constant. 
E)  demand has a positive slope. 
A)  only price and quantity matter in determining supply. 
B)  firms always want to sell a certain amount of a product. 
C)  supply is too important to be left to the marketplace. 
D)  all other determinants of supply are held constant. 
E)  demand has a positive slope.

Question 13

"He [the producer] intends only his gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention." What famous economist made this statement?

Accepted Answer

A)  Alfred Marshall 
B)  Friedrich Hayek 
C)  Adam Smith 
D)  David Ricardo 
A)  Alfred Marshall 
B)  Friedrich Hayek 
C)  Adam Smith 
D)  David Ricardo

Question 14

Figure 3-16  
Refer to Figure 3-16. When the price is P 2, producer surplus is

Accepted Answer

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

Question 15

Markets coordinate output decisions by pushing

Accepted Answer

A)  up price when there is a shortage. 
B)  down price when quantity demanded exceeds quantity supplied. 
C)  up price when there is a surplus. 
D)  up price when quantity supplied exceeds quantity demanded. 
A)  up price when there is a shortage. 
B)  down price when quantity demanded exceeds quantity supplied. 
C)  up price when there is a surplus. 
D)  up price when quantity supplied exceeds quantity demanded.

Question 16

If a surplus exists in a market we know that the actual price is

Accepted Answer

A)  above equilibrium price and quantity supplied is greater than quantity demanded. 
B)  above equilibrium price and quantity demanded is greater than quantity supplied. 
C)  below equilibrium price and quantity demanded is greater than quantity supplied. 
D)  below equilibrium price and quantity supplied is greater than quantity demanded. 
A)  above equilibrium price and quantity supplied is greater than quantity demanded. 
B)  above equilibrium price and quantity demanded is greater than quantity supplied. 
C)  below equilibrium price and quantity demanded is greater than quantity supplied. 
D)  below equilibrium price and quantity supplied is greater than quantity demanded.

Question 17

Figure 3-22

Refer to Figure 3-22. Which of the four graphs illustrates an increase in quantity supplied?

Accepted Answer

A)  A 
B)  B 
C)  C 
D)  D 
A)  A 
B)  B 
C)  C 
D)  D

Question 18

According to Adam Smith's invisible hand principle, productive actions that promote the general welfare of society will be undertaken when

Accepted Answer

A)  political representatives are elected democratically. 
B)  competitive markets direct the actions of self-interested individuals. 
C)  the selfish instincts of individuals are controlled. 
D)  workers are able to organize and develop strong unions. 
A)  political representatives are elected democratically. 
B)  competitive markets direct the actions of self-interested individuals. 
C)  the selfish instincts of individuals are controlled. 
D)  workers are able to organize and develop strong unions.

Question 19

Figure 3-4  
Figure 3-4 shows conditions in the market for beef. A reduction in the price of the grain used to feed cattle results in

Accepted Answer

A)  the supply curve for beef shifting to the left resulting in higher beef prices and a lower quantity sold. 
B)  the supply curve for beef shifting to the right resulting in lower beef prices and a higher quantity sold. 
C)  the demand curve for beef shifting to the left resulting in lower beef prices and a lower quantity sold. 
D)  the demand curve for beef shifting to the right resulting in higher beef prices and a higher quantity sold. 
A)  the supply curve for beef shifting to the left resulting in higher beef prices and a lower quantity sold. 
B)  the supply curve for beef shifting to the right resulting in lower beef prices and a higher quantity sold. 
C)  the demand curve for beef shifting to the left resulting in lower beef prices and a lower quantity sold. 
D)  the demand curve for beef shifting to the right resulting in higher beef prices and a higher quantity sold.

Question 20

If a firm is not covering the cost of all resources employed by the firm (including the opportunity cost of resources owned by the firm), it will generally

Accepted Answer

A)  go out of business in the long run. 
B)  remain in business as long as the current conditions are unchanged. 
C)  experience an increase in its stock price because investors will be attracted to it. 
D)  attempt to expand the size of its operation. 
A)  go out of business in the long run. 
B)  remain in business as long as the current conditions are unchanged. 
C)  experience an increase in its stock price because investors will be attracted to it. 
D)  attempt to expand the size of its operation.

A technological breakthrough lowers the cost of manufacturing VCRs. As a result, the market changes to a new equilibrium because of

Jeff buys a new shirt for $50. If his willingness to pay is ____, he receives consumer surplus of $15 on his purchase

Which of the following best explains the source of consumer surplus for good A?

If an economic action generates more costs than benefits, the action

Figure 3-18 Refer to Figure 3-18. Which area represents the increase in consumer surplus when the price falls from P ₁ to P ₂?

Other things constant, a decrease in consumer income will

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 is true of profits and losses?

Which of the following would most likely cause the price of wheat to decline?

Corn and soybeans are alternatives that could be grown by most farmers. If government subsidies for ethanol lead to higher corn prices, this will

How would a decrease in the cost of production affect the market for new washing machines?

An important assumption that is made when constructing a supply schedule is

"He [the producer] intends only his gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention." What famous economist made this statement?

Figure 3-16 Refer to Figure 3-16. When the price is P ₂, producer surplus is

Markets coordinate output decisions by pushing

If a surplus exists in a market we know that the actual price is

Figure 3-22 Refer to Figure 3-22. Which of the four graphs illustrates an increase in quantity supplied?

According to Adam Smith's invisible hand principle, productive actions that promote the general welfare of society will be undertaken when

Figure 3-4 Figure 3-4 shows conditions in the market for beef. A reduction in the price of the grain used to feed cattle results in

If a firm is not covering the cost of all resources employed by the firm (including the opportunity cost of resources owned by the firm), it will generally

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

A technological breakthrough lowers the cost of manufacturing VCRs. As a result, the market changes to a new equilibrium because of

Jeff buys a new shirt for $50. If his willingness to pay is ____, he receives consumer surplus of $15 on his purchase

Which of the following best explains the source of consumer surplus for good A?

If an economic action generates more costs than benefits, the action

Figure 3-18 Refer to Figure 3-18. Which area represents the increase in consumer surplus when the price falls from P 1 to P 2?

Other things constant, a decrease in consumer income will

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 is true of profits and losses?

Which of the following would most likely cause the price of wheat to decline?

Corn and soybeans are alternatives that could be grown by most farmers. If government subsidies for ethanol lead to higher corn prices, this will

How would a decrease in the cost of production affect the market for new washing machines?

An important assumption that is made when constructing a supply schedule is

"He [the producer] intends only his gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention." What famous economist made this statement?

Figure 3-16 Refer to Figure 3-16. When the price is P 2, producer surplus is

Markets coordinate output decisions by pushing

If a surplus exists in a market we know that the actual price is

Figure 3-22 Refer to Figure 3-22. Which of the four graphs illustrates an increase in quantity supplied?

According to Adam Smith's invisible hand principle, productive actions that promote the general welfare of society will be undertaken when

Figure 3-4 Figure 3-4 shows conditions in the market for beef. A reduction in the price of the grain used to feed cattle results in

If a firm is not covering the cost of all resources employed by the firm (including the opportunity cost of resources owned by the firm), it will generally

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 3-18 Refer to Figure 3-18. Which area represents the increase in consumer surplus when the price falls from P ₁ to P ₂?

Figure 3-16 Refer to Figure 3-16. When the price is P ₂, producer surplus is