Question 1

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 2

When economists say the demand for a product has decreased, they mean

Accepted Answer

A)  the demand curve has shifted to the left. 
B)  the product price has increased, and as a consequence, consumers are buying less of the product. 
C)  consumers are now willing and able to buy more of this product at each possible price. 
D)  the demand curve has shifted to the right. 
A)  the demand curve has shifted to the left. 
B)  the product price has increased, and as a consequence, consumers are buying less of the product. 
C)  consumers are now willing and able to buy more of this product at each possible price. 
D)  the demand curve has shifted to the right.

Question 3

Figure 3-22

Refer to Figure 3-22. Suppose the events depicted in graphs A and C were illustrated together on a single graph. A definitive result of the two events would be

Accepted Answer

A)  an increase in the equilibrium quantity. 
B)  an increase in the equilibrium price. 
C)  an instance in which the law of demand fails to hold. 
D)  All of the above are correct. 
A)  an increase in the equilibrium quantity. 
B)  an increase in the equilibrium price. 
C)  an instance in which the law of demand fails to hold. 
D)  All of the above are correct.

Question 4

Which of the following are true ?

Accepted Answer

A)  Economists use the criterion of economic efficiency to judge the merit of alternative outcomes. 
B)  Undertaking an economic action will be efficient if it produces more benefits than costs for the individuals of the economy. 
C)  Undertaking an economic action will be inefficient if it produces more costs than benefits to the individuals. 
D)  All of the above are true. 
A)  Economists use the criterion of economic efficiency to judge the merit of alternative outcomes. 
B)  Undertaking an economic action will be efficient if it produces more benefits than costs for the individuals of the economy. 
C)  Undertaking an economic action will be inefficient if it produces more costs than benefits to the individuals. 
D)  All of the above are true.

Question 5

"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 is the "invisible hand" referred to in this statement?

Accepted Answer

A)  the elasticity of the market demand curve 
B)  the power of government when decisions are made democratically 
C)  the guidelines and regulations set for his industry by the government 
D)  the incentive structure accompanying market prices 
A)  the elasticity of the market demand curve 
B)  the power of government when decisions are made democratically 
C)  the guidelines and regulations set for his industry by the government 
D)  the incentive structure accompanying market prices

Question 6

Which of the following would cause an increase in the price of gasoline and an expansion in the equilibrium quantity?

Accepted Answer

A)  an increase in the price of crude oil, a key ingredient required for the production of gasoline 
B)  the introduction of a miracle carburetor that substantially improves the gas mileage of automobiles 
C)  a recession that substantially reduces the income of households 
D)  an increase in the popularity and use of Sport Utility Vehicles that consume a lot of gasoline per mile driven 
A)  an increase in the price of crude oil, a key ingredient required for the production of gasoline 
B)  the introduction of a miracle carburetor that substantially improves the gas mileage of automobiles 
C)  a recession that substantially reduces the income of households 
D)  an increase in the popularity and use of Sport Utility Vehicles that consume a lot of gasoline per mile driven

Question 7

Profit can be defined as the

Accepted Answer

A)  difference between the sales revenue of a business firm and the opportunity cost of the resources required to produce the goods supplied by the firm. 
B)  difference between a company's income and direct monetary costs of production. 
C)  difference between the price of a product and the consumer's valuation of the good. 
D)  amount of total revenue earned by the firm minus its payments to stockholders. 
A)  difference between the sales revenue of a business firm and the opportunity cost of the resources required to produce the goods supplied by the firm. 
B)  difference between a company's income and direct monetary costs of production. 
C)  difference between the price of a product and the consumer's valuation of the good. 
D)  amount of total revenue earned by the firm minus its payments to stockholders.

Question 8

Figure 3-16  
Refer to Figure 3-16. When the price is P 1, producer surplus is

Accepted Answer

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

Question 9

If Harry only pays $25,000 to purchase a new car even though he would have been willing to pay as much as $35,000 for the car, this indicates that

Accepted Answer

A)  Harry is an irrational consumer. 
B)  The seller earned a $10,000 profit on the sale of the car. 
C)  Harry reaped $10,000 of consumer surplus from the transaction. 
D)  The seller received $10,000 worth of producer surplus on the transaction. 
A)  Harry is an irrational consumer. 
B)  The seller earned a $10,000 profit on the sale of the car. 
C)  Harry reaped $10,000 of consumer surplus from the transaction. 
D)  The seller received $10,000 worth of producer surplus on the transaction.

Question 10

Which of the following would cause the price of automobiles to rise?

Accepted Answer

A)  a decrease in the wages of autoworkers 
B)  a reduction in the price of bus travel 
C)  an increase in the price of gasoline 
D)  an increase in consumer income 
A)  a decrease in the wages of autoworkers 
B)  a reduction in the price of bus travel 
C)  an increase in the price of gasoline 
D)  an increase in consumer income

Question 11

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 12

Which of the following will most likely decrease the current price of personal computers?

Accepted Answer

A)  a technological advance that decreases the production costs of personal computers 
B)  an increase in consumer income 
C)  development of new software that makes it easier for more people to use personal computers 
D)  the expectation that the price of personal computers will increase during the next six months 
A)  a technological advance that decreases the production costs of personal computers 
B)  an increase in consumer income 
C)  development of new software that makes it easier for more people to use personal computers 
D)  the expectation that the price of personal computers will increase during the next six months

Question 13

If the quantity of a good supplied is not very sensitive to the price of the good, this is illustrated by a

Accepted Answer

A)  demand curve that is relatively flat (more horizontal). 
B)  demand curve that is relatively steep (more vertical). 
C)  supply curve that is relatively flat (more horizontal). 
D)  supply curve that is relatively steep (more vertical). 
A)  demand curve that is relatively flat (more horizontal). 
B)  demand curve that is relatively steep (more vertical). 
C)  supply curve that is relatively flat (more horizontal). 
D)  supply curve that is relatively steep (more vertical).

Question 14

A decrease in the price of a good would

Accepted Answer

A)  increase the demand for the good. 
B)  increase the quantity demanded for the good. 
C)  decrease the demand for the good. 
D)  decrease the quantity supplied of the good. 
A)  increase the demand for the good. 
B)  increase the quantity demanded for the good. 
C)  decrease the demand for the good. 
D)  decrease the quantity supplied of the good.

Question 15

A decrease 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)  an increase 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)  an increase in equilibrium price.

Question 16

During a major war between two oil producing nations, there would likely be

Accepted Answer

A)  an increase in the price of oil because the supply of oil would decrease. 
B)  an increase in the price of oil because the supply of oil would increase. 
C)  a decrease in the price of oil because the supply of oil would decrease. 
D)  a decrease in the price of oil because the supply of oil would increase. 
A)  an increase in the price of oil because the supply of oil would decrease. 
B)  an increase in the price of oil because the supply of oil would increase. 
C)  a decrease in the price of oil because the supply of oil would decrease. 
D)  a decrease in the price of oil because the supply of oil would increase.

Question 17

Use the figure below to answer the following question(s).
Figure 3-9
 
Given the demand ( D ) and supply ( S ) for gasoline in Figure 3-9, if the price of gasoline were $3 per gallon,

Accepted Answer

A)  consumers would wish to purchase more than was being supplied. 
B)  producers would be supplying more than consumers wished to purchase. 
C)  the quantity consumers wished to purchase would equal the quantity that producers wished to supply. 
D)  there would be a tendency for the price of gasoline to rise. 
A)  consumers would wish to purchase more than was being supplied. 
B)  producers would be supplying more than consumers wished to purchase. 
C)  the quantity consumers wished to purchase would equal the quantity that producers wished to supply. 
D)  there would be a tendency for the price of gasoline to rise.

Question 18

Andrew decides that he would pay as much as $3,000 for a new laptop computer. He buys the computer and realizes consumer surplus of $700. How much did Andrew pay for his computer?

Accepted Answer

A)  $700 
B)  $2,300 
C)  $3,000 
D)  $3,700 
A)  $700 
B)  $2,300 
C)  $3,000 
D)  $3,700

Question 19

Which of the following would reduce the price of DVD players and increase the quantity sold?

Accepted Answer

A)  an increase in the demand for DVD players 
B)  a decrease in the demand for DVD players 
C)  a decrease in the supply of DVD players 
D)  an increase in the supply of DVD players 
A)  an increase in the demand for DVD players 
B)  a decrease in the demand for DVD players 
C)  a decrease in the supply of DVD players 
D)  an increase in the supply of DVD players

Question 20

Under competitive conditions, market prices

Accepted Answer

A)  generally convey little information about the value and cost of goods. 
B)  do not usually have much of an effect on the decisions of individuals. 
C)  are incapable of coordinating the actions of buyers and sellers. 
D)  generally bring the self-interest of individuals into harmony with the general welfare. 
A)  generally convey little information about the value and cost of goods. 
B)  do not usually have much of an effect on the decisions of individuals. 
C)  are incapable of coordinating the actions of buyers and sellers. 
D)  generally bring the self-interest of individuals into harmony with the general welfare.

Price is important in a market economy because it

When economists say the demand for a product has decreased, they mean

Figure 3-22 Refer to Figure 3-22. Suppose the events depicted in graphs A and C were illustrated together on a single graph. A definitive result of the two events would be

Which of the following are true ?

"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 is the "invisible hand" referred to in this statement?

Which of the following would cause an increase in the price of gasoline and an expansion in the equilibrium quantity?

Profit can be defined as the

Figure 3-16 Refer to Figure 3-16. When the price is P ₁, producer surplus is

If Harry only pays $25,000 to purchase a new car even though he would have been willing to pay as much as $35,000 for the car, this indicates that

Which of the following would cause the price of automobiles to rise?

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.

Which of the following will most likely decrease the current price of personal computers?

If the quantity of a good supplied is not very sensitive to the price of the good, this is illustrated by a

A decrease in the price of a good would

A decrease in demand will cause

During a major war between two oil producing nations, there would likely be

Use the figure below to answer the following question(s). Figure 3-9 Given the demand ( D ) and supply ( S ) for gasoline in Figure 3-9, if the price of gasoline were $3 per gallon,

Andrew decides that he would pay as much as $3,000 for a new laptop computer. He buys the computer and realizes consumer surplus of $700. How much did Andrew pay for his computer?

Which of the following would reduce the price of DVD players and increase the quantity sold?

Under competitive conditions, market prices

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

Price is important in a market economy because it

When economists say the demand for a product has decreased, they mean

Figure 3-22 Refer to Figure 3-22. Suppose the events depicted in graphs A and C were illustrated together on a single graph. A definitive result of the two events would be

Which of the following are true ?

"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 is the "invisible hand" referred to in this statement?

Which of the following would cause an increase in the price of gasoline and an expansion in the equilibrium quantity?

Profit can be defined as the

Figure 3-16 Refer to Figure 3-16. When the price is P 1, producer surplus is

If Harry only pays $25,000 to purchase a new car even though he would have been willing to pay as much as $35,000 for the car, this indicates that

Which of the following would cause the price of automobiles to rise?

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.

Which of the following will most likely decrease the current price of personal computers?

If the quantity of a good supplied is not very sensitive to the price of the good, this is illustrated by a

A decrease in the price of a good would

A decrease in demand will cause

During a major war between two oil producing nations, there would likely be

Use the figure below to answer the following question(s). Figure 3-9 Given the demand ( D ) and supply ( S ) for gasoline in Figure 3-9, if the price of gasoline were $3 per gallon,

Andrew decides that he would pay as much as $3,000 for a new laptop computer. He buys the computer and realizes consumer surplus of $700. How much did Andrew pay for his computer?

Which of the following would reduce the price of DVD players and increase the quantity sold?

Under competitive conditions, market prices

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 3-16 Refer to Figure 3-16. When the price is P ₁, producer surplus is