Question 1

If the market supply increases and, simultaneously, market demand decreases, the new equilibrium will show:

Accepted Answer

A)  market price will decrease, and market quantity exchanged could increase, decrease, or remain unchanged. 
B)  market price will increase, and market quantity exchanged will decrease. 
C)  market price will increase, and the quantity exchanged could increase, decrease, or remain the same. 
D)  market price could increase, decrease, or remain the same, and quantity exchanged will increase. 
E)  market price will increase, decrease, or remain the same, and quantity exchanged will decrease. 
A)  market price will decrease, and market quantity exchanged could increase, decrease, or remain unchanged. 
B)  market price will increase, and market quantity exchanged will decrease. 
C)  market price will increase, and the quantity exchanged could increase, decrease, or remain the same. 
D)  market price could increase, decrease, or remain the same, and quantity exchanged will increase. 
E)  market price will increase, decrease, or remain the same, and quantity exchanged will decrease. A

Question 2

An increase in demand and a decrease in supply cause which of the following?

Accepted Answer

A)  Equilibrium price change is indeterminate. 
B)  Equilibrium quantity decreases. 
C)  Equilibrium price falls. 
D)  Equilibrium price rises. 
E)  Equilibrium quantity increases. 
A)  Equilibrium price change is indeterminate. 
B)  Equilibrium quantity decreases. 
C)  Equilibrium price falls. 
D)  Equilibrium price rises. 
E)  Equilibrium quantity increases. D

Question 3

Why do negative externalities like pollution result in inefficiency?

Accepted Answer

A)  Because producers artificially restrict their supply. 
B)  Because producers ignore the external costs they impose on third-parties. 
C)  Because producers manufacture more goods than people can afford to buy. 
D)  Because producers will receive an unequal distribution of profits. 
A)  Because producers artificially restrict their supply. 
B)  Because producers ignore the external costs they impose on third-parties. 
C)  Because producers manufacture more goods than people can afford to buy. 
D)  Because producers will receive an unequal distribution of profits. B

Question 4

Consider the market for grapes. An increase in the wage paid to grape pickers will cause the:

Accepted Answer

A)  demand curve for grapes to shift to the right, resulting in a higher equilibrium price for grapes and a reduction in the quantity consumed. 
B)  demand curve for grapes to shift to the left, resulting in a lower equilibrium price for grapes and an increase in the quantity consumed. 
C)  supply curve for grapes to shift to the left, resulting in a lower equilibrium price for grapes and a decrease in the quantity consumed. 
D)  supply curve for grapes to shift to the left, resulting in a higher equilibrium price for grapes and a decrease in the quantity consumed. 
A)  demand curve for grapes to shift to the right, resulting in a higher equilibrium price for grapes and a reduction in the quantity consumed. 
B)  demand curve for grapes to shift to the left, resulting in a lower equilibrium price for grapes and an increase in the quantity consumed. 
C)  supply curve for grapes to shift to the left, resulting in a lower equilibrium price for grapes and a decrease in the quantity consumed. 
D)  supply curve for grapes to shift to the left, resulting in a higher equilibrium price for grapes and a decrease in the quantity consumed.

Question 5

Exhibit 4-4  Supply and demand curves for good X   Which of the graphs in Exhibit 4-4 illustrates an increase in buyers' income, assuming that good X is a normal good?

Accepted Answer

A)  Graph A. 
B)  Graph B. 
C)  Graph C. 
D)  None of the above. 
A)  Graph A. 
B)  Graph B. 
C)  Graph C. 
D)  None of the above.

Question 6

Higher gasoline prices would likely raise the price of large, gas-guzzling automobiles.

Accepted Answer

A) True 
 B)False

Question 7

An increase in the demand for tattoos will lead to a:

Accepted Answer

A)  higher price and a larger quantity sold. 
B)  lower price and a larger quantity sold. 
C)  higher price and a smaller quantity sold. 
D)  lower price and a smaller quantity sold 
A)  higher price and a larger quantity sold. 
B)  lower price and a larger quantity sold. 
C)  higher price and a smaller quantity sold. 
D)  lower price and a smaller quantity sold

Question 8

Exhibit 4-3  Supply and demand curves   In Exhibit 4-3, an increase in quantity supplied would cause a movement from which equilibrium point to another, other things being equal?

Accepted Answer

A)  E1 to E2. 
B)  E1 to E4. 
C)  E4 to E1. 
D)  E3 to E4. 
A)  E1 to E2. 
B)  E1 to E4. 
C)  E4 to E1. 
D)  E3 to E4.

Question 9

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.

Question 10

Rent controls create distortions in the housing market by:

Accepted Answer

A)  increasing rents received by landlords 
B)  raising property values. 
C)  encouraging landlords to overspend for maintenance. 
D)  discouraging new housing construction. 
E)  increasing the supply of housing in the long run. 
A)  increasing rents received by landlords 
B)  raising property values. 
C)  encouraging landlords to overspend for maintenance. 
D)  discouraging new housing construction. 
E)  increasing the supply of housing in the long run.

Question 11

A minimum wage that is set below the equilibrium wage will:

Accepted Answer

A)  cause increased unemployment. 
B)  have no effect on employment. 
C)  cause the overall wage to increase. 
D)  cause the overall wage to decrease. 
E)  create more jobs. 
A)  cause increased unemployment. 
B)  have no effect on employment. 
C)  cause the overall wage to increase. 
D)  cause the overall wage to decrease. 
E)  create more jobs.

Question 12

Exhibit 4-10  Supply and demand data for apricots   Which of the following would occur if the government sets a price floor of $4 in the market shown in Exhibit 4-10?

Accepted Answer

A)  There would be a shortage of apricots. 
B)  Buyers would not purchase all of the apricots that are grown. 
C)  Buyers would purchase more apricots than are currently being supplied. 
D)  Farmers would reduce the number of acres allocated to the growing of apricots. 
A)  There would be a shortage of apricots. 
B)  Buyers would not purchase all of the apricots that are grown. 
C)  Buyers would purchase more apricots than are currently being supplied. 
D)  Farmers would reduce the number of acres allocated to the growing of apricots.

Question 13

An increase in both supply and demand causes which of the following?

Accepted Answer

A)  Equilibrium price falls. 
B)  Equilibrium price rises. 
C)  Equilibrium price change is indeterminate. 
D)  Equilibrium quantity decreases. 
E)  Equilibrium quantity change is indeterminate. 
A)  Equilibrium price falls. 
B)  Equilibrium price rises. 
C)  Equilibrium price change is indeterminate. 
D)  Equilibrium quantity decreases. 
E)  Equilibrium quantity change is indeterminate.

Question 14

In the presence of positive externalities, a free market will choose a price which is too ____ and produce an output which is too ____ compared with the social optimum.

Accepted Answer

A)  high; low 
B)  low; low 
C)  high; high 
D)  low; high 
E)  marginal; inequitable 
A)  high; low 
B)  low; low 
C)  high; high 
D)  low; high 
E)  marginal; inequitable

Question 15

If Congress decides to increase the tax per pack paid by sellers of cigarettes, other things being equal, the price of cigarettes will rise. This rise in prices can be attributed to a(n):

Accepted Answer

A)  upward movement along the supply curve for cigarettes. 
B)  rightward shift of the supply curve for cigarettes. 
C)  upward movement along the demand curve for cigarettes. 
D)  leftward shift of the supply curve for cigarettes. 
A)  upward movement along the supply curve for cigarettes. 
B)  rightward shift of the supply curve for cigarettes. 
C)  upward movement along the demand curve for cigarettes. 
D)  leftward shift of the supply curve for cigarettes.

Question 16

How would a decrease in the price of the feed grains used to feed cattle affect the market for beef?

Accepted Answer

A)  The demand for beef would increase, increasing beef prices. 
B)  The demand for beef would decrease, decreasing beef prices. 
C)  The supply of beef would increase, decreasing beef prices. 
D)  The supply of beef would decrease, increasing beef prices. 
A)  The demand for beef would increase, increasing beef prices. 
B)  The demand for beef would decrease, decreasing beef prices. 
C)  The supply of beef would increase, decreasing beef prices. 
D)  The supply of beef would decrease, increasing beef prices.

Question 17

Which of the following is a property of a public good?

Accepted Answer

A)  It is established by legislation. 
B)  Free riders are excluded. 
C)  Users collectively consume benefits. 
D)  It is determined by positive economics. 
A)  It is established by legislation. 
B)  Free riders are excluded. 
C)  Users collectively consume benefits. 
D)  It is determined by positive economics.

Question 18

If the demand curve increases while the supply curve remains unchanged, the equilibrium price would decrease.

Accepted Answer

A) True 
 B)False

Question 19

Public goods differ from private goods in that:

Accepted Answer

A)  they produce negative externalities. 
B)  they are not scarce. 
C)  their benefits cannot be denied to anyone. 
D)  their consumption must be regulated by the government. 
E)  their benefits are very narrow. 
A)  they produce negative externalities. 
B)  they are not scarce. 
C)  their benefits cannot be denied to anyone. 
D)  their consumption must be regulated by the government. 
E)  their benefits are very narrow.

Question 20

Exhibit 4-7  Demand and supply schedules for movie tickets   In Exhibit 4-7, the equilibrium price of a movie ticket is:

Accepted Answer

A)  $10. 
B)  $8. 
C)  $6. 
D)  $4. 
E)  $2. 
A)  $10. 
B)  $8. 
C)  $6. 
D)  $4. 
E)  $2.

Exam 4: Markets in Action

If the market supply increases and, simultaneously, market demand decreases, the new equilibrium will show:

An increase in demand and a decrease in supply cause which of the following?

Why do negative externalities like pollution result in inefficiency?

Consider the market for grapes. An increase in the wage paid to grape pickers will cause the:

Exhibit 4-4 Supply and demand curves for good X Which of the graphs in Exhibit 4-4 illustrates an increase in buyers' income, assuming that good X is a normal good?

Higher gasoline prices would likely raise the price of large, gas-guzzling automobiles.

An increase in the demand for tattoos will lead to a:

Exhibit 4-3 Supply and demand curves In Exhibit 4-3, an increase in quantity supplied would cause a movement from which equilibrium point to another, other things being equal?

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?

Rent controls create distortions in the housing market by:

A minimum wage that is set below the equilibrium wage will:

Exhibit 4-10 Supply and demand data for apricots Which of the following would occur if the government sets a price floor of $4 in the market shown in Exhibit 4-10?

An increase in both supply and demand causes which of the following?

In the presence of positive externalities, a free market will choose a price which is too ____ and produce an output which is too ____ compared with the social optimum.

If Congress decides to increase the tax per pack paid by sellers of cigarettes, other things being equal, the price of cigarettes will rise. This rise in prices can be attributed to a(n):

How would a decrease in the price of the feed grains used to feed cattle affect the market for beef?

Which of the following is a property of a public good?

If the demand curve increases while the supply curve remains unchanged, the equilibrium price would decrease.

Public goods differ from private goods in that:

Exhibit 4-7 Demand and supply schedules for movie tickets In Exhibit 4-7, the equilibrium price of a movie ticket is:

Introducing the Economic Way of Thinking

Production Possibilities, Opportunity Cost, and Economic Growth

Market Demand and Supply

Price Elasticity of Demand

Production Costs

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets and Income Distribution

Gross Domestic Product

Business Cycles and Unemployment

Inflation

Aggregate Demand and Supply

Fiscal Policy

The Public Sector

Federal Deficits, Surpluses, and the National Debt

Money and the Federal Reserve System

Money Creation

Policy Disputes Using the Self-Correcting Aggregate Demand and Supply Model

International Trade and Finance

Economies in Transition

Growth and the Less-Developed Countries

Filters

In the presence of positive externalities, a free market will choose a price which is too and produce an output which is too compared with the social optimum.