Question 1

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

Accepted Answer

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

Question 2

The price elasticity of demand for a good or service is determined primarily by the

Accepted Answer

A)  size of the consumer surplus. 
B)  availability of substitutes for the good. 
C)  incomes of consumers. 
D)  availability of complementary goods. 
A)  size of the consumer surplus. 
B)  availability of substitutes for the good. 
C)  incomes of consumers. 
D)  availability of complementary goods.

Question 3

Consumer surplus

Accepted Answer

A)  is the difference between total willingness to pay and the total amount actually paid. 
B)  guarantees that the market value of a good in money is equal to the total economic value of the good. 
C)  is always negative because of diminishing marginal utility. 
D)  is the total area under a consumer's demand curve. 
A)  is the difference between total willingness to pay and the total amount actually paid. 
B)  guarantees that the market value of a good in money is equal to the total economic value of the good. 
C)  is always negative because of diminishing marginal utility. 
D)  is the total area under a consumer's demand curve.

Question 4

A movement along a demand curve

Accepted Answer

A)  is called a change in demand. 
B)  is the result of a change in the price of the good. 
C)  can be caused by many things. 
D)  means the product is inelastic. 
A)  is called a change in demand. 
B)  is the result of a change in the price of the good. 
C)  can be caused by many things. 
D)  means the product is inelastic.

Question 5

How would a decrease in the cost of production affect the market for video games?

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 6

Figure 3-15   Refer to Figure 3-15. Which area represents the increase in producer surplus when the price rises from P1 to P2?

Accepted Answer

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

Question 7

If people expect the price of shorts to rise next month, the demand for shorts will

Accepted Answer

A)  decrease now. 
B)  increase now. 
C)  stay the same now and increase next month. 
D)  stay the same now and decrease next month. 
E)  stay the same now and next month. 
A)  decrease now. 
B)  increase now. 
C)  stay the same now and increase next month. 
D)  stay the same now and decrease next month. 
E)  stay the same now and next month.

Question 8

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.

Question 9

The height of the demand curve for a product indicates the

Accepted Answer

A)  minimum price consumers are willing to pay for an additional unit of it. 
B)  minimum quantity consumers are willing to purchase at the current price. 
C)  maximum price consumers are willing to pay for an additional unit of it. 
D)  minimum price required to induce suppliers to produce an additional unit of it. 
A)  minimum price consumers are willing to pay for an additional unit of it. 
B)  minimum quantity consumers are willing to purchase at the current price. 
C)  maximum price consumers are willing to pay for an additional unit of it. 
D)  minimum price required to induce suppliers to produce an additional unit of it.

Question 10

When economists say the quantity supplied of a product has decreased, they mean the

Accepted Answer

A)  supply curve has shifted to the left. 
B)  supply curve has shifted to the right. 
C)  price of the product has risen, and consequently, suppliers are producing more of it. 
D)  price of the product has fallen, and consequently, suppliers are producing less of it. 
A)  supply curve has shifted to the left. 
B)  supply curve has shifted to the right. 
C)  price of the product has risen, and consequently, suppliers are producing more of it. 
D)  price of the product has fallen, and consequently, suppliers are producing less of it.

Question 11

Which of the following is a function performed by market prices?

Accepted Answer

A)  Market prices communicate information to buyers and sellers. 
B)  Market prices coordinate the decisions of buyers and sellers. 
C)  Market prices motivate entrepreneurs to produce those products that are currently most desired relative to their costs of production. 
D)  All of the above are functions performed by market prices. 
A)  Market prices communicate information to buyers and sellers. 
B)  Market prices coordinate the decisions of buyers and sellers. 
C)  Market prices motivate entrepreneurs to produce those products that are currently most desired relative to their costs of production. 
D)  All of the above are functions performed by market prices.

Question 12

How will an increase in the price of coffee affect the market for cocoa, a substitute good?

Accepted Answer

A)  The supply of cocoa will increase, leading to a reduction in the price of cocoa. 
B)  The supply of cocoa will decrease, leading to an increase in the price of cocoa. 
C)  The demand for cocoa will increase, leading to an increase in the price of cocoa. 
D)  The demand for cocoa will decrease, leading to a reduction in the price of cocoa. 
A)  The supply of cocoa will increase, leading to a reduction in the price of cocoa. 
B)  The supply of cocoa will decrease, leading to an increase in the price of cocoa. 
C)  The demand for cocoa will increase, leading to an increase in the price of cocoa. 
D)  The demand for cocoa will decrease, leading to a reduction in the price of cocoa.

Question 13

If the quantity of a good supplied is not very sensitive to the price of the good, economists say the supply of the good is relatively

Accepted Answer

A)  inelastic. 
B)  elastic. 
C)  robust. 
D)  inverse. 
A)  inelastic. 
B)  elastic. 
C)  robust. 
D)  inverse.

Question 14

If Mateo is paid $25,000 to sell his crop of tomatoes even though he would have been willing to have sold the crop for as little as $20,000, this indicates that

Accepted Answer

A)  Mateo received no producer surplus from the transaction. 
B)  Mateo received $5,000 of producer surplus from the transaction. 
C)  Mateo received $20,000 of producer surplus from the transaction. 
D)  Mateo received $25,000 of producer surplus from the transaction. 
A)  Mateo received no producer surplus from the transaction. 
B)  Mateo received $5,000 of producer surplus from the transaction. 
C)  Mateo received $20,000 of producer surplus from the transaction. 
D)  Mateo received $25,000 of producer surplus from the transaction.

Question 15

Which of the following would most likely decrease the current demand for DVD players?

Accepted Answer

A)  an increase in consumer income 
B)  an increase in the prices of television sets, a complement for DVD players 
C)  an expectation that the price of DVD players would rise sharply in the near future 
D)  an increase in the price of VCRs, a substitute for DVD players 
A)  an increase in consumer income 
B)  an increase in the prices of television sets, a complement for DVD players 
C)  an expectation that the price of DVD players would rise sharply in the near future 
D)  an increase in the price of VCRs, a substitute for DVD players

Question 16

If the demand for 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 17

The maximum price that consumers are willing to pay for the hundredth unit of a good can be found as

Accepted Answer

A)  the height of the supply curve at a quantity of 100. 
B)  the height of the demand curve at a quantity of 100. 
C)  the difference between the height of the supply and demand curves at a quantity of 100. 
D)  none of the above. 
A)  the height of the supply curve at a quantity of 100. 
B)  the height of the demand curve at a quantity of 100. 
C)  the difference between the height of the supply and demand curves at a quantity of 100. 
D)  none of the above.

Question 18

The price of chicken increases as the result of higher beef prices. This indicates that

Accepted Answer

A)  chicken and beef are substitutes. 
B)  chicken and beef are complements. 
C)  the market demand for beef is inelastic. 
D)  the market demand for chicken is elastic. 
A)  chicken and beef are substitutes. 
B)  chicken and beef are complements. 
C)  the market demand for beef is inelastic. 
D)  the market demand for chicken is elastic.

Question 19

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 20

The current demand for automobiles would decrease if

Accepted Answer

A)  the price of gasoline fell. 
B)  consumer income rose. 
C)  consumers suddenly believed the price of automobiles would be sharply lower in the near future. 
D)  consumers suddenly believed the price of automobiles would be sharply higher in the near future. 
A)  the price of gasoline fell. 
B)  consumer income rose. 
C)  consumers suddenly believed the price of automobiles would be sharply lower in the near future. 
D)  consumers suddenly believed the price of automobiles would be sharply higher in the near future.

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

The price elasticity of demand for a good or service is determined primarily by the

Consumer surplus

A movement along a demand curve

How would a decrease in the cost of production affect the market for video games?

Figure 3-15 Refer to Figure 3-15. Which area represents the increase in producer surplus when the price rises from P₁ to P₂?

If people expect the price of shorts to rise next month, the demand for shorts will

Under competitive conditions, market prices

The height of the demand curve for a product indicates the

When economists say the quantity supplied of a product has decreased, they mean the

Which of the following is a function performed by market prices?

How will an increase in the price of coffee affect the market for cocoa, a substitute good?

If the quantity of a good supplied is not very sensitive to the price of the good, economists say the supply of the good is relatively

If Mateo is paid $25,000 to sell his crop of tomatoes even though he would have been willing to have sold the crop for as little as $20,000, this indicates that

Which of the following would most likely decrease the current demand for DVD players?

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

The maximum price that consumers are willing to pay for the hundredth unit of a good can be found as

The price of chicken increases as the result of higher beef prices. This indicates that

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

The current demand for automobiles would decrease if

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

Taking the Nations Economic Pulse

Economic Fluctuations, Unemployment, and Inflation

An Introduction to Basic Macroeconomic Markets

Dynamic Change, Economic Fluctuations, and the Ad--As Model

Fiscal Policy: The Keynesian View and the Historical Development of Macroeconomics

Fiscal Policy: Incentives, and Secondary Effects

Money and the Banking System

Modern Macroeconomics and Monetary Policy

Stabilization Policy, Output, and Employment

Creating an Environment for Growth and Prosperity

Institutions, Policies, and Cross-Country Differences in Income and Growth

Gaining From International Trade

International Finance and the Foreign Exchange Market

Special Topics

Filters

Exam 3: Demand, Supply, and the Market Process

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

The price elasticity of demand for a good or service is determined primarily by the

Consumer surplus

A movement along a demand curve

How would a decrease in the cost of production affect the market for video games?

Figure 3-15 Refer to Figure 3-15. Which area represents the increase in producer surplus when the price rises from P1 to P2?

If people expect the price of shorts to rise next month, the demand for shorts will

Under competitive conditions, market prices

The height of the demand curve for a product indicates the

When economists say the quantity supplied of a product has decreased, they mean the

Which of the following is a function performed by market prices?

How will an increase in the price of coffee affect the market for cocoa, a substitute good?

If the quantity of a good supplied is not very sensitive to the price of the good, economists say the supply of the good is relatively

If Mateo is paid $25,000 to sell his crop of tomatoes even though he would have been willing to have sold the crop for as little as $20,000, this indicates that

Which of the following would most likely decrease the current demand for DVD players?

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

The maximum price that consumers are willing to pay for the hundredth unit of a good can be found as

The price of chicken increases as the result of higher beef prices. This indicates that

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

The current demand for automobiles would decrease if

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

Taking the Nations Economic Pulse

Economic Fluctuations, Unemployment, and Inflation

An Introduction to Basic Macroeconomic Markets

Dynamic Change, Economic Fluctuations, and the Ad--As Model

Fiscal Policy: The Keynesian View and the Historical Development of Macroeconomics

Fiscal Policy: Incentives, and Secondary Effects

Money and the Banking System

Modern Macroeconomics and Monetary Policy

Stabilization Policy, Output, and Employment

Creating an Environment for Growth and Prosperity

Institutions, Policies, and Cross-Country Differences in Income and Growth

Gaining From International Trade

International Finance and the Foreign Exchange Market

Special Topics

Filters

Figure 3-15 Refer to Figure 3-15. Which area represents the increase in producer surplus when the price rises from P₁ to P₂?