Question 1

If price rises, what happens to the quantity demanded for a product?

Accepted Answer

A)  It increases. 
B)  It decreases. 
C)  It does not change. 
D)  Uncertain--economic theory has no answer to this question. 
A)  It increases. 
B)  It decreases. 
C)  It does not change. 
D)  Uncertain--economic theory has no answer to this question.

Question 2

If consumer purchases of a good are highly sensitive to the price of the good, economists say the demand for the good is relatively

Accepted Answer

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

Question 3

When competition is present and property rights protected and enforced, market prices will

Accepted Answer

A)  discourage profit-seeking business firms from producing efficiently. 
B)  direct entrepreneurs toward production of goods that are inferior in quality. 
C)  encourage self-interested individuals to develop skills that are expected to be valuable in the future. 
D)  always decrease. 
A)  discourage profit-seeking business firms from producing efficiently. 
B)  direct entrepreneurs toward production of goods that are inferior in quality. 
C)  encourage self-interested individuals to develop skills that are expected to be valuable in the future. 
D)  always decrease.

Question 4

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 5

The term market always refers to

Accepted Answer

A)  an arrangement in which buyers and sellers meet at a specific time and place. 
B)  an arrangement in which an auctioneer plays at least a limited role in setting prices. 
C)  a group of buyers and sellers of a particular good or service. 
D)  a single buyer and seller of a particular good or service. 
A)  an arrangement in which buyers and sellers meet at a specific time and place. 
B)  an arrangement in which an auctioneer plays at least a limited role in setting prices. 
C)  a group of buyers and sellers of a particular good or service. 
D)  a single buyer and seller of a particular good or service.

Question 6

Figure 3-18   Refer to Figure 3-18. Which area represents consumer surplus at a price of P1?

Accepted Answer

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

Question 7

Figure 3-10   Figure 3-10 illustrates the conditions of demand and supply in the market for compact discs. Indicate the equilibrium price and quantity.

Accepted Answer

A)  price, $20; quantity, 2,000 
B)  price, $15; quantity, 3,000 
C)  price, $10; quantity, 2,000 
D)  price, $10; quantity, 4,000 
A)  price, $20; quantity, 2,000 
B)  price, $15; quantity, 3,000 
C)  price, $10; quantity, 2,000 
D)  price, $10; quantity, 4,000

Question 8

Which of the following is not a function of prices in a market system?

Accepted Answer

A)  Prices have the crucial job of balancing supply and demand. 
B)  Prices send signals to buyers and sellers to help them make rational economic decisions. 
C)  Prices coordinate economic activity. 
D)  Prices ensure an equitable distribution of goods and services among consumers. 
A)  Prices have the crucial job of balancing supply and demand. 
B)  Prices send signals to buyers and sellers to help them make rational economic decisions. 
C)  Prices coordinate economic activity. 
D)  Prices ensure an equitable distribution of goods and services among consumers.

Question 9

A hotel in New Hampshire charges $150 per room in the winter ski season and $90 during the summer months. The number of rooms and operating costs are constant year round. These prices indicate

Accepted Answer

A)  a rightward shift in the demand in the summer. 
B)  a rightward shift in demand in the winter. 
C)  a leftward shift in the supply curve in the summer. 
D)  a leftward shift in demand in the winter. 
A)  a rightward shift in the demand in the summer. 
B)  a rightward shift in demand in the winter. 
C)  a leftward shift in the supply curve in the summer. 
D)  a leftward shift in demand in the winter.

Question 10

Which of the following would most likely increase the supply of beef?

Accepted Answer

A)  lower prices of grains used to feed cattle 
B)  lower prices for chicken, a substitute for beef 
C)  new medical research suggesting that beef causes more serious health problems than was previously thought 
D)  an increase in the cost of transporting beef products to the consumer market 
A)  lower prices of grains used to feed cattle 
B)  lower prices for chicken, a substitute for beef 
C)  new medical research suggesting that beef causes more serious health problems than was previously thought 
D)  an increase in the cost of transporting beef products to the consumer market

Question 11

An increase in supply will cause

Accepted Answer

A)  an increase in demand. 
B)  a decrease in demand. 
C)  an increase in quantity demanded. 
D)  a decrease in quantity demanded. 
E)  an increase in equilibrium price. 
A)  an increase in demand. 
B)  a decrease in demand. 
C)  an increase in quantity demanded. 
D)  a decrease in quantity demanded. 
E)  an increase in equilibrium price.

Question 12

Liam is willing to cut lawns for a minimum of $200 a week. He is, however, paid $250 for the same service by a lawn maintenance company. This is an example of

Accepted Answer

A)  consumer surplus. 
B)  employment discrimination. 
C)  producer surplus. 
D)  the derivation of accounting profit. 
A)  consumer surplus. 
B)  employment discrimination. 
C)  producer surplus. 
D)  the derivation of accounting profit.

Question 13

When there is excess supply of a product in a market,

Accepted Answer

A)  price will tend to rise. 
B)  price must be above the equilibrium price. 
C)  producers will expand output and sales will rise. 
D)  price must be below the equilibrium price. 
A)  price will tend to rise. 
B)  price must be above the equilibrium price. 
C)  producers will expand output and sales will rise. 
D)  price must be below the equilibrium price.

Question 14

Suppose the demand for tacos decreases. What will happen to producer surplus in the market for tacos?

Accepted Answer

A)  It increases. 
B)  It decreases. 
C)  It remains unchanged. 
D)  It may increase, decrease, or remain unchanged. 
A)  It increases. 
B)  It decreases. 
C)  It remains unchanged. 
D)  It may increase, decrease, or remain unchanged.

Question 15

Ceteris paribus, a decrease in the price of a good will cause the

Accepted Answer

A)  quantity demanded of the good to decrease. 
B)  quantity supplied of the good to increase. 
C)  producer surplus derived from the good to decrease. 
D)  supply of the good to decrease. 
A)  quantity demanded of the good to decrease. 
B)  quantity supplied of the good to increase. 
C)  producer surplus derived from the good to decrease. 
D)  supply of the good to decrease.

Question 16

Figure 3-18   Refer to Figure 3-18. When the price falls from P1 to P2, which area represents the increase in consumer surplus to new buyers entering the market?

Accepted Answer

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

Question 17

Figure 3-16   Refer to Figure 3-16. When the price is P2, 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 18

Which of the following occurs when a shortage occurs in the market for a good?

Accepted Answer

A)  Quantity demanded exceeds quantity supplied and the market mechanism pushes the price up, which in turn encourages more production and less consumption. 
B)  Quantity supplied exceeds quantity demanded and the price falls, which encourages more production and less consumption. 
C)  Quantity demanded exceeds quantity supplied and the market mechanism pushes the price down, which encourages more production and less consumption. 
D)  Quantity supplied exceeds quantity demanded and the price rises, which encourages more production and less consumption. 
A)  Quantity demanded exceeds quantity supplied and the market mechanism pushes the price up, which in turn encourages more production and less consumption. 
B)  Quantity supplied exceeds quantity demanded and the price falls, which encourages more production and less consumption. 
C)  Quantity demanded exceeds quantity supplied and the market mechanism pushes the price down, which encourages more production and less consumption. 
D)  Quantity supplied exceeds quantity demanded and the price rises, which encourages more production and less consumption.

Question 19

If equilibrium is present in a market,

Accepted Answer

A)  there is generally either a shortage or a surplus. 
B)  quantity demanded equals quantity supplied. 
C)  quantity demanded exceeds quantity supplied. 
D)  quantity supplied exceeds quantity demanded. 
A)  there is generally either a shortage or a surplus. 
B)  quantity demanded equals quantity supplied. 
C)  quantity demanded exceeds quantity supplied. 
D)  quantity supplied exceeds quantity demanded.

Question 20

If the price of coffee decreases, the demand curve for tea (a substitute good) will

Accepted Answer

A)  remain unchanged. 
B)  shift to the right. 
C)  shift to the left. 
D)  do none of the above 
A)  remain unchanged. 
B)  shift to the right. 
C)  shift to the left. 
D)  do none of the above

If price rises, what happens to the quantity demanded for a product?

If consumer purchases of a good are highly sensitive to the price of the good, economists say the demand for the good is relatively

When competition is present and property rights protected and enforced, market prices will

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

The term market always refers to

Figure 3-18 Refer to Figure 3-18. Which area represents consumer surplus at a price of P₁?

Figure 3-10 Figure 3-10 illustrates the conditions of demand and supply in the market for compact discs. Indicate the equilibrium price and quantity.

Which of the following is not a function of prices in a market system?

A hotel in New Hampshire charges $150 per room in the winter ski season and $90 during the summer months. The number of rooms and operating costs are constant year round. These prices indicate

Which of the following would most likely increase the supply of beef?

An increase in supply will cause

Liam is willing to cut lawns for a minimum of $200 a week. He is, however, paid $250 for the same service by a lawn maintenance company. This is an example of

When there is excess supply of a product in a market,

Suppose the demand for tacos decreases. What will happen to producer surplus in the market for tacos?

Ceteris paribus, a decrease in the price of a good will cause the

Figure 3-18 Refer to Figure 3-18. When the price falls from P₁ to P₂, which area represents the increase in consumer surplus to new buyers entering the market?

Figure 3-16 Refer to Figure 3-16. When the price is P₂, producer surplus is

Which of the following occurs when a shortage occurs in the market for a good?

If equilibrium is present in a market,

If the price of coffee decreases, the demand curve for tea (a substitute good) will

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

If price rises, what happens to the quantity demanded for a product?

If consumer purchases of a good are highly sensitive to the price of the good, economists say the demand for the good is relatively

When competition is present and property rights protected and enforced, market prices will

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

The term market always refers to

Figure 3-18 Refer to Figure 3-18. Which area represents consumer surplus at a price of P1?

Figure 3-10 Figure 3-10 illustrates the conditions of demand and supply in the market for compact discs. Indicate the equilibrium price and quantity.

Which of the following is not a function of prices in a market system?

A hotel in New Hampshire charges $150 per room in the winter ski season and $90 during the summer months. The number of rooms and operating costs are constant year round. These prices indicate

Which of the following would most likely increase the supply of beef?

An increase in supply will cause

Liam is willing to cut lawns for a minimum of $200 a week. He is, however, paid $250 for the same service by a lawn maintenance company. This is an example of

When there is excess supply of a product in a market,

Suppose the demand for tacos decreases. What will happen to producer surplus in the market for tacos?

Ceteris paribus, a decrease in the price of a good will cause the

Figure 3-18 Refer to Figure 3-18. When the price falls from P1 to P2, which area represents the increase in consumer surplus to new buyers entering the market?

Figure 3-16 Refer to Figure 3-16. When the price is P2, producer surplus is

Which of the following occurs when a shortage occurs in the market for a good?

If equilibrium is present in a market,

If the price of coffee decreases, the demand curve for tea (a substitute good) will

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 3-18 Refer to Figure 3-18. Which area represents consumer surplus at a price of P₁?

Figure 3-18 Refer to Figure 3-18. When the price falls from P₁ to P₂, which area represents the increase in consumer surplus to new buyers entering the market?

Figure 3-16 Refer to Figure 3-16. When the price is P₂, producer surplus is