Question 1

If consumer purchases of a good are highly 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 2

Which of the following is true of the interaction of supply and demand?

Accepted Answer

A)  As the price increases, the quantity demanded and the quantity supplied will increase. 
B)  As the price increases, the quantity demanded and the quantity supplied will decrease. 
C)  As the price increases, the quantity demanded increases and the quantity supplied will decrease. 
D)  As the price increases, the quantity demanded will decrease and the quantity supplied will increase. 
E)  As the price increases, neither the quantity demanded nor quantity supplied will change. 
A)  As the price increases, the quantity demanded and the quantity supplied will increase. 
B)  As the price increases, the quantity demanded and the quantity supplied will decrease. 
C)  As the price increases, the quantity demanded increases and the quantity supplied will decrease. 
D)  As the price increases, the quantity demanded will decrease and the quantity supplied will increase. 
E)  As the price increases, neither the quantity demanded nor quantity supplied will change.

Question 3

Suppose a person defects from Cuba (a country that generally disregards the use of markets) to the United States and asks to see a market in action. Where would you take her? Did you give her a complete showing of this market?

Accepted Answer

Most students will provide answers such

Question 4

Table 3-2   Refer to Table 3-2. Suppose each of the five sellers can supply at most one unit of the good; then the market quantity supplied is exactly 3 if the price is

Accepted Answer

A)  $670. 
B)  $770. 
C)  $970. 
D)  $1,170. 
A)  $670. 
B)  $770. 
C)  $970. 
D)  $1,170.

Question 5

If price falls, what happens to the demand 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 6

Figure 3-22         Refer to Figure 3-22. Graph C shows which of the following?

Accepted Answer

A)  An increase in demand and an increase in quantity supplied. 
B)  An increase in demand and an increase in supply. 
C)  An increase in quantity demanded and an increase in quantity supplied. 
D)  An increase in supply and an increase in quantity demanded. 
A)  An increase in demand and an increase in quantity supplied. 
B)  An increase in demand and an increase in supply. 
C)  An increase in quantity demanded and an increase in quantity supplied. 
D)  An increase in supply and an increase in quantity demanded.

Question 7

Susan says, "If the price of wool coats goes up, suppliers will offer more of the coats for sale." Brad replies, "It takes three months to harvest wool and employ all the steps necessary to produce a wool coat. Quantity supplied cannot possibly increase for three months." Is Brad correct? Why or why not?

Accepted Answer

Brad is correct in noting the supply of

Question 8

The law of demand refers to the

Accepted Answer

A)  inverse relationship between the price of a good and the willingness of consumers to buy it. 
B)  price increase that results from an increase in demand for a good of limited supply. 
C)  inverse relationship between the price of a good and the quantity offered for sale. 
D)  increase in the quantity of a good available when its price increases. 
A)  inverse relationship between the price of a good and the willingness of consumers to buy it. 
B)  price increase that results from an increase in demand for a good of limited supply. 
C)  inverse relationship between the price of a good and the quantity offered for sale. 
D)  increase in the quantity of a good available when its price increases.

Question 9

Table 3-2   Refer to Table 3-2. If the market price is $1,000, the producer surplus in the market is

Accepted Answer

A)  $700. 
B)  $750. 
C)  $2,250. 
D)  $3,700. 
A)  $700. 
B)  $750. 
C)  $2,250. 
D)  $3,700.

Question 10

If price falls, 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 11

Other things constant, an increase in consumer income will

Accepted Answer

A)  shift the demand curve for automobiles to the left. 
B)  shift the demand curve for automobiles to the right. 
C)  cause a movement along the demand curve for automobiles, but it will not shift the demand curve. 
D)  lead to a reduction in the supply of automobiles. 
A)  shift the demand curve for automobiles to the left. 
B)  shift the demand curve for automobiles to the right. 
C)  cause a movement along the demand curve for automobiles, but it will not shift the demand curve. 
D)  lead to a reduction in the supply of automobiles.

Question 12

Figure 3-12   In Figure 3-12, suppose D1 and S1 indicate initial conditions in the market for ice cream. Which of the following changes would tend to shift this market from D1 to D2?

Accepted Answer

A)  an increase in the price of milk, an ingredient used to produce ice cream 
B)  an increase in the price of frozen yogurt, a substitute for ice cream 
C)  a decrease in the price of sugar, an ingredient used to produce ice cream 
D)  a decrease in consumer income 
A)  an increase in the price of milk, an ingredient used to produce ice cream 
B)  an increase in the price of frozen yogurt, a substitute for ice cream 
C)  a decrease in the price of sugar, an ingredient used to produce ice cream 
D)  a decrease in consumer income

Question 13

A demand curve for flowers would show the

Accepted Answer

A)  number of flowers the floral shop is willing to sell at various prices. 
B)  number of people who need flowers. 
C)  quantity of people who want to buy these flowers. 
D)  number of flowers that will be purchased at various prices. 
A)  number of flowers the floral shop is willing to sell at various prices. 
B)  number of people who need flowers. 
C)  quantity of people who want to buy these flowers. 
D)  number of flowers that will be purchased at various prices.

Question 14

Which of the following best explains the source of consumer surplus for a particular product?

Accepted Answer

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

Question 15

If the supply of a good is relatively elastic, this means that the quantity supplied of the good is

Accepted Answer

A)  not very sensitive to the price of the good. 
B)  highly sensitive to the price of the good. 
C)  unrelated to the price of the good. 
D)  none of the above. 
A)  not very sensitive to the price of the good. 
B)  highly sensitive to the price of the good. 
C)  unrelated to the price of the good. 
D)  none of the above.

Question 16

How will consumers generally react to an increase in the price of butter?

Accepted Answer

A)  They will purchase a larger quantity of butter. 
B)  They will substitute other goods like margarine for the more expensive butter. 
C)  They will reduce their purchases of substitute goods like margarine. 
D)  They will continue purchasing the same quantity of butter at the higher price. 
A)  They will purchase a larger quantity of butter. 
B)  They will substitute other goods like margarine for the more expensive butter. 
C)  They will reduce their purchases of substitute goods like margarine. 
D)  They will continue purchasing the same quantity of butter at the higher price.

Question 17

The Invisible Hand Principle suggests that

Accepted Answer

A)  market prices direct individuals to produce more goods. 
B)  individuals pursuing their own interests detract from the economic well-being of society. 
C)  there should be stronger governmental initiatives to ensure cooperation for the betterment of society. 
D)  market forces tend to channel the actions of self-interested individuals into activities that promote the general betterment of society. 
A)  market prices direct individuals to produce more goods. 
B)  individuals pursuing their own interests detract from the economic well-being of society. 
C)  there should be stronger governmental initiatives to ensure cooperation for the betterment of society. 
D)  market forces tend to channel the actions of self-interested individuals into activities that promote the general betterment of society.

Question 18

If price rises, what happens to quantity supplied of a product?

Accepted Answer

A)  It increases. 
B)  It decreases. 
C)  It does not change. 
D)  Quantity supplied is constant, but supply increases. 
A)  It increases. 
B)  It decreases. 
C)  It does not change. 
D)  Quantity supplied is constant, but supply increases.

Question 19

Figure 3-22         Refer to Figure 3-22. Which of the four graphs represents the market for peanut butter after a major hurricane hits the peanut-growing south?

Accepted Answer

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

Question 20

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.

If consumer purchases of a good are highly sensitive to the price of the good, this is illustrated by a

Which of the following is true of the interaction of supply and demand?

Suppose a person defects from Cuba (a country that generally disregards the use of markets) to the United States and asks to see a market in action. Where would you take her? Did you give her a complete showing of this market?

Table 3-2 Refer to Table 3-2. Suppose each of the five sellers can supply at most one unit of the good; then the market quantity supplied is exactly 3 if the price is

If price falls, what happens to the demand for a product?

Figure 3-22 Refer to Figure 3-22. Graph C shows which of the following?

The law of demand refers to the

Table 3-2 Refer to Table 3-2. If the market price is $1,000, the producer surplus in the market is

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

Other things constant, an increase in consumer income will

Figure 3-12 In Figure 3-12, suppose D₁ and S₁ indicate initial conditions in the market for ice cream. Which of the following changes would tend to shift this market from D₁ to D₂?

A demand curve for flowers would show the

Which of the following best explains the source of consumer surplus for a particular product?

If the supply of a good is relatively elastic, this means that the quantity supplied of the good is

How will consumers generally react to an increase in the price of butter?

The Invisible Hand Principle suggests that

If price rises, what happens to quantity supplied of a product?

Figure 3-22 Refer to Figure 3-22. Which of the four graphs represents the market for peanut butter after a major hurricane hits the peanut-growing south?

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

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 consumer purchases of a good are highly sensitive to the price of the good, this is illustrated by a

Which of the following is true of the interaction of supply and demand?

Suppose a person defects from Cuba (a country that generally disregards the use of markets) to the United States and asks to see a market in action. Where would you take her? Did you give her a complete showing of this market?

Table 3-2 Refer to Table 3-2. Suppose each of the five sellers can supply at most one unit of the good; then the market quantity supplied is exactly 3 if the price is

If price falls, what happens to the demand for a product?

Figure 3-22 Refer to Figure 3-22. Graph C shows which of the following?

The law of demand refers to the

Table 3-2 Refer to Table 3-2. If the market price is $1,000, the producer surplus in the market is

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

Other things constant, an increase in consumer income will

Figure 3-12 In Figure 3-12, suppose D1 and S1 indicate initial conditions in the market for ice cream. Which of the following changes would tend to shift this market from D1 to D2?

A demand curve for flowers would show the

Which of the following best explains the source of consumer surplus for a particular product?

If the supply of a good is relatively elastic, this means that the quantity supplied of the good is

How will consumers generally react to an increase in the price of butter?

The Invisible Hand Principle suggests that

If price rises, what happens to quantity supplied of a product?

Figure 3-22 Refer to Figure 3-22. Which of the four graphs represents the market for peanut butter after a major hurricane hits the peanut-growing south?

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

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 3-12 In Figure 3-12, suppose D₁ and S₁ indicate initial conditions in the market for ice cream. Which of the following changes would tend to shift this market from D₁ to D₂?