Question 1

An increase 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)  a decrease 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)  a decrease in equilibrium price.

Question 2

Figure 3-6   In Figure 3-6, suppose D1 and S1 indicate initial conditions in the market for ice cream. Which of the following changes would tend to cause a shift from S1 to S2 in the market for ice cream?

Accepted Answer

A)  an increase in the price of sugar, an ingredient used to produce ice cream 
B)  a decrease in the price of frozen yogurt, a substitute for ice cream 
C)  abnormally hot weather that temporarily increases consumer desire for ice cream 
D)  a decrease in the price of milk, an ingredient used to produce ice cream 
A)  an increase in the price of sugar, an ingredient used to produce ice cream 
B)  a decrease in the price of frozen yogurt, a substitute for ice cream 
C)  abnormally hot weather that temporarily increases consumer desire for ice cream 
D)  a decrease in the price of milk, an ingredient used to produce ice cream

Question 3

Kayla decides that she would pay as much as $400 for a new refrigerator. She buys the refrigerator and realizes consumer surplus of $75. How much did Kayla pay for her refrigerator?

Accepted Answer

A)  $75 
B)  $325 
C)  $400 
D)  $475 
A)  $75 
B)  $325 
C)  $400 
D)  $475

Question 4

Two studies published in the New England Journal of Medicine link the risk of breast cancer to alcohol consumption. Young women who have nine drinks per week were reportedly 150 percent more likely to develop breast cancer. According to economic analysis, how would this information affect the market for alcohol?

Accepted Answer

A)  Demand will increase, placing upward pressure on price. 
B)  Supply will decrease, placing downward pressure on price. 
C)  Demand will decrease, placing downward pressure on price. 
D)  Supply will increase, placing upward pressure on price. 
A)  Demand will increase, placing upward pressure on price. 
B)  Supply will decrease, placing downward pressure on price. 
C)  Demand will decrease, placing downward pressure on price. 
D)  Supply will increase, placing upward pressure on price.

Question 5

If we observe a decrease in the price of a good and an increase in the amount of the good bought and sold, this could be explained by

Accepted Answer

A)  an increase in the supply of the good. 
B)  an increase in the demand for the good. 
C)  a decrease in the demand for the good. 
D)  a decrease in the supply of the good. 
A)  an increase in the supply of the good. 
B)  an increase in the demand for the good. 
C)  a decrease in the demand for the good. 
D)  a decrease in the supply of the good.

Question 6

Figure 3-22         Refer to Figure 3-22. Which of the four graphs represents the market for cars as a result of the adoption of new technology on assembly lines?

Accepted Answer

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

Question 7

The number of people willing to buy tickets to the Super Bowl is invariably greater than the number of tickets (and seats) available. This is evidence that the price of the tickets is

Accepted Answer

A)  higher than the equilibrium price. 
B)  equal to the equilibrium price since the number of tickets bought equals the number sold. 
C)  lower than the equilibrium price. 
D)  higher than the equilibrium price when the demand is inelastic but lower when the demand is elastic. 
A)  higher than the equilibrium price. 
B)  equal to the equilibrium price since the number of tickets bought equals the number sold. 
C)  lower than the equilibrium price. 
D)  higher than the equilibrium price when the demand is inelastic but lower when the demand is elastic.

Question 8

According to the law of supply,

Accepted Answer

A)  more of a good is desired by consumers as the price falls. 
B)  less of a good is desired by consumers as the price rises. 
C)  more of a good will be offered by suppliers as the price rises. 
D)  less of a good will be offered by suppliers as the price rises. 
A)  more of a good is desired by consumers as the price falls. 
B)  less of a good is desired by consumers as the price rises. 
C)  more of a good will be offered by suppliers as the price rises. 
D)  less of a good will be offered by suppliers as the price rises.

Question 9

Assume the demand curve for shampoo is downward sloping. If the price of shampoo falls from $1.50 to $1.25 per bottle,

Accepted Answer

A)  the demand for shampoo will fall. 
B)  the demand for shampoo will rise. 
C)  a larger quantity of shampoo will be demanded. 
D)  a smaller quantity of shampoo will be demanded. 
A)  the demand for shampoo will fall. 
B)  the demand for shampoo will rise. 
C)  a larger quantity of shampoo will be demanded. 
D)  a smaller quantity of shampoo will be demanded.

Question 10

At a price of $5, Tyrone buys 10 units of a product; when the price increases to $6, Tyrone buys 8 units. Which of the following is correct about Tyrone's behavior?

Accepted Answer

A)  Tyrone's demand has decreased. 
B)  Tyrone's demand has increased. 
C)  Tyrone's quantity demanded has decreased, and his demand has not changed. 
D)  Tyrone's quantity demanded has increased, and his demand has increased. 
E)  Tyrone's demand has increased, and his quantity demanded has decreased. 
A)  Tyrone's demand has decreased. 
B)  Tyrone's demand has increased. 
C)  Tyrone's quantity demanded has decreased, and his demand has not changed. 
D)  Tyrone's quantity demanded has increased, and his demand has increased. 
E)  Tyrone's demand has increased, and his quantity demanded has decreased.

Question 11

Table 3-1   Refer to Table 3-1. If the table represents the willingness to pay of four buyers and the price of the product is $15, then who would be willing to purchase the product?

Accepted Answer

A)  Mike 
B)  Mike and Sandy 
C)  Mike, Sandy, and Jonathan 
D)  Mike, Sandy, Jonathan, and Haley 
A)  Mike 
B)  Mike and Sandy 
C)  Mike, Sandy, and Jonathan 
D)  Mike, Sandy, Jonathan, and Haley

Question 12

The invisible hand principle indicates that competitive markets can help promote the efficient use of resources

Accepted Answer

A)  only if buyers and sellers really care, personally, about economic efficiency. 
B)  even when each market participant cares only about their own self interest rather than about the overall efficiency of resource use. 
C)  even if business firms fail to produce goods efficiently. 
D)  if, and only if, businesses recognize their social obligation to keep costs low and use resources wisely. 
A)  only if buyers and sellers really care, personally, about economic efficiency. 
B)  even when each market participant cares only about their own self interest rather than about the overall efficiency of resource use. 
C)  even if business firms fail to produce goods efficiently. 
D)  if, and only if, businesses recognize their social obligation to keep costs low and use resources wisely.

Question 13

In which statement(s) are "supply" and "quantity supplied" used correctly?
(I)  "An increase in the price of toasters will increase the quantity supplied of toasters."
(II)  "A technological advance that lowers the cost of producing toasters will increase the supply of toasters."

Accepted Answer

A)  in both statements I and II 
B)  in statement I only 
C)  in statement II only 
D)  in neither statements I nor II 
A)  in both statements I and II 
B)  in statement I only 
C)  in statement II only 
D)  in neither statements I nor II

Question 14

Prices direct economic activity in a market economy by

Accepted Answer

A)  influencing the actions of buyers and sellers. 
B)  reducing scarcity of the goods and services produced. 
C)  eliminating the need for government intervention. 
D)  allocating goods and services in the most equitable way. 
A)  influencing the actions of buyers and sellers. 
B)  reducing scarcity of the goods and services produced. 
C)  eliminating the need for government intervention. 
D)  allocating goods and services in the most equitable way.

Question 15

Profits and losses play an important role in helping

Accepted Answer

A)  to signal to government which businesses are suffering losses so that they can be subsidized. 
B)  consumers decide which products they value the most by looking at each firm's profit. 
C)  to allocate scarce resources in a manner that maximizes the value created to society. 
D)  ensure that the total profits in the economy exactly equal the total losses. 
A)  to signal to government which businesses are suffering losses so that they can be subsidized. 
B)  consumers decide which products they value the most by looking at each firm's profit. 
C)  to allocate scarce resources in a manner that maximizes the value created to society. 
D)  ensure that the total profits in the economy exactly equal the total losses.

Question 16

Figure 3-16   Refer to Figure 3-16. When the price falls from P2 to P1, producer surplus

Accepted Answer

A)  decreases by an amount equal to C. 
B)  decreases by an amount equal to A + B. 
C)  decreases by an amount equal to A + C. 
D)  increases by an amount equal to A + B. 
A)  decreases by an amount equal to C. 
B)  decreases by an amount equal to A + B. 
C)  decreases by an amount equal to A + C. 
D)  increases by an amount equal to A + B.

Question 17

When a firm is earning economic profit, this indicates the firm is

Accepted Answer

A)  increasing the value of the resources that it is using. 
B)  reducing the value of the resources that it is using. 
C)  supplying the market with a low quality product. 
D)  creating less value for consumers than another firm that is currently earning losses. 
A)  increasing the value of the resources that it is using. 
B)  reducing the value of the resources that it is using. 
C)  supplying the market with a low quality product. 
D)  creating less value for consumers than another firm that is currently earning losses.

Question 18

Figure 3-18   Refer to Figure 3-18. Which area represents the increase in consumer surplus when the price falls from P1 to P2?

Accepted Answer

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

Question 19

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 20

If coffee and cream are complements, an increase in the price of coffee will cause

Accepted Answer

A)  the demand for cream to increase. 
B)  the demand for cream to fall. 
C)  the demand for coffee to fall. 
D)  no change in the demand for cream; only quantity demanded would be affected. 
A)  the demand for cream to increase. 
B)  the demand for cream to fall. 
C)  the demand for coffee to fall. 
D)  no change in the demand for cream; only quantity demanded would be affected.

An increase in demand will cause

Figure 3-6 In Figure 3-6, suppose D₁ and S₁ indicate initial conditions in the market for ice cream. Which of the following changes would tend to cause a shift from S₁ to S₂ in the market for ice cream?

Kayla decides that she would pay as much as $400 for a new refrigerator. She buys the refrigerator and realizes consumer surplus of $75. How much did Kayla pay for her refrigerator?

If we observe a decrease in the price of a good and an increase in the amount of the good bought and sold, this could be explained by

Figure 3-22 Refer to Figure 3-22. Which of the four graphs represents the market for cars as a result of the adoption of new technology on assembly lines?

The number of people willing to buy tickets to the Super Bowl is invariably greater than the number of tickets (and seats) available. This is evidence that the price of the tickets is

According to the law of supply,

Assume the demand curve for shampoo is downward sloping. If the price of shampoo falls from $1.50 to $1.25 per bottle,

At a price of $5, Tyrone buys 10 units of a product; when the price increases to $6, Tyrone buys 8 units. Which of the following is correct about Tyrone's behavior?

Table 3-1 Refer to Table 3-1. If the table represents the willingness to pay of four buyers and the price of the product is $15, then who would be willing to purchase the product?

The invisible hand principle indicates that competitive markets can help promote the efficient use of resources

In which statement(s) are "supply" and "quantity supplied" used correctly? (I) "An increase in the price of toasters will increase the quantity supplied of toasters." (II) "A technological advance that lowers the cost of producing toasters will increase the supply of toasters."

Prices direct economic activity in a market economy by

Profits and losses play an important role in helping

Figure 3-16 Refer to Figure 3-16. When the price falls from P₂ to P₁, producer surplus

When a firm is earning economic profit, this indicates the firm is

Figure 3-18 Refer to Figure 3-18. Which area represents the increase in consumer surplus when the price falls from P₁ to P₂?

A decrease in the price of a good would

If coffee and cream are complements, an increase in the price of coffee will cause

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 increase in demand will cause

Figure 3-6 In Figure 3-6, suppose D1 and S1 indicate initial conditions in the market for ice cream. Which of the following changes would tend to cause a shift from S1 to S2 in the market for ice cream?

Kayla decides that she would pay as much as $400 for a new refrigerator. She buys the refrigerator and realizes consumer surplus of $75. How much did Kayla pay for her refrigerator?

If we observe a decrease in the price of a good and an increase in the amount of the good bought and sold, this could be explained by

Figure 3-22 Refer to Figure 3-22. Which of the four graphs represents the market for cars as a result of the adoption of new technology on assembly lines?

The number of people willing to buy tickets to the Super Bowl is invariably greater than the number of tickets (and seats) available. This is evidence that the price of the tickets is

According to the law of supply,

Assume the demand curve for shampoo is downward sloping. If the price of shampoo falls from $1.50 to $1.25 per bottle,

At a price of $5, Tyrone buys 10 units of a product; when the price increases to $6, Tyrone buys 8 units. Which of the following is correct about Tyrone's behavior?

Table 3-1 Refer to Table 3-1. If the table represents the willingness to pay of four buyers and the price of the product is $15, then who would be willing to purchase the product?

The invisible hand principle indicates that competitive markets can help promote the efficient use of resources

In which statement(s) are "supply" and "quantity supplied" used correctly? (I) "An increase in the price of toasters will increase the quantity supplied of toasters." (II) "A technological advance that lowers the cost of producing toasters will increase the supply of toasters."

Prices direct economic activity in a market economy by

Profits and losses play an important role in helping

Figure 3-16 Refer to Figure 3-16. When the price falls from P2 to P1, producer surplus

When a firm is earning economic profit, this indicates the firm is

Figure 3-18 Refer to Figure 3-18. Which area represents the increase in consumer surplus when the price falls from P1 to P2?

A decrease in the price of a good would

If coffee and cream are complements, an increase in the price of coffee will cause

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 3-6 In Figure 3-6, suppose D₁ and S₁ indicate initial conditions in the market for ice cream. Which of the following changes would tend to cause a shift from S₁ to S₂ in the market for ice cream?

Figure 3-16 Refer to Figure 3-16. When the price falls from P₂ to P₁, producer surplus

Figure 3-18 Refer to Figure 3-18. Which area represents the increase in consumer surplus when the price falls from P₁ to P₂?