Question 1

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 2

Use the figure below to answer the following question(s).
Figure 3-8
  
-In Figure 3-8,if the initial demand and supply for soybeans were D₁ and S₁,how would a decrease in the cost of producing soybeans affect the market for soybeans?

Accepted Answer

A) Demand would increase to D₂,price would increase to P₂,and the quantity would increase to S. 
B) Supply would increase to S₂,price would decrease to P₀,and the quantity would increase to S. 
C) Both demand and supply would increase so the price would remain at P₁,but the quantity would increase to T. 
D) None of the above would occur. 
A) Demand would increase to D₂,price would increase to P₂,and the quantity would increase to S. 
B) Supply would increase to S₂,price would decrease to P₀,and the quantity would increase to S. 
C) Both demand and supply would increase so the price would remain at P₁,but the quantity would increase to T. 
D) None of the above would occur.

Question 3

Which of the following observations was made famous by Adam Smith in his book The Wealth of Nations?

Accepted Answer

A) There is no such thing as a free lunch. 
B) People buy more when prices are low than when prices are high. 
C) No matter how much people earn,they tend to spend more than they earn. 
D) Households and firms interacting in markets are guided by an "invisible hand" that leads them to desirable market outcomes. 
A) There is no such thing as a free lunch. 
B) People buy more when prices are low than when prices are high. 
C) No matter how much people earn,they tend to spend more than they earn. 
D) Households and firms interacting in markets are guided by an "invisible hand" that leads them to desirable market outcomes.

Question 4

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 5

If cable TV service and satellite TV service are substitutes,

Accepted Answer

A) a decrease in the price of cable will decrease the demand for satellite TV. 
B) an increase in the price of cable will decrease the demand for satellite TV. 
C) an increase in the price of cable will generally have no effect on the demand for satellite TV. 
D) an increase in the price of cable will shift the demand curve for satellite TV to the left. 
A) a decrease in the price of cable will decrease the demand for satellite TV. 
B) an increase in the price of cable will decrease the demand for satellite TV. 
C) an increase in the price of cable will generally have no effect on the demand for satellite TV. 
D) an increase in the price of cable will shift the demand curve for satellite TV to the left.

Question 6

If the quantity of a good supplied is highly 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 7

Figure 3-11
  
-In Figure 3-11,suppose D₁ and S₁ indicate initial conditions in the market for kitchen cabinets.Which of the following would tend to cause the supply curve to shift from S₁ to S₂?

Accepted Answer

A) the invention of "folding" plates and cups that take up substantially less storage space in the kitchen 
B) a decrease in consumer income 
C) a decrease in the price of wood,a resource used to produce kitchen cabinets 
D) an increase in the price of steel hinges,a resource used to produce kitchen cabinets 
A) the invention of "folding" plates and cups that take up substantially less storage space in the kitchen 
B) a decrease in consumer income 
C) a decrease in the price of wood,a resource used to produce kitchen cabinets 
D) an increase in the price of steel hinges,a resource used to produce kitchen cabinets

Question 8

Which of the following is the best description of the effects of an increase in the supply of bread?

Accepted Answer

A) Consumers will pay more for bread. 
B) Bread prices will fall,and bread sales will rise. 
C) A permanent surplus of bread will remain on the market. 
D) Bakers will have higher marginal costs. 
A) Consumers will pay more for bread. 
B) Bread prices will fall,and bread sales will rise. 
C) A permanent surplus of bread will remain on the market. 
D) Bakers will have higher marginal costs.

Question 9

Suppose the demand for nachos increases.What will happen to producer surplus in the market for nachos?

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 10

Dallas buys strawberries,and he would be willing to pay more than he now pays.Suppose that Dallas has a change in his tastes such that he values strawberries more than before.If the market price is the same as before,then

Accepted Answer

A) Dallas's consumer surplus would be unaffected. 
B) Dallas's consumer surplus would increase. 
C) Dallas's consumer surplus would decrease. 
D) Dallas would be wise to buy fewer strawberries than before. 
A) Dallas's consumer surplus would be unaffected. 
B) Dallas's consumer surplus would increase. 
C) Dallas's consumer surplus would decrease. 
D) Dallas would be wise to buy fewer strawberries than before.

Question 11

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 12

If there is a decrease in demand for lettuce,we would expect

Accepted Answer

A) both the price and quantity sold to increase. 
B) both the price and quantity sold to decrease. 
C) the price to decrease and the quantity sold to increase. 
D) the price to increase and the quantity sold to decrease. 
A) both the price and quantity sold to increase. 
B) both the price and quantity sold to decrease. 
C) the price to decrease and the quantity sold to increase. 
D) the price to increase and the quantity sold to decrease.

Question 13

Which of the following is most likely to shift the demand curve for electricity to the left?

Accepted Answer

A) consumers becoming more energy conscious 
B) an increase in income 
C) a decrease in the price of electricity 
D) an increase in the price of natural gas,a substitute source of energy 
A) consumers becoming more energy conscious 
B) an increase in income 
C) a decrease in the price of electricity 
D) an increase in the price of natural gas,a substitute source of energy

Question 14

Price is important in a market economy because it

Accepted Answer

A) eliminates imbalances between supply and demand. 
B) serves as the rationing mechanism for the limited supplies of goods and services. 
C) coordinates the choices of consumers and producers and brings them into harmony. 
D) is all of the above. 
A) eliminates imbalances between supply and demand. 
B) serves as the rationing mechanism for the limited supplies of goods and services. 
C) coordinates the choices of consumers and producers and brings them into harmony. 
D) is all of the above.

Question 15

In the textbook market,a rise in consumer income,other things being equal,will cause

Accepted Answer

A) the demand curve for textbooks to shift to the left. 
B) the demand curve for textbooks to shift to the right. 
C) a downward movement along the demand curve for textbooks. 
D) an upward movement along the demand curve for textbooks. 
A) the demand curve for textbooks to shift to the left. 
B) the demand curve for textbooks to shift to the right. 
C) a downward movement along the demand curve for textbooks. 
D) an upward movement along the demand curve for textbooks.

Question 16

"A reduction in gasoline prices caused the demand for gasoline to increase.The lower gas prices also led to an increase in demand for large cars,causing their prices to rise." These statements

Accepted Answer

A) are essentially correct. 
B) contain one error;the lower gasoline prices would cause an increase in the quantity demanded of gasoline,not an increase in demand. 
C) contain one error;the lower gasoline prices would increase the quantity demanded of large cars,not the demand. 
D) contain two errors;the lower gasoline prices would cause the quantity of gasoline demanded (rather than the demand)to increase,and the lower gasoline price would cause an increase in quantity demanded (rather than the demand)for large cars. 
A) are essentially correct. 
B) contain one error;the lower gasoline prices would cause an increase in the quantity demanded of gasoline,not an increase in demand. 
C) contain one error;the lower gasoline prices would increase the quantity demanded of large cars,not the demand. 
D) contain two errors;the lower gasoline prices would cause the quantity of gasoline demanded (rather than the demand)to increase,and the lower gasoline price would cause an increase in quantity demanded (rather than the demand)for large cars.

Question 17

When Adam Smith said economic activity was directed by an "invisible hand," he was referring to the fact that

Accepted Answer

A) competitive markets motivate altruistic individuals to pursue productive activities that only serve their private interests. 
B) when economic activity is directed by competitive markets,the actions of self-interested individuals will generally serve the public interest. 
C) invisible forces will lead to economic chaos unless wise central planning directs economic activity. 
D) scarcity is largely the result of invisible forces that would be eliminated if individuals were free to pursue their own self-interests. 
A) competitive markets motivate altruistic individuals to pursue productive activities that only serve their private interests. 
B) when economic activity is directed by competitive markets,the actions of self-interested individuals will generally serve the public interest. 
C) invisible forces will lead to economic chaos unless wise central planning directs economic activity. 
D) scarcity is largely the result of invisible forces that would be eliminated if individuals were free to pursue their own self-interests.

Question 18

If an increase in the price of good X causes the demand for good Y to decrease,this indicates that

Accepted Answer

A) X and Y are complements. 
B) X and Y are substitutes. 
C) X and Y are unrelated. 
D) the demand for X is elastic,but the demand for Y is inelastic. 
A) X and Y are complements. 
B) X and Y are substitutes. 
C) X and Y are unrelated. 
D) the demand for X is elastic,but the demand for Y is inelastic.

Question 19

Corn and soybeans are alternatives that could be grown by most farmers.If government subsidies for ethanol lead to higher corn prices,this will

Accepted Answer

A) increase the supply of corn. 
B) increase the supply of soybeans. 
C) decrease the supply of soybeans. 
D) decrease the supply of corn. 
E) have no effect on the supplies of corn and soybeans. 
A) increase the supply of corn. 
B) increase the supply of soybeans. 
C) decrease the supply of soybeans. 
D) decrease the supply of corn. 
E) have no effect on the supplies of corn and soybeans.

Question 20

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

Exam 3: Asupply,demand,and the Market Process

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

Use the figure below to answer the following question(s). Figure 3-8 -In Figure 3-8,if the initial demand and supply for soybeans were D₁ and S₁,how would a decrease in the cost of producing soybeans affect the market for soybeans?

Which of the following observations was made famous by Adam Smith in his book The Wealth of Nations?

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

If cable TV service and satellite TV service are substitutes,

If the quantity of a good supplied is highly sensitive to the price of the good,economists say the supply of the good is relatively

Figure 3-11 -In Figure 3-11,suppose D₁ and S₁ indicate initial conditions in the market for kitchen cabinets.Which of the following would tend to cause the supply curve to shift from S₁ to S₂?

Which of the following is the best description of the effects of an increase in the supply of bread?

Suppose the demand for nachos increases.What will happen to producer surplus in the market for nachos?

Dallas buys strawberries,and he would be willing to pay more than he now pays.Suppose that Dallas has a change in his tastes such that he values strawberries more than before.If the market price is the same as before,then

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.

If there is a decrease in demand for lettuce,we would expect

Which of the following is most likely to shift the demand curve for electricity to the left?

Price is important in a market economy because it

In the textbook market,a rise in consumer income,other things being equal,will cause

"A reduction in gasoline prices caused the demand for gasoline to increase.The lower gas prices also led to an increase in demand for large cars,causing their prices to rise." These statements

When Adam Smith said economic activity was directed by an "invisible hand," he was referring to the fact that

If an increase in the price of good X causes the demand for good Y to decrease,this indicates that

Corn and soybeans are alternatives that could be grown by most farmers.If government subsidies for ethanol lead to higher corn prices,this will

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?

The Economic Approach

Asome Tools of the Economist

Asupply and Demand: Applications and Extensions

Difficult Cases for the Market and the Role of Government

The Economics of Collective Decision-Making

Ataking the Nations Economic Pulse

Economic Fluctuations, unemployment, and Inflation

Aan Introduction to Basic Macroeconomic Markets

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

Fiscal Policy: the Keynesian View and Historical Perspective

Fiscal Policy, incentives, and Secondary Effects

Amoney 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

Consumer Choice and Elasticity

Acosts and the Supply of Goods

Aprice Takers and the Competitive Process

Price-Searcher Markets With Low Entry Barriers

Aprice-Searcher Markets With High Entry Barriers

The Supply of and Demand for Productive Resources

Earnings, productivity, and the Job Market

Investment, the Capital Market, and the Wealth of Nations

Income Inequality and Poverty

Government Spending and Taxation

The Economics of Social Security

The Stock Market: Its Function, Performance, and Potential As an Investment Opportunity

Great Debates in Economics: Keynes Versus Hayek

The Crisis of 2008: Causes and Lessons for the Future

Lessons From the Great Depression

Lessons From Japan and Canada

The Federal Budget and the National Debt

The Economics of Healthcare

Education: Problems and Performance

Earnings Differences Between Men and Women

Do Labor Unions Increase the Wages of Workers

The Question of Resource Exhaustion

Difficult Environmental Cases and the Role of Government

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