Question 1

Suppose both the equilibrium price and quantity rise for a particular product.Which of the following best explains this situation?

Accepted Answer

A) Supply and demand simultaneously increased and the shift in supply was greater than the shift in demand. 
B) Supply and demand simultaneously increased and the shift in supply was less than the shift in demand. 
C) Supply and demand simultaneously decreased and the shift in supply was greater than the shift in demand. 
D) Supply and demand simultaneously decreased and the shift in supply was less than the shift in demand. 
A) Supply and demand simultaneously increased and the shift in supply was greater than the shift in demand. 
B) Supply and demand simultaneously increased and the shift in supply was less than the shift in demand. 
C) Supply and demand simultaneously decreased and the shift in supply was greater than the shift in demand. 
D) Supply and demand simultaneously decreased and the shift in supply was less than the shift in demand.

Question 2

Suppose the price of gasoline and other petroleum products declined sharply.Which of the following will most likely occur as the result of the lower petroleum prices?

Accepted Answer

A) an increase in demand for solar heating systems 
B) an increase in demand for larger,more powerful automobiles 
C) an increase in demand for home insulation products 
D) an increase in demand for gasoline 
A) an increase in demand for solar heating systems 
B) an increase in demand for larger,more powerful automobiles 
C) an increase in demand for home insulation products 
D) an increase in demand for gasoline

Question 3

Graphically,the area that represents the difference between the maximum price consumers were willing to pay for a good and the market price is called

Accepted Answer

A) consumer surplus. 
B) producer surplus. 
C) marginal cost. 
D) triangular arbitrage. 
A) consumer surplus. 
B) producer surplus. 
C) marginal cost. 
D) triangular arbitrage.

Question 4

Which of the following is a major implication of the invisible hand concept?

Accepted Answer

A) When directed by competitive market prices,the actions of self-interested individuals will tend to promote overall economic prosperity. 
B) Prosperity cannot be achieved unless the selfish nature of people can be changed. 
C) Competition is harmful to the health of an economy because it results in wasteful duplication. 
D) Government-operated firms tend to have higher efficiency and lower costs than private sector firms. 
A) When directed by competitive market prices,the actions of self-interested individuals will tend to promote overall economic prosperity. 
B) Prosperity cannot be achieved unless the selfish nature of people can be changed. 
C) Competition is harmful to the health of an economy because it results in wasteful duplication. 
D) Government-operated firms tend to have higher efficiency and lower costs than private sector firms.

Question 5

Suppose Katie,Kendra,and Kristen each purchase a particular type of cell phone at a price of $80.Katie's willingness to pay was $100,Kendra's willingness to pay was $95,and Kristen's willingness to pay was $80.Consumer surplus for the three individuals is

Accepted Answer

A) $15. 
B) $20. 
C) $35. 
D) $80. 
A) $15. 
B) $20. 
C) $35. 
D) $80.

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 due to new producers entering the market?

Accepted Answer

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

Question 7

Which of the following would lead to an increase in the demand for fast food in Houston?

Accepted Answer

A) an increase in Houston's population 
B) a decrease in average consumer income in Houston 
C) a front page newspaper article in Houston stating that fast food is very bad for your health 
D) a decrease in the average price charged by sit-down restaurants 
A) an increase in Houston's population 
B) a decrease in average consumer income in Houston 
C) a front page newspaper article in Houston stating that fast food is very bad for your health 
D) a decrease in the average price charged by sit-down restaurants

Question 8

The curve that shows the relationship between the price of a good and the quantity that consumers are willing to purchase at each price is the

Accepted Answer

A) supply curve. 
B) demand curve. 
C) production possibilities curve. 
D) consumption curve. 
A) supply curve. 
B) demand curve. 
C) production possibilities curve. 
D) consumption curve.

Question 9

All things constant,a decrease in bus,train,and airplane fares will

Accepted Answer

A) shift the demand curve for automobiles to the left. 
B) cause a movement along the demand curve for automobiles. 
C) shift the demand curve for automobiles to the right. 
D) have no impact on the demand curve for automobiles. 
A) shift the demand curve for automobiles to the left. 
B) cause a movement along the demand curve for automobiles. 
C) shift the demand curve for automobiles to the right. 
D) have no impact on the demand curve for automobiles.

Question 10

Markets coordinate output decisions by pushing

Accepted Answer

A) up price when there is a shortage. 
B) down price when quantity demanded exceeds quantity supplied. 
C) up price when there is a surplus. 
D) up price when quantity supplied exceeds quantity demanded. 
A) up price when there is a shortage. 
B) down price when quantity demanded exceeds quantity supplied. 
C) up price when there is a surplus. 
D) up price when quantity supplied exceeds quantity demanded.

Question 11

Figure 3-2
  
-Given the supply and demand conditions illustrated in Figure 3-2,the equilibrium price of steak is

Accepted Answer

A) $2 per pound. 
B) $4 per pound. 
C) $6 per pound. 
D) $8 per pound. 
A) $2 per pound. 
B) $4 per pound. 
C) $6 per pound. 
D) $8 per pound.

Question 12

"Falling consumer income from the recent recession has hurt automakers in more ways than one.Not only have sales of new cars fallen,but car prices have fallen as well.As a result,the major automakers have announced cutbacks in production and layoffs of workers." Which of the following places these statements in the proper economic terminology within the context of the supply and demand model? [Note: It may help to graph this first.]

Accepted Answer

A) a decrease in demand and a decrease in supply 
B) a decrease in demand and a decrease in quantity supplied 
C) a decrease in quantity demanded and a decrease in quantity supplied 
D) a decrease in quantity demanded and a decrease in supply 
A) a decrease in demand and a decrease in supply 
B) a decrease in demand and a decrease in quantity supplied 
C) a decrease in quantity demanded and a decrease in quantity supplied 
D) a decrease in quantity demanded and a decrease in supply

Question 13

According to the law of supply,as the price of a good decreases

Accepted Answer

A) buyers will buy more of the good. 
B) sellers will produce more of the good. 
C) buyers will buy less of the good. 
D) sellers will produce less of the good. 
A) buyers will buy more of the good. 
B) sellers will produce more of the good. 
C) buyers will buy less of the good. 
D) sellers will produce less of the good.

Question 14

When an unusually bad frost reduces the apple crop in Washington state,the price of canned apple juice may rise immediately in supermarkets,even though the juice on the shelves was made from last year's plentiful crop.The invisible hand theory tells us that the profit-seeking merchants who raise their prices in such situations

Accepted Answer

A) are hurting the economy,since the juice now on the shelves was produced at a lower cost. 
B) are profiting by rationing the juice,which is now more scarce to the consumers willing to pay the most for the now more limited supply. 
C) are ignoring the motivating function of prices,which the invisible hand theory holds should be set according to the cost paid by the merchant. 
D) will not actually profit since they are ignoring a basic economic rule: Only raise prices when consumer demand increases. 
A) are hurting the economy,since the juice now on the shelves was produced at a lower cost. 
B) are profiting by rationing the juice,which is now more scarce to the consumers willing to pay the most for the now more limited supply. 
C) are ignoring the motivating function of prices,which the invisible hand theory holds should be set according to the cost paid by the merchant. 
D) will not actually profit since they are ignoring a basic economic rule: Only raise prices when consumer demand increases.

Question 15

Which of the following would be most likely to cause the demand for Miller beer to increase?

Accepted Answer

A) an increase in the price of Budweiser beer 
B) a decrease in consumer income 
C) a decrease in the price of barley used to make Miller beer 
D) a decrease in the price of Miller beer 
A) an increase in the price of Budweiser beer 
B) a decrease in consumer income 
C) a decrease in the price of barley used to make Miller beer 
D) a decrease in the price of Miller beer

Question 16

Which of the following would most likely cause the current demand for DVD players to rise?

Accepted Answer

A) an increase in consumer income 
B) a decline in the price of VCRs,a substitute for DVD players 
C) a decrease in the price of DVD players 
D) the expectation that the price of DVD players will decline sharply during the next six months 
A) an increase in consumer income 
B) a decline in the price of VCRs,a substitute for DVD players 
C) a decrease in the price of DVD players 
D) the expectation that the price of DVD players will decline sharply during the next six months

Question 17

Market prices generally promote social cooperation because they

Accepted Answer

A) clarify the options available to people and encourage individuals to help others in exchange for income. 
B) encourage government officials to levy taxes to provide people with the necessities of life. 
C) eliminate scarcity by allowing prices to rise. 
D) reward only altruistic actions,whereby,people seek to help others without the expectation of personal gain. 
A) clarify the options available to people and encourage individuals to help others in exchange for income. 
B) encourage government officials to levy taxes to provide people with the necessities of life. 
C) eliminate scarcity by allowing prices to rise. 
D) reward only altruistic actions,whereby,people seek to help others without the expectation of personal gain.

Question 18

If the price of a good is below the equilibrium price,

Accepted Answer

A) suppliers will find inventories building;they will cut output and raise prices. 
B) suppliers will find inventories being depleted.They will increase production and raise prices. 
C) the demand curve will shift down until an equilibrium is established at the existing price. 
D) the supply curve will shift up until an equilibrium is established at the existing price. 
A) suppliers will find inventories building;they will cut output and raise prices. 
B) suppliers will find inventories being depleted.They will increase production and raise prices. 
C) the demand curve will shift down until an equilibrium is established at the existing price. 
D) the supply curve will shift up until an equilibrium is established at the existing price.

Question 19

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 20

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

Exam 3: Asupply,demand,and the Market Process

Suppose both the equilibrium price and quantity rise for a particular product.Which of the following best explains this situation?

Suppose the price of gasoline and other petroleum products declined sharply.Which of the following will most likely occur as the result of the lower petroleum prices?

Graphically,the area that represents the difference between the maximum price consumers were willing to pay for a good and the market price is called

Which of the following is a major implication of the invisible hand concept?

Suppose Katie,Kendra,and Kristen each purchase a particular type of cell phone at a price of $80.Katie's willingness to pay was $100,Kendra's willingness to pay was $95,and Kristen's willingness to pay was $80.Consumer surplus for the three individuals is

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

Which of the following would lead to an increase in the demand for fast food in Houston?

The curve that shows the relationship between the price of a good and the quantity that consumers are willing to purchase at each price is the

All things constant,a decrease in bus,train,and airplane fares will

Markets coordinate output decisions by pushing

Figure 3-2 -Given the supply and demand conditions illustrated in Figure 3-2,the equilibrium price of steak is

According to the law of supply,as the price of a good decreases

Which of the following would be most likely to cause the demand for Miller beer to increase?

Which of the following would most likely cause the current demand for DVD players to rise?

Market prices generally promote social cooperation because they

If the price of a good is below the equilibrium price,

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

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

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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