Question 1

Which of the following most accurately describes the invisible hand concept?

Accepted Answer

A) Wise central planning by government is necessary for the efficient use of resources. 
B) In a democratic setting, majority rule will result in the efficient use of resources. 
C) In a market setting, when individuals pursue their own interests, they simultaneously tend to promote the public interest. 
D) In a market setting, when individuals pursue their own interests, they tend to engage in activities that lower the overall economic welfare of society. 
A) Wise central planning by government is necessary for the efficient use of resources. 
B) In a democratic setting, majority rule will result in the efficient use of resources. 
C) In a market setting, when individuals pursue their own interests, they simultaneously tend to promote the public interest. 
D) In a market setting, when individuals pursue their own interests, they tend to engage in activities that lower the overall economic welfare of society.

Question 2

If there is a decrease in both the supply and demand for a good, which of the following will definitely occur?

Accepted Answer

A) The price of the good will increase. 
B) The price of the good will decrease. 
C) The equilibrium quantity will increase. 
D) The equilibrium quantity will decrease. 
A) The price of the good will increase. 
B) The price of the good will decrease. 
C) The equilibrium quantity will increase. 
D) The equilibrium quantity will decrease.

Question 3

A terrible storm wipes out 70 percent of the peanut crop. Explain and show graphically how this will affect the market for peanut butter and the market for jelly, a complementary good.

Accepted Answer

Higher peanut prices will shift the supp

Question 4

Use the figure below to answer the following question(s).
Figure 3-14
  
-Refer to Figure 3-14. The gasoline market was initially in equilibrium at point

Accepted Answer

A) r. 
B) s. 
C) t. 
D) u. 
E)  Other things constant, an increase in the popularity and use of Sport Utility Vehicles (SUVs) that consume more gasoline per mile driven than most other types of cars would likely move the equilibrium in this market toward point 
A) r. 
B) s. 
C) t. 
D) u. 
E)  Other things constant, an increase in the popularity and use of Sport Utility Vehicles (SUVs) that consume more gasoline per mile driven than most other types of cars would likely move the equilibrium in this market toward point

Question 5

Figure 3-22

-Refer to Figure 3-22. Graph A 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 6

An increase in the demand for tattoos will lead to a

Accepted Answer

A) higher price and a larger quantity sold. 
B) lower price and a larger quantity sold. 
C) higher price and a smaller quantity sold. 
D) lower price and a smaller quantity sold. 
A) higher price and a larger quantity sold. 
B) lower price and a larger quantity sold. 
C) higher price and a smaller quantity sold. 
D) lower price and a smaller quantity sold.

Question 7

Figure 3-23
  
-Refer to Figure 3-23. The movement from point A to point B on the graph would be caused by

Accepted Answer

A) an increase in price. 
B) a decrease in price. 
C) a decrease in the price of a substitute good. 
D) an increase in income. 
A) an increase in price. 
B) a decrease in price. 
C) a decrease in the price of a substitute good. 
D) an increase in income.

Question 8

Economic efficiency requires that

Accepted Answer

A) individuals take all actions within their power. 
B) only long-lasting, high-quality products be produced. 
C) income be distributed equally among individuals. 
D) all economic activity generating more benefits than costs to individuals in the economy be undertaken. 
A) individuals take all actions within their power. 
B) only long-lasting, high-quality products be produced. 
C) income be distributed equally among individuals. 
D) all economic activity generating more benefits than costs to individuals in the economy be undertaken.

Question 9

Suppose demand decreases and supply increases. Which of the following will happen?

Accepted Answer

A) Equilibrium price will rise, fall, or stay the same while equilibrium quantity will decrease. 
B) Equilibrium price will rise, fall, or stay the same while equilibrium quantity will increase. 
C) Equilibrium quantity will rise, fall, or stay the same and equilibrium price will increase. 
D) Equilibrium quantity will rise, fall, or stay the same while equilibrium price will decrease. 
E) The change in equilibrium price and quantity cannot be determined. 
A) Equilibrium price will rise, fall, or stay the same while equilibrium quantity will decrease. 
B) Equilibrium price will rise, fall, or stay the same while equilibrium quantity will increase. 
C) Equilibrium quantity will rise, fall, or stay the same and equilibrium price will increase. 
D) Equilibrium quantity will rise, fall, or stay the same while equilibrium price will decrease. 
E) The change in equilibrium price and quantity cannot be determined.

Question 10

Figure 3-22

-Refer to Figure 3-22. Which of the four graphs represents the market for winter coats as we progress from winter to spring?

Accepted Answer

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

Question 11

How would a decrease in the cost of production affect the market for new washing machines?

Accepted Answer

A) Supply would decrease, leading to an increase in price and a reduction in quantity sold. 
B) Supply would decrease, leading to a reduction in price and a reduction in quantity sold. 
C) Supply would increase, leading to an increase in price and an increase in quantity sold. 
D) Supply would increase, leading to a reduction in price and an increase in quantity sold. 
A) Supply would decrease, leading to an increase in price and a reduction in quantity sold. 
B) Supply would decrease, leading to a reduction in price and a reduction in quantity sold. 
C) Supply would increase, leading to an increase in price and an increase in quantity sold. 
D) Supply would increase, leading to a reduction in price and an increase in quantity sold.

Question 12

Use the figure below to answer the following question(s).
Figure 3-14
  
-Refer to Figure 3-14. The gasoline market was initially in equilibrium at point

Accepted Answer

A) r. 
B) s. 
C) t. 
D) u. 
E)  Other things constant, a decrease in the price of crude oil, an important ingredient used to produce gasoline, would likely move the equilibrium in this market toward point 
A) r. 
B) s. 
C) t. 
D) u. 
E)  Other things constant, a decrease in the price of crude oil, an important ingredient used to produce gasoline, would likely move the equilibrium in this market toward point

Question 13

Which of the following would most likely cause the price of wheat to decline?

Accepted Answer

A) an increase in the production costs of corn, a substitute for wheat 
B) a decrease in the price of soybeans, a substitute for wheat 
C) an increase in the price of fertilizer, a resource used to produce wheat 
D) a sandwich craze among Americans, causing increased demand for whole-wheat bread 
A) an increase in the production costs of corn, a substitute for wheat 
B) a decrease in the price of soybeans, a substitute for wheat 
C) an increase in the price of fertilizer, a resource used to produce wheat 
D) a sandwich craze among Americans, causing increased demand for whole-wheat bread

Question 14

Figure 3-22

-Refer to Figure 3-22. Suppose the events depicted in graphs A and C were illustrated together on a single graph. A definitive result of the two events would be

Accepted Answer

A) an increase in the equilibrium quantity. 
B) an increase in the equilibrium price. 
C) an instance in which the law of demand fails to hold. 
D) All of the above are correct. 
A) an increase in the equilibrium quantity. 
B) an increase in the equilibrium price. 
C) an instance in which the law of demand fails to hold. 
D) All of the above are correct.

Question 15

Figure 3-15
  
-Refer to Figure 3-15. When the price rises from P₁ to P₂, which area represents the increase in producer surplus to existing producers?

Accepted Answer

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

Question 16

If the demand for a good increases, which of the following will generally occur in a market setting?

Accepted Answer

A) The price of the good will decrease. 
B) The supply of the good will increase. 
C) The quantity supplied will increase. 
D) Producer profits will fall. 
A) The price of the good will decrease. 
B) The supply of the good will increase. 
C) The quantity supplied will increase. 
D) Producer profits will fall.

Question 17

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 18

"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 19

Figure 3-21
  
-Refer to Figure 3-21. At the quantity Q₃,

Accepted Answer

A) the market is in equilibrium. 
B) consumer surplus is maximized. 
C) the sum of consumer surplus and producer surplus is maximized. 
D) the value to buyers is less than the cost to sellers. 
A) the market is in equilibrium. 
B) consumer surplus is maximized. 
C) the sum of consumer surplus and producer surplus is maximized. 
D) the value to buyers is less than the cost to sellers.

Question 20

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.

Exam 3: B: Supply, Demand, and the Market Process

Which of the following most accurately describes the invisible hand concept?

If there is a decrease in both the supply and demand for a good, which of the following will definitely occur?

A terrible storm wipes out 70 percent of the peanut crop. Explain and show graphically how this will affect the market for peanut butter and the market for jelly, a complementary good.

Use the figure below to answer the following question(s). Figure 3-14 -Refer to Figure 3-14. The gasoline market was initially in equilibrium at point

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

An increase in the demand for tattoos will lead to a

Figure 3-23 -Refer to Figure 3-23. The movement from point A to point B on the graph would be caused by

Economic efficiency requires that

Suppose demand decreases and supply increases. Which of the following will happen?

Figure 3-22 -Refer to Figure 3-22. Which of the four graphs represents the market for winter coats as we progress from winter to spring?

How would a decrease in the cost of production affect the market for new washing machines?

Use the figure below to answer the following question(s). Figure 3-14 -Refer to Figure 3-14. The gasoline market was initially in equilibrium at point

Which of the following would most likely cause the price of wheat to decline?

Figure 3-22 -Refer to Figure 3-22. Suppose the events depicted in graphs A and C were illustrated together on a single graph. A definitive result of the two events would be

Figure 3-15 -Refer to Figure 3-15. When the price rises from P₁ to P₂, which area represents the increase in producer surplus to existing producers?

If the demand for a good increases, which of the following will generally occur in a market setting?

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?

Figure 3-21 -Refer to Figure 3-21. At the quantity Q₃,

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

The Economic Approach

A: Some Tools of the Economist

B: Some Tools of the Economist

A: Supply, Demand, and the Market Process

A: Supply and Demand: Applications and Extensions

B: Supply and Demand: Applications and Extensions

Difficult Cases for the Market and the Role of Government

The Economics of Collective Decision-Making

Consumer Choice and Elasticity

A: Costs and the Supply of Goods

B: Costs and the Supply of Goods

A: Price Takers and the Competitive Process

B: Price Takers and the Competitive Process

Price-Searcher Markets With Low Entry Barriers

A: Price-Searcher Markets With High Entry Barriers

B: Price-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

Appendix: Government Spending and Taxation

Appendix: the Economics of Social Security

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

Appendix: Great Debates in Economics: Keynes Versus Hayek

Appendix: the Crisis of 2008: Causes and Lessons for the Future

Appendix: Lessons From the Great Depression

Appendix: the Economics of Healthcare

Appendix:education: Problems and Performance

Appendix: Earnings Differences Between Men and Women

Appendix: the Question of Resource Exhaustion

Appendix: Do Labor Unions Increase the Wages of Workers

Appendix: Difficult Environmental Cases and the Role of Government

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