Question 1

If the supply of a good increased, what would be the effect on the equilibrium price and quantity?

Accepted Answer

A) Price would increase and quantity would decrease. 
B) Price would decrease and quantity would decrease. 
C) Price would increase and quantity would increase. 
D) Price would decrease and quantity would increase. 
A) Price would increase and quantity would decrease. 
B) Price would decrease and quantity would decrease. 
C) Price would increase and quantity would increase. 
D) Price would decrease and quantity would increase.

Question 2

Suppose demand increases and supply decreases. 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 3

When competition is present and property rights protected and enforced, market prices will

Accepted Answer

A) discourage profit-seeking business firms from producing efficiently. 
B) direct entrepreneurs toward production of goods that are inferior in quality. 
C) encourage self-interested individuals to develop skills that are expected to be valuable in the future. 
D) always decrease. 
A) discourage profit-seeking business firms from producing efficiently. 
B) direct entrepreneurs toward production of goods that are inferior in quality. 
C) encourage self-interested individuals to develop skills that are expected to be valuable in the future. 
D) always decrease.

Question 4

Figure 3-16
  
-Refer to Figure 3-16. When the price is P₁, producer surplus is

Accepted Answer

A) A. 
B) C. 
C) A + B. 
D) C + D. 
A) A. 
B) C. 
C) A + B. 
D) C + D.

Question 5

An agricultural economist reports that corn prices are very high this year and that corn growers are earning substantial profits. He concludes that government action is needed to direct more farmers to grow corn. Is such action necessary? Why or why not?

Accepted Answer

No government action is necessary to dir

Question 6

Figure 3-17
  
-Refer to Figure 3-17. When the price rises from P₁ to P₂, consumer surplus

Accepted Answer

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

Question 7

Which of the following will most likely result from a destruction of half of the Florida orange crop due to a hard freeze?

Accepted Answer

A) a decrease in the demand for oranges 
B) an increase in the supply of oranges 
C) an increase in the quantity of oranges bought and sold 
D) an increase in the price of oranges 
A) a decrease in the demand for oranges 
B) an increase in the supply of oranges 
C) an increase in the quantity of oranges bought and sold 
D) an increase in the price of oranges

Question 8

Which of the following would be the best example of consumer surplus?

Accepted Answer

A) Jane pays $30 a month for phone service even though it is worth $70 to her. 
B) Sam refuses to pay $10 for a haircut because it is only worth $8 to him. 
C) Fred buys a car for $4,000, the maximum amount that he would be willing to pay for it. 
D) When Sue purchases a candy bar for $.50, she uses a $20 bill to pay for it. 
A) Jane pays $30 a month for phone service even though it is worth $70 to her. 
B) Sam refuses to pay $10 for a haircut because it is only worth $8 to him. 
C) Fred buys a car for $4,000, the maximum amount that he would be willing to pay for it. 
D) When Sue purchases a candy bar for $.50, she uses a $20 bill to pay for it.

Question 9

Figure 3-20
  
-Refer to Figure 3-20. If 40 units of the good are being bought and sold, then

Accepted Answer

A) cost to sellers is equal to the value to buyers. 
B) the value to buyers is greater than the cost to sellers. 
C) the cost to sellers is greater than the value to buyers. 
D) producer surplus would be greater than consumer surplus. 
A) cost to sellers is equal to the value to buyers. 
B) the value to buyers is greater than the cost to sellers. 
C) the cost to sellers is greater than the value to buyers. 
D) producer surplus would be greater than consumer surplus.

Question 10

Which of the following is not a function of prices in a market system?

Accepted Answer

A) Prices have the crucial job of balancing supply and demand. 
B) Prices send signals to buyers and sellers to help them make rational economic decisions. 
C) Prices coordinate economic activity. 
D) Prices ensure an equitable distribution of goods and services among consumers. 
A) Prices have the crucial job of balancing supply and demand. 
B) Prices send signals to buyers and sellers to help them make rational economic decisions. 
C) Prices coordinate economic activity. 
D) Prices ensure an equitable distribution of goods and services among consumers.

Question 11

Use the figure below to answer the following question(s).
Figure 3-9
  
-In Figure 3-9, if D and S represent the demand and supply for gasoline, what is the equilibrium price and quantity?

Accepted Answer

A) price, $1; quantity, 20 
B) price, $2; quantity, 30 
C) price, $3; quantity, 40 
D) price, $4; quantity, 50 
A) price, $1; quantity, 20 
B) price, $2; quantity, 30 
C) price, $3; quantity, 40 
D) price, $4; quantity, 50

Question 12

If coffee and cream are complements, a decrease in the price of coffee will cause

Accepted Answer

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

Question 13

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 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

If the supply of a good decreased, what would be the effect on the equilibrium price and quantity?

Accepted Answer

A) Price would increase, and quantity would decrease. 
B) Price would decrease, and quantity would decrease. 
C) Price would increase, and quantity would increase. 
D) Price would decrease, and quantity would increase. 
A) Price would increase, and quantity would decrease. 
B) Price would decrease, and quantity would decrease. 
C) Price would increase, and quantity would increase. 
D) Price would decrease, and quantity would increase.

Question 16

Which of the following is most likely to result in higher prices of tickets at movie theatres near your campus?

Accepted Answer

A) an unexpected increase in enrollment at your college 
B) lower electricity rates that reduces the cost of keeping the theater at a comfortable temperature 
C) lower prices for video tape and DVD movie rentals in the stores near your campus 
D) an increase in tuition at your school that lowers enrollment 
A) an unexpected increase in enrollment at your college 
B) lower electricity rates that reduces the cost of keeping the theater at a comfortable temperature 
C) lower prices for video tape and DVD movie rentals in the stores near your campus 
D) an increase in tuition at your school that lowers enrollment

Question 17

Use the figure below to answer the following question(s).
Figure 3-13
  
-Refer to Figure 3-13. The market for margarine was initially in equilibrium at point

Accepted Answer

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

Question 18

Which of the following is most likely to lead to an increase in the rental price of apartments near your campus?

Accepted Answer

A) lower property taxes on apartment buildings 
B) an unexpected increase in enrollment at your college 
C) lower prices for the bricks used in the construction of apartments 
D) the building of a new large dormitory on the college campus 
A) lower property taxes on apartment buildings 
B) an unexpected increase in enrollment at your college 
C) lower prices for the bricks used in the construction of apartments 
D) the building of a new large dormitory on the college campus

Question 19

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 20

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

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

If the supply of a good increased, what would be the effect on the equilibrium price and quantity?

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

When competition is present and property rights protected and enforced, market prices will

Figure 3-16 -Refer to Figure 3-16. When the price is P₁, producer surplus is

An agricultural economist reports that corn prices are very high this year and that corn growers are earning substantial profits. He concludes that government action is needed to direct more farmers to grow corn. Is such action necessary? Why or why not?

Figure 3-17 -Refer to Figure 3-17. When the price rises from P₁ to P₂, consumer surplus

Which of the following will most likely result from a destruction of half of the Florida orange crop due to a hard freeze?

Which of the following would be the best example of consumer surplus?

Figure 3-20 -Refer to Figure 3-20. If 40 units of the good are being bought and sold, then

Which of the following is not a function of prices in a market system?

Use the figure below to answer the following question(s). Figure 3-9 -In Figure 3-9, if D and S represent the demand and supply for gasoline, what is the equilibrium price and quantity?

If coffee and cream are complements, a decrease in the price of coffee will cause

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?

If the supply of a good decreased, what would be the effect on the equilibrium price and quantity?

Which of the following is most likely to result in higher prices of tickets at movie theatres near your campus?

Use the figure below to answer the following question(s). Figure 3-13 -Refer to Figure 3-13. The market for margarine was initially in equilibrium at point

Which of the following is most likely to lead to an increase in the rental price of apartments near your campus?

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

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 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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