Question 1

Figure 3-20
  
-Refer to Figure 3-20. If 110 units of the good are being bought and sold, then

Accepted Answer

A) the 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 is greater than consumer surplus. 
A) the 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 is greater than consumer surplus.

Question 2

A hurricane damaged much of the housing in Miami. Shortly thereafter, the price of plywood rose significantly. The events suggest that

Accepted Answer

A) a decrease in the supply of plywood caused the price of plywood to rise. 
B) an increase in the supply of plywood caused the price of plywood to rise. 
C) a decrease in the demand for plywood caused the price of plywood to rise. 
D) an increase in the demand for plywood caused the price of plywood to rise. 
A) a decrease in the supply of plywood caused the price of plywood to rise. 
B) an increase in the supply of plywood caused the price of plywood to rise. 
C) a decrease in the demand for plywood caused the price of plywood to rise. 
D) an increase in the demand for plywood caused the price of plywood to rise.

Question 3

Assume that supply increases greatly and demand increases slightly. Which of the following will happen?

Accepted Answer

A) Equilibrium price will fall and equilibrium quantity will rise. 
B) Equilibrium price will rise and equilibrium quantity will fall. 
C) Equilibrium price will rise and equilibrium quantity will rise. 
D) Equilibrium price will fall and equilibrium quantity will fall. 
E) Neither equilibrium price nor equilibrium quantity will change. 
A) Equilibrium price will fall and equilibrium quantity will rise. 
B) Equilibrium price will rise and equilibrium quantity will fall. 
C) Equilibrium price will rise and equilibrium quantity will rise. 
D) Equilibrium price will fall and equilibrium quantity will fall. 
E) Neither equilibrium price nor equilibrium quantity will change.

Question 4

Susan says, "If the price of wool coats goes up, suppliers will offer more of the coats for sale." Brad replies, "It takes three months to harvest wool and employ all the steps necessary to produce a wool coat. Quantity supplied cannot possibly increase for three months." Is Brad correct? Why or why not?

Accepted Answer

Brad is correct in noting the supply of

Question 5

Figure 3-23
  
-Refer to Figure 3-23. It is apparent from the figure that

Accepted Answer

A) the good is inferior. 
B) the demand for the good decreases as income increases. 
C) the demand for the good conforms to the law of demand. 
D) All of the above are correct. 
A) the good is inferior. 
B) the demand for the good decreases as income increases. 
C) the demand for the good conforms to the law of demand. 
D) All of the above are correct.

Question 6

A movement along a demand curve

Accepted Answer

A) is called a change in demand. 
B) is the result of a change in the price of the good. 
C) can be caused by many things. 
D) means the product is inelastic. 
A) is called a change in demand. 
B) is the result of a change in the price of the good. 
C) can be caused by many things. 
D) means the product is inelastic.

Question 7

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 8

Figure 3-23
  
-Refer to Figure 3-23. The movement from point A to point B on the graph shows

Accepted Answer

A) a decrease in demand. 
B) an increase in demand. 
C) a decrease in quantity demanded. 
D) an increase in quantity demanded. 
A) a decrease in demand. 
B) an increase in demand. 
C) a decrease in quantity demanded. 
D) an increase in quantity demanded.

Question 9

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 10

Consumer surplus is the area on the graph

Accepted Answer

A) above the supply curve and below the demand curve. 
B) below the demand curve and above the market price. 
C) that represents the gains that producers receive when they sell a product. 
D) that reflect the opportunity cost of producing the a good. 
A) above the supply curve and below the demand curve. 
B) below the demand curve and above the market price. 
C) that represents the gains that producers receive when they sell a product. 
D) that reflect the opportunity cost of producing the a good.

Question 11

The invisible hand principle, as developed by Adam Smith in The Wealth of Nations, states that

Accepted Answer

A) government control over economic activity is essential for the talents of individuals to be directed toward their highest valued use. 
B) the economic wealth of a nation is determined by a nation's holdings of precious metals, such as gold and silver. 
C) public policy should prohibit domestic producers from selling their goods to foreigners. 
D) competitive markets will bring individual self-interest and the public interest into harmony. 
A) government control over economic activity is essential for the talents of individuals to be directed toward their highest valued use. 
B) the economic wealth of a nation is determined by a nation's holdings of precious metals, such as gold and silver. 
C) public policy should prohibit domestic producers from selling their goods to foreigners. 
D) competitive markets will bring individual self-interest and the public interest into harmony.

Question 12

Figure 3-17
  
-Refer to Figure 3-17. Area C represents

Accepted Answer

A) the decrease in consumer surplus that results from a downward-sloping demand curve. 
B) consumer surplus to new consumers who enter the market when the price falls from P₂ to P₁. 
C) the increase in producer surplus when quantity sold increases from Q₂ to Q₁. 
D) the decrease in consumer surplus to each consumer in the market when the price increases from P₁ to P₂. 
A) the decrease in consumer surplus that results from a downward-sloping demand curve. 
B) consumer surplus to new consumers who enter the market when the price falls from P₂ to P₁. 
C) the increase in producer surplus when quantity sold increases from Q₂ to Q₁. 
D) the decrease in consumer surplus to each consumer in the market when the price increases from P₁ to P₂.

Question 13

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 14

Figure 3-20
  
-Refer to Figure 3-20. At the equilibrium price, consumer surplus is

Accepted Answer

A) $480. 
B) $640. 
C) $1,120. 
D) $1,280. 
A) $480. 
B) $640. 
C) $1,120. 
D) $1,280.

Question 15

In his book The Wealth of Nations, this famous economist argued that economic activity was directed by an "invisible hand."

Accepted Answer

A) Alfred Marshall 
B) Milton Friedman 
C) Adam Smith 
D) David Ricardo 
A) Alfred Marshall 
B) Milton Friedman 
C) Adam Smith 
D) David Ricardo

Question 16

Figure 3-22

-Refer to Figure 3-22. Which of the four graphs illustrates a decrease in quantity demanded?

Accepted Answer

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

Question 17

When a conflict arises in a major oil-exporting area of the world, such as the Middle East, the price of gasoline already in the storage tanks at local gas stations usually increases. Which of the following best explains this occurrence?

Accepted Answer

A) Gas station owners anticipate consumers will buy more gasoline as gasoline prices increase. 
B) Gas station owners are attempting to repeal the laws of supply and demand. 
C) Gas station owners anticipate higher replacement costs for their supply of gasoline and, therefore, raise their prices in response to this higher expected cost. 
D) A decline in consumer demand generally causes gas station owners to raise their prices. 
A) Gas station owners anticipate consumers will buy more gasoline as gasoline prices increase. 
B) Gas station owners are attempting to repeal the laws of supply and demand. 
C) Gas station owners anticipate higher replacement costs for their supply of gasoline and, therefore, raise their prices in response to this higher expected cost. 
D) A decline in consumer demand generally causes gas station owners to raise their prices.

Question 18

Which of the following would most likely cause both a decrease in the price of plasma screen TVs and a decrease in the number sold?

Accepted Answer

A) an increase in the supply of plasma screen TVs 
B) an increase in the demand for plasma screen TVs 
C) a decrease in the supply of plasma screen TVs 
D) a decrease in the demand for plasma screen TVs 
A) an increase in the supply of plasma screen TVs 
B) an increase in the demand for plasma screen TVs 
C) a decrease in the supply of plasma screen TVs 
D) a decrease in the demand for plasma screen TVs

Question 19

John advertises his used car for $3,000 in the newspaper. He would be willing to sell his used car for as low as $2,000. He is offered $2,600 for it from a buyer and accepts it. In this trade, John receives

Accepted Answer

A) producer surplus of $3,000. 
B) producer surplus of $2,600. 
C) producer surplus of $600. 
D) consumer surplus of $400. 
A) producer surplus of $3,000. 
B) producer surplus of $2,600. 
C) producer surplus of $600. 
D) consumer surplus of $400.

Question 20

Figure 3-21
  
-Refer to Figure 3-21. At the quantity Q₂,

Accepted Answer

A) the value to buyers and the cost to sellers are both P₂. 
B) the value to buyers is P₂ and the cost to sellers is P₃. 
C) the value to buyers and the cost to sellers are both P₃. 
D) the value to buyers is P₃ and the cost to sellers is P₂. 
A) the value to buyers and the cost to sellers are both P₂. 
B) the value to buyers is P₂ and the cost to sellers is P₃. 
C) the value to buyers and the cost to sellers are both P₃. 
D) the value to buyers is P₃ and the cost to sellers is P₂.

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

Figure 3-20 -Refer to Figure 3-20. If 110 units of the good are being bought and sold, then

A hurricane damaged much of the housing in Miami. Shortly thereafter, the price of plywood rose significantly. The events suggest that

Assume that supply increases greatly and demand increases slightly. Which of the following will happen?

Figure 3-23 -Refer to Figure 3-23. It is apparent from the figure that

A movement along a demand curve

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

Figure 3-23 -Refer to Figure 3-23. The movement from point A to point B on the graph shows

Price is important in a market economy because it

Consumer surplus is the area on the graph

The invisible hand principle, as developed by Adam Smith in The Wealth of Nations, states that

Figure 3-17 -Refer to Figure 3-17. Area C represents

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

Figure 3-20 -Refer to Figure 3-20. At the equilibrium price, consumer surplus is

In his book The Wealth of Nations, this famous economist argued that economic activity was directed by an "invisible hand."

Figure 3-22 -Refer to Figure 3-22. Which of the four graphs illustrates a decrease in quantity demanded?

When a conflict arises in a major oil-exporting area of the world, such as the Middle East, the price of gasoline already in the storage tanks at local gas stations usually increases. Which of the following best explains this occurrence?

Which of the following would most likely cause both a decrease in the price of plasma screen TVs and a decrease in the number sold?

John advertises his used car for $3,000 in the newspaper. He would be willing to sell his used car for as low as $2,000. He is offered $2,600 for it from a buyer and accepts it. In this trade, John receives

Figure 3-21 -Refer to Figure 3-21. At the quantity Q₂,

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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