Question 1

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 2

Which of the following would increase the price of fitness equipment?

Accepted Answer

A) a reduction in consumer income 
B) a major study indicating that a 30-minute workout each day improved health more than was previously thought to be the case 
C) a decrease in the price of steel used to produce the equipment 
D) all of the above 
A) a reduction in consumer income 
B) a major study indicating that a 30-minute workout each day improved health more than was previously thought to be the case 
C) a decrease in the price of steel used to produce the equipment 
D) all of the above

Question 3

Figure 3-22

-Refer to Figure 3-22. Which of the four graphs illustrates an increase in quantity supplied?

Accepted Answer

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

Question 4

If an increase in the price of peaches reduces the demand for cream, this indicates that peaches and cream are

Accepted Answer

A) normal goods. 
B) inferior goods. 
C) complements. 
D) substitutes. 
A) normal goods. 
B) inferior goods. 
C) complements. 
D) substitutes.

Question 5

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 6

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

Accepted Answer

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

Question 7

Assume that supply increases slightly and demand increases greatly. 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 8

Figure 3-1
  
-Which of the following is true regarding the market for steak shown in Figure 3-1?

Accepted Answer

A) If the price of steak were $2 per pound, producers would want to supply less steak than consumers would want to buy. 
B) If the price of steak were $4 per pound, producers would want to supply more steak than consumers would want to buy. 
C) If the price of steak were $3 per pound, producers would want to supply the same amount of steak that consumers would want to buy. 
D) All of the above are true regarding the market for steak shown in the figure. 
A) If the price of steak were $2 per pound, producers would want to supply less steak than consumers would want to buy. 
B) If the price of steak were $4 per pound, producers would want to supply more steak than consumers would want to buy. 
C) If the price of steak were $3 per pound, producers would want to supply the same amount of steak that consumers would want to buy. 
D) All of the above are true regarding the market for steak shown in the figure.

Question 9

The efficiency of market organization is dependent on which of the following?

Accepted Answer

A) well-regulated supply and demand 
B) the availability of low cost resources and high tariffs on foreign imports 
C) competitive markets and well-defined and enforced private property rights 
D) Government establishment of the invisible hand principle and the inelasticity of certain goods. 
A) well-regulated supply and demand 
B) the availability of low cost resources and high tariffs on foreign imports 
C) competitive markets and well-defined and enforced private property rights 
D) Government establishment of the invisible hand principle and the inelasticity of certain goods.

Question 10

Which of the following would lead to an increase in the demand for rental apartments in your area?

Accepted Answer

A) a reduction in the rental price of apartments 
B) a sharp increase in the number of out-of-town students attending the local college 
C) an increase in the cost of the materials used to construct apartment units. 
D) an increase in unemployment and reduction in the income of people in your area 
A) a reduction in the rental price of apartments 
B) a sharp increase in the number of out-of-town students attending the local college 
C) an increase in the cost of the materials used to construct apartment units. 
D) an increase in unemployment and reduction in the income of people in your area

Question 11

If the demand for 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 12

According to the invisible hand principle, competitive markets generally

Accepted Answer

A) bring the self-interest of individuals into harmony with the efficient allocation of resources, even though centralized planning of economic activities is absent. 
B) bring the self-interest of individuals into harmony with the efficient allocation of resources when the behavior of individuals is directed by democratic centralized planning. 
C) require central direction; otherwise, the actions of self-interested individuals will conflict with the general interests of society. 
D) promote the economic welfare of self-interested producers at the expense of unorganized groups such as consumers and taxpayers. 
A) bring the self-interest of individuals into harmony with the efficient allocation of resources, even though centralized planning of economic activities is absent. 
B) bring the self-interest of individuals into harmony with the efficient allocation of resources when the behavior of individuals is directed by democratic centralized planning. 
C) require central direction; otherwise, the actions of self-interested individuals will conflict with the general interests of society. 
D) promote the economic welfare of self-interested producers at the expense of unorganized groups such as consumers and taxpayers.

Question 13

Prices direct economic activity in a market economy by

Accepted Answer

A) influencing the actions of buyers and sellers. 
B) reducing scarcity of the goods and services produced. 
C) eliminating the need for government intervention. 
D) allocating goods and services in the most equitable way. 
A) influencing the actions of buyers and sellers. 
B) reducing scarcity of the goods and services produced. 
C) eliminating the need for government intervention. 
D) allocating goods and services in the most equitable way.

Question 14

During a major war between two oil producing nations, there would likely be

Accepted Answer

A) an increase in the price of oil because the supply of oil would decrease. 
B) an increase in the price of oil because the supply of oil would increase. 
C) a decrease in the price of oil because the supply of oil would decrease. 
D) a decrease in the price of oil because the supply of oil would increase. 
A) an increase in the price of oil because the supply of oil would decrease. 
B) an increase in the price of oil because the supply of oil would increase. 
C) a decrease in the price of oil because the supply of oil would decrease. 
D) a decrease in the price of oil because the supply of oil would increase.

Question 15

Figure 3-18
  
-Refer to Figure 3-18. When the price falls from P₁ to P₂, which area represents the increase in consumer surplus to existing buyers?

Accepted Answer

A) ABD 
B) ACF 
C) BCED 
D) DEF 
A) ABD 
B) ACF 
C) BCED 
D) DEF

Question 16

How would a decrease in consumer income affect the market for new furniture?

Accepted Answer

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

Question 17

A recent study suggested that moderate wine drinking may actually benefit one's health. If this information leads to an increased demand for wine, we would expect

Accepted Answer

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

Question 18

Which of the following would reduce the price of DVD players and increase the quantity sold?

Accepted Answer

A) an increase in the demand for DVD players 
B) a decrease in the demand for DVD players 
C) a decrease in the supply of DVD players 
D) an increase in the supply of DVD players 
A) an increase in the demand for DVD players 
B) a decrease in the demand for DVD players 
C) a decrease in the supply of DVD players 
D) an increase in the supply of DVD players

Question 19

How will an increase in the price of coffee affect the market for cocoa, a substitute good?

Accepted Answer

A) The supply of cocoa will increase, leading to a reduction in the price of cocoa. 
B) The supply of cocoa will decrease, leading to an increase in the price of cocoa. 
C) The demand for cocoa will increase, leading to an increase in the price of cocoa. 
D) The demand for cocoa will decrease, leading to a reduction in the price of cocoa. 
A) The supply of cocoa will increase, leading to a reduction in the price of cocoa. 
B) The supply of cocoa will decrease, leading to an increase in the price of cocoa. 
C) The demand for cocoa will increase, leading to an increase in the price of cocoa. 
D) The demand for cocoa will decrease, leading to a reduction in the price of cocoa.

Question 20

Economists maintain that the price of a product has no effect on demand. How can this be true?

Accepted Answer

When constructing the demand curve, pric

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

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

Which of the following would increase the price of fitness equipment?

Figure 3-22 -Refer to Figure 3-22. Which of the four graphs illustrates an increase in quantity supplied?

If an increase in the price of peaches reduces the demand for cream, this indicates that peaches and cream are

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 falls,

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

Figure 3-1 -Which of the following is true regarding the market for steak shown in Figure 3-1?

The efficiency of market organization is dependent on which of the following?

Which of the following would lead to an increase in the demand for rental apartments in your area?

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

According to the invisible hand principle, competitive markets generally

Prices direct economic activity in a market economy by

During a major war between two oil producing nations, there would likely be

Figure 3-18 -Refer to Figure 3-18. When the price falls from P₁ to P₂, which area represents the increase in consumer surplus to existing buyers?

How would a decrease in consumer income affect the market for new furniture?

A recent study suggested that moderate wine drinking may actually benefit one's health. If this information leads to an increased demand for wine, we would expect

Which of the following would reduce the price of DVD players and increase the quantity sold?

How will an increase in the price of coffee affect the market for cocoa, a substitute good?

Economists maintain that the price of a product has no effect on demand. How can this be true?

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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