Question 1

Figure 3-15
  
-Refer to Figure 3-15. Which area represents producer surplus when the price is P₂?

Accepted Answer

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

Question 2

Figure 3-6
  
-In Figure 3-6, suppose D₁ and S₁ indicate initial conditions in the market for ice cream. Which of the following changes would tend to cause a shift from S₁ to S₂ in the market for ice cream?

Accepted Answer

A) an increase in the price of sugar, an ingredient used to produce ice cream 
B) a decrease in the price of frozen yogurt, a substitute for ice cream 
C) abnormally hot weather that temporarily increases consumer desire for ice cream 
D) a decrease in the price of milk, an ingredient used to produce ice cream 
A) an increase in the price of sugar, an ingredient used to produce ice cream 
B) a decrease in the price of frozen yogurt, a substitute for ice cream 
C) abnormally hot weather that temporarily increases consumer desire for ice cream 
D) a decrease in the price of milk, an ingredient used to produce ice cream

Question 3

Around Easter time, the price of eggs rises. Some consumers complain about this and claim stores are 'price gouging.' Are there any positive functions played by the higher price of eggs around Easter? What would happen if the price of eggs were not permitted to rise by law?

Accepted Answer

The price of eggs rises around Easter du

Question 4

Which of the following would cause the price of automobiles to rise?

Accepted Answer

A) a decrease in the wages of autoworkers 
B) a reduction in the price of bus travel 
C) an increase in the price of gasoline 
D) an increase in consumer income 
A) a decrease in the wages of autoworkers 
B) a reduction in the price of bus travel 
C) an increase in the price of gasoline 
D) an increase in consumer income

Question 5

(I) The height of the demand curve for a commodity indicates the maximum amount the consumer would be willing to pay for each unit of the good. (II) The height of the supply curve for a commodity indicates the minimum price the seller would accept for each unit of the good.

Accepted Answer

A) I is true; II is false. 
B) I is false; II is true. 
C) Both I and II are false. 
D) Both I and II are true. 
A) I is true; II is false. 
B) I is false; II is true. 
C) Both I and II are false. 
D) Both I and II are true.

Question 6

Figure 3-10
  
-Figure 3-10 illustrates the conditions of demand and supply in the market for compact discs. Indicate the equilibrium price and quantity.

Accepted Answer

A) price, $20; quantity, 2,000 
B) price, $15; quantity, 3,000 
C) price, $10; quantity, 2,000 
D) price, $10; quantity, 4,000 
A) price, $20; quantity, 2,000 
B) price, $15; quantity, 3,000 
C) price, $10; quantity, 2,000 
D) price, $10; quantity, 4,000

Question 7

Use the figure below to answer the following question(s).
Figure 3-9
  
-Given the demand (D) and supply (S) for gasoline in Figure 3-9, if the price of gasoline were $3 per gallon,

Accepted Answer

A) consumers would wish to purchase more than was being supplied. 
B) producers would be supplying more than consumers wished to purchase. 
C) the quantity consumers wished to purchase would equal the quantity that producers wished to supply. 
D) there would be a tendency for the price of gasoline to rise. 
A) consumers would wish to purchase more than was being supplied. 
B) producers would be supplying more than consumers wished to purchase. 
C) the quantity consumers wished to purchase would equal the quantity that producers wished to supply. 
D) there would be a tendency for the price of gasoline to rise.

Question 8

Figure 3-22

-Refer to Figure 3-22. Which of the four graphs represents the market for pizza delivery in a college town as we go from summer to the beginning of the fall semester?

Accepted Answer

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

Question 9

After a hurricane in Florida knocked out the regional water supply for several days, the demand for bottled water increased sharply. In a market economy, how will this increase in demand affect the equilibrium price and quantity of bottled water?

Accepted Answer

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

Question 10

Which of the following is necessary for the invisible hand of market prices to work properly?

Accepted Answer

A) buyers and sellers who generally tend to disregard their own self-interest 
B) democratic political procedures and highly regulated markets 
C) price controls that restrict the movement of market prices 
D) competition and property rights that are well-defined and enforced 
A) buyers and sellers who generally tend to disregard their own self-interest 
B) democratic political procedures and highly regulated markets 
C) price controls that restrict the movement of market prices 
D) competition and property rights that are well-defined and enforced

Question 11

Sam lives in a town with a population of 3,000. He says, "This town really needs a pizza restaurant. People want pizza and would be willing to pay a lot for it, but no one will open a pizza place because they couldn't make any money." Evaluate Sam's statement.

Accepted Answer

His statement clearly conflicts with the

Question 12

"He [the producer] intends only his gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention." What is the "invisible hand" referred to in this statement?

Accepted Answer

A) the elasticity of the market demand curve 
B) the power of government when decisions are made democratically 
C) the guidelines and regulations set for his industry by the government 
D) the incentive structure accompanying market prices 
A) the elasticity of the market demand curve 
B) the power of government when decisions are made democratically 
C) the guidelines and regulations set for his industry by the government 
D) the incentive structure accompanying market prices

Question 13

Which of the following is a function performed by market prices?

Accepted Answer

A) Market prices communicate information to buyers and sellers. 
B) Market prices coordinate the decisions of buyers and sellers. 
C) Market prices motivate entrepreneurs to produce those products that are currently most desired relative to their costs of production. 
D) All of the above are functions performed by market prices. 
A) Market prices communicate information to buyers and sellers. 
B) Market prices coordinate the decisions of buyers and sellers. 
C) Market prices motivate entrepreneurs to produce those products that are currently most desired relative to their costs of production. 
D) All of the above are functions performed by market prices.

Question 14

Adam Smith's invisible hand principle stresses

Accepted Answer

A) that benevolence is a powerful motivator that encourages individuals to engage in productive economic activity. 
B) the tendency of the competitive market process to direct self-interested individuals into activities that enhance the economic welfare of society. 
C) the potential of government regulation as a means of bringing the self interest of individuals into harmony with the economic welfare of society. 
D) the tendency of self-interested individuals to pursue activities that benefit themselves but harm the overall economic welfare of society. 
A) that benevolence is a powerful motivator that encourages individuals to engage in productive economic activity. 
B) the tendency of the competitive market process to direct self-interested individuals into activities that enhance the economic welfare of society. 
C) the potential of government regulation as a means of bringing the self interest of individuals into harmony with the economic welfare of society. 
D) the tendency of self-interested individuals to pursue activities that benefit themselves but harm the overall economic welfare of society.

Question 15

Figure 3-18
  
-Refer to Figure 3-18. Which area represents the increase in consumer surplus when the price falls from P₁ to P₂?

Accepted Answer

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

Question 16

A decrease in the price of flour will shift the supply curve for donuts

Accepted Answer

A) leftward, causing the equilibrium price to increase and quantity to decrease. 
B) leftward, causing the equilibrium price and quantity to decrease. 
C) rightward, causing the equilibrium price to decrease and equilibrium quantity to increase. 
D) rightward, causing the equilibrium price and quantity to increase. 
A) leftward, causing the equilibrium price to increase and quantity to decrease. 
B) leftward, causing the equilibrium price and quantity to decrease. 
C) rightward, causing the equilibrium price to decrease and equilibrium quantity to increase. 
D) rightward, causing the equilibrium price and quantity to increase.

Question 17

Market prices provide information to consumers, helping them coordinate their activities so long as

Accepted Answer

A) competition is present and buyers and sellers are free to choose mutually agreeable prices. 
B) prices are not allowed to rise too high, causing a shortage. 
C) prices are legally kept equal in all markets, preventing unfair price increases in markets with shortages and unfair price decreases when a market surplus is present. 
D) the government carefully screens producers and effectively keeps inefficient producers out of the market. 
A) competition is present and buyers and sellers are free to choose mutually agreeable prices. 
B) prices are not allowed to rise too high, causing a shortage. 
C) prices are legally kept equal in all markets, preventing unfair price increases in markets with shortages and unfair price decreases when a market surplus is present. 
D) the government carefully screens producers and effectively keeps inefficient producers out of the market.

Question 18

"If gasoline were taxed, the price of gasoline would rise. Consequently, the demand for gasoline would fall, causing the price to fall to the original level." This statement is

Accepted Answer

A) essentially correct. 
B) incorrect--after the demand falls, the price would fall but to some level higher than the original level. 
C) incorrect--demand and quantity demanded are confused. The price increase would reduce quantity demanded, not demand. 
D) incorrect--after the demand falls, the price would fall but to some level lower than the original level. 
A) essentially correct. 
B) incorrect--after the demand falls, the price would fall but to some level higher than the original level. 
C) incorrect--demand and quantity demanded are confused. The price increase would reduce quantity demanded, not demand. 
D) incorrect--after the demand falls, the price would fall but to some level lower than the original level.

Question 19

Which of the following would decrease the price of packaged hot dogs?

Accepted Answer

A) an increase in the price of hot dog buns, a complement to packaged hot dogs 
B) a decrease in the price of hamburger meat, a substitute for packaged hot dogs 
C) a technological advance that lowers the cost of producing packaged hot dogs 
D) all of the above 
A) an increase in the price of hot dog buns, a complement to packaged hot dogs 
B) a decrease in the price of hamburger meat, a substitute for packaged hot dogs 
C) a technological advance that lowers the cost of producing packaged hot dogs 
D) all of the above

Question 20

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, a decrease in the price of butter, a close substitute for margarine, 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 butter, a close substitute for margarine, would likely move the equilibrium in this market toward point

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

Figure 3-15 -Refer to Figure 3-15. Which area represents producer surplus when the price is P₂?

Figure 3-6 -In Figure 3-6, suppose D₁ and S₁ indicate initial conditions in the market for ice cream. Which of the following changes would tend to cause a shift from S₁ to S₂ in the market for ice cream?

Around Easter time, the price of eggs rises. Some consumers complain about this and claim stores are 'price gouging.' Are there any positive functions played by the higher price of eggs around Easter? What would happen if the price of eggs were not permitted to rise by law?

Which of the following would cause the price of automobiles to rise?

(I) The height of the demand curve for a commodity indicates the maximum amount the consumer would be willing to pay for each unit of the good. (II) The height of the supply curve for a commodity indicates the minimum price the seller would accept for each unit of the good.

Figure 3-10 -Figure 3-10 illustrates the conditions of demand and supply in the market for compact discs. Indicate the equilibrium price and quantity.

Use the figure below to answer the following question(s). Figure 3-9 -Given the demand (D) and supply (S) for gasoline in Figure 3-9, if the price of gasoline were $3 per gallon,

Figure 3-22 -Refer to Figure 3-22. Which of the four graphs represents the market for pizza delivery in a college town as we go from summer to the beginning of the fall semester?

After a hurricane in Florida knocked out the regional water supply for several days, the demand for bottled water increased sharply. In a market economy, how will this increase in demand affect the equilibrium price and quantity of bottled water?

Which of the following is necessary for the invisible hand of market prices to work properly?

Sam lives in a town with a population of 3,000. He says, "This town really needs a pizza restaurant. People want pizza and would be willing to pay a lot for it, but no one will open a pizza place because they couldn't make any money." Evaluate Sam's statement.

"He [the producer] intends only his gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention." What is the "invisible hand" referred to in this statement?

Which of the following is a function performed by market prices?

Adam Smith's invisible hand principle stresses

Figure 3-18 -Refer to Figure 3-18. Which area represents the increase in consumer surplus when the price falls from P₁ to P₂?

A decrease in the price of flour will shift the supply curve for donuts

Market prices provide information to consumers, helping them coordinate their activities so long as

"If gasoline were taxed, the price of gasoline would rise. Consequently, the demand for gasoline would fall, causing the price to fall to the original level." This statement is

Which of the following would decrease the price of packaged hot dogs?

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

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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