Question 1

A decrease in supply will have what effect on equilibrium price and quantity?

Accepted Answer

A) Price will increase; quantity will decrease. 
B) Price will decrease; quantity will increase. 
C) Both price and quantity will increase. 
D) Both price and quantity will decrease. 
A) Price will increase; quantity will decrease. 
B) Price will decrease; quantity will increase. 
C) Both price and quantity will increase. 
D) Both price and quantity will decrease.

Question 2

Figure 4-4
  
-Assume that Figure 4-4 shows demand for MP₃ players.An increase in the price of music downloads changes demand from

Accepted Answer

A) D₁ to D₂. 
B) D₂ to D₁ . 
C) D₂ to D₃. 
D) D₁ to D₃. 
A) D₁ to D₂. 
B) D₂ to D₁ . 
C) D₂ to D₃. 
D) D₁ to D₃.

Question 3

Suppose demand can be described with the equation Q = 900 − 5P and supply with the equation Q = 100 + 5P.
a.Determine the equilibrium price and quantity.
b.Determine the surplus or shortage if the price were $100.

Accepted Answer

a.Equate the supply and demand as follow

Question 4

Define the following terms and explain their importance to the study of economics.
a.demand
b.surplus
c.equilibrium
d.law of supply and demand
e.quantity demanded

Accepted Answer

a.Demand is a schedule that indicates ho

Question 5

A minimum wage law may cause unemployment among low-skill workers.

Accepted Answer

A) True 
 B)False

Question 6

Give an example of a price floor.Draw a corresponding diagram and explain why there is a continuing surplus.

Accepted Answer

The example used in the text is price su

Question 7

Who tends to benefit from the sugar price supports?

Accepted Answer

A) users of sugar in other products 
B) individual users of sugar 
C) producers of other agricultural products 
D) producers of sugar 
E) All of the above are correct. 
A) users of sugar in other products 
B) individual users of sugar 
C) producers of other agricultural products 
D) producers of sugar 
E) All of the above are correct.

Question 8

Figure 4-9
  
-"Moonshine" is illegal home brew made by adding sugar to accelerate corn fermentation.Ten pounds of sugar are necessary to make a gallon of moonshine.In the mid-1970s, the price of sugar tripled and the price of moonshine skyrocketed from $6 to $15 a gallon.Which graph in Figure 4-9 best illustrates this?

Accepted Answer

A) 1 
B) 2 
C) 3 
D) 4 
A) 1 
B) 2 
C) 3 
D) 4

Question 9

Even though prices may change frequently, they can be expected to gravitate toward equilibrium.

Accepted Answer

A) True 
 B)False

Question 10

Throughout history, governments have used price controls to

Accepted Answer

A) protect buyers. 
B) protect sellers. 
C) serve the "public interest." 
D) All of the above are correct. 
A) protect buyers. 
B) protect sellers. 
C) serve the "public interest." 
D) All of the above are correct.

Question 11

During the American Revolution, Washington's army nearly starved to death after price controls were enacted to "help" buy food for the army at affordable prices.The Continental Congress later passed a law which

Accepted Answer

A) exhorted the public to obey the law and help supply food to the army. 
B) passed tax increases to punish those who refused to sell the food. 
C) revised the American Law of Supply and Demand. 
D) overrode local ordinances and essentially repealed the price controls. 
E) called for the repeal of other price control measures. 
A) exhorted the public to obey the law and help supply food to the army. 
B) passed tax increases to punish those who refused to sell the food. 
C) revised the American Law of Supply and Demand. 
D) overrode local ordinances and essentially repealed the price controls. 
E) called for the repeal of other price control measures.

Question 12

Which of the following would cause a movement up (or leftward) along the demand curve for European autos in the United States?

Accepted Answer

A) an increase in the price of American autos 
B) a decrease in the price of American autos 
C) an increase in income in the United States 
D) an increase in the price of European cars 
A) an increase in the price of American autos 
B) a decrease in the price of American autos 
C) an increase in income in the United States 
D) an increase in the price of European cars

Question 13

Which of the following will tend to occur if price controls are imposed on a product?

Accepted Answer

A) persistent shortages 
B) illegal markets 
C) illicit channels of distribution 
D) industry investment slows or stops 
E) All of the above are correct. 
A) persistent shortages 
B) illegal markets 
C) illicit channels of distribution 
D) industry investment slows or stops 
E) All of the above are correct.

Question 14

What are the major problems that will tend to arise if there are legal limits on the movement of prices?

Accepted Answer

A) favoritism and corruption of officials and market participants 
B) unenforceability of laws and higher costs of transactions 
C) increasing restrictions to enforce the laws 
D) misallocation of resources as prices no longer correspond to costs 
E) All of the above are correct. 
A) favoritism and corruption of officials and market participants 
B) unenforceability of laws and higher costs of transactions 
C) increasing restrictions to enforce the laws 
D) misallocation of resources as prices no longer correspond to costs 
E) All of the above are correct.

Question 15

Which of the following is a symptom of a price floor?

Accepted Answer

A) scalping of Super Bowl tickets 
B) surplus cheese 
C) the New York city housing shortage 
D) black markets 
E) milk shortages 
A) scalping of Super Bowl tickets 
B) surplus cheese 
C) the New York city housing shortage 
D) black markets 
E) milk shortages

Question 16

The supply curve shows

Accepted Answer

A) the same basic information as the demand curve. 
B) who will have an opportunity to produce or purchase an item. 
C) the quantity produced as a function of the price. 
D) plots of what quantities have been sold over the past few weeks or months. 
A) the same basic information as the demand curve. 
B) who will have an opportunity to produce or purchase an item. 
C) the quantity produced as a function of the price. 
D) plots of what quantities have been sold over the past few weeks or months.

Question 17

Exhibit 4-1
The following are the equations for the supply and demand curves in the market for weezils:
 
where QS1U1B1dS1U1B0 is the quantity demanded, QS1U1B1sS1U1B0 is the quantity supplied, and P is the price per weezil in dollars.

-Refer to Exhibit 4-1.According to the data given, the equilibrium price of a weezil is

Accepted Answer

A) $3. 
B) $5. 
C) $11. 
D) $14. 
A) $3. 
B) $5. 
C) $11. 
D) $14.

Question 18

Economists use the mechanism of supply and demand to study: ​

Accepted Answer

A) ​inflation 
B) ​unemployment 
C) ​environmental protection 
D) ​both a and b 
E) ​all of these 
A) ​inflation 
B) ​unemployment 
C) ​environmental protection 
D) ​both a and b 
E) ​all of these

Question 19

Both demand and supply curves usually have positive slopes.

Accepted Answer

A) True 
 B)False

Question 20

Supply can shift due to changes in price.

Accepted Answer

A) True 
 B)False

Exam 4: Supply and Demand: an Initial Look

A decrease in supply will have what effect on equilibrium price and quantity?

Figure 4-4 -Assume that Figure 4-4 shows demand for MP₃ players.An increase in the price of music downloads changes demand from

Suppose demand can be described with the equation Q = 900 − 5P and supply with the equation Q = 100 + 5P. a.Determine the equilibrium price and quantity. b.Determine the surplus or shortage if the price were $100.

Define the following terms and explain their importance to the study of economics. a.demand b.surplus c.equilibrium d.law of supply and demand e.quantity demanded

A minimum wage law may cause unemployment among low-skill workers.

Give an example of a price floor.Draw a corresponding diagram and explain why there is a continuing surplus.

Who tends to benefit from the sugar price supports?

Even though prices may change frequently, they can be expected to gravitate toward equilibrium.

Throughout history, governments have used price controls to

During the American Revolution, Washington's army nearly starved to death after price controls were enacted to "help" buy food for the army at affordable prices.The Continental Congress later passed a law which

Which of the following would cause a movement up (or leftward) along the demand curve for European autos in the United States?

Which of the following will tend to occur if price controls are imposed on a product?

What are the major problems that will tend to arise if there are legal limits on the movement of prices?

Which of the following is a symptom of a price floor?

The supply curve shows

Exhibit 4-1 The following are the equations for the supply and demand curves in the market for weezils: where Qd is the quantity demanded, Qs is the quantity supplied, and P is the price per weezil in dollars. -Refer to Exhibit 4-1.According to the data given, the equilibrium price of a weezil is

Economists use the mechanism of supply and demand to study: ​

Both demand and supply curves usually have positive slopes.

Supply can shift due to changes in price.

What Is Economics

The Economy: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Consumer Choice: Individual and Market Demand

Demand and Elasticity

Production, Inputs, and Cost: Building Blocks for Supply Analysis

Output, Price, and Profit: the Importance of Marginal Analysis

Securities: Business Finance and the Economy: the Tail That Wags the Dog

The Firm and the Industry Under Perfect Competition

Monopoly

Between Competition and Monopoly

Limiting Market Power: Regulation and Antitrust

The Case for Free Markets: the Price System

The Shortcomings of Free Markets

Externalities, the Environment, and Natural Resources

Taxation and Resource Allocation

Pricing the Factors of Production

Labor and Entrepreneurship: the Human Inputs

Poverty, Inequality, and Discrimination

Is Useconomic Leadership Threatened

An Introduction to Macroeconomics

The Goals of Macroeconomic Policy

Economic Growth: Theory and Policy

Aggregate Demand and the Powerful Consumer

Demand-Side Equilibrium: Unemployment or Inflation

Bringing in the Supply Side: Unemployment and Inflation

Managing Aggregate Demand: Fiscal Policy

Money and the Banking System

Monetary Policy: Conventional and Unconventional

He Financial Crisis and the Great Recession

The Debate Over Monetary and Fiscal Policy

Budget Deficits in the Short and Long Run

The Trade-Off Between Inflation and Unemployment

International Trade and Comparative Advantage

The International Monetary System: Order or Disorder

Exchange Rates and the Macroeconomy

Filters

Exhibit 4-1 The following are the equations for the supply and demand curves in the market for weezils: where Q_d is the quantity demanded, Q_s is the quantity supplied, and P is the price per weezil in dollars. -Refer to Exhibit 4-1.According to the data given, the equilibrium price of a weezil is

Economists use the mechanism of supply and demand to study: