Question 1

​Imagine that the state legislature raises the tax on gasoline by 10 cents/gallon.What most likely happens next?

Accepted Answer

A) ​Service station operators pass along the tax to you, adding the 10 cents to the price of a gallon of gas. 
B) ​Service station operators grumble, but pay the tax without passing the cost along to you. 
C) ​Service station operators pass along as much of the tax to you as they can, probably about 6 cents/gallon. 
D) ​None of these choices. 
A) ​Service station operators pass along the tax to you, adding the 10 cents to the price of a gallon of gas. 
B) ​Service station operators grumble, but pay the tax without passing the cost along to you. 
C) ​Service station operators pass along as much of the tax to you as they can, probably about 6 cents/gallon. 
D) ​None of these choices.

Question 2

In some markets, demand can be approximated by?
Q = 50 − 5P + 10Y?
where Q is quantity, P price per unit, and Y = buyers' income.Supply can be approximated by?
Q = −5 + 10P.
a.If Y = 20, what is equilibrium price and output?
b.If Y rises to 25, what is the new equilibrium price and output?

Accepted Answer

a.Equate the supply and demand equations

Question 3

When people suddenly want to buy something, supply increases.

Accepted Answer

A) True 
 B)False

Question 4

Any factor that shifts the demand curve to the left but does not affect the supply curve will lower the equilibrium price and raise the equilibrium quantity.

Accepted Answer

A) True 
 B)False

Question 5

Figure 4-5
  
-If the suppliers of a good will sell any amount at $30 but there are no sales, then the market can best be represented by which graph in Figure 4-5?

Accepted Answer

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

Question 6

At equilibrium, quantity demanded equals quantity supplied.

Accepted Answer

A) True 
 B)False

Question 7

The price for labor is the wage rate.What happens to the quantity of labor supplied if wages increase?

Accepted Answer

A) It increases. 
B) It decreases. 
C) It does not change. 
D) Uncertain-economic theory has no answer to this question. 
A) It increases. 
B) It decreases. 
C) It does not change. 
D) Uncertain-economic theory has no answer to this question.

Question 8

Figure 4-21
  
-A surplus will tend to occur at which price in Figure 4-21?

Accepted Answer

A) P₁ 
B) P₂ 
C) P₃ 
A) P₁ 
B) P₂ 
C) P₃

Question 9

The U.S.government restricts the production of peanuts by limiting production licenses.By also prohibiting imports, the government maintains prices well above levels peanut farmers would obtain if supply were not restricted.Economists call this type of program a(n)

Accepted Answer

A) price ceiling. 
B) price floor. 
C) opportunity cost. 
D) shortage. 
E) efficiency move. 
A) price ceiling. 
B) price floor. 
C) opportunity cost. 
D) shortage. 
E) efficiency move.

Question 10

The quantity of newspapers sold will decline if

Accepted Answer

A) newsprint becomes more expensive. 
B) the printers' union makes wage concessions. 
C) prices are reduced. 
D) magazine prices rise. 
A) newsprint becomes more expensive. 
B) the printers' union makes wage concessions. 
C) prices are reduced. 
D) magazine prices rise.

Question 11

The slope of a demand curve is almost always

Accepted Answer

A) positive, because when people buy more of a good the cost of producing it will rise. 
B) positive, because the more money a person has, the more of a particular good will be bought. 
C) negative, because when people buy more of a good the cost of producing it will fall. 
D) negative, because with everything else equal, the same people will buy more of a good when its price is lower. 
E) positive, because as the price rises, people want to sell more of the good. 
A) positive, because when people buy more of a good the cost of producing it will rise. 
B) positive, because the more money a person has, the more of a particular good will be bought. 
C) negative, because when people buy more of a good the cost of producing it will fall. 
D) negative, because with everything else equal, the same people will buy more of a good when its price is lower. 
E) positive, because as the price rises, people want to sell more of the good.

Question 12

Figure 4-4
  
-Assume that Figure 4-4 shows demand for soda.A decrease in the price of apple juice will change 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 13

An important assumption that is made when constructing a demand schedule is that

Accepted Answer

A) only price and quantity matter in determining demand. 
B) people always want a certain amount of a product. 
C) demand is too important to be left to the economists. 
D) all other determinants of demand are held constant. 
E) demand has a positive slope. 
A) only price and quantity matter in determining demand. 
B) people always want a certain amount of a product. 
C) demand is too important to be left to the economists. 
D) all other determinants of demand are held constant. 
E) demand has a positive slope.

Question 14

When price is above the equilibrium level, competitive price cutting will continue as long as quantity supplied exceeds quantity demanded.

Accepted Answer

A) True 
 B)False

Question 15

The invention of machinery that can double the amount of gold extracted from raw ore will likely lead mining companies to

Accepted Answer

A) raise the world price of gold to pay for the new machinery. 
B) lower the world price of gold because any amount can now be produced more cheaply. 
C) raise the world price of gold because miners' wages must double as their productivity doubles. 
D) lower the world price of gold only if new mining companies are not allowed to enter the industry. 
A) raise the world price of gold to pay for the new machinery. 
B) lower the world price of gold because any amount can now be produced more cheaply. 
C) raise the world price of gold because miners' wages must double as their productivity doubles. 
D) lower the world price of gold only if new mining companies are not allowed to enter the industry.

Question 16

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

Accepted Answer

A) persistent surpluses 
B) problems of disposal of goods 
C) disguised discounts developing to eliminate excess production 
D) overinvestment in the industry 
E) All of the above are correct. 
A) persistent surpluses 
B) problems of disposal of goods 
C) disguised discounts developing to eliminate excess production 
D) overinvestment in the industry 
E) All of the above are correct.

Question 17

A supply schedule shows

Accepted Answer

A) the "market potential" for a product. 
B) how much producers are willing and able to sell at different prices. 
C) possible combinations of output under different conditions. 
D) how much consumers would like to buy at different prices. 
E) All of the above are correct. 
A) the "market potential" for a product. 
B) how much producers are willing and able to sell at different prices. 
C) possible combinations of output under different conditions. 
D) how much consumers would like to buy at different prices. 
E) All of the above are correct.

Question 18

Changes in the size of an industry may cause supply to shift.

Accepted Answer

A) True 
 B)False

Question 19

A demand curve shows the relationship between price and quantity demanded only so long as all other things are held constant.

Accepted Answer

A) True 
 B)False

Question 20

How does rent control tend to cause persistent imbalances in the market for housing?

Accepted Answer

A) Quantity demanded exceeds quantity supplied but price cannot rise to remove the shortage. 
B) Quantity demanded exceeds quantity supplied but price cannot fall to remove the surplus. 
C) Quantity supplied exceeds quantity demanded but price cannot rise to remove the shortage. 
D) Quantity supplied exceeds quantity demanded but price cannot fall to remove the surplus. 
A) Quantity demanded exceeds quantity supplied but price cannot rise to remove the shortage. 
B) Quantity demanded exceeds quantity supplied but price cannot fall to remove the surplus. 
C) Quantity supplied exceeds quantity demanded but price cannot rise to remove the shortage. 
D) Quantity supplied exceeds quantity demanded but price cannot fall to remove the surplus.

Exam 4: Supply and Demand: an Initial Look

​Imagine that the state legislature raises the tax on gasoline by 10 cents/gallon.What most likely happens next?

In some markets, demand can be approximated by? Q = 50 − 5P + 10Y? where Q is quantity, P price per unit, and Y = buyers' income.Supply can be approximated by? Q = −5 + 10P. a.If Y = 20, what is equilibrium price and output? b.If Y rises to 25, what is the new equilibrium price and output?

When people suddenly want to buy something, supply increases.

Any factor that shifts the demand curve to the left but does not affect the supply curve will lower the equilibrium price and raise the equilibrium quantity.

Figure 4-5 -If the suppliers of a good will sell any amount at $30 but there are no sales, then the market can best be represented by which graph in Figure 4-5?

At equilibrium, quantity demanded equals quantity supplied.

The price for labor is the wage rate.What happens to the quantity of labor supplied if wages increase?

Figure 4-21 -A surplus will tend to occur at which price in Figure 4-21?

The U.S.government restricts the production of peanuts by limiting production licenses.By also prohibiting imports, the government maintains prices well above levels peanut farmers would obtain if supply were not restricted.Economists call this type of program a(n)

The quantity of newspapers sold will decline if

The slope of a demand curve is almost always

Figure 4-4 -Assume that Figure 4-4 shows demand for soda.A decrease in the price of apple juice will change demand from

An important assumption that is made when constructing a demand schedule is that

When price is above the equilibrium level, competitive price cutting will continue as long as quantity supplied exceeds quantity demanded.

The invention of machinery that can double the amount of gold extracted from raw ore will likely lead mining companies to

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

A supply schedule shows

Changes in the size of an industry may cause supply to shift.

A demand curve shows the relationship between price and quantity demanded only so long as all other things are held constant.

How does rent control tend to cause persistent imbalances in the market for housing?

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

Imagine that the state legislature raises the tax on gasoline by 10 cents/gallon.What most likely happens next?