Question 1

An upward-sloping supply curve shows that

Accepted Answer

A) buyers are willing to pay more for a scarce product. 
B) suppliers are willing to increase production of their goods if they can receive higher prices for them. 
C) buyers are unaffected by sellers' costs of production. 
D) the price of a product is not influenced by the price buyers are willing to pay. 
E) at higher prices, an envy effect begins to affect the demand curve. 
A) buyers are willing to pay more for a scarce product. 
B) suppliers are willing to increase production of their goods if they can receive higher prices for them. 
C) buyers are unaffected by sellers' costs of production. 
D) the price of a product is not influenced by the price buyers are willing to pay. 
E) at higher prices, an envy effect begins to affect the demand curve.

Question 2

In early 1996, Congress proposed an agriculture bill that would gradually reduce price supports for many agricultural products.If the bill were to be approved, what would most likely happen to the number of families employed in agriculture?

Accepted Answer

A) It would decrease, because agricultural prices would fall. 
B) It would decrease, because agricultural prices would rise. 
C) It would increase, because agricultural prices would fall. 
D) It would increase, because agricultural prices would rise. 
A) It would decrease, because agricultural prices would fall. 
B) It would decrease, because agricultural prices would rise. 
C) It would increase, because agricultural prices would fall. 
D) It would increase, because agricultural prices would rise.

Question 3

Are markets always in equilibrium?

Accepted Answer

A) Yes, they are always at the equilibrium point, or very close to it. 
B) Yes, because few things tend to alter supply and demand. 
C) No, but if there is no interference, they tend to move toward equilibrium. 
D) No, they never "settle down" into a stable price and quantity. 
E) Uncertain, economic theory has no answer to this question. 
A) Yes, they are always at the equilibrium point, or very close to it. 
B) Yes, because few things tend to alter supply and demand. 
C) No, but if there is no interference, they tend to move toward equilibrium. 
D) No, they never "settle down" into a stable price and quantity. 
E) Uncertain, economic theory has no answer to this question.

Question 4

Figure 4-22
  
-Because of falling oil prices in the past, Libya could afford fewer imported goods.Government controls were established to limit imports of cigarettes.In 1985, the market price of Marlboros rose to $70 a carton.Which graph in Figure 4-22 best depicts this situation?

Accepted Answer

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

Question 5

An increase in consumer income will shift both the supply and demand curves.

Accepted Answer

A) True 
 B)False

Question 6

If the demand for steak shifts to the right, the most likely explanation is that

Accepted Answer

A) the price of cattle feed has fallen. 
B) consumer income has risen. 
C) the price of steak has fallen. 
D) cattle production has fallen. 
A) the price of cattle feed has fallen. 
B) consumer income has risen. 
C) the price of steak has fallen. 
D) cattle production has fallen.

Question 7

Figure 4-4
  
-Assume that Figure 4-4 shows demand for steak.An increase in income of buyers will change demand from

Accepted Answer

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

Question 8

Price ceilings lead to market surpluses.

Accepted Answer

A) True 
 B)False

Question 9

If the government puts price controls on medical care, this will increase the supply of affordable care in the United States.

Accepted Answer

A) True 
 B)False

Question 10

Rent controls are designed to protect consumers from high rents.

Accepted Answer

A) True 
 B)False

Question 11

A demand schedule relates prices of a particular good to quantities demanded.

Accepted Answer

A) True 
 B)False

Question 12

Show graphically the effect of technological advance on the price of music downloads.In a separate graph show what happens to the price of CDs as a secondary effect of the new download technology.

Accepted Answer

Figure 4-27
 @#IMG-DLM& 
The first graph shows a r

Question 13

-Refer to Table 4-1.At $4, what is the shortage?

Accepted Answer

A) 0 
B) 1,500 
C) 3,000 
D) 4,500 
E) 6,000 
A) 0 
B) 1,500 
C) 3,000 
D) 4,500 
E) 6,000

Question 14

-Refer to Table 4-1.What is the equilibrium price in the example above?

Accepted Answer

A) $9 
B) $8 
C) $7 
D) $6 
E) $5 
A) $9 
B) $8 
C) $7 
D) $6 
E) $5

Question 15

One motive for "battling the invisible hand" is

Accepted Answer

A) unhappiness about the prices that occur in free markets. 
B) envy toward those who apparently benefit from certain prices. 
C) a desire to have government "correct" some problems. 
D) an attempt to produce justice between buyers and sellers. 
E) All of the above are correct. 
A) unhappiness about the prices that occur in free markets. 
B) envy toward those who apparently benefit from certain prices. 
C) a desire to have government "correct" some problems. 
D) an attempt to produce justice between buyers and sellers. 
E) All of the above are correct.

Question 16

If orange juice prices double next year, there will be a

Accepted Answer

A) rightward shift in the demand for grapefruit juice. 
B) rightward shift in the supply of grapefruit juice. 
C) leftward shift in the supply of grapefruit juice. 
D) leftward shift in the demand for grapefruit juice. 
A) rightward shift in the demand for grapefruit juice. 
B) rightward shift in the supply of grapefruit juice. 
C) leftward shift in the supply of grapefruit juice. 
D) leftward shift in the demand for grapefruit juice.

Question 17

"The market has failed to provide enough rental housing in New York City.This demonstrates another failure of free markets-they may lead to shortages of necessities." Explain why you agree or disagree.

Accepted Answer

An economist would disagree.The free mar

Question 18

Each point on the demand curve is

Accepted Answer

A) demand for the product. 
B) a quantity demanded at that price. 
C) the amount that people want to buy. 
D) the amount people want to buy at different income levels. 
E) All of the above are correct. 
A) demand for the product. 
B) a quantity demanded at that price. 
C) the amount that people want to buy. 
D) the amount people want to buy at different income levels. 
E) All of the above are correct.

Question 19

Why do airlines tend to lower ticket prices in the winter?

Accepted Answer

A) Supply is relatively variable, and a drop in demand lowers equilibrium price. 
B) Demand is relatively variable, and a drop in supply lowers equilibrium price. 
C) A drop in both supply and demand lowers equilibrium price. 
D) Supply is relatively fixed, and a drop in demand lowers equilibrium price. 
E) Demand is relatively fixed, and a drop in supply lowers equilibrium price. 
A) Supply is relatively variable, and a drop in demand lowers equilibrium price. 
B) Demand is relatively variable, and a drop in supply lowers equilibrium price. 
C) A drop in both supply and demand lowers equilibrium price. 
D) Supply is relatively fixed, and a drop in demand lowers equilibrium price. 
E) Demand is relatively fixed, and a drop in supply lowers equilibrium price.

Question 20

Figure 4-2
  
-If the government has stated that it will buy any amount of good X offered at $30, which demand curve in Figure 4-2 is appropriate?

Accepted Answer

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

Exam 4: Supply and Demand: an Initial Look

An upward-sloping supply curve shows that

In early 1996, Congress proposed an agriculture bill that would gradually reduce price supports for many agricultural products.If the bill were to be approved, what would most likely happen to the number of families employed in agriculture?

Are markets always in equilibrium?

Figure 4-22 -Because of falling oil prices in the past, Libya could afford fewer imported goods.Government controls were established to limit imports of cigarettes.In 1985, the market price of Marlboros rose to $70 a carton.Which graph in Figure 4-22 best depicts this situation?

An increase in consumer income will shift both the supply and demand curves.

If the demand for steak shifts to the right, the most likely explanation is that

Figure 4-4 -Assume that Figure 4-4 shows demand for steak.An increase in income of buyers will change demand from

Price ceilings lead to market surpluses.

If the government puts price controls on medical care, this will increase the supply of affordable care in the United States.

Rent controls are designed to protect consumers from high rents.

A demand schedule relates prices of a particular good to quantities demanded.

Show graphically the effect of technological advance on the price of music downloads.In a separate graph show what happens to the price of CDs as a secondary effect of the new download technology.

-Refer to Table 4-1.At $4, what is the shortage?

-Refer to Table 4-1.What is the equilibrium price in the example above?

One motive for "battling the invisible hand" is

If orange juice prices double next year, there will be a

"The market has failed to provide enough rental housing in New York City.This demonstrates another failure of free markets-they may lead to shortages of necessities." Explain why you agree or disagree.

Each point on the demand curve is

Why do airlines tend to lower ticket prices in the winter?

Figure 4-2 -If the government has stated that it will buy any amount of good X offered at $30, which demand curve in Figure 4-2 is appropriate?

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

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