Question 1

Lower labour costs

Accepted Answer

A) increase the supply of Tim's baked goods and lower the equilibrium price. 
B) increase the supply of Tim's baked goods, increase the demand for Tim's baked goods and increase the equilibrium quantity. 
C) lower the equilibrium price of Tim's baked goods but do not change the equilibrium quantity. 
D) increase the demand for Tim's baked goods and raise the price. 
E) increase the quantity supplied of Tim's baked goods. 
A) increase the supply of Tim's baked goods and lower the equilibrium price. 
B) increase the supply of Tim's baked goods, increase the demand for Tim's baked goods and increase the equilibrium quantity. 
C) lower the equilibrium price of Tim's baked goods but do not change the equilibrium quantity. 
D) increase the demand for Tim's baked goods and raise the price. 
E) increase the quantity supplied of Tim's baked goods.

Question 2

What will happen to the equilibrium price and quantity of coffee if it is discovered to help prevent colds and, at the same time, Brazil and Vietnam emerge in the global market as massive producers of coffee?

Accepted Answer

A) The equilibrium price will fall and the effect on the equilibrium quantity is uncertain. 
B) The equilibrium price will rise and the effect on the equilibrium quantity is uncertain. 
C) The equilibrium quantity will decrease and the equilibrium price will rise. 
D) The equilibrium quantity will increase and the equilibrium price will remain unchanged. 
E) The equilibrium quantity will increase and the effect on the equilibrium price is uncertain. 
A) The equilibrium price will fall and the effect on the equilibrium quantity is uncertain. 
B) The equilibrium price will rise and the effect on the equilibrium quantity is uncertain. 
C) The equilibrium quantity will decrease and the equilibrium price will rise. 
D) The equilibrium quantity will increase and the equilibrium price will remain unchanged. 
E) The equilibrium quantity will increase and the effect on the equilibrium price is uncertain.

Question 3

Use the information below to answer the following questions.
Fact 3.5.1
The market for coffee is initially in equilibrium. Pepsi is a substitute for coffee; cream is a complement of coffee. Consider the market for coffee. Assume that all ceteris paribus assumptions continue to hold except for the event listed.
-Refer to Fact 3.5.1. The price of cream falls. Simultaneously, there is an increase in the wages of farm workers who harvest coffee beans. The equilibrium quantity of coffee

Accepted Answer

A) increases. 
B) decreases. 
C) remains the same. 
D) increases or decreases depending on the slope of the supply and demand curves. 
E) increases, decreases, or remains the same depending on the relative shifts of the supply and demand curves. 
A) increases. 
B) decreases. 
C) remains the same. 
D) increases or decreases depending on the slope of the supply and demand curves. 
E) increases, decreases, or remains the same depending on the relative shifts of the supply and demand curves.

Question 4

Some producers are chatting over a beer. Which one of the following quotations refers to a movement along the supply curve?

Accepted Answer

A) "Wage increases have forced us to raise our prices." 
B) "Our new, sophisticated equipment will enable us to undercut our competitors." 
C) "Raw material prices have sky-rocketed; we will have to pass the cost on to our customers." 
D) "We anticipate a big increase in demand. Our product price should rise, so we are planning for an increase in output." 
E) "New competitors in the industry are causing prices to fall." 
A) "Wage increases have forced us to raise our prices." 
B) "Our new, sophisticated equipment will enable us to undercut our competitors." 
C) "Raw material prices have sky-rocketed; we will have to pass the cost on to our customers." 
D) "We anticipate a big increase in demand. Our product price should rise, so we are planning for an increase in output." 
E) "New competitors in the industry are causing prices to fall."

Question 5

A rise in the price of a good

Accepted Answer

A) decreases demand for the good. 
B) creates a movement up along the supply curve. 
C) creates a movement down along the demand curve. 
D) increases the supply of the good. 
E) increases preferences for the good. 
A) decreases demand for the good. 
B) creates a movement up along the supply curve. 
C) creates a movement down along the demand curve. 
D) increases the supply of the good. 
E) increases preferences for the good.

Question 6

Use the table below to answer the following questions.
Table 3.5.3
Demand and supply schedules for designer sport t-shirts at CoolU
  
-Refer to Table 3.5.3. A new store opens up on the edge of campus, Great Wild North Sportswear, which has the capacity to do as much business as all the existing businesses. The quantity of t-shirts supplied doubles at each price. In addition, in a television interview, Joe Cool shows off his designer sport t-shirt, setting off a new craze that doubles business at the local sportswear establishments. The quantity of t-shirts demanded doubles at each price. The new equilibrium price is $________ and the new equilibrium quantity is ________ t-shirts per month.

Accepted Answer

A) 8; 400 
B) 8; 200 
C) 3; 400 
D) 12; 240 
E) 16; 400 
A) 8; 400 
B) 8; 200 
C) 3; 400 
D) 12; 240 
E) 16; 400

Question 7

Use the figure below to answer the following questions.
   
Figure 3.2.1
-Point A in Figure 3.2.1 indicates that

Accepted Answer

A) $1 is the least that consumers are willing to pay for the 4,000th apple. 
B) consumers will not be in equilibrium if the price of an apple is $1. 
C) consumers will only pay $1 for any apple. 
D) if the price is $1, consumers will plan to buy 4,000 apples. 
E) if the price is more than $1, consumers will buy 9,000 apples. 
A) $1 is the least that consumers are willing to pay for the 4,000th apple. 
B) consumers will not be in equilibrium if the price of an apple is $1. 
C) consumers will only pay $1 for any apple. 
D) if the price is $1, consumers will plan to buy 4,000 apples. 
E) if the price is more than $1, consumers will buy 9,000 apples.

Question 8

The price of a good will rise if

Accepted Answer

A) demand for the good decreases. 
B) supply of the good decreases. 
C) there is a surplus of the good. 
D) the price of a substitute for the good decreases. 
E) the good is an inferior good and income increases. 
A) demand for the good decreases. 
B) supply of the good decreases. 
C) there is a surplus of the good. 
D) the price of a substitute for the good decreases. 
E) the good is an inferior good and income increases.

Question 9

Suppose we observe a fall in the price of good A and an increase in the quantity of good A bought and sold. Which one of the following is a likely explanation?

Accepted Answer

A) The law of supply is violated. 
B) The demand for A decreased. 
C) The demand for A increased. 
D) The supply of A increased. 
E) The supply of A decreased. 
A) The law of supply is violated. 
B) The demand for A decreased. 
C) The demand for A increased. 
D) The supply of A increased. 
E) The supply of A decreased.

Question 10

Use the figure below to answer the following questions.
 
Figure 3.5.1
-Initially, the demand curve for good A is D₂ in Figure 3.5.1. If income increases and A is a normal good, we would expect to see a movement from point A to point

Accepted Answer

A) B. 
B) C. 
C) D. 
D) E. 
E) C and back to point A. 
A) B. 
B) C. 
C) D. 
D) E. 
E) C and back to point A.

Question 11

Use the table below to answer the following questions.
Table 3.5.3
Demand and supply schedules for designer sport t-shirts at CoolU
  
-Refer to Table 3.5.3. A new store opens up on the edge of campus, Great Wild North Sportswear, which has the capacity to do as much business as all the existing businesses. The quantity of t-shirts supplied doubles at each price. This would be represented as a

Accepted Answer

A) movement up along the demand curve. 
B) rightward shift of the demand curve. 
C) leftward shift of the demand curve. 
D) rightward shift of the supply curve. 
E) leftward shift of the supply curve. 
A) movement up along the demand curve. 
B) rightward shift of the demand curve. 
C) leftward shift of the demand curve. 
D) rightward shift of the supply curve. 
E) leftward shift of the supply curve.

Question 12

Suppose we observe a rise in the price of good A and an increase in the quantity of good A bought and sold. Which one of the following is a likely explanation?

Accepted Answer

A) The law of demand is violated. 
B) The demand for A decreased. 
C) The demand for A increased. 
D) The supply of A increased. 
E) The supply of A decreased. 
A) The law of demand is violated. 
B) The demand for A decreased. 
C) The demand for A increased. 
D) The supply of A increased. 
E) The supply of A decreased.

Question 13

The demand curve slopes downward to the right because

Accepted Answer

A) an increase in income leads to increased consumption. 
B) of the law of supply. 
C) of the law of demand. 
D) of comparative advantage. 
E) as income rises, the quantity demanded increases. 
A) an increase in income leads to increased consumption. 
B) of the law of supply. 
C) of the law of demand. 
D) of comparative advantage. 
E) as income rises, the quantity demanded increases.

Question 14

If we observe an increase in the equilibrium quantity of good A, we know that

Accepted Answer

A) either the demand for A has increased or the supply of A has decreased or both. 
B) either the demand for A has increased or the supply of A has increased or both. 
C) either the demand for A has decreased or the supply of A has increased or both. 
D) either the demand for A has decreased or the supply of A has decreased or both. 
E) the price of A has risen. 
A) either the demand for A has increased or the supply of A has decreased or both. 
B) either the demand for A has increased or the supply of A has increased or both. 
C) either the demand for A has decreased or the supply of A has increased or both. 
D) either the demand for A has decreased or the supply of A has decreased or both. 
E) the price of A has risen.

Question 15

Use the figure below to answer the following questions.
   
Figure 3.2.2
-Refer to Figure 3.2.2. If consumers' income increases,

Accepted Answer

A) the quantity of pizzas demanded increases. 
B) the demand curve for pizzas shifts from D₁ to D₂ if a pizza is a normal good. 
C) the supply of pizzas increases. 
D) the quantity of pizzas supplied decreases. 
E) a movement from point A to point B on D₁ occurs. 
A) the quantity of pizzas demanded increases. 
B) the demand curve for pizzas shifts from D₁ to D₂ if a pizza is a normal good. 
C) the supply of pizzas increases. 
D) the quantity of pizzas supplied decreases. 
E) a movement from point A to point B on D₁ occurs.

Question 16

People buy more of good 1 when the price of good 2 rises. Good 1 and good 2 are

Accepted Answer

A) complements. 
B) substitutes. 
C) normal goods. 
D) inferior goods. 
E) substitutes in production 
A) complements. 
B) substitutes. 
C) normal goods. 
D) inferior goods. 
E) substitutes in production

Question 17

If the market for Twinkies is in equilibrium, then

Accepted Answer

A) Twinkies must be a normal good. 
B) producers would like to sell more at the current price. 
C) consumers would like to buy more at the current price. 
D) there is a surplus. 
E) the equilibrium quantity equals the quantity demanded. 
A) Twinkies must be a normal good. 
B) producers would like to sell more at the current price. 
C) consumers would like to buy more at the current price. 
D) there is a surplus. 
E) the equilibrium quantity equals the quantity demanded.

Question 18

Use the information below to answer the following questions.
Fact 3.5.1
The market for coffee is initially in equilibrium. Pepsi is a substitute for coffee; cream is a complement of coffee. Consider the market for coffee. Assume that all ceteris paribus assumptions continue to hold except for the event listed.
-Refer to Fact 3.5.1. If there is an increase in the wages of farm workers who harvest coffee beans, the equilibrium quantity of coffee

Accepted Answer

A) increases. 
B) decreases. 
C) remains the same. 
D) increases or decreases depending on the slope of the supply and demand curves. 
E) increases or decreases depending on the relative shifts of the supply and demand curves. 
A) increases. 
B) decreases. 
C) remains the same. 
D) increases or decreases depending on the slope of the supply and demand curves. 
E) increases or decreases depending on the relative shifts of the supply and demand curves.

Question 19

An increase in supply is shown by

Accepted Answer

A) a movement down along the supply curve. 
B) a movement up along the supply curve. 
C) a rightward shift of the supply curve. 
D) a leftward shift of the supply curve. 
E) an initial movement up and then down along the same supply curve. 
A) a movement down along the supply curve. 
B) a movement up along the supply curve. 
C) a rightward shift of the supply curve. 
D) a leftward shift of the supply curve. 
E) an initial movement up and then down along the same supply curve.

Question 20

The price of good A rises, and the demand curve for good B shifts leftward. We can conclude that

Accepted Answer

A) A and B are substitutes. 
B) A and B are complements. 
C) A and B are complements in production. 
D) B is an inferior good. 
E) B is a normal good. 
A) A and B are substitutes. 
B) A and B are complements. 
C) A and B are complements in production. 
D) B is an inferior good. 
E) B is a normal good.

Exam 3: Demand and Supply

Lower labour costs

What will happen to the equilibrium price and quantity of coffee if it is discovered to help prevent colds and, at the same time, Brazil and Vietnam emerge in the global market as massive producers of coffee?

Some producers are chatting over a beer. Which one of the following quotations refers to a movement along the supply curve?

A rise in the price of a good

Use the figure below to answer the following questions. Figure 3.2.1 -Point A in Figure 3.2.1 indicates that

The price of a good will rise if

Suppose we observe a fall in the price of good A and an increase in the quantity of good A bought and sold. Which one of the following is a likely explanation?

Use the figure below to answer the following questions. Figure 3.5.1 -Initially, the demand curve for good A is D₂ in Figure 3.5.1. If income increases and A is a normal good, we would expect to see a movement from point A to point

Suppose we observe a rise in the price of good A and an increase in the quantity of good A bought and sold. Which one of the following is a likely explanation?

The demand curve slopes downward to the right because

If we observe an increase in the equilibrium quantity of good A, we know that

Use the figure below to answer the following questions. Figure 3.2.2 -Refer to Figure 3.2.2. If consumers' income increases,

People buy more of good 1 when the price of good 2 rises. Good 1 and good 2 are

If the market for Twinkies is in equilibrium, then

An increase in supply is shown by

The price of good A rises, and the demand curve for good B shifts leftward. We can conclude that

What Is Economics

The Economic Problem

Elasticity

Efficiency and Equity

Governments Actions in Markets

Global Markets in Action

Utility and Demand

Possibilities, Preferences, and Choices

Organizing Production

Output and Costs

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Externalities

Public Goods and Common Resources

Markets for Factors of Production

Economic Inequality

Measuring Gdp and Economic Growth

Monitoring Jobs and Inflation

Economic Growth

Finance, Saving, and Investment

Money, the Price Level, and Inflation

The Exchange Rate and the Balance of Payments

Aggregate Supply and Aggregate Demand

Expenditure Multipliers

The Business Cycle, Inflation, and Deflation

Fiscal Policy

Monetary Policy

Macro Only: International Trade Policy

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