Question 1

The most important characteristic of the equilibrium price is that it:

Accepted Answer

A)  guarantees that producers earn profit. 
B)  clears the market. 
C)  increases the quantity demanded. 
D)  decreases the quantity demanded. 
A)  guarantees that producers earn profit. 
B)  clears the market. 
C)  increases the quantity demanded. 
D)  decreases the quantity demanded. B

Question 2

Exhibit 3-10 Demand and supply curves
  
-In Exhibit 3-10,what do you expect to happen in this market at point C?

Accepted Answer

A)  Competition among demanders will drive the price down. 
B)  Competition among demanders will drive the price up. 
C)  Competition among suppliers will drive the price up. 
D)  Competition among suppliers will drive the price down. 
E)  The equilibrium price A is not attainable. 
A)  Competition among demanders will drive the price down. 
B)  Competition among demanders will drive the price up. 
C)  Competition among suppliers will drive the price up. 
D)  Competition among suppliers will drive the price down. 
E)  The equilibrium price A is not attainable. D

Question 3

Suppose A and B are complementary goods.Other things being equal,the demand curve for A will shift to the right when the price of B goes up.

Accepted Answer

A) True 
 B)False  False

Question 4

Exhibit 3-15 Supply and demand curves for good X
  
-In Exhibit 3-15,if the price moves from $2.00 to $1.00,unsold inventories will:

Accepted Answer

A)  fall, putting upward pressure on price. 
B)  fall, putting less pressure on price. 
C)  rise, putting less pressure on price. 
D)  rise, putting upward pressure on price. 
A)  fall, putting upward pressure on price. 
B)  fall, putting less pressure on price. 
C)  rise, putting less pressure on price. 
D)  rise, putting upward pressure on price.

Question 5

Exhibit 3-8 Demand and supply data for radios
  
-In Exhibit 3-9,if the market price is $50,

Accepted Answer

A)  this market will be in equilibrium. 
B)  a shortage of 27 units would result. 
C)  the price is below the equilibrium price. 
D)  a surplus of 26 units would result. 
E)  a surplus of 27 units would result. 
A)  this market will be in equilibrium. 
B)  a shortage of 27 units would result. 
C)  the price is below the equilibrium price. 
D)  a surplus of 26 units would result. 
E)  a surplus of 27 units would result.

Question 6

Market equilibrium occurs when the quantity supplied is greater than the quantity demanded.

Accepted Answer

A) True 
 B)False

Question 7

Exhibit 3-8 Demand and supply data for radios
  
-In Exhibit 3-8,at any market price of radios above $50,a(n)____ would result,causing price to ____.

Accepted Answer

A)  excess demand; rise 
B)  excess supply; rise 
C)  excess demand; fall 
D)  excess supply; fall 
E)  shortage; rise 
A)  excess demand; rise 
B)  excess supply; rise 
C)  excess demand; fall 
D)  excess supply; fall 
E)  shortage; rise

Question 8

Exhibit 3-14 Supply and demand curves
  
-In Exhibit 3-14,assume that the market price of compact discs is $15 each.This price is:

Accepted Answer

A)  an equilibrium price. 
B)  not an equilibrium price because there is an excess quantity demanded at a price of $15. 
C)  an equilibrium price because suppliers can store inventories in their warehouses. 
D)  not an equilibrium price because the quantity supplied of compact discs is greater than the quantity demanded. 
A)  an equilibrium price. 
B)  not an equilibrium price because there is an excess quantity demanded at a price of $15. 
C)  an equilibrium price because suppliers can store inventories in their warehouses. 
D)  not an equilibrium price because the quantity supplied of compact discs is greater than the quantity demanded.

Question 9

The supply curve for chicken will shift to the right,if production costs increases.

Accepted Answer

A) True 
 B)False

Question 10

Other things being equal,an increase in the price of gasoline will decrease the quantity demanded for gasoline.

Accepted Answer

A) True 
 B)False

Question 11

Exhibit 3-12 Supply and demand data
  
-In Exhibit 3-12,at a price of $2.00 the market will experience a(n):

Accepted Answer

A)  shortage of 150 units. 
B)  surplus of 100 units. 
C)  shortage of 100 units. 
D)  equilibrium. 
A)  shortage of 150 units. 
B)  surplus of 100 units. 
C)  shortage of 100 units. 
D)  equilibrium.

Question 12

Tickets to the Indiana-Purdue basketball game are usually sold out in advance of game day.This suggests:

Accepted Answer

A)  the price of the tickets must be very high or else people would not consider them valuable. 
B)  the price is set below the equilibrium level. 
C)  the Indiana basketball stadium is relatively small. 
D)  everyone who attends the game will enjoy it. 
A)  the price of the tickets must be very high or else people would not consider them valuable. 
B)  the price is set below the equilibrium level. 
C)  the Indiana basketball stadium is relatively small. 
D)  everyone who attends the game will enjoy it.

Question 13

When the market price of a product is below the equilibrium price,shortages will result and sellers can be expected to reduce the supply of that product.

Accepted Answer

A) True 
 B)False

Question 14

Exhibit 3-8 Demand and supply data for radios
  
-In Exhibit 3-8,the equilibrium market price in this radio market would be:

Accepted Answer

A)  $65 
B)  $60 
C)  $55 
D)  $50 
E)  $45 
A)  $65 
B)  $60 
C)  $55 
D)  $50 
E)  $45

Question 15

A surplus means that the quantity supplied is greater than the quantity demanded at the prevailing price.

Accepted Answer

A) True 
 B)False

Question 16

Interpret what an increase in demand and an increase in supply mean.Discuss the causes of an increase in demand and an increase in supply.How are increases in demand and supply expressed graphically?

Accepted Answer

An increase in demand means buyers will

Question 17

A shortage occurs when the quantity demanded exceeds the quantity supplied.

Accepted Answer

A) True 
 B)False

Question 18

If the market price is below the equilibrium price,then:

Accepted Answer

A)  a surplus of product will result. 
B)  the quantity supplied will exceed the quantity demanded. 
C)  the market supply curve will shift to the right. 
D)  the quantity demanded will exceed the quantity supplied. 
E)  the market demand curve will shift to the left. 
A)  a surplus of product will result. 
B)  the quantity supplied will exceed the quantity demanded. 
C)  the market supply curve will shift to the right. 
D)  the quantity demanded will exceed the quantity supplied. 
E)  the market demand curve will shift to the left.

Question 19

If renting videos is an inferior good,demand for this service will rise when consumer income falls.

Accepted Answer

A) True 
 B)False

Question 20

Suppose the market price of a good X is below the equilibrium price.The result is a shortage and sellers can be expected to decrease the quantity of that good X supplied.

Accepted Answer

A) True 
 B)False

Exam 3: Part 2: Market Demand and Supply

The most important characteristic of the equilibrium price is that it:

Exhibit 3-10 Demand and supply curves -In Exhibit 3-10,what do you expect to happen in this market at point C?

Suppose A and B are complementary goods.Other things being equal,the demand curve for A will shift to the right when the price of B goes up.

Exhibit 3-15 Supply and demand curves for good X -In Exhibit 3-15,if the price moves from $2.00 to $1.00,unsold inventories will:

Exhibit 3-8 Demand and supply data for radios -In Exhibit 3-9,if the market price is $50,

Market equilibrium occurs when the quantity supplied is greater than the quantity demanded.

Exhibit 3-8 Demand and supply data for radios -In Exhibit 3-8,at any market price of radios above $50,a(n)____ would result,causing price to ____.

Exhibit 3-14 Supply and demand curves -In Exhibit 3-14,assume that the market price of compact discs is $15 each.This price is:

The supply curve for chicken will shift to the right,if production costs increases.

Other things being equal,an increase in the price of gasoline will decrease the quantity demanded for gasoline.

Exhibit 3-12 Supply and demand data -In Exhibit 3-12,at a price of $2.00 the market will experience a(n):

Tickets to the Indiana-Purdue basketball game are usually sold out in advance of game day.This suggests:

When the market price of a product is below the equilibrium price,shortages will result and sellers can be expected to reduce the supply of that product.

Exhibit 3-8 Demand and supply data for radios -In Exhibit 3-8,the equilibrium market price in this radio market would be:

A surplus means that the quantity supplied is greater than the quantity demanded at the prevailing price.

Interpret what an increase in demand and an increase in supply mean.Discuss the causes of an increase in demand and an increase in supply.How are increases in demand and supply expressed graphically?

A shortage occurs when the quantity demanded exceeds the quantity supplied.

If the market price is below the equilibrium price,then:

If renting videos is an inferior good,demand for this service will rise when consumer income falls.

Suppose the market price of a good X is below the equilibrium price.The result is a shortage and sellers can be expected to decrease the quantity of that good X supplied.

Introducing the Economic Way of Thinking

A: Appendix: Applying Graphs to Economics

Production Possibilities,Opportunity Cost,and Economic Growth

Part 1: Market Demand and Supply

Markets in Action

Price Elasticity of Demand

Production Costs

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets and Income Distribution

Gross Domestic Product

Business Cycles and Unemployment

Inflation

Aggregate Demand and Supply

A: Appendix: The Self-Correcting Aggregate Demand and Supply Model

Fiscal Policy

The Public Sector

Federal Deficits,Surpluses,and the National Debt

Money and the Federal Reserve System

Money Creation

Monetary Policy

A: Appendix: Policy Disputes Using the Self-Correcting Aggregate Demand and Supply Model

International Trade and Finance

Economies in Transition

Growth and the Less-Developed Countries

Filters

Exhibit 3-8 Demand and supply data for radios -In Exhibit 3-8,at any market price of radios above $50,a(n) would result,causing price to .