Question 1

Distinguish the laws of demand and supply.How are the laws of demand and supply illustrated graphically?

Accepted Answer

The law of demand states that there is a

Question 2

Market equilibrium is:

Accepted Answer

A)  defined as the condition in which there is neither a shortage or surplus. 
B)  defined as the condition under which the separately formulated plans of buyers and sellers exactly mesh when tested in the market. 
C)  represented graphically by the intersection of the supply and demand curves. 
D)  all of the above. 
A)  defined as the condition in which there is neither a shortage or surplus. 
B)  defined as the condition under which the separately formulated plans of buyers and sellers exactly mesh when tested in the market. 
C)  represented graphically by the intersection of the supply and demand curves. 
D)  all of the above.

Question 3

The price system eliminates scarcity.

Accepted Answer

A) True 
 B)False

Question 4

Exhibit 3-11 Demand and supply curves
  
-In Exhibit 3-11,in Panel B the movement from A to C describes a(n):

Accepted Answer

A)  increase in demand and a decrease in supply, where the increase in demand is relatively bigger. 
B)  decrease in both demand and supply, where the decrease in supply is relatively bigger. 
C)  increase in demand and a decrease in supply, where the decrease in supply is relatively bigger. 
D)  decrease in demand and increase in supply, where the increase in supply is relatively bigger. 
E)  increase in both demand and supply, where the increase in supply is relatively bigger. 
A)  increase in demand and a decrease in supply, where the increase in demand is relatively bigger. 
B)  decrease in both demand and supply, where the decrease in supply is relatively bigger. 
C)  increase in demand and a decrease in supply, where the decrease in supply is relatively bigger. 
D)  decrease in demand and increase in supply, where the increase in supply is relatively bigger. 
E)  increase in both demand and supply, where the increase in supply is relatively bigger.

Question 5

When the price of a good is above its equilibrium price,a:

Accepted Answer

A)  surplus puts upward pressure on the price. 
B)  surplus puts downward pressure on the price. 
C)  shortage puts upward pressure on the price. 
D)  shortage puts downward pressure on the price. 
A)  surplus puts upward pressure on the price. 
B)  surplus puts downward pressure on the price. 
C)  shortage puts upward pressure on the price. 
D)  shortage puts downward pressure on the price.

Question 6

Exhibit 3-16 Supply and demand curves for chairs
  
-In Exhibit 3-16,if the market price of chairs is initially $15,a movement toward equilibrium would require:

Accepted Answer

A)  no change, because an equilibrium already exists. 
B)  the price to fall below $15 and both the quantity supplied and the quantity demanded to fall. 
C)  the price to remain the same, but the supply curve to shift to the left. 
D)  the price to fall below $15, the quantity supplied to fall, and the quantity demanded to rise. 
A)  no change, because an equilibrium already exists. 
B)  the price to fall below $15 and both the quantity supplied and the quantity demanded to fall. 
C)  the price to remain the same, but the supply curve to shift to the left. 
D)  the price to fall below $15, the quantity supplied to fall, and the quantity demanded to rise.

Question 7

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

Accepted Answer

A) True 
 B)False

Question 8

The law of supply states that an increase in supply is represented graphically as a rightward shift of the supply curve.

Accepted Answer

A) True 
 B)False

Question 9

If input prices increase,the supply curve for cheese will shift to the right.

Accepted Answer

A) True 
 B)False

Question 10

Exhibit 3-15 Supply and demand curves for good X
  
-In Exhibit 3-15,at a price of $.50 the market for good X will experience a:

Accepted Answer

A)  shortage of 100 units. 
B)  surplus of 100 units. 
C)  shortage of 300 units. 
D)  surplus of 200 units. 
A)  shortage of 100 units. 
B)  surplus of 100 units. 
C)  shortage of 300 units. 
D)  surplus of 200 units.

Question 11

Which of the following best explains the determination of the equilibrium price of a product?

Accepted Answer

A)  Production costs. 
B)  The supply of a good. 
C)  The interaction of supply and demand. 
D)  The decisions of government. 
A)  Production costs. 
B)  The supply of a good. 
C)  The interaction of supply and demand. 
D)  The decisions of government.

Question 12

Exhibit 3-10 Demand and supply curves
  
-In Exhibit 3-10,which of the following points represents an excess quantity supplied?

Accepted Answer

A)  Point E. 
B)  Point B. 
C)  Point C. 
D)  Point F. 
E)  Point A. 
A)  Point E. 
B)  Point B. 
C)  Point C. 
D)  Point F. 
E)  Point A.

Question 13

If people buy more of a generic brand when consumer income falls,it is an inferior good.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following is true about the market equilibrium?

Accepted Answer

A)  As the price increases, the quantity demanded and the quantity supplied increases. 
B)  As the price increases, the quantity demanded and the quantity supplied decreases. 
C)  As the price increases, the quantity demanded increases and the quantity supplied decreases. 
D)  As the price increases, the quantity demanded decreases and the quantity supplied increases. 
E)  As the price increases, neither the quantity demanded nor quantity supplied change. 
A)  As the price increases, the quantity demanded and the quantity supplied increases. 
B)  As the price increases, the quantity demanded and the quantity supplied decreases. 
C)  As the price increases, the quantity demanded increases and the quantity supplied decreases. 
D)  As the price increases, the quantity demanded decreases and the quantity supplied increases. 
E)  As the price increases, neither the quantity demanded nor quantity supplied change.

Question 15

Exhibit 3-15 Supply and demand curves for good X
  
-In the market shown in Exhibit 3-15,the equilibrium price and quantity of good X are:

Accepted Answer

A)  $0.50, 250. 
B)  $2.00, 300. 
C)  $2.00, 100. 
D)  $1.00, 200. 
A)  $0.50, 250. 
B)  $2.00, 300. 
C)  $2.00, 100. 
D)  $1.00, 200.

Question 16

Equilibrium in a market exists when there is neither a surplus nor a shortage of the item.

Accepted Answer

A) True 
 B)False

Question 17

All of the following apply to the description of a market in equilibrium except:

Accepted Answer

A)  quantity supplied equals quantity demanded. 
B)  the intersection of the supply and demand curves. 
C)  no excess supply exists. 
D)  no excess demand exists. 
E)  the price of the good is falling. 
A)  quantity supplied equals quantity demanded. 
B)  the intersection of the supply and demand curves. 
C)  no excess supply exists. 
D)  no excess demand exists. 
E)  the price of the good is falling.

Question 18

Exhibit 3-13 Supply and demand curves
  
-Which of the graphs in Exhibit 3-13 illustrates a shortage exists at the indicated market price?

Accepted Answer

A)  Diagram A. 
B)  Diagram B. 
C)  Diagram C. 
D)  Diagrams A and B. 
A)  Diagram A. 
B)  Diagram B. 
C)  Diagram C. 
D)  Diagrams A and B.

Question 19

In economics,the term "shortage" means that the quantity demanded is greater than the quantity supplied at the existing price.

Accepted Answer

A) True 
 B)False

Question 20

Excess quantity demanded for a good creates pressure to push the price of that good down toward the equilibrium price.

Accepted Answer

A) True 
 B)False

Exam 3: Part 2: Market Demand and Supply

Distinguish the laws of demand and supply.How are the laws of demand and supply illustrated graphically?

Market equilibrium is:

The price system eliminates scarcity.

Exhibit 3-11 Demand and supply curves -In Exhibit 3-11,in Panel B the movement from A to C describes a(n):

When the price of a good is above its equilibrium price,a:

Exhibit 3-16 Supply and demand curves for chairs -In Exhibit 3-16,if the market price of chairs is initially $15,a movement toward equilibrium would require:

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

The law of supply states that an increase in supply is represented graphically as a rightward shift of the supply curve.

If input prices increase,the supply curve for cheese will shift to the right.

Exhibit 3-15 Supply and demand curves for good X -In Exhibit 3-15,at a price of $.50 the market for good X will experience a:

Which of the following best explains the determination of the equilibrium price of a product?

Exhibit 3-10 Demand and supply curves -In Exhibit 3-10,which of the following points represents an excess quantity supplied?

If people buy more of a generic brand when consumer income falls,it is an inferior good.

Which of the following is true about the market equilibrium?

Exhibit 3-15 Supply and demand curves for good X -In the market shown in Exhibit 3-15,the equilibrium price and quantity of good X are:

Equilibrium in a market exists when there is neither a surplus nor a shortage of the item.

All of the following apply to the description of a market in equilibrium except:

Exhibit 3-13 Supply and demand curves -Which of the graphs in Exhibit 3-13 illustrates a shortage exists at the indicated market price?

In economics,the term "shortage" means that the quantity demanded is greater than the quantity supplied at the existing price.

Excess quantity demanded for a good creates pressure to push the price of that good down toward the equilibrium price.

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

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