Question 1

Assume consumers eat either rice or pasta for dinner every night. If the price of rice increases, then one would expect to see:

Accepted Answer

A) an increase in the quantity of pasta demanded. 
B) an increase in the demand for pasta. 
C) a decrease in the quantity of pasta demanded. 
D) a decrease in the demand for pasta. 
A) an increase in the quantity of pasta demanded. 
B) an increase in the demand for pasta. 
C) a decrease in the quantity of pasta demanded. 
D) a decrease in the demand for pasta.

Question 2

Assume both the demand for bagels and the supply of bagels increase. Which of the following outcomes is certain to occur?

Accepted Answer

A) The equilibrium price of bagels will rise. 
B) The equilibrium quantity of bagels will rise. 
C) The equilibrium price of bagels will fall. 
D) The equilibrium quantity of bagels will fall. 
A) The equilibrium price of bagels will rise. 
B) The equilibrium quantity of bagels will rise. 
C) The equilibrium price of bagels will fall. 
D) The equilibrium quantity of bagels will fall.

Question 3

The Equilibrium Principle asserts that in a market equilibrium:

Accepted Answer

A) no unexploited opportunities exist for society. 
B) unexploited opportunities exist for individuals but not for society. 
C) unexploited opportunities exist for both individuals and society. 
D) no unexploited opportunities exist for individuals. 
A) no unexploited opportunities exist for society. 
B) unexploited opportunities exist for individuals but not for society. 
C) unexploited opportunities exist for both individuals and society. 
D) no unexploited opportunities exist for individuals.

Question 4

Refer to the given table. The equilibrium price in this market is: $$\begin{array} { | r | r | r | } 
\hline \text { Price Per Unit } & \text { Columu A Units Per Year } & \text { Colum B Units Per Year } \
\hline \$ 20 & 100 & 40 \
\hline \$ 30 & 95 & 50 \
\hline \$ 40 & 80 & 60 \
\hline \$ 50 & 65 & 70 \
\hline \$ 60 & 50 & \mathbf { 8 0 } \
\hline
\end{array}$$

Accepted Answer

A) between $20 and $30. 
B) between $30 and $40. 
C) between $40 and $50. 
D) nonexistent. 
A) between $20 and $30. 
B) between $30 and $40. 
C) between $40 and $50. 
D) nonexistent.

Question 5

Refer to the accompanying figure. An increase in demand is represented by a shift from:

Accepted Answer

A) curve A to curve B. 
B) curve B to curve A. 
C) curve C to curve D. 
D) curve D to curve C. 
A) curve A to curve B. 
B) curve B to curve A. 
C) curve C to curve D. 
D) curve D to curve C.

Question 6

If supply and demand both increase, the new equilibrium price will be ________ and the new equilibrium quantity will be ________.

Accepted Answer

A) lower; lower 
B) lower; uncertain 
C) uncertain; higher 
D) higher; higher 
A) lower; lower 
B) lower; uncertain 
C) uncertain; higher 
D) higher; higher

Question 7

Refer to the accompanying figure, which shows the market for cups of coffee. Consider the original supply and the original demand curve. If the government imposes a price ceiling of $1.00 on a cup of coffee, then there would be:

Accepted Answer

A) a short-term excess demand for coffee, followed by an increase in the equilibrium price. 
B) an excess supply of coffee. 
C) an excess demand for coffee. 
D) a new equilibrium at a price of $1.00 per cup and a quantity of 50 cups per hour. 
A) a short-term excess demand for coffee, followed by an increase in the equilibrium price. 
B) an excess supply of coffee. 
C) an excess demand for coffee. 
D) a new equilibrium at a price of $1.00 per cup and a quantity of 50 cups per hour.

Question 8

Assume that Joe is willing to produce a hamburger for $1, and Mary is willing to pay $3 for a hamburger. Which of the following is true?

Accepted Answer

A) Joe and Mary can make a mutually beneficial exchange. 
B) Joe and Mary cannot make a mutually beneficial exchange. 
C) Joe and Mary will not trade in equilibrium. 
D) Joe and Mary will only trade if the equilibrium price is less than $1. 
A) Joe and Mary can make a mutually beneficial exchange. 
B) Joe and Mary cannot make a mutually beneficial exchange. 
C) Joe and Mary will not trade in equilibrium. 
D) Joe and Mary will only trade if the equilibrium price is less than $1.

Question 9

Which of the following factors will lead to a decrease in the current supply of a good?

Accepted Answer

A) A fall in the current price of a good or service 
B) A technological advance that decreases production costs 
C) A decrease in the price of inputs to the production process 
D) A belief that the price of a good or service will go up in the future 
A) A fall in the current price of a good or service 
B) A technological advance that decreases production costs 
C) A decrease in the price of inputs to the production process 
D) A belief that the price of a good or service will go up in the future

Question 10

Suppose we observe an increase in both the equilibrium price and quantity of bread. This is best explained by:

Accepted Answer

A) an increase in the cost of flour used in the production of bread. 
B) a technological advance that lowers the marginal cost of producing bread. 
C) a decrease in the price of butter, a complement to bread. 
D) a decrease in the price of pasta, a substitute to bread. 
A) an increase in the cost of flour used in the production of bread. 
B) a technological advance that lowers the marginal cost of producing bread. 
C) a decrease in the price of butter, a complement to bread. 
D) a decrease in the price of pasta, a substitute to bread.

Question 11

In a free market, if the price of a good is below the equilibrium price, then;

Accepted Answer

A) the government will set a higher price to reestablish the market equilibrium. 
B) sellers, dissatisfied with growing inventories, will raise their prices. 
C) buyers, hoping to ensure they acquire the good, will bid the price higher. 
D) sellers, dissatisfied with growing inventories, will lower their prices. 
A) the government will set a higher price to reestablish the market equilibrium. 
B) sellers, dissatisfied with growing inventories, will raise their prices. 
C) buyers, hoping to ensure they acquire the good, will bid the price higher. 
D) sellers, dissatisfied with growing inventories, will lower their prices.

Question 12

Refer to the given table. Suppose the columns in this table reflect demand and supply. At a price of $50: $$\begin{array} { | r | r | r | } 
\hline \text { Price Per Unit } & \text { Columu A Units Per Year } & \text { Colum B Units Per Year } \
\hline \$ 20 & 100 & 40 \
\hline \$ 30 & 95 & 50 \
\hline \$ 40 & 80 & 60 \
\hline \$ 50 & 65 & 70 \
\hline \$ 60 & 50 & \mathbf { 8 0 } \
\hline
\end{array}$$

Accepted Answer

A) the market will be in equilibrium. 
B) there will be an excess demand of 5 units. 
C) there will be an excess supply of 70 units. 
D) there will be an excess supply of 5 units. 
A) the market will be in equilibrium. 
B) there will be an excess demand of 5 units. 
C) there will be an excess supply of 70 units. 
D) there will be an excess supply of 5 units.

Question 13

Office workers and word processing programs are complements if:

Accepted Answer

A) an increase in the price of word processing programs leads to an increase in the demand for office workers. 
B) a decrease in the wage paid to office workers leads to an increase in the demand for word processing programs. 
C) they perform similar functions. 
D) a decrease in the wage paid to office workers leads to a leftward shift in the demand for word processing programs. 
A) an increase in the price of word processing programs leads to an increase in the demand for office workers. 
B) a decrease in the wage paid to office workers leads to an increase in the demand for word processing programs. 
C) they perform similar functions. 
D) a decrease in the wage paid to office workers leads to a leftward shift in the demand for word processing programs.

Question 14

When a market is in equilibrium:

Accepted Answer

A) there is either excess demand or excess supply. 
B) both excess demand and excess supply are positive. 
C) both excess demand and excess supply are positive and equal to each other. 
D) there is neither excess demand nor excess supply. 
A) there is either excess demand or excess supply. 
B) both excess demand and excess supply are positive. 
C) both excess demand and excess supply are positive and equal to each other. 
D) there is neither excess demand nor excess supply.

Question 15

Jessica's marginal cost for producing a pitcher of lemonade is $0.25. Therefore, $0.25 is her:

Accepted Answer

A) marginal revenue. 
B) equilibrium price. 
C) reservation price. 
D) producers surplus. 
A) marginal revenue. 
B) equilibrium price. 
C) reservation price. 
D) producers surplus.

Question 16

Suppose that Tom bought a bike from Helen for $195. If Helen's reservation price was $185, and Tom's reservation price was $215, the total economic surplus from this transaction was:

Accepted Answer

A) $30 
B) $185 
C) $195 
D) $215 
A) $30 
B) $185 
C) $195 
D) $215

Question 17

If the supply curve and the demand curve both shift to the left, then the new equilibrium:

Accepted Answer

A) quantity will be higher, but the direction of the price change is uncertain. 
B) price will be lower, but the direction of the change in quantity is uncertain. 
C) price will be higher, but the direction of the change in quantity is uncertain. 
D) quantity will be lower, but the direction of the price change is uncertain. 
A) quantity will be higher, but the direction of the price change is uncertain. 
B) price will be lower, but the direction of the change in quantity is uncertain. 
C) price will be higher, but the direction of the change in quantity is uncertain. 
D) quantity will be lower, but the direction of the price change is uncertain.

Question 18

The tendency of markets to automatically gravitate toward equilibrium is an application of the:

Accepted Answer

A) Scarcity Principle. 
B) Cost-Benefit Principle. 
C) Principle of Comparative Advantage. 
D) Incentive Principle. 
A) Scarcity Principle. 
B) Cost-Benefit Principle. 
C) Principle of Comparative Advantage. 
D) Incentive Principle.

Question 19

Suppose that the equilibrium price of T-shirts increases and the equilibrium quantity of T-shirts decreases. This is best explained by:

Accepted Answer

A) an increase in the demand for T-shirts. 
B) a decrease in the supply of T-shirts. 
C) an increase in the supply of T-shirts. 
D) a decrease in the demand for T-shirts. 
A) an increase in the demand for T-shirts. 
B) a decrease in the supply of T-shirts. 
C) an increase in the supply of T-shirts. 
D) a decrease in the demand for T-shirts.

Question 20

"As the price of personal computers continues to fall, demand increases." This headline is inaccurate because:

Accepted Answer

A) a change in the price of personal computers shifts the demand curve. 
B) a change in the price of personal computers shifts the supply curve. 
C) the statement is backwards: increased demand leads to lower prices. 
D) a falling price of personal computers increases the quantity demanded, not demand. 
A) a change in the price of personal computers shifts the demand curve. 
B) a change in the price of personal computers shifts the supply curve. 
C) the statement is backwards: increased demand leads to lower prices. 
D) a falling price of personal computers increases the quantity demanded, not demand.

Exam 3: Supply and Demand

Assume consumers eat either rice or pasta for dinner every night. If the price of rice increases, then one would expect to see:

Assume both the demand for bagels and the supply of bagels increase. Which of the following outcomes is certain to occur?

The Equilibrium Principle asserts that in a market equilibrium:

Refer to the given table. The equilibrium price in this market is: Price Per Unit Columu A Units Per Year Colum B Units Per Year \ 20 100 40 \ 30 95 50 \ 40 80 60 \ 50 65 70 \ 60 50

Refer to the accompanying figure. An increase in demand is represented by a shift from:

If supply and demand both increase, the new equilibrium price will be ________ and the new equilibrium quantity will be ________.

Refer to the accompanying figure, which shows the market for cups of coffee. Consider the original supply and the original demand curve. If the government imposes a price ceiling of $1.00 on a cup of coffee, then there would be:

Assume that Joe is willing to produce a hamburger for $1, and Mary is willing to pay $3 for a hamburger. Which of the following is true?

Which of the following factors will lead to a decrease in the current supply of a good?

Suppose we observe an increase in both the equilibrium price and quantity of bread. This is best explained by:

In a free market, if the price of a good is below the equilibrium price, then;

Refer to the given table. Suppose the columns in this table reflect demand and supply. At a price of $50: Price Per Unit Columu A Units Per Year Colum B Units Per Year \ 20 100 40 \ 30 95 50 \ 40 80 60 \ 50 65 70 \ 60 50

Office workers and word processing programs are complements if:

When a market is in equilibrium:

Jessica's marginal cost for producing a pitcher of lemonade is $0.25. Therefore, $0.25 is her:

Suppose that Tom bought a bike from Helen for $195. If Helen's reservation price was $185, and Tom's reservation price was $215, the total economic surplus from this transaction was:

If the supply curve and the demand curve both shift to the left, then the new equilibrium:

The tendency of markets to automatically gravitate toward equilibrium is an application of the:

Suppose that the equilibrium price of T-shirts increases and the equilibrium quantity of T-shirts decreases. This is best explained by:

"As the price of personal computers continues to fall, demand increases." This headline is inaccurate because:

Thinking Like an Economist

Comparative Advantage

Elasticity

Demand

Perfectly Competitive Supply

Efficiency, Exchange, and the Invisible Hand in Action

Monopoly, Oligopoly, and Monopolistic Competition

Games and Strategic Behavior

An Introduction to Behavioral Economics

Externalities, Property Rights, and the Environment

The Economics of Information

Labor Markets, Poverty, and Income Distribution

Public Goods and Tax Policy

International Trade and Trade Policy

Macroeconomics: The Birds Eye View of the Economy

Measuring Economic Activity: GDP and Unemployment

Measuring the Price Level and Inflation

Economic Growth, Productivity, and Living Standards

The Labor Market: Workers, Wages, and Unemployment

Saving and Capital Formation

Money Prices and the Federal Reserve

Financial Markets and International Capital Flows

Short-Term Economic Fluctuations: An Introduction

Spending and Output in the Short Run

Stabilizing the Economy: The Role of the Fed

Aggregate Demand, Aggregate Supply, and Inflation

Exchange Rates and the Open Economy

Filters

If supply and demand both increase, the new equilibrium price will be and the new equilibrium quantity will be .