Question 1

Suppose that the price of doughnuts decreases. Given that doughnut holes are a by-product of producing doughnuts, one would expect:

Accepted Answer

A) the supply of doughnut holes to decrease. 
B) the supply of doughnuts to decrease. 
C) the supply of doughnut holes to increase. 
D) the supply of doughnuts to increase. 
A) the supply of doughnut holes to decrease. 
B) the supply of doughnuts to decrease. 
C) the supply of doughnut holes to increase. 
D) the supply of doughnuts to increase.

Question 2

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

Accepted Answer

A) the market will be in equilibrium. 
B) there will be an excess demand of 95 units. 
C) there will be an excess supply of 45 units. 
D) there will be an excess demand of 45 units. 
A) the market will be in equilibrium. 
B) there will be an excess demand of 95 units. 
C) there will be an excess supply of 45 units. 
D) there will be an excess demand of 45 units.

Question 3

To understand how the price of a good is determined in a free market, one must account for the desires of:

Accepted Answer

A) buyers. 
B) sellers. 
C) governmental agencies. 
D) buyers and sellers. 
A) buyers. 
B) sellers. 
C) governmental agencies. 
D) buyers and sellers.

Question 4

An increase in the quantity of tea demanded occurs if:

Accepted Answer

A) the population of tea drinkers grows. 
B) the price of coffee rises. 
C) the income of tea drinkers increases. 
D) the price of the tea falls. 
A) the population of tea drinkers grows. 
B) the price of coffee rises. 
C) the income of tea drinkers increases. 
D) the price of the tea falls.

Question 5

Suppose that the technology used to manufacture laptops has improved. The likely result would be:

Accepted Answer

A) an increase in supply of laptops. 
B) an increase in quantity supplied of laptops. 
C) a decrease in supply of laptops. 
D) a decrease in quantity supplied of laptops. 
A) an increase in supply of laptops. 
B) an increase in quantity supplied of laptops. 
C) a decrease in supply of laptops. 
D) a decrease in quantity supplied of laptops.

Question 6

If the demand for cucumbers falls when the price of tomatoes rises, then we know that tomatoes and cucumbers are:

Accepted Answer

A) substitutes. 
B) complements. 
C) inferior goods. 
D) normal goods. 
A) substitutes. 
B) complements. 
C) inferior goods. 
D) normal goods.

Question 7

If the demand for computers increases as consumers' incomes rise, then computers are:

Accepted Answer

A) an inferior good. 
B) a complementary good. 
C) a normal good. 
D) a substitute good. 
A) an inferior good. 
B) a complementary good. 
C) a normal good. 
D) a substitute good.

Question 8

As the price of a good rises:

Accepted Answer

A) firms generally decrease the supply of the good. 
B) more firms can cover their opportunity cost of producing the good. 
C) firms generally increase the supply of the good. 
D) government regulation becomes more justified. 
A) firms generally decrease the supply of the good. 
B) more firms can cover their opportunity cost of producing the good. 
C) firms generally increase the supply of the good. 
D) government regulation becomes more justified.

Question 9

After the price of Revlon nail polish increased, Jen stopped buying Revlon nail polish and started buying a cheaper brand of nail polish instead. This is called:

Accepted Answer

A) the substitution effect of a price change. 
B) the income effect of a price change. 
C) a decrease in the buyer's reservation price. 
D) a decrease in the seller's reservation price. 
A) the substitution effect of a price change. 
B) the income effect of a price change. 
C) a decrease in the buyer's reservation price. 
D) a decrease in the seller's reservation price.

Question 10

An increase in the demand for GM automobiles results in:

Accepted Answer

A) a lower equilibrium price for GM automobiles. 
B) an increase in the quantity supplied of GM automobiles. 
C) an increase in the supply of GM automobiles. 
D) a lower equilibrium quantity of GM automobiles. 
A) a lower equilibrium price for GM automobiles. 
B) an increase in the quantity supplied of GM automobiles. 
C) an increase in the supply of GM automobiles. 
D) a lower equilibrium quantity of GM automobiles.

Question 11

A price ceiling that is set above the equilibrium price:

Accepted Answer

A) will lead to a black market. 
B) will have no effect on the market. 
C) will lead to excess supply in the market. 
D) will lead to excess demand in the market. 
A) will lead to a black market. 
B) will have no effect on the market. 
C) will lead to excess supply in the market. 
D) will lead to excess demand in the market.

Question 12

Which of the following is likely to lead to a decrease in the demand for tennis balls?

Accepted Answer

A) An increase in the price of the rubber used to make tennis balls. 
B) An increase in the price of tennis balls. 
C) An increase in the price of tennis racquets. 
D) An increase in the expected future price of tennis balls. 
A) An increase in the price of the rubber used to make tennis balls. 
B) An increase in the price of tennis balls. 
C) An increase in the price of tennis racquets. 
D) An increase in the expected future price of tennis balls.

Question 13

When two people agree to a price in a negotiation, we can assume that:

Accepted Answer

A) each one will receive equal benefits from the transaction. 
B) the seller will receive more benefit from the transaction than the buyer. 
C) only one of the parties will benefit, but there is not enough information to determine which one it will be. 
D) both parties will benefit. 
A) each one will receive equal benefits from the transaction. 
B) the seller will receive more benefit from the transaction than the buyer. 
C) only one of the parties will benefit, but there is not enough information to determine which one it will be. 
D) both parties will benefit.

Question 14

The buyer's reservation price for a particular good or service is the:

Accepted Answer

A) smallest price the buyer would be willing to pay for it. 
B) same as the market price. 
C) largest price the buyer would be willing to pay for it. 
D) price the buyer must pay to ensure he or she gets it. 
A) smallest price the buyer would be willing to pay for it. 
B) same as the market price. 
C) largest price the buyer would be willing to pay for it. 
D) price the buyer must pay to ensure he or she gets it.

Question 15

"All else constant, consumers will purchase more of a good as the price falls." This statement reflects the behavior underlying:

Accepted Answer

A) the demand curve. 
B) a change in demand. 
C) the supply curve. 
D) a change in supply. 
A) the demand curve. 
B) a change in demand. 
C) the supply curve. 
D) a change in supply.

Question 16

Suppose the residents of Metropolis travel to work either by bus or train. If the price of train tickets increases, then:

Accepted Answer

A) the demand for train tickets will increase. 
B) the demand for bus tickets will increase. 
C) the demand for train tickets will decrease. 
D) the demand for bus tickets will decrease. 
A) the demand for train tickets will increase. 
B) the demand for bus tickets will increase. 
C) the demand for train tickets will decrease. 
D) the demand for bus tickets will decrease.

Question 17

Refer to the accompanying figure, which shows the market for cups of coffee. What might cause a shift from the original supply curve to the new supply curve?

Accepted Answer

A) A storm that wipes out a large part of the coffee crop 
B) A new technology that reduces amount of coffee beans needed to make a good cup of coffee 
C) A news report that coffee consumption increases longevity 
D) An increase in the price of tea 
A) A storm that wipes out a large part of the coffee crop 
B) A new technology that reduces amount of coffee beans needed to make a good cup of coffee 
C) A news report that coffee consumption increases longevity 
D) An increase in the price of tea

Question 18

If there are no unexploited opportunities for individuals in a particular market, then one can conclude that:

Accepted Answer

A) government regulation has been successful. 
B) the market is in equilibrium. 
C) the market is not in equilibrium. 
D) a socially optimal outcome has been achieved. 
A) government regulation has been successful. 
B) the market is in equilibrium. 
C) the market is not in equilibrium. 
D) a socially optimal outcome has been achieved.

Question 19

Refer to the accompanying figure. An increase in supply 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 C to curve B. 
A) curve A to curve B. 
B) curve B to curve A. 
C) curve C to curve D. 
D) curve C to curve B.

Question 20

The situation described in the book as "smart for one, dumb for all" occurs when:

Accepted Answer

A) individuals act rationally, so there are no unexploited opportunities for society as a whole. 
B) individuals act rationally, but there are still unexploited opportunities for society as a whole. 
C) individuals make better decisions when they are alone than when they are part of a group. 
D) individuals make better decisions when they are part of a group than when they are alone. 
A) individuals act rationally, so there are no unexploited opportunities for society as a whole. 
B) individuals act rationally, but there are still unexploited opportunities for society as a whole. 
C) individuals make better decisions when they are alone than when they are part of a group. 
D) individuals make better decisions when they are part of a group than when they are alone.

Exam 3: Supply and Demand

Suppose that the price of doughnuts decreases. Given that doughnut holes are a by-product of producing doughnuts, one would expect:

Refer to the given table. Suppose the columns in this table reflect demand and supply. At a price of $30: 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

To understand how the price of a good is determined in a free market, one must account for the desires of:

An increase in the quantity of tea demanded occurs if:

Suppose that the technology used to manufacture laptops has improved. The likely result would be:

If the demand for cucumbers falls when the price of tomatoes rises, then we know that tomatoes and cucumbers are:

If the demand for computers increases as consumers' incomes rise, then computers are:

As the price of a good rises:

After the price of Revlon nail polish increased, Jen stopped buying Revlon nail polish and started buying a cheaper brand of nail polish instead. This is called:

An increase in the demand for GM automobiles results in:

A price ceiling that is set above the equilibrium price:

Which of the following is likely to lead to a decrease in the demand for tennis balls?

When two people agree to a price in a negotiation, we can assume that:

The buyer's reservation price for a particular good or service is the:

"All else constant, consumers will purchase more of a good as the price falls." This statement reflects the behavior underlying:

Suppose the residents of Metropolis travel to work either by bus or train. If the price of train tickets increases, then:

Refer to the accompanying figure, which shows the market for cups of coffee. What might cause a shift from the original supply curve to the new supply curve?

If there are no unexploited opportunities for individuals in a particular market, then one can conclude that:

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

The situation described in the book as "smart for one, dumb for all" occurs when:

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

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