Question 1

-In a free market, the market price and quantity in the above figure will adjust to equilibrium values of

Accepted Answer

A)  $1 per gallon and 50 million gallons. 
B)  $4 per gallon and 10 million gallons. 
C)  $2 per gallon and 60 million gallons. 
D)  $2 per gallon and 30 million gallons. 
A)  $1 per gallon and 50 million gallons. 
B)  $4 per gallon and 10 million gallons. 
C)  $2 per gallon and 60 million gallons. 
D)  $2 per gallon and 30 million gallons.

Question 2

-Refer to the above table. What is the market quantity demanded of DVDs at a price of $12?

Accepted Answer

A)  6 
B)  9 
C)  12 
D)  24 
A)  6 
B)  9 
C)  12 
D)  24

Question 3

A significant increase in the price of tennis balls will most likely lead to

Accepted Answer

A)  an increase in the demand for tennis racquets. 
B)  an inward shift in the demand for tennis balls. 
C)  a movement along the demand curve for tennis racquets. 
D)  an inward shift in the demand for tennis racquets. 
A)  an increase in the demand for tennis racquets. 
B)  an inward shift in the demand for tennis balls. 
C)  a movement along the demand curve for tennis racquets. 
D)  an inward shift in the demand for tennis racquets.

Question 4

-Refer to the above figure. The rightward shift of the curve could have been caused by

Accepted Answer

A)  a technological improvement. 
B)  a technological setback. 
C)  an increase in income. 
D)  a decrease in income. 
A)  a technological improvement. 
B)  a technological setback. 
C)  an increase in income. 
D)  a decrease in income.

Question 5

Which one of the following statements is FALSE?

Accepted Answer

A)  Generally, what matters most to consumers is what a good costs in dollars. 
B)  The relative price of a good is its price measured relative to the price of other goods. 
C)  The nominal price of a good is its price measured in current dollars. 
D)  When the price of beer goes up by the same proportion as the prices of all other goods, the relative price of beer does not change. 
A)  Generally, what matters most to consumers is what a good costs in dollars. 
B)  The relative price of a good is its price measured relative to the price of other goods. 
C)  The nominal price of a good is its price measured in current dollars. 
D)  When the price of beer goes up by the same proportion as the prices of all other goods, the relative price of beer does not change.

Question 6

-Refer to the above figure. Corn is an input for producing Corn Flakes. Which diagram shows the effect on the supply of Corn Flakes when the price of corn has increased?

Accepted Answer

A)  graph C 
B)  graph D 
C)  neither graph 
D)  both graphs 
A)  graph C 
B)  graph D 
C)  neither graph 
D)  both graphs

Question 7

Other things being equal, an increase in wages paid to workers in the steel industry will cause

Accepted Answer

A)  the quantity of steel demanded to increase. 
B)  the quantity of steel supplied to decrease. 
C)  the supply of steel to decrease. 
D)  the demand for steel to decrease. 
A)  the quantity of steel demanded to increase. 
B)  the quantity of steel supplied to decrease. 
C)  the supply of steel to decrease. 
D)  the demand for steel to decrease.

Question 8

How is the market supply curve found? In what ways is the process similar to the way the market demand curve is determined? In what ways are they different?

Accepted Answer

The market supply curve is obtained by h

Question 9

In 1950, a phone call at a pay phone cost 5 cents and a first-class stamp cost 3 cents. Today, those prices are 50 cents and 44 cents respectively. What has happened to the price of each good relative to the other? What has happened to the price of each good relative to all other goods?

Accepted Answer

The price of a phone call has decreased

Question 10

If the price of airline travel in Europe falls and the demand for train travel in Europe also falls, then the two goods are

Accepted Answer

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

Question 11

-If the market price rises from P0 to P2 in the above figure, then there is a

Accepted Answer

A)  surplus equal to the distance Q0, Q2. 
B)  surplus equal to the distance Q1, Q2. 
C)  shortage equal to the distance Q0, Q2. 
D)  shortage equal to the distance Q1, Q2. 
A)  surplus equal to the distance Q0, Q2. 
B)  surplus equal to the distance Q1, Q2. 
C)  shortage equal to the distance Q0, Q2. 
D)  shortage equal to the distance Q1, Q2.

Question 12

A market demand curve is found by

Accepted Answer

A)  adding the prices each consumer would pay for each quantity. 
B)  adding the prices and the quantities demanded by a consumer. 
C)  adding the quantities demanded for each individual consumer at each price. 
D)  taking the demand curve of the "representative" consumer. 
A)  adding the prices each consumer would pay for each quantity. 
B)  adding the prices and the quantities demanded by a consumer. 
C)  adding the quantities demanded for each individual consumer at each price. 
D)  taking the demand curve of the "representative" consumer.

Question 13

If there is a decline in the price of milk, an input in the production of ice cream, then there will be a(n)

Accepted Answer

A)  decrease in the supply of ice cream and a leftward shift of the supply curve. 
B)  decrease in the quantity of ice cream supplied and a movement up along the supply curve. 
C)  increase in the supply of ice cream and a rightward shift of the supply curve. 
D)  increase in the quantity of ice cream supplied and a movement down along the supply curve. 
A)  decrease in the supply of ice cream and a leftward shift of the supply curve. 
B)  decrease in the quantity of ice cream supplied and a movement up along the supply curve. 
C)  increase in the supply of ice cream and a rightward shift of the supply curve. 
D)  increase in the quantity of ice cream supplied and a movement down along the supply curve.

Question 14

Given a market equilibrium point, explain, using the concepts of demand and supply, how it is achieved.

Accepted Answer

Market equilibrium occurs at the point a

Question 15

Which of the following is NOT true about the equilibrium price?

Accepted Answer

A)  The price where a change in quantity supplied occurs. 
B)  The price where the demand curve intersects the supply curve. 
C)  The price where quantity demanded equals quantity supplied. 
D)  The price where there is neither excess quantity demanded or excess quantity supplied. 
A)  The price where a change in quantity supplied occurs. 
B)  The price where the demand curve intersects the supply curve. 
C)  The price where quantity demanded equals quantity supplied. 
D)  The price where there is neither excess quantity demanded or excess quantity supplied.

Question 16

-Refer to the above figure. At a price of four cents, a(n) ________ of bubble gum will exist in the market.

Accepted Answer

A)  surplus 
B)  shortage 
C)  excess quantity demanded 
D)  equilibrium quantity 
A)  surplus 
B)  shortage 
C)  excess quantity demanded 
D)  equilibrium quantity

Question 17

The arrangements that individuals have with each other to exchange goods is known as

Accepted Answer

A)  demand. 
B)  supply. 
C)  a market. 
D)  complements. 
A)  demand. 
B)  supply. 
C)  a market. 
D)  complements.

Question 18

-Refer to the above figure. At a price of $2, excess quantity demanded equals

Accepted Answer

A)  0. 
B)  3. 
C)  12. 
D)  15. 
A)  0. 
B)  3. 
C)  12. 
D)  15.

Question 19

State the law of demand and illustrate it. Explain what is meant by the term "price" in the law of demand.

Accepted Answer

The law of demand states that when the p

Question 20

An increase in the number of consumers in a market would cause

Accepted Answer

A)  an increase in quantity demanded. 
B)  an increase in quantity supplied. 
C)  an increase in demand. 
D)  an increase in supply. 
A)  an increase in quantity demanded. 
B)  an increase in quantity supplied. 
C)  an increase in demand. 
D)  an increase in supply.

Exam 3: Demand and Supply

-In a free market, the market price and quantity in the above figure will adjust to equilibrium values of

-Refer to the above table. What is the market quantity demanded of DVDs at a price of $12?

A significant increase in the price of tennis balls will most likely lead to

-Refer to the above figure. The rightward shift of the curve could have been caused by

Which one of the following statements is FALSE?

-Refer to the above figure. Corn is an input for producing Corn Flakes. Which diagram shows the effect on the supply of Corn Flakes when the price of corn has increased?

Other things being equal, an increase in wages paid to workers in the steel industry will cause

How is the market supply curve found? In what ways is the process similar to the way the market demand curve is determined? In what ways are they different?

In 1950, a phone call at a pay phone cost 5 cents and a first-class stamp cost 3 cents. Today, those prices are 50 cents and 44 cents respectively. What has happened to the price of each good relative to the other? What has happened to the price of each good relative to all other goods?

If the price of airline travel in Europe falls and the demand for train travel in Europe also falls, then the two goods are

-If the market price rises from P0 to P2 in the above figure, then there is a

A market demand curve is found by

If there is a decline in the price of milk, an input in the production of ice cream, then there will be a(n)

Given a market equilibrium point, explain, using the concepts of demand and supply, how it is achieved.

Which of the following is NOT true about the equilibrium price?

-Refer to the above figure. At a price of four cents, a(n) ________ of bubble gum will exist in the market.

The arrangements that individuals have with each other to exchange goods is known as

-Refer to the above figure. At a price of $2, excess quantity demanded equals

State the law of demand and illustrate it. Explain what is meant by the term "price" in the law of demand.

An increase in the number of consumers in a market would cause

The Nature of Economics

Scarcity and the World of Trade-Offs

Extensions of Demand and Supply Analysis

Public Spending and Public Choice

Funding the Public Sector

The Macroeconomy: Unemployment, Inflation, and Deflation

Measuring the Economys Performance

Global Economic Growth and Development

Real GDP and the Price Level in the Long Run

Classical and Keynesian Macro Analyses

Consumption, Real GDP, and the Multiplier

Fiscal Policy

Deficit Spending and the Public Debt

Money, Banking, and Central Banking

Domestic and International Dimensions of Monetary Policy

Stabilization in an Integrated World Economy

Policies and Prospects for Global Economic Growth

Demand and Supply Elasticity

Consumer Choice

Rents, Profits, and the Financial Environment of Business

The Firm: Cost and Output Determination

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Regulation and Antitrust Policy in a Globalized Economy

The Labor Market: Demand, Supply and Outsourcing

Unions and Labor Market Monopoly Power

Income, Poverty, and Health Care

Environmental Economics

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

Filters

-If the market price rises from P₀ to P₂ in the above figure, then there is a