Question 1

Black markets are associated with

Accepted Answer

A)  price floors and the resulting product surpluses. 
B)  price floors and the resulting product shortages. 
C)  ceiling prices and the resulting product shortages. 
D)  ceiling prices and the resulting product surpluses. 
A)  price floors and the resulting product surpluses. 
B)  price floors and the resulting product shortages. 
C)  ceiling prices and the resulting product shortages. 
D)  ceiling prices and the resulting product surpluses. C

Question 2

The law of demand states that, other things equal,

Accepted Answer

A)  price and quantity demanded are inversely related. 
B)  the larger the number of buyers in a market, the lower will be product price. 
C)  price and quantity demanded are directly related. 
D)  consumers will buy more of a product at high prices than at low prices. 
A)  price and quantity demanded are inversely related. 
B)  the larger the number of buyers in a market, the lower will be product price. 
C)  price and quantity demanded are directly related. 
D)  consumers will buy more of a product at high prices than at low prices. A

Question 3

An increase in product price will cause

Accepted Answer

A)  quantity demanded to decrease. 
B)  quantity supplied to decrease. 
C)  quantity demanded to increase. 
D)  the supply curve to shift to the left. 
A)  quantity demanded to decrease. 
B)  quantity supplied to decrease. 
C)  quantity demanded to increase. 
D)  the supply curve to shift to the left. A

Question 4

Sometimes, we observe cases where the price of a product rose and the quantity bought by buyers also increased. Such cases occur due to a violation of the

Accepted Answer

A)  Law of Demand. 
B)  Law of Supply. 
C)  allocative efficiency rule. 
D)  ceteris paribus assumption. 
A)  Law of Demand. 
B)  Law of Supply. 
C)  allocative efficiency rule. 
D)  ceteris paribus assumption.

Question 5

Productive efficiency refers to

Accepted Answer

A)  the use of the least-cost method of production. 
B)  the production of the product mix most wanted by society. 
C)  the full employment of all available resources. 
D)  production at some point inside of the production possibilities curve. 
A)  the use of the least-cost method of production. 
B)  the production of the product mix most wanted by society. 
C)  the full employment of all available resources. 
D)  production at some point inside of the production possibilities curve.

Question 6

The law of supply states that, ceteris paribus, if the price of loans (known as "interest rate") rises then the quantity supplied of loans will increase.

Accepted Answer

A) True 
 B)False

Question 7

Allocative efficiency refers to

Accepted Answer

A)  the use of the least-cost method of production. 
B)  the production of the product mix most wanted by society. 
C)  the full employment of all available resources. 
D)  production at some point inside of the production possibilities curve. 
A)  the use of the least-cost method of production. 
B)  the production of the product mix most wanted by society. 
C)  the full employment of all available resources. 
D)  production at some point inside of the production possibilities curve.

Question 8

(Advanced analysis) The demand for commodity X is represented by the equation P = 10 - 0.2Q and supply by the equation P = 2 + 0.2Q. If demand changes from P = 10 - .2Q to P = 7 - .3Q, the new equilibrium price is

Accepted Answer

A)  $2. 
B)  $4. 
C)  $6. 
D)  $7. 
A)  $2. 
B)  $4. 
C)  $6. 
D)  $7.

Question 9

An inferior good is

Accepted Answer

A)  one whose demand curve will shift rightward as incomes rise. 
B)  one whose price and quantity demanded vary directly. 
C)  one that has not been approved by the Federal Food and Drug Administration. 
D)  not accurately defined by any of these statements. 
A)  one whose demand curve will shift rightward as incomes rise. 
B)  one whose price and quantity demanded vary directly. 
C)  one that has not been approved by the Federal Food and Drug Administration. 
D)  not accurately defined by any of these statements.

Question 10

If the price of product L increases, the demand curve for close-substitute product J will

Accepted Answer

A)  shift downward toward the horizontal axis. 
B)  shift to the left. 
C)  shift to the right. 
D)  remain unchanged. 
A)  shift downward toward the horizontal axis. 
B)  shift to the left. 
C)  shift to the right. 
D)  remain unchanged.

Question 11

When the price of oil declines significantly, the price of gasoline also declines. The latter occurs because of a(n)

Accepted Answer

A)  increase in the demand for gasoline. 
B)  decrease in the demand for gasoline. 
C)  increase in the supply of gasoline. 
D)  decrease in the supply of gasoline. 
A)  increase in the demand for gasoline. 
B)  decrease in the demand for gasoline. 
C)  increase in the supply of gasoline. 
D)  decrease in the supply of gasoline.

Question 12

In the diagrams below, the subscript "1" refers to the initial position of the curve, while the subscript "2" refers to the final position after the curve shifts.   Which diagram illustrates the effect on the natural-gas market of the widespread use of "fracking," or hydraulic fracturing, by gas-drilling companies?

Accepted Answer

A)  A 
B)  B 
C)  C 
D)  D 
A)  A 
B)  B 
C)  C 
D)  D

Question 13

The graph below shows the market for tickets to a "Final Four" sports event. Assume that there is only one kind of ticket to the event.   Given this market, if the event organizers pre-set the price at $20, then this action would result in a

Accepted Answer

A)  shortage of 5,000 units. 
B)  shortage of 55,000 units. 
C)  surplus of 5,000 units. 
D)  surplus of 50,000 units. 
A)  shortage of 5,000 units. 
B)  shortage of 55,000 units. 
C)  surplus of 5,000 units. 
D)  surplus of 50,000 units.

Question 14

One reason that the quantity demanded of a good increases when its price falls is that the

Accepted Answer

A)  price decline shifts the supply curve to the left. 
B)  lower price shifts the demand curve to the left. 
C)  lower price shifts the demand curve to the right. 
D)  lower price increases the real incomes of buyers, enabling them to buy more. 
A)  price decline shifts the supply curve to the left. 
B)  lower price shifts the demand curve to the left. 
C)  lower price shifts the demand curve to the right. 
D)  lower price increases the real incomes of buyers, enabling them to buy more.

Question 15

If two goods are complements,

Accepted Answer

A)  they are consumed independently. 
B)  an increase in the price of one will increase the demand for the other. 
C)  a decrease in the price of one will increase the demand for the other. 
D)  they are necessarily inferior goods. 
A)  they are consumed independently. 
B)  an increase in the price of one will increase the demand for the other. 
C)  a decrease in the price of one will increase the demand for the other. 
D)  they are necessarily inferior goods.

Question 16

An increase in the price of product B leads to an increase in the demand for product C This indicates that products B and C are

Accepted Answer

A)  complementary goods. 
B)  substitute goods. 
C)  inferior goods. 
D)  normal goods. 
A)  complementary goods. 
B)  substitute goods. 
C)  inferior goods. 
D)  normal goods.

Question 17

If we observe the price of a good in a competitive market rising, then we can conclude that there had been a shortage in the market.

Accepted Answer

A) True 
 B)False

Question 18

A government subsidy per unit of output increases supply.

Accepted Answer

A) True 
 B)False

Question 19

(Advanced analysis) The demand for commodity X is represented by the equation P = 100 - 2Q and supply by the equation P = 10 + 4Q. The equilibrium price is

Accepted Answer

A)  $50. 
B)  $70. 
C)  $80. 
D)  $130. 
A)  $50. 
B)  $70. 
C)  $80. 
D)  $130.

Question 20

A recent study found that an increase in the federal tax on beer (which would increase the price of beer) would reduce the demand for marijuana. Based on this information we can conclude that

Accepted Answer

A)  beer and marijuana are substitute goods. 
B)  beer and marijuana are complementary goods. 
C)  beer is an inferior good. 
D)  marijuana is an inferior good. 
A)  beer and marijuana are substitute goods. 
B)  beer and marijuana are complementary goods. 
C)  beer is an inferior good. 
D)  marijuana is an inferior good.

Exam 3: Demand, Supply, and Market Equilibrium

Black markets are associated with

The law of demand states that, other things equal,

An increase in product price will cause

Sometimes, we observe cases where the price of a product rose and the quantity bought by buyers also increased. Such cases occur due to a violation of the

Productive efficiency refers to

The law of supply states that, ceteris paribus, if the price of loans (known as "interest rate") rises then the quantity supplied of loans will increase.

Allocative efficiency refers to

(Advanced analysis) The demand for commodity X is represented by the equation P = 10 - 0.2Q and supply by the equation P = 2 + 0.2Q. If demand changes from P = 10 - .2Q to P = 7 - .3Q, the new equilibrium price is

An inferior good is

If the price of product L increases, the demand curve for close-substitute product J will

When the price of oil declines significantly, the price of gasoline also declines. The latter occurs because of a(n)

The graph below shows the market for tickets to a "Final Four" sports event. Assume that there is only one kind of ticket to the event. Given this market, if the event organizers pre-set the price at $20, then this action would result in a

One reason that the quantity demanded of a good increases when its price falls is that the

If two goods are complements,

An increase in the price of product B leads to an increase in the demand for product C This indicates that products B and C are

If we observe the price of a good in a competitive market rising, then we can conclude that there had been a shortage in the market.

A government subsidy per unit of output increases supply.

(Advanced analysis) The demand for commodity X is represented by the equation P = 100 - 2Q and supply by the equation P = 10 + 4Q. The equilibrium price is

A recent study found that an increase in the federal tax on beer (which would increase the price of beer) would reduce the demand for marijuana. Based on this information we can conclude that

Limits, Alternatives, and Choices

The Market System and the Circular Flow

Market Failures: Public Goods and Externalities

Governments Role and Government Failure

Elasticity

Utility Maximization

Behavioral Economics

Businesses and the Costs of Production

Pure Competition in the Short Run

Pure Competition in the Long Run

Pure Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Technology, Rd, and Efficiency

The Demand for Resources

Wage Determination

Rent, Interest, and Profit

Natural Resource and Energy Economics

Public Finance: Expenditures and Taxes

Antitrust Policy and Regulation

Agriculture: Economics and Policy

Income Inequality, Poverty, and Discrimination

Health Care

Immigration

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

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