Question 1

In order to derive a market demand curve from individuals' demand curves, we add up the

Accepted Answer

A)  various individuals' quantities demanded at each price level. 
B)  various prices that each buyer is willing and able to pay. 
C)  incomes of all buyers, assuming that their tastes remain constant. 
D)  total number of buyers in the market at each time period. 
A)  various individuals' quantities demanded at each price level. 
B)  various prices that each buyer is willing and able to pay. 
C)  incomes of all buyers, assuming that their tastes remain constant. 
D)  total number of buyers in the market at each time period.

Question 2

A leftward shift of the supply curve for oil in the United States is most likely to result from

Accepted Answer

A)  a decrease in the fees that oil companies must pay for drilling licenses. 
B)  an increase in the subsidy for oil exploration and drilling. 
C)  a decrease in the world price of oil. 
D)  an increase in the costs of exploration and drilling for oil. 
A)  a decrease in the fees that oil companies must pay for drilling licenses. 
B)  an increase in the subsidy for oil exploration and drilling. 
C)  a decrease in the world price of oil. 
D)  an increase in the costs of exploration and drilling for oil.

Question 3

What combination of changes would most likely decrease the equilibrium price?

Accepted Answer

A)  when supply decreases and demand increases 
B)  when demand increases and supply increases 
C)  when demand decreases and supply decreases 
D)  when supply increases and demand decreases 
A)  when supply decreases and demand increases 
B)  when demand increases and supply increases 
C)  when demand decreases and supply decreases 
D)  when supply increases and demand decreases

Question 4

If there is a surplus of a product, its price

Accepted Answer

A)  is below the equilibrium level. 
B)  is above the equilibrium level. 
C)  will rise in the near future. 
D)  is in equilibrium. 
A)  is below the equilibrium level. 
B)  is above the equilibrium level. 
C)  will rise in the near future. 
D)  is in equilibrium.

Question 5

When economists describe "a market," they mean

Accepted Answer

A)  a place where stocks and bonds are traded. 
B)  a communication network that allow individuals to keep in touch with each other. 
C)  a hypothetical place where the production of goods and services takes place. 
D)  a system that allows buyers and sellers to interact with one another. 
A)  a place where stocks and bonds are traded. 
B)  a communication network that allow individuals to keep in touch with each other. 
C)  a hypothetical place where the production of goods and services takes place. 
D)  a system that allows buyers and sellers to interact with one another.

Question 6

Because successive units of a good produce less and less additional satisfaction, the price must fall to encourage a buyer to purchase more units of the good. This statement is most consistent with which explanation for the law of demand?

Accepted Answer

A)  diminishing marginal utility 
B)  the rationing function of prices 
C)  the substitution effect 
D)  the income effect 
A)  diminishing marginal utility 
B)  the rationing function of prices 
C)  the substitution effect 
D)  the income effect

Question 7

With a downsloping demand curve and an upsloping supply curve for a product, placing an excise tax on this product will

Accepted Answer

A)  increase equilibrium price and quantity. 
B)  decrease equilibrium price and quantity. 
C)  decrease equilibrium price and increase equilibrium quantity. 
D)  increase equilibrium price and decrease equilibrium quantity. 
A)  increase equilibrium price and quantity. 
B)  decrease equilibrium price and quantity. 
C)  decrease equilibrium price and increase equilibrium quantity. 
D)  increase equilibrium price and decrease equilibrium quantity.

Question 8

Suppose that corn prices rise significantly. If farmers expect the price of corn to continue rising relative to other crops, then we would expect

Accepted Answer

A)  the supply of ethanol, a corn-based product, to increase. 
B)  consumer demand for wheat to fall. 
C)  the supply to increase as farmers plant more corn. 
D)  the supply to fall as farmers plant more of other crops. 
A)  the supply of ethanol, a corn-based product, to increase. 
B)  consumer demand for wheat to fall. 
C)  the supply to increase as farmers plant more corn. 
D)  the supply to fall as farmers plant more of other crops.

Question 9

If a legal ceiling price is set above the equilibrium price,

Accepted Answer

A)  a shortage of the product will occur. 
B)  a surplus of the product will occur. 
C)  a black market will evolve. 
D)  neither the equilibrium price nor the equilibrium quantity will be affected. 
A)  a shortage of the product will occur. 
B)  a surplus of the product will occur. 
C)  a black market will evolve. 
D)  neither the equilibrium price nor the equilibrium quantity will be affected.

Question 10

If there is a surplus in a market, competition among the sellers will drive price down.

Accepted Answer

A) True 
 B)False

Question 11

A news story states that "DVDs lose their appeal as consumers switch to online streaming for movies." In a competitive market for DVDs, this situation would lead to a(n)

Accepted Answer

A)  increase in the price and the quantity sold of DVDs. 
B)  decrease in the price and the quantity sold of DVDs. 
C)  increase in the price and a decrease in the quantity sold of DVDs. 
D)  decrease in the price and an increase in the quantity sold of DVDs. 
A)  increase in the price and the quantity sold of DVDs. 
B)  decrease in the price and the quantity sold of DVDs. 
C)  increase in the price and a decrease in the quantity sold of DVDs. 
D)  decrease in the price and an increase in the quantity sold of DVDs.

Question 12

Over time, the equilibrium price of a gigabyte of computer memory has fallen, while the equilibrium quantity purchased has increased. Based on this we can conclude that

Accepted Answer

A)  decreases in the demand for computer memory have exceeded increases in supply. 
B)  decreases in the supply of computer memory have exceeded increases in demand. 
C)  increases in the demand for computer memory have exceeded increases in supply. 
D)  increases in the supply of computer memory have exceeded increases in demand. 
A)  decreases in the demand for computer memory have exceeded increases in supply. 
B)  decreases in the supply of computer memory have exceeded increases in demand. 
C)  increases in the demand for computer memory have exceeded increases in supply. 
D)  increases in the supply of computer memory have exceeded increases in demand.

Question 13

Answer the question on the basis of the given supply and demand data for wheat.   Equilibrium price will be

Accepted Answer

A)  $4. 
B)  $3. 
C)  $2. 
D)  $1. 
A)  $4. 
B)  $3. 
C)  $2. 
D)  $1.

Question 14

As a result of a fall in the price of gasoline, consumers can afford to buy more gasoline for more driving trips. This is an illustration of

Accepted Answer

A)  the income effect. 
B)  the substitution effect. 
C)  diminishing marginal utility. 
D)  consumer sovereignty. 
A)  the income effect. 
B)  the substitution effect. 
C)  diminishing marginal utility. 
D)  consumer sovereignty.

Question 15

If the price of oil increases significantly, buyers and sellers of gasoline will both expect the price of gasoline to also increase. If sellers of gasoline act on their expectations more than the buyers do, then

Accepted Answer

A)  the equilibrium price of gasoline will increase, while the equilibrium quantity will decrease. 
B)  the equilibrium price of gasoline will increase, while the equilibrium quantity will increase. 
C)  the equilibrium price of gasoline will decrease, while the equilibrium quantity will decrease. 
D)  the equilibrium price of gasoline will decrease, while the equilibrium quantity will increase. 
A)  the equilibrium price of gasoline will increase, while the equilibrium quantity will decrease. 
B)  the equilibrium price of gasoline will increase, while the equilibrium quantity will increase. 
C)  the equilibrium price of gasoline will decrease, while the equilibrium quantity will decrease. 
D)  the equilibrium price of gasoline will decrease, while the equilibrium quantity will increase.

Question 16

In response to the general public's complaints about "price gouging" by sellers, the government could impose a price floor.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following is a determinant of supply?

Accepted Answer

A)  tastes and preferences of buyers 
B)  price of a complementary good 
C)  consumer income 
D)  product taxes and subsidies 
A)  tastes and preferences of buyers 
B)  price of a complementary good 
C)  consumer income 
D)  product taxes and subsidies

Question 18

When the price of a product falls, the purchasing power of our money income rises and thus permits consumers to purchase more of the product. This statement describes

Accepted Answer

A)  an inferior good. 
B)  the rationing function of prices. 
C)  the substitution effect. 
D)  the income effect. 
A)  an inferior good. 
B)  the rationing function of prices. 
C)  the substitution effect. 
D)  the income effect.

Question 19

A surplus of a product will arise when price is

Accepted Answer

A)  above equilibrium, with the result that quantity demanded exceeds quantity supplied. 
B)  above equilibrium, with the result that quantity supplied exceeds quantity demanded. 
C)  below equilibrium, with the result that quantity demanded exceeds quantity supplied. 
D)  below equilibrium, with the result that quantity supplied exceeds quantity demanded. 
A)  above equilibrium, with the result that quantity demanded exceeds quantity supplied. 
B)  above equilibrium, with the result that quantity supplied exceeds quantity demanded. 
C)  below equilibrium, with the result that quantity demanded exceeds quantity supplied. 
D)  below equilibrium, with the result that quantity supplied exceeds quantity demanded.

Question 20

Plastics manufacturers can make either toys or plastic containers. If the prices and profitability of plastic toys increase, then the

Accepted Answer

A)  demand for plastic containers will decrease. 
B)  supply of plastic containers will increase. 
C)  demand for plastic containers will increase. 
D)  supply of plastic containers will decrease. 
A)  demand for plastic containers will decrease. 
B)  supply of plastic containers will increase. 
C)  demand for plastic containers will increase. 
D)  supply of plastic containers will decrease.

Exam 3: Demand, Supply, and Market Equilibrium

In order to derive a market demand curve from individuals' demand curves, we add up the

A leftward shift of the supply curve for oil in the United States is most likely to result from

What combination of changes would most likely decrease the equilibrium price?

If there is a surplus of a product, its price

When economists describe "a market," they mean

Because successive units of a good produce less and less additional satisfaction, the price must fall to encourage a buyer to purchase more units of the good. This statement is most consistent with which explanation for the law of demand?

With a downsloping demand curve and an upsloping supply curve for a product, placing an excise tax on this product will

Suppose that corn prices rise significantly. If farmers expect the price of corn to continue rising relative to other crops, then we would expect

If a legal ceiling price is set above the equilibrium price,

If there is a surplus in a market, competition among the sellers will drive price down.

A news story states that "DVDs lose their appeal as consumers switch to online streaming for movies." In a competitive market for DVDs, this situation would lead to a(n)

Over time, the equilibrium price of a gigabyte of computer memory has fallen, while the equilibrium quantity purchased has increased. Based on this we can conclude that

Answer the question on the basis of the given supply and demand data for wheat. Equilibrium price will be

As a result of a fall in the price of gasoline, consumers can afford to buy more gasoline for more driving trips. This is an illustration of

If the price of oil increases significantly, buyers and sellers of gasoline will both expect the price of gasoline to also increase. If sellers of gasoline act on their expectations more than the buyers do, then

In response to the general public's complaints about "price gouging" by sellers, the government could impose a price floor.

Which of the following is a determinant of supply?

When the price of a product falls, the purchasing power of our money income rises and thus permits consumers to purchase more of the product. This statement describes

A surplus of a product will arise when price is

Plastics manufacturers can make either toys or plastic containers. If the prices and profitability of plastic toys increase, then the

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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