Question 1

Which of the following would most likely increase the demand for gasoline?

Accepted Answer

A)  the expectation by consumers that gasoline prices will be higher in the future 
B)  the expectation by consumers that gasoline prices will be lower in the future 
C)  a widespread shift in car ownership from SUVs to hybrid sedans 
D)  a decrease in the price of public transportation 
A)  the expectation by consumers that gasoline prices will be higher in the future 
B)  the expectation by consumers that gasoline prices will be lower in the future 
C)  a widespread shift in car ownership from SUVs to hybrid sedans 
D)  a decrease in the price of public transportation

Question 2

Suppose that in 2007, Ford sold 500,000 Mustangs at an average price of $18,800 per car; in 2008, 600,000 Mustangs were sold at an average price of $19,500 per car. These statements

Accepted Answer

A)  suggest that the demand for Mustangs decreased between 2007 and 2008. 
B)  suggest that the supply of Mustangs must have increased between 2007 and 2008. 
C)  suggest that the demand for Mustangs increased between 2007 and 2008. 
D)  constitute an exception to the law of demand in that they suggest an upsloping demand curve. 
A)  suggest that the demand for Mustangs decreased between 2007 and 2008. 
B)  suggest that the supply of Mustangs must have increased between 2007 and 2008. 
C)  suggest that the demand for Mustangs increased between 2007 and 2008. 
D)  constitute an exception to the law of demand in that they suggest an upsloping demand curve.

Question 3

The figure below shows three demand curves for coffee.   Which of the following would cause a shift in coffee demand from D1 to D3?

Accepted Answer

A)  a decrease in the cost of producing coffee 
B)  a scientific report stating that coffee improves memory 
C)  a decrease in the prices of cream and sugar 
D)  a decrease in the price of tea 
A)  a decrease in the cost of producing coffee 
B)  a scientific report stating that coffee improves memory 
C)  a decrease in the prices of cream and sugar 
D)  a decrease in the price of tea

Question 4

If the demand for steak (a normal good) shifts to the left, the most likely reason is that

Accepted Answer

A)  consumer incomes have fallen. 
B)  cattle production has declined. 
C)  the price of steak has risen. 
D)  the price of cattle feed has gone up. 
A)  consumer incomes have fallen. 
B)  cattle production has declined. 
C)  the price of steak has risen. 
D)  the price of cattle feed has gone up.

Question 5

Increasing marginal cost of production explains

Accepted Answer

A)  the law of demand. 
B)  the income effect. 
C)  why the supply curve is upsloping. 
D)  why the demand curve is downsloping. 
A)  the law of demand. 
B)  the income effect. 
C)  why the supply curve is upsloping. 
D)  why the demand curve is downsloping.

Question 6

Which is most likely to be observed in a community where legal ceilings are imposed on residential rents?

Accepted Answer

A)  Poor people will be able to find adequate housing. 
B)  Homeowners will reduce their own use of housing space, making more available to others. 
C)  Those whose needs for housing are most urgent will be able to obtain the space they want. 
D)  People moving into the community will have difficulty locating residential space to rent. 
A)  Poor people will be able to find adequate housing. 
B)  Homeowners will reduce their own use of housing space, making more available to others. 
C)  Those whose needs for housing are most urgent will be able to obtain the space they want. 
D)  People moving into the community will have difficulty locating residential space to rent.

Question 7

The construction of demand and supply curves assumes that the primary variable influencing decisions to produce and purchase goods is

Accepted Answer

A)  price. 
B)  expectations. 
C)  preferences. 
D)  incomes. 
A)  price. 
B)  expectations. 
C)  preferences. 
D)  incomes.

Question 8

Assume that the graphs show a competitive market for the product stated in the question.     Select the graph above that best shows the change in the market specified in the following situation: the market for houses, when consumers experience a substantial fall in income due to a serious economic recession.

Accepted Answer

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

Question 9

Suppose that in the clothing market, production costs have fallen, but the equilibrium price and quantity purchased have both increased. Based on this information we can conclude that

Accepted Answer

A)  the supply of clothing has grown faster than the demand for clothing. 
B)  demand for clothing has grown faster than the supply of clothing. 
C)  the supply of and demand for clothing have grown by the same proportion. 
D)  there is no way to determine what has happened to supply and demand with this information. 
A)  the supply of clothing has grown faster than the demand for clothing. 
B)  demand for clothing has grown faster than the supply of clothing. 
C)  the supply of and demand for clothing have grown by the same proportion. 
D)  there is no way to determine what has happened to supply and demand with this information.

Question 10

Which of the following statements is correct?

Accepted Answer

A)  An increase in the price of C will decrease the demand for complementary product D. 
B)  A decrease in income will decrease the demand for an inferior good. 
C)  An increase in income will reduce the demand for a normal good. 
D)  A decline in the price of X will increase the demand for substitute product Y. 
A)  An increase in the price of C will decrease the demand for complementary product D. 
B)  A decrease in income will decrease the demand for an inferior good. 
C)  An increase in income will reduce the demand for a normal good. 
D)  A decline in the price of X will increase the demand for substitute product Y.

Question 11

With a downsloping demand curve and an upsloping supply curve for a product, a decrease in resource prices 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 12

Producing a good in the least costly way is known as allocative efficiency.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following will cause a decrease in market equilibrium price and an increase in equilibrium quantity?

Accepted Answer

A)  an increase in supply 
B)  an increase in demand 
C)  a decrease in supply 
D)  a decrease in demand 
A)  an increase in supply 
B)  an increase in demand 
C)  a decrease in supply 
D)  a decrease in demand

Question 14

An effective price floor on wheat will

Accepted Answer

A)  force otherwise profitable farmers out of business. 
B)  result in a shortage of wheat. 
C)  result in a surplus of wheat. 
D)  clear the market for wheat. 
A)  force otherwise profitable farmers out of business. 
B)  result in a shortage of wheat. 
C)  result in a surplus of wheat. 
D)  clear the market for wheat.

Question 15

A firm's supply curve is upsloping because

Accepted Answer

A)  the expansion of production necessitates the use of qualitatively inferior inputs. 
B)  mass production economies are associated with larger levels of output. 
C)  consumers envision a positive relationship between price and quality. 
D)  beyond some point, the production costs of additional units of output will rise. 
A)  the expansion of production necessitates the use of qualitatively inferior inputs. 
B)  mass production economies are associated with larger levels of output. 
C)  consumers envision a positive relationship between price and quality. 
D)  beyond some point, the production costs of additional units of output will rise.

Question 16

If the organizers of a major sports event set the ticket price above the equilibrium level, then scalping will develop in a secondary market for tickets.

Accepted Answer

A) True 
 B)False

Question 17

An increase in the price of a product will reduce the amount of it purchased because

Accepted Answer

A)  the higher price will signal to consumers that the good is of low quality. 
B)  the higher price means that real incomes have risen. 
C)  consumers will substitute other products for the one whose price has risen. 
D)  consumers substitute relatively high-priced for relatively low-priced products. 
A)  the higher price will signal to consumers that the good is of low quality. 
B)  the higher price means that real incomes have risen. 
C)  consumers will substitute other products for the one whose price has risen. 
D)  consumers substitute relatively high-priced for relatively low-priced products.

Question 18

An economist for a bicycle company predicts that, other things equal, a rise in consumer incomes will increase the demand for bicycles. This prediction assumes that

Accepted Answer

A)  there are many goods that are substitutes for bicycles. 
B)  there are many goods that are complementary to bicycles. 
C)  there are few goods that are substitutes for bicycles. 
D)  bicycles are normal goods. 
A)  there are many goods that are substitutes for bicycles. 
B)  there are many goods that are complementary to bicycles. 
C)  there are few goods that are substitutes for bicycles. 
D)  bicycles are normal goods.

Question 19

Running shoes and staplers are

Accepted Answer

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

Question 20

There will be a surplus of a product when

Accepted Answer

A)  price is below the equilibrium level. 
B)  the supply curve is downward sloping and the demand curve is upward sloping. 
C)  the demand and supply curves fail to intersect. 
D)  consumers want to buy less than producers offer for sale. 
A)  price is below the equilibrium level. 
B)  the supply curve is downward sloping and the demand curve is upward sloping. 
C)  the demand and supply curves fail to intersect. 
D)  consumers want to buy less than producers offer for sale.

Exam 3: Demand, Supply, and Market Equilibrium

Which of the following would most likely increase the demand for gasoline?

Suppose that in 2007, Ford sold 500,000 Mustangs at an average price of $18,800 per car; in 2008, 600,000 Mustangs were sold at an average price of $19,500 per car. These statements

The figure below shows three demand curves for coffee. Which of the following would cause a shift in coffee demand from D1 to D3?

If the demand for steak (a normal good) shifts to the left, the most likely reason is that

Increasing marginal cost of production explains

Which is most likely to be observed in a community where legal ceilings are imposed on residential rents?

The construction of demand and supply curves assumes that the primary variable influencing decisions to produce and purchase goods is

Suppose that in the clothing market, production costs have fallen, but the equilibrium price and quantity purchased have both increased. Based on this information we can conclude that

Which of the following statements is correct?

With a downsloping demand curve and an upsloping supply curve for a product, a decrease in resource prices will

Producing a good in the least costly way is known as allocative efficiency.

Which of the following will cause a decrease in market equilibrium price and an increase in equilibrium quantity?

An effective price floor on wheat will

A firm's supply curve is upsloping because

If the organizers of a major sports event set the ticket price above the equilibrium level, then scalping will develop in a secondary market for tickets.

An increase in the price of a product will reduce the amount of it purchased because

An economist for a bicycle company predicts that, other things equal, a rise in consumer incomes will increase the demand for bicycles. This prediction assumes that

Running shoes and staplers are

There will be a surplus of a product when

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

Filters

The figure below shows three demand curves for coffee. Which of the following would cause a shift in coffee demand from D₁to D₃?