Question 1

When there is an excess supply of a good,there is a(n):

Accepted Answer

A) downward pressure on price because firms hold out for the best price they can get. 
B) downward pressure on price because firms accumulate unwanted inventories. 
C) upward pressure on price because firms hold out for the best price they can get. 
D) upward pressure on price because firms accumulate unwanted inventories. 
A) downward pressure on price because firms hold out for the best price they can get. 
B) downward pressure on price because firms accumulate unwanted inventories. 
C) upward pressure on price because firms hold out for the best price they can get. 
D) upward pressure on price because firms accumulate unwanted inventories.

Question 2

When the government establishes a price ceiling below the equilibrium price:

Accepted Answer

A) there will be a temporary shortage that market forces will eventually clear. 
B) a shortage will occur that market forces will not be able to clear. 
C) producers will eliminate the resulting shortage by jointly deciding to increase supply. 
D) the market equilibrium price will prevail. 
A) there will be a temporary shortage that market forces will eventually clear. 
B) a shortage will occur that market forces will not be able to clear. 
C) producers will eliminate the resulting shortage by jointly deciding to increase supply. 
D) the market equilibrium price will prevail.

Question 3

If a higher price results in no change in total expenditure,then demand is:

Accepted Answer

A) elastic. 
B) inelastic. 
C) unit-elastic. 
D) not responsive to price changes at all. 
A) elastic. 
B) inelastic. 
C) unit-elastic. 
D) not responsive to price changes at all.

Question 4

The income elasticity of demand for an inferior good:

Accepted Answer

A) is negative. 
B) is positive. 
C) is zero. 
D) depends on the price elasticity of demand for that food. 
A) is negative. 
B) is positive. 
C) is zero. 
D) depends on the price elasticity of demand for that food.

Question 5

Suppose a vaccine for the common cold is discovered.The government begins to produce the vaccine in as large a volume as possible.However,the market clearing price is very high due to high demand for it.Following this,the government introduces a price control and sets up an allocation scheme to control the vaccine's distribution.Which of the following is likely to be true about the price control introduced by the government?

Accepted Answer

A) The price set by the government is above the market equilibrium. 
B) The price set by the government is below the market equilibrium. 
C) The price set by the government is same as the market equilibrium. 
D) Nothing can be determined about the price control from the information given here. 
A) The price set by the government is above the market equilibrium. 
B) The price set by the government is below the market equilibrium. 
C) The price set by the government is same as the market equilibrium. 
D) Nothing can be determined about the price control from the information given here.

Question 6

If the average household income in some town increased from $50,000 to $60,000,and the their expenditure on housing increased from $1,400 per month to $1,484 per month,the income elasticity of demand for housing is:

Accepted Answer

A) -0.4 
B) 0.3 
C) 1.0 
D) 1.2 
A) -0.4 
B) 0.3 
C) 1.0 
D) 1.2

Question 7

If the value of price elasticity of demand is 0.2,it implies that a 1 percent increase in price leads to a:

Accepted Answer

A) 2 percent decrease in quantity demanded. 
B) 2 percent increase in quantity demanded. 
C) 0.2 percent decrease in quantity demanded. 
D) 0.2 percent increase in quantity demanded. 
A) 2 percent decrease in quantity demanded. 
B) 2 percent increase in quantity demanded. 
C) 0.2 percent decrease in quantity demanded. 
D) 0.2 percent increase in quantity demanded.

Question 8

-Refer to Figure 2-1.Assume that an effective price ceiling of $2 is imposed in this market.What is the maximum cost that consumers will be willing to bear to be able to consume the good or service?

Accepted Answer

A) $2 
B) $4 
C) $6 
D) $8 
A) $2 
B) $4 
C) $6 
D) $8

Question 9

The cross-price elasticity of demand between substitutes:

Accepted Answer

A) is negative. 
B) is positive. 
C) is zero. 
D) is negative if the own-price elasticity of each good is inelastic,but positive if the own-price elasticity of each good is elastic. 
A) is negative. 
B) is positive. 
C) is zero. 
D) is negative if the own-price elasticity of each good is inelastic,but positive if the own-price elasticity of each good is elastic.

Question 10

As the price of shirts rises,the law of supply would predict a(n):

Accepted Answer

A) increase in the quantity of shirts supplied. 
B) decrease in the quantity of shirts supplied. 
C) increase in the supply of shirts. 
D) decrease in the supply of shirts. 
A) increase in the quantity of shirts supplied. 
B) decrease in the quantity of shirts supplied. 
C) increase in the supply of shirts. 
D) decrease in the supply of shirts.

Question 11

If the price elasticity of demand for a commodity is greater than one,it implies that:

Accepted Answer

A) an increase in supply will increase total revenues. 
B) a decrease in supply will increase total revenues. 
C) a price ceiling that lowers price below the market equilibrium will increase total the total consumer spending on that good. 
D) a price floor that raises price above the equilibrium will increase total the total consumer spending on that good. 
A) an increase in supply will increase total revenues. 
B) a decrease in supply will increase total revenues. 
C) a price ceiling that lowers price below the market equilibrium will increase total the total consumer spending on that good. 
D) a price floor that raises price above the equilibrium will increase total the total consumer spending on that good.

Question 12

The negative slope of the demand curve indicates that:

Accepted Answer

A) more consumers are willing to buy the good as its supply falls. 
B) consumption increases as the price falls. 
C) consumption is a positive function of income. 
D) less consumers are willing to buy the good as the price falls. 
A) more consumers are willing to buy the good as its supply falls. 
B) consumption increases as the price falls. 
C) consumption is a positive function of income. 
D) less consumers are willing to buy the good as the price falls.

Question 13

A rise in the quantity demanded of lemons can be attributed to:

Accepted Answer

A) a leftward shift in the supply curve of lemons. 
B) a lower price of lemons. 
C) a decline in the number of people drinking lemonade. 
D) an increase in the price of lime juice. 
A) a leftward shift in the supply curve of lemons. 
B) a lower price of lemons. 
C) a decline in the number of people drinking lemonade. 
D) an increase in the price of lime juice.

Question 14

An increase in supply,other things equal,will cause the:

Accepted Answer

A) equilibrium price to fall and the equilibrium quantity to rise. 
B) equilibrium price and quantity to fall. 
C) equilibrium price and quantity to rise. 
D) equilibrium price to rise and the equilibrium quantity to fall. 
A) equilibrium price to fall and the equilibrium quantity to rise. 
B) equilibrium price and quantity to fall. 
C) equilibrium price and quantity to rise. 
D) equilibrium price to rise and the equilibrium quantity to fall.

Question 15

The demand curve for water is downward sloping,indicating that:

Accepted Answer

A) there are an increasing number of reservoirs. 
B) more consumers enter the market as the price falls. 
C) there is more consumption per person at lower prices. 
D) the production costs for water are very low. 
A) there are an increasing number of reservoirs. 
B) more consumers enter the market as the price falls. 
C) there is more consumption per person at lower prices. 
D) the production costs for water are very low.

Question 16

The demand and supply functions of a firm are given as follows:
Qd = 10 - 3P
Qs = 2 + P
A)Determine the equilibrium price and quantity.

Accepted Answer

Equilibrium price = $2,new price level (

Question 17

Which of the following statements is not true about a demand curve?

Accepted Answer

A) The demand curve shows the maximum price consumers will pay for various quantities of a product. 
B) Movements along a demand curve reflect changes in consumers' tastes. 
C) The demand curve shows the quantities consumers will purchase at various prices. 
D) Movements along a demand curve reflect consumers' response to price changes. 
A) The demand curve shows the maximum price consumers will pay for various quantities of a product. 
B) Movements along a demand curve reflect changes in consumers' tastes. 
C) The demand curve shows the quantities consumers will purchase at various prices. 
D) Movements along a demand curve reflect consumers' response to price changes.

Question 18

If price changes from $4.75 to $5.25 and quantity demanded changes from 1,025 to 975 units,then the price elasticity of demand is approximately:

Accepted Answer

A) 4.0. 
B) 0.5. 
C) 0.25 
D) 2.2. 
A) 4.0. 
B) 0.5. 
C) 0.25 
D) 2.2.

Question 19

The market supply curve depicts:

Accepted Answer

A) the negative relationship between the price of the commodity offered for sale and the quantity supplied. 
B) the negative relationship between the price of the commodity offered for sale and the producer surplus. 
C) the positive relationship between the quantity offered for sale by a single firm and the total supply by all firms in an industry. 
D) the positive relationship between market price and the total quantity supplied by all firms in an industry. 
A) the negative relationship between the price of the commodity offered for sale and the quantity supplied. 
B) the negative relationship between the price of the commodity offered for sale and the producer surplus. 
C) the positive relationship between the quantity offered for sale by a single firm and the total supply by all firms in an industry. 
D) the positive relationship between market price and the total quantity supplied by all firms in an industry.

Question 20

When the market for a good,such as gasoline,is competitive and its price suddenly increases substantially,we can infer:

Accepted Answer

A) that the higher price was most likely arbitrarily set by greedy gas companies seeking increased profits. 
B) that the higher price was most likely a response to a change in market forces beyond any individual firm's control. 
C) nefarious intent on the part of gasoline companies and that a government mandated price ceiling would serve consumers' interests. 
D) that prices are not good indicators of relative scarcity. 
A) that the higher price was most likely arbitrarily set by greedy gas companies seeking increased profits. 
B) that the higher price was most likely a response to a change in market forces beyond any individual firm's control. 
C) nefarious intent on the part of gasoline companies and that a government mandated price ceiling would serve consumers' interests. 
D) that prices are not good indicators of relative scarcity.

When there is an excess supply of a good,there is a(n):

When the government establishes a price ceiling below the equilibrium price:

If a higher price results in no change in total expenditure,then demand is:

The income elasticity of demand for an inferior good:

If the average household income in some town increased from $50,000 to $60,000,and the their expenditure on housing increased from $1,400 per month to $1,484 per month,the income elasticity of demand for housing is:

If the value of price elasticity of demand is 0.2,it implies that a 1 percent increase in price leads to a:

-Refer to Figure 2-1.Assume that an effective price ceiling of $2 is imposed in this market.What is the maximum cost that consumers will be willing to bear to be able to consume the good or service?

The cross-price elasticity of demand between substitutes:

As the price of shirts rises,the law of supply would predict a(n):

If the price elasticity of demand for a commodity is greater than one,it implies that:

The negative slope of the demand curve indicates that:

A rise in the quantity demanded of lemons can be attributed to:

An increase in supply,other things equal,will cause the:

The demand curve for water is downward sloping,indicating that:

The demand and supply functions of a firm are given as follows: Q_d = 10 - 3P Q_s = 2 + P A)Determine the equilibrium price and quantity.

Which of the following statements is not true about a demand curve?

If price changes from $4.75 to $5.25 and quantity demanded changes from 1,025 to 975 units,then the price elasticity of demand is approximately:

The market supply curve depicts:

When the market for a good,such as gasoline,is competitive and its price suddenly increases substantially,we can infer:

An Introduction to Microeconomics

The Theory of Consumer Choice

Individual and Market Demand

Using Consumer Choice Theory

Exchange, Efficiency, and Prices

Production

The Cost of Production

Profit Maximization in Perfectly Competitive Markets

Using the Competitive Model

Monopoly

Product Pricing With Monopoly Power

Monopolistic Competition and Oligopoly

Game Theory and the Economics of Information

Using Noncompetitive Market Models

Employment and Pricing of Inputs

Wages, Rent, Interest, and Profit

Using Input Market Analysis

General Equilibrium Analysis and Economic Efficiency

Public Goods and Externalities

Filters

Exam 2: Supply and Demand

When there is an excess supply of a good,there is a(n):

When the government establishes a price ceiling below the equilibrium price:

If a higher price results in no change in total expenditure,then demand is:

The income elasticity of demand for an inferior good:

If the average household income in some town increased from $50,000 to $60,000,and the their expenditure on housing increased from $1,400 per month to $1,484 per month,the income elasticity of demand for housing is:

If the value of price elasticity of demand is 0.2,it implies that a 1 percent increase in price leads to a:

-Refer to Figure 2-1.Assume that an effective price ceiling of $2 is imposed in this market.What is the maximum cost that consumers will be willing to bear to be able to consume the good or service?

The cross-price elasticity of demand between substitutes:

As the price of shirts rises,the law of supply would predict a(n):

If the price elasticity of demand for a commodity is greater than one,it implies that:

The negative slope of the demand curve indicates that:

A rise in the quantity demanded of lemons can be attributed to:

An increase in supply,other things equal,will cause the:

The demand curve for water is downward sloping,indicating that:

The demand and supply functions of a firm are given as follows: Qd = 10 - 3P Qs = 2 + P A)Determine the equilibrium price and quantity.

Which of the following statements is not true about a demand curve?

If price changes from $4.75 to $5.25 and quantity demanded changes from 1,025 to 975 units,then the price elasticity of demand is approximately:

The market supply curve depicts:

When the market for a good,such as gasoline,is competitive and its price suddenly increases substantially,we can infer:

An Introduction to Microeconomics

The Theory of Consumer Choice

Individual and Market Demand

Using Consumer Choice Theory

Exchange, Efficiency, and Prices

Production

The Cost of Production

Profit Maximization in Perfectly Competitive Markets

Using the Competitive Model

Monopoly

Product Pricing With Monopoly Power

Monopolistic Competition and Oligopoly

Game Theory and the Economics of Information

Using Noncompetitive Market Models

Employment and Pricing of Inputs

Wages, Rent, Interest, and Profit

Using Input Market Analysis

General Equilibrium Analysis and Economic Efficiency

Public Goods and Externalities

Filters

The demand and supply functions of a firm are given as follows: Q_d = 10 - 3P Q_s = 2 + P A)Determine the equilibrium price and quantity.