Question 1

Which of the following pairs of goods are probably complements?

Accepted Answer

A)  Televisions and roller skates. 
B)  Frozen yogurt and ice cream. 
C)  Steak and chicken. 
D)  Hamburgers and ketchup. 
A)  Televisions and roller skates. 
B)  Frozen yogurt and ice cream. 
C)  Steak and chicken. 
D)  Hamburgers and ketchup.

Question 2

Competitive market equilibrium

Accepted Answer

A)  is determined by the intersection of the market demand and supply curves. 
B)  implies that quantity supplied is sufficiently larger than quantity demanded. 
C)  is determined by the intersection of the excess demand and excess supply curves. 
D)  implies that quantity demanded is sufficiently larger than quantity supplied. 
A)  is determined by the intersection of the market demand and supply curves. 
B)  implies that quantity supplied is sufficiently larger than quantity demanded. 
C)  is determined by the intersection of the excess demand and excess supply curves. 
D)  implies that quantity demanded is sufficiently larger than quantity supplied.

Question 3

Suppose you produce wooden desks, and government legislation protecting the spotted owl has made it more expensive for you to purchase wood. What do you expect to happen to the equilibrium price and quantity of wooden desks?

Accepted Answer

A)  Price and quantity will increase. 
B)  Price will increase but quantity will decrease. 
C)  Price and quantity will decrease. 
D)  Price will decrease but quantity will increase. 
A)  Price and quantity will increase. 
B)  Price will increase but quantity will decrease. 
C)  Price and quantity will decrease. 
D)  Price will decrease but quantity will increase.

Question 4

The supply function

Accepted Answer

A)  describes how much of good X will be produced at an alternative price of good X, given all the other variables being constant. 
B)  recognizes that the quantity of a good produced depends on its price and supply shifters. 
C)  shows the relationship between the quantity supplied of X and variables other than its price. 
D)  does not include technology. 
A)  describes how much of good X will be produced at an alternative price of good X, given all the other variables being constant. 
B)  recognizes that the quantity of a good produced depends on its price and supply shifters. 
C)  shows the relationship between the quantity supplied of X and variables other than its price. 
D)  does not include technology.

Question 5

The minimum wage

Accepted Answer

A)  is an example of a price floor. 
B)  leads to an increase in the number of people employed in unskilled jobs. 
C)  leads to a decrease in the number of people employed in skilled jobs. 
D)  causes an increase in social welfare. 
A)  is an example of a price floor. 
B)  leads to an increase in the number of people employed in unskilled jobs. 
C)  leads to a decrease in the number of people employed in skilled jobs. 
D)  causes an increase in social welfare.

Question 6

Producer surplus is measured as the area

Accepted Answer

A)  below the demand curve and above the market price. 
B)  above the demand curve and below the market price. 
C)  above the supply curve and below the market price. 
D)  below the supply curve and above the market price. 
A)  below the demand curve and above the market price. 
B)  above the demand curve and below the market price. 
C)  above the supply curve and below the market price. 
D)  below the supply curve and above the market price.

Question 7

When quantity demanded exceeds quantity supplied

Accepted Answer

A)  there exists a surplus of a good. 
B)  the price tends to fall. 
C)  the price is below the equilibrium price. 
D)  there is no excess demand. 
A)  there exists a surplus of a good. 
B)  the price tends to fall. 
C)  the price is below the equilibrium price. 
D)  there is no excess demand.

Question 8

Advertising can influence demand by altering tastes of consumers. This type of advertising is known as

Accepted Answer

A)  persuasive advertising. 
B)  informative advertising. 
C)  strategic advertising. 
D)  influential advertising. 
A)  persuasive advertising. 
B)  informative advertising. 
C)  strategic advertising. 
D)  influential advertising.

Question 9

If the price of good X becomes lower, then the level of consumer surplus becomes

Accepted Answer

A)  lower. 
B)  higher. 
C)  unchanged. 
D)  lower in the short-run but higher in the long run. 
A)  lower. 
B)  higher. 
C)  unchanged. 
D)  lower in the short-run but higher in the long run.

Question 10

If consumers expect future prices to be higher

Accepted Answer

A)  they substitute current purchases for future purchases of perishable products. 
B)  stockpiling will happen when products are durable in nature. 
C)  the position of the demand will not change. 
D)  the demand for automobiles today will not change. 
A)  they substitute current purchases for future purchases of perishable products. 
B)  stockpiling will happen when products are durable in nature. 
C)  the position of the demand will not change. 
D)  the demand for automobiles today will not change.

Question 11

If firms expect prices to be higher in the future and the product is not perishable, then

Accepted Answer

A)  the current supply curve shifts to the left. 
B)  the current supply curve shifts to the right. 
C)  producers produce more output to hold back for the future. 
D)  none of the statements associated with this question are correct. 
A)  the current supply curve shifts to the left. 
B)  the current supply curve shifts to the right. 
C)  producers produce more output to hold back for the future. 
D)  none of the statements associated with this question are correct.

Question 12

When the government imposes a price floor above the market price, the result will be that

Accepted Answer

A)  surpluses occur. 
B)  shortages become a problem. 
C)  supply and demand will shift up to the new equilibrium. 
D)  a price floor set above the equilibrium price will have no effect on the market equilibrium. 
A)  surpluses occur. 
B)  shortages become a problem. 
C)  supply and demand will shift up to the new equilibrium. 
D)  a price floor set above the equilibrium price will have no effect on the market equilibrium.

Question 13

Producer surplus is the

Accepted Answer

A)  area above the supply curve but below the demand curve. 
B)  area above the supply curve but below the market price of the good. 
C)  minimum amount required by a producer for producing the good. 
D)  maximum amount a producer can collect from consumers. 
A)  area above the supply curve but below the demand curve. 
B)  area above the supply curve but below the market price of the good. 
C)  minimum amount required by a producer for producing the good. 
D)  maximum amount a producer can collect from consumers.

Question 14

A price ceiling is

Accepted Answer

A)  the minimum legal price that can be charged in a market. 
B)  the maximum legal price that can be charged in a market. 
C)  above the initial equilibrium price. 
D)  equal to the initial equilibrium price. 
A)  the minimum legal price that can be charged in a market. 
B)  the maximum legal price that can be charged in a market. 
C)  above the initial equilibrium price. 
D)  equal to the initial equilibrium price.

Question 15

An excise tax of $1.00 per gallon of gasoline placed on the suppliers of gasoline would shift the supply curve

Accepted Answer

A)  down by $1.00. 
B)  down by more than $1.00. 
C)  up by $1.00. 
D)  up by less than $1.00. 
A)  down by $1.00. 
B)  down by more than $1.00. 
C)  up by $1.00. 
D)  up by less than $1.00.

Question 16

Technological advances will cause the supply curve to:

Accepted Answer

A)  shift to the left. 
B)  shift to the right. 
C)  become flatter. 
D)  become steeper. 
A)  shift to the left. 
B)  shift to the right. 
C)  become flatter. 
D)  become steeper.

Question 17

Suppose the demand for good X is given by Qdx = 10 + axPx + ayPy + aMM. If aM is negative, then good y is:

Accepted Answer

A)  a normal good. 
B)  an inferior good. 
C)  a complement. 
D)  a substitute. 
A)  a normal good. 
B)  an inferior good. 
C)  a complement. 
D)  a substitute.

Question 18

Estimates suggest that the North American Free Trade Agreement (NAFTA) will ultimately result in tariff cuts averaging 38 percent globally. Assuming these estimates are correct, would you expect the price of the average imported goods to fall by 38 percent? Explain.

Accepted Answer

A tariff reduction can be viewed as a re

Question 19

The government decides that a specific scarce good should be provided for everyone who wants it at a price of zero and passes a law making it illegal to buy or sell the good. However, people can give the good away. This good is highly desirable for some of the population. What effect will this law have on the market? What would happen in this market if the law were removed?

Accepted Answer

The new legislation is essentially a pri

Question 20

Suppose the market demand for good X is given by QXd = 20 - 2PX. If the equilibrium price of X is $5 per unit, then the total value a consumer receives from consuming the equilibrium quantity is

Accepted Answer

A)  $100. 
B)  $75. 
C)  $50. 
D)  $25. 
A)  $100. 
B)  $75. 
C)  $50. 
D)  $25.

Which of the following pairs of goods are probably complements?

Competitive market equilibrium

Suppose you produce wooden desks, and government legislation protecting the spotted owl has made it more expensive for you to purchase wood. What do you expect to happen to the equilibrium price and quantity of wooden desks?

The supply function

The minimum wage

Producer surplus is measured as the area

When quantity demanded exceeds quantity supplied

Advertising can influence demand by altering tastes of consumers. This type of advertising is known as

If the price of good X becomes lower, then the level of consumer surplus becomes

If consumers expect future prices to be higher

If firms expect prices to be higher in the future and the product is not perishable, then

When the government imposes a price floor above the market price, the result will be that

Producer surplus is the

A price ceiling is

An excise tax of $1.00 per gallon of gasoline placed on the suppliers of gasoline would shift the supply curve

Technological advances will cause the supply curve to:

Suppose the demand for good X is given by Q^d_x = 10 + a_xP_x + a_yP_y + a_MM. If a_M is negative, then good y is:

Estimates suggest that the North American Free Trade Agreement (NAFTA) will ultimately result in tariff cuts averaging 38 percent globally. Assuming these estimates are correct, would you expect the price of the average imported goods to fall by 38 percent? Explain.

Suppose the market demand for good X is given by Q_X^d = 20 - 2P_X. If the equilibrium price of X is $5 per unit, then the total value a consumer receives from consuming the equilibrium quantity is

The Fundamentals of Managerial Economics

Quantitative Demand Analysis

The Theory of Individual Behavior

The Production Process and Costs

The Organization of the Firm

The Nature of Industry

Managing in Competitive, Monopolistic, and Monopolistically Competitive Markets

Basic Oligopoly Models

Game Theory: Inside Oligopoly

Pricing Strategies for Firms With Market Power

The Economics of Information

Advanced Topics in Business Strategy

A Managers Guide to Government in the Marketplace

Filters

Exam 2: Market Forces: Demand and Supply

Which of the following pairs of goods are probably complements?

Competitive market equilibrium

Suppose you produce wooden desks, and government legislation protecting the spotted owl has made it more expensive for you to purchase wood. What do you expect to happen to the equilibrium price and quantity of wooden desks?

The supply function

The minimum wage

Producer surplus is measured as the area

When quantity demanded exceeds quantity supplied

Advertising can influence demand by altering tastes of consumers. This type of advertising is known as

If the price of good X becomes lower, then the level of consumer surplus becomes

If consumers expect future prices to be higher

If firms expect prices to be higher in the future and the product is not perishable, then

When the government imposes a price floor above the market price, the result will be that

Producer surplus is the

A price ceiling is

An excise tax of $1.00 per gallon of gasoline placed on the suppliers of gasoline would shift the supply curve

Technological advances will cause the supply curve to:

Suppose the demand for good X is given by Qdx = 10 + axPx + ayPy + aMM. If aM is negative, then good y is:

Estimates suggest that the North American Free Trade Agreement (NAFTA) will ultimately result in tariff cuts averaging 38 percent globally. Assuming these estimates are correct, would you expect the price of the average imported goods to fall by 38 percent? Explain.

Suppose the market demand for good X is given by QXd = 20 - 2PX. If the equilibrium price of X is $5 per unit, then the total value a consumer receives from consuming the equilibrium quantity is

The Fundamentals of Managerial Economics

Quantitative Demand Analysis

The Theory of Individual Behavior

The Production Process and Costs

The Organization of the Firm

The Nature of Industry

Managing in Competitive, Monopolistic, and Monopolistically Competitive Markets

Basic Oligopoly Models

Game Theory: Inside Oligopoly

Pricing Strategies for Firms With Market Power

The Economics of Information

Advanced Topics in Business Strategy

A Managers Guide to Government in the Marketplace

Filters

Suppose the demand for good X is given by Q^d_x = 10 + a_xP_x + a_yP_y + a_MM. If a_M is negative, then good y is:

Suppose the market demand for good X is given by Q_X^d = 20 - 2P_X. If the equilibrium price of X is $5 per unit, then the total value a consumer receives from consuming the equilibrium quantity is