Question 1

At the equilibrium price, quantity demanded is equal to quantity supplied.

Accepted Answer

A) True 
 B)False  True

Question 2

Which of the following might explain why the price of DVD players has been falling?

Accepted Answer

A)  an increase in consumer income 
B)  a decrease in the price of high-definition Blu-ray players 
C)  a decrease in the price of DVDs 
D)  an increase in the price of gasoline 
A)  an increase in consumer income 
B)  a decrease in the price of high-definition Blu-ray players 
C)  a decrease in the price of DVDs 
D)  an increase in the price of gasoline B

Question 3

Higher gasoline prices have led to a decrease in the demand for large SUVs. Consequently, in the market for SUVs, economists are predicting:

Accepted Answer

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

Question 4

An early frost in the vineyards of Napa Valley would cause a(n):

Accepted Answer

A)  increase in the demand for wine, increasing price. 
B)  increase in the supply of wine, decreasing price. 
C)  decrease in the demand for wine, decreasing price. 
D)  decrease in the supply of wine, increasing price. 
A)  increase in the demand for wine, increasing price. 
B)  increase in the supply of wine, decreasing price. 
C)  decrease in the demand for wine, decreasing price. 
D)  decrease in the supply of wine, increasing price.

Question 5

An increase in the wages of fruit pickers will ultimately lead to a decrease in the supply of fruit and hence an increase in the price of fruit.

Accepted Answer

A) True 
 B)False

Question 6

A free market can be described by the equations Qd = 100 - P and Qs = -20 + P. What are the equilibrium conditions in this market (that is, find equilibrium P and Q), and what are the maximum gains from trade in this market?

Accepted Answer

Price is $60, and eq

Question 7

An increase in supply and a decrease in demand occur in a market. What happens to the equilibrium price and quantity?

Accepted Answer

A)  The equilibrium price decreases; the change in the equilibrium quantity is uncertain. 
B)  The equilibrium price decreases; the equilibrium quantity increases. 
C)  The equilibrium price increases; the change in the equilibrium quantity is uncertain. 
D)  The equilibrium price increases; the equilibrium quantity decreases. 
A)  The equilibrium price decreases; the change in the equilibrium quantity is uncertain. 
B)  The equilibrium price decreases; the equilibrium quantity increases. 
C)  The equilibrium price increases; the change in the equilibrium quantity is uncertain. 
D)  The equilibrium price increases; the equilibrium quantity decreases.

Question 8

Figure: Supply and Demand 2   What happens as a result of the change in demand in the diagram?

Accepted Answer

A)  a decrease in both the equilibrium price and the equilibrium quantity 
B)  an increase in both the equilibrium price and the equilibrium quantity 
C)  an increase in the equilibrium price and a decrease in the equilibrium quantity 
D)  a decrease in the equilibrium price and an increase in the equilibrium quantity 
A)  a decrease in both the equilibrium price and the equilibrium quantity 
B)  an increase in both the equilibrium price and the equilibrium quantity 
C)  an increase in the equilibrium price and a decrease in the equilibrium quantity 
D)  a decrease in the equilibrium price and an increase in the equilibrium quantity

Question 9

Table: Supply and Demand Schedule
 
In the table, a surplus occurs at a price ________, and a shortage occurs at a price _________.

Accepted Answer

A)  of $17; below $15 
B)  of $15; above $15 
C)  above $15; of $15 
D)  above $11; below $17 
A)  of $17; below $15 
B)  of $15; above $15 
C)  above $15; of $15 
D)  above $11; below $17

Question 10

If the market for iPads experiences a surplus, then the:

Accepted Answer

A)  supply of iPads will fall. 
B)  demand for iPads will rise. 
C)  price of iPads will rise. 
D)  price of iPads will fall. 
A)  supply of iPads will fall. 
B)  demand for iPads will rise. 
C)  price of iPads will rise. 
D)  price of iPads will fall.

Question 11

In the long run, will the market price for a good/service always equals the equilibrium price? Explain why or why not.

Accepted Answer

Yes, due to the invisible hand. If price

Question 12

The government plans to increase cigarette taxes in six months. Since consumers should expect the future price of cigarettes to increase, the current demand for cigarettes will increase, and the price of cigarettes will rise even before the tax is implemented.

Accepted Answer

A) True 
 B)False

Question 13

Use the following to answer questions:
Figure: Chocolate  
-(Figure: Chocolate) What is the equilibrium price per pound in the diagram?

Accepted Answer

A)  $4 
B)  $6 
C)  $8 
D)  $10 
A)  $4 
B)  $6 
C)  $8 
D)  $10

Question 14

Imagine a free market in which quantity supplied is 50 units and quantity demanded is 40 units at the current price. The market is experiencing a(n):

Accepted Answer

A)  equilibrium. 
B)  surplus. 
C)  shortage. 
D)  shift. 
A)  equilibrium. 
B)  surplus. 
C)  shortage. 
D)  shift.

Question 15

A(n) ______ causes the equilibrium price to ______ and equilibrium quantity to ______.

Accepted Answer

A)  decrease in supply; rise; fall 
B)  decrease in demand; fall; rise 
C)  increase in supply; rise; rise 
D)  increase in demand; rise; fall 
A)  decrease in supply; rise; fall 
B)  decrease in demand; fall; rise 
C)  increase in supply; rise; rise 
D)  increase in demand; rise; fall

Question 16

Technological advances have increased the supply of digital cameras. As a result the:

Accepted Answer

A)  demand for digital cameras will increase, putting downward pressure on the price of digital cameras. 
B)  quantity demanded for digital cameras will increase. 
C)  quantity supplied of digitals cameras will increase, putting downward pressure on the price of digital cameras. 
D)  demand and supply of digital cameras will both increase. 
A)  demand for digital cameras will increase, putting downward pressure on the price of digital cameras. 
B)  quantity demanded for digital cameras will increase. 
C)  quantity supplied of digitals cameras will increase, putting downward pressure on the price of digital cameras. 
D)  demand and supply of digital cameras will both increase.

Question 17

A market shortage can be defined as a situation in which the quantity supplied in a market is greater than the quantity demanded, at the given price.

Accepted Answer

A) True 
 B)False

Question 18

Imagine a free market in which at a price of $10, quantity supplied is 50 units and quantity demanded is 40 units. Equilibrium price in this market:

Accepted Answer

A)  is equal to $10. 
B)  is less than $10. 
C)  is greater than $10. 
D)  differs from $10 in an indeterminate direction. 
A)  is equal to $10. 
B)  is less than $10. 
C)  is greater than $10. 
D)  differs from $10 in an indeterminate direction.

Question 19

The free market maximizes the gains from trade, producing the level of output that maximizes consumer surplus plus producer surplus.

Accepted Answer

A) True 
 B)False

Question 20

Economic growth in China has led to more Chinese people owning cars, which:

Accepted Answer

A)  increased demand for oil, causing oil prices to rise. 
B)  decreased demand for oil, causing oil prices to rise. 
C)  increased demand for oil but decreased supply, causing oil prices to increase rapidly. 
D)  increased demand and supply of oil, causing oil prices to increase rapidly. 
A)  increased demand for oil, causing oil prices to rise. 
B)  decreased demand for oil, causing oil prices to rise. 
C)  increased demand for oil but decreased supply, causing oil prices to increase rapidly. 
D)  increased demand and supply of oil, causing oil prices to increase rapidly.

Exam 4: Equilibrium

At the equilibrium price, quantity demanded is equal to quantity supplied.

Which of the following might explain why the price of DVD players has been falling?

Higher gasoline prices have led to a decrease in the demand for large SUVs. Consequently, in the market for SUVs, economists are predicting:

An early frost in the vineyards of Napa Valley would cause a(n):

An increase in the wages of fruit pickers will ultimately lead to a decrease in the supply of fruit and hence an increase in the price of fruit.

A free market can be described by the equations Qd = 100 - P and Qs = -20 + P. What are the equilibrium conditions in this market (that is, find equilibrium P and Q), and what are the maximum gains from trade in this market?

An increase in supply and a decrease in demand occur in a market. What happens to the equilibrium price and quantity?

Figure: Supply and Demand 2 What happens as a result of the change in demand in the diagram?

Table: Supply and Demand Schedule In the table, a surplus occurs at a price ________, and a shortage occurs at a price _________.

If the market for iPads experiences a surplus, then the:

In the long run, will the market price for a good/service always equals the equilibrium price? Explain why or why not.

The government plans to increase cigarette taxes in six months. Since consumers should expect the future price of cigarettes to increase, the current demand for cigarettes will increase, and the price of cigarettes will rise even before the tax is implemented.

Use the following to answer questions: Figure: Chocolate -(Figure: Chocolate) What is the equilibrium price per pound in the diagram?

Imagine a free market in which quantity supplied is 50 units and quantity demanded is 40 units at the current price. The market is experiencing a(n):

A(n) ______ causes the equilibrium price to ______ and equilibrium quantity to ______.

Technological advances have increased the supply of digital cameras. As a result the:

A market shortage can be defined as a situation in which the quantity supplied in a market is greater than the quantity demanded, at the given price.

Imagine a free market in which at a price of $10, quantity supplied is 50 units and quantity demanded is 40 units. Equilibrium price in this market:

The free market maximizes the gains from trade, producing the level of output that maximizes consumer surplus plus producer surplus.

Economic growth in China has led to more Chinese people owning cars, which:

The Big Ideas

The Power of Trade and Comparative

Supply and Demand

Elasticity and Its Applications

Taxes and Subsidies

The Price System

Price Ceilings and Floors

International Trade

Externalities- When the Price Is Not Right

Costs and Profit Maximization Under Competition

Competition and the Invisible Hand

Monopoly

Price Discrimination

Oligopoly and Game Theory

Competing for Monopoly

Monopolistic Competition and Advertising

Labor Markets

Public Goods and the Tragedy of the Commons

Political Economy and Public Choice

Economics, Ethics, and Public Policy

Managing Incentives

Stock Markets and Personal Finance

Price Discrimination

Consumer Choice

Filters

A free market can be described by the equations Q_d = 100 - P and Q_s = -20 + P. What are the equilibrium conditions in this market (that is, find equilibrium P and Q), and what are the maximum gains from trade in this market?

Table: Supply and Demand Schedule In the table, a surplus occurs at a price , and a shortage occurs at a price _.

A(n) causes the equilibrium price to and equilibrium quantity to __.