Question 1

What effect do computer chip sellers' expectations of falling chip prices in the coming months have on the current computer chip market?

Accepted Answer

A)  The supply of computer chips increases, pushing down the equilibrium price and quantity. 
B)  The supply of computer chips increases, pushing down the equilibrium price and increasing the equilibrium quantity. 
C)  The demand for computer chips increases, pushing down the equilibrium price and increasing the equilibrium quantity. 
D)  The demand for computer chips decreases, pushing down the equilibrium price and increasing the equilibrium quantity. 
A)  The supply of computer chips increases, pushing down the equilibrium price and quantity. 
B)  The supply of computer chips increases, pushing down the equilibrium price and increasing the equilibrium quantity. 
C)  The demand for computer chips increases, pushing down the equilibrium price and increasing the equilibrium quantity. 
D)  The demand for computer chips decreases, pushing down the equilibrium price and increasing the equilibrium quantity.

Question 2

If demand increases, ceteris paribus, the quantity exchanged will be ______ at the new market equilibrium point.

Accepted Answer

A)  larger 
B)  smaller 
C)  the same 
D)  either larger or smaller 
A)  larger 
B)  smaller 
C)  the same 
D)  either larger or smaller

Question 3

The quantity demanded for wireless computer mouses is Qd = 500 - 1.75P, and the quantity supplied is Qs = 450 + 0.25P.
a. Calculate the equilibrium price and quantity.
b. Is total surplus maximized at 440 mouses? Explain.
c. If the market price is currently $10, is there a shortage or surplus of mouses? How do you know?
d. If the market price is $40, is there a shortage or surplus of mouses? How do you know?

Accepted Answer

a. Q_d = Q_s. 500 – 1.75P = 450 + 0.25P 50 =

Question 4

An increase in the price of granite would result in a decrease in the DEMAND for granite countertops.

Accepted Answer

A) True 
 B)False

Question 5

Suppose there is an increase in demand in a market and no change in the supply. What will happen to the market equilibrium price and quantity?

Accepted Answer

A)  Equilibrium price will rise; equilibrium quantity will rise. 
B)  Equilibrium price will rise; equilibrium quantity will fall. 
C)  Equilibrium price will fall; equilibrium quantity will rise. 
D)  Equilibrium price will fall; equilibrium quantity will fall. 
A)  Equilibrium price will rise; equilibrium quantity will rise. 
B)  Equilibrium price will rise; equilibrium quantity will fall. 
C)  Equilibrium price will fall; equilibrium quantity will rise. 
D)  Equilibrium price will fall; equilibrium quantity will fall.

Question 6

If there is a surplus of a good, sellers will:

Accepted Answer

A)  lower the price in order to increase quantity demanded. 
B)  raise the price in order to decrease quantity demanded. 
C)  compete with buyers. 
D)  know that the buyers overvalue the good. 
A)  lower the price in order to increase quantity demanded. 
B)  raise the price in order to decrease quantity demanded. 
C)  compete with buyers. 
D)  know that the buyers overvalue the good.

Question 7

There is a positive relationship between price and quantity supplied.

Accepted Answer

A) True 
 B)False

Question 8

The sum of consumer and producer surplus increases when producers sell more than the market equilibrium quantity.

Accepted Answer

A) True 
 B)False

Question 9

When a market is competitive:

Accepted Answer

A)  buyers compete with sellers to try to get lower prices. 
B)  buyers compete with other buyers, raising prices; and sellers compete with sellers, lowering prices. 
C)  everybody competes with everybody else. 
D)  buyers compete with sellers and sellers compete with one another, but buyers do not compete with one another. 
A)  buyers compete with sellers to try to get lower prices. 
B)  buyers compete with other buyers, raising prices; and sellers compete with sellers, lowering prices. 
C)  everybody competes with everybody else. 
D)  buyers compete with sellers and sellers compete with one another, but buyers do not compete with one another.

Question 10

If supply decreases, ceteris paribus, market price will be ______ at the new equilibrium point.

Accepted Answer

A)  higher 
B)  lower 
C)  the same 
D)  either higher or lower 
A)  higher 
B)  lower 
C)  the same 
D)  either higher or lower

Question 11

Use the following to answer questions:
Figure: Price and Quantity 3  
-(Figure: Price and Quantity 3) Which of the following statements is TRUE at a market's equilibrium price and quantity?
I. Consumer surplus plus producer surplus is maximized.
II. Goods are purchased by buyers who value them the most.
III. The lowest-cost producers manufacture the goods.
IV. The gains from trade are minimized.

Accepted Answer

A)  I and IV only 
B)  II and III only 
C)  I, II, and III only 
D)  I, II, III, and IV 
A)  I and IV only 
B)  II and III only 
C)  I, II, and III only 
D)  I, II, III, and IV

Question 12

The United Nations estimates that Earth's population growth rate will slow down by the year 2050 at which time population may start to decrease. If technological change allows the supply of oil to increase at a constant rate, and nothing else changes, what effect will a slowdown in population growth have on the price of oil?

Accepted Answer

A)  Demand will increase during this period, and the price of oil will continue to increase beyond 2050. 
B)  Demand will increase more slowly during this period but since supply is growing at a constant rate, the rate of price increase will fall, and ultimately the price of oil may begin to fall. 
C)  Demand will increase, raising the quantity supplied. Since the quantity supplied will increase, the price must go down. 
D)  The supply of oil will fall and prices will rise. 
A)  Demand will increase during this period, and the price of oil will continue to increase beyond 2050. 
B)  Demand will increase more slowly during this period but since supply is growing at a constant rate, the rate of price increase will fall, and ultimately the price of oil may begin to fall. 
C)  Demand will increase, raising the quantity supplied. Since the quantity supplied will increase, the price must go down. 
D)  The supply of oil will fall and prices will rise.

Question 13

A demand curve shows the relationship between:

Accepted Answer

A)  quantity demanded and quantity supplied, which are positively related. 
B)  quantity demanded and quantity supplied, which are negatively related. 
C)  price and quantity demanded, which are positively related. 
D)  price and quantity demanded, which are negatively related. 
A)  quantity demanded and quantity supplied, which are positively related. 
B)  quantity demanded and quantity supplied, which are negatively related. 
C)  price and quantity demanded, which are positively related. 
D)  price and quantity demanded, which are negatively related.

Question 14

The formation of the Organization of the Petroleum Exporting Countries (OPEC) made it easier for these oil-producing countries to act together and successfully limit the supply of oil, thus raising prices.

Accepted Answer

A) True 
 B)False

Question 15

If hipsters decide that Pabst Blue Ribbon has become cliché and they seek out a more iconic beverage, what will happen in the market for PBR?

Accepted Answer

A)  Demand will decrease, quantity demanded will decrease, and price will increase. 
B)  Supply will decrease, quantity demanded will decrease, and price will decrease. 
C)  Demand will decrease, quantity supplied will decrease, and price will decrease. 
D)  Demand will decrease, quantity supplied will increase, and price will decrease. 
A)  Demand will decrease, quantity demanded will decrease, and price will increase. 
B)  Supply will decrease, quantity demanded will decrease, and price will decrease. 
C)  Demand will decrease, quantity supplied will decrease, and price will decrease. 
D)  Demand will decrease, quantity supplied will increase, and price will decrease.

Question 16

In a free market setting where quantity supplied is 50 units and quantity demanded is 40 units, price will:

Accepted Answer

A)  rise. 
B)  fall. 
C)  remain the same. 
D)  move in an indeterminate direction. 
A)  rise. 
B)  fall. 
C)  remain the same. 
D)  move in an indeterminate direction.

Question 17

Use the following to answer questions:
Figure: Price and Quantity 2  
-(Figure: Price and Quantity 2) At a cost of $20 per unit in the diagram, the value of the unexploited gains from trade is:

Accepted Answer

A)  $200. 
B)  $500. 
C)  $600. 
D)  $900. 
A)  $200. 
B)  $500. 
C)  $600. 
D)  $900.

Question 18

Use the following to answer questions:
Figure: Market Equilibrium  
-(Figure: Market Equilibrium) Refer to the figure. At a price of $3, quantity supplied is ______ and quantity demanded is ______, leading to a _______.

Accepted Answer

A)  6; 2; surplus of 4 units 
B)  2; 6; shortage of 8 units 
C)  2; 4; surplus of 2 units 
D)  4; 2; shortage of 2 units 
A)  6; 2; surplus of 4 units 
B)  2; 6; shortage of 8 units 
C)  2; 4; surplus of 2 units 
D)  4; 2; shortage of 2 units

Question 19

In a competitive market, buyers compete with sellers.

Accepted Answer

A) True 
 B)False

Question 20

After a hurricane in Florida destroys half of the orange crop, economists predict:

Accepted Answer

A)  an increase in both orange prices and orange sales. 
B)  a decrease in both orange prices and orange sales. 
C)  an increase in orange prices and a decrease in orange sales. 
D)  a decrease in orange prices and an increase in orange sales. 
A)  an increase in both orange prices and orange sales. 
B)  a decrease in both orange prices and orange sales. 
C)  an increase in orange prices and a decrease in orange sales. 
D)  a decrease in orange prices and an increase in orange sales.

Exam 4: Equilibrium

What effect do computer chip sellers' expectations of falling chip prices in the coming months have on the current computer chip market?

If demand increases, ceteris paribus, the quantity exchanged will be ______ at the new market equilibrium point.

An increase in the price of granite would result in a decrease in the DEMAND for granite countertops.

Suppose there is an increase in demand in a market and no change in the supply. What will happen to the market equilibrium price and quantity?

If there is a surplus of a good, sellers will:

There is a positive relationship between price and quantity supplied.

The sum of consumer and producer surplus increases when producers sell more than the market equilibrium quantity.

When a market is competitive:

If supply decreases, ceteris paribus, market price will be ______ at the new equilibrium point.

A demand curve shows the relationship between:

The formation of the Organization of the Petroleum Exporting Countries (OPEC) made it easier for these oil-producing countries to act together and successfully limit the supply of oil, thus raising prices.

If hipsters decide that Pabst Blue Ribbon has become cliché and they seek out a more iconic beverage, what will happen in the market for PBR?

In a free market setting where quantity supplied is 50 units and quantity demanded is 40 units, price will:

Use the following to answer questions: Figure: Price and Quantity 2 -(Figure: Price and Quantity 2) At a cost of $20 per unit in the diagram, the value of the unexploited gains from trade is:

Use the following to answer questions: Figure: Market Equilibrium -(Figure: Market Equilibrium) Refer to the figure. At a price of $3, quantity supplied is ______ and quantity demanded is ______, leading to a _______.

In a competitive market, buyers compete with sellers.

After a hurricane in Florida destroys half of the orange crop, economists predict:

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

Use the following to answer questions: Figure: Market Equilibrium -(Figure: Market Equilibrium) Refer to the figure. At a price of $3, quantity supplied is and quantity demanded is , leading to a ___.