Question 1

Which of the following would increase the demand for beef?

Accepted Answer

A)  lower pork prices 
B)  higher consumer income 
C)  higher prices of feed grains used to feed beef cattle 
D)  an increase in the price of beef 
A)  lower pork prices 
B)  higher consumer income 
C)  higher prices of feed grains used to feed beef cattle 
D)  an increase in the price of beef

Question 2

Figure: Supply and Demand 3   Which of the following statements applies to the diagram?

Accepted Answer

A)  An increase in supply causes an increase in quantity demanded. 
B)  A decrease in supply causes an increase in quantity demanded. 
C)  An increase in supply causes an increase in demand. 
D)  A decrease in supply causes a decrease in demand. 
A)  An increase in supply causes an increase in quantity demanded. 
B)  A decrease in supply causes an increase in quantity demanded. 
C)  An increase in supply causes an increase in demand. 
D)  A decrease in supply causes a decrease in demand.

Question 3

An increase in quantity demanded is a movement along a fixed demand curve caused by a shift in the supply curve.

Accepted Answer

A) True 
 B)False

Question 4

In a free market in which an equilibrium price and quantity prevails:

Accepted Answer

A)  consumer surplus is less than producer surplus. 
B)  consumer surplus is greater than producer surplus. 
C)  consumer surplus is the same as producer surplus. 
D)  consumer surplus and producer surplus are maximized. 
A)  consumer surplus is less than producer surplus. 
B)  consumer surplus is greater than producer surplus. 
C)  consumer surplus is the same as producer surplus. 
D)  consumer surplus and producer surplus are maximized.

Question 5

A market can be described by the equations Qd = 300 - 4P and Qs = 6P. At a price of $40, will this market experience a shortage or a surplus and what is the amount of this shortage or surplus? Will this market return to equilibrium? Why or why not?

Accepted Answer

Equilibrium price is $30, and equilibriu

Question 6

A shortage will occur at any price below equilibrium price, and a surplus will occur at any price above equilibrium price.

Accepted Answer

A) True 
 B)False

Question 7

When Asian countries went into a recession in 1997, the demand for oil _______ and the price of oil ________.

Accepted Answer

A)  increased; increased 
B)  decreased; increased 
C)  decreased; decreased 
D)  increased; decreased 
A)  increased; increased 
B)  decreased; increased 
C)  decreased; decreased 
D)  increased; decreased

Question 8

Suppose that the equilibrium price in the market is $10. If the current market price is $7.50:

Accepted Answer

A)  the equilibrium price will fall to $7.50. 
B)  competition among buyers will increase the current price. 
C)  the current price will fall below $7.50 as sellers compete for market share. 
D)  There is not enough information provided to answer the question. 
A)  the equilibrium price will fall to $7.50. 
B)  competition among buyers will increase the current price. 
C)  the current price will fall below $7.50 as sellers compete for market share. 
D)  There is not enough information provided to answer the question.

Question 9

Vernon Smith tested the supply and demand model in the laboratory and found that:

Accepted Answer

A)  the results were not consistent with competitive price theory, as he expected. 
B)  buyers and sellers quickly converged on the predicted equilibrium. 
C)  the model may work in real life, but it does not work in the laboratory. 
D)  the buyers with the lowest willingness to pay bought the goods. 
A)  the results were not consistent with competitive price theory, as he expected. 
B)  buyers and sellers quickly converged on the predicted equilibrium. 
C)  the model may work in real life, but it does not work in the laboratory. 
D)  the buyers with the lowest willingness to pay bought the goods.

Question 10

What is the difference between a shift in the demand curve and a movement along the demand curve?

Accepted Answer

A)  A shift is a reaction to a movement along the demand curve. 
B)  A shift implies a change in the whole demand curve; a movement does not. 
C)  A shift conveys a change in the opportunity cost; a movement does not. 
D)  A shift creates a new equilibrium price; a movement creates a new equilibrium quantity. 
A)  A shift is a reaction to a movement along the demand curve. 
B)  A shift implies a change in the whole demand curve; a movement does not. 
C)  A shift conveys a change in the opportunity cost; a movement does not. 
D)  A shift creates a new equilibrium price; a movement creates a new equilibrium quantity.

Question 11

If demand 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 12

When the demand curve shifts, equilibrium price and quantity exchanged move in opposite directions.

Accepted Answer

A) True 
 B)False

Question 13

Use the following to answer questions:
Figure: Market Changes  
-(Figure: Market Changes) Refer to the figures. If these figures represent the market for blue jeans, which figure shows the effect of an increase in the price of denim, a raw material used to make jeans?

Accepted Answer

A)  Figure A 
B)  Figure B 
C)  Figure C 
D)  Figure D 
A)  Figure A 
B)  Figure B 
C)  Figure C 
D)  Figure D

Question 14

Which of the following would NOT lead to a decrease in the price of domestic automobiles?

Accepted Answer

A)  an increase in the price of foreign-made automobiles 
B)  an economic recession, which decreases consumer income 
C)  a decrease in the wages paid to union auto workers 
D)  an increase in the number of domestic automakers 
A)  an increase in the price of foreign-made automobiles 
B)  an economic recession, which decreases consumer income 
C)  a decrease in the wages paid to union auto workers 
D)  an increase in the number of domestic automakers

Question 15

Use the following to answer questions:
Figure: Price and Quantity 1  
-(Figure: Price and Quantity 1) In the diagram, at a price of $40, the quantity demanded is ______, the quantity supplied is ______, and there is a ______.

Accepted Answer

A)  40; 60; surplus of 20 units 
B)  80; 20; shortage of 60 units 
C)  60; 40; shortage of 20 units 
D)  20; 60; surplus of 40 units 
A)  40; 60; surplus of 20 units 
B)  80; 20; shortage of 60 units 
C)  60; 40; shortage of 20 units 
D)  20; 60; surplus of 40 units

Question 16

In a competitive market:

Accepted Answer

A)  buyers compete with other buyers, and sellers compete with other sellers. 
B)  buyers compete with sellers, and sellers compete with buyers. 
C)  sellers alone determine the equilibrium price. 
D)  buyers alone determine the equilibrium price. 
A)  buyers compete with other buyers, and sellers compete with other sellers. 
B)  buyers compete with sellers, and sellers compete with buyers. 
C)  sellers alone determine the equilibrium price. 
D)  buyers alone determine the equilibrium price.

Question 17

A surplus occurs when:

Accepted Answer

A)  workers are more productive than expected. 
B)  the quantity supplied is greater than the quantity demanded. 
C)  more people want to buy a good than want to sell it. 
D)  a market is at equilibrium. 
A)  workers are more productive than expected. 
B)  the quantity supplied is greater than the quantity demanded. 
C)  more people want to buy a good than want to sell it. 
D)  a market is at equilibrium.

Question 18

Imagine a free market in which quantity supplied is 50 units and quantity demanded is 50 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 19

Use the following to answer questions:
Figure: Demand, Supply Shifts  
-(Figure: Demand, Supply Shifts) In the figure, the initial demand curve is D1 and the initial supply curve is S1. Resource prices in this market increase; at the same time, the consumer population declines as migration causes an outflow of population to other regions. What happens to the supply curve and/or demand curve?

Accepted Answer

A)  S1 shifts to S2 but then shifts back to S1. D1 remains at D1. 
B)  S1 shifts to S3 and D1 shifts to D2. 
C)  S1 shifts to S2 and D1 shifts to D3. 
D)  S1 shifts to S2 and D1 shifts to D2. 
A)  S1 shifts to S2 but then shifts back to S1. D1 remains at D1. 
B)  S1 shifts to S3 and D1 shifts to D2. 
C)  S1 shifts to S2 and D1 shifts to D3. 
D)  S1 shifts to S2 and D1 shifts to D2.

Question 20

In a free market setting where quantity supplied is 50 units and quantity demanded is 50 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.

Exam 4: Equilibrium

Which of the following would increase the demand for beef?

Figure: Supply and Demand 3 Which of the following statements applies to the diagram?

An increase in quantity demanded is a movement along a fixed demand curve caused by a shift in the supply curve.

In a free market in which an equilibrium price and quantity prevails:

A market can be described by the equations Qd = 300 - 4P and Qs = 6P. At a price of $40, will this market experience a shortage or a surplus and what is the amount of this shortage or surplus? Will this market return to equilibrium? Why or why not?

A shortage will occur at any price below equilibrium price, and a surplus will occur at any price above equilibrium price.

When Asian countries went into a recession in 1997, the demand for oil _______ and the price of oil ________.

Suppose that the equilibrium price in the market is $10. If the current market price is $7.50:

Vernon Smith tested the supply and demand model in the laboratory and found that:

What is the difference between a shift in the demand curve and a movement along the demand curve?

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

When the demand curve shifts, equilibrium price and quantity exchanged move in opposite directions.

Use the following to answer questions: Figure: Market Changes -(Figure: Market Changes) Refer to the figures. If these figures represent the market for blue jeans, which figure shows the effect of an increase in the price of denim, a raw material used to make jeans?

Which of the following would NOT lead to a decrease in the price of domestic automobiles?

Use the following to answer questions: Figure: Price and Quantity 1 -(Figure: Price and Quantity 1) In the diagram, at a price of $40, the quantity demanded is ______, the quantity supplied is ______, and there is a ______.

In a competitive market:

A surplus occurs when:

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

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

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 market can be described by the equations Q_d = 300 - 4P and Q_s = 6P. At a price of $40, will this market experience a shortage or a surplus and what is the amount of this shortage or surplus? Will this market return to equilibrium? Why or why not?

When Asian countries went into a recession in 1997, the demand for oil _ and the price of oil __.

Use the following to answer questions: Figure: Price and Quantity 1 -(Figure: Price and Quantity 1) In the diagram, at a price of $40, the quantity demanded is , the quantity supplied is , and there is a __.