Question 1

If market supply increases:

Accepted Answer

A)  equilibrium price and quantity will both increase. 
B)  equilibrium price and quantity will both decrease. 
C)  equilibrium price will increase but equilibrium quantity will decrease. 
D)  equilibrium price will decrease but equilibrium quantity will increase. 
A)  equilibrium price and quantity will both increase. 
B)  equilibrium price and quantity will both decrease. 
C)  equilibrium price will increase but equilibrium quantity will decrease. 
D)  equilibrium price will decrease but equilibrium quantity will increase.

Question 2

If demand increases, 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 3

Which choice explains how the OPEC crisis of 1973 affected oil prices?

Accepted Answer

A)  The supply of oil was reduced, leading to a rise in oil prices. 
B)  The supply of oil was increased, leading to a fall in oil prices. 
C)  The demand for oil increased, leading to a rise in oil prices. 
D)  The demand for oil decreased, leading to a fall in oil prices. 
A)  The supply of oil was reduced, leading to a rise in oil prices. 
B)  The supply of oil was increased, leading to a fall in oil prices. 
C)  The demand for oil increased, leading to a rise in oil prices. 
D)  The demand for oil decreased, leading to a fall in oil prices.

Question 4

Use the following to answer questions:
Figure: Demand and Supply  
-(Figure: Demand and Supply) Refer to the figure. Which statement is TRUE?

Accepted Answer

A)  The gains from trade are maximized at 20 units of output. 
B)  At 16 units of output, there are unexploited gains from trade. 
C)  Buyers are willing to pay $20 for the 16th unit of output and it costs sellers $60 to produce that unit. 
D)  A free market is likely to produce less than 12 units of output. 
A)  The gains from trade are maximized at 20 units of output. 
B)  At 16 units of output, there are unexploited gains from trade. 
C)  Buyers are willing to pay $20 for the 16th unit of output and it costs sellers $60 to produce that unit. 
D)  A free market is likely to produce less than 12 units of output.

Question 5

Use the following to answer questions:
Figure: Price and Quantity 1  
-(Figure: Price and Quantity 1) In the diagram, at a price of $80, the quantity demanded is ______, the quantity supplied is ______, and there is ______.

Accepted Answer

A)  20; 80; a surplus of 60 units 
B)  80; 20, a surplus of 60 units 
C)  80; 20, a shortage of 60 units 
D)  20; 20; no surplus or shortage 
A)  20; 80; a surplus of 60 units 
B)  80; 20, a surplus of 60 units 
C)  80; 20, a shortage of 60 units 
D)  20; 20; no surplus or shortage

Question 6

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. If this depicts the equilibrium in the market for computer printers, what will happen when the price of computers increases?

Accepted Answer

A)  There is not enough information to determine what will happen. 
B)  D1 will shift to D2. 
C)  D1 will shift to D3. 
D)  S1 will shift to S3. 
A)  There is not enough information to determine what will happen. 
B)  D1 will shift to D2. 
C)  D1 will shift to D3. 
D)  S1 will shift to S3.

Question 7

Use the following to answer questions:
Figure: Price and Quantity 3  
-(Figure: Price and Quantity 3) The value of wasted resources at a quantity of 80 units in the diagram is:

Accepted Answer

A)  $800. 
B)  $900. 
C)  $600. 
D)  $200. 
A)  $800. 
B)  $900. 
C)  $600. 
D)  $200.

Question 8

At the competitive market equilibrium the buyers who purchase the product have the highest willingness to pay.

Accepted Answer

A) True 
 B)False

Question 9

How is a class in which students are graded on a curve like a competitive market?

Accepted Answer

A)  In both cases, the quantity supplied equals the quantity demanded. 
B)  In a competitive market, demanders compete against one another for goods, the same way students compete for grades. 
C)  In a competitive market, demanders compete against suppliers for goods, the same way students compete for grades. 
D)  If the price is too high, demanders should blame suppliers, the same way students should blame professors for bad grades. 
A)  In both cases, the quantity supplied equals the quantity demanded. 
B)  In a competitive market, demanders compete against one another for goods, the same way students compete for grades. 
C)  In a competitive market, demanders compete against suppliers for goods, the same way students compete for grades. 
D)  If the price is too high, demanders should blame suppliers, the same way students should blame professors for bad grades.

Question 10

Which of the following events will cause a decrease in the equilibrium price?

Accepted Answer

A)  a government tax on output 
B)  a decrease in income for an inferior good 
C)  an increase in the price of a substitute good 
D)  lower input prices 
A)  a government tax on output 
B)  a decrease in income for an inferior good 
C)  an increase in the price of a substitute good 
D)  lower input prices

Question 11

At the free market equilibrium, the quantity demanded minus the quantity supplied equals zero.

Accepted Answer

A) True 
 B)False

Question 12

A decrease in supply raises the price of a good, but it also decreases the quantity demanded, which lowers the price of a good. The net effect on price is ambiguous.

Accepted Answer

A) True 
 B)False

Question 13

Why is consuming a quantity above equilibrium wasteful?

Accepted Answer

A)  because there are willing buyers of the good who do not purchase it 
B)  because resources are used without making society better off 
C)  because it creates a shortage, which generates waste 
D)  because it creates a surplus, which generates waste 
A)  because there are willing buyers of the good who do not purchase it 
B)  because resources are used without making society better off 
C)  because it creates a shortage, which generates waste 
D)  because it creates a surplus, which generates waste

Question 14

There is no difference between saying that there is a change in supply and in saying there is a change in the quantity supplied.

Accepted Answer

A) True 
 B)False

Question 15

When there is a shortage of 1,000 units of a particular good:

Accepted Answer

A)  the price of the good will rise. 
B)  the price of the good will fall. 
C)  the quantity demanded of the good will equal 1,000 units. 
D)  there will be no change in the price of the good. 
A)  the price of the good will rise. 
B)  the price of the good will fall. 
C)  the quantity demanded of the good will equal 1,000 units. 
D)  there will be no change in the price of the good.

Question 16

The equilibrium quantity is the quantity at which:

Accepted Answer

A)  consumers' willingness to pay equals producers' willingness to sell. 
B)  buyers have no unsatisfied wants. 
C)  gains from trade are minimized. 
D)  suppliers' production is maximized. 
A)  consumers' willingness to pay equals producers' willingness to sell. 
B)  buyers have no unsatisfied wants. 
C)  gains from trade are minimized. 
D)  suppliers' production is maximized.

Question 17

The yearly shortage of Super Bowl tickets implies that the price of Super Bowl tickets is:

Accepted Answer

A)  set at the equilibrium price since they always sell out. 
B)  above the equilibrium price. 
C)  below the equilibrium price. 
D)  not set by supply and demand, but instead set by the NFL. 
A)  set at the equilibrium price since they always sell out. 
B)  above the equilibrium price. 
C)  below the equilibrium price. 
D)  not set by supply and demand, but instead set by the NFL.

Question 18

OPEC is able to raise oil prices by:

Accepted Answer

A)  increasing the demand for oil. 
B)  decreasing the supply of oil by cutting production. 
C)  decreasing transportation costs, a complement to oil. 
D)  subsidizing the oil production of developing countries. 
A)  increasing the demand for oil. 
B)  decreasing the supply of oil by cutting production. 
C)  decreasing transportation costs, a complement to oil. 
D)  subsidizing the oil production of developing countries.

Question 19

An increase in the quantity supplied causes the supply curve to shift down and to the right.

Accepted Answer

A) True 
 B)False

Question 20

At a free market equilibrium there are no unexploited gains from trade.

Accepted Answer

A) True 
 B)False

Exam 4: Equilibrium

If market supply increases:

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

Which choice explains how the OPEC crisis of 1973 affected oil prices?

Use the following to answer questions: Figure: Demand and Supply -(Figure: Demand and Supply) Refer to the figure. Which statement is TRUE?

Use the following to answer questions: Figure: Price and Quantity 1 -(Figure: Price and Quantity 1) In the diagram, at a price of $80, the quantity demanded is ______, the quantity supplied is ______, and there is ______.

Use the following to answer questions: Figure: Price and Quantity 3 -(Figure: Price and Quantity 3) The value of wasted resources at a quantity of 80 units in the diagram is:

At the competitive market equilibrium the buyers who purchase the product have the highest willingness to pay.

How is a class in which students are graded on a curve like a competitive market?

Which of the following events will cause a decrease in the equilibrium price?

At the free market equilibrium, the quantity demanded minus the quantity supplied equals zero.

A decrease in supply raises the price of a good, but it also decreases the quantity demanded, which lowers the price of a good. The net effect on price is ambiguous.

Why is consuming a quantity above equilibrium wasteful?

There is no difference between saying that there is a change in supply and in saying there is a change in the quantity supplied.

When there is a shortage of 1,000 units of a particular good:

The equilibrium quantity is the quantity at which:

The yearly shortage of Super Bowl tickets implies that the price of Super Bowl tickets is:

OPEC is able to raise oil prices by:

An increase in the quantity supplied causes the supply curve to shift down and to the right.

At a free market equilibrium there are no unexploited gains from trade.

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: Price and Quantity 1 -(Figure: Price and Quantity 1) In the diagram, at a price of $80, the quantity demanded is , the quantity supplied is , and there is __.