Question 1

Figure: Supply and Demand 1   At a market quantity of 5, the shaded region in the figure represents:

Accepted Answer

A)  satisfied wants. 
B)  unexploited gains from trade. 
C)  the value of wasted resources. 
D)  willingness to pay. 
A)  satisfied wants. 
B)  unexploited gains from trade. 
C)  the value of wasted resources. 
D)  willingness to pay.

Question 2

If market demand decreases:

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 3

An increase in demand causes an increase in quantity supplied, which causes a decrease in price.

Accepted Answer

A) True 
 B)False

Question 4

In free markets, shortages lead to:

Accepted Answer

A)  lower prices. 
B)  higher prices. 
C)  surpluses. 
D)  unexploited gains from trade. 
A)  lower prices. 
B)  higher prices. 
C)  surpluses. 
D)  unexploited gains from trade.

Question 5

Gains from trade are maximized in a competitive market when:

Accepted Answer

A)  quantity supplied equals quantity demanded. 
B)  quantity supplied exceeds quantity demanded. 
C)  quantity demanded exceeds quantity supplied. 
D)  quantity supplied equals zero. 
A)  quantity supplied equals quantity demanded. 
B)  quantity supplied exceeds quantity demanded. 
C)  quantity demanded exceeds quantity supplied. 
D)  quantity supplied equals zero.

Question 6

Suppose the price of oil is falling due to a drop-off in demand after the summer driving season. Explain what a group of oil-producing nations (like OPEC) that control a significant amount of the world's oil supplies could do in order to keep prices (and hence profits) high.

Accepted Answer

OPEC nations would want to dec

Question 7

The September 11 terrorist attacks turned many people away from flying. The demand and supply model would predict which of the following events in the airline travel market?

Accepted Answer

A)  The supply of airline travel would decrease, resulting in a higher equilibrium price and lower equilibrium quantity. 
B)  The supply of airline travel would increase, resulting in a lower equilibrium price and higher equilibrium quantity. 
C)  The demand for airline travel would decrease, resulting in a lower equilibrium price and lower equilibrium quantity. 
D)  The supply and demand for airline travel would decrease, resulting in a higher equilibrium price and higher equilibrium quantity. 
A)  The supply of airline travel would decrease, resulting in a higher equilibrium price and lower equilibrium quantity. 
B)  The supply of airline travel would increase, resulting in a lower equilibrium price and higher equilibrium quantity. 
C)  The demand for airline travel would decrease, resulting in a lower equilibrium price and lower equilibrium quantity. 
D)  The supply and demand for airline travel would decrease, resulting in a higher equilibrium price and higher equilibrium quantity.

Question 8

Imagine a free market in equilibrium. After a sudden decrease in supply (but before the price can adjust), the market experiences a:

Accepted Answer

A)  shortage. 
B)  surplus. 
C)  its initial equilibrium. 
D)  a new equilibrium. 
A)  shortage. 
B)  surplus. 
C)  its initial equilibrium. 
D)  a new equilibrium.

Question 9

Following the release of a new study showing even more benefits to drinking red wine, economists expect:

Accepted Answer

A)  a shortage of red wine until the price rises. 
B)  a surplus of red wine until the price falls. 
C)  that both the price and quantity of red wine will decrease. 
D)  the supply of red wine will increase immediately. 
A)  a shortage of red wine until the price rises. 
B)  a surplus of red wine until the price falls. 
C)  that both the price and quantity of red wine will decrease. 
D)  the supply of red wine will increase immediately.

Question 10

In 1980 when Iraq attacked Iran, the price of oil _______ because of a(n) ______.

Accepted Answer

A)  increased; disruption in the supply of oil 
B)  increased; decrease in the demand for oil 
C)  fell; increased demand for oil 
D)  fell; increased quantity of oil supplied 
A)  increased; disruption in the supply of oil 
B)  increased; decrease in the demand for oil 
C)  fell; increased demand for oil 
D)  fell; increased quantity of oil supplied

Question 11

If the government institutes a tax on suppliers of Cheesy-Poofs, the market for Cheesy-Poofs will see:

Accepted Answer

A)  a decrease in demand, a decrease in quantity supplied, and an increase in price. 
B)  an increase in supply, a decrease in quantity supplied, and an increase in price. 
C)  a decrease in supply, an increase in quantity demanded, and an increase in price. 
D)  a decrease in supply, a decrease in quantity demanded, and an increase in price. 
A)  a decrease in demand, a decrease in quantity supplied, and an increase in price. 
B)  an increase in supply, a decrease in quantity supplied, and an increase in price. 
C)  a decrease in supply, an increase in quantity demanded, and an increase in price. 
D)  a decrease in supply, a decrease in quantity demanded, and an increase in price.

Question 12

If the equilibrium quantity in a market is 200, resources will be wasted and society made poorer if 250 units are produced.

Accepted Answer

A) True 
 B)False

Question 13

The key condition for equilibrium to occur in a market is:

Accepted Answer

A)  the demand curve equals the supply curve. 
B)  quantity demanded equals quantity supplied. 
C)  price equals quantity. 
D)  demand for one good equals demand for all other goods. 
A)  the demand curve equals the supply curve. 
B)  quantity demanded equals quantity supplied. 
C)  price equals quantity. 
D)  demand for one good equals demand for all other goods.

Question 14

Economic experiments suggest that the real world closely follows theoretical supply and demand.

Accepted Answer

A) True 
 B)False

Question 15

In a free market equilibrium, the gains from trade are always greater for consumers than for producers.

Accepted Answer

A) True 
 B)False

Question 16

For suppliers to sell more than the equilibrium quantity, it would mean that:

Accepted Answer

A)  it costs suppliers less to produce the good than its value to buyers. 
B)  it costs suppliers more to produce the good than its value to buyers. 
C)  the gains from trade increase. 
D)  suppliers gain from trade while buyers are unaffected. 
A)  it costs suppliers less to produce the good than its value to buyers. 
B)  it costs suppliers more to produce the good than its value to buyers. 
C)  the gains from trade increase. 
D)  suppliers gain from trade while buyers are unaffected.

Question 17

What is the difference between a change in the demand and a change in quantity demanded?

Accepted Answer

A)  A change in demand requires a movement along the demand curve, a change in quantity demanded does not. 
B)  A change in demand shifts the entire curve, a change in quantity demanded means price changed. 
C)  A change in quantity demanded means consumer preferences have changed. 
D)  A change in demand creates a new market equilibrium, a change in quantity demanded does not. 
A)  A change in demand requires a movement along the demand curve, a change in quantity demanded does not. 
B)  A change in demand shifts the entire curve, a change in quantity demanded means price changed. 
C)  A change in quantity demanded means consumer preferences have changed. 
D)  A change in demand creates a new market equilibrium, a change in quantity demanded does not.

Question 18

Imagine a free market in equilibrium. After a sudden decrease in demand (but before the price can adjust), the market experiences a:

Accepted Answer

A)  shortage. 
B)  surplus. 
C)  no change. 
D)  new equilibrium. 
A)  shortage. 
B)  surplus. 
C)  no change. 
D)  new equilibrium.

Question 19

When the price of a good equals the equilibrium price:

Accepted Answer

A)  there will still be some wasted resources. 
B)  gains from trade are minimized. 
C)  opportunity cost is minimized. 
D)  there are no unexploited gains from trade. 
A)  there will still be some wasted resources. 
B)  gains from trade are minimized. 
C)  opportunity cost is minimized. 
D)  there are no unexploited gains from trade.

Question 20

What can cause both equilibrium price and quantity to increase?

Accepted Answer

A)  an increase in the price of a complement good 
B)  a decrease in the population 
C)  consumer tastes becoming more favorable toward the good 
D)  an increase in the number of sellers 
A)  an increase in the price of a complement good 
B)  a decrease in the population 
C)  consumer tastes becoming more favorable toward the good 
D)  an increase in the number of sellers

Exam 4: Equilibrium

Figure: Supply and Demand 1 At a market quantity of 5, the shaded region in the figure represents:

If market demand decreases:

An increase in demand causes an increase in quantity supplied, which causes a decrease in price.

In free markets, shortages lead to:

Gains from trade are maximized in a competitive market when:

Suppose the price of oil is falling due to a drop-off in demand after the summer driving season. Explain what a group of oil-producing nations (like OPEC) that control a significant amount of the world's oil supplies could do in order to keep prices (and hence profits) high.

The September 11 terrorist attacks turned many people away from flying. The demand and supply model would predict which of the following events in the airline travel market?

Imagine a free market in equilibrium. After a sudden decrease in supply (but before the price can adjust), the market experiences a:

Following the release of a new study showing even more benefits to drinking red wine, economists expect:

In 1980 when Iraq attacked Iran, the price of oil _______ because of a(n) ______.

If the government institutes a tax on suppliers of Cheesy-Poofs, the market for Cheesy-Poofs will see:

If the equilibrium quantity in a market is 200, resources will be wasted and society made poorer if 250 units are produced.

The key condition for equilibrium to occur in a market is:

Economic experiments suggest that the real world closely follows theoretical supply and demand.

In a free market equilibrium, the gains from trade are always greater for consumers than for producers.

For suppliers to sell more than the equilibrium quantity, it would mean that:

What is the difference between a change in the demand and a change in quantity demanded?

Imagine a free market in equilibrium. After a sudden decrease in demand (but before the price can adjust), the market experiences a:

When the price of a good equals the equilibrium price:

What can cause both equilibrium price and quantity to increase?

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

In 1980 when Iraq attacked Iran, the price of oil _ because of a(n) .