Question 1

When there is an excess supply in the market, competition will:

Accepted Answer

A)  drive the price down to the equilibrium price. 
B)  drive the price up to the equilibrium price. 
C)  cause the demand curve to shift right. 
D)  cause the supply curve to increase. 
A)  drive the price down to the equilibrium price. 
B)  drive the price up to the equilibrium price. 
C)  cause the demand curve to shift right. 
D)  cause the supply curve to increase.

Question 2

In a competitive market, sellers compete with other sellers.

Accepted Answer

A) True 
 B)False

Question 3

Consider the market for electric guitars, a normal good. Use well-labeled supply and demand diagrams to illustrate the effects of the following events on the market for electric guitars.
a. Consumer income increases.
b. The price of wood increases.
c. The price of electric amplifiers decreases.
d. There is a decrease in the price of bass guitars, a substitute for electric guitars.
e. The government eliminates taxes on the producers of electric guitars.
f. Many new electric guitar companies are started by an influx of immigrants.

Accepted Answer

The answer of Consider the market for electric guitars, a...

Question 4

Use the following to answer questions:
Figure: Price and Quantity 1  
-(Figure: Price and Quantity 1) In the diagram, at which price is quantity demanded equal to the quantity supplied?

Accepted Answer

A)  $40 
B)  $50 
C)  $60 
D)  $80 
A)  $40 
B)  $50 
C)  $60 
D)  $80

Question 5

Lead, an input in the production of ammunition, increased in price from $0.60/lb in 2006 to over $1.50/lb in 2007. A possible explanation for this is that demand has increased faster than supply has increased.

Accepted Answer

A) True 
 B)False

Question 6

An increase in the quantity supplied results in:

Accepted Answer

A)  a shift of the supply curve to the left. 
B)  a shift of the supply curve to the right. 
C)  a movement upward and to the right along the supply curve. 
D)  a movement downward and to the left along the supply curve. 
A)  a shift of the supply curve to the left. 
B)  a shift of the supply curve to the right. 
C)  a movement upward and to the right along the supply curve. 
D)  a movement downward and to the left along the supply curve.

Question 7

An increase in demand and a decrease in supply 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

In a market, the equilibrium condition is given by the following:

Accepted Answer

A)  quantity demanded = quantity supplied 
B)  quantity demanded × quantity supplied 
C)  quantity demanded / quantity supplied 
D)  price × quantity demanded = quantity supplied 
A)  quantity demanded = quantity supplied 
B)  quantity demanded × quantity supplied 
C)  quantity demanded / quantity supplied 
D)  price × quantity demanded = quantity supplied

Question 9

A decrease in the supply of milk will lead to a decrease in the QUANTITY DEMANDED of milk.

Accepted Answer

A) True 
 B)False

Question 10

The equilibrium price is unstable because sellers have an incentive to lower their price to sell more goods.

Accepted Answer

A) True 
 B)False

Question 11

If supply decreases and its slope remains the same, consumer surplus:

Accepted Answer

A)  increases. 
B)  decreases. 
C)  stays the same. 
D)  cannot be determined given the information provided. 
A)  increases. 
B)  decreases. 
C)  stays the same. 
D)  cannot be determined given the information provided.

Question 12

The price of gasoline decreased dramatically in the summer of 2009. One likely reason for this change is:

Accepted Answer

A)  a shortage in the supply of oil worldwide. 
B)  riots in the Middle East that disrupted oil shipments. 
C)  a decrease in the demand for gasoline brought on by the recession. 
D)  strong economic growth in China that increased the demand for automobiles. 
A)  a shortage in the supply of oil worldwide. 
B)  riots in the Middle East that disrupted oil shipments. 
C)  a decrease in the demand for gasoline brought on by the recession. 
D)  strong economic growth in China that increased the demand for automobiles.

Question 13

Surpluses drive price up while shortages drive price down.

Accepted Answer

A) True 
 B)False

Question 14

Figure: Supply-Driven Price Change   Refer to the figure. When the supply curve shifts from S0 to S1, the equilibrium price rises to:

Accepted Answer

A)  $12 and the equilibrium quantity falls to 70. 
B)  $10 and the equilibrium quantity falls to 100. 
C)  $12 and the equilibrium quantity falls to 40. 
D)  $10 and the equilibrium quantity falls to 70. 
A)  $12 and the equilibrium quantity falls to 70. 
B)  $10 and the equilibrium quantity falls to 100. 
C)  $12 and the equilibrium quantity falls to 40. 
D)  $10 and the equilibrium quantity falls to 70.

Question 15

In free markets, surpluses lead to:

Accepted Answer

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

Question 16

If the market price is above the equilibrium price, which of the following will occur?

Accepted Answer

A)  Quantity demanded will exceed quantity supplied and the market price will eventually fall. 
B)  Quantity demanded will exceed quantity supplied and the market price will eventually rise. 
C)  Quantity supplied will exceed quantity demanded and the market price will eventually fall. 
D)  Quantity supplied will exceed quantity demanded, and the market price will eventually rise. 
A)  Quantity demanded will exceed quantity supplied and the market price will eventually fall. 
B)  Quantity demanded will exceed quantity supplied and the market price will eventually rise. 
C)  Quantity supplied will exceed quantity demanded and the market price will eventually fall. 
D)  Quantity supplied will exceed quantity demanded, and the market price will eventually rise.

Question 17

Gains from trade are maximized at the:

Accepted Answer

A)  equilibrium price and quantity. 
B)  midpoint on the demand curve. 
C)  point at which output is maximized. 
D)  vertical intercept on the supply curve. 
A)  equilibrium price and quantity. 
B)  midpoint on the demand curve. 
C)  point at which output is maximized. 
D)  vertical intercept on the supply curve.

Question 18

When the quantity supplied of a good exceeds the quantity demanded, there is a(n):

Accepted Answer

A)  shortage. 
B)  surplus. 
C)  equilibrium. 
D)  opportunity cost. 
A)  shortage. 
B)  surplus. 
C)  equilibrium. 
D)  opportunity cost.

Question 19

Imagine a free market in which quantity supplied is 40 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 20

Figure: Demand-Driven Price Change   Refer to the figure. When the demand curve shifts from D0 to D1, the equilibrium price rises to:

Accepted Answer

A)  $9 and the equilibrium quantity rises to 120. 
B)  $9 and the equilibrium quantity rises to 160. 
C)  $8 and the equilibrium quantity rises to 140. 
D)  $8 and the equilibrium quantity rises to 160. 
A)  $9 and the equilibrium quantity rises to 120. 
B)  $9 and the equilibrium quantity rises to 160. 
C)  $8 and the equilibrium quantity rises to 140. 
D)  $8 and the equilibrium quantity rises to 160.

Exam 4: Equilibrium

When there is an excess supply in the market, competition will:

In a competitive market, sellers compete with other sellers.

Use the following to answer questions: Figure: Price and Quantity 1 -(Figure: Price and Quantity 1) In the diagram, at which price is quantity demanded equal to the quantity supplied?

Lead, an input in the production of ammunition, increased in price from $0.60/lb in 2006 to over $1.50/lb in 2007. A possible explanation for this is that demand has increased faster than supply has increased.

An increase in the quantity supplied results in:

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

In a market, the equilibrium condition is given by the following:

A decrease in the supply of milk will lead to a decrease in the QUANTITY DEMANDED of milk.

The equilibrium price is unstable because sellers have an incentive to lower their price to sell more goods.

If supply decreases and its slope remains the same, consumer surplus:

The price of gasoline decreased dramatically in the summer of 2009. One likely reason for this change is:

Surpluses drive price up while shortages drive price down.

Figure: Supply-Driven Price Change Refer to the figure. When the supply curve shifts from S0 to S1, the equilibrium price rises to:

In free markets, surpluses lead to:

If the market price is above the equilibrium price, which of the following will occur?

Gains from trade are maximized at the:

When the quantity supplied of a good exceeds the quantity demanded, there is a(n):

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

Figure: Demand-Driven Price Change Refer to the figure. When the demand curve shifts from D0 to D1, the equilibrium price rises to:

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

Figure: Supply-Driven Price Change Refer to the figure. When the supply curve shifts from S₀ to S₁, the equilibrium price rises to:

Figure: Demand-Driven Price Change Refer to the figure. When the demand curve shifts from D₀ to D₁, the equilibrium price rises to: