Question 1

Consumer surplus can be defined as the net benefit to consumers from participating in a market.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following explains why the demand for oil has a negative slope?

Accepted Answer

A)  Oil is equally valuable in all of its uses. 
B)  Oil is not equally valuable in all of its uses. 
C)  Oil has many uses. 
D)  Oil has few substitutes. 
A)  Oil is equally valuable in all of its uses. 
B)  Oil is not equally valuable in all of its uses. 
C)  Oil has many uses. 
D)  Oil has few substitutes.

Question 3

On a graph of a demand curve, total consumer surplus equals:

Accepted Answer

A)  the demand curve. 
B)  the area above the demand curve and beneath the market price. 
C)  the area beneath the demand curve and above the market price. 
D)  the market price. 
A)  the demand curve. 
B)  the area above the demand curve and beneath the market price. 
C)  the area beneath the demand curve and above the market price. 
D)  the market price.

Question 4

Figure: Demand Shift   Refer to the figure. Which factor would cause the change in the figure?

Accepted Answer

A)  a decrease in the price of a complement good 
B)  a decrease in the price of the product 
C)  a decrease in the price of a substitute good 
D)  an increase in taxes 
A)  a decrease in the price of a complement good 
B)  a decrease in the price of the product 
C)  a decrease in the price of a substitute good 
D)  an increase in taxes

Question 5

Suppose it is widely believed that the price of flat-screen, high-definition televisions will be lower next year. What will happen as a result of such beliefs?

Accepted Answer

A)  The demand for flat-screen TVs will increase now. 
B)  The demand for flat-screen TVs will decrease next year. 
C)  The demand for flat-screen TVs will decrease now. 
D)  The demand for flat-screen TVs will not change now. 
A)  The demand for flat-screen TVs will increase now. 
B)  The demand for flat-screen TVs will decrease next year. 
C)  The demand for flat-screen TVs will decrease now. 
D)  The demand for flat-screen TVs will not change now.

Question 6

When income increases, the demand for all goods increases as well.

Accepted Answer

A) True 
 B)False

Question 7

A local university decides to double its enrollment over the next five years in order to increase tuition revenue. Which of the following would most likely occur in the market for rental housing in the surrounding community?

Accepted Answer

A)  a decrease in the price of rental housing 
B)  an increase in the demand for rental housing 
C)  a decrease in the supply of rental housing 
D)  A population change leads to a change in quantity demanded, not demand. 
A)  a decrease in the price of rental housing 
B)  an increase in the demand for rental housing 
C)  a decrease in the supply of rental housing 
D)  A population change leads to a change in quantity demanded, not demand.

Question 8

Bloomberg News reports that OPEC (a group of countries that together form the world's leading supplier of oil) will increase their supply of oil. This is expected to bring future oil prices down. How will this move by OPEC affect the demand for oil today? Explain your reasoning.

Accepted Answer

It will cause today's demand for oil to

Question 9

The movie trilogy The Lord of the Rings was hugely successful, and, as a result, the demand for fantasy novels, action figures, and online role-playing games surged. The increase in demand can be explained by a(n):

Accepted Answer

A)  increase in population. 
B)  change in expectations. 
C)  change in tastes. 
D)  change in the price of substitutes. 
A)  increase in population. 
B)  change in expectations. 
C)  change in tastes. 
D)  change in the price of substitutes.

Question 10

Use the following to answer questions:
Figure: Producer Surplus  
-(Figure: Producer Surplus) Refer to the figure. What is the producer surplus at a price of $2 per unit?

Accepted Answer

A)  $5 
B)  $6 
C)  $10 
D)  $20 
A)  $5 
B)  $6 
C)  $10 
D)  $20

Question 11

Nintendo Wii's controllers use two AA batteries. When the price of Nintendo Wii fell from $199 to $149, the demand for AA batteries:

Accepted Answer

A)  increased since they are a complement good to the Nintendo Wii. 
B)  decreased since they are a complement good to the Nintendo Wii. 
C)  increased since they are a substitute good to the Nintendo Wii. 
D)  decreased since they are a substitute good to the Nintendo Wii. 
A)  increased since they are a complement good to the Nintendo Wii. 
B)  decreased since they are a complement good to the Nintendo Wii. 
C)  increased since they are a substitute good to the Nintendo Wii. 
D)  decreased since they are a substitute good to the Nintendo Wii.

Question 12

A reduction in the expected future supply of a good will increase the demand for substitute goods today.

Accepted Answer

A) True 
 B)False

Question 13

Suppose that Country X is a high-cost producer of oil and Country Y is a low-cost producer of oil. The citizens of Country X use both oil produced in their own country as well as oil produced in Country Y. If the market price of oil decreases, oil production in Country X will _______, and the citizens of Country X will _________________.

Accepted Answer

A)  decrease; purchase a larger fraction of their oil from Country Y 
B)  increase; purchase a larger fraction of their oil from Country X 
C)  decrease; not change their consumption mix between imported and domestic oil 
D)  increase; purchase a smaller fraction of their oil from Country Y 
A)  decrease; purchase a larger fraction of their oil from Country Y 
B)  increase; purchase a larger fraction of their oil from Country X 
C)  decrease; not change their consumption mix between imported and domestic oil 
D)  increase; purchase a smaller fraction of their oil from Country Y

Question 14

If Maria is willing to pay $50 for a sweatshirt, how much consumer surplus does she earn if the market price for sweatshirts is $27.50 each?

Accepted Answer

A)  $27.50 
B)  $50.00 
C)  $77.50 
D)  $22.50 
A)  $27.50 
B)  $50.00 
C)  $77.50 
D)  $22.50

Question 15

The quantity supplied is the:

Accepted Answer

A)  amount of inputs that a firm earns profit on. 
B)  change in the sellers' output multiplied by the change in price. 
C)  incremental cost of producing one more unit of output, holding all other things constant. 
D)  amount of a good that firms are willing and able to sell at a particular price during a given period of time. 
A)  amount of inputs that a firm earns profit on. 
B)  change in the sellers' output multiplied by the change in price. 
C)  incremental cost of producing one more unit of output, holding all other things constant. 
D)  amount of a good that firms are willing and able to sell at a particular price during a given period of time.

Question 16

A government subsidy to producers causes the:

Accepted Answer

A)  supply of the product to increase. 
B)  supply of the product to decrease. 
C)  supply curve to change slope. 
D)  supply curve to shift up and to the left. 
A)  supply of the product to increase. 
B)  supply of the product to decrease. 
C)  supply curve to change slope. 
D)  supply curve to shift up and to the left.

Question 17

A decrease in the opportunity cost of steel production will:

Accepted Answer

A)  increase the price of steel. 
B)  make suppliers more likely to produce steel, thus shifting the supply curve up and to the left. 
C)  make suppliers more likely to produce steel, thus shifting the supply curve down and to the right. 
D)  entice producers to produce more substitute goods. 
A)  increase the price of steel. 
B)  make suppliers more likely to produce steel, thus shifting the supply curve up and to the left. 
C)  make suppliers more likely to produce steel, thus shifting the supply curve down and to the right. 
D)  entice producers to produce more substitute goods.

Question 18

What will happen to the supply of workers 18 to 21 years after a baby boom?

Accepted Answer

A)  It will decrease, since workers will cost more to hire. 
B)  It will increase because of the influx of new adults into the labor market. 
C)  It will increase because workers will be needed to care for retirees. 
D)  It will decrease because producer surplus will be lower. 
A)  It will decrease, since workers will cost more to hire. 
B)  It will increase because of the influx of new adults into the labor market. 
C)  It will increase because workers will be needed to care for retirees. 
D)  It will decrease because producer surplus will be lower.

Question 19

If the price of corn rises, all else the same, we expect the supply of soybeans to increase.

Accepted Answer

A) True 
 B)False

Question 20

A demand curve indicates that:

Accepted Answer

A)  the quantity demanded of a good is higher when its price is higher. 
B)  the quantity demanded of a good is higher when its price is lower. 
C)  the demand for a good is higher when its price is lower. 
D)  the demand for a good is higher when its price is higher. 
A)  the quantity demanded of a good is higher when its price is higher. 
B)  the quantity demanded of a good is higher when its price is lower. 
C)  the demand for a good is higher when its price is lower. 
D)  the demand for a good is higher when its price is higher.

Exam 3: Supply and Demand

Consumer surplus can be defined as the net benefit to consumers from participating in a market.

Which of the following explains why the demand for oil has a negative slope?

On a graph of a demand curve, total consumer surplus equals:

Figure: Demand Shift Refer to the figure. Which factor would cause the change in the figure?

Suppose it is widely believed that the price of flat-screen, high-definition televisions will be lower next year. What will happen as a result of such beliefs?

When income increases, the demand for all goods increases as well.

A local university decides to double its enrollment over the next five years in order to increase tuition revenue. Which of the following would most likely occur in the market for rental housing in the surrounding community?

Bloomberg News reports that OPEC (a group of countries that together form the world's leading supplier of oil) will increase their supply of oil. This is expected to bring future oil prices down. How will this move by OPEC affect the demand for oil today? Explain your reasoning.

The movie trilogy The Lord of the Rings was hugely successful, and, as a result, the demand for fantasy novels, action figures, and online role-playing games surged. The increase in demand can be explained by a(n):

Use the following to answer questions: Figure: Producer Surplus -(Figure: Producer Surplus) Refer to the figure. What is the producer surplus at a price of $2 per unit?

Nintendo Wii's controllers use two AA batteries. When the price of Nintendo Wii fell from $199 to $149, the demand for AA batteries:

A reduction in the expected future supply of a good will increase the demand for substitute goods today.

If Maria is willing to pay $50 for a sweatshirt, how much consumer surplus does she earn if the market price for sweatshirts is $27.50 each?

The quantity supplied is the:

A government subsidy to producers causes the:

A decrease in the opportunity cost of steel production will:

What will happen to the supply of workers 18 to 21 years after a baby boom?

If the price of corn rises, all else the same, we expect the supply of soybeans to increase.

A demand curve indicates that:

The Big Ideas

The Power of Trade and Comparative

Equilibrium

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

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