Question 1

An increase in demand is a movement along the demand curve to the right.

Accepted Answer

A) True 
 B)False

Question 2

Firms are willing and able to sell 100 guitars per day at a price of $250 per guitar. What price will firms require to sell 100 guitars per day if there is a tax of $15 per guitar?

Accepted Answer

A)  $235 
B)  $250 
C)  between $235 and $250 
D)  $265 
A)  $235 
B)  $250 
C)  between $235 and $250 
D)  $265

Question 3

Use the following to answer questions:
Figure: Supply Shift 2  
-(Figure: Supply Shift 2) Refer to the figure. What would cause the supply curve to shift from S1 to S2?

Accepted Answer

A)  a $20 tax on each unit of output 
B)  a $40 tax on each unit of output 
C)  a $40 subsidy on each unit of output 
D)  a $20 subsidy on each unit of output 
A)  a $20 tax on each unit of output 
B)  a $40 tax on each unit of output 
C)  a $40 subsidy on each unit of output 
D)  a $20 subsidy on each unit of output

Question 4

Scientists discover that an asteroid is headed toward Earth and the force of its impact, expected in a matter of weeks, will wipe out all human life. What will happen to the demand for cancer screenings?

Accepted Answer

A)  It would increase because everyone would want to make sure they don't have cancer before they die. 
B)  There would be no effect. 
C)  The price of the screenings would increase, but the quantity demanded would stay the same. 
D)  It would decrease because people wouldn't care anymore if they had cancer. 
A)  It would increase because everyone would want to make sure they don't have cancer before they die. 
B)  There would be no effect. 
C)  The price of the screenings would increase, but the quantity demanded would stay the same. 
D)  It would decrease because people wouldn't care anymore if they had cancer.

Question 5

Figure: Oil Market   Refer to the figure. Which event could cause the change in the figure?

Accepted Answer

A)  the expectation of an outbreak of war in the world's best oil-producing regions 
B)  the expectation of an increase in the future supply of oil 
C)  the expectation that next week's oil prices will be substantially lower 
D)  the expectation of a technology breakthrough in solar energy 
A)  the expectation of an outbreak of war in the world's best oil-producing regions 
B)  the expectation of an increase in the future supply of oil 
C)  the expectation that next week's oil prices will be substantially lower 
D)  the expectation of a technology breakthrough in solar energy

Question 6

Joe runs a landscape company and uses one of his home's bedrooms as a home office. This office could be used to earn rental income from college students. If average rental income in Joe's neighborhood were to rise:

Accepted Answer

A)  Joe's opportunity cost of using a bedroom as a home office would decrease. 
B)  Joe's landscape company would experience a decrease in demand for services at all prices. 
C)  Joe should expand his office space in his home. 
D)  Joe's opportunity cost of using a bedroom as a home office would increase. 
A)  Joe's opportunity cost of using a bedroom as a home office would decrease. 
B)  Joe's landscape company would experience a decrease in demand for services at all prices. 
C)  Joe should expand his office space in his home. 
D)  Joe's opportunity cost of using a bedroom as a home office would increase.

Question 7

Figure: Demand   In the diagram, for a market price of $4 total consumer surplus equals:

Accepted Answer

A)  $30. 
B)  $60. 
C)  $100. 
D)  $75. 
A)  $30. 
B)  $60. 
C)  $100. 
D)  $75.

Question 8

Which variable does NOT shift the demand curve?

Accepted Answer

A)  population 
B)  price of complement goods 
C)  income 
D)  price of the good itself 
A)  population 
B)  price of complement goods 
C)  income 
D)  price of the good itself

Question 9

A market has a supply equation as follows: Qs = -20 + 2P. The market price for the product is $20. Calculate the dollar amount of producer surplus in this market and illustrate your answer graphically.

Accepted Answer

The first step is to calculate the inter

Question 10

The demand curve shows the quantity that consumers are willing and able to purchase at different prices.

Accepted Answer

A) True 
 B)False

Question 11

An increase in production costs at any given quantity _______ supply.

Accepted Answer

A)  increases 
B)  decreases 
C)  does not change 
D)  changes in an indeterminate direction 
A)  increases 
B)  decreases 
C)  does not change 
D)  changes in an indeterminate direction

Question 12

If the price of oil were sufficiently high, it would be used only in:

Accepted Answer

A)  making plastics. 
B)  generating heat. 
C)  powering cars and jets. 
D)  making kerosene. 
A)  making plastics. 
B)  generating heat. 
C)  powering cars and jets. 
D)  making kerosene.

Question 13

A decrease in the cost of inputs will shift the supply curve down and to the right.

Accepted Answer

A) True 
 B)False

Question 14

The law of supply states that there is a _____ relationship between price and quantity ______.

Accepted Answer

A)  positive; demanded 
B)  positive; supplied 
C)  negative; demanded 
D)  negative; supplied 
A)  positive; demanded 
B)  positive; supplied 
C)  negative; demanded 
D)  negative; supplied

Question 15

If romaine lettuce and iceberg lettuce are substitutes, a(n) _____ in the price of romaine lettuce will ______ the demand for iceberg lettuce.

Accepted Answer

A)  increase; decrease 
B)  increase; increase 
C)  decrease; increase 
D)  decrease; not change 
A)  increase; decrease 
B)  increase; increase 
C)  decrease; increase 
D)  decrease; not change

Question 16

Use the following to answer questions:
Figure: Supply Shifts  
-(Figure: Supply Shifts) In the figure, the initial supply curve is S1. If producers form expectations that the price will be lower in the near future, S1 will:

Accepted Answer

A)  shift to S2 now. 
B)  shift to S3 now. 
C)  not shift now. 
D)  only shift to S3 in the future. 
A)  shift to S2 now. 
B)  shift to S3 now. 
C)  not shift now. 
D)  only shift to S3 in the future.

Question 17

Use the following to answer questions:
Figure: Producer Surplus  
-(Figure: Producer Surplus) Refer to the figure. What is the change in producer surplus if the price rises from $2 to $3 per unit?

Accepted Answer

A)  $5 
B)  $10 
C)  $15 
D)  $20 
A)  $5 
B)  $10 
C)  $15 
D)  $20

Question 18

Changes in expectations can shift supply or demand.

Accepted Answer

A) True 
 B)False

Question 19

The demand for a product is given by:
 
Graph the demand curve and calculate consumer surplus at price of $2.

Accepted Answer

Consumer surplus = 0

Question 20

For an inferior good, higher income results in:

Accepted Answer

A)  an increase in demand. 
B)  a decrease in demand. 
C)  a movement up along the demand curve. 
D)  a movement down along the demand curve. 
A)  an increase in demand. 
B)  a decrease in demand. 
C)  a movement up along the demand curve. 
D)  a movement down along the demand curve.

Exam 3: Supply and Demand

An increase in demand is a movement along the demand curve to the right.

Firms are willing and able to sell 100 guitars per day at a price of $250 per guitar. What price will firms require to sell 100 guitars per day if there is a tax of $15 per guitar?

Use the following to answer questions: Figure: Supply Shift 2 -(Figure: Supply Shift 2) Refer to the figure. What would cause the supply curve to shift from S1 to S2?

Scientists discover that an asteroid is headed toward Earth and the force of its impact, expected in a matter of weeks, will wipe out all human life. What will happen to the demand for cancer screenings?

Figure: Oil Market Refer to the figure. Which event could cause the change in the figure?

Joe runs a landscape company and uses one of his home's bedrooms as a home office. This office could be used to earn rental income from college students. If average rental income in Joe's neighborhood were to rise:

Figure: Demand In the diagram, for a market price of $4 total consumer surplus equals:

Which variable does NOT shift the demand curve?

A market has a supply equation as follows: Qs = -20 + 2P. The market price for the product is $20. Calculate the dollar amount of producer surplus in this market and illustrate your answer graphically.

The demand curve shows the quantity that consumers are willing and able to purchase at different prices.

An increase in production costs at any given quantity _______ supply.

If the price of oil were sufficiently high, it would be used only in:

A decrease in the cost of inputs will shift the supply curve down and to the right.

The law of supply states that there is a _____ relationship between price and quantity ______.

If romaine lettuce and iceberg lettuce are substitutes, a(n) _____ in the price of romaine lettuce will ______ the demand for iceberg lettuce.

Use the following to answer questions: Figure: Supply Shifts -(Figure: Supply Shifts) In the figure, the initial supply curve is S1. If producers form expectations that the price will be lower in the near future, S1 will:

Use the following to answer questions: Figure: Producer Surplus -(Figure: Producer Surplus) Refer to the figure. What is the change in producer surplus if the price rises from $2 to $3 per unit?

Changes in expectations can shift supply or demand.

The demand for a product is given by: Graph the demand curve and calculate consumer surplus at price of $2.

For an inferior good, higher income results in:

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

Filters

Use the following to answer questions: Figure: Supply Shift 2 -(Figure: Supply Shift 2) Refer to the figure. What would cause the supply curve to shift from S₁ to S₂?

A market has a supply equation as follows: Q_s = -20 + 2P. The market price for the product is $20. Calculate the dollar amount of producer surplus in this market and illustrate your answer graphically.

The law of supply states that there is a _ relationship between price and quantity __.

If romaine lettuce and iceberg lettuce are substitutes, a(n) _ in the price of romaine lettuce will __ the demand for iceberg lettuce.

Use the following to answer questions: Figure: Supply Shifts -(Figure: Supply Shifts) In the figure, the initial supply curve is S₁. If producers form expectations that the price will be lower in the near future, S₁will: