Question 1

Figure: Demand Shift   In the figure,the demand curve shifted from D0 to D1.To describe this movement,we would say that:

Accepted Answer

A)  demand increased,which caused an increase in supply. 
B)  quantity demanded increased,which caused an increase in supply. 
C)  demand increased,which caused an increase in quantity supplied. 
D)  quantity demanded increased,which caused an increase in quantity supplied. 
A)  demand increased,which caused an increase in supply. 
B)  quantity demanded increased,which caused an increase in supply. 
C)  demand increased,which caused an increase in quantity supplied. 
D)  quantity demanded increased,which caused an increase in quantity supplied.

Question 2

Figure: Basic Supply and Demand M   In a free market,as illustrated in the diagram,total gains from trade are greatest when:

Accepted Answer

A)  60 units are sold at a price of $2. 
B)  40 units are sold at a price of $3. 
C)  60 units are sold at a price of $4. 
D)  50 units are sold at a price of $3. 
A)  60 units are sold at a price of $2. 
B)  40 units are sold at a price of $3. 
C)  60 units are sold at a price of $4. 
D)  50 units are sold at a price of $3.

Question 3

A market can be described by the equations Qd = 100 - P and Qs = P.What are the equilibrium price and quantity in this market?

Accepted Answer

A)  The equilibrium price is $50 and the equilibrium quantity is 50 units. 
B)  The equilibrium price is $100 and the equilibrium quantity is 100 units. 
C)  The equilibrium price is $0 and the equilibrium quantity is 0 units. 
D)  The equilibrium price is $0 and the equilibrium quantity is 100 units. 
A)  The equilibrium price is $50 and the equilibrium quantity is 50 units. 
B)  The equilibrium price is $100 and the equilibrium quantity is 100 units. 
C)  The equilibrium price is $0 and the equilibrium quantity is 0 units. 
D)  The equilibrium price is $0 and the equilibrium quantity is 100 units.

Question 4

Use the following to answer questions 
Figure: Basic Supply and Demand  
-(Figure: Basic Supply and Demand)In the diagram,which of the following statements is TRUE?

Accepted Answer

A)  The equilibrium price is $3,and the equilibrium quantity is 60 units. 
B)  The equilibrium price is $4,and the equilibrium quantity is 60 units. 
C)  The equilibrium price is $2,and the equilibrium quantity is 40 units. 
D)  The equilibrium price is $3,and the equilibrium quantity is 50 units. 
A)  The equilibrium price is $3,and the equilibrium quantity is 60 units. 
B)  The equilibrium price is $4,and the equilibrium quantity is 60 units. 
C)  The equilibrium price is $2,and the equilibrium quantity is 40 units. 
D)  The equilibrium price is $3,and the equilibrium quantity is 50 units.

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

Higher gasoline prices have led to a decrease in the demand for large SUVs.Consequently,in the market for SUVs,economists are predicting:

Accepted Answer

A)  an increase in both the price and quantity of sales. 
B)  a decrease in both the price and quantity of sales. 
C)  an increase in price and a decrease in the quantity of sales. 
D)  a decrease in price and an increase in the quantity of sales. 
A)  an increase in both the price and quantity of sales. 
B)  a decrease in both the price and quantity of sales. 
C)  an increase in price and a decrease in the quantity of sales. 
D)  a decrease in price and an increase in the quantity of sales.

Question 7

The government plans to increase cigarette taxes in six months.Since consumers should expect the future price of cigarettes to increase,the current demand for cigarettes will increase,and the price of cigarettes will rise even before the tax is implemented.

Accepted Answer

A) True 
 B)False

Question 8

If sellers want to sell more products than buyers are willing to purchase,we know that:

Accepted Answer

A)  the current price is less than the equilibrium price. 
B)  quantity demanded exceeds quantity supplied. 
C)  the current price is greater than the equilibrium price. 
D)  the demand curve will likely increase. 
A)  the current price is less than the equilibrium price. 
B)  quantity demanded exceeds quantity supplied. 
C)  the current price is greater than the equilibrium price. 
D)  the demand curve will likely increase.

Question 9

If the price of Nike Air Force 1 sneakers is below the equilibrium price:

Accepted Answer

A)  competition will eventually push the price up. 
B)  there will be a surplus of sneakers. 
C)  quantity demanded will increase as the price rises to meet the equilibrium price. 
D)  quantity supplied will be greater than quantity demanded. 
A)  competition will eventually push the price up. 
B)  there will be a surplus of sneakers. 
C)  quantity demanded will increase as the price rises to meet the equilibrium price. 
D)  quantity supplied will be greater than quantity demanded.

Question 10

An increase in the wages of fruit pickers will ultimately lead to a decrease in the supply of fruit and hence an increase in the price of fruit.

Accepted Answer

A) True 
 B)False

Question 11

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 12

An increase in quantity demanded is a shift in the entire demand curve.

Accepted Answer

A) True 
 B)False

Question 13

If supply 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 14

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 15

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 16

Use the following to answer questions 
Figure: Price and Quantity 3  
-Why did Vernon Smith win the Nobel Prize in Economics in 2002?

Accepted Answer

A)  He created the theory of supply and demand. 
B)  He used laboratory experiments as a tool to confirm the theory of supply and demand. 
C)  He was able to disprove the theory of supply and demand. 
D)  This is a trick question,because Vernon Smith did not win the Nobel Prize. 
A)  He created the theory of supply and demand. 
B)  He used laboratory experiments as a tool to confirm the theory of supply and demand. 
C)  He was able to disprove the theory of supply and demand. 
D)  This is a trick question,because Vernon Smith did not win the Nobel Prize.

Question 17

A free market achieves an equilibrium price and quantity due to:

Accepted Answer

A)  the combined actions of buyers and sellers. 
B)  increased competition among sellers. 
C)  government regulations placed on market participants. 
D)  buyers' ability to affect market outcomes. 
A)  the combined actions of buyers and sellers. 
B)  increased competition among sellers. 
C)  government regulations placed on market participants. 
D)  buyers' ability to affect market outcomes.

Question 18

Which of the following would increase the demand for beef?

Accepted Answer

A)  lower pork prices 
B)  higher consumer income 
C)  higher prices of feed grains used to feed beef cattle 
D)  an increase in the price of beef 
A)  lower pork prices 
B)  higher consumer income 
C)  higher prices of feed grains used to feed beef cattle 
D)  an increase in the price of beef

Question 19

The equilibrium price is:

Accepted Answer

A)  stable because at this price the quantity demanded equals the quantity supplied. 
B)  unstable because at this price the quantity demanded is less than the quantity supplied. 
C)  unstable because at this price the quantity demanded exceeds the quantity supplied. 
D)  stable because at this price all buyers are willing and able to pay. 
A)  stable because at this price the quantity demanded equals the quantity supplied. 
B)  unstable because at this price the quantity demanded is less than the quantity supplied. 
C)  unstable because at this price the quantity demanded exceeds the quantity supplied. 
D)  stable because at this price all buyers are willing and able to pay.

Question 20

When Asian countries went into a recession in 1997,the demand for oil _______ and the price of oil ________.

Accepted Answer

A)  increased;increased 
B)  decreased;increased 
C)  decreased;decreased 
D)  increased;decreased 
A)  increased;increased 
B)  decreased;increased 
C)  decreased;decreased 
D)  increased;decreased

Exam 4: Equilibrium- How Supply and Demand

Figure: Demand Shift In the figure,the demand curve shifted from D0 to D1.To describe this movement,we would say that:

Figure: Basic Supply and Demand M In a free market,as illustrated in the diagram,total gains from trade are greatest when:

A market can be described by the equations Qd = 100 - P and Qs = P.What are the equilibrium price and quantity in this market?

Use the following to answer questions Figure: Basic Supply and Demand -(Figure: Basic Supply and Demand)In the diagram,which of the following statements is TRUE?

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

Higher gasoline prices have led to a decrease in the demand for large SUVs.Consequently,in the market for SUVs,economists are predicting:

The government plans to increase cigarette taxes in six months.Since consumers should expect the future price of cigarettes to increase,the current demand for cigarettes will increase,and the price of cigarettes will rise even before the tax is implemented.

If sellers want to sell more products than buyers are willing to purchase,we know that:

If the price of Nike Air Force 1 sneakers is below the equilibrium price:

An increase in the wages of fruit pickers will ultimately lead to a decrease in the supply of fruit and hence an increase in the price of fruit.

An increase in the quantity supplied results in:

An increase in quantity demanded is a shift in the entire demand curve.

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

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

OPEC is able to raise oil prices by:

Use the following to answer questions Figure: Price and Quantity 3 -Why did Vernon Smith win the Nobel Prize in Economics in 2002?

A free market achieves an equilibrium price and quantity due to:

Which of the following would increase the demand for beef?

The equilibrium price is:

When Asian countries went into a recession in 1997,the demand for oil _______ and the price of oil ________.

The Big Ideas

The Power of Trade

Supply and Demand

Price Ceilings and Floors

GDP and the Measurement of Progress

The Wealth of Nations and Economic Growth

Growth,capital Accumulation

Saving,investment,and the Financial System

Stock Markets and Personal Finance

Unemployment and Labor Force Participation

Inflation and the Quantity Theory of Money

Business Fluctuations

Transmission and Amplification Mechanisms

The Federal Reserve System

Monetary Policy

The Federal Budget- Taxes and Spending

Fiscal Policy

International Trade

International Finance

Political Economy and Public Choice

Filters

Figure: Demand Shift In the figure,the demand curve shifted from D₀ to D₁.To describe this movement,we would say that:

A market can be described by the equations Q_d = 100 - P and Q_s = P.What are the equilibrium price and quantity in this market?

When Asian countries went into a recession in 1997,the demand for oil _ and the price of oil __.