Question 1

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 2

If scientists discover a new form of energy that cuts the cost of producing electricity to the equivalent of $10 a barrel,what will happen to the market for oil?

Accepted Answer

A)  The price of oil would rise because of the competition from the new energy source. 
B)  The supply of oil would decrease because few suppliers can profitably produce oil at $10 a barrel. 
C)  There would be no effect on the market for oil. 
D)  Demand for oil would decrease over time since no one would pay more than $10 for a barrel of oil to produce energy. 
A)  The price of oil would rise because of the competition from the new energy source. 
B)  The supply of oil would decrease because few suppliers can profitably produce oil at $10 a barrel. 
C)  There would be no effect on the market for oil. 
D)  Demand for oil would decrease over time since no one would pay more than $10 for a barrel of oil to produce energy.

Question 3

A demand curve shows the relationship between:

Accepted Answer

A)  quantity demanded and quantity supplied,which are positively related. 
B)  quantity demanded and quantity supplied,which are negatively related. 
C)  price and quantity demanded,which are positively related. 
D)  price and quantity demanded,which are negatively related. 
A)  quantity demanded and quantity supplied,which are positively related. 
B)  quantity demanded and quantity supplied,which are negatively related. 
C)  price and quantity demanded,which are positively related. 
D)  price and quantity demanded,which are negatively related.

Question 4

Suppose that the equilibrium price in the market is $10.If the current market price is $7.50:

Accepted Answer

A)  the equilibrium price will fall to $7.50. 
B)  competition among buyers will increase the current price. 
C)  the current price will fall below $7.50 as sellers compete for market share. 
D)  There is not enough information provided to answer the question. 
A)  the equilibrium price will fall to $7.50. 
B)  competition among buyers will increase the current price. 
C)  the current price will fall below $7.50 as sellers compete for market share. 
D)  There is not enough information provided to answer the question.

Question 5

After a hurricane in Florida destroys half of the orange crop,economists predict:

Accepted Answer

A)  an increase in both orange prices and orange sales. 
B)  a decrease in both orange prices and orange sales. 
C)  an increase in orange prices and a decrease in orange sales. 
D)  a decrease in orange prices and an increase in orange sales. 
A)  an increase in both orange prices and orange sales. 
B)  a decrease in both orange prices and orange sales. 
C)  an increase in orange prices and a decrease in orange sales. 
D)  a decrease in orange prices and an increase in orange sales.

Question 6

Figure: Four Panel 1   Which of the four panels shows an increase in the quantity supplied?

Accepted Answer

A)  Panel A 
B)  Panel B 
C)  Panel C 
D)  Panel D 
A)  Panel A 
B)  Panel B 
C)  Panel C 
D)  Panel D

Question 7

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 8

The sum of consumer and producer surplus increases when producers sell more than the market equilibrium quantity.

Accepted Answer

A) True 
 B)False

Question 9

Use the following to answer questions 
Figure: Market Changes  
-(Figure: Market Changes)Refer to the figures.If these figures represent the market for asparagus,which figure shows the effect of a new disease-resistant asparagus seed?

Accepted Answer

A)  Figure A 
B)  Figure B 
C)  Figure C 
D)  Figure D 
A)  Figure A 
B)  Figure B 
C)  Figure C 
D)  Figure D

Question 10

In a competitive market:

Accepted Answer

A)  buyers compete with other buyers,and sellers compete with other sellers. 
B)  buyers compete with sellers,and sellers compete with buyers. 
C)  sellers alone determine the equilibrium price. 
D)  buyers alone determine the equilibrium price. 
A)  buyers compete with other buyers,and sellers compete with other sellers. 
B)  buyers compete with sellers,and sellers compete with buyers. 
C)  sellers alone determine the equilibrium price. 
D)  buyers alone determine the equilibrium price.

Question 11

Use the following to answer questions 
Figure: Market Changes  
-(Figure: Market Changes)Refer to the figures.If the figures represent the market for a popular soda,which figure shows the effect of an increase in the price of a competing energy drink?

Accepted Answer

A)  Figure A 
B)  Figure B 
C)  Figure C 
D)  Figure D 
A)  Figure A 
B)  Figure B 
C)  Figure C 
D)  Figure D

Question 12

What will happen in the market for cotton as a result of a severe drought?

Accepted Answer

A)  The demand for cotton will decrease,causing the equilibrium price to fall and equilibrium quantity to fall. 
B)  The demand for cotton will increase,causing the equilibrium price to rise and equilibrium quantity to rise. 
C)  The supply of cotton will decrease,causing the equilibrium price to fall and equilibrium quantity to fall. 
D)  The supply of cotton will decrease,causing the equilibrium price to rise and equilibrium quantity to fall. 
A)  The demand for cotton will decrease,causing the equilibrium price to fall and equilibrium quantity to fall. 
B)  The demand for cotton will increase,causing the equilibrium price to rise and equilibrium quantity to rise. 
C)  The supply of cotton will decrease,causing the equilibrium price to fall and equilibrium quantity to fall. 
D)  The supply of cotton will decrease,causing the equilibrium price to rise and equilibrium quantity to fall.

Question 13

An early frost in the vineyards of Napa Valley would cause a(n):

Accepted Answer

A)  increase in the demand for wine,increasing price. 
B)  increase in the supply of wine,decreasing price. 
C)  decrease in the demand for wine,decreasing price. 
D)  decrease in the supply of wine,increasing price. 
A)  increase in the demand for wine,increasing price. 
B)  increase in the supply of wine,decreasing price. 
C)  decrease in the demand for wine,decreasing price. 
D)  decrease in the supply of wine,increasing price.

Question 14

An increase in the price of corn will lead to a decrease in the DEMAND for corn.

Accepted Answer

A) True 
 B)False

Question 15

A shortage occurs when:

Accepted Answer

A)  the price of a good is too high. 
B)  a market is at equilibrium. 
C)  the quantity supplied is zero. 
D)  the quantity demanded is greater than the quantity supplied. 
A)  the price of a good is too high. 
B)  a market is at equilibrium. 
C)  the quantity supplied is zero. 
D)  the quantity demanded is greater than the quantity supplied.

Question 16

After adjusting for inflation,a comparison of the price of leg warmers reveals that the price of leg warmers was significantly higher in the 1980s than it is today.Which of the following can explain this?

Accepted Answer

A)  Since the 1980s jeans have become preferable to leg warmers,decreasing the demand for leg warmers. 
B)  New regulation on the importing of leg warmers made abroad decreased the supply of leg warmers to the United States. 
C)  An increase in the price of cotton used to make leg warmers has led to a decrease in the price of leg warmers today. 
D)  The expected increase in the price of yarn has led to a decrease in the price of leg warmers today. 
A)  Since the 1980s jeans have become preferable to leg warmers,decreasing the demand for leg warmers. 
B)  New regulation on the importing of leg warmers made abroad decreased the supply of leg warmers to the United States. 
C)  An increase in the price of cotton used to make leg warmers has led to a decrease in the price of leg warmers today. 
D)  The expected increase in the price of yarn has led to a decrease in the price of leg warmers today.

Question 17

When the demand curve shifts,equilibrium price and quantity exchanged move in opposite directions.

Accepted Answer

A) True 
 B)False

Question 18

With an equilibrium price of $10,a price of $10.99 would create an excess supply.

Accepted Answer

A) True 
 B)False

Question 19

How did the spread of the Internet affect the market for news (regardless of source)?

Accepted Answer

A)  Demand increased,causing the price to rise. 
B)  Demand decreased,causing the price to fall. 
C)  Supply decreased,causing the price to rise. 
D)  Supply increased,causing the price to fall. 
A)  Demand increased,causing the price to rise. 
B)  Demand decreased,causing the price to fall. 
C)  Supply decreased,causing the price to rise. 
D)  Supply increased,causing the price to fall.

Question 20

Which of the following would NOT lead to a decrease in the price of domestic automobiles?

Accepted Answer

A)  an increase in the price of foreign-made automobiles 
B)  an economic recession,which decreases consumer income 
C)  a decrease in the wages paid to union auto workers 
D)  an increase in the number of domestic automakers 
A)  an increase in the price of foreign-made automobiles 
B)  an economic recession,which decreases consumer income 
C)  a decrease in the wages paid to union auto workers 
D)  an increase in the number of domestic automakers

Exam 4: Equilibrium- How Supply and Demand

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

If scientists discover a new form of energy that cuts the cost of producing electricity to the equivalent of $10 a barrel,what will happen to the market for oil?

A demand curve shows the relationship between:

Suppose that the equilibrium price in the market is $10.If the current market price is $7.50:

After a hurricane in Florida destroys half of the orange crop,economists predict:

Figure: Four Panel 1 Which of the four panels shows an increase in the quantity supplied?

In free markets,surpluses lead to:

The sum of consumer and producer surplus increases when producers sell more than the market equilibrium quantity.

Use the following to answer questions Figure: Market Changes -(Figure: Market Changes)Refer to the figures.If these figures represent the market for asparagus,which figure shows the effect of a new disease-resistant asparagus seed?

In a competitive market:

Use the following to answer questions Figure: Market Changes -(Figure: Market Changes)Refer to the figures.If the figures represent the market for a popular soda,which figure shows the effect of an increase in the price of a competing energy drink?

What will happen in the market for cotton as a result of a severe drought?

An early frost in the vineyards of Napa Valley would cause a(n):

An increase in the price of corn will lead to a decrease in the DEMAND for corn.

A shortage occurs when:

After adjusting for inflation,a comparison of the price of leg warmers reveals that the price of leg warmers was significantly higher in the 1980s than it is today.Which of the following can explain this?

When the demand curve shifts,equilibrium price and quantity exchanged move in opposite directions.

With an equilibrium price of $10,a price of $10.99 would create an excess supply.

How did the spread of the Internet affect the market for news (regardless of source)?

Which of the following would NOT lead to a decrease in the price of domestic automobiles?

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