Question 1

In a free market,gains from trade are maximized when people act in their own self-interest.

Accepted Answer

A) True 
 B)False

Question 2

Figure: Supply and Demand 1   At a market quantity of 5,the shaded region in the figure represents:

Accepted Answer

A)  satisfied wants. 
B)  unexploited gains from trade. 
C)  the value of wasted resources. 
D)  willingness to pay. 
A)  satisfied wants. 
B)  unexploited gains from trade. 
C)  the value of wasted resources. 
D)  willingness to pay.

Question 3

The growing economies of China and India have increased the demand for:

Accepted Answer

A)  oil,leading to higher oil prices in the early part of the twenty-first century. 
B)  automobiles,leading to rising oil supplies and falling prices. 
C)  automobiles,leading to a decrease in the supply of oil and rising oil prices. 
D)  oil,leading to lower oil prices in the early part of the twenty-first century. 
A)  oil,leading to higher oil prices in the early part of the twenty-first century. 
B)  automobiles,leading to rising oil supplies and falling prices. 
C)  automobiles,leading to a decrease in the supply of oil and rising oil prices. 
D)  oil,leading to lower oil prices in the early part of the twenty-first century.

Question 4

In a competitive market,buyers compete with sellers.

Accepted Answer

A) True 
 B)False

Question 5

In a free market in which an equilibrium price and quantity prevails:

Accepted Answer

A)  consumer surplus is less than producer surplus. 
B)  consumer surplus is greater than producer surplus. 
C)  consumer surplus is the same as producer surplus. 
D)  consumer surplus and producer surplus are maximized. 
A)  consumer surplus is less than producer surplus. 
B)  consumer surplus is greater than producer surplus. 
C)  consumer surplus is the same as producer surplus. 
D)  consumer surplus and producer surplus are maximized.

Question 6

Use the following to answer questions 
Figure: Market Changes  
-(Figure: Market Changes)Refer to the figures.If these figures represent the market for blue jeans,which figure shows the effect of an increase in the price of denim,a raw material used to make jeans?

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 7

When the price of a good increases,demand for the good will:

Accepted Answer

A)  increase. 
B)  decrease. 
C)  be unaffected. 
D)  depend on the corresponding change in supply. 
A)  increase. 
B)  decrease. 
C)  be unaffected. 
D)  depend on the corresponding change in supply.

Question 8

A market can be described by the equations Qd = 50 - 3P and Qs = 2P.What are the equilibrium price and quantity in this market?

Accepted Answer

A)  The equilibrium price is $20 and the equilibrium quantity is 10 units. 
B)  The equilibrium price is $50 and the equilibrium quantity is 100 units. 
C)  The equilibrium price is $30 and the equilibrium quantity is 10 units. 
D)  The equilibrium price is $10 and the equilibrium quantity is 20 units. 
A)  The equilibrium price is $20 and the equilibrium quantity is 10 units. 
B)  The equilibrium price is $50 and the equilibrium quantity is 100 units. 
C)  The equilibrium price is $30 and the equilibrium quantity is 10 units. 
D)  The equilibrium price is $10 and the equilibrium quantity is 20 units.

Question 9

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 10

What is the difference between a shift in the demand curve and a movement along the demand curve?

Accepted Answer

A)  A shift is a reaction to a movement along the demand curve. 
B)  A shift implies a change in the whole demand curve;a movement does not. 
C)  A shift conveys a change in the opportunity cost;a movement does not. 
D)  A shift creates a new equilibrium price;a movement creates a new equilibrium quantity. 
A)  A shift is a reaction to a movement along the demand curve. 
B)  A shift implies a change in the whole demand curve;a movement does not. 
C)  A shift conveys a change in the opportunity cost;a movement does not. 
D)  A shift creates a new equilibrium price;a movement creates a new equilibrium quantity.

Question 11

A shortage occurs when consumers want to buy more goods than sellers are making available.

Accepted Answer

A) True 
 B)False

Question 12

When the market price is above the equilibrium,the price will increase over time.

Accepted Answer

A) True 
 B)False

Question 13

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

Accepted Answer

A)  shortage. 
B)  surplus. 
C)  no change. 
D)  new equilibrium. 
A)  shortage. 
B)  surplus. 
C)  no change. 
D)  new equilibrium.

Question 14

Imagine a free market in which at a price of $10,quantity supplied is 50 units and quantity demanded is 40 units.Equilibrium price in this market:

Accepted Answer

A)  is equal to $10. 
B)  is less than $10. 
C)  is greater than $10. 
D)  differs from $10 in an indeterminate direction. 
A)  is equal to $10. 
B)  is less than $10. 
C)  is greater than $10. 
D)  differs from $10 in an indeterminate direction.

Question 15

Use the following to answer questions 
Figure: Market Changes  
-(Figure: Market Changes)Refer to the figures.If the figures represent the market for wool sweaters,which figure shows the effect of an unseasonably warm winter?

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 16

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 17

The U.S.government limits the importation of Chinese-made bras.What effect does this trade restriction have on the market for bras?

Accepted Answer

A)  The equilibrium price will increase and the equilibrium quantity will decrease. 
B)  The demand for bras will increase,leading to a lower equilibrium price. 
C)  The equilibrium price will increase and the equilibrium quantity will increase. 
D)  The equilibrium price will decrease,leading to a higher equilibrium quantity. 
A)  The equilibrium price will increase and the equilibrium quantity will decrease. 
B)  The demand for bras will increase,leading to a lower equilibrium price. 
C)  The equilibrium price will increase and the equilibrium quantity will increase. 
D)  The equilibrium price will decrease,leading to a higher equilibrium quantity.

Question 18

In free markets,shortages lead to:

Accepted Answer

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

Question 19

When you move along a demand curve:

Accepted Answer

A)  only price is held constant. 
B)  income and the price of the good are held constant. 
C)  all non-price determinants of demand are held constant. 
D)  all determinants of quantity demanded are held constant. 
A)  only price is held constant. 
B)  income and the price of the good are held constant. 
C)  all non-price determinants of demand are held constant. 
D)  all determinants of quantity demanded are held constant.

Question 20

At the competitive market equilibrium the buyers who purchase the product have the highest willingness to pay.

Accepted Answer

A) True 
 B)False

Exam 4: Equilibrium- How Supply and Demand

In a free market,gains from trade are maximized when people act in their own self-interest.

Figure: Supply and Demand 1 At a market quantity of 5,the shaded region in the figure represents:

The growing economies of China and India have increased the demand for:

In a competitive market,buyers compete with sellers.

In a free market in which an equilibrium price and quantity prevails:

Use the following to answer questions Figure: Market Changes -(Figure: Market Changes)Refer to the figures.If these figures represent the market for blue jeans,which figure shows the effect of an increase in the price of denim,a raw material used to make jeans?

When the price of a good increases,demand for the good will:

A market can be described by the equations Qd = 50 - 3P and Qs = 2P.What are the equilibrium price and quantity in this market?

Gains from trade are maximized at the:

What is the difference between a shift in the demand curve and a movement along the demand curve?

A shortage occurs when consumers want to buy more goods than sellers are making available.

When the market price is above the equilibrium,the price will increase over time.

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

Imagine a free market in which at a price of $10,quantity supplied is 50 units and quantity demanded is 40 units.Equilibrium price in this market:

Use the following to answer questions Figure: Market Changes -(Figure: Market Changes)Refer to the figures.If the figures represent the market for wool sweaters,which figure shows the effect of an unseasonably warm winter?

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

The U.S.government limits the importation of Chinese-made bras.What effect does this trade restriction have on the market for bras?

In free markets,shortages lead to:

When you move along a demand curve:

At the competitive market equilibrium the buyers who purchase the product have the highest willingness to pay.

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

A market can be described by the equations Q_d = 50 - 3P and Q_s = 2P.What are the equilibrium price and quantity in this market?