Question 1

The government must subsidize firms to ensure that there are no unexploited gains from trade.

Accepted Answer

A) True 
 B)False

Question 2

Use the following to answer questions 
Figure: Demand and Supply  
-(Figure: Demand and Supply)Refer to the figure.At the equilibrium quantity,total surplus is:

Accepted Answer

A)  $960. 
B)  $480. 
C)  $320. 
D)  $240 
A)  $960. 
B)  $480. 
C)  $320. 
D)  $240

Question 3

An increase in supply causes a temporary surplus at the old equilibrium price.

Accepted Answer

A) True 
 B)False

Question 4

When there is a surplus,sellers have an incentive to ______ their price and buyers have an incentive to offer a ______ price.

Accepted Answer

A)  increase;lower 
B)  decrease;lower 
C)  increase;higher 
D)  decrease;higher 
A)  increase;lower 
B)  decrease;lower 
C)  increase;higher 
D)  decrease;higher

Question 5

If market demand decreases:

Accepted Answer

A)  equilibrium price and quantity will both increase. 
B)  equilibrium price and quantity will both decrease. 
C)  equilibrium price will increase but equilibrium quantity will decrease. 
D)  equilibrium price will decrease but equilibrium quantity will increase. 
A)  equilibrium price and quantity will both increase. 
B)  equilibrium price and quantity will both decrease. 
C)  equilibrium price will increase but equilibrium quantity will decrease. 
D)  equilibrium price will decrease but equilibrium quantity will increase.

Question 6

A market shortage can be defined as a situation in which the quantity supplied in a market is greater than the quantity demanded,at the given price.

Accepted Answer

A) True 
 B)False

Question 7

Use the following to answer questions 
Figure: Demand,Supply Shifts  
-(Figure: Demand,Supply Shifts)In the figure,the initial demand curve is D1 and the initial supply curve is S1.If this depicts the equilibrium in the market for computer printers,what will happen when the price of computers increases?

Accepted Answer

A)  There is not enough information to determine what will happen. 
B)  D1 will shift to D2. 
C)  D1 will shift to D3. 
D)  S1 will shift to S3. 
A)  There is not enough information to determine what will happen. 
B)  D1 will shift to D2. 
C)  D1 will shift to D3. 
D)  S1 will shift to S3.

Question 8

At a free market equilibrium there are no unexploited gains from trade.

Accepted Answer

A) True 
 B)False

Question 9

There is a positive relationship between price and quantity demanded.

Accepted Answer

A) True 
 B)False

Question 10

What effect did the 1997 East Asian recession in countries such as South Korea,Indonesia,and Thailand have on the oil market?

Accepted Answer

A)  The recession decreased income,made the world more dependent on oil,and increased oil demand and prices. 
B)  The recession led to high unemployment,and reduced the demand for driving and the supply of oil. 
C)  The recession decreased income,and reduced the demand for oil and oil prices. 
D)  The recession led to high unemployment,increased demand for Sunday driving,and higher oil prices. 
A)  The recession decreased income,made the world more dependent on oil,and increased oil demand and prices. 
B)  The recession led to high unemployment,and reduced the demand for driving and the supply of oil. 
C)  The recession decreased income,and reduced the demand for oil and oil prices. 
D)  The recession led to high unemployment,increased demand for Sunday driving,and higher oil prices.

Question 11

The Arab Oil Embargo of 1973,the Iranian Revolution of 1979,and the Gulf War of 1991 all affected oil prices by:

Accepted Answer

A)  increasing the demand for oil. 
B)  reducing the supply of oil. 
C)  reducing the demand for oil. 
D)  increasing the supply of oil. 
A)  increasing the demand for oil. 
B)  reducing the supply of oil. 
C)  reducing the demand for oil. 
D)  increasing the supply of oil.

Question 12

An increase in the price of granite would result in a decrease in the DEMAND for granite countertops.

Accepted Answer

A) True 
 B)False

Question 13

Use the following to answer questions 
Figure: Price and Quantity 3  
-Which of the following is a contribution of economist Vernon Smith?

Accepted Answer

A)  the idea of movements along the supply and demand curves 
B)  the discovery of equilibrium price 
C)  experimental evidence of equilibrium price 
D)  the theory of demand shocks 
A)  the idea of movements along the supply and demand curves 
B)  the discovery of equilibrium price 
C)  experimental evidence of equilibrium price 
D)  the theory of demand shocks

Question 14

The equilibrium price is unstable because sellers have an incentive to lower their price to sell more goods.

Accepted Answer

A) True 
 B)False

Question 15

If there is a surplus of a good,sellers will:

Accepted Answer

A)  lower the price in order to increase quantity demanded. 
B)  raise the price in order to decrease quantity demanded. 
C)  compete with buyers. 
D)  know that the buyers overvalue the good. 
A)  lower the price in order to increase quantity demanded. 
B)  raise the price in order to decrease quantity demanded. 
C)  compete with buyers. 
D)  know that the buyers overvalue the good.

Question 16

Figure: Supply and Demand 3   Which of the following statements applies to the diagram?

Accepted Answer

A)  An increase in supply causes an increase in quantity demanded. 
B)  A decrease in supply causes an increase in quantity demanded. 
C)  An increase in supply causes an increase in demand. 
D)  A decrease in supply causes a decrease in demand. 
A)  An increase in supply causes an increase in quantity demanded. 
B)  A decrease in supply causes an increase in quantity demanded. 
C)  An increase in supply causes an increase in demand. 
D)  A decrease in supply causes a decrease in demand.

Question 17

If demand 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 18

A shortage of a good occurs when:

Accepted Answer

A)  the quantity supplied equals the quantity demanded. 
B)  the quantity supplied is greater than the quantity demanded. 
C)  the quantity supplied is less than the quantity demanded. 
D)  supply does not exist. 
A)  the quantity supplied equals the quantity demanded. 
B)  the quantity supplied is greater than the quantity demanded. 
C)  the quantity supplied is less than the quantity demanded. 
D)  supply does not exist.

Question 19

Which statement most accurately explains the upward trend in the market price of oil since around the year 2000?

Accepted Answer

A)  The supply of oil has increased faster than the demand for oil has increased. 
B)  Both the demand for and the supply of oil has decreased. 
C)  The demand for oil has increased faster than the supply of oil has increased. 
D)  The demand for oil has decreased while the supply of oil has increased. 
A)  The supply of oil has increased faster than the demand for oil has increased. 
B)  Both the demand for and the supply of oil has decreased. 
C)  The demand for oil has increased faster than the supply of oil has increased. 
D)  The demand for oil has decreased while the supply of oil has increased.

Question 20

Immediately after a hurricane,it is likely that the quantity demanded for tree cutting/removal services will ______ the quantity supplied,causing the price of tree cutting/removal services to ______.

Accepted Answer

A)  equal;remain unchanged 
B)  be less than;rise 
C)  exceed;rise 
D)  decrease;fall 
A)  equal;remain unchanged 
B)  be less than;rise 
C)  exceed;rise 
D)  decrease;fall

The government must subsidize firms to ensure that there are no unexploited gains from trade.

Use the following to answer questions Figure: Demand and Supply -(Figure: Demand and Supply)Refer to the figure.At the equilibrium quantity,total surplus is:

An increase in supply causes a temporary surplus at the old equilibrium price.

When there is a surplus,sellers have an incentive to their price and buyers have an incentive to offer a price.

If market demand decreases:

A market shortage can be defined as a situation in which the quantity supplied in a market is greater than the quantity demanded,at the given price.

At a free market equilibrium there are no unexploited gains from trade.

There is a positive relationship between price and quantity demanded.

What effect did the 1997 East Asian recession in countries such as South Korea,Indonesia,and Thailand have on the oil market?

The Arab Oil Embargo of 1973,the Iranian Revolution of 1979,and the Gulf War of 1991 all affected oil prices by:

An increase in the price of granite would result in a decrease in the DEMAND for granite countertops.

Use the following to answer questions Figure: Price and Quantity 3 -Which of the following is a contribution of economist Vernon Smith?

The equilibrium price is unstable because sellers have an incentive to lower their price to sell more goods.

If there is a surplus of a good,sellers will:

Figure: Supply and Demand 3 Which of the following statements applies to the diagram?

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

A shortage of a good occurs when:

Which statement most accurately explains the upward trend in the market price of oil since around the year 2000?

Immediately after a hurricane,it is likely that the quantity demanded for tree cutting/removal services will the quantity supplied,causing the price of tree cutting/removal services to .

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

Exam 4: Equilibrium- How Supply and Demand

The government must subsidize firms to ensure that there are no unexploited gains from trade.

Use the following to answer questions Figure: Demand and Supply -(Figure: Demand and Supply)Refer to the figure.At the equilibrium quantity,total surplus is:

An increase in supply causes a temporary surplus at the old equilibrium price.

When there is a surplus,sellers have an incentive to ______ their price and buyers have an incentive to offer a ______ price.

If market demand decreases:

A market shortage can be defined as a situation in which the quantity supplied in a market is greater than the quantity demanded,at the given price.

At a free market equilibrium there are no unexploited gains from trade.

There is a positive relationship between price and quantity demanded.

What effect did the 1997 East Asian recession in countries such as South Korea,Indonesia,and Thailand have on the oil market?

The Arab Oil Embargo of 1973,the Iranian Revolution of 1979,and the Gulf War of 1991 all affected oil prices by:

An increase in the price of granite would result in a decrease in the DEMAND for granite countertops.

Use the following to answer questions Figure: Price and Quantity 3 -Which of the following is a contribution of economist Vernon Smith?

The equilibrium price is unstable because sellers have an incentive to lower their price to sell more goods.

If there is a surplus of a good,sellers will:

Figure: Supply and Demand 3 Which of the following statements applies to the diagram?

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

A shortage of a good occurs when:

Which statement most accurately explains the upward trend in the market price of oil since around the year 2000?

Immediately after a hurricane,it is likely that the quantity demanded for tree cutting/removal services will ______ the quantity supplied,causing the price of tree cutting/removal services to ______.

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

When there is a surplus,sellers have an incentive to their price and buyers have an incentive to offer a price.

Immediately after a hurricane,it is likely that the quantity demanded for tree cutting/removal services will the quantity supplied,causing the price of tree cutting/removal services to .