Question 1

The price of gasoline decreased dramatically in the summer of 2009.One likely reason for this change is:

Accepted Answer

A)  a shortage in the supply of oil worldwide. 
B)  riots in the Middle East that disrupted oil shipments. 
C)  a decrease in the demand for gasoline brought on by the recession. 
D)  strong economic growth in China that increased the demand for automobiles. 
A)  a shortage in the supply of oil worldwide. 
B)  riots in the Middle East that disrupted oil shipments. 
C)  a decrease in the demand for gasoline brought on by the recession. 
D)  strong economic growth in China that increased the demand for automobiles.

Question 2

An increase in the quantity supplied causes the supply curve to shift down and to the right.

Accepted Answer

A) True 
 B)False

Question 3

Use the following to answer questions 
Figure: Price and Quantity 3  
-Brazilian rosewood is renowned for its tonal qualities and gorgeous figuring on acoustic guitars.However,Brazilian rosewood is now banned from use in the construction of new guitars.What will likely happen to the price of used Brazilian rosewood guitars over time?

Accepted Answer

A)  The price for used Brazilian rosewood guitars will increase because there will be a smaller supply of those guitars on the used market. 
B)  The price for used Brazilian rosewood guitars will decrease as fewer people decide to sell their rosewood guitars. 
C)  The price of used Brazilian rosewood guitars will increase at first and then decrease,since an increase in demand raises prices,causing people to buy less of the product. 
D)  The price for used Brazilian rosewood guitars will increase as more people try to cash in by selling their increasingly rare rosewood guitars. 
A)  The price for used Brazilian rosewood guitars will increase because there will be a smaller supply of those guitars on the used market. 
B)  The price for used Brazilian rosewood guitars will decrease as fewer people decide to sell their rosewood guitars. 
C)  The price of used Brazilian rosewood guitars will increase at first and then decrease,since an increase in demand raises prices,causing people to buy less of the product. 
D)  The price for used Brazilian rosewood guitars will increase as more people try to cash in by selling their increasingly rare rosewood guitars.

Question 4

Use the following to answer questions 
Figure: Basic Supply and Demand  
-(Figure: Basic Supply and Demand)In the diagram,the market price is stable only at a price of:

Accepted Answer

A)  $2. 
B)  $3. 
C)  $4. 
D)  $50. 
A)  $2. 
B)  $3. 
C)  $4. 
D)  $50.

Question 5

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.Suppose this depicts the market for corn.How does the market change when flooding in Iowa destroys a significant amount of the corn crop.

Accepted Answer

A)  S1 will shift to S2. 
B)  D1 will shift to D2. 
C)  S1 will shift to S3. 
D)  There will be no change in supply or demand in the market for corn. 
A)  S1 will shift to S2. 
B)  D1 will shift to D2. 
C)  S1 will shift to S3. 
D)  There will be no change in supply or demand in the market for corn.

Question 6

An increase in supply raises the equilibrium price and increases the equilibrium quantity.

Accepted Answer

A) True 
 B)False

Question 7

If the market price is below the equilibrium price,which of the following will occur?

Accepted Answer

A)  Quantity demanded will exceed quantity supplied and the market price will eventually fall. 
B)  Quantity demanded will exceed quantity supplied and the market price will eventually rise. 
C)  Quantity supplied will exceed quantity demanded and the market price will eventually fall. 
D)  Quantity supplied will exceed quantity demanded and the market price will eventually rise. 
A)  Quantity demanded will exceed quantity supplied and the market price will eventually fall. 
B)  Quantity demanded will exceed quantity supplied and the market price will eventually rise. 
C)  Quantity supplied will exceed quantity demanded and the market price will eventually fall. 
D)  Quantity supplied will exceed quantity demanded and the market price will eventually rise.

Question 8

At the equilibrium price,quantity demanded is equal to quantity supplied.

Accepted Answer

A) True 
 B)False

Question 9

When a market is competitive:

Accepted Answer

A)  buyers compete with sellers to try to get lower prices. 
B)  buyers compete with other buyers,raising prices;and sellers compete with sellers,lowering prices. 
C)  everybody competes with everybody else. 
D)  buyers compete with sellers and sellers compete with one another,but buyers do not compete with one another. 
A)  buyers compete with sellers to try to get lower prices. 
B)  buyers compete with other buyers,raising prices;and sellers compete with sellers,lowering prices. 
C)  everybody competes with everybody else. 
D)  buyers compete with sellers and sellers compete with one another,but buyers do not compete with one another.

Question 10

How is a class in which students are graded on a curve like a competitive market?

Accepted Answer

A)  In both cases,the quantity supplied equals the quantity demanded. 
B)  In a competitive market,demanders compete against one another for goods,the same way students compete for grades. 
C)  In a competitive market,demanders compete against suppliers for goods,the same way students compete for grades. 
D)  If the price is too high,demanders should blame suppliers,the same way students should blame professors for bad grades. 
A)  In both cases,the quantity supplied equals the quantity demanded. 
B)  In a competitive market,demanders compete against one another for goods,the same way students compete for grades. 
C)  In a competitive market,demanders compete against suppliers for goods,the same way students compete for grades. 
D)  If the price is too high,demanders should blame suppliers,the same way students should blame professors for bad grades.

Question 11

What effect do computer chip sellers' expectations of falling chip prices in the coming months have on the current computer chip market?

Accepted Answer

A)  The supply of computer chips increases,pushing down the equilibrium price and quantity. 
B)  The supply of computer chips increases,pushing down the equilibrium price and increasing the equilibrium quantity. 
C)  The demand for computer chips increases,pushing down the equilibrium price and increasing the equilibrium quantity. 
D)  The demand for computer chips decreases,pushing down the equilibrium price and increasing the equilibrium quantity. 
A)  The supply of computer chips increases,pushing down the equilibrium price and quantity. 
B)  The supply of computer chips increases,pushing down the equilibrium price and increasing the equilibrium quantity. 
C)  The demand for computer chips increases,pushing down the equilibrium price and increasing the equilibrium quantity. 
D)  The demand for computer chips decreases,pushing down the equilibrium price and increasing the equilibrium quantity.

Question 12

Economic experiments suggest that the real world closely follows theoretical supply and demand.

Accepted Answer

A) True 
 B)False

Question 13

The United Nations estimates that Earth's population growth rate will slow down by the year 2050 at which time population may start to decrease.If technological change allows the supply of oil to increase at a constant rate,and nothing else changes,what effect will a slowdown in population growth have on the price of oil?

Accepted Answer

A)  Demand will increase during this period,and the price of oil will continue to increase beyond 2050. 
B)  Demand will increase more slowly during this period but since supply is growing at a constant rate,the rate of price increase will fall,and ultimately the price of oil may begin to fall. 
C)  Demand will increase,raising the quantity supplied.Since the quantity supplied will increase,the price must go down. 
D)  The supply of oil will fall and prices will rise. 
A)  Demand will increase during this period,and the price of oil will continue to increase beyond 2050. 
B)  Demand will increase more slowly during this period but since supply is growing at a constant rate,the rate of price increase will fall,and ultimately the price of oil may begin to fall. 
C)  Demand will increase,raising the quantity supplied.Since the quantity supplied will increase,the price must go down. 
D)  The supply of oil will fall and prices will rise.

Question 14

An increase in the demand for organic foods will lead to:

Accepted Answer

A)  an increase in the price,and hence an increase in the supply of organic foods. 
B)  an increase in the price,and hence an increase in the quantity supplied of organic foods. 
C)  a decrease in the price,and hence a decrease in the supply of organic foods. 
D)  a decrease in the price,and hence a decrease in the quantity supplied of organic foods. 
A)  an increase in the price,and hence an increase in the supply of organic foods. 
B)  an increase in the price,and hence an increase in the quantity supplied of organic foods. 
C)  a decrease in the price,and hence a decrease in the supply of organic foods. 
D)  a decrease in the price,and hence a decrease in the quantity supplied of organic foods.

Question 15

Imagine a free market in which quantity supplied is 50 units and quantity demanded is 50 units at the current price.The market is experiencing a(n):

Accepted Answer

A)  equilibrium. 
B)  surplus. 
C)  shortage. 
D)  shift. 
A)  equilibrium. 
B)  surplus. 
C)  shortage. 
D)  shift.

Question 16

Why is consuming a quantity above equilibrium wasteful?

Accepted Answer

A)  because there are willing buyers of the good who do not purchase it 
B)  because resources are used without making society better off 
C)  because it creates a shortage,which generates waste 
D)  because it creates a surplus,which generates waste 
A)  because there are willing buyers of the good who do not purchase it 
B)  because resources are used without making society better off 
C)  because it creates a shortage,which generates waste 
D)  because it creates a surplus,which generates waste

Question 17

Use the following to answer questions 
Figure: Price and Quantity 3  
-Laboratory experiments by Vernon Smith support:

Accepted Answer

A)  the supply and demand model's usefulness in predicting changes in a free market. 
B)  a market equilibrium where the quantity supplied always exceeds the quantity demanded. 
C)  a market equilibrium where the quantity demanded always exceeds the quantity supplied. 
D)  suspicions that a market equilibrium does not exist in the real world. 
A)  the supply and demand model's usefulness in predicting changes in a free market. 
B)  a market equilibrium where the quantity supplied always exceeds the quantity demanded. 
C)  a market equilibrium where the quantity demanded always exceeds the quantity supplied. 
D)  suspicions that a market equilibrium does not exist in the real world.

Question 18

When there is a recession,the price of oil tends to fall because:

Accepted Answer

A)  people drive more during recessions while looking for employment. 
B)  the supply of oil increases during a recession,due to technological change. 
C)  the prices of substitutes for oil rise during recessions. 
D)  incomes fall during a recession,and oil is a normal good. 
A)  people drive more during recessions while looking for employment. 
B)  the supply of oil increases during a recession,due to technological change. 
C)  the prices of substitutes for oil rise during recessions. 
D)  incomes fall during a recession,and oil is a normal good.

Question 19

Use the following to answer questions 
Figure: Market Equilibrium  
-(Figure: Market Equilibrium)Refer to the figure.At a price of $1,the market is characterized by a(n):

Accepted Answer

A)  excess supply of 2 units. 
B)  excess demand of 4 units. 
C)  surplus of 4 units. 
D)  shortage of 6 units. 
A)  excess supply of 2 units. 
B)  excess demand of 4 units. 
C)  surplus of 4 units. 
D)  shortage of 6 units.

Question 20

Use the following to answer questions 
Figure: Price and Quantity 3  
-The September 11 terrorist attacks turned many people away from flying.The demand and supply model would predict which of the following events in the airline travel market?

Accepted Answer

A)  The supply of airline travel would decrease,resulting in a higher equilibrium price and lower equilibrium quantity. 
B)  The supply of airline travel would increase,resulting in a lower equilibrium price and higher equilibrium quantity. 
C)  The demand for airline travel would decrease,resulting in a lower equilibrium price and lower equilibrium quantity. 
D)  The supply and demand for airline travel would decrease,resulting in a higher equilibrium price and higher equilibrium quantity. 
A)  The supply of airline travel would decrease,resulting in a higher equilibrium price and lower equilibrium quantity. 
B)  The supply of airline travel would increase,resulting in a lower equilibrium price and higher equilibrium quantity. 
C)  The demand for airline travel would decrease,resulting in a lower equilibrium price and lower equilibrium quantity. 
D)  The supply and demand for airline travel would decrease,resulting in a higher equilibrium price and higher equilibrium quantity.

The price of gasoline decreased dramatically in the summer of 2009.One likely reason for this change is:

An increase in the quantity supplied causes the supply curve to shift down and to the right.

Use the following to answer questions Figure: Basic Supply and Demand -(Figure: Basic Supply and Demand)In the diagram,the market price is stable only at a price of:

An increase in supply raises the equilibrium price and increases the equilibrium quantity.

If the market price is below the equilibrium price,which of the following will occur?

At the equilibrium price,quantity demanded is equal to quantity supplied.

When a market is competitive:

How is a class in which students are graded on a curve like a competitive market?

What effect do computer chip sellers' expectations of falling chip prices in the coming months have on the current computer chip market?

Economic experiments suggest that the real world closely follows theoretical supply and demand.

An increase in the demand for organic foods will lead to:

Imagine a free market in which quantity supplied is 50 units and quantity demanded is 50 units at the current price.The market is experiencing a(n):

Why is consuming a quantity above equilibrium wasteful?

Use the following to answer questions Figure: Price and Quantity 3 -Laboratory experiments by Vernon Smith support:

When there is a recession,the price of oil tends to fall because:

Use the following to answer questions Figure: Market Equilibrium -(Figure: Market Equilibrium)Refer to the figure.At a price of $1,the market is characterized by a(n):

Use the following to answer questions Figure: Price and Quantity 3 -The September 11 terrorist attacks turned many people away from flying.The demand and supply model would predict which of the following events in the airline travel market?

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 price of gasoline decreased dramatically in the summer of 2009.One likely reason for this change is:

An increase in the quantity supplied causes the supply curve to shift down and to the right.

Use the following to answer questions Figure: Basic Supply and Demand -(Figure: Basic Supply and Demand)In the diagram,the market price is stable only at a price of:

An increase in supply raises the equilibrium price and increases the equilibrium quantity.

If the market price is below the equilibrium price,which of the following will occur?

At the equilibrium price,quantity demanded is equal to quantity supplied.

When a market is competitive:

How is a class in which students are graded on a curve like a competitive market?

What effect do computer chip sellers' expectations of falling chip prices in the coming months have on the current computer chip market?

Economic experiments suggest that the real world closely follows theoretical supply and demand.

An increase in the demand for organic foods will lead to:

Imagine a free market in which quantity supplied is 50 units and quantity demanded is 50 units at the current price.The market is experiencing a(n):

Why is consuming a quantity above equilibrium wasteful?

Use the following to answer questions Figure: Price and Quantity 3 -Laboratory experiments by Vernon Smith support:

When there is a recession,the price of oil tends to fall because:

Use the following to answer questions Figure: Market Equilibrium -(Figure: Market Equilibrium)Refer to the figure.At a price of $1,the market is characterized by a(n):

Use the following to answer questions Figure: Price and Quantity 3 -The September 11 terrorist attacks turned many people away from flying.The demand and supply model would predict which of the following events in the airline travel market?

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