Question 1

When a shortage occurs,the market price increases.

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.Which statement is TRUE?

Accepted Answer

A)  The gains from trade are maximized at 20 units of output. 
B)  At 16 units of output,there are unexploited gains from trade. 
C)  Buyers are willing to pay $20 for the 16th unit of output and it costs sellers $60 to produce that unit. 
D)  A free market is likely to produce less than 12 units of output. 
A)  The gains from trade are maximized at 20 units of output. 
B)  At 16 units of output,there are unexploited gains from trade. 
C)  Buyers are willing to pay $20 for the 16th unit of output and it costs sellers $60 to produce that unit. 
D)  A free market is likely to produce less than 12 units of output.

Question 3

If a frost destroys half of the orange crop in Florida,the equilibrium price of oranges will rise.

Accepted Answer

A) True 
 B)False

Question 4

The price of professional sports tickets is high;therefore,you should blame the owners for taking advantage of the fans,not the other buyers for outbidding you.

Accepted Answer

A) True 
 B)False

Question 5

Use the following to answer questions 
Figure: Price and Quantity 3  
-(Figure: Price and Quantity 3)At a quantity of 80 units in the figure,it cost sellers ______ to produce the last unit,but buyers value this last unit at ______.

Accepted Answer

A)  $80;$50 
B)  $50;$20 
C)  $20;$80 
D)  $80;$20 
A)  $80;$50 
B)  $50;$20 
C)  $20;$80 
D)  $80;$20

Question 6

When supply decreases there is a ______ at the old equilibrium price,which puts ______ pressure on price until the market reaches the new equilibrium.

Accepted Answer

A)  surplus;downward 
B)  surplus;upward 
C)  shortage;upward 
D)  shortage;downward 
A)  surplus;downward 
B)  surplus;upward 
C)  shortage;upward 
D)  shortage;downward

Question 7

What is the difference between a change in the demand and a change in quantity demanded?

Accepted Answer

A)  A change in demand requires a movement along the demand curve,a change in quantity demanded does not. 
B)  A change in demand shifts the entire curve,a change in quantity demanded means price changed. 
C)  A change in quantity demanded means consumer preferences have changed. 
D)  A change in demand creates a new market equilibrium,a change in quantity demanded does not. 
A)  A change in demand requires a movement along the demand curve,a change in quantity demanded does not. 
B)  A change in demand shifts the entire curve,a change in quantity demanded means price changed. 
C)  A change in quantity demanded means consumer preferences have changed. 
D)  A change in demand creates a new market equilibrium,a change in quantity demanded does not.

Question 8

When there is a shortage in the market,competition will:

Accepted Answer

A)  drive the price down to the equilibrium price. 
B)  drive the price up to the equilibrium price. 
C)  cause the demand curve to shift right. 
D)  cause the supply curve to increase. 
A)  drive the price down to the equilibrium price. 
B)  drive the price up to the equilibrium price. 
C)  cause the demand curve to shift right. 
D)  cause the supply curve to increase.

Question 9

Explain why an increase in demand for a good does not lead to an increase in supply.What does an increase in the demand for a good lead to?

Accepted Answer

An increase in the demand for a good doe

Question 10

Use the following to answer questions 
Figure: Price and Quantity 3  
-Vernon Smith showed the market equilibrium concept to be:

Accepted Answer

A)  unrelated to experimental results. 
B)  inconsistent with experimental results. 
C)  consistent with experimental results. 
D)  not testable in experimental settings. 
A)  unrelated to experimental results. 
B)  inconsistent with experimental results. 
C)  consistent with experimental results. 
D)  not testable in experimental settings.

Question 11

In a free market setting where quantity supplied is 50 units and quantity demanded is 50 units,price will:

Accepted Answer

A)  rise. 
B)  fall. 
C)  remain the same. 
D)  move in an indeterminate direction. 
A)  rise. 
B)  fall. 
C)  remain the same. 
D)  move in an indeterminate direction.

Question 12

For each good produced in a free market economy,demand and supply determine:

Accepted Answer

A)  the price of the good,but not the quantity. 
B)  the quantity of the good,but not the price. 
C)  both the price and the quantity of the good. 
D)  neither price nor quantity;sellers determine the price. 
A)  the price of the good,but not the quantity. 
B)  the quantity of the good,but not the price. 
C)  both the price and the quantity of the good. 
D)  neither price nor quantity;sellers determine the price.

Question 13

Use the following to answer questions 
Figure: Price and Quantity 1  
-(Figure: Price and Quantity 1)In the diagram,at which price is there a surplus?

Accepted Answer

A)  $80 
B)  $50 
C)  $40 
D)  $0 
A)  $80 
B)  $50 
C)  $40 
D)  $0

Question 14

A decrease in supply raises the price of a good,but it also decreases the quantity demanded,which lowers the price of a good.The net effect on price is ambiguous.

Accepted Answer

A) True 
 B)False

Question 15

Use the following to answer questions 
Figure: Price and Quantity 3  
-In Vernon Smith's supply and demand lab experiment:

Accepted Answer

A)  Smith knew the true demand and supply curves,but the subjects did not. 
B)  the subjects did not know their own willingness to pay or sell. 
C)  it took a long time to arrive at equilibrium. 
D)  there were many unrealized gains from trade. 
A)  Smith knew the true demand and supply curves,but the subjects did not. 
B)  the subjects did not know their own willingness to pay or sell. 
C)  it took a long time to arrive at equilibrium. 
D)  there were many unrealized gains from trade.

Question 16

In order for the gains of trade to be maximized,everyone whose willingness to pay for the good is greater than zero must receive it.

Accepted Answer

A) True 
 B)False

Question 17

An increase in demand causes a:

Accepted Answer

A)  temporary shortage at the old equilibrium price and a higher new equilibrium price and quantity. 
B)  permanent shortage,leaving the equilibrium price and quantity unchanged. 
C)  temporary surplus at the old equilibrium price and a lower equilibrium price and quantity. 
D)  temporary shortage at the old equilibrium price,a higher new equilibrium price,and a lower new equilibrium quantity. 
A)  temporary shortage at the old equilibrium price and a higher new equilibrium price and quantity. 
B)  permanent shortage,leaving the equilibrium price and quantity unchanged. 
C)  temporary surplus at the old equilibrium price and a lower equilibrium price and quantity. 
D)  temporary shortage at the old equilibrium price,a higher new equilibrium price,and a lower new equilibrium quantity.

Question 18

Which of the following would cause the current supply of iPods to increase?

Accepted Answer

A)  an economic boom,which increases the amount that people are willing to spend on personal electronics 
B)  a decrease in the price of songs on iTunes 
C)  producers expecting that the future price of iPods will decrease 
D)  an increase in the wages offered to technicians building iPods 
A)  an economic boom,which increases the amount that people are willing to spend on personal electronics 
B)  a decrease in the price of songs on iTunes 
C)  producers expecting that the future price of iPods will decrease 
D)  an increase in the wages offered to technicians building iPods

Question 19

In a competitive market,sellers compete with other sellers.

Accepted Answer

A) True 
 B)False

Question 20

Use the following to answer questions 
Figure: Market Equilibrium  
-(Figure: Market Equilibrium)According to the figure,the equilibrium price and quantity are:

Accepted Answer

A)  $1 and 4 units. 
B)  $4 and 8 units. 
C)  $2 and 4 units. 
D)  $3 and 6 units. 
A)  $1 and 4 units. 
B)  $4 and 8 units. 
C)  $2 and 4 units. 
D)  $3 and 6 units.

Exam 4: Equilibrium- How Supply and Demand

When a shortage occurs,the market price increases.

Use the following to answer questions Figure: Demand and Supply -(Figure: Demand and Supply)Refer to the figure.Which statement is TRUE?

If a frost destroys half of the orange crop in Florida,the equilibrium price of oranges will rise.

The price of professional sports tickets is high;therefore,you should blame the owners for taking advantage of the fans,not the other buyers for outbidding you.

Use the following to answer questions Figure: Price and Quantity 3 -(Figure: Price and Quantity 3)At a quantity of 80 units in the figure,it cost sellers ______ to produce the last unit,but buyers value this last unit at ______.

When supply decreases there is a ______ at the old equilibrium price,which puts ______ pressure on price until the market reaches the new equilibrium.

What is the difference between a change in the demand and a change in quantity demanded?

When there is a shortage in the market,competition will:

Explain why an increase in demand for a good does not lead to an increase in supply.What does an increase in the demand for a good lead to?

Use the following to answer questions Figure: Price and Quantity 3 -Vernon Smith showed the market equilibrium concept to be:

In a free market setting where quantity supplied is 50 units and quantity demanded is 50 units,price will:

For each good produced in a free market economy,demand and supply determine:

Use the following to answer questions Figure: Price and Quantity 1 -(Figure: Price and Quantity 1)In the diagram,at which price is there a surplus?

A decrease in supply raises the price of a good,but it also decreases the quantity demanded,which lowers the price of a good.The net effect on price is ambiguous.

Use the following to answer questions Figure: Price and Quantity 3 -In Vernon Smith's supply and demand lab experiment:

In order for the gains of trade to be maximized,everyone whose willingness to pay for the good is greater than zero must receive it.

An increase in demand causes a:

Which of the following would cause the current supply of iPods to increase?

In a competitive market,sellers compete with other sellers.

Use the following to answer questions Figure: Market Equilibrium -(Figure: Market Equilibrium)According to the figure,the equilibrium price and quantity are:

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

Use the following to answer questions Figure: Price and Quantity 3 -(Figure: Price and Quantity 3)At a quantity of 80 units in the figure,it cost sellers to produce the last unit,but buyers value this last unit at .

When supply decreases there is a at the old equilibrium price,which puts pressure on price until the market reaches the new equilibrium.