Question 1

Suppose there is an increase in demand in a market and no change in the supply.What will happen to the market equilibrium price and quantity?

Accepted Answer

A)  Equilibrium price will rise;equilibrium quantity will rise. 
B)  Equilibrium price will rise;equilibrium quantity will fall. 
C)  Equilibrium price will fall;equilibrium quantity will rise. 
D)  Equilibrium price will fall;equilibrium quantity will fall. 
A)  Equilibrium price will rise;equilibrium quantity will rise. 
B)  Equilibrium price will rise;equilibrium quantity will fall. 
C)  Equilibrium price will fall;equilibrium quantity will rise. 
D)  Equilibrium price will fall;equilibrium quantity will fall.

Question 2

A shortage will occur at any price below equilibrium price,and a surplus will occur at any price above equilibrium price.

Accepted Answer

A) True 
 B)False

Question 3

In a free market setting where quantity supplied is 50 units and quantity demanded is 40 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 4

If demand decreases,ceteris paribus,the quantity exchanged will be ______ at the new market equilibrium point.

Accepted Answer

A)  larger 
B)  smaller 
C)  the same 
D)  either larger or smaller 
A)  larger 
B)  smaller 
C)  the same 
D)  either larger or smaller

Question 5

Suppose the price of oil is falling due to a drop-off in demand after the summer driving season.Explain what a group of oil-producing nations (like OPEC)that control a significant amount of the world's oil supplies could do in order to keep prices (and hence profits)high.

Accepted Answer

OPEC nations would want to dec

Question 6

The equilibrium price and quantity are the only price and quantity that are stable in a free market.

Accepted Answer

A) True 
 B)False

Question 7

Figure: Supply-Driven Price Change   Refer to the figure.When the supply curve shifts from S0 to S1,the equilibrium price rises to:

Accepted Answer

A)  $12 and the equilibrium quantity falls to 70. 
B)  $10 and the equilibrium quantity falls to 100. 
C)  $12 and the equilibrium quantity falls to 40. 
D)  $10 and the equilibrium quantity falls to 70. 
A)  $12 and the equilibrium quantity falls to 70. 
B)  $10 and the equilibrium quantity falls to 100. 
C)  $12 and the equilibrium quantity falls to 40. 
D)  $10 and the equilibrium quantity falls to 70.

Question 8

An increase in demand causes an increase in quantity supplied,which causes a decrease in price.

Accepted Answer

A) True 
 B)False

Question 9

Imagine a free market in which quantity supplied is 50 units and quantity demanded is 40 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 10

If hipsters decide that Pabst Blue Ribbon has become cliché and they seek out a more iconic beverage,what will happen in the market for PBR?

Accepted Answer

A)  Demand will decrease,quantity demanded will decrease,and price will increase. 
B)  Supply will decrease,quantity demanded will decrease,and price will decrease. 
C)  Demand will decrease,quantity supplied will decrease,and price will decrease. 
D)  Demand will decrease,quantity supplied will increase,and price will decrease. 
A)  Demand will decrease,quantity demanded will decrease,and price will increase. 
B)  Supply will decrease,quantity demanded will decrease,and price will decrease. 
C)  Demand will decrease,quantity supplied will decrease,and price will decrease. 
D)  Demand will decrease,quantity supplied will increase,and price will decrease.

Question 11

When there is an excess supply 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 12

An increase in quantity demanded is a movement along a fixed demand curve caused by a shift in the supply curve.

Accepted Answer

A) True 
 B)False

Question 13

In the long run,will the market price for a good/service always equals the equilibrium price? Explain why or why not.

Accepted Answer

Yes,due to the invisible hand.If prices

Question 14

Which of the following events will cause a decrease in the equilibrium price?

Accepted Answer

A)  a government tax on output 
B)  a decrease in income for an inferior good 
C)  an increase in the price of a substitute good 
D)  lower input prices 
A)  a government tax on output 
B)  a decrease in income for an inferior good 
C)  an increase in the price of a substitute good 
D)  lower input prices

Question 15

How did the spread of the Internet affect the market for newspapers?

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 16

When producers produce more than the equilibrium quantity:

Accepted Answer

A)  resources are wasted producing goods at a higher cost than consumers are willing to pay. 
B)  the market is operating at an abnormally high level of efficiency. 
C)  sellers have an incentive to reduce their price. 
D)  buyers have an incentive to offer a higher price. 
A)  resources are wasted producing goods at a higher cost than consumers are willing to pay. 
B)  the market is operating at an abnormally high level of efficiency. 
C)  sellers have an incentive to reduce their price. 
D)  buyers have an incentive to offer a higher price.

Question 17

Lead,an input in the production of ammunition,increased in price from $0.60/lb in 2006 to over $1.50/lb in 2007.A possible explanation for this is that demand has increased faster than supply has increased.

Accepted Answer

A) True 
 B)False

Question 18

When the price of a good decreases:

Accepted Answer

A)  the quantity demanded increases. 
B)  demand increases. 
C)  the quantity supplied increases. 
D)  supply increases. 
A)  the quantity demanded increases. 
B)  demand increases. 
C)  the quantity supplied increases. 
D)  supply increases.

Question 19

When there is a surplus of a good:

Accepted Answer

A)  sellers will lower the price in order to increase quantity demanded. 
B)  sellers will raise the price in order to decrease quantity demanded. 
C)  sellers will compete with buyers. 
D)  this is an indication the buyers do not value the good. 
A)  sellers will lower the price in order to increase quantity demanded. 
B)  sellers will raise the price in order to decrease quantity demanded. 
C)  sellers will compete with buyers. 
D)  this is an indication the buyers do not value the good.

Question 20

Use the following to answer questions 
Figure: Price and Quantity 1  
-(Figure: Price and Quantity 1)In the diagram,at a price of $80,the quantity demanded is ______,the quantity supplied is ______,and there is ______.

Accepted Answer

A)  20;80;a surplus of 60 units 
B)  80;20,a surplus of 60 units 
C)  80;20,a shortage of 60 units 
D)  20;20;no surplus or shortage 
A)  20;80;a surplus of 60 units 
B)  80;20,a surplus of 60 units 
C)  80;20,a shortage of 60 units 
D)  20;20;no surplus or shortage

Exam 4: Equilibrium- How Supply and Demand

Suppose there is an increase in demand in a market and no change in the supply.What will happen to the market equilibrium price and quantity?

A shortage will occur at any price below equilibrium price,and a surplus will occur at any price above equilibrium price.

In a free market setting where quantity supplied is 50 units and quantity demanded is 40 units,price will:

If demand decreases,ceteris paribus,the quantity exchanged will be ______ at the new market equilibrium point.

Suppose the price of oil is falling due to a drop-off in demand after the summer driving season.Explain what a group of oil-producing nations (like OPEC)that control a significant amount of the world's oil supplies could do in order to keep prices (and hence profits)high.

The equilibrium price and quantity are the only price and quantity that are stable in a free market.

Figure: Supply-Driven Price Change Refer to the figure.When the supply curve shifts from S0 to S1,the equilibrium price rises to:

An increase in demand causes an increase in quantity supplied,which causes a decrease in price.

Imagine a free market in which quantity supplied is 50 units and quantity demanded is 40 units at the current price.The market is experiencing a(n):

If hipsters decide that Pabst Blue Ribbon has become cliché and they seek out a more iconic beverage,what will happen in the market for PBR?

When there is an excess supply in the market,competition will:

An increase in quantity demanded is a movement along a fixed demand curve caused by a shift in the supply curve.

In the long run,will the market price for a good/service always equals the equilibrium price? Explain why or why not.

Which of the following events will cause a decrease in the equilibrium price?

How did the spread of the Internet affect the market for newspapers?

When producers produce more than the equilibrium quantity:

Lead,an input in the production of ammunition,increased in price from $0.60/lb in 2006 to over $1.50/lb in 2007.A possible explanation for this is that demand has increased faster than supply has increased.

When the price of a good decreases:

When there is a surplus of a good:

Use the following to answer questions Figure: Price and Quantity 1 -(Figure: Price and Quantity 1)In the diagram,at a price of $80,the quantity demanded is ______,the quantity supplied is ______,and there is ______.

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

Figure: Supply-Driven Price Change Refer to the figure.When the supply curve shifts from S₀ to S₁,the equilibrium price rises to:

Use the following to answer questions Figure: Price and Quantity 1 -(Figure: Price and Quantity 1)In the diagram,at a price of $80,the quantity demanded is ,the quantity supplied is ,and there is __.