Question 1

Exhibit 4-2  
-Consider Exhibit 4-2 which shows 3 supply curves for milk.Which of the following would shift the supply curve for milk from S1 to S0?

Accepted Answer

A) a decrease in the price cattle feed 
B) the expectation of a higher price in the near future 
C) an increase in the price of milk 
D) an increase in the price of beef 
E) a new and improved cattle food that increases the yield per dairy cow 
A) a decrease in the price cattle feed 
B) the expectation of a higher price in the near future 
C) an increase in the price of milk 
D) an increase in the price of beef 
E) a new and improved cattle food that increases the yield per dairy cow

Question 2

Suppose a market is in equilibrium and then a price ceiling is established below the equilibrium price.Which of the following will happen?

Accepted Answer

A) quantity demanded will decrease 
B) a surplus will develop 
C) a shortage will develop 
D) the quantity sold will rise 
E) the market will remain in equilibrium 
A) quantity demanded will decrease 
B) a surplus will develop 
C) a shortage will develop 
D) the quantity sold will rise 
E) the market will remain in equilibrium

Question 3

The income effect of an increase in the price of hominy grits (an inferior good)is a(n)

Accepted Answer

A) decrease in the demand for hominy grits 
B) decrease in the quantity demanded of hominy grits 
C) increase in the demand for hominy grits 
D) increase in the quantity demanded of hominy grits 
E) new demand curve because everything else is no longer constant 
A) decrease in the demand for hominy grits 
B) decrease in the quantity demanded of hominy grits 
C) increase in the demand for hominy grits 
D) increase in the quantity demanded of hominy grits 
E) new demand curve because everything else is no longer constant

Question 4

Markets reduce transactions costs

Accepted Answer

A) by decreasing the time spent searching for information about goods and services 
B) only when they have a highly structured set of rules like the New York Stock Exchange 
C) because each market uses the same set of rules for buying and selling goods and services 
D) only when the government can coordinate the plans of many buyers and sellers 
E) when prices are set by the sellers and are not determined by negotiation between the buyers and the sellers 
A) by decreasing the time spent searching for information about goods and services 
B) only when they have a highly structured set of rules like the New York Stock Exchange 
C) because each market uses the same set of rules for buying and selling goods and services 
D) only when the government can coordinate the plans of many buyers and sellers 
E) when prices are set by the sellers and are not determined by negotiation between the buyers and the sellers

Question 5

A decrease in the price of peanuts will cause a leftward shift of the supply curve of peanut butter.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following will increase the supply of vanilla ice cream?

Accepted Answer

A) an increase in the price of vanilla beans (an ingredient in ice cream) 
B) a decrease in the sales tax on restaurant bills 
C) an increase in the price of chocolate ice cream 
D) a decrease in the price of milk (an ingredient in ice cream) 
E) an increase in the price of hot fudge 
A) an increase in the price of vanilla beans (an ingredient in ice cream) 
B) a decrease in the sales tax on restaurant bills 
C) an increase in the price of chocolate ice cream 
D) a decrease in the price of milk (an ingredient in ice cream) 
E) an increase in the price of hot fudge

Question 7

Which of the following will cause the demand curve for a normal good to shift to the right?

Accepted Answer

A) a decrease in income 
B) an increase in the price of a complementary good 
C) a decrease in the price of the good 
D) an increase in the price of a substitute good 
E) an expectation of a future price decline 
A) a decrease in income 
B) an increase in the price of a complementary good 
C) a decrease in the price of the good 
D) an increase in the price of a substitute good 
E) an expectation of a future price decline

Question 8

Which of the following is correct when a price is set below a market's equilibrium price?

Accepted Answer

A) quantity demanded exceeds quantity supplied at the set price 
B) quantity demanded is less than quantity supplied at the set price 
C) quantity demanded is equal to quantity supplied at the set price 
D) at the set price there is a surplus 
E) the market price is less than the ceiling price 
A) quantity demanded exceeds quantity supplied at the set price 
B) quantity demanded is less than quantity supplied at the set price 
C) quantity demanded is equal to quantity supplied at the set price 
D) at the set price there is a surplus 
E) the market price is less than the ceiling price

Question 9

Along a given demand curve,a decrease in supply will typically

Accepted Answer

A) decrease price,but the change in quantity could be in either direction 
B) increase price and decrease the quantity 
C) decrease price but leave quantity unchanged 
D) decrease both quantity and price 
E) increase both quantity and price 
A) decrease price,but the change in quantity could be in either direction 
B) increase price and decrease the quantity 
C) decrease price but leave quantity unchanged 
D) decrease both quantity and price 
E) increase both quantity and price

Question 10

In the market for chewing gum,the current price is 50 cents per pack and 100,000 packs are sold.Which of the following events would lead to a new equilibrium price of 60 cents and quantity of 90,000 packs?

Accepted Answer

A) an increase in the price of other kinds of candy 
B) an increase in the price of the ingredients used to make chewing gum 
C) a decrease in the number of young people in the population 
D) an agreement by workers in the chewing gum industry to work for lower wages 
E) an increase in income 
A) an increase in the price of other kinds of candy 
B) an increase in the price of the ingredients used to make chewing gum 
C) a decrease in the number of young people in the population 
D) an agreement by workers in the chewing gum industry to work for lower wages 
E) an increase in income

Question 11

Which of the following is most likely to be an inferior good?

Accepted Answer

A) airline travel 
B) restaurant meals 
C) a subscription to the Wall Street Journal 
D) soft drinks 
E) used clothing 
A) airline travel 
B) restaurant meals 
C) a subscription to the Wall Street Journal 
D) soft drinks 
E) used clothing

Question 12

A decrease in the price of a good will cause a leftward shift of the demand curve,if it is a normal good.

Accepted Answer

A) True 
 B)False

Question 13

If supply increases and demand decreases,then equilibrium price will fall.

Accepted Answer

A) True 
 B)False

Question 14

Exhibit 4-8  
-Based on Exhibit 4-8,a rent ceiling of $750 per month would result in a number of units rented of

Accepted Answer

A) There is not enough information to determine the answer. 
B) 50,000 
C) greater than 50,000 but less than 90,000 
D) 90,000 
E) 130,000 
A) There is not enough information to determine the answer. 
B) 50,000 
C) greater than 50,000 but less than 90,000 
D) 90,000 
E) 130,000

Question 15

The explanation for the law of demand begins with

Accepted Answer

A) a small number of wants satisfied by scarce resources 
B) finite wants satisfied by infinite resources 
C) unlimited wants confronting scarce resources 
D) unlimited wants matching up with unlimited resources 
E) prices acting as signals to existing and potential suppliers 
A) a small number of wants satisfied by scarce resources 
B) finite wants satisfied by infinite resources 
C) unlimited wants confronting scarce resources 
D) unlimited wants matching up with unlimited resources 
E) prices acting as signals to existing and potential suppliers

Question 16

Suppose the current equilibrium price of pizza is $5.If the government decides the price of pizza cannot rise above $4,the result of this policy would be

Accepted Answer

A) a shortage 
B) a surplus 
C) that the market would remain in equilibrium but with a larger quantity bought and sold than at $5 
D) at the $4 price,the quantity sold would be greater than the quantity bought 
E) a shift of demand to the right 
A) a shortage 
B) a surplus 
C) that the market would remain in equilibrium but with a larger quantity bought and sold than at $5 
D) at the $4 price,the quantity sold would be greater than the quantity bought 
E) a shift of demand to the right

Question 17

If there is a shortage in the market for jeans,

Accepted Answer

A) producers' inventories will increase 
B) the price should begin to rise 
C) the demand curve will shift to restore equilibrium in the market 
D) the supply curve will shift to restore equilibrium in the market 
E) producers expect government to impose a price ceiling 
A) producers' inventories will increase 
B) the price should begin to rise 
C) the demand curve will shift to restore equilibrium in the market 
D) the supply curve will shift to restore equilibrium in the market 
E) producers expect government to impose a price ceiling

Question 18

If the demand for bicycles increases,

Accepted Answer

A) the quantity demanded decreases 
B) equilibrium price increases and equilibrium quantity decreases 
C) equilibrium price decreases and equilibrium quantity increases 
D) quantity supplied increases 
E) quantity supplied decreases 
A) the quantity demanded decreases 
B) equilibrium price increases and equilibrium quantity decreases 
C) equilibrium price decreases and equilibrium quantity increases 
D) quantity supplied increases 
E) quantity supplied decreases

Question 19

A decrease in demand for a good could mean that

Accepted Answer

A) consumers are willing to pay a higher price for each quantity of the good 
B) consumers are willing to buy larger quantities of the good at each price 
C) the demand curve has undergone a parallel shift to the right 
D) the demand curve has undergone a nonparallel shift to the right 
E) the demand curve has shifted to the left 
A) consumers are willing to pay a higher price for each quantity of the good 
B) consumers are willing to buy larger quantities of the good at each price 
C) the demand curve has undergone a parallel shift to the right 
D) the demand curve has undergone a nonparallel shift to the right 
E) the demand curve has shifted to the left

Question 20

Which of the following explains the relationship between price and the quantity supplied?

Accepted Answer

A) When expanding output,firms will incur greater total costs. 
B) As the price of a commodity falls,producers will find it more profitable to use higher-priced inputs in their production process. 
C) As a result of rising production costs,firms can increase profits by expanding output only if the price of output increases. 
D) To expand output,firms must hire more resources,which are always of poorer quality. 
E) Consumers want more at lower prices. 
A) When expanding output,firms will incur greater total costs. 
B) As the price of a commodity falls,producers will find it more profitable to use higher-priced inputs in their production process. 
C) As a result of rising production costs,firms can increase profits by expanding output only if the price of output increases. 
D) To expand output,firms must hire more resources,which are always of poorer quality. 
E) Consumers want more at lower prices.

Exam 4: Demand, supply, and Markets

Exhibit 4-2 -Consider Exhibit 4-2 which shows 3 supply curves for milk.Which of the following would shift the supply curve for milk from S1 to S0?

Suppose a market is in equilibrium and then a price ceiling is established below the equilibrium price.Which of the following will happen?

The income effect of an increase in the price of hominy grits (an inferior good)is a(n)

Markets reduce transactions costs

A decrease in the price of peanuts will cause a leftward shift of the supply curve of peanut butter.

Which of the following will increase the supply of vanilla ice cream?

Which of the following will cause the demand curve for a normal good to shift to the right?

Which of the following is correct when a price is set below a market's equilibrium price?

Along a given demand curve,a decrease in supply will typically

In the market for chewing gum,the current price is 50 cents per pack and 100,000 packs are sold.Which of the following events would lead to a new equilibrium price of 60 cents and quantity of 90,000 packs?

Which of the following is most likely to be an inferior good?

A decrease in the price of a good will cause a leftward shift of the demand curve,if it is a normal good.

If supply increases and demand decreases,then equilibrium price will fall.

Exhibit 4-8 -Based on Exhibit 4-8,a rent ceiling of $750 per month would result in a number of units rented of

The explanation for the law of demand begins with

Suppose the current equilibrium price of pizza is $5.If the government decides the price of pizza cannot rise above $4,the result of this policy would be

If there is a shortage in the market for jeans,

If the demand for bicycles increases,

A decrease in demand for a good could mean that

Which of the following explains the relationship between price and the quantity supplied?

The Art and Science of Economic Analysis

Economic Tools and Economics Systems

Economic Decision Makers

Introduction to Macroeconomics

Tracking the Useconomy

Unemployment and Inflation

Productivity and Growth

Aaggregate Expenditure and Aggregate Demand

Baggregate Expenditure and Aggregate Demand

Aggregate Supply

Fiscal Policy

Federal Budgets and Public Policy

Money and the Financial System

Banking and the Money Supply

Monetary Theory and Policy

Macro Policy Debate: Active or Passive

International Trade

Externalities and the Environment

International Finance

Economic Development

understanding Graphs

National Income Accounts

The Algebra of Demand-Side Equilibrium

Filters

Exhibit 4-2 -Consider Exhibit 4-2 which shows 3 supply curves for milk.Which of the following would shift the supply curve for milk from S₁ to S₀?