Question 1

In deriving the demand schedule for a good, economists assume that

Accepted Answer

A)  consumers have equal incomes to allocate among goods. 
B)  a consumer will allocate all of her income to one good. 
C)  all other influences on demand except the product price are held constant. 
D)  reported income changes at each point on the demand schedule. 
A)  consumers have equal incomes to allocate among goods. 
B)  a consumer will allocate all of her income to one good. 
C)  all other influences on demand except the product price are held constant. 
D)  reported income changes at each point on the demand schedule.

Question 2

Given the market data for good X in the above table, an equilibrium quantity is established at

Accepted Answer

A)  90 units. 
B)  60 units. 
C)  30 units. 
D)  120 units. 
A)  90 units. 
B)  60 units. 
C)  30 units. 
D)  120 units.

Question 3

If the market price rises from P0 to P2 in the above figure, then there is a

Accepted Answer

A)  surplus equal to the distance Q0, Q2. 
B)  surplus equal to the distance Q1, Q2. 
C)  shortage equal to the distance Q0, Q2. 
D)  shortage equal to the distance Q1, Q2. 
A)  surplus equal to the distance Q0, Q2. 
B)  surplus equal to the distance Q1, Q2. 
C)  shortage equal to the distance Q0, Q2. 
D)  shortage equal to the distance Q1, Q2.

Question 4

The law of demand includes the statement "other things being equal." These other things include all of the following EXCEPT

Accepted Answer

A)  the price of that good in the law of demand. 
B)  consumers' income. 
C)  consumers' tastes and preferences. 
D)  the number of potential buyers. 
A)  the price of that good in the law of demand. 
B)  consumers' income. 
C)  consumers' tastes and preferences. 
D)  the number of potential buyers.

Question 5

If the price of an item can freely adjust, a market will

Accepted Answer

A)  always move towards equilibrium. 
B)  always have an excess quantity demanded. 
C)  always have an excess quantity supplied. 
D)  never move towards equilibrium because prices are always increasing. 
A)  always move towards equilibrium. 
B)  always have an excess quantity demanded. 
C)  always have an excess quantity supplied. 
D)  never move towards equilibrium because prices are always increasing.

Question 6

If two goods are substitutes, then

Accepted Answer

A)  an increase in the price of one causes the demand for the other to fall. 
B)  there is an inverse relationship between changes in the price of one good and changes in the demand for the other. 
C)  if the price of one good falls, the demand for the other good falls also. 
D)  changes in the quantity demanded of one good will not affect the demand for the other. 
A)  an increase in the price of one causes the demand for the other to fall. 
B)  there is an inverse relationship between changes in the price of one good and changes in the demand for the other. 
C)  if the price of one good falls, the demand for the other good falls also. 
D)  changes in the quantity demanded of one good will not affect the demand for the other.

Question 7

The market supply curve can be derived by

Accepted Answer

A)  vertically adding the individual supplies at each quantity level. 
B)  multiplying the price and quantity supplied at each price level. 
C)  horizontally adding the individual supplies at each price level. 
D)  looking at the capacity utilization in the largest firms in the industry. 
A)  vertically adding the individual supplies at each quantity level. 
B)  multiplying the price and quantity supplied at each price level. 
C)  horizontally adding the individual supplies at each price level. 
D)  looking at the capacity utilization in the largest firms in the industry.

Question 8

If the price of hot dogs increases, the demand for hot dog buns will

Accepted Answer

A)  increase. 
B)  decrease. 
C)  remain constant. 
D)  shift to the right. 
A)  increase. 
B)  decrease. 
C)  remain constant. 
D)  shift to the right.

Question 9

The market supply curve is found by

Accepted Answer

A)  plotting the supply curves of individual firms. 
B)  plotting and summing up the supply curves of individual firms. 
C)  plotting the supply curves of individual consumers. 
D)  taking the supply curve of the representative firm. 
A)  plotting the supply curves of individual firms. 
B)  plotting and summing up the supply curves of individual firms. 
C)  plotting the supply curves of individual consumers. 
D)  taking the supply curve of the representative firm.

Question 10

-Which of the following situations could generate a shortage?

Accepted Answer

A)  Demand for a good increases, resulting in a new higher market clearing price. 
B)  Demand for a good decreases, resulting in a new lower market clearing price. 
C)  Demand for a good increases, but the price is not permitted to rise. 
D)  Demand for a good decreases, but the price is not permitted to fall. 
A)  Demand for a good increases, resulting in a new higher market clearing price. 
B)  Demand for a good decreases, resulting in a new lower market clearing price. 
C)  Demand for a good increases, but the price is not permitted to rise. 
D)  Demand for a good decreases, but the price is not permitted to fall.

Question 11

If a scalper for the Super Bowl is able to charge $5,000 for a front-row seat, this suggests that

Accepted Answer

A)  at the regular price, there is a surplus of Super Bowl tickets. 
B)  at the regular price, there is a shortage of Super Bowl tickets. 
C)  at the regular price, the quantity of Super Bowl tickets demanded equals the quantity supplied. 
D)  the scalper is making the football fan worse off. 
A)  at the regular price, there is a surplus of Super Bowl tickets. 
B)  at the regular price, there is a shortage of Super Bowl tickets. 
C)  at the regular price, the quantity of Super Bowl tickets demanded equals the quantity supplied. 
D)  the scalper is making the football fan worse off.

Question 12

Regarding the law of supply, which of the following statements is correct?

Accepted Answer

A)  As the price of a good or service rises, the quantity supplied will increase. 
B)  As the price of a good or service rises, the quantity supplied will decrease. 
C)  The ceteris paribus assumption does not apply. 
D)  As demand falls, supply rises. 
A)  As the price of a good or service rises, the quantity supplied will increase. 
B)  As the price of a good or service rises, the quantity supplied will decrease. 
C)  The ceteris paribus assumption does not apply. 
D)  As demand falls, supply rises.

Question 13

Which one of the following statements is TRUE?

Accepted Answer

A)  If the money price of a good increases, its relative price necessarily increases. 
B)  If the money price of a good increases, its relative price necessarily decreases. 
C)  The relative price of a good refers to the opportunity cost of purchasing it. 
D)  Rational consumers always ignore the monetary price of a good when deciding whether to buy it. 
A)  If the money price of a good increases, its relative price necessarily increases. 
B)  If the money price of a good increases, its relative price necessarily decreases. 
C)  The relative price of a good refers to the opportunity cost of purchasing it. 
D)  Rational consumers always ignore the monetary price of a good when deciding whether to buy it.

Question 14

-In the above figure, what would result if the price was $10?

Accepted Answer

A)  a surplus 
B)  a shortage 
C)  equilibrium 
D)  excess supply 
A)  a surplus 
B)  a shortage 
C)  equilibrium 
D)  excess supply

Question 15

Suppose that milk producers expect that the price of milk is going to drop next week. This would cause

Accepted Answer

A)  a decrease in the supply of milk today. 
B)  an increase in the supply of milk today. 
C)  an increase in the demand for milk today. 
D)  the selling price of milk to rise today. 
A)  a decrease in the supply of milk today. 
B)  an increase in the supply of milk today. 
C)  an increase in the demand for milk today. 
D)  the selling price of milk to rise today.

Question 16

Assuming bottled water and cola are substitutes, if the price of bottled water rises

Accepted Answer

A)  there is a movement along the demand curve for cola. 
B)  the demand curve for bottled water will shift to the right. 
C)  the demand curve for cola will shift to the right. 
D)  the demand curve for bottled water will shift to the left. 
A)  there is a movement along the demand curve for cola. 
B)  the demand curve for bottled water will shift to the right. 
C)  the demand curve for cola will shift to the right. 
D)  the demand curve for bottled water will shift to the left.

Question 17

-What happens as the result of a surplus?

Accepted Answer

A)  There is downward pressure on prices. 
B)  There is upward pressure on prices. 
C)  Consumers begin to view the good as an inferior good because it is too commonplace. 
D)  Demand for the good increases. 
A)  There is downward pressure on prices. 
B)  There is upward pressure on prices. 
C)  Consumers begin to view the good as an inferior good because it is too commonplace. 
D)  Demand for the good increases.

Question 18

-Refer to the above figure. The equilibrium price and quantity are

Accepted Answer

A)  $2 and 12 units. 
B)  $6 and 9 units. 
C)  $8 and 6 units. 
D)  $10 and 1 unit. 
A)  $2 and 12 units. 
B)  $6 and 9 units. 
C)  $8 and 6 units. 
D)  $10 and 1 unit.

Question 19

-Refer to the above figure. For a normal good, the rightward shift of the curve could have been caused by

Accepted Answer

A)  a technological improvement. 
B)  an increase in the cost of inputs. 
C)  an increase in income. 
D)  a decrease in income. 
A)  a technological improvement. 
B)  an increase in the cost of inputs. 
C)  an increase in income. 
D)  a decrease in income.

Question 20

Explain how a market demand curve is constructed.

Accepted Answer

The market demand curve is the horizonta

Exam 3: Demand and Supply

In deriving the demand schedule for a good, economists assume that

Given the market data for good X in the above table, an equilibrium quantity is established at

If the market price rises from P0 to P2 in the above figure, then there is a

The law of demand includes the statement "other things being equal." These other things include all of the following EXCEPT

If the price of an item can freely adjust, a market will

If two goods are substitutes, then

The market supply curve can be derived by

If the price of hot dogs increases, the demand for hot dog buns will

The market supply curve is found by

-Which of the following situations could generate a shortage?

If a scalper for the Super Bowl is able to charge $5,000 for a front-row seat, this suggests that

Regarding the law of supply, which of the following statements is correct?

Which one of the following statements is TRUE?

-In the above figure, what would result if the price was $10?

Suppose that milk producers expect that the price of milk is going to drop next week. This would cause

Assuming bottled water and cola are substitutes, if the price of bottled water rises

-What happens as the result of a surplus?

-Refer to the above figure. The equilibrium price and quantity are

-Refer to the above figure. For a normal good, the rightward shift of the curve could have been caused by

Explain how a market demand curve is constructed.

The Nature of Economics

Scarcity and the World of Trade-Offs

Extensions of Demand and Supply Analysis

Public Spending and Public Choice

Funding the Public Sector

The Macroeconomy: Unemployment, Inflation, and Deflation

Measuring the Economys Performance

Global Economic Growth and Development

Real GDP and the Price Level in the Long Run

Classical and Keynesian Macro Analyses

Consumption, Real GDP, and the Multiplier

Fiscal Policy

Deficit Spending and the Public Debt

Money, Banking, and Central Banking

Domestic and International Dimensions of Monetary Policy

Stabilization in an Integrated World Economy

Policies and Prospects for Global Economic Growth

Demand and Supply Elasticity

Consumer Choice

Rents, Profits, and the Financial Environment of Business

The Firm: Cost and Output Determination

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Regulation and Antitrust Policy in a Globalized Economy

The Labor Market: Demand, Supply and Outsourcing

Unions and Labor Market Monopoly Power

Income, Poverty, and Health Care

Environmental Economics

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

Filters