Question 1

Flour is an input used to produce cookies. Suppose that the price of flour rises. As a result

Accepted Answer

A)  the supply curve for flour will shift to the right. 
B)  the supply curve for flour will shift to the left. 
C)  the supply curve for cookies will shift to the right. 
D)  the supply curve for cookies will shift to the left. 
A)  the supply curve for flour will shift to the right. 
B)  the supply curve for flour will shift to the left. 
C)  the supply curve for cookies will shift to the right. 
D)  the supply curve for cookies will shift to the left.

Question 2

The arrangements that individuals have with each other to exchange goods is known as

Accepted Answer

A)  demand. 
B)  supply. 
C)  a market. 
D)  complements. 
A)  demand. 
B)  supply. 
C)  a market. 
D)  complements.

Question 3

Which of the following will cause an outward (rightward) shift in the supply curve?

Accepted Answer

A)  a reduction in the price of the good 
B)  an increase in the price of labor input 
C)  an increase in the number of consumers 
D)  technological progress 
A)  a reduction in the price of the good 
B)  an increase in the price of labor input 
C)  an increase in the number of consumers 
D)  technological progress

Question 4

-What happens as the result of a shortage?

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 they have a hard time finding it. 
D)  Supply of the good decreases. 
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 they have a hard time finding it. 
D)  Supply of the good decreases.

Question 5

The price of a new textbook is $120 in one year and is $150 two years later, while the price of a used copy of the text increased from $40 to $60. The relative price of a new textbook

Accepted Answer

A)  increased from 3 to 4.5. 
B)  decreased from 0.8 to 0.67. 
C)  decreased from 3 to 2.5. 
D)  remained constant. 
A)  increased from 3 to 4.5. 
B)  decreased from 0.8 to 0.67. 
C)  decreased from 3 to 2.5. 
D)  remained constant.

Question 6

Which of the following statements is consistent with a decrease in supply?

Accepted Answer

A)  Prices of raw material inputs have increased. 
B)  There has been an advance in technology. 
C)  Consumers' incomes have increased. 
D)  The market price has decreased. 
A)  Prices of raw material inputs have increased. 
B)  There has been an advance in technology. 
C)  Consumers' incomes have increased. 
D)  The market price has decreased.

Question 7

For a normal good, an increase in consumer income will lead to I. a movement down the demand curve
II) a rightward shift in the demand curve
III) a reduction in supply

Accepted Answer

A)  I only. 
B)  II only. 
C)  III only. 
D)  both II and III. 
A)  I only. 
B)  II only. 
C)  III only. 
D)  both II and III.

Question 8

Other things being constant, the only way to move along a given supply curve for a product is for

Accepted Answer

A)  the product's relative price to change. 
B)  the future relative price of related goods to change. 
C)  the number of sellers to change. 
D)  technological changes to occur. 
A)  the product's relative price to change. 
B)  the future relative price of related goods to change. 
C)  the number of sellers to change. 
D)  technological changes to occur.

Question 9

When income rises

Accepted Answer

A)  demand for a normal good rises. 
B)  demand for a luxury good falls. 
C)  demand for an inferior good rises. 
D)  quantity of a normal good demanded rises. 
A)  demand for a normal good rises. 
B)  demand for a luxury good falls. 
C)  demand for an inferior good rises. 
D)  quantity of a normal good demanded rises.

Question 10

-Refer to the above figure. Which panel demonstrates the law of supply?

Accepted Answer

A)  Panel A 
B)  Panel B 
C)  Panel C 
D)  Panel D 
A)  Panel A 
B)  Panel B 
C)  Panel C 
D)  Panel D

Question 11

Here's what we know about last year's weekly demand for 2-night DVD rentals in the Village of Harmony: When P = $3, Qd = 100; at P = $5, Qd = 75; and when P = $7, Qd = 50. This year the village population has increased by 25%. What impact is this most likely to have?

Accepted Answer

A)  Each individual's demand for DVD rentals will increase. 
B)  Each individual's demand curve for DVD rentals will shift to the left. 
C)  The market demand curve for DVD rentals shifts left. 
D)  The market demand for DVD rentals increases. 
A)  Each individual's demand for DVD rentals will increase. 
B)  Each individual's demand curve for DVD rentals will shift to the left. 
C)  The market demand curve for DVD rentals shifts left. 
D)  The market demand for DVD rentals increases.

Question 12

In 1950, a phone call at a pay phone cost 5 cents and a first-class stamp cost 3 cents. Today, those prices are 50 cents and 49 cents respectively. What has happened to the price of each good relative to the other? What has happened to the price of each good relative to all other goods?

Accepted Answer

The price of a phone call has decreased

Question 13

The price of cookies in terms of gallons of milk per cookie is 0.6 and the price a gallon of milk in terms of pounds of butter per gallon is 1.2. What is the relative price of cookies to butter?

Accepted Answer

A)  1.39 
B)  0.6 
C)  0.72 
D)  0.50 
A)  1.39 
B)  0.6 
C)  0.72 
D)  0.50

Question 14

The law of supply implies that the supply curve is

Accepted Answer

A)  flat. 
B)  upward sloping. 
C)  downward sloping. 
D)  vertical. 
A)  flat. 
B)  upward sloping. 
C)  downward sloping. 
D)  vertical.

Question 15

Graphically, the market supply curve is obtained by

Accepted Answer

A)  changing the ceteris paribus conditions. 
B)  a change in quantity supplied. 
C)  horizontally summing quantity supplied at various prices for individual producers. 
D)  vertically summing quantity supplied at various prices for individual producers. 
A)  changing the ceteris paribus conditions. 
B)  a change in quantity supplied. 
C)  horizontally summing quantity supplied at various prices for individual producers. 
D)  vertically summing quantity supplied at various prices for individual producers.

Question 16

Which of the following causes an increase in demand for a normal good?

Accepted Answer

A)  increase in the price of a substitute 
B)  increase in the price of a complement 
C)  decrease in price 
D)  decrease in income 
A)  increase in the price of a substitute 
B)  increase in the price of a complement 
C)  decrease in price 
D)  decrease in income

Question 17

-Refer to the above figure. Suppose that Cheerios and Apple Jacks are substitutes. Which diagram shows the effect on the demand for Cheerios when the price of Apple Jacks cereal has decreased?

Accepted Answer

A)  A 
B)  B 
C)  neither graph 
D)  both graphs 
A)  A 
B)  B 
C)  neither graph 
D)  both graphs

Question 18

An increase in the relative price of a good cannot be caused by

Accepted Answer

A)  an increase in the nominal price of the good that is greater than the increase in the nominal price of the other good. 
B)  a decrease in the nominal price of the good that is less than the decrease in the nominal price of the other good. 
C)  a decrease in the nominal price of the other good while the price of the good itself remains constant. 
D)  an increase in the nominal price of the other good while the price of the good itself remains constant. 
A)  an increase in the nominal price of the good that is greater than the increase in the nominal price of the other good. 
B)  a decrease in the nominal price of the good that is less than the decrease in the nominal price of the other good. 
C)  a decrease in the nominal price of the other good while the price of the good itself remains constant. 
D)  an increase in the nominal price of the other good while the price of the good itself remains constant.

Question 19

-At a price of P0 in the above figure, which of the following statements is FALSE?

Accepted Answer

A)  Quantity demanded equals quantity supplied. 
B)  There is an equilibrium in the market. 
C)  P0 is the market clearing price. 
D)  There is a surplus equal to Q0. 
A)  Quantity demanded equals quantity supplied. 
B)  There is an equilibrium in the market. 
C)  P0 is the market clearing price. 
D)  There is a surplus equal to Q0.

Question 20

-If there is a shortage

Accepted Answer

A)  fewer producers want to sell the product because it is too scarce. 
B)  consumers will drive up the price further. 
C)  firms will drive up the price to enhance profits. 
D)  the price will decline to the equilibrium level. 
A)  fewer producers want to sell the product because it is too scarce. 
B)  consumers will drive up the price further. 
C)  firms will drive up the price to enhance profits. 
D)  the price will decline to the equilibrium level.

Exam 3: Demand and Supply

Flour is an input used to produce cookies. Suppose that the price of flour rises. As a result

The arrangements that individuals have with each other to exchange goods is known as

Which of the following will cause an outward (rightward) shift in the supply curve?

-What happens as the result of a shortage?

The price of a new textbook is $120 in one year and is $150 two years later, while the price of a used copy of the text increased from $40 to $60. The relative price of a new textbook

Which of the following statements is consistent with a decrease in supply?

For a normal good, an increase in consumer income will lead to I. a movement down the demand curve II) a rightward shift in the demand curve III) a reduction in supply

Other things being constant, the only way to move along a given supply curve for a product is for

When income rises

-Refer to the above figure. Which panel demonstrates the law of supply?

Here's what we know about last year's weekly demand for 2-night DVD rentals in the Village of Harmony: When P = $3, Qd = 100; at P = $5, Qd = 75; and when P = $7, Qd = 50. This year the village population has increased by 25%. What impact is this most likely to have?

In 1950, a phone call at a pay phone cost 5 cents and a first-class stamp cost 3 cents. Today, those prices are 50 cents and 49 cents respectively. What has happened to the price of each good relative to the other? What has happened to the price of each good relative to all other goods?

The price of cookies in terms of gallons of milk per cookie is 0.6 and the price a gallon of milk in terms of pounds of butter per gallon is 1.2. What is the relative price of cookies to butter?

The law of supply implies that the supply curve is

Graphically, the market supply curve is obtained by

Which of the following causes an increase in demand for a normal good?

-Refer to the above figure. Suppose that Cheerios and Apple Jacks are substitutes. Which diagram shows the effect on the demand for Cheerios when the price of Apple Jacks cereal has decreased?

An increase in the relative price of a good cannot be caused by

-At a price of P0 in the above figure, which of the following statements is FALSE?

-If there is a shortage

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

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