Question 1

Figure 4-1  
-Refer to Figure 4-1. The movement from point A to point B on the graph is caused by a(n)

Accepted Answer

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

Question 2

Suppose you like to make, from scratch, pies filled with banana cream and vanilla pudding. You notice that the price of bananas has increased. As a result, your demand for vanilla pudding would

Accepted Answer

A)  decrease. 
B)  increase. 
C)  be unaffected. 
D)  There is insufficient information given to answer the question. 
A)  decrease. 
B)  increase. 
C)  be unaffected. 
D)  There is insufficient information given to answer the question.

Question 3

The line that relates the price of a good and the quantity demanded of that good is called the demand

Accepted Answer

A)  schedule, and it usually slopes upward. 
B)  schedule, and it usually slopes downward. 
C)  curve, and it usually slopes upward. 
D)  curve, and it usually slopes downward. 
A)  schedule, and it usually slopes upward. 
B)  schedule, and it usually slopes downward. 
C)  curve, and it usually slopes upward. 
D)  curve, and it usually slopes downward.

Question 4

An increase in supply is represented by a

Accepted Answer

A)  movement downward and to the left along a supply curve. 
B)  movement upward and to the right along a supply curve. 
C)  rightward shift of a supply curve. 
D)  leftward shift of a supply curve. 
A)  movement downward and to the left along a supply curve. 
B)  movement upward and to the right along a supply curve. 
C)  rightward shift of a supply curve. 
D)  leftward shift of a supply curve.

Question 5

There is no shortage of scarce resources in a market economy because

Accepted Answer

A)  the government makes shortages illegal. 
B)  resources are abundant in market economies. 
C)  prices adjust to eliminate shortages. 
D)  quantity supplied is always greater than quantity demanded in market economies. 
A)  the government makes shortages illegal. 
B)  resources are abundant in market economies. 
C)  prices adjust to eliminate shortages. 
D)  quantity supplied is always greater than quantity demanded in market economies.

Question 6

Which of the following is not an example of a market?

Accepted Answer

A)  A small town has only one seller of electricity. 
B)  In the United States, a sick person cannot legally purchase a kidney. 
C)  In Florida, there are many buyers and sellers of key lime pie. 
D)  The availability of Internet shopping has expanded the clothing choices for buyers who do not live near large cities. 
A)  A small town has only one seller of electricity. 
B)  In the United States, a sick person cannot legally purchase a kidney. 
C)  In Florida, there are many buyers and sellers of key lime pie. 
D)  The availability of Internet shopping has expanded the clothing choices for buyers who do not live near large cities.

Question 7

Warrensburg is a small college town in Missouri. At the end of August each year, the market demand for fast food in Warrensburg

Accepted Answer

A)  increases. 
B)  decreases. 
C)  remains constant, but we observe a movement downward and to the right along the demand curve. 
D)  remains constant, but we observe a movement upward and to the left along the demand curve. 
A)  increases. 
B)  decreases. 
C)  remains constant, but we observe a movement downward and to the right along the demand curve. 
D)  remains constant, but we observe a movement upward and to the left along the demand curve.

Question 8

Does a change in the price in a market result in a shift of the demand curve or in a movement along the demand curve?

Accepted Answer

A movement

Question 9

In a market economy, supply and demand are important because they

Accepted Answer

A)  play a critical role in the allocation of the economy's scarce resources. 
B)  determine how much of each good gets produced. 
C)  can be used to predict the impact on the economy of various events and policies. 
D)  All of the above are correct. 
A)  play a critical role in the allocation of the economy's scarce resources. 
B)  determine how much of each good gets produced. 
C)  can be used to predict the impact on the economy of various events and policies. 
D)  All of the above are correct.

Question 10

Figure 4-16  
-Refer to Figure 4-16. The shift from S to S' could be caused by an

Accepted Answer

A)  increase in the price of the good. 
B)  improvement in production technology. 
C)  increase in income. 
D)  increase in input prices. 
A)  increase in the price of the good. 
B)  improvement in production technology. 
C)  increase in income. 
D)  increase in input prices.

Question 11

Table 4-13
The demand schedule below pertains to sandwiches demanded per week.  
-Refer to Table 4-13. Suppose Harry, Darby, and Jake are the only demanders of sandwiches. Also suppose the following: • x = 2.
-The current price of a sandwich is $3.00.
-The market quantity supplied of sandwiches is 4.
-The slope of the supply curve is 2.
Then there is currently a

Accepted Answer

A)  shortage of 6 sandwiches, and the equilibrium price of a sandwich is less than $3.00. 
B)  shortage of 6 sandwiches, and the equilibrium price of a sandwich is $5.00. 
C)  surplus of 6 sandwiches, and the equilibrium price of a sandwich is less than $3.00. 
D)  surplus of 6 sandwiches, and the equilibrium price of a sandwich is $5.00. 
A)  shortage of 6 sandwiches, and the equilibrium price of a sandwich is less than $3.00. 
B)  shortage of 6 sandwiches, and the equilibrium price of a sandwich is $5.00. 
C)  surplus of 6 sandwiches, and the equilibrium price of a sandwich is less than $3.00. 
D)  surplus of 6 sandwiches, and the equilibrium price of a sandwich is $5.00.

Question 12

Which of the following demonstrates the law of supply?

Accepted Answer

A)  When leather became more expensive, belt producers decreased their supply of belts. 
B)  When car production technology improved, car producers increased their supply of cars. 
C)  When sweater producers expected sweater prices to rise in the near future, they decreased their current supply of sweaters. 
D)  When ketchup prices rose, ketchup sellers increased their quantity supplied of ketchup. 
A)  When leather became more expensive, belt producers decreased their supply of belts. 
B)  When car production technology improved, car producers increased their supply of cars. 
C)  When sweater producers expected sweater prices to rise in the near future, they decreased their current supply of sweaters. 
D)  When ketchup prices rose, ketchup sellers increased their quantity supplied of ketchup.

Question 13

An increase in demand will cause an increase in price, which will cause an increase in quantity supplied.

Accepted Answer

A) True 
 B)False

Question 14

The market for diamond rings is closely linked to the market for high-quality diamonds. If a large quantity of high- quality diamonds enters the market, then the

Accepted Answer

A)  supply curve for diamond rings will shift right, which will create a shortage at the current price. Price will increase, which will decrease quantity demanded and increase quantity supplied. The new market equilibrium will be at a higher price and higher quantity. 
B)  supply curve for diamond rings will shift right, which will create a surplus at the current price. Price will decrease, which will increase quantity demanded and decrease quantity supplied. The new market equilibrium will be at a lower price and higher quantity. 
C)  demand curve for diamond rings will shift right, which will create a shortage at the current price. Price will increase, which will decrease quantity demanded and increase quantity supplied. The new market equilibrium will be at a higher price and higher quantity. 
D)  demand curve for diamond rings will shift right, which will create a surplus at the current price. Price will decrease, which will increase quantity demanded and decrease quantity supplied. The new market equilibrium will be at a lower price and higher quantity. 
A)  supply curve for diamond rings will shift right, which will create a shortage at the current price. Price will increase, which will decrease quantity demanded and increase quantity supplied. The new market equilibrium will be at a higher price and higher quantity. 
B)  supply curve for diamond rings will shift right, which will create a surplus at the current price. Price will decrease, which will increase quantity demanded and decrease quantity supplied. The new market equilibrium will be at a lower price and higher quantity. 
C)  demand curve for diamond rings will shift right, which will create a shortage at the current price. Price will increase, which will decrease quantity demanded and increase quantity supplied. The new market equilibrium will be at a higher price and higher quantity. 
D)  demand curve for diamond rings will shift right, which will create a surplus at the current price. Price will decrease, which will increase quantity demanded and decrease quantity supplied. The new market equilibrium will be at a lower price and higher quantity.

Question 15

A decrease in the price of blueberries will decrease both the equilibrium price and quantity in the market for blueberry muffins.

Accepted Answer

A) True 
 B)False

Question 16

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 17

The unique point at which the supply and demand curves intersect is called

Accepted Answer

A)  market harmony. 
B)  coincidence. 
C)  equivalence. 
D)  equilibrium. 
A)  market harmony. 
B)  coincidence. 
C)  equivalence. 
D)  equilibrium.

Question 18

Figure 4-26  
-Refer to Figure 4-26. Which of the following movements would illustrate the effect in the market for Ramen noodles of a decrease in the incomes of young adults, assuming that Ramen noodles are an inferior good?

Accepted Answer

A)  Point A to Point B 
B)  Point C to Point B 
C)  Point C to Point D 
D)  Point A to Point D 
A)  Point A to Point B 
B)  Point C to Point B 
C)  Point C to Point D 
D)  Point A to Point D

Question 19

Which of the following is not a characteristic of a perfectly competitive market?

Accepted Answer

A)  Sellers set the price of the product. 
B)  There are many sellers. 
C)  Buyers must accept the price the market determines. 
D)  All of the above are characteristics of a perfectly competitive market. 
A)  Sellers set the price of the product. 
B)  There are many sellers. 
C)  Buyers must accept the price the market determines. 
D)  All of the above are characteristics of a perfectly competitive market.

Question 20

Figure 4-18  
-Refer to Figure 4-18. At a price of $15, there would be a

Accepted Answer

A)  surplus of 400 units. 
B)  shortage of 200 units. 
C)  shortage of 400 units. 
D)  shortage of 600 units. 
A)  surplus of 400 units. 
B)  shortage of 200 units. 
C)  shortage of 400 units. 
D)  shortage of 600 units.

Exam 4: The Market Forces of Supply and Demand

Figure 4-1 -Refer to Figure 4-1. The movement from point A to point B on the graph is caused by a(n)

Suppose you like to make, from scratch, pies filled with banana cream and vanilla pudding. You notice that the price of bananas has increased. As a result, your demand for vanilla pudding would

The line that relates the price of a good and the quantity demanded of that good is called the demand

An increase in supply is represented by a

There is no shortage of scarce resources in a market economy because

Which of the following is not an example of a market?

Warrensburg is a small college town in Missouri. At the end of August each year, the market demand for fast food in Warrensburg

Does a change in the price in a market result in a shift of the demand curve or in a movement along the demand curve?

In a market economy, supply and demand are important because they

Figure 4-16 -Refer to Figure 4-16. The shift from S to S' could be caused by an

Which of the following demonstrates the law of supply?

An increase in demand will cause an increase in price, which will cause an increase in quantity supplied.

The market for diamond rings is closely linked to the market for high-quality diamonds. If a large quantity of high- quality diamonds enters the market, then the

A decrease in the price of blueberries will decrease both the equilibrium price and quantity in the market for blueberry muffins.

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

The unique point at which the supply and demand curves intersect is called

Figure 4-26 -Refer to Figure 4-26. Which of the following movements would illustrate the effect in the market for Ramen noodles of a decrease in the incomes of young adults, assuming that Ramen noodles are an inferior good?

Which of the following is not a characteristic of a perfectly competitive market?

Figure 4-18 -Refer to Figure 4-18. At a price of $15, there would be a

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

Elasticity and Its Application

Supply, Demand, and Government Policies

Consumers, Producers, and the Efficiency of Markets

Application: the Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Monopolistic Competition

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

The Basic Tools of Finance

Unemployment

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Trade-Off Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

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