Question 1

As a result of advances in technology, cellular telephones have become cheaper to produce. Illustrate the effect of this change on the market for cellular telephones.

Accepted Answer

The answer of As a result of advances in technology,...

Question 2

If at a price of $1000, 8 different laptop manufacturers are willing to sell 20 laptops each. If the 8 manufacturers are the only sellers of laptops in the market, then at a price of $1000, there are laptops supplied in the market.

Accepted Answer

A)  8 
B)  820 
C)  20 
D)  160

Question 3

When consumers find their incomes increasing, they tend to buy more _______.

Accepted Answer

The answer of When consumers find their incomes increasing, they...

Question 4

Suppose that the price of oranges increases and the quantity of oranges in the market decreases. Suggest two reasons why this might have happened.

Accepted Answer

The answer of Suppose that the price of oranges increases...

Question 5

Suppose that in October the price of a cup of cafe latte was $1.50 and 400 lattes were consumed. In November the price of a latte was $2.00 and 200 lattes were consumed. What might have caused this change?

Accepted Answer

A)  The price of tea (a substitute for cafe lattes) rose. 
B)  The price of coffee beans (an input of production of cafe lattes) rose. 
C)  The price of coffee beans (an input of production of cafe lattes) fell. 
D)  The price of tea (a substitute for cafe lattes) fell.

Question 6

The market demand curve is:

Accepted Answer

A)  negatively sloped. 
B)  always horizontal. 
C)  always vertical 
D)  upward sloping.

Question 7

If an increase in income results in a decrease in the demand for Honda Civics, then Honda Civics are considered:

Accepted Answer

A)  substitute goods. 
B)  inferior goods. 
C)  normal goods. 
D)  complementary goods.

Question 8

When a government pays a company for producing a product or good with the result that selling the product is more profitable regardless of the price so that the company will produce more of it, it is called a _______.

Accepted Answer

The answer of When a government pays a company for...

Question 9

Using a graph, illustrate the effect that an increase in production costs will have on the equilibrium price and quantity of a good.

Accepted Answer

The answer of Using a graph, illustrate the effect that...

Question 10

Figure 4.4
-Figure 4.4 illustrates the demand for guitars. Assume that guitars and guitar strings are complements. A decrease in the price of guitar strings would bring about a movement from:

Accepted Answer

A)  point B to point A. 
B)  D1 to D2. 
C)  D1 to D0. 
D)  point B to point C.

Question 11

Suppose that the Surgeon General releases a study suggesting that steak consumption increases the risk of cancer. As a result of this study, we would predict that the equilibrium quantity of steak will _______ and the equilibrium price of steak will _______.

Accepted Answer

A)  increase; increase 
B)  increase; decrease 
C)  decrease; increase 
D)  decrease; decrease

Question 12

A demand curve is defined as the relationship between:

Accepted Answer

A)  the price of a good and the quantity of that good that producers are willing to sell. 
B)  the income of consumers and the quantity of a good that consumers are willing to buy. 
C)  the price of a good and the quantity of that good that consumers are willing to buy. 
D)  the income of consumers and the quantity of a good that producers are willing to sell.

Question 13

Figure 4.4
-Figure 4.4 illustrates the demand for guitars. Assume guitars are an inferior good. An increase in income would bring about a movement from:

Accepted Answer

A)  D1 to D0. 
B)  D1 to D2. 
C)  point B to point A. 
D)  point B to point C.

Question 14

A government sometimes creates an excess supply of a product by setting a minimum price at which the product may be sold to consumers. This is sometimes called a:

Accepted Answer

A)  price floor. 
B)  price ceiling. 
C)  tax. 
D)  none of the above

Question 15

If a government imposes a tax on the producers of a product, in addition to making the product more costly and less profitable, the tax will _______.

Accepted Answer

The answer of If a government imposes a tax on...

Question 16

Becky demands more raisins as her income increases. From this, we can conclude that, for Becky:

Accepted Answer

A)  raisins are a substitute good. 
B)  raisins are an inferior good. 
C)  raisins are a complementary good. 
D)  raisins are a normal good.

Question 17

Suppose that consumers expect that the price of a product will increase in the future. The result is that:

Accepted Answer

A)  the current supply of the product increases. 
B)  the current demand for the product increases. 
C)  the current supply of the product decreases. 
D)  the current demand for the product decreases.

Question 18

If incomes increase and Honda Civics are considered inferior goods, then

Accepted Answer

A)  the quantity demanded for Honda Civics will decrease. 
B)  the demand for Honda Civics will decrease. 
C)  the demand for Honda Civics will increase. 
D)  the quantity demanded for Honda Civics will increase.

Question 19

Peaches and cream are complements. When the price of peaches rises and the price of raw milk (used to make cream) rises:

Accepted Answer

A)  the equilibrium price of cream rises and the equilibrium quantity of cream might rise or fall. 
B)  the equilibrium price of cream falls and the equilibrium quantity of cream might rise or fall. 
C)  the equilibrium price of cream falls and the equilibrium quantity of cream rises. 
D)  the equilibrium quantity of cream falls and the equilibrium price of cream might rise or fall.

Question 20

Peaches and cream are complements. When the price of peaches falls, the equilibrium quantity of cream will and the equilibrium price of cream will _ .

Accepted Answer

A)  rise; rise 
B)  rise; fall 
C)  fall; rise 
D)  fall; fall

Exam 4: Demand, Supply, and Market Equilibrium