Question 1

"He [the producer] intends only his gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention." What famous economist made this statement?

Accepted Answer

A) Alfred Marshall 
B) Friedrich Hayek 
C) Adam Smith 
D) David Ricardo

Question 2

In a competitive market economy, a resource in short supply will be allocated

Accepted Answer

A) so that each firm gets enough to keep producing some portion of its output. 
B) according to how much each firm purchased before the shortage. 
C) to those firms that can make the most profitable use of it. 
D) by government regulation.

Question 3

A technological breakthrough lowers the cost of manufacturing microwave ovens. As a result, the market changes to a new equilibrium because of

Accepted Answer

A) an upward movement along the demand curve for microwave ovens. 
B) a rightward shift in the demand curve for microwave ovens. 
C) a rightward shift in the supply curve for microwave ovens. 
D) a shortage of microwave ovens.

Question 4

If we observe a decrease in the price of a good and a decrease in the amount of the good bought and sold, this could be explained by

Accepted Answer

A) an increase in the supply of the good. 
B) an increase in the demand for the good. 
C) a decrease in the demand for the good. 
D) a decrease in the supply of the good.

Question 5

A decrease in supply will cause

Accepted Answer

A) an increase in demand. 
B) a decrease in demand. 
C) an increase in quantity demanded. 
D) a decrease in quantity demanded. 
E) a decrease in equilibrium price.

Question 6

Figure 3-20 
-Refer to Figure 3-20. If the price decreases from $22 to $16, consumer surplus increases by

Accepted Answer

A) $120. 
B) $360. 
C) $480. 
D) $600.

Question 7

The term market always refers to

Accepted Answer

A) an arrangement in which buyers and sellers meet at a specific time and place. 
B) an arrangement in which an auctioneer plays at least a limited role in setting prices. 
C) a group of buyers and sellers of a particular good or service. 
D) a single buyer and seller of a particular good or service.

Question 8

Because the height of the demand curve measures the marginal value of the good to consumers, the fact that a demand curve slopes downward to the right illustrates that

Accepted Answer

A) as more of a product is consumed, consumers will value additional units less. 
B) as more of a product is consumed, consumers will value additional units more. 
C) the value of additional units of the good is unrelated to the amount consumed. 
D) the cost of production for a good generally rises as more of it is produced.

Question 9

To be economically successful, the entrepreneur must

Accepted Answer

A) combine resources in a manner that increases their value. 
B) produce a good that consumers value less than the resources used to produce it. 
C) use only personal financial capital to avoid the interest payments that would have to be paid if the money is borrowed from the bank. 
D) transform or rearrange resources to maximize the entrepreneur's cost of production.

Question 10

Figure 3-21 
-Refer to Figure 3-21. At the quantity Q2,

Accepted Answer

A) the value to buyers and the cost to sellers are both P2. 
B) the value to buyers is P2 and the cost to sellers is P3. 
C) the value to buyers and the cost to sellers are both P3. 
D) the value to buyers is P3 and the cost to sellers is P2.

Question 11

The efficiency of market organization is dependent on which of the following?

Accepted Answer

A) well-regulated supply and demand 
B) the availability of low cost resources and high tariffs on foreign imports 
C) competitive markets and well-defined and enforced private property rights 
D) Government establishment of the invisible hand principle and the inelasticity of certain goods.

Question 12

According to economic theory, which of the following would most likely cause the demand curve for hamburgers to decrease?

Accepted Answer

A) a drop in the price of hot dogs 
B) an increase in the price of hamburgers 
C) a drop in the price of hamburgers 
D) a technological advance that reduces the cost of making frozen hamburger patties.

Question 13

When economists say the quantity supplied of a product has increased, they mean the

Accepted Answer

A) supply curve has shifted to the left. 
B) supply curve has shifted to the right. 
C) price of the product has risen, and consequently, suppliers are producing more of it. 
D) price of the product has fallen, and consequently, suppliers are producing less of it.

Question 14

Suppose a person defects from Cuba (a country that generally disregards the use of markets) to the United States and asks to see a market in action. Where would you take her? Did you give her a complete showing of this market?

Accepted Answer

The answer of Suppose a person defects from Cuba (a...

Question 15

Farmers can choose to produce eggs or milk. If there is an increase in the price of milk then what will be the effect in the egg market?

Accepted Answer

A) The quantity of eggs demanded will increase. 
B) Egg demand will decrease. 
C) Egg supply will increase. 
D) Egg supply will decrease.

Question 16

Andrew buys yogurt, and he would be willing to pay more than he now pays. Suppose that Andrew has a change in his tastes such that he values yogurt more than before. If the market price is the same as before, then

Accepted Answer

A) Andrew's consumer surplus would be unaffected. 
B) Andrew's consumer surplus would increase. 
C) Andrew's consumer surplus would decrease. 
D) Andrew would be wise to buy less yogurt than before.

Question 17

Assume that supply decreases greatly and demand decreases slightly. Which of the following will happen?

Accepted Answer

A) Equilibrium price will fall and equilibrium quantity will rise. 
B) Equilibrium price will rise and equilibrium quantity will fall. 
C) Equilibrium price will rise and equilibrium quantity will rise. 
D) Equilibrium price will fall and equilibrium quantity will fall. 
E) Neither equilibrium price nor equilibrium quantity will change.

Question 18

An increase in the price of a good would

Accepted Answer

A) decrease the demand for the good. 
B) decrease the quantity demanded for the good. 
C) increase the demand for the good. 
D) decrease the quantity supplied of the good.

Question 19

How will consumers generally react to an increase in the price of butter?

Accepted Answer

A) They will purchase a larger quantity of butter. 
B) They will substitute other goods like margarine for the more expensive butter. 
C) They will reduce their purchases of substitute goods like margarine. 
D) They will continue purchasing the same quantity of butter at the higher price.

Question 20

Figure 3-15 
-Refer to Figure 3-17. Area C represents

Accepted Answer

A) the decrease in consumer surplus that results from a downward-sloping demand curve. 
B) consumer surplus to new consumers who enter the market when the price falls from P2 to P1. 
C) the increase in producer surplus when quantity sold increases from Q2 to Q1. 
D) the decrease in consumer surplus to each consumer in the market when the price increases from P1 to P2.

Exam 3: Demand, Supply, and the Market Process

"He [the producer] intends only his gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention." What famous economist made this statement?

In a competitive market economy, a resource in short supply will be allocated

A technological breakthrough lowers the cost of manufacturing microwave ovens. As a result, the market changes to a new equilibrium because of

If we observe a decrease in the price of a good and a decrease in the amount of the good bought and sold, this could be explained by

A decrease in supply will cause

Figure 3-20 -Refer to Figure 3-20. If the price decreases from $22 to $16, consumer surplus increases by

The term market always refers to

Because the height of the demand curve measures the marginal value of the good to consumers, the fact that a demand curve slopes downward to the right illustrates that

To be economically successful, the entrepreneur must

Figure 3-21 -Refer to Figure 3-21. At the quantity Q₂,

The efficiency of market organization is dependent on which of the following?

According to economic theory, which of the following would most likely cause the demand curve for hamburgers to decrease?

When economists say the quantity supplied of a product has increased, they mean the

Suppose a person defects from Cuba (a country that generally disregards the use of markets) to the United States and asks to see a market in action. Where would you take her? Did you give her a complete showing of this market?

Farmers can choose to produce eggs or milk. If there is an increase in the price of milk then what will be the effect in the egg market?

Andrew buys yogurt, and he would be willing to pay more than he now pays. Suppose that Andrew has a change in his tastes such that he values yogurt more than before. If the market price is the same as before, then

Assume that supply decreases greatly and demand decreases slightly. Which of the following will happen?

An increase in the price of a good would

How will consumers generally react to an increase in the price of butter?

Figure 3-15 -Refer to Figure 3-17. Area C represents

Exam 3: Demand, Supply, and the Market Process

"He [the producer] intends only his gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention." What famous economist made this statement?

In a competitive market economy, a resource in short supply will be allocated

A technological breakthrough lowers the cost of manufacturing microwave ovens. As a result, the market changes to a new equilibrium because of

If we observe a decrease in the price of a good and a decrease in the amount of the good bought and sold, this could be explained by

A decrease in supply will cause

Figure 3-20 -Refer to Figure 3-20. If the price decreases from $22 to $16, consumer surplus increases by

The term market always refers to

Because the height of the demand curve measures the marginal value of the good to consumers, the fact that a demand curve slopes downward to the right illustrates that

To be economically successful, the entrepreneur must

Figure 3-21 -Refer to Figure 3-21. At the quantity Q2,

The efficiency of market organization is dependent on which of the following?

According to economic theory, which of the following would most likely cause the demand curve for hamburgers to decrease?

When economists say the quantity supplied of a product has increased, they mean the

Suppose a person defects from Cuba (a country that generally disregards the use of markets) to the United States and asks to see a market in action. Where would you take her? Did you give her a complete showing of this market?

Farmers can choose to produce eggs or milk. If there is an increase in the price of milk then what will be the effect in the egg market?

Andrew buys yogurt, and he would be willing to pay more than he now pays. Suppose that Andrew has a change in his tastes such that he values yogurt more than before. If the market price is the same as before, then

Assume that supply decreases greatly and demand decreases slightly. Which of the following will happen?

An increase in the price of a good would

How will consumers generally react to an increase in the price of butter?

Figure 3-15 -Refer to Figure 3-17. Area C represents

Figure 3-21 -Refer to Figure 3-21. At the quantity Q₂,