Question 1

Suppose Katie, Kendra, and Kristen each purchase a particular type of cell phone at a price of $80. Katie's willingness to pay was $100, Kendra's willingness to pay was $95, and Kristen's willingness to pay was $80. Consumer surplus for the three individuals is

Accepted Answer

A) $15. 
B) $20. 
C) $35. 
D) $80.

Question 2

If the demand for a good is relatively inelastic, this means that consumer purchases of the good are

Accepted Answer

A) not very sensitive to the price of the good. 
B) highly sensitive to the price of the good. 
C) unrelated to the price of the good. 
D) unaffected by changes in the income level of consumers.

Question 3

Between 1994 and 2004, the monthly charge for cellular phone service decreased from $120 per month to $30 per month. At the same time, the number of subscribers increased from less than 10 million to more than 75 million. Which of the following provides the best explanation for these changes?

Accepted Answer

A) an increase in consumer income between 1994 and 2004 
B) a reduction in the price of residential phone service, a substitute for cellular phone service 
C) an increase in the wages of workers in the cellular phone industry 
D) technological improvements that reduced the cost of supplying cellular phone service

Question 4

If there is a decrease in both the supply and demand for a good, which of the following will definitely occur?

Accepted Answer

A) The price of the good will increase. 
B) The price of the good will decrease. 
C) The equilibrium quantity will increase. 
D) The equilibrium quantity will decrease.

Question 5

Two studies published in the New England Journal of Medicine link the risk of breast cancer to alcohol consumption. Young women who have nine drinks per week were reportedly 150 percent more likely to develop breast cancer. According to economic analysis, how would this information affect the market for alcohol?

Accepted Answer

A) Demand will increase, placing upward pressure on price. 
B) Supply will decrease, placing downward pressure on price. 
C) Demand will decrease, placing downward pressure on price. 
D) Supply will increase, placing upward pressure on price.

Question 6

According to the law of supply,

Accepted Answer

A) more of a good is desired by consumers as the price falls. 
B) less of a good is desired by consumers as the price rises. 
C) more of a good will be offered by suppliers as the price rises. 
D) less of a good will be offered by suppliers as the price rises.

Question 7

Figure 3-7 
-In Figure 3-7, suppose D1 and S1 indicate the initial conditions in the market for ice cream. Which of the following changes would tend to cause the shift from D1 to D2 in the market for ice cream?

Accepted Answer

A) a decrease in the price of sugar, an ingredient used to produce ice cream 
B) an increase in the price of frozen yogurt, a substitute for ice cream 
C) abnormally cold weather that decreased consumer desire for ice cream 
D) an increase in the price of milk, an ingredient used to produce ice cream

Question 8

Which of the following is not a function of prices in a market system?

Accepted Answer

A) Prices have the crucial job of balancing supply and demand. 
B) Prices send signals to buyers and sellers to help them make rational economic decisions. 
C) Prices coordinate economic activity. 
D) Prices ensure an equitable distribution of goods and services among consumers.

Question 9

Table 3-2
 
-Refer to Table 3-2. If the price is $1,000,

Accepted Answer

A) Denise is an eager supplier. 
B) Catherine is an eager supplier. 
C) Dale's producer surplus is $500. 
D) All of the above are correct.

Question 10

Which of the following will decrease the demand for coffee?

Accepted Answer

A) the discovery that caffeine can cause heart problems 
B) an increase in the price of coffee 
C) an increase in the price of tea, a substitute for coffee 
D) a decrease in the prices of coffee makers and coffee cups, complements to coffee

Question 11

When oil prices increased to record levels in the 1970s, salaries dramatically increased for petroleum geologists skilled in finding oil. Those geologists who moved from other areas to the higher paying jobs were

Accepted Answer

A) seeking to profit from society's needs rather than following the guidance of the invisible hand, which would have led them to seek jobs serving society rather than jobs with higher pay. 
B) following the guidance of the invisible hand and probably serving society's best interests as well as their own. 
C) causing oil prices to rise even more by moving to jobs with higher salaries. 
D) helping themselves but hurting the economy.

Question 12

Graphically, the area that represents the difference between the market price and the minimum price required to induce suppliers to produce a good is called

Accepted Answer

A) consumer surplus. 
B) producer surplus. 
C) marginal cost. 
D) triangular arbitrage.

Question 13

Other things being equal, the effect of a decrease in the price of grapes would be illustrated by

Accepted Answer

A) a rightward shift in the demand curve for grapes. 
B) an increase in the quantity demanded for grapes. 
C) a leftward shift in the demand curve for grapes. 
D) a decrease in the quantity demanded grapes.

Question 14

If you were a government official that wanted to raise the equilibrium price of milk, which of the following actions would you take?

Accepted Answer

A) Take milk from government storage and sell it. 
B) Encourage farmers to produce more milk. 
C) Subsidize purchases of dairy equipment. 
D) Encourage farmers to produce less milk.

Question 15

Use the figure below to answer the following question(s).
Figure 3-3 
-In Figure 3-3, if the initial demand for margarine were D1, the impact of an increase in the price of margarine from $0.35 to $0.40 per pound on consumer purchases would be illustrated as

Accepted Answer

A) a shift in the demand curve to D2. 
B) a shift in the demand curve to D3. 
C) a movement upward to the left along the original demand curve D1. 
D) none of the above.

Question 16

Table 3-2
 
-Refer to Table 3-2. If the market price is $1,000, the producer surplus in the market is

Accepted Answer

A) $700. 
B) $750. 
C) $2,250. 
D) $3,700.

Question 17

A hotel in New Hampshire charges $150 per room in the winter ski season and $90 during the summer months. The number of rooms and operating costs are constant year round. These prices indicate

Accepted Answer

A) a rightward shift in the demand in the summer. 
B) a rightward shift in demand in the winter. 
C) a leftward shift in the supply curve in the summer. 
D) a leftward shift in demand in the winter.

Question 18

Which of the following is a function performed by market prices?

Accepted Answer

A) Market prices communicate information to buyers and sellers. 
B) Market prices coordinate the decisions of buyers and sellers. 
C) Market prices motivate entrepreneurs to produce those products that are currently most desired relative to their costs of production. 
D) All of the above are functions performed by market prices.

Question 19

How would a decrease in the cost of production affect the market for video games?

Accepted Answer

A) Supply would decrease, leading to an increase in price and a reduction in quantity sold. 
B) Supply would decrease, leading to a reduction in price and a reduction in quantity sold. 
C) Supply would increase, leading to an increase in price and an increase in quantity sold. 
D) Supply would increase, leading to a reduction in price and an increase in quantity sold.

Question 20

Which of the following would most likely decrease the current demand for DVD players?

Accepted Answer

A) an increase in consumer income 
B) an increase in the prices of television sets, a complement for DVD players 
C) an expectation that the price of DVD players would rise sharply in the near future 
D) an increase in the price of VCRs, a substitute for DVD players

Exam 3: Demand, Supply, and the Market Process

Suppose Katie, Kendra, and Kristen each purchase a particular type of cell phone at a price of $80. Katie's willingness to pay was $100, Kendra's willingness to pay was $95, and Kristen's willingness to pay was $80. Consumer surplus for the three individuals is

If the demand for a good is relatively inelastic, this means that consumer purchases of the good are

Between 1994 and 2004, the monthly charge for cellular phone service decreased from $120 per month to $30 per month. At the same time, the number of subscribers increased from less than 10 million to more than 75 million. Which of the following provides the best explanation for these changes?

If there is a decrease in both the supply and demand for a good, which of the following will definitely occur?

According to the law of supply,

Figure 3-7 -In Figure 3-7, suppose D₁ and S₁ indicate the initial conditions in the market for ice cream. Which of the following changes would tend to cause the shift from D₁ to D₂ in the market for ice cream?

Which of the following is not a function of prices in a market system?

Table 3-2 -Refer to Table 3-2. If the price is $1,000,

Which of the following will decrease the demand for coffee?

When oil prices increased to record levels in the 1970s, salaries dramatically increased for petroleum geologists skilled in finding oil. Those geologists who moved from other areas to the higher paying jobs were

Graphically, the area that represents the difference between the market price and the minimum price required to induce suppliers to produce a good is called

Other things being equal, the effect of a decrease in the price of grapes would be illustrated by

If you were a government official that wanted to raise the equilibrium price of milk, which of the following actions would you take?

Use the figure below to answer the following question(s) . Figure 3-3 -In Figure 3-3, if the initial demand for margarine were D₁, the impact of an increase in the price of margarine from $0.35 to $0.40 per pound on consumer purchases would be illustrated as

Table 3-2 -Refer to Table 3-2. If the market price is $1,000, the producer surplus in the market is

A hotel in New Hampshire charges $150 per room in the winter ski season and $90 during the summer months. The number of rooms and operating costs are constant year round. These prices indicate

Which of the following is a function performed by market prices?

How would a decrease in the cost of production affect the market for video games?

Which of the following would most likely decrease the current demand for DVD players?

Exam 3: Demand, Supply, and the Market Process

Suppose Katie, Kendra, and Kristen each purchase a particular type of cell phone at a price of $80. Katie's willingness to pay was $100, Kendra's willingness to pay was $95, and Kristen's willingness to pay was $80. Consumer surplus for the three individuals is

If the demand for a good is relatively inelastic, this means that consumer purchases of the good are

Between 1994 and 2004, the monthly charge for cellular phone service decreased from $120 per month to $30 per month. At the same time, the number of subscribers increased from less than 10 million to more than 75 million. Which of the following provides the best explanation for these changes?

If there is a decrease in both the supply and demand for a good, which of the following will definitely occur?

According to the law of supply,

Figure 3-7 -In Figure 3-7, suppose D1 and S1 indicate the initial conditions in the market for ice cream. Which of the following changes would tend to cause the shift from D1 to D2 in the market for ice cream?

Which of the following is not a function of prices in a market system?

Table 3-2 -Refer to Table 3-2. If the price is $1,000,

Which of the following will decrease the demand for coffee?

When oil prices increased to record levels in the 1970s, salaries dramatically increased for petroleum geologists skilled in finding oil. Those geologists who moved from other areas to the higher paying jobs were

Graphically, the area that represents the difference between the market price and the minimum price required to induce suppliers to produce a good is called

Other things being equal, the effect of a decrease in the price of grapes would be illustrated by

If you were a government official that wanted to raise the equilibrium price of milk, which of the following actions would you take?

Use the figure below to answer the following question(s) . Figure 3-3 -In Figure 3-3, if the initial demand for margarine were D1, the impact of an increase in the price of margarine from $0.35 to $0.40 per pound on consumer purchases would be illustrated as

Table 3-2 -Refer to Table 3-2. If the market price is $1,000, the producer surplus in the market is

A hotel in New Hampshire charges $150 per room in the winter ski season and $90 during the summer months. The number of rooms and operating costs are constant year round. These prices indicate

Which of the following is a function performed by market prices?

How would a decrease in the cost of production affect the market for video games?

Which of the following would most likely decrease the current demand for DVD players?

Figure 3-7 -In Figure 3-7, suppose D₁ and S₁ indicate the initial conditions in the market for ice cream. Which of the following changes would tend to cause the shift from D₁ to D₂ in the market for ice cream?

Use the figure below to answer the following question(s) . Figure 3-3 -In Figure 3-3, if the initial demand for margarine were D₁, the impact of an increase in the price of margarine from $0.35 to $0.40 per pound on consumer purchases would be illustrated as