Question 1

If people expect the price of shorts to rise next month, the demand for shorts will

Accepted Answer

A)  decrease now. 
B)  increase now. 
C)  stay the same now and increase next month. 
D)  stay the same now and decrease next month. 
E)  stay the same now and next month.

Question 2

Two products that are usually consumed jointly would be referred to as

Accepted Answer

A)  substitutes. 
B)  complements. 
C)  inferior goods. 
D)  unrelated goods.

Question 3

Figure 3-6 
-In Figure 3-6, suppose D1 and S1 indicate initial conditions in the market for ice cream. Which of the following changes would tend to cause a shift from S1 to S2 in the market for ice cream?

Accepted Answer

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

Question 4

During the last two centuries, after adjustment for inflation,

Accepted Answer

A)  corporate bonds have yielded a real return of approximately 7 percent annually, compared to a real return of about 3 percent for corporate stocks. 
B)  corporate stocks have yielded a real return of approximately 7 percent annually, compared to a real return of about 3 percent for bonds. 
C)  both corporate stocks and bonds have yielded a real rate of return of about 3 percent. 
D)  both corporate stocks and bonds have yielded a real rate of return of about 7 percent.

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

If Mateo is paid $25,000 to sell his crop of tomatoes even though he would have been willing to have sold the crop for as little as $20,000, this indicates that

Accepted Answer

A)  Mateo received no producer surplus from the transaction. 
B)  Mateo received $5,000 of producer surplus from the transaction. 
C)  Mateo received $20,000 of producer surplus from the transaction. 
D)  Mateo received $25,000 of producer surplus from the transaction.

Question 7

An increase 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)  an increase in equilibrium price.

Question 8

Does it ever make sense to purchase a stock that has never paid a dividend? Explain.

Accepted Answer

The answer of Does it ever make sense to purchase...

Question 9

Figure 3-18 
-Refer to Figure 3-18. Which area represents the increase in consumer surplus when the price falls from P1 to P2?

Accepted Answer

A)  ABD 
B)  ACF 
C)  DEF 
D)  BCFD

Question 10

Since 1802, the average annual compound return for stock holdings, adjusted for inflation, has been approximately

Accepted Answer

A)  2 percent. 
B)  7 percent. 
C)  15 percent. 
D)  30 percent.

Question 11

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 12

Figure 3-20 
-Refer to Figure 3-20. If 40 units of the good are being bought and sold, then

Accepted Answer

A)  cost to sellers is equal to the value to buyers. 
B)  the value to buyers is greater than the cost to sellers. 
C)  the cost to sellers is greater than the value to buyers. 
D)  producer surplus would be greater than consumer surplus.

Question 13

If we observe a decrease in the price of a good and an increase 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 14

If consumer purchases of a good are not very sensitive to the price of the good, economists say the demand for the good is relatively

Accepted Answer

A)  inelastic. 
B)  elastic. 
C)  robust. 
D)  inverse.

Question 15

Figure 3-17.
-Refer to Figure 3-15. Which area represents the increase in producer surplus when the price rises from P1 to P2 due to new producers entering the market?

Accepted Answer

A)  BCE 
B)  ACF 
C)  DEF 
D)  AFEB

Question 16

How would a decrease in consumer income affect the market for lawn mowers?

Accepted Answer

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

Question 17

If price rises, what happens to quantity supplied of a product?

Accepted Answer

A)  It increases. 
B)  It decreases. 
C)  It does not change. 
D)  Quantity supplied is constant, but supply increases.

Question 18

If a small percentage increase in the price of a good results in a rather large percentage reduction in the quantity demanded of the good, demand is said to be

Accepted Answer

A)  vertical. 
B)  relatively inelastic. 
C)  relatively elastic. 
D)  robust.

Question 19

Figure 3-20 
-Refer to Figure 3-20. At the equilibrium price, producer surplus is

Accepted Answer

A)  $480. 
B)  $640. 
C)  $1,120. 
D)  $1,280.

Question 20

If the supply of a good is relatively inelastic, this means that the quantity supplied of the good is

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)  none of the above.

Exam 3: Demand, Supply, and the Market Process

If people expect the price of shorts to rise next month, the demand for shorts will

Two products that are usually consumed jointly would be referred to as

Figure 3-6 -In Figure 3-6, suppose D₁ and S₁ indicate initial conditions in the market for ice cream. Which of the following changes would tend to cause a shift from S₁ to S₂ in the market for ice cream?

During the last two centuries, after adjustment for inflation,

If Mateo is paid $25,000 to sell his crop of tomatoes even though he would have been willing to have sold the crop for as little as $20,000, this indicates that

An increase in supply will cause

Does it ever make sense to purchase a stock that has never paid a dividend? Explain.

Figure 3-18 -Refer to Figure 3-18. Which area represents the increase in consumer surplus when the price falls from P₁ to P₂?

Since 1802, the average annual compound return for stock holdings, adjusted for inflation, has been approximately

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

Figure 3-20 -Refer to Figure 3-20. If 40 units of the good are being bought and sold, then

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

If consumer purchases of a good are not very sensitive to the price of the good, economists say the demand for the good is relatively

Figure 3-17. -Refer to Figure 3-15. Which area represents the increase in producer surplus when the price rises from P₁ to P₂ due to new producers entering the market?

How would a decrease in consumer income affect the market for lawn mowers?

If price rises, what happens to quantity supplied of a product?

If a small percentage increase in the price of a good results in a rather large percentage reduction in the quantity demanded of the good, demand is said to be

Figure 3-20 -Refer to Figure 3-20. At the equilibrium price, producer surplus is

If the supply of a good is relatively inelastic, this means that the quantity supplied of the good is

Exam 3: Demand, Supply, and the Market Process

If people expect the price of shorts to rise next month, the demand for shorts will

Two products that are usually consumed jointly would be referred to as

Figure 3-6 -In Figure 3-6, suppose D1 and S1 indicate initial conditions in the market for ice cream. Which of the following changes would tend to cause a shift from S1 to S2 in the market for ice cream?

During the last two centuries, after adjustment for inflation,

If Mateo is paid $25,000 to sell his crop of tomatoes even though he would have been willing to have sold the crop for as little as $20,000, this indicates that

An increase in supply will cause

Does it ever make sense to purchase a stock that has never paid a dividend? Explain.

Figure 3-18 -Refer to Figure 3-18. Which area represents the increase in consumer surplus when the price falls from P1 to P2?

Since 1802, the average annual compound return for stock holdings, adjusted for inflation, has been approximately

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

Figure 3-20 -Refer to Figure 3-20. If 40 units of the good are being bought and sold, then

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

If consumer purchases of a good are not very sensitive to the price of the good, economists say the demand for the good is relatively

Figure 3-17. -Refer to Figure 3-15. Which area represents the increase in producer surplus when the price rises from P1 to P2 due to new producers entering the market?

How would a decrease in consumer income affect the market for lawn mowers?

If price rises, what happens to quantity supplied of a product?

If a small percentage increase in the price of a good results in a rather large percentage reduction in the quantity demanded of the good, demand is said to be

Figure 3-20 -Refer to Figure 3-20. At the equilibrium price, producer surplus is

If the supply of a good is relatively inelastic, this means that the quantity supplied of the good is

Figure 3-6 -In Figure 3-6, suppose D₁ and S₁ indicate initial conditions in the market for ice cream. Which of the following changes would tend to cause a shift from S₁ to S₂ in the market for ice cream?

Figure 3-18 -Refer to Figure 3-18. Which area represents the increase in consumer surplus when the price falls from P₁ to P₂?

Figure 3-17. -Refer to Figure 3-15. Which area represents the increase in producer surplus when the price rises from P₁ to P₂ due to new producers entering the market?