Question 1

The law of demand states that if price increases, other things being equal, the demand for the product will decrease.

Accepted Answer

A) True 
 B)False

Question 2

A firm's supply curve is upsloping because

Accepted Answer

A) the expansion of production necessitates the use of qualitatively inferior inputs. 
B) mass production economies are associated with larger levels of output. 
C) consumers envision a positive relationship between price and quality. 
D) beyond some point, the production costs of additional units of output will rise.

Question 3

(Consider This) Surge prices

Accepted Answer

A) create shortages of rides during peak demand times. 
B) increase both the demand for and supply of rides. 
C) result in surpluses in the ride market by generating too much supply. 
D) reflect greater anticipated demand and elicit greater quantity supplied of drivers.

Question 4

In the following question you are asked to determine, other things equal, the effects of a given change in a determinant of demand or supply for product X upon (1) the demand (D) for, or supply (S) of, X; (2) the equilibrium price (P) of X; and (3) the equilibrium quantity (Q) of X.Consumer expectations that the price of X will rise sharply in the future will

Accepted Answer

A) increase S, increase P, and increase Q. 
B) increase D, increase P, and increase Q. 
C) decrease S, increase P, and increase Q. 
D) increase D, decrease P, and increase Q.

Question 5

Suppose that tacos and pizza are substitutes, and that soda and pizza are complements.We would expect an increase in the price of pizza to

Accepted Answer

A) reduce the demand for tacos and increase the demand for soda. 
B) reduce the demand for soda and increase the demand for tacos. 
C) increase the demand for both soda and tacos. 
D) reduce the demand for both soda and tacos.

Question 6

The rationing function of prices refers to the fact that government must distribute any surplus goods that may be left in a competitive market.

Accepted Answer

A) True 
 B)False

Question 7

An effective price floor on wheat will

Accepted Answer

A) force otherwise profitable farmers out of business. 
B) result in a shortage of wheat. 
C) result in a surplus of wheat. 
D) clear the market for wheat.

Question 8

Which of the following will cause a decrease in market equilibrium price and an increase in equilibrium quantity?

Accepted Answer

A) an increase in supply 
B) an increase in demand 
C) a decrease in supply 
D) a decrease in demand

Question 9

Which of the following will not cause a change in the demand for product A?

Accepted Answer

A) a change in the number of buyers 
B) a change in the price of A 
C) a decline in consumer incomes 
D) a decrease in the price of close-substitute product B

Question 10

An "increase in the quantity supplied" suggests a

Accepted Answer

A) rightward shift of the supply curve. 
B) movement down along the supply curve. 
C) movement up along the supply curve. 
D) leftward shift of the supply curve.

Question 11

In the foreign exchange market, if Canadian companies import more products from the U.S., then the demand for Canadian dollars will increase.

Accepted Answer

A) True 
 B)False

Question 12

Markets, viewed from the perspective of the supply and demand model,

Accepted Answer

A) assume many buyers and many sellers of a standardized product. 
B) assume market power so that buyers and sellers bargain with one another. 
C) do not exist in the real-world economy. 
D) are approximated by markets in which a single seller determines price.

Question 13

Which of the following statements about ticket scalping is correct?

Accepted Answer

A) Scalping tends to be prevalent when there is a surplus of tickets. 
B) Scalping tends to be prevalent when there is a shortage of tickets. 
C) Scalping benefits only one party-the sellers-but not the buyers. 
D) Scalping benefits only one party-the buyers-but not the sellers.

Question 14

Which of the following statements is true about productive and allocative efficiency?

Accepted Answer

A) Realizing allocative efficiency implies that productive efficiency has been realized. 
B) Productive efficiency can only occur if there is also allocative efficiency. 
C) Society can achieve either productive efficiency or allocative efficiency, but not both simultaneously. 
D) Productive efficiency and allocative efficiency can only occur together; neither can occur without the other.

Question 15

Last year the price of corn was $3 a bushel and the quantity of corn demanded was 10 million bushels.This year the price of corn was $4.00 a bushel and the quantity demanded was 9 million bushels.Is this evidence that the law of demand does not apply to corn?

Accepted Answer

A) Yes, because there is a direct relationship between the price of corn and the quantity supplied. 
B) Yes, because there is an inverse relationship between the price of corn and the quantity demanded. 
C) No, because the other-things-equal assumption was violated over the two-year period. 
D) No, because the evidence indicates that there is a shortage of corn.

Question 16

A large increase in the supply of HD-TV sets occurs simultaneously with a smaller decrease in its demand.As a result, the equilibrium price will

Accepted Answer

A) increase and the equilibrium quantity will decrease. 
B) increase and the equilibrium quantity will increase. 
C) decrease and the equilibrium quantity will decrease. 
D) decrease and the equilibrium quantity will increase.

Question 17

(Advanced analysis) The demand for commodity X is represented by the equation P = 100 - 2Q and supply by the equation P = 10 + 4Q.The equilibrium quantity is

Accepted Answer

A) 10. 
B) 20. 
C) 15. 
D) 30.

Question 18

A price ceiling means that

Accepted Answer

A) there is currently a surplus of the relevant product. 
B) government is imposing a legal price that is typically below the equilibrium price. 
C) government wants to stop a deflationary spiral. 
D) government is imposing a legal price that is typically above the equilibrium price.

Question 19

(Advanced analysis) The demand for commodity X is represented by the equation P = 10 - 0.2Q and supply by the equation P = 2 + 0.2Q.If demand changes from P = 10 - .2Q to P = 7 - .3Q, the new equilibrium price is

Accepted Answer

A) $2. 
B) $4. 
C) $6. 
D) $7.

Question 20

If we observe the price of a good in a competitive market rising, then we can conclude that there had been a shortage in the market.

Accepted Answer

A) True 
 B)False

Exam 3: Demand, Supply, and Market Equilibrium

The law of demand states that if price increases, other things being equal, the demand for the product will decrease.

A firm's supply curve is upsloping because

(Consider This) Surge prices

Suppose that tacos and pizza are substitutes, and that soda and pizza are complements.We would expect an increase in the price of pizza to

The rationing function of prices refers to the fact that government must distribute any surplus goods that may be left in a competitive market.

An effective price floor on wheat will

Which of the following will cause a decrease in market equilibrium price and an increase in equilibrium quantity?

Which of the following will not cause a change in the demand for product A?

An "increase in the quantity supplied" suggests a

In the foreign exchange market, if Canadian companies import more products from the U.S., then the demand for Canadian dollars will increase.

Markets, viewed from the perspective of the supply and demand model,

Which of the following statements about ticket scalping is correct?

Which of the following statements is true about productive and allocative efficiency?

Last year the price of corn was $3 a bushel and the quantity of corn demanded was 10 million bushels.This year the price of corn was $4.00 a bushel and the quantity demanded was 9 million bushels.Is this evidence that the law of demand does not apply to corn?

A large increase in the supply of HD-TV sets occurs simultaneously with a smaller decrease in its demand.As a result, the equilibrium price will

(Advanced analysis) The demand for commodity X is represented by the equation P = 100 - 2Q and supply by the equation P = 10 + 4Q.The equilibrium quantity is

A price ceiling means that

(Advanced analysis) The demand for commodity X is represented by the equation P = 10 - 0.2Q and supply by the equation P = 2 + 0.2Q.If demand changes from P = 10 - .2Q to P = 7 - .3Q, the new equilibrium price is

If we observe the price of a good in a competitive market rising, then we can conclude that there had been a shortage in the market.