Question 1

Suppose demand decreases and supply decreases. Which of the following will happen?

Accepted Answer

A)  Equilibrium price will rise, fall, or stay the same while equilibrium quantity will decrease. 
B)  Equilibrium price will rise, fall, or stay the same while equilibrium quantity will increase 
C)  Equilibrium quantity will rise, fall, or stay the same and equilibrium price will increase. 
D)  Equilibrium quantity will rise, fall, or stay the same while equilibrium price will decrease. 
E)  The change in equilibrium price and quantity cannot be determined.

Question 2

If the demand for a good decreased, what would be the effect on the equilibrium price and quantity?

Accepted Answer

A)  Price would increase, and quantity would decrease. 
B)  Price would decrease, and quantity would decrease. 
C)  Price would increase, and quantity would increase. 
D)  Price would decrease, and quantity would increase.

Question 3

The forces of supply and demand assure that

Accepted Answer

A)  demand curves and supply curves tend to shift to the right as time goes by. 
B)  the price of a good will eventually rise in response to an excess demand for that good. 
C)  when the supply curve for a good shifts, the demand curve for that good shifts in response. 
D)  the equilibrium price of a good will be rising more often than it will be falling.

Question 4

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 5

Assume the demand curve for cookies is downward sloping. If the price of cookies falls from $1.50 to $1.25 per dozen,

Accepted Answer

A)  the demand for cookies will fall. 
B)  the demand for cookies will rise. 
C)  a larger quantity of cookies will be demanded. 
D)  a smaller quantity of cookies will be demanded.

Question 6

A decrease in the supply of a good will

Accepted Answer

A)  decrease the demand for the good. 
B)  cause the price of the good to fall. 
C)  lead to an increase in the price of the good. 
D)  increase the quantity of the good bought and sold.

Question 7

If an increase in the price of peaches reduces the demand for cream, this indicates that peaches and cream are

Accepted Answer

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

Question 8

An increase in the price of a good normally increases the

Accepted Answer

A)  demand for its substitutes 
B)  supply of complements for the good 
C)  purchasing power of consumers' dollar incomes 
D)  money income of the consumer

Question 9

Suppose demand decreases and supply increases. Which of the following will happen?

Accepted Answer

A)  Equilibrium price will rise, fall, or stay the same while equilibrium quantity will decrease. 
B)  Equilibrium price will rise, fall, or stay the same while equilibrium quantity will increase. 
C)  Equilibrium quantity will rise, fall, or stay the same and equilibrium price will increase. 
D)  Equilibrium quantity will rise, fall, or stay the same while equilibrium price will decrease. 
E)  The change in equilibrium price and quantity cannot be determined.

Question 10

When economists say the demand for a product has increased, they mean the

Accepted Answer

A)  demand curve has shifted to the right. 
B)  price of the product has fallen, and consequently, consumers are buying more of it. 
C)  cost of producing the product has risen. 
D)  amount of the product that consumers are willing to purchase at various prices has decreased.

Question 11

Use the figure below to answer the following question(s).
Figure 3-3

In Figure 3-3, if the initial demand for margarine were D 1, the impact of a decrease in the price of butter, a substitute good for margarine, would be illustrated as

Accepted Answer

A)  a shift in the demand curve to D 2. 
B)  a shift in the demand curve to D 3. 
C)  a movement downward to the right along the original demand curve D 1. 
D)  none of the above.

Question 12

If cigars and cigarettes are substitute goods, an increase in the price of cigars would result in

Accepted Answer

A)  an increase in the demand for cigarettes. 
B)  a decrease in the price of cigarettes. 
C)  a decrease in the demand for cigarettes. 
D)  a decrease in the demand for cigars.

Question 13

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

Accepted Answer

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

Question 14

According to Adam Smith, what is the primary source of a nation's wealth?

Accepted Answer

A)  The amount of gold and silver in the government's possession. 
B)  A spirit of cooperation in which people share according to their means. 
C)  Strong central planning authorities. 
D)  The people's ability to produce products and trade in free markets.

Question 15

Which of the following will cause a decrease in the demand for peanut butter?

Accepted Answer

A)  an increase in the supply of peanut butter 
B)  an increase in the price of peanut butter 
C)  a doubling of the price of bread 
D)  a drought in Georgia that destroyed 30 percent of the peanut crop 
E)  an increase in consumer income

Question 16

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 17

Figure 3-23 
Refer to Figure 3-23. The movement from point A to point B on the graph shows

Accepted Answer

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

Question 18

Figure 3-15 
Refer to Figure 3-15. When the price rises from P 1 to P 2, which area represents the increase in producer surplus to existing producers?

Accepted Answer

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

Question 19

Which one of the following factors would increase the demand for oranges?

Accepted Answer

A)  an increase in the price of grapefruit, a substitute product 
B)  a reduction in the price of bananas, a substitute product 
C)  development of a line of high-yield orange trees that are also more freeze resistant 
D)  a decrease in consumer income

Question 20

Which of the following is least likely to increase the demand for new tires?

Accepted Answer

A)  a decrease in the price of tires 
B)  a decrease in the price of cars 
C)  an increase in consumer income 
D)  an increase in the number of miles people drive per year

Exam 3: Demand, Supply, and the Market Process

Suppose demand decreases and supply decreases. Which of the following will happen?

If the demand for a good decreased, what would be the effect on the equilibrium price and quantity?

The forces of supply and demand assure that

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

Assume the demand curve for cookies is downward sloping. If the price of cookies falls from $1.50 to $1.25 per dozen,

A decrease in the supply of a good will

If an increase in the price of peaches reduces the demand for cream, this indicates that peaches and cream are

An increase in the price of a good normally increases the

Suppose demand decreases and supply increases. Which of the following will happen?

When economists say the demand for a product has increased, they mean the

Use the figure below to answer the following question(s) . Figure 3-3 In Figure 3-3, if the initial demand for margarine were D ₁, the impact of a decrease in the price of butter, a substitute good for margarine, would be illustrated as

If cigars and cigarettes are substitute goods, an increase in the price of cigars would result in

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

According to Adam Smith, what is the primary source of a nation's wealth?

Which of the following will cause a decrease in the demand for peanut butter?

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

Figure 3-23 Refer to Figure 3-23. The movement from point A to point B on the graph shows

Figure 3-15 Refer to Figure 3-15. When the price rises from P ₁ to P ₂, which area represents the increase in producer surplus to existing producers?

Which one of the following factors would increase the demand for oranges?

Which of the following is least likely to increase the demand for new tires?

Exam 3: Demand, Supply, and the Market Process

Suppose demand decreases and supply decreases. Which of the following will happen?

If the demand for a good decreased, what would be the effect on the equilibrium price and quantity?

The forces of supply and demand assure that

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

Assume the demand curve for cookies is downward sloping. If the price of cookies falls from $1.50 to $1.25 per dozen,

A decrease in the supply of a good will

If an increase in the price of peaches reduces the demand for cream, this indicates that peaches and cream are

An increase in the price of a good normally increases the

Suppose demand decreases and supply increases. Which of the following will happen?

When economists say the demand for a product has increased, they mean the

Use the figure below to answer the following question(s) . Figure 3-3 In Figure 3-3, if the initial demand for margarine were D 1, the impact of a decrease in the price of butter, a substitute good for margarine, would be illustrated as

If cigars and cigarettes are substitute goods, an increase in the price of cigars would result in

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

According to Adam Smith, what is the primary source of a nation's wealth?

Which of the following will cause a decrease in the demand for peanut butter?

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

Figure 3-23 Refer to Figure 3-23. The movement from point A to point B on the graph shows

Figure 3-15 Refer to Figure 3-15. When the price rises from P 1 to P 2, which area represents the increase in producer surplus to existing producers?

Which one of the following factors would increase the demand for oranges?

Which of the following is least likely to increase the demand for new tires?

Use the figure below to answer the following question(s) . Figure 3-3 In Figure 3-3, if the initial demand for margarine were D ₁, the impact of a decrease in the price of butter, a substitute good for margarine, would be illustrated as

Figure 3-15 Refer to Figure 3-15. When the price rises from P ₁ to P ₂, which area represents the increase in producer surplus to existing producers?