Question 1

An increase in the expected future price of a good will cause the current demand for the good to

Accepted Answer

A)  decrease, which is a shift to the left of the demand curve. 
B)  decrease, which is a shift to the right of the demand curve. 
C)  increase, which is a shift to the left of the demand curve. 
D)  increase, which is a shift to the right of the demand curve.

Question 2

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 3

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 4

Suppose prices for new homes have risen and sales of new homes have also risen. We can conclude that

Accepted Answer

A)  the demand for new homes has risen. 
B)  the law of demand has been violated. 
C)  new firms have entered the construction industry. 
D)  construction firms must be facing higher costs.

Question 5

Use the figure below to answer the following question(s). Figure 3-13
 Refer to Figure 3-13. The market for margarine was initially in equilibrium at point e. Other things constant, a decrease in the price of butter, a close substitute for margarine, would likely move the equilibrium in this market toward point

Accepted Answer

A)  r. 
B)  s. 
C)  t. 
D)  u.

Question 6

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 7

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 8

Figure 3-11  In Figure 3-11, suppose D1 and S1 indicate initial conditions in the market for kitchen cabinets. Which of the following would tend to cause the supply curve to shift from S1 to S2?

Accepted Answer

A)  the invention of "folding" plates and cups that take up substantially less storage space in the kitchen 
B)  a decrease in consumer income 
C)  a decrease in the price of wood, a resource used to produce kitchen cabinets 
D)  an increase in the price of steel hinges, a resource used to produce kitchen cabinets

Question 9

Which of the following observations was made famous by Adam Smith in his book The Wealth of Nations?

Accepted Answer

A)  There is no such thing as a free lunch. 
B)  People buy more when prices are low than when prices are high. 
C)  No matter how much people earn, they tend to spend more than they earn. 
D)  Households and firms interacting in markets are guided by an "invisible hand" that leads them to desirable market outcomes.

Question 10

Use the figure below to answer the following question(s). Figure 3-9
 In Figure 3-9, if D and S represent the demand and supply for gasoline, what is the equilibrium price and quantity?

Accepted Answer

A)  price, $1; quantity, 20 
B)  price, $2; quantity, 30 
C)  price, $3; quantity, 40 
D)  price, $4; quantity, 50

Question 11

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 12

Market prices are

Accepted Answer

A)  conveyors of information. 
B)  determined by the interactions of supply and demand in voluntary exchange. 
C)  indicators of the relative scarcity of resources and products. 
D)  all of the above.

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

Figure 3-19  Refer to Figure 3-19. Sellers whose costs are less than price are represented by which line segment?

Accepted Answer

A)  AC 
B)  CE 
C)  BC 
D)  CD

Question 15

Suppliers recognize there is a shortage in the market for their product when they notice that

Accepted Answer

A)  the quantity supplied exceeds the quantity demanded. 
B)  the quantity demanded is falling. 
C)  inventories are falling. 
D)  production exceeds new orders for the product. 
E)  government economists announce a shortage exists.

Question 16

The total economic cost of producing a good or service is called the

Accepted Answer

A)  comparative value of construction. 
B)  social consequence of resources. 
C)  marginal valuation of output. 
D)  opportunity cost of production.

Question 17

The law of demand refers to the

Accepted Answer

A)  decrease in price that can be expected as more units of a product are demanded. 
B)  increase in price that results from an increase in demand for a good of limited supply. 
C)  inverse relationship between the price of a good and the quantity demanded. 
D)  increase in the quantity of a good available when its price increases.

Question 18

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 19

How will a reduction in the price of cotton influence the market for blue jeans?

Accepted Answer

A)  The cost of producing blue jeans will fall, and the supply curve for blue jeans will shift to the left. 
B)  The cost of producing blue jeans will fall, and the supply curve for blue jeans will shift to the right. 
C)  The cost of producing blue jeans will rise, and the supply curve for blue jeans will shift to the left. 
D)  The cost of producing blue jeans will rise, and the supply curve for blue jeans will shift to the right.

Question 20

Which of the following would lead to an increase in the demand for designer blue jeans?

Accepted Answer

A)  a decrease in the price of designer blue jeans 
B)  a reduction in the price of the cotton used to produce the jeans 
C)  an increase in the income of youthful Americans 
D)  an increase in the price of the cotton used to produce the jeans

Exam 3: Demand, Supply, and the Market Process