Question 1

According to the law of supply,

Accepted Answer

A) producers are willing to supply larger amounts of a good as its price increases. 
B) a direct relationship exists between the price of a good and the amount buyers choose to buy. 
C) an inverse relationship exists between the price of a good and the amount buyers wish to buy. 
D) an inverse relationship exists between the price of a good and the amount producers supply.

Question 2

Figure 3-23
 
-Refer to Figure 3-23.The movement from point A to point B on the graph would be caused by

Accepted Answer

A) an increase in price. 
B) a decrease in price. 
C) a decrease in the price of a substitute good. 
D) an increase in income.

Question 3

Consumer surplus is the area on the graph

Accepted Answer

A) above the supply curve and below the demand curve. 
B) below the demand curve and above the market price. 
C) that represents the gains that producers receive when they sell a product. 
D) that reflect the opportunity cost of producing the a good.

Question 4

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 5

Willingness to pay

Accepted Answer

A) measures the value that a buyer places on a good. 
B) is the amount a seller actually receives for a good minus the minimum amount the seller is willing to accept. 
C) is the maximum amount a buyer is willing to pay minus the minimum amount a seller is willing to accept. 
D) is the amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it.

Question 6

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 7

If salsa and nacho chips are complements,an increase in the price of nacho chips would

Accepted Answer

A) increase the price of salsa. 
B) decrease the demand for salsa. 
C) increase the demand for salsa. 
D) have no effect on the demand for salsa.

Question 8

Suppose a new law requires all piercing studios to pass tougher licensing tests and to begin using more costly sterilization methods.Other things constant,this law would cause

Accepted Answer

A) an increase in the supply of piercings and a lower price for piercings. 
B) an increase in the supply of piercings and a higher price for piercings. 
C) a decrease in the supply of piercings and a higher price for piercings. 
D) a decrease in the supply of piercings and a lower price for piercings.

Question 9

If the demand for a good increases,which of the following will generally occur in a market setting?

Accepted Answer

A) The price of the good will decrease. 
B) The supply of the good will increase. 
C) The quantity supplied will increase. 
D) Producer profits will fall.

Question 10

Figure 3-1
 
-Which of the following is true regarding the market for steak shown in Figure 3-1?

Accepted Answer

A) If the price of steak were $2 per pound,producers would want to supply less steak than consumers would want to buy. 
B) If the price of steak were $4 per pound,producers would want to supply more steak than consumers would want to buy. 
C) If the price of steak were $3 per pound,producers would want to supply the same amount of steak that consumers would want to buy. 
D) All of the above are true regarding the market for steak shown in the figure.

Question 11

If price falls,what happens to the quantity demanded for a product?

Accepted Answer

A) It increases. 
B) It decreases. 
C) It does not change. 
D) Uncertain--economic theory has no answer to this question.

Question 12

Table 3-1
 
-Refer to Table 3-1.If the table represents the willingness to pay of four buyers and the price of the product is $15,then who would be willing to purchase the product?

Accepted Answer

A) Mike 
B) Mike and Sandy 
C) Mike,Sandy,and Jonathan 
D) Mike,Sandy,Jonathan,and Haley

Question 13

Adam Smith's invisible hand principle stresses

Accepted Answer

A) that benevolence is a powerful motivator that encourages individuals to engage in productive economic activity. 
B) the tendency of the competitive market process to direct self-interested individuals into activities that enhance the economic welfare of society. 
C) the potential of government regulation as a means of bringing the self interest of individuals into harmony with the economic welfare of society. 
D) the tendency of self-interested individuals to pursue activities that benefit themselves but harm the overall economic welfare of society.

Question 14

When a firm is earning economic profit,this indicates the firm is

Accepted Answer

A) increasing the value of the resources that it is using. 
B) reducing the value of the resources that it is using. 
C) supplying the market with a low quality product. 
D) creating less value for consumers than another firm that is currently earning losses.

Question 15

Table 3-2
 
-Refer to Table 3-2.If the price is $775,who would be willing to supply the product?

Accepted Answer

A) Dale and Jill 
B) Dale,Jill and Denise 
C) Denise,Catherine and Jackson 
D) Catherine and Jackson

Question 16

A question on an economics exam asks,"What happens in the market for jelly when the price of peanut butter increases?" Allison,an excellent student,shows the demand for jelly increasing.Is she necessarily wrong? Why or why not?

Accepted Answer

The answer of A question on an economics exam asks,"What...

Question 17

An important assumption that is made when constructing a demand schedule is that

Accepted Answer

A) only price and quantity matter in determining demand. 
B) people always want a certain amount of a product. 
C) demand is too important to be left to the economists. 
D) all other determinants of demand are held constant. 
E) demand has a positive slope.

Question 18

A decrease 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) a decrease in equilibrium price.

Question 19

Figure 3-24
 
-In Figure 3-24,which of the following is true?

Accepted Answer

A) At P3,consumer surplus and producer surplus are equal. 
B) At P2,consumer surplus is greater than producer surplus. 
C) At P1,consumer surplus is greater than producer surplus. 
D) At P1,consumer surplus and producer surplus are equal.

Question 20

A decrease in the price of flour will shift the supply curve for donuts

Accepted Answer

A) leftward,causing the equilibrium price to increase and quantity to decrease. 
B) leftward,causing the equilibrium price and quantity to decrease. 
C) rightward,causing the equilibrium price to decrease and equilibrium quantity to increase. 
D) rightward,causing the equilibrium price and quantity to increase.

Exam 3: Asupply,demand,and the Market Process