Question 1

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 2

Profit can be defined as the

Accepted Answer

A) difference between the sales revenue of a business firm and the opportunity cost of the resources required to produce the goods supplied by the firm. 
B) difference between a company's income and direct monetary costs of production. 
C) difference between the price of a product and the consumer's valuation of the good. 
D) amount of total revenue earned by the firm minus its payments to stockholders.

Question 3

When property rights are well defined and markets are competitive,

Accepted Answer

A) the total gains from trade (the combined area of producer and consumer surplus)are maximized at the market equilibrium. 
B) the market equilibrium is consistent with economic efficiency in that all units creating more benefit than cost have been produced. 
C) the market will automatically move toward the price and quantity where the quantity supplied and the quantity demanded are in balance. 
D) all of the above are true.

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

During a major war between two oil producing nations,there would likely be

Accepted Answer

A) an increase in the price of oil because the supply of oil would decrease. 
B) an increase in the price of oil because the supply of oil would increase. 
C) a decrease in the price of oil because the supply of oil would decrease. 
D) a decrease in the price of oil because the supply of oil would increase.

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

Which of the following would reduce the price of DVD players and increase the quantity sold?

Accepted Answer

A) an increase in the demand for DVD players 
B) a decrease in the demand for DVD players 
C) a decrease in the supply of DVD players 
D) an increase in the supply of DVD players

Question 8

If coffee and cream are complements,a decrease in the price of coffee will cause

Accepted Answer

A) the demand for cream to decrease. 
B) the demand for cream to increase. 
C) the demand for coffee to increase. 
D) no change in the demand for cream;only quantity demanded would be affected.

Question 9

Which of the following does the law of demand specifically imply?

Accepted Answer

A) If the product price increases,quantity demanded will decrease. 
B) If consumer income increases,quantity demanded will increase. 
C) If the product price increases,quantity demanded will increase. 
D) If consumer income increases,quantity demanded will decrease. 
E) If supply increases,demand will increase.

Question 10

Which of the following is not a function of prices in a market system?

Accepted Answer

A) Prices have the crucial job of balancing supply and demand. 
B) Prices send signals to buyers and sellers to help them make rational economic decisions. 
C) Prices coordinate economic activity. 
D) Prices ensure an equitable distribution of goods and services among consumers.

Question 11

Which of the following most accurately describes the invisible hand concept?

Accepted Answer

A) Wise central planning by government is necessary for the efficient use of resources. 
B) In a democratic setting,majority rule will result in the efficient use of resources. 
C) In a market setting,when individuals pursue their own interests,they simultaneously tend to promote the public interest. 
D) In a market setting,when individuals pursue their own interests,they tend to engage in activities that lower the overall economic welfare of society.

Question 12

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 13

As the number of elderly consumers in a market increases and the number of younger consumers declines,we would expect

Accepted Answer

A) an increase in the demand for medical services. 
B) a decrease in the demand for medical services. 
C) a decrease in the demand for blue jeans. 
D) both a and c.

Question 14

Which of the following would decrease the price of packaged hot dogs?

Accepted Answer

A) an increase in the price of hot dog buns,a complement to packaged hot dogs 
B) a decrease in the price of hamburger meat,a substitute for packaged hot dogs 
C) a technological advance that lowers the cost of producing packaged hot dogs 
D) all of the above

Question 15

The Red Jacket Mountain View Inn in New Hampshire charges $150 per room in the winter ski season and $90 during the summer months.The number of rooms and operating costs are constant year round.These prices indicate

Accepted Answer

A) a rightward shift in the demand in the summer. 
B) a rightward shift in demand in the winter. 
C) a leftward shift in the supply curve in the summer. 
D) a leftward shift in demand in the winter.

Question 16

Which of the following would most likely cause the current demand for DVD players to fall?

Accepted Answer

A) an increase in consumer income 
B) an increase in the price of DVD players 
C) an increase in the price of Blu-ray players,a substitute good 
D) the expectation that the price of DVD players will decrease sharply during the next six months

Question 17

Which of the following events would decrease producer surplus?

Accepted Answer

A) Sellers' costs stay the same and the price of the good increases. 
B) Sellers' costs increase and the price of the good stays the same. 
C) Sellers' costs decrease and the price of the good increases. 
D) All of the above are correct.

Question 18

If a surplus exists in a market we know that the actual price is

Accepted Answer

A) above equilibrium price and quantity supplied is greater than quantity demanded. 
B) above equilibrium price and quantity demanded is greater than quantity supplied. 
C) below equilibrium price and quantity demanded is greater than quantity supplied. 
D) below equilibrium price and quantity supplied is greater than quantity demanded.

Question 19

Which one of the following would most likely increase the demand for wheat?

Accepted Answer

A) an increase in the price of soybeans,a substitute product 
B) a decrease in the price of corn,a substitute product 
C) the development of a hybrid seed that doubles wheat yields per acre 
D) a decrease in the price of wheat

Question 20

Use the figure below to answer the following question(s).
Figure 3-3
 
-In Figure 3-3,if the initial demand for margarine were D₁,the impact of an increase in the price of margarine from $0.35 to $0.40 per pound on consumer purchases would be illustrated as

Accepted Answer

A) a shift in the demand curve to D₂. 
B) a shift in the demand curve to D₃. 
C) a movement upward to the left along the original demand curve D₁. 
D) none of the above.

Exam 3: Asupply,demand,and the Market Process

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