Question 1

An increase in the number of firms in a market will cause the quantity of a good supplied to increase.

Accepted Answer

A) True 
 B)False

Question 2

If you are considering buying either an Apple iPhone or a Samsung Galaxy, and you choose the Samsung only because the price is lower, then you consider

Accepted Answer

A)  the iPhone and the Galaxy to be complements. 
B)  the iPhone and the Galaxy to be substitutes. 
C)  the iPhone to be a normal good and the Galaxy to be an inferior good. 
D)  the iPhone to be an inferior good and Galaxy to be a normal good.

Question 3

Hurricane Katrina damaged a large portion of oil refining and pipeline capacity in the Gulf coast states. In the market for gasoline,

Accepted Answer

A)  the supply curve shifted to the left resulting in an increase in the equilibrium price. 
B)  the supply curve shifted to the right resulting in an increase in the equilibrium price. 
C)  the demand curve shifted to the left resulting in a decrease in the equilibrium price. 
D)  the demand curve shifted to the right resulting in an increase in the equilibrium price.

Question 4

Consider the collectors' market for first editions of two popular children's books, Harry Potter and the Order of the Phoenix by J. K. Rowling and Ruby in the Smoke by Philip Pullman. Sales of the Harry Potter novel are much greater than sales of Ruby in the Smoke yet the price of the Harry Potter novel is much lower than the price of Pullman's novel.
a. On one large diagram, draw a demand and supply graph for first editions of Harry Potter and the Order of the Phoenix and another demand and supply graph for first editions of Ruby in the Smoke.
b. Show how it is possible for the price of the Harry Potter novel to be much lower than the price of Pullman's novel, even though the demand for the Harry Potter novel is much greater than the demand for Ruby in the Smoke.
c. Provide a written explanation to accompany your graphical illustration.

Accepted Answer

The answer of Consider the collectors' market for first editions...

Question 5

What is the ceteris paribus condition?

Accepted Answer

The answer of What is the ceteris paribus condition?...

Question 6

Figure 3-7 
-Refer to Figure 3-7. Assume that the graphs in this figure represent the demand and supply curves for coffee. What happens in this market if buyers expect the price of coffee to rise?

Accepted Answer

A)  Panel (a) 
B)  Panel (b) 
C)  Panel (c) 
D)  Panel (d)

Question 7

Figure 3-3 
-Refer to Figure 3-3. The figure above shows the supply and demand curves for two markets: the market for original Picasso paintings and the market for designer jeans. Which graph most likely represents which market?

Accepted Answer

A)  Graph B represents the market for original Picasso paintings and Graph A represents the market for designer jeans. 
B)  Graph A represents the market for original Picasso paintings and Graph B represents the market for designer jeans. 
C)  Graph A represents both the market for original Picasso paintings and designer jeans. 
D)  Graph B represents both the market for original Picasso paintings and designer jeans.

Question 8

The income effect of a price change refers to the impact of a change in

Accepted Answer

A)  income on the price of a good. 
B)  demand when income changes. 
C)  the quantity demanded when income changes. 
D)  the price of a good on a consumer's purchasing power.

Question 9

Figure 3-8 
-Which of the following would cause a decrease in the equilibrium price and an increase in the equilibrium quantity of salmon?

Accepted Answer

A)  a decrease in demand and an increase in supply 
B)  an increase in supply 
C)  an increase in supply and an increase in demand greater than the increase in supply 
D)  a decrease in demand and a decrease in supply

Question 10

Studies have shown that smoking cigarettes can cause heart disease. Assume this is true, and favorable weather has increased the tobacco harvest in North Carolina. In the market for cigarettes, these two developments would

Accepted Answer

A)  decrease demand and decrease supply, resulting in an increase in the equilibrium quantity and a decrease in the equilibrium price of cigarettes. 
B)  increase demand and increase supply, resulting in an increase in the equilibrium quantity and an uncertain effect on the equilibrium price of cigarettes. 
C)  decrease demand and increase supply, resulting in a decrease in the equilibrium price and an uncertain effect on the equilibrium quantity of cigarettes. 
D)  decrease demand and increase supply, resulting in an increase in both the equilibrium price and the equilibrium quantity of cigarettes.

Question 11

Cigars are becoming increasingly popular in the United States, and a growing number of cigar manufacturers in the Caribbean and Central America have begun producing and exporting cigars to the U.S. market. How has this affected the equilibrium price and quantity of cigars?

Accepted Answer

The answer of Cigars are becoming increasingly popular in the...

Question 12

Figure 3-8 
-Refer to Figure 3-8. The graph in this figure illustrates an initial competitive equilibrium in the market for apples at the intersection of D1 and S1 (point

Accepted Answer

A)  The equilibrium point will move from A to B. 
A) . If there is a shortage of apples how will the equilibrium point change? 
B)  The equilibrium point will move from A to C. 
C)  There will be no change in the equilibrium point. 
D)  The equilibrium point will move from A to E.

Question 13

Figure 3-4 
-Refer to Figure 3-4. If the price is $20,

Accepted Answer

A)  there would be a surplus of 600 units. 
B)  there would be a shortage of 600 units. 
C)  quantity demanded is zero. 
D)  the market is in equilibrium.

Question 14

In October 2005, the U.S. Fish and Wildlife Service banned the importation of beluga caviar, the most prized of caviars, from the Caspian Sea. What happened in the market for caviar in the U.S.?

Accepted Answer

A)  The supply curve shifted to the left. 
B)  The supply curve shifted to the right. 
C)  The demand curve shifted to the right. 
D)  The demand curve shifted to the left.

Question 15

The substitution effect of a price change refers to

Accepted Answer

A)  the change in quantity demanded that results from a change in price making a good more or less expensive relative to other goods that are substitutes. 
B)  the shift of a demand curve when the price of a substitute good changes. 
C)  the movement along the demand curve due to a change in purchasing power brought about by the price change. 
D)  the shift in the demand curve due to a change in purchasing power brought about by the price change.

Question 16

Which of the following would cause both the equilibrium price and equilibrium quantity of barley (assume that barley is an inferior good) to increase?

Accepted Answer

A)  an increase in consumer income 
B)  a drought that sharply reduces barley output 
C)  a decrease in consumer income 
D)  unusually good weather that results in a bumper crop of barley

Question 17

By drawing a demand curve with ________ on the vertical axis and ________ on the horizontal axis, economists assume that the most important determinant of the demand for a good is the ________ of the good.

Accepted Answer

A)  quantity; price; quantity 
B)  price; quantity; quantity 
C)  price; quantity; price 
D)  quantity; price; price

Question 18

Figure 3-4 
-Refer to Figure 3-4. At a price of $15, how many units will be sold?

Accepted Answer

A)  300 
B)  400 
C)  600 
D)  700

Question 19

Figure 3-8 
-Select the phrase that correctly completes the following statement. "An increase in input prices caused a decrease in the supply of baseballs. As a result ________."

Accepted Answer

A)  the price of baseballs increased and the demand for baseballs decreased 
B)  the equilibrium quantity of baseballs increased 
C)  the price of baseballs increased and the quantity demanded of baseballs decreased 
D)  the price of baseballs increased. The higher price caused the supply of baseballs to increase

Question 20

Figure 3-6 
-Refer to Figure 3-6. The figure above represents the market for canvas tote bags. Compare the conditions in the market when the price is $50 and when the price is $35. Which of the following describes how the market differs at these prices?

Accepted Answer

A)  At each price there is a surplus; the surplus is greater at $35 than at $50. 
B)  The difference between quantity supplied and quantity demanded is greater at $50 than at $35. 
C)  At each price there is a surplus; firms will lower the equilibrium price in order to eliminate the surplus. 
D)  At each price the supply of tote bags exceeds that demand for tote bags.

Exam 3: Where Prices Come From: the Interaction of Demand and Supply

An increase in the number of firms in a market will cause the quantity of a good supplied to increase.

If you are considering buying either an Apple iPhone or a Samsung Galaxy, and you choose the Samsung only because the price is lower, then you consider

Hurricane Katrina damaged a large portion of oil refining and pipeline capacity in the Gulf coast states. In the market for gasoline,

What is the ceteris paribus condition?

Figure 3-7 -Refer to Figure 3-7. Assume that the graphs in this figure represent the demand and supply curves for coffee. What happens in this market if buyers expect the price of coffee to rise?

Figure 3-3 -Refer to Figure 3-3. The figure above shows the supply and demand curves for two markets: the market for original Picasso paintings and the market for designer jeans. Which graph most likely represents which market?

The income effect of a price change refers to the impact of a change in

Figure 3-8 -Which of the following would cause a decrease in the equilibrium price and an increase in the equilibrium quantity of salmon?

Studies have shown that smoking cigarettes can cause heart disease. Assume this is true, and favorable weather has increased the tobacco harvest in North Carolina. In the market for cigarettes, these two developments would

Cigars are becoming increasingly popular in the United States, and a growing number of cigar manufacturers in the Caribbean and Central America have begun producing and exporting cigars to the U.S. market. How has this affected the equilibrium price and quantity of cigars?

Figure 3-8 -Refer to Figure 3-8. The graph in this figure illustrates an initial competitive equilibrium in the market for apples at the intersection of D1 and S1 (point A) The equilibrium point will move from A to B.

Figure 3-4 -Refer to Figure 3-4. If the price is $20,

In October 2005, the U.S. Fish and Wildlife Service banned the importation of beluga caviar, the most prized of caviars, from the Caspian Sea. What happened in the market for caviar in the U.S.?

The substitution effect of a price change refers to

Which of the following would cause both the equilibrium price and equilibrium quantity of barley (assume that barley is an inferior good) to increase?

By drawing a demand curve with on the vertical axis and on the horizontal axis, economists assume that the most important determinant of the demand for a good is the of the good.

Figure 3-4 -Refer to Figure 3-4. At a price of $15, how many units will be sold?

Figure 3-8 -Select the phrase that correctly completes the following statement. "An increase in input prices caused a decrease in the supply of baseballs. As a result ________."

Figure 3-6 -Refer to Figure 3-6. The figure above represents the market for canvas tote bags. Compare the conditions in the market when the price is $50 and when the price is $35. Which of the following describes how the market differs at these prices?