Question 1

In a competitive market, the market demand is Qd = 400 - 5P and the market supply is Qs = 10P - 80. A price ceiling of $32 will result in

Accepted Answer

A)  a shortage of 80 units. 
B)  a shortage of 44 units. 
C)  a surplus of 26 units. 
D)  neither a shortage nor a surplus.

Question 2

Suppose the demand for good X is given by Qdx = 10 + axPx + ayPy + aMM. From the law of demand we know that ax will be:

Accepted Answer

A)  less than zero. 
B)  greater than zero. 
C)  zero. 
D)  none of the statements associated with this question are correct.

Question 3

Suppose the demand for X is given by Qxd = 100 - 2PX + 4PY + 10M + 2A, where PX represents the price of good X, PY is the price of good Y, M is income and A is the amount of advertising on good X. Based on this information, we know that good Y is

Accepted Answer

A)  a substitute for good X. 
B)  a complement for good X. 
C)  an inferior good. 
D)  a normal good.

Question 4

Suppose the market demand for good X is given by QXd = 20 - 2PX. If the equilibrium price of X is $5 per unit then consumer surplus is

Accepted Answer

A)  $100. 
B)  $75. 
C)  $50. 
D)  $25.

Question 5

In a competitive market, the market demand is Qd = 150 - 2P and the market supply is Qs = 30 + 4P. A price ceiling of $16 will result in a

Accepted Answer

A)  shortage of 24 units. 
B)  shortage of 34 units. 
C)  surplus of 58 units. 
D)  surplus of 34 units.

Question 6

The demand curve for product X is given by QX = 50 - 2PX. How much consumer surplus do consumers receive when PX = $5?

Accepted Answer

A)  $400. 
B)  $200. 
C)  $100. 
D)  $500.

Question 7

Persuasive advertising influences demand by:

Accepted Answer

A)  providing information about the availability of a product. 
B)  offering reduced prices for the product. 
C)  altering the underlying tastes of consumers. 
D)  none of the statements are correct.

Question 8

As additional firms enter an industry, the market supply curve

Accepted Answer

A)  shifts to the right. 
B)  shifts to the left. 
C)  remains the same. 
D)  none of the statements associated with this question are correct.

Question 9

Which of the following are least likely to be complements?

Accepted Answer

A)  Peanut butter and jelly. 
B)  Bread and butter. 
C)  Sports coats and dress slacks. 
D)  Cars and trucks.

Question 10

Consider a market characterized by the following inverse demand and supply functions: PX = 10 - 2QX and PX = 2 + 2QX. Compute the surplus received by consumers and producers.

Accepted Answer

A)  $24 and $24, respectively. 
B)  $4 and $4, respectively. 
C)  $2 and $6, respectively. 
D)  $6 and $2, respectively.

Question 11

The economic principle that producers are willing to produce more output when price is high is depicted by the:

Accepted Answer

A)  upward slope of the supply curve. 
B)  extreme steepness of the supply curve. 
C)  downward slope of the supply curve. 
D)  interaction of the supply and demand curves.

Question 12

Suppose supply decreases and demand increases. What effect will this have on the price?

Accepted Answer

A)  It will fall. 
B)  It will rise. 
C)  It may rise or fall. 
D)  It will remain the same.

Question 13

The supply function for good X is given by Qxs = 200 + 4PX - 3PY - 5PW, where PX is the price of X, PY is the price of good Y and PW is the price of input W. If PX = 500, PY = 250, PW = 30, then the supply curve is

Accepted Answer

A)  Qxs = 1300. 
B)  Qxs = -700 + 4Px. 
C)  Qxs = -550 + 4Px. 
D)  Qxs = 150 + 4Px.

Question 14

Which of the following can explain an increase in the demand for housing in retirement communities?

Accepted Answer

A)  A drop in real estate prices. 
B)  An increase in the population of the elderly. 
C)  A drop in the average age of retirees. 
D)  Mandatory government legislation.

Question 15

Demand shifters do not include the

Accepted Answer

A)  price of the good. 
B)  consumer's tastes and preferences. 
C)  the price of the other related goods. 
D)  consumer's expectations about future prices of the good.

Question 16

Suppose both supply and demand increase. What effect will this have on the equilibrium price?

Accepted Answer

A)  It will fall. 
B)  It will rise. 
C)  It may rise or fall. 
D)  It will remain the same.

Question 17

Suppose the market supply for good X is given by QXS = -100 + 5PX. If the equilibrium price of X is $100 per unit then producer surplus is

Accepted Answer

A)  $400. 
B)  $1,600. 
C)  $16,000. 
D)  none of the statements associated with this question are correct.

Question 18

Suppose X and Y are complements and demand for X is Qxd = α0 + αXPX + αYPY + αMM + αHH. Then we know

Accepted Answer

A)  αH > 0. 
B)  αX > 0. 
C)  αY M < 0.

Question 19

Suppose the market supply for good X is given by QXS = -100 + 5PX. If the equilibrium price of X is $100 per unit then producers' revenue from X is

Accepted Answer

A)  $100. 
B)  $20,000. 
C)  $40,000. 
D)  cannot be determined from the information contained in the question.

Question 20

Good X is a normal good if an increase in income leads to

Accepted Answer

A)  an increase in the supply for good X. 
B)  an increase in the demand for good X. 
C)  a decrease in the demand for good X. 
D)  a decrease in the supply for good X.

Exam 2: Market Forces: Demand and Supply

In a competitive market, the market demand is Q^d = 400 - 5P and the market supply is Q^s = 10P - 80. A price ceiling of $32 will result in

Suppose the demand for good X is given by Q^d_x = 10 + a_xP_x + a_yP_y + a_MM. From the law of demand we know that a_x will be:

Suppose the demand for X is given by Q_x^d = 100 - 2P_X + 4P_Y + 10M + 2A, where P_X represents the price of good X, P_Y is the price of good Y, M is income and A is the amount of advertising on good X. Based on this information, we know that good Y is

Suppose the market demand for good X is given by Q_X^d = 20 - 2P_X. If the equilibrium price of X is $5 per unit then consumer surplus is

In a competitive market, the market demand is Q^d = 150 - 2P and the market supply is Q^s = 30 + 4P. A price ceiling of $16 will result in a

The demand curve for product X is given by Q_X = 50 - 2P_X. How much consumer surplus do consumers receive when P_X = $5?

Persuasive advertising influences demand by:

As additional firms enter an industry, the market supply curve

Which of the following are least likely to be complements?

Consider a market characterized by the following inverse demand and supply functions: P_X = 10 - 2Q_X and P_X = 2 + 2Q_X. Compute the surplus received by consumers and producers.

The economic principle that producers are willing to produce more output when price is high is depicted by the:

Suppose supply decreases and demand increases. What effect will this have on the price?

The supply function for good X is given by Q_x^s = 200 + 4P_X - 3P_Y - 5P_W, where P_X is the price of X, P_Y is the price of good Y and P_W is the price of input W. If P_X = 500, P_Y = 250, P_W = 30, then the supply curve is

Which of the following can explain an increase in the demand for housing in retirement communities?

Demand shifters do not include the

Suppose both supply and demand increase. What effect will this have on the equilibrium price?

Suppose the market supply for good X is given by Q_X^S = -100 + 5P_X. If the equilibrium price of X is $100 per unit then producer surplus is

Suppose X and Y are complements and demand for X is Q_x^d = α₀ + α_XP_X + α_YP_Y + α_MM + α_HH. Then we know

Suppose the market supply for good X is given by Q_X^S = -100 + 5P_X. If the equilibrium price of X is $100 per unit then producers' revenue from X is

Good X is a normal good if an increase in income leads to