Question 1

Figure: Shifting Demand  In the diagram, which of the following factors would cause the demand curve to shift from D1 to D2?

Accepted Answer

A)  an increase in the price of a substitute good 
B)  a decrease in the price of a complement good 
C)  an increase in the population 
D)  an increase in income if this is an inferior good

Question 2

To economists, the term consumer surplus means:

Accepted Answer

A)  the excess money consumers have left over, after purchasing goods. 
B)  the difference between the price a consumer is willing to pay, and the price that suppliers are willing to accept. 
C)  the consumer's gain from trading. 
D)  the difference between the price a consumer is able to pay and willing to pay.

Question 3

A recent explosion in the demand for (and price of) organically produced foods has caused many farmers to convert from traditional farming methods to higher-cost organic farming methods. Explain what has happened to the opportunity cost of traditional farming and why. Based on your explanation, does it make sense to see so many farmers moving to organic farming? Explain.

Accepted Answer

The answer of A recent explosion in the demand for...

Question 4

Figure: Demand Curve  Which statement is TRUE regarding the figure?

Accepted Answer

A)  At a price of $6 per unit, consumers are willing and able to buy 10 units. 
B)  The maximum price demanders are willing to pay for 15 units is $6 per unit. 
C)  The higher the price, the greater the quantity demanded. 
D)  At a price of $3.75 per unit, consumers are indifferent between buying 10 and 15 units.

Question 5

Figure: Supply Shift  According to the figure, the:

Accepted Answer

A)  costs of producing output have decreased. 
B)  technology for producing output has improved. 
C)  costs of producing output have increased. 
D)  price of the product has decreased.

Question 6

Figure: Demand Curve  Refer to the figure. What is the maximum price per book that buyers are willing to pay for 2,500 books?

Accepted Answer

A)  $60 
B)  $45 
C)  $30 
D)  $15

Question 7

Figure: Religion  This graph illustrates the work of psychologists Harvey Whitehouse and Quentin Atkinson, as published in the April 23-29, 2011 issue of The Economist. The "unpleasantness" of religious rituals (0 is low, 5 is high) is along the x-axis. How often the religion requires the ritual to be performed is along the y-axis. What economic concept does this diagram represent?

Accepted Answer

A)  opportunity cost 
B)  consumer surplus 
C)  a demand curve 
D)  an inferior good

Question 8

Which of the following choices correctly illustrates how changes in opportunity costs affect supply?

Accepted Answer

A)  A farmer produces corn and wheat. The price of wheat rises, so he shifts his resources toward wheat and the supply of wheat rises. 
B)  A fisherman fishes for lobsters and oysters. The price of lobsters rises, so he decides to spend more of his time fishing for oysters because he can make the same amount of money with fewer lobsters. 
C)  A textbook for economics becomes cheaper, so more students opt to buy that particular textbook. 
D)  Milk and cereal are complementary goods, so when the price of cereal falls, the quantity supplied of milk rises.

Question 9

Figure: Supply Shift  In the figure, a movement from S1 to S2 represents:

Accepted Answer

A)  a decrease in supply. 
B)  an increase in supply. 
C)  a decrease in quantity supplied. 
D)  an increase in quantity supplied.

Question 10

Suppose that Saudi Arabia can produce oil at $4 per barrel, Iran at $10 per barrel, and Canada at $25 per barrel. If the price of oil is $90 per barrel, what is total producer surplus per barrel for world suppliers?

Accepted Answer

A)  $270 
B)  $129 
C)  $231 
D)  $51

Question 11

If the price of granite countertops rises, we would expect the demand for quartz countertops (a substitute product for granite) to decrease.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following factors causes a decrease in supply?

Accepted Answer

A)  a decrease in demand 
B)  a decrease in the price of the product 
C)  an increase in the price of the product 
D)  new taxes on output

Question 13

For a normal good, higher income results in:

Accepted Answer

A)  an increase in demand. 
B)  a decrease in demand. 
C)  a movement up along the demand curve. 
D)  a movement down along the demand curve.

Question 14

Which of the following would cause the demand for hot dog buns to increase?

Accepted Answer

A)  a fall in the price of hot dog buns 
B)  a fall in the price of hot dogs 
C)  a rise in the price of hot dogs 
D)  a rise in the price of hot dog buns

Question 15

What does the law of demand state?

Accepted Answer

A)  As incomes increase, people consume more of all goods. 
B)  The demand for a good increases with the number of consumers in the market. 
C)  As the price of a good increases, consumers purchase less of that good. 
D)  The supply of a good increases in proportion to the demand for it.

Question 16

The market price of a good is $5 and 40 units of the good sell at this price. Its demand curve intersects the vertical axis at a price of $10 and has a constant slope. What is the approximate value of consumer surplus in this market?

Accepted Answer

A)  $100 
B)  $50 
C)  $200 
D)  $75

Question 17

Which statement expresses the law of demand?

Accepted Answer

A)  There is a positive relationship between price and consumer surplus. 
B)  There is a positive relationship between price and quantity that buyers are willing and able to purchase. 
C)  There is an inverse relationship between the willingness to pay and the ability to pay. 
D)  There is a negative relationship between price and quantity demanded.

Question 18

An increase in the future expected price of a storable good ________ supply.

Accepted Answer

A)  increases 
B)  decreases 
C)  does not change 
D)  changes in an indeterminate direction

Question 19

Use the following to answer questions:
Figure: Bananas 
-(Figure: Bananas) Refer to the figure. If the price of bananas is $2 a pound, how many pounds of bananas will suppliers supply?

Accepted Answer

A)  0 
B)  1 
C)  10 
D)  10,000

Question 20

Recall your reading about NAFTA in the textbook. Why did the NAFTA agreement result in an increase in lumber supply in the United States?

Accepted Answer

A)  NAFTA decreed that the United States should produce more lumber. 
B)  NAFTA stands for North American Furniture Trade Agreement. 
C)  NAFTA reduced barriers to trade, allowing Canadian lumber to enter the United States. 
D)  The United States sold more lumber to Canada.

Exam 3: Supply and Demand

Figure: Shifting Demand In the diagram, which of the following factors would cause the demand curve to shift from D₁ to D₂?