Question 1

An increase in the price of ice cream is likely to cause:

Accepted Answer

A)  a movement to the left along the demand curve for ice cream.
B)  an inward shift of the demand curve for ice cream.
C)  an outward shift of the demand curve for ice cream.
D)  a movement to the right along the demand curve for ice cream.E) C) and D)
F) A) and B)

Question 2

The law of supply is described as the:

Accepted Answer

A)  inverse relationship between price and quantity supplied.
B)  direct relationship between price and quantity supplied.
C)  inverse relationship between income and quantity supplied.
D)  direct relationship between income and quantity supplied.E) All of the above
F) None of the above

Question 3

Suppose a recent epidemic of mad cow disease causes the government to mandate that thousands of cows be put down. What effect will this have on the market for leather shoes?

Accepted Answer

A)  The demand for leather shoes will increase.
B)  The supply of leather shoes will decrease.
C)  The demand and supply of leather shoes will increase.
D)  This scenario will not affect the market for leather shoes.E) All of the above
F) A) and D)

Question 4

When does a shortage occur?

Accepted Answer

A)  When the quantity supplied is less than the quantity demanded
B)  When the quantity demanded is less than the quantity supplied
C)  When goods have to be sold quickly or else they may rot or expire
D)  When producers see a need to decrease the price of the goodE) A) and B)
F) A) and C)

Question 5

If a producer incorrectly sets the price of its product too low:

Accepted Answer

A)  a shortage (excess demand) will result.
B)  a surplus (excess supply) will result.
C)  equilibrium will result.
D)  the producer will soon shut down.E) C) and D)
F) B) and C)

Question 6

Suppose the demand for socks has decreased. This change can be shown graphically as a:

Accepted Answer

A)  shift in the demand curve to the right.
B)  shift in the demand curve to the left.
C)  movement along the demand curve to the right.
D)  movement along the demand curve to the left.E) A) and B)
F) C) and D)

Question 7

A decrease in the price of spaghetti noodles is likely to cause a(n) _____ in the demand for penne pasta, due to a change in the price of a _____.

Accepted Answer

A)  increase; complementary good
B)  increase; substitute good
C)  decrease; complementary good
D)  decrease; substitute goodE) B) and C)
F) B) and D)

Question 8

Ceteris paribus is:

Accepted Answer

A)  the Latin term for "all other things being the same."
B)  only necessary for the definition of the law of demand.
C)  often used by economists to isolate the effect of a multiple changes that are important.
D)  the Latin term for "as things change only consider these changes".E) C) and D)
F) A) and B)

Question 9

Suppose the price of house paint, a normal good, has increased. This change can be shown graphically as a:

Accepted Answer

A)  shift in the demand curve to the right.
B)  shift in the demand curve to the left.
C)  movement along the demand curve to the right.
D)  movement along the demand curve to the left.E) A) and B)
F) All of the above

Question 10

Consider a market that is in equilibrium. If the market experiences both an increase in demand and a decrease in supply:

Accepted Answer

A)  the equilibrium price and quantity will rise.
B)  the equilibrium quantity will rise, but the change in the equilibrium price cannot be predicted.
C)  the equilibrium price will rise, but the change in the equilibrium quantity cannot be predicted.
D)  the equilibrium price and quantity will fall.E) A) and D)
F) None of the above

Question 11

A non-price determinant of supply refers to something:

Accepted Answer

A)  other than supply that affects the price.
B)  other than the price that affects supply.
C)  that determines how large a role the price plays in the supply decision.
D)  that determines how the price is affected by the seller's income.E) C) and D)
F) B) and C)

Question 12

The term market refers to:

Accepted Answer

A)  a physical location where buyers and sellers meet to exchange goods for money.
B)  the buyers and sellers who trade a particular good or service, not to a physical location.
C)  a location where buyers go to fulfill their wants and needs.
D)  a hypothetical place of exchange.E) A) and D)
F) C) and D)

Question 13

Consider a market that is in equilibrium. If the market experiences both a decrease in demand and an increase in supply:

Accepted Answer

A)  the equilibrium price and quantity will rise.
B)  the equilibrium quantity will fall, but the change in the equilibrium price cannot be predicted.
C)  the equilibrium price will fall, but the change in the equilibrium quantity cannot be predicted.
D)  the equilibrium price and quantity will fall.E) A) and C)
F) B) and D)

Question 14

Why is the market for used cars not considered to be perfectly competitive?

Accepted Answer

A)  There is complete information.
B)  The buyers are not price takers.
C)  The good is standardized.
D)  There are always very low transaction costs.E) A) and B)
F) A) and C)

Question 15

The supply curve is a(n) _____ line that reflects the _____ relationship between price and quantity supplied.

Accepted Answer

A)  downward-sloping; inverse
B)  upward-sloping; inverse
C)  downward-sloping; direct
D)  upward-sloping; directE) C) and D)
F) A) and C)

Question 16

The demand for Snickers candy bars will decrease if:

Accepted Answer

A)  the price of Snickers candy bars decreases.
B)  a news story claims 95 percent of all geniuses eat at least one Snickers candy bar a day.
C)  the price of Milky Way candy bars (a substitute) decreases.
D)  the price of Milky Way candy bars (a substitute) increases.E) A) and B)
F) B) and C)

Question 17

Suppose a factory recently removed robots from its production line, decreasing productivity. This will likely cause a:

Accepted Answer

A)  rightward shift of the supply curve.
B)  leftward shift of the supply curve.
C)  downward shift of the supply curve.
D)  movement up along the supply curve.E) A) and C)
F) B) and C)

Question 18

The graph shown depicts the market for a good. Assume the market was originally in equilibrium where the demand curve (D) and supply curve (S1) intersect. Something changes in the market, and the supply curve shifts to S2. Which of the following statements is true?

Accepted Answer

A)  The equilibrium price will decrease by $5.
B)  The equilibrium quantity will increase by 20 units.
C)  The equilibrium price will increase by $5.
D)  The equilibrium quantity will increase by 30 units.E) C) and D)
F) A) and D)

Question 19

The graph shown depicts the market for a good. At a price of $15, there is:

Accepted Answer

A)  a shortage (excess demand) of 10 units.
B)  a shortage (excess demand) of 20 units.
C)  a shortage (excess demand) of 30 units.
D)  a surplus (excess supply) of 20 units.E) A) and D)
F) None of the above

Question 20

Consider a market that is in equilibrium. If the market experiences a decrease in demand:

Accepted Answer

A)  the equilibrium price and quantity will rise.
B)  the equilibrium price will rise and the equilibrium quantity will fall.
C)  the equilibrium price and quantity will fall.
D)  the equilibrium price will fall and the equilibrium quantity will rise.E) None of the above
F) B) and C)

Exam 3: Markets

A non-price determinant of supply refers to something:

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Suppose the demand for socks has decreased. This change can be shown graphically as a:

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Consider a market that is in equilibrium. If the market experiences both an increase in demand and a decrease in supply:

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The supply curve is a(n) _____ line that reflects the _____ relationship between price and quantity supplied.

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If a producer incorrectly sets the price of its product too low:

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Suppose a factory recently removed robots from its production line, decreasing productivity. This will likely cause a:

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The graph shown depicts the market for a good. Assume the market was originally in equilibrium where the demand curve (D) and supply curve (S1) intersect. Something changes in the market, and the supply curve shifts to S2. Which of the following statements is true?

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Ceteris paribus is:

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Suppose a recent epidemic of mad cow disease causes the government to mandate that thousands of cows be put down. What effect will this have on the market for leather shoes?

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A decrease in the price of spaghetti noodles is likely to cause a(n) _____ in the demand for penne pasta, due to a change in the price of a _____.

Correct AnswerverifiedShow Answer

An increase in the price of ice cream is likely to cause:

Correct AnswerverifiedShow Answer

The graph shown depicts the market for a good. At a price of $15, there is:

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Why is the market for used cars not considered to be perfectly competitive?

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Consider a market that is in equilibrium. If the market experiences both a decrease in demand and an increase in supply:

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The demand for Snickers candy bars will decrease if:

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Suppose the price of house paint, a normal good, has increased. This change can be shown graphically as a:

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Consider a market that is in equilibrium. If the market experiences a decrease in demand:

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The term market refers to:

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The law of supply is described as the:

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When does a shortage occur?

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The supply curve is a(n) _ line that reflects the _ relationship between price and quantity supplied.

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A decrease in the price of spaghetti noodles is likely to cause a(n) _ in the demand for penne pasta, due to a change in the price of a _.

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