Question 1

Assume that the graphs show a competitive market for the product stated in the question.   Select the graph above that best shows the change in the market specified in the following situation: In the market for houses, when consumers experience a substantial fall in income due to a serious economic recession.

Accepted Answer

A)   Graph A
B)   Graph B
C)   Graph C
D)   Graph DE) None of the above
F) A) and B)

Question 2

The price of pork may increase as a result of:

Accepted Answer

A)   A decrease in the cost of feed for pigs
B)   Decreased advertising of pork
C)   An increase in the cost of producing beef
D)   A subsidy to pork producersE) A) and D)
F) A) and B)

Question 3

Assume that the graphs show a competitive market for the product stated in the question.   Select the graph above that best shows the change in the market specified in the following situation: In the market for digital cameras, when the productivity of workers in the digital camera industry increases.

Accepted Answer

A)   Graph A
B)   Graph B
C)   Graph C
D)   Graph DE) All of the above
F) A) and D)

Question 4

If there is a surplus in a market, competition among the sellers will drive price down.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following is an example of a price ceiling?

Accepted Answer

A)   Limits on interest rates charged by credit card companies
B)   Subsidies for apartment rent in major cities
C)   Minimum-wage laws for unskilled workers
D)   Price supports for agricultural productsE) None of the above
F) All of the above

Question 6

Which of the following is consistent with the law of demand?

Accepted Answer

A)   A decrease in the price of tacos causes sellers to want to sell less
B)   An increase in the people's craving for pizza causes buyers to buy more pizza
C)   An increase in the price of hamburgers causes buyers to buy fewer hamburgers
D)   A decrease in the price of egg rolls causes a decrease in the quantity of egg rolls demandedE) A) and B)
F) C) and D)

Question 7

In the diagrams below, the subscript "1" refers to the initial position of the curve, while the subscript "2" refers to the final position after the curve shifts.  Refer to the diagrams above. In which of them would we see a shortage at the initial price after the indicated curve has shifted?

Accepted Answer

A)   A and D
B)   B and D
C)   B and C
D)   A and CE) A) and D)
F) B) and C)

Question 8

If the market price is above the equilibrium price:

Accepted Answer

A)   A shortage will occur and producers will produce more and lower prices
B)   A surplus will occur and producers will produce less and lower prices
C)   A surplus will result and consumers will bid prices up
D)   Producers will make extremely high profitsE) A) and B)
F) A) and D)

Question 9

In order to derive a market demand curve from individuals' demand curves, we add up the:

Accepted Answer

A)   Various individuals' quantities demanded at each price level
B)   Various prices that each buyer is willing and able to pay
C)   Incomes of all buyers, assuming that their tastes remain constant
D)   Total number of buyers in the market at each time periodE) None of the above
F) A) and B)

Question 10

Refer to the above diagram of the market for corn. If the price in this market is at $4 per bushel, then there will be a:

Accepted Answer

A)   Surplus and the price will tend to rise
B)   Shortage and the price will tend to rise
C)   Surplus and the price will tend to fall
D)   Shortage and the price will tend to fallE) A) and B)
F) A) and D)

Question 11

Refer to the above table. If demand decreased by 4 units at each price and supply decreased by 2 units at each price, what would the new equilibrium price and quantity be?

Accepted Answer

A)   $3 and 5 units
B)   $4 and 4 units
C)   $5 and 5 units
D)   $6 and 6 unitsE) A) and C)
F) B) and C)

Question 12

Refer to the four graphs above. In which graph would the indicated shifts cause equilibrium quantity to definitely rise, but the effect on price is indeterminate?

Accepted Answer

A)   Graph A
B)   Graph B
C)   Graph C
D)   Graph DE) B) and C)
F) B) and D)

Question 13

Suppose that goods A and B are close substitutes. If the price of good A falls, then we would expect an:

Accepted Answer

A)   Increase in the demand for A and an increase in the quantity of B demanded
B)   Increase in the demand for A and a decrease in the quantity of B demanded
C)   Increase in the quantity of A demanded and a decrease in the demand for B
D)   Increase in the demand for good A as well as for good BE) A) and D)
F) A) and C)

Question 14

Which of the following factors is a "demand shifter" for new houses?

Accepted Answer

A)   The price of lumber
B)   Wages for construction workers
C)   The price of new houses
D)   The interest rates on mortgage loansE) C) and D)
F) B) and C)

Question 15

A government will create a surplus in a market when it:

Accepted Answer

A)   Sets a price ceiling above the equilibrium price
B)   Sets a price floor above the equilibrium price
C)   Sets a price floor below the equilibrium price
D)   Sets a price ceiling below the equilibrium priceE) A) and C)
F) All of the above

Question 16

As a result of a decrease in the price of online streaming movies, consumers download more movies online and buy fewer DVDs. This is an illustration of:

Accepted Answer

A)   Consumer sovereignty
B)   The income effect
C)   The substitution effect
D)   Diminishing marginal utilityE) A) and B)
F) B) and C)

Question 17

A large increase in the supply of HD-TV sets occurs simultaneously with a smaller decrease in its demand. As a result the equilibrium price will:

Accepted Answer

A)   Increase and the equilibrium quantity will decrease
B)   Increase and the equilibrium quantity will increase
C)   Decrease and the equilibrium quantity will decrease
D)   Decrease and the equilibrium quantity will increaseE) C) and D)
F) A) and B)

Question 18

Sometimes, we observe cases where the price of a product rose and the quantity bought by buyers also increased. Such cases occur due to a violation of the:

Accepted Answer

A)   Law of Demand
B)   Law of Supply
C)   Allocative efficiency rule
D)   Ceteris paribus assumptionE) None of the above
F) B) and C)

Question 19

Which of the following is a determinant of supply?

Accepted Answer

A)   Tastes and preferences
B)   Price of a complementary good
C)   Consumer income
D)   Product taxes and subsidiesE) All of the above
F) A) and B)

Question 20

Which would be a likely cause of an increase in the demand for pizza?

Accepted Answer

A)   A reduced desire for take-out and fast-food dining
B)   A decrease in the price of hamburger sandwiches
C)   A decrease in the prices of cheese, pepperoni, and mushrooms
D)   A health report showing eating pizza reduces stressE) B) and D)
F) None of the above

Exam 3: Demand, Supply, and Market Equilibrium

The price of pork may increase as a result of:

Correct Answer
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Refer to the four graphs above. In which graph would the indicated shifts cause equilibrium quantity to definitely rise, but the effect on price is indeterminate?

Correct Answer
verified

If the market price is above the equilibrium price:

Correct Answer
verified

Suppose that goods A and B are close substitutes. If the price of good A falls, then we would expect an:

Correct Answer
verified

If there is a surplus in a market, competition among the sellers will drive price down.

Correct Answer
verified

Assume that the graphs show a competitive market for the product stated in the question. Select the graph above that best shows the change in the market specified in the following situation: In the market for digital cameras, when the productivity of workers in the digital camera industry increases.

Correct Answer
verified

Which of the following factors is a "demand shifter" for new houses?

Correct Answer
verified

A government will create a surplus in a market when it:

Correct Answer
verified

A large increase in the supply of HD-TV sets occurs simultaneously with a smaller decrease in its demand. As a result the equilibrium price will:

Correct Answer
verified

Sometimes, we observe cases where the price of a product rose and the quantity bought by buyers also increased. Such cases occur due to a violation of the:

Correct Answer
verified

Which would be a likely cause of an increase in the demand for pizza?

Correct Answer
verified

Correct Answer
verified

Which of the following is consistent with the law of demand?

Correct Answer
verified

Refer to the above diagram of the market for corn. If the price in this market is at $4 per bushel, then there will be a:

Correct Answer
verified

Which of the following is a determinant of supply?

Correct Answer
verified

In order to derive a market demand curve from individuals' demand curves, we add up the:

Correct Answer
verified

In the diagrams below, the subscript "1" refers to the initial position of the curve, while the subscript "2" refers to the final position after the curve shifts. Refer to the diagrams above. In which of them would we see a shortage at the initial price after the indicated curve has shifted?

Correct Answer
verified

Refer to the above table. If demand decreased by 4 units at each price and supply decreased by 2 units at each price, what would the new equilibrium price and quantity be?

Correct Answer
verified

As a result of a decrease in the price of online streaming movies, consumers download more movies online and buy fewer DVDs. This is an illustration of:

Correct Answer
verified

Which of the following is an example of a price ceiling?

Correct Answer
verified

Exam 3: Demand, Supply, and Market Equilibrium

The price of pork may increase as a result of:

Correct AnswerverifiedShow Answer

Refer to the four graphs above. In which graph would the indicated shifts cause equilibrium quantity to definitely rise, but the effect on price is indeterminate?

Correct AnswerverifiedShow Answer

If the market price is above the equilibrium price:

Correct AnswerverifiedShow Answer

Suppose that goods A and B are close substitutes. If the price of good A falls, then we would expect an:

Correct AnswerverifiedShow Answer

If there is a surplus in a market, competition among the sellers will drive price down.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following factors is a "demand shifter" for new houses?

Correct AnswerverifiedShow Answer

A government will create a surplus in a market when it:

Correct AnswerverifiedShow Answer

A large increase in the supply of HD-TV sets occurs simultaneously with a smaller decrease in its demand. As a result the equilibrium price will:

Correct AnswerverifiedShow Answer

Sometimes, we observe cases where the price of a product rose and the quantity bought by buyers also increased. Such cases occur due to a violation of the:

Correct AnswerverifiedShow Answer

Which would be a likely cause of an increase in the demand for pizza?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following is consistent with the law of demand?

Correct AnswerverifiedShow Answer

Refer to the above diagram of the market for corn. If the price in this market is at $4 per bushel, then there will be a:

Correct AnswerverifiedShow Answer

Which of the following is a determinant of supply?

Correct AnswerverifiedShow Answer

In order to derive a market demand curve from individuals' demand curves, we add up the:

Correct AnswerverifiedShow Answer

In the diagrams below, the subscript "1" refers to the initial position of the curve, while the subscript "2" refers to the final position after the curve shifts. Refer to the diagrams above. In which of them would we see a shortage at the initial price after the indicated curve has shifted?

Correct AnswerverifiedShow Answer

Refer to the above table. If demand decreased by 4 units at each price and supply decreased by 2 units at each price, what would the new equilibrium price and quantity be?

Correct AnswerverifiedShow Answer

As a result of a decrease in the price of online streaming movies, consumers download more movies online and buy fewer DVDs. This is an illustration of:

Correct AnswerverifiedShow Answer

Which of the following is an example of a price ceiling?

Correct AnswerverifiedShow Answer

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