Question 1

In competitive markets, a surplus or shortage will

Accepted Answer

A)  never exist because the markets are always at equilibrium.
B)  cause changes in the quantities demanded and supplied that tend to eliminate the surplus or shortage.
C)  cause shifts in the demand and supply curves that tend to eliminate the surplus or shortage.
D)  cause changes in the quantities demanded and supplied that tend to intensify the surplus or shortage.E) C) and D)
F) A) and D)

Question 2

Which of the following goods would most probably be an inferior good?

Accepted Answer

A)  French wines
B)  generic beer
C)  theater tickets
D)  steakE) A) and D)
F) A) and B)

Question 3

Because successive units of a good produce less and less additional satisfaction, the price must fall to encourage a buyer to purchase more units of the good.This statement is most consistent with which explanation for the law of demand?

Accepted Answer

A)  diminishing marginal utility
B)  the rationing function of prices
C)  the substitution effect
D)  the income effectE) A) and B)
F) A) and C)

Question 4

A headline reads, "Lumber Prices Up Sharply." In a competitive market, this situation would lead to a(n)

Accepted Answer

A)  increase in the price and quantity of new homes.
B)  decrease in the price and quantity of new homes.
C)  increase in the price of new homes and decrease in quantity.
D)  decrease in the price of new homes and increase in quantity.E) B) and D)
F) A) and D)

Question 5

If the demand for steak (a normal good)  shifts to the left, the most likely reason is that

Accepted Answer

A)  consumer incomes have fallen.
B)  cattle production has declined.
C)  the price of steak has risen.
D)  the price of cattle feed has gone up.E) All of the above
F) A) and C)

Question 6

Suppose that in 2007, Ford sold 500,000 Mustangs at an average price of $18,800 per car; in 2008, 600,000 Mustangs were sold at an average price of $19,500 per car.These statements

Accepted Answer

A)  suggest that the demand for Mustangs decreased between 2007 and 2008.
B)  suggest that the supply of Mustangs must have increased between 2007 and 2008.
C)  suggest that the demand for Mustangs increased between 2007 and 2008.
D)  constitute an exception to the law of demand in that they suggest an upsloping demand curve.Topic: DemandE) A) and B)
F) None of the above

Question 7

Suppose that a more efficient way to produce a good is discovered, thus lowering production costs for the good.This will cause a(n)

Accepted Answer

A)  increase in supply.
B)  decrease in supply.
C)  increase in quantity supplied.
D)  decrease in quantity supplied.E) A) and B)
F) All of the above

Question 8

Blu-ray players and Blu-ray discs are

Accepted Answer

A)  complementary goods.
B)  substitute goods.
C)  independent goods.
D)  inferior goods.E) A) and C)
F) A) and B)

Question 9

In constructing a demand curve for product X,

Accepted Answer

A)  consumer preferences are allowed to vary.
B)  the prices of other goods are assumed constant.
C)  money incomes are allowed to vary.
D)  the supply curve of product X is assumed constant.E) B) and C)
F) None of the above

Question 10

(Advanced analysis)  The demand for commodity X is represented by the equation P = 10 - 0.2Q and supply by the equation P = 2 + 0.2Q.If demand changes from P = 10 - .2Q to P = 7 - .3Q, the new equilibrium quantity is

Accepted Answer

A)  10.
B)  20.
C)  15.
D)  30.E) A) and B)
F) A) and C)

Question 11

(Advanced analysis)  The demand for commodity X is represented by the equation P = 10 - 0.2Q and supply by the equation P = 2 + 0.2Q.The equilibrium quantity is

Accepted Answer

A)  10.
B)  20.
C)  15.
D)  30.E) A) and D)
F) All of the above

Question 12

A price floor in a competitive market will result in persistent shortages of a product.

Accepted Answer

A) True 
 B)False

Question 13

If the price of Pepsi decreases, other factors constant, then we'd expect to see a consequent shift of the demand curve for

Accepted Answer

A)  Coke to the left.
B)  Coke to the right.
C)  Pepsi to the left.
D)  Pepsi to the right.E) A) and D)
F) A) and C)

Question 14

When an economist says that the demand for a product has increased, this means that

Accepted Answer

A)  consumers are now willing to purchase more of this product at each possible price.
B)  the product has become particularly scarce for some reason.
C)  product price has fallen and, as a consequence, consumers are buying a larger quantity of the product.
D)  the demand curve has shifted to the left.E) A) and D)
F) All of the above

Question 15

A government-set price floor on a product

Accepted Answer

A)  does not interfere with the rationing function of price in a market system.
B)  will drive resources away from the production of the product.
C)  will attract more resources toward the production of the product.
D)  is intended to benefit the buyers of the product.E) A) and D)
F) B) and C)

Question 16

The scalping of tickets for an event is a sign that the stated price on the ticket is

Accepted Answer

A)  equal to the quantity demanded.
B)  equal to the market clearing price.
C)  below the market clearing price.
D)  above the market clearing price.E) A) and D)
F) B) and D)

Question 17

Suppose that corn prices rise significantly.If farmers expect the price of corn to continue rising relative to other crops, then we would expect

Accepted Answer

A)  the supply of ethanol, a corn-based product, to increase.
B)  consumer demand for wheat to fall.
C)  the supply to increase as farmers plant more corn.
D)  the supply to fall as farmers plant more of other crops.Difficulty: 02 MediumE) A) and D)
F) A) and C)

Question 18

All of the following are assumed to be constant when the supply curve for a product is drawn, except the

Accepted Answer

A)  price of the product.
B)  production technology used by the firm.
C)  number of producers.
D)  price of inputs used to make the product.E) C) and D)
F) A) and B)

Question 19

If the demand and supply curves for product X are stable, a government-mandated increase in the price of X will

Accepted Answer

A)  increase the supply of X and decrease the demand for X.
B)  increase the demand for X and decrease the supply of X.
C)  increase the quantity supplied of X and decrease the quantity demanded of X.
D)  decrease the quantity supplied of X and increase the quantity demanded of X.E) A) and B)
F) A) and C)

Question 20

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 producers.E) A) and D)
F) B) and C)

Exam 3: Demand, Supply, and Market Equilibrium

(Advanced analysis) The demand for commodity X is represented by the equation P = 10 - 0.2Q and supply by the equation P = 2 + 0.2Q.If demand changes from P = 10 - .2Q to P = 7 - .3Q, the new equilibrium quantity is

Correct AnswerverifiedShow Answer

The scalping of tickets for an event is a sign that the stated price on the ticket is

Correct AnswerverifiedShow Answer

Suppose that in 2007, Ford sold 500,000 Mustangs at an average price of $18,800 per car; in 2008, 600,000 Mustangs were sold at an average price of $19,500 per car.These statements

Correct AnswerverifiedShow Answer

A government-set price floor on a product

Correct AnswerverifiedShow Answer

(Advanced analysis) The demand for commodity X is represented by the equation P = 10 - 0.2Q and supply by the equation P = 2 + 0.2Q.The equilibrium quantity is

Correct AnswerverifiedShow Answer

Because successive units of a good produce less and less additional satisfaction, the price must fall to encourage a buyer to purchase more units of the good.This statement is most consistent with which explanation for the law of demand?

Correct AnswerverifiedShow Answer

Suppose that a more efficient way to produce a good is discovered, thus lowering production costs for the good.This will cause a(n)

Correct AnswerverifiedShow Answer

The price of pork may increase as a result of

Correct AnswerverifiedShow Answer

Suppose that corn prices rise significantly.If farmers expect the price of corn to continue rising relative to other crops, then we would expect

Correct AnswerverifiedShow Answer

If the demand and supply curves for product X are stable, a government-mandated increase in the price of X will

Correct AnswerverifiedShow Answer

If the price of Pepsi decreases, other factors constant, then we'd expect to see a consequent shift of the demand curve for

Correct AnswerverifiedShow Answer

When an economist says that the demand for a product has increased, this means that

Correct AnswerverifiedShow Answer

In competitive markets, a surplus or shortage will

Correct AnswerverifiedShow Answer

All of the following are assumed to be constant when the supply curve for a product is drawn, except the

Correct AnswerverifiedShow Answer

If the demand for steak (a normal good) shifts to the left, the most likely reason is that

Correct AnswerverifiedShow Answer

A headline reads, "Lumber Prices Up Sharply." In a competitive market, this situation would lead to a(n)

Correct AnswerverifiedShow Answer

Which of the following goods would most probably be an inferior good?

Correct AnswerverifiedShow Answer

In constructing a demand curve for product X,

Correct AnswerverifiedShow Answer

A price floor in a competitive market will result in persistent shortages of a product.

Correct AnswerverifiedShow Answer

Blu-ray players and Blu-ray discs are

Correct AnswerverifiedShow Answer

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