Question 1

Which of the following events will cause a leftward shift in the supply curve of gasoline?

Accepted Answer

A) A decrease in the price of gasoline 
B) An increase in the wage rate of refinery workers 
C) Decrease in the price of crude oil 
D) An improvement in oil refining technology 
E) all of the above 
A) A decrease in the price of gasoline 
B) An increase in the wage rate of refinery workers 
C) Decrease in the price of crude oil 
D) An improvement in oil refining technology 
E) all of the above B

Question 2

Which of the following would cause a shift to the right of the supply curve for gasoline? I.A large increase in the price of public transportation.
II)A large decrease in the price of automobiles.
III)A large reduction in the costs of producing gasoline.

Accepted Answer

A) I only 
B) II only 
C) III only 
D) II and III only 
A) I only 
B) II only 
C) III only 
D) II and III only C

Question 3

The demand for tickets to the Daytona 500 NASCAR event is given by the equation
QD = 350,000 - 800P.The supply of tickets to the event is given by the capacity of the Daytona track,which is 150,000.What is the equilibrium price of tickets to the event? What is the price elasticity of demand at the equilibrium price? What is the price elasticity of supply at the equilibrium price?

Accepted Answer

Consumers are willing to pay P = = $250 per ticket.The price elasticity of demand at $250 is E_D = = = . The price elasticity of supply is E_S = = = 0.

Question 4

The demand for a bushel of wheat in 1981 was given by the equation QD = 3550 - 266P.At a price of $3.46 per bushel,what is the price elasticity of demand? If the price of wheat falls to $3.27 per bushel,what happens to the revenue generated from the sale of wheat?

Accepted Answer

At a price of $3.46 per bushel,the quant

Question 5

When the current price is above the market-clearing level we would expect:

Accepted Answer

A) quantity demanded to exceed quantity supplied. 
B) quantity supplied to exceed quantity demanded. 
C) a shortage. 
D) greater production to occur during the next period. 
A) quantity demanded to exceed quantity supplied. 
B) quantity supplied to exceed quantity demanded. 
C) a shortage. 
D) greater production to occur during the next period.

Question 6

The discussion of Figure 2.2 in the text indicates that quantity demanded for most goods tends to increase as income rises.However,the quantity of bananas demanded in the U.S.tends to decrease as income rises.Under this condition,we expect that an increase in consumer income shifts the demand curve for bananas:

Accepted Answer

A) rightward 
B) no shift. 
C) leftward. 
D) downward. 
A) rightward 
B) no shift. 
C) leftward. 
D) downward.

Question 7

Figure 2.1
-Refer to Figure 2.1.At point D,demand is:

Accepted Answer

A) completely inelastic. 
B) inelastic,but not completely inelastic. 
C) unit elastic. 
D) elastic,but not infinitely elastic. 
E) infinitely elastic. 
A) completely inelastic. 
B) inelastic,but not completely inelastic. 
C) unit elastic. 
D) elastic,but not infinitely elastic. 
E) infinitely elastic.

Question 8

Suppose that,at the market clearing price of natural gas,the price elasticity of demand is -1.2 and the price elasticity of supply is 0.6.What will result from a price ceiling that is 10 percent below the market clearing price?

Accepted Answer

A) A shortage equal to 1.8 percent of the market clearing quantity 
B) A shortage equal to 0.6 percent of the market clearing quantity 
C) A shortage equal to 18 percent of the market clearing quantity 
D) A shortage equal to 6 percent of the market clearing quantity 
E) More information is needed. 
A) A shortage equal to 1.8 percent of the market clearing quantity 
B) A shortage equal to 0.6 percent of the market clearing quantity 
C) A shortage equal to 18 percent of the market clearing quantity 
D) A shortage equal to 6 percent of the market clearing quantity 
E) More information is needed.

Question 9

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

Accepted Answer

A) Support prices for agricultural commodities 
B) Minimum wage laws 
C) Rent control program 
D) all of the above 
A) Support prices for agricultural commodities 
B) Minimum wage laws 
C) Rent control program 
D) all of the above

Question 10

For computers and other business equipment,small changes in business earnings tend to generate relatively large short-run changes in the demand for this equipment.In the long run,the responsiveness of demand for business equipment with respect to income changes tends to be:

Accepted Answer

A) even more responsive. 
B) less responsive. 
C) equally responsive. 
D) none of the above 
A) even more responsive. 
B) less responsive. 
C) equally responsive. 
D) none of the above

Question 11

For automobile demand in the U.S.,the income response tends to be larger in the:

Accepted Answer

A) short run. 
B) long run. 
C) The income response is the same in the long run and the short run. 
D) We do not have enough information to answer this question. 
A) short run. 
B) long run. 
C) The income response is the same in the long run and the short run. 
D) We do not have enough information to answer this question.

Question 12

Ice cream can be frozen.In the short run the magnitude of the own price elasticity of demand for ice cream:

Accepted Answer

A) is higher than in the long run. 
B) is lower than in the short run. 
C) is the same as in the long run. 
D) does not depend on the fact that ice cream can be frozen. 
A) is higher than in the long run. 
B) is lower than in the short run. 
C) is the same as in the long run. 
D) does not depend on the fact that ice cream can be frozen.

Question 13

The effect of the September 11 attacks on the World Trade Center on the market for office space in downtown Manhattan was that both the equilibrium price and the equilibrium quantity fell.What is the most likely explanation for this?

Accepted Answer

A) Supply and demand both shifted left,and the magnitude of the demand shift was greater. 
B) Supply and demand both shifted left,and the magnitude of the supply shift was greater. 
C) Supply shifted left,demand shifted right,and the magnitude of the demand shift was greater. 
D) Supply shifted left,demand shifted right,and the magnitude of the supply shift was greater. 
A) Supply and demand both shifted left,and the magnitude of the demand shift was greater. 
B) Supply and demand both shifted left,and the magnitude of the supply shift was greater. 
C) Supply shifted left,demand shifted right,and the magnitude of the demand shift was greater. 
D) Supply shifted left,demand shifted right,and the magnitude of the supply shift was greater.

Question 14

The inverse demand curve for product X is given by:
PX = 25 - 0.005Q + 0.15PY,
where PX represents price in dollars per unit,Q represents rate of sales in pounds per week,and PY represents selling price of another product Y in dollars per unit.The inverse supply curve of product X is given by: PX = 5 + 0.004Q.
a.Determine the equilibrium price and sales of X.Let PY = $10.
b.Determine whether X and Y are substitutes or complements.

Accepted Answer

a.Equate supply to demand to calculate Q

Question 15

Consider a linear,upward sloping supply curve.If the supply curve shifts upward,then:

Accepted Answer

A) the price elasticity of supply will increase. 
B) the price elasticity of supply will increase if the slope of the supply curve is greater than one. 
C) the price elasticity of supply will increase if the slope of the supply curve is greater than one and the lowest price needed to induce firms to supply anything is positive. 
D) the price elasticity of supply will be constant. 
E) none of the above 
A) the price elasticity of supply will increase. 
B) the price elasticity of supply will increase if the slope of the supply curve is greater than one. 
C) the price elasticity of supply will increase if the slope of the supply curve is greater than one and the lowest price needed to induce firms to supply anything is positive. 
D) the price elasticity of supply will be constant. 
E) none of the above

Question 16

Due to the recent increase in the price of natural gas,the quantity of coal demanded by electric power generation plants has increased.Based on this information,coal and natural gas are:

Accepted Answer

A) complements. 
B) substitutes. 
C) independent goods. 
D) none of the above 
A) complements. 
B) substitutes. 
C) independent goods. 
D) none of the above

Question 17

To protect the cod fishery off the northeast coast of the U.S.,the federal government may limit the amount of fish that each boat can catch in the fishery.The result of this public policy is to:

Accepted Answer

A) shift the cod demand curve to the left. 
B) shift the cod demand curve to the right. 
C) shift the cod supply curve to the right. 
D) shift the cod supply curve to the left. 
A) shift the cod demand curve to the left. 
B) shift the cod demand curve to the right. 
C) shift the cod supply curve to the right. 
D) shift the cod supply curve to the left.

Question 18

As long as the actual market price exceeds the equilibrium market price,there will be:

Accepted Answer

A) downward pressure on the market price. 
B) upward pressure on the market price. 
C) no purchases made. 
D) Both A and C are correct. 
E) Both B and C are correct. 
A) downward pressure on the market price. 
B) upward pressure on the market price. 
C) no purchases made. 
D) Both A and C are correct. 
E) Both B and C are correct.

Question 19

The U.S.Department of Agriculture is interested in analyzing the domestic market for corn.The USDA's staff economists estimate the following equations for the demand and supply curves:
Qd = 1,600 - 125P
Qs = 440 + 165P
Quantities are measured in millions of bushels; prices are measured in dollars per bushel.
a.Calculate the equilibrium price and quantity that will prevail under a completely free market.
b.Calculate the price elasticities of supply and demand at the equilibrium values.
c.The government currently has a $4.50 bushel support price in place.What impact will this support price have on the market? Will the government be forced to purchase corn under a program that requires them to buy up any surpluses? If so,how much?

Accepted Answer

a.Set Q_d = Q_s to d

Question 20

There are two techniques of egg production: free range (where hens roam around the farm)or factory (where hens are fed and watered in wire cages).The free range technique has a much more elastic supply curve than the factory technique.When the demand for eggs falls:

Accepted Answer

A) egg production using the factory technique falls less than with the free range technique. 
B) egg production using the factory technique falls more than with the free range technique. 
C) the production using both techniques falls by the same amount. 
D) the factory egg producers supply curve shifts inward. 
E) the free range egg producers supply curve shifts inward. 
A) egg production using the factory technique falls less than with the free range technique. 
B) egg production using the factory technique falls more than with the free range technique. 
C) the production using both techniques falls by the same amount. 
D) the factory egg producers supply curve shifts inward. 
E) the free range egg producers supply curve shifts inward.

Which of the following events will cause a leftward shift in the supply curve of gasoline?

Which of the following would cause a shift to the right of the supply curve for gasoline? I.A large increase in the price of public transportation. II)A large decrease in the price of automobiles. III)A large reduction in the costs of producing gasoline.

The demand for a bushel of wheat in 1981 was given by the equation Q_D = 3550 - 266P.At a price of $3.46 per bushel,what is the price elasticity of demand? If the price of wheat falls to $3.27 per bushel,what happens to the revenue generated from the sale of wheat?

When the current price is above the market-clearing level we would expect:

Figure 2.1 -Refer to Figure 2.1.At point D,demand is:

Suppose that,at the market clearing price of natural gas,the price elasticity of demand is -1.2 and the price elasticity of supply is 0.6.What will result from a price ceiling that is 10 percent below the market clearing price?

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

For computers and other business equipment,small changes in business earnings tend to generate relatively large short-run changes in the demand for this equipment.In the long run,the responsiveness of demand for business equipment with respect to income changes tends to be:

For automobile demand in the U.S.,the income response tends to be larger in the:

Ice cream can be frozen.In the short run the magnitude of the own price elasticity of demand for ice cream:

The effect of the September 11 attacks on the World Trade Center on the market for office space in downtown Manhattan was that both the equilibrium price and the equilibrium quantity fell.What is the most likely explanation for this?

Consider a linear,upward sloping supply curve.If the supply curve shifts upward,then:

Due to the recent increase in the price of natural gas,the quantity of coal demanded by electric power generation plants has increased.Based on this information,coal and natural gas are:

To protect the cod fishery off the northeast coast of the U.S.,the federal government may limit the amount of fish that each boat can catch in the fishery.The result of this public policy is to:

As long as the actual market price exceeds the equilibrium market price,there will be:

There are two techniques of egg production: free range (where hens roam around the farm)or factory (where hens are fed and watered in wire cages).The free range technique has a much more elastic supply curve than the factory technique.When the demand for eggs falls:

Preliminaries

Consumer Behavior

Individual and Market Demand

Uncertainty and Consumer Behavior

Production

The Cost of Production

Profit Maximization and Competitive Supply

The Analysis of Competitive Markets

Market Power: Monopoly and Monopsony

Pricing With Market Power

Monopolistic Competition and Oligopoly

Game Theory and Competitive Strategy

Markets for Factor Inputs

Investment,time and Capital Markets

General Equilibrium and Economic Efficiency 1-83

Markets With Asymmetric Information

Externalities and Public Goods

Filters

Exam 2: The Basics of Supply and Demand

Which of the following events will cause a leftward shift in the supply curve of gasoline?

Which of the following would cause a shift to the right of the supply curve for gasoline? I.A large increase in the price of public transportation. II)A large decrease in the price of automobiles. III)A large reduction in the costs of producing gasoline.

The demand for a bushel of wheat in 1981 was given by the equation QD = 3550 - 266P.At a price of $3.46 per bushel,what is the price elasticity of demand? If the price of wheat falls to $3.27 per bushel,what happens to the revenue generated from the sale of wheat?

When the current price is above the market-clearing level we would expect:

Figure 2.1 -Refer to Figure 2.1.At point D,demand is:

Suppose that,at the market clearing price of natural gas,the price elasticity of demand is -1.2 and the price elasticity of supply is 0.6.What will result from a price ceiling that is 10 percent below the market clearing price?

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

For computers and other business equipment,small changes in business earnings tend to generate relatively large short-run changes in the demand for this equipment.In the long run,the responsiveness of demand for business equipment with respect to income changes tends to be:

For automobile demand in the U.S.,the income response tends to be larger in the:

Ice cream can be frozen.In the short run the magnitude of the own price elasticity of demand for ice cream:

The effect of the September 11 attacks on the World Trade Center on the market for office space in downtown Manhattan was that both the equilibrium price and the equilibrium quantity fell.What is the most likely explanation for this?

Consider a linear,upward sloping supply curve.If the supply curve shifts upward,then:

Due to the recent increase in the price of natural gas,the quantity of coal demanded by electric power generation plants has increased.Based on this information,coal and natural gas are:

To protect the cod fishery off the northeast coast of the U.S.,the federal government may limit the amount of fish that each boat can catch in the fishery.The result of this public policy is to:

As long as the actual market price exceeds the equilibrium market price,there will be:

There are two techniques of egg production: free range (where hens roam around the farm)or factory (where hens are fed and watered in wire cages).The free range technique has a much more elastic supply curve than the factory technique.When the demand for eggs falls:

Preliminaries

Consumer Behavior

Individual and Market Demand

Uncertainty and Consumer Behavior

Production

The Cost of Production

Profit Maximization and Competitive Supply

The Analysis of Competitive Markets

Market Power: Monopoly and Monopsony

Pricing With Market Power

Monopolistic Competition and Oligopoly

Game Theory and Competitive Strategy

Markets for Factor Inputs

Investment,time and Capital Markets

General Equilibrium and Economic Efficiency 1-83

Markets With Asymmetric Information

Externalities and Public Goods

Filters

The demand for a bushel of wheat in 1981 was given by the equation Q_D = 3550 - 266P.At a price of $3.46 per bushel,what is the price elasticity of demand? If the price of wheat falls to $3.27 per bushel,what happens to the revenue generated from the sale of wheat?