Question 1

A demand curve of the form: Q = a - bP,where a and b are positive real numbers,:

Accepted Answer

A) is an upward sloping straight line. 
B) has a constant price elasticity of demand. 
C) is a downward sloping straight line. 
D) is a parabolic curve. 
A) is an upward sloping straight line. 
B) has a constant price elasticity of demand. 
C) is a downward sloping straight line. 
D) is a parabolic curve.

Question 2

The market for gravel has been estimated to have these supply and demand relationships:
Supply P = 10 + 0.01Q
Demand P = 100 - 0.01Q,
where P represents price per unit in dollars,and Q represents sales per week in tons.Determine the equilibrium price and sales.Determine the amount of shortage or surplus that would develop at P = $40/ton.

Accepted Answer

The equilibrium price can be found by eq

Question 3

Plastic and steel are substitutes in the production of body panels for certain automobiles. If the price of plastic increases,with other things remaining the same,we would expect:

Accepted Answer

A) the price of steel to fall. 
B) the demand curve for steel to shift to the right. 
C) the demand curve for plastic to shift to the left. 
D) nothing to happen to steel because it is only a substitute for plastic. 
E) the demand curve for steel to shift to the left. 
A) the price of steel to fall. 
B) the demand curve for steel to shift to the right. 
C) the demand curve for plastic to shift to the left. 
D) nothing to happen to steel because it is only a substitute for plastic. 
E) the demand curve for steel to shift to the left.

Question 4

Which of the following statements about the diagram below is true?

Accepted Answer

A) Demand is infinitely elastic. 
B) Demand is completely inelastic. 
C) Demand becomes more inelastic the lower the price. 
D) Demand becomes more elastic the lower the price. 
A) Demand is infinitely elastic. 
B) Demand is completely inelastic. 
C) Demand becomes more inelastic the lower the price. 
D) Demand becomes more elastic the lower the price.

Question 5

Harding Enterprises has developed a new product called the Gillooly Shillelagh.The market demand for this product is given as follows:
Q = 240 - 4P
a.At what price is the price elasticity of demand equal to zero?
b.At what price is demand infinitely elastic?
c.At what price is the price elasticity of demand equal to one?
d.If the shillelagh is priced at $40,what is the point price elasticity of demand?

Accepted Answer

a.The demand curve given in this problem

Question 6

Which of the following statements about the diagram below is true?

Accepted Answer

A) Demand is infinitely elastic. 
B) Demand is completely inelastic. 
C) Demand becomes more inelastic as price declines. 
D) Demand becomes more elastic as price declines. 
A) Demand is infinitely elastic. 
B) Demand is completely inelastic. 
C) Demand becomes more inelastic as price declines. 
D) Demand becomes more elastic as price declines.

Question 7

The price of good A goes up.As a result,the demand for good B shifts to the left.From this we can infer that:

Accepted Answer

A) good A is used to produce good B. 
B) good B is used to produce good A. 
C) goods A and B are substitutes. 
D) goods A and B are complements. 
E) none of the above 
A) good A is used to produce good B. 
B) good B is used to produce good A. 
C) goods A and B are substitutes. 
D) goods A and B are complements. 
E) none of the above

Question 8

This year a new oil field with substantial reserves has been discovered.Such discoveries are not made every year.Therefore an increase in the demand for oil will:

Accepted Answer

A) increase the long run price of oil more than the short run price of oil. 
B) increase the long run price of oil less than the short run price of oil. 
C) ensure the long run price of oil and short run price of oil increase by the same amount. 
D) ensure that the short run price of oil falls. 
E) ensure that the short run price of oil remains unchanged. 
A) increase the long run price of oil more than the short run price of oil. 
B) increase the long run price of oil less than the short run price of oil. 
C) ensure the long run price of oil and short run price of oil increase by the same amount. 
D) ensure that the short run price of oil falls. 
E) ensure that the short run price of oil remains unchanged.

Question 9

An important determinant of the amount of grains harvested next year by Ethiopian farmers is the amount of seeds planted this year.Given that Western nations have guaranteed to donate five hundred tons of grain next year,this year the Ethiopian farmers will:

Accepted Answer

A) plant more seeds as the food aid establishes a minimum price for grain. 
B) plant more seeds as the farmers' confidence is restored. 
C) plant the same amount of seeds as they would have without the food aid. 
D) plant fewer seeds as consumers demand for grain is completely price elastic. 
E) plant fewer seeds as the price of grain will be lower with the food aid. 
A) plant more seeds as the food aid establishes a minimum price for grain. 
B) plant more seeds as the farmers' confidence is restored. 
C) plant the same amount of seeds as they would have without the food aid. 
D) plant fewer seeds as consumers demand for grain is completely price elastic. 
E) plant fewer seeds as the price of grain will be lower with the food aid.

Question 10

Along any downward sloping straight-line demand curve:

Accepted Answer

A) both the price elasticity and slope vary. 
B) the price elasticity varies,but the slope is constant. 
C) the slope varies,but the price elasticity is constant. 
D) both the price elasticity and slope are constant. 
A) both the price elasticity and slope vary. 
B) the price elasticity varies,but the slope is constant. 
C) the slope varies,but the price elasticity is constant. 
D) both the price elasticity and slope are constant.

Question 11

From 1970 to 1993,the real price of a college education increased,and total enrollment increased.Which of the following could have caused this increase in price and enrollment?

Accepted Answer

A) A shift to the right in the supply curve for college education and a shift to the left in the demand curve for college education. 
B) A shift to the left in the supply curve for college education and a shift to the right in the demand curve for college education. 
C) A shift to the left in the supply curve for college education and a shift to the left in the demand curve for college education. 
D) none of the above 
A) A shift to the right in the supply curve for college education and a shift to the left in the demand curve for college education. 
B) A shift to the left in the supply curve for college education and a shift to the right in the demand curve for college education. 
C) A shift to the left in the supply curve for college education and a shift to the left in the demand curve for college education. 
D) none of the above

Question 12

For U.S.consumers,the income elasticity of demand for fruit juice is 1.1.If the economy enters a recession next year and consumer income declines by 2.5%,what is the expected change in the quantity of fruit juice demanded next year?

Accepted Answer

A) -2.75% 
B) +2.75% 
C) -27.5% 
D) +27.5% 
A) -2.75% 
B) +2.75% 
C) -27.5% 
D) +27.5%

Question 13

If the actual price were below the equilibrium price in the market for bread,a:

Accepted Answer

A) surplus would develop that cannot be eliminated over time. 
B) shortage would develop,which market forces would eliminate over time. 
C) surplus would develop,which market forces would eliminate over time. 
D) shortage would develop,which market forces would tend to exacerbate. 
A) surplus would develop that cannot be eliminated over time. 
B) shortage would develop,which market forces would eliminate over time. 
C) surplus would develop,which market forces would eliminate over time. 
D) shortage would develop,which market forces would tend to exacerbate.

Question 14

Which of the following is NOT an application of supply and demand analysis?

Accepted Answer

A) Understanding changing world economic conditions and their effects on prices 
B) Evaluating the effects of government price controls on the agricultural industry 
C) Determining how taxes affect aggregate consumption spending patterns 
D) all of the above 
E) none of the above 
A) Understanding changing world economic conditions and their effects on prices 
B) Evaluating the effects of government price controls on the agricultural industry 
C) Determining how taxes affect aggregate consumption spending patterns 
D) all of the above 
E) none of the above

Question 15

The income elasticity of demand is the

Accepted Answer

A) absolute change in quantity demanded resulting from a one unit increase in income. 
B) percent change in quantity demanded resulting from the absolute increase in income. 
C) percent change in quantity demanded resulting from a one percent increase in income. 
D) percent change in income resulting from a one percent increase in quantity demanded. 
E) percent change in income resulting from a one percent increase in price. 
A) absolute change in quantity demanded resulting from a one unit increase in income. 
B) percent change in quantity demanded resulting from the absolute increase in income. 
C) percent change in quantity demanded resulting from a one percent increase in income. 
D) percent change in income resulting from a one percent increase in quantity demanded. 
E) percent change in income resulting from a one percent increase in price.

Question 16

Assume that steak and potatoes are complements.When the price of steak goes up,the demand curve for potatoes:

Accepted Answer

A) shifts to the left. 
B) shifts to the right. 
C) remains constant. 
D) shifts to the right initially and then returns to its original position. 
A) shifts to the left. 
B) shifts to the right. 
C) remains constant. 
D) shifts to the right initially and then returns to its original position.

Question 17

Consider the demand curve of the form Q = a - bP.If a is a positive real number,and b = 0,then demand is

Accepted Answer

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

Question 18

The daily demand for hotel rooms on Manhattan Island in New York is given by the equation QD = 250,000 - 375P.The daily supply of hotel rooms on Manhattan Island is given by the equation QS = 15,000 + 212.5P.Diagram these demand and supply curves in price and quantity space.What is the equilibrium price and quantity of hotel rooms on Manhattan Island?

Accepted Answer

The equilibrium price can be found by eq

Question 19

A supply curve reveals:

Accepted Answer

A) the quantity of output consumers are willing to purchase at each possible market price. 
B) the difference between quantity demanded and quantity supplied at each price. 
C) the maximum level of output an industry can produce,regardless of price. 
D) the quantity of output that producers are willing to produce and sell at each possible market price. 
A) the quantity of output consumers are willing to purchase at each possible market price. 
B) the difference between quantity demanded and quantity supplied at each price. 
C) the maximum level of output an industry can produce,regardless of price. 
D) the quantity of output that producers are willing to produce and sell at each possible market price.

Question 20

American Mining Company is interested in obtaining quick estimates of the supply and demand curves for coal.The firm's research department informs you that the elasticity of supply is approximately 1.7,the elasticity of demand is approximately -0.85,and the current price and quantity are $41 and 1,206,respectively.Price is measured in dollars per ton,quantity the number of tons per week.
a.Estimate linear supply and demand curves at the current price and quantity.
b.What impact would a 10% increase in demand have on the equilibrium price and quantity?
c.If the government refused to let American raise the price when demand increased in (b)above,what shortage is created?

Accepted Answer

a.First we estimate the demand curve Q =

A demand curve of the form: Q = a - bP,where a and b are positive real numbers,:

Plastic and steel are substitutes in the production of body panels for certain automobiles. If the price of plastic increases,with other things remaining the same,we would expect:

Which of the following statements about the diagram below is true?

Which of the following statements about the diagram below is true?

The price of good A goes up.As a result,the demand for good B shifts to the left.From this we can infer that:

This year a new oil field with substantial reserves has been discovered.Such discoveries are not made every year.Therefore an increase in the demand for oil will:

An important determinant of the amount of grains harvested next year by Ethiopian farmers is the amount of seeds planted this year.Given that Western nations have guaranteed to donate five hundred tons of grain next year,this year the Ethiopian farmers will:

Along any downward sloping straight-line demand curve:

From 1970 to 1993,the real price of a college education increased,and total enrollment increased.Which of the following could have caused this increase in price and enrollment?

For U.S.consumers,the income elasticity of demand for fruit juice is 1.1.If the economy enters a recession next year and consumer income declines by 2.5%,what is the expected change in the quantity of fruit juice demanded next year?

If the actual price were below the equilibrium price in the market for bread,a:

Which of the following is NOT an application of supply and demand analysis?

The income elasticity of demand is the

Assume that steak and potatoes are complements.When the price of steak goes up,the demand curve for potatoes:

Consider the demand curve of the form Q = a - bP.If a is a positive real number,and b = 0,then demand is

A supply curve reveals:

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

A demand curve of the form: Q = a - bP,where a and b are positive real numbers,:

Plastic and steel are substitutes in the production of body panels for certain automobiles. If the price of plastic increases,with other things remaining the same,we would expect:

Which of the following statements about the diagram below is true?

Which of the following statements about the diagram below is true?

The price of good A goes up.As a result,the demand for good B shifts to the left.From this we can infer that:

This year a new oil field with substantial reserves has been discovered.Such discoveries are not made every year.Therefore an increase in the demand for oil will:

An important determinant of the amount of grains harvested next year by Ethiopian farmers is the amount of seeds planted this year.Given that Western nations have guaranteed to donate five hundred tons of grain next year,this year the Ethiopian farmers will:

Along any downward sloping straight-line demand curve:

From 1970 to 1993,the real price of a college education increased,and total enrollment increased.Which of the following could have caused this increase in price and enrollment?

For U.S.consumers,the income elasticity of demand for fruit juice is 1.1.If the economy enters a recession next year and consumer income declines by 2.5%,what is the expected change in the quantity of fruit juice demanded next year?

If the actual price were below the equilibrium price in the market for bread,a:

Which of the following is NOT an application of supply and demand analysis?

The income elasticity of demand is the

Assume that steak and potatoes are complements.When the price of steak goes up,the demand curve for potatoes:

Consider the demand curve of the form Q = a - bP.If a is a positive real number,and b = 0,then demand is

A supply curve reveals:

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