Question 1

Draw a supply and demand diagram. Label the equilibrium price and equilibrium quantity as well as the axes and curves.

Accepted Answer

P^e = equilibrium price Q^e = equilibrium quantity

Question 2

Suppose that the price of bananas has been rising while the amount sold has been falling. Which of the following is the best explanation?
(A)Consumer preferences have shifted in favor of bananas because they are healthful.
(B)Consumer incomes have risen faster than inflation.
(C)Bad weather has reduced some banana crops.

Accepted Answer

The best explanation is (C) because a reduction in supply would have led to a higher price and a lower quantity sold, as predicted. The other explanations would have led to a higher price and a higher quantity sold.

Question 3

Which of the following statements is false?

Accepted Answer

A)  A demand curve is a visual representation of a demand schedule. 
B)  A demand curve is typically drawn with quantity demanded on the horizontal axis. 
C)  A demand curve is derived from different quantities produced. 
D)  A demand curve is typically drawn with price on the vertical axis. 
E)  A demand curve is always downward sloping. 
A)  A demand curve is a visual representation of a demand schedule. 
B)  A demand curve is typically drawn with quantity demanded on the horizontal axis. 
C)  A demand curve is derived from different quantities produced. 
D)  A demand curve is typically drawn with price on the vertical axis. 
E)  A demand curve is always downward sloping. C

Question 4

A rightward shift of a supply curve represents an increase in supply.

Accepted Answer

A) True 
 B)False

Question 5

In the case of a surplus,

Accepted Answer

A)  there is no need for adjustment because equilibrium is rarely perfect. 
B)  the quantity supplied exceeds the quantity demanded at the current price level. 
C)  producer incomes will fall and production will rise in order to make up for the shortfall. 
D)  market price will rise. 
E)  the quantity demanded exceeds the quantity supplied at the current price level. 
A)  there is no need for adjustment because equilibrium is rarely perfect. 
B)  the quantity supplied exceeds the quantity demanded at the current price level. 
C)  producer incomes will fall and production will rise in order to make up for the shortfall. 
D)  market price will rise. 
E)  the quantity demanded exceeds the quantity supplied at the current price level.

Question 6

Exhibit 3-3  
-Refer to Exhibit 3-3. If the price is $27,

Accepted Answer

A)  producers are willing to produce a maximum of 32 units. 
B)  there is an equilibrium. 
C)  there is a tendency for price to rise. 
D)  consumers are willing to buy as much as 25 units. 
E)  there is a shortage of 30 units. 
A)  producers are willing to produce a maximum of 32 units. 
B)  there is an equilibrium. 
C)  there is a tendency for price to rise. 
D)  consumers are willing to buy as much as 25 units. 
E)  there is a shortage of 30 units.

Question 7

Exhibit 3-3  
-Refer to Exhibit 3-3. A shortage of ____ units will result in a price of ____.

Accepted Answer

A)  42; $9 
B)  32; $18 
C)  25; $27 
D)  30; $27 
E)  30; $9 
A)  42; $9 
B)  32; $18 
C)  25; $27 
D)  30; $27 
E)  30; $9

Question 8

An increase in production costs shifts the supply curve leftward.

Accepted Answer

A) True 
 B)False

Question 9

Suppose more firms enter the computer market. What will happen to demand, quantity demanded, supply, and quantity supplied as a result of this market change?

Accepted Answer

Supply increases but demand do

Question 10

If quantity supplied is less than quantity demanded, then

Accepted Answer

A)  there is a shortage in the market. 
B)  prices will fall. 
C)  equilibrium has been achieved. 
D)  consumer incomes will increase. 
E)  there is a surplus in the market. 
A)  there is a shortage in the market. 
B)  prices will fall. 
C)  equilibrium has been achieved. 
D)  consumer incomes will increase. 
E)  there is a surplus in the market.

Question 11

Which of the following will not increase the demand for a good?

Accepted Answer

A)  An expectation of a decline in the product price in the future 
B)  The product price falls, ceteris paribus. 
C)  An increase in the price of a substitute 
D)  A decrease in the price of a complement 
E)  A foreign country opens its markets to imports from others. 
A)  An expectation of a decline in the product price in the future 
B)  The product price falls, ceteris paribus. 
C)  An increase in the price of a substitute 
D)  A decrease in the price of a complement 
E)  A foreign country opens its markets to imports from others.

Question 12

In which of the following statements are the terms demand, supply, quantity demanded, and/or quantity supplied used correctly?

Accepted Answer

A)  When the quantity demanded exceeds supply, the equilibrium price will rise. 
B)  Changes in demand and supply cause changes in the equilibrium price. 
C)  If the demand rises, supply rises. 
D)  Oranges are cheaper in Florida; therefore, the demand is greater in Florida. 
E)  Decreases in quantity demanded and quantity supplied often occur simultaneously. 
A)  When the quantity demanded exceeds supply, the equilibrium price will rise. 
B)  Changes in demand and supply cause changes in the equilibrium price. 
C)  If the demand rises, supply rises. 
D)  Oranges are cheaper in Florida; therefore, the demand is greater in Florida. 
E)  Decreases in quantity demanded and quantity supplied often occur simultaneously.

Question 13

If the equilibrium quantity decreases while the equilibrium price increases, which of the following is the most likely reason?

Accepted Answer

A)  Supply increases while demand decreases. 
B)  Supply increases while demand does not change. 
C)  Both supply and demand increase. 
D)  Both supply and demand decrease. 
E)  Neither supply nor demand changes. 
A)  Supply increases while demand decreases. 
B)  Supply increases while demand does not change. 
C)  Both supply and demand increase. 
D)  Both supply and demand decrease. 
E)  Neither supply nor demand changes.

Question 14

The demand curve is a relationship between the price of a good and the quantity consumers are willing to buy at that price.

Accepted Answer

A) True 
 B)False

Question 15

Market equilibrium is determined by

Accepted Answer

A)  the producers in the market. 
B)  the largest consumers in the market. 
C)  all producers and consumers together. 
D)  the consumers in the market. 
E)  the largest firms in the market. 
A)  the producers in the market. 
B)  the largest consumers in the market. 
C)  all producers and consumers together. 
D)  the consumers in the market. 
E)  the largest firms in the market.

Question 16

When there is a decrease in supply, all else held equal,

Accepted Answer

A)  equilibrium price falls, demand increases, and equilibrium quantity increases. 
B)  equilibrium price falls, demand does not change, and equilibrium quantity increases. 
C)  equilibrium price rises, quantity demanded decreases, and equilibrium quantity decreases. 
D)  equilibrium price falls, quantity demanded decreases, and equilibrium quantity decreases. 
E)  equilibrium price rises, demand does not change, and equilibrium quantity increases. 
A)  equilibrium price falls, demand increases, and equilibrium quantity increases. 
B)  equilibrium price falls, demand does not change, and equilibrium quantity increases. 
C)  equilibrium price rises, quantity demanded decreases, and equilibrium quantity decreases. 
D)  equilibrium price falls, quantity demanded decreases, and equilibrium quantity decreases. 
E)  equilibrium price rises, demand does not change, and equilibrium quantity increases.

Question 17

When economists say that the supply of a product has decreased, they mean that

Accepted Answer

A)  a greater quantity will be produced at any price. 
B)  the price is too high for equilibrium. 
C)  a smaller quantity will be produced at any price. 
D)  demand was too high for producers to make a profit. 
E)  the price is too low for equilibrium. 
A)  a greater quantity will be produced at any price. 
B)  the price is too high for equilibrium. 
C)  a smaller quantity will be produced at any price. 
D)  demand was too high for producers to make a profit. 
E)  the price is too low for equilibrium.

Question 18

What is the difference between a decrease in demand and a decrease in quantity demanded?

Accepted Answer

A decrease in demand is a shif

Question 19

Exhibit 3-4  
-In Exhibit 3-4, which of the following is the most likely reason for the shift of the demand curve from D1 to D2?

Accepted Answer

A)  An increase in the price of the good 
B)  A decrease in the price of the good 
C)  An increase in the number of consumers 
D)  An increase in the supply of the good 
E)  A decrease in the supply of the good 
A)  An increase in the price of the good 
B)  A decrease in the price of the good 
C)  An increase in the number of consumers 
D)  An increase in the supply of the good 
E)  A decrease in the supply of the good

Question 20

With a single supply and demand diagram, illustrate a shortage and a surplus. Carefully label the diagram.

Accepted Answer

The answer of With a single supply and demand diagram,...

Exam 3: The Supply and Demand Model

Draw a supply and demand diagram. Label the equilibrium price and equilibrium quantity as well as the axes and curves.

Which of the following statements is false?

A rightward shift of a supply curve represents an increase in supply.

In the case of a surplus,

Exhibit 3-3 -Refer to Exhibit 3-3. If the price is $27,

Exhibit 3-3 -Refer to Exhibit 3-3. A shortage of ____ units will result in a price of ____.

An increase in production costs shifts the supply curve leftward.

Suppose more firms enter the computer market. What will happen to demand, quantity demanded, supply, and quantity supplied as a result of this market change?

If quantity supplied is less than quantity demanded, then

Which of the following will not increase the demand for a good?

In which of the following statements are the terms demand, supply, quantity demanded, and/or quantity supplied used correctly?

If the equilibrium quantity decreases while the equilibrium price increases, which of the following is the most likely reason?

The demand curve is a relationship between the price of a good and the quantity consumers are willing to buy at that price.

Market equilibrium is determined by

When there is a decrease in supply, all else held equal,

When economists say that the supply of a product has decreased, they mean that

What is the difference between a decrease in demand and a decrease in quantity demanded?

Exhibit 3-4 -In Exhibit 3-4, which of the following is the most likely reason for the shift of the demand curve from D1 to D2?

With a single supply and demand diagram, illustrate a shortage and a surplus. Carefully label the diagram.

The Central Idea

Observing and Explaining the Economy

Subtleties of the Supply and Demand Model: Price Floors, Price Ceilings, and Elasticity

Macroeconomics: the Big Picture

Measuring the Production, Income, and Spending of Nations

The Spending Allocation Model

Unemployment and Employment

Productivity and Economic Growth

Money and Inflation

The Nature and Causes of Economic Fluctuations

Deriving the Formula for the Keynesian Multiplier and the Forward-Looking Consumption Model

The Economic Fluctuations Model

Using the Economic Fluctuations Model

Fiscal Policy

Monetary Policy

Capital and Financial Markets

Economic Growth and Globalization

International Trade

International Finance

Reading, Understanding, and Creating Graphs

the Miracle of Compound Growth

Present Discounted Value

Deriving the Growth Accounting Formula

Filters

Exhibit 3-3 -Refer to Exhibit 3-3. A shortage of units will result in a price of .

Exhibit 3-4 -In Exhibit 3-4, which of the following is the most likely reason for the shift of the demand curve from D₁ to D₂?