Question 1

Why does supply slope upward?

Accepted Answer

As more of a good is produced, per-unit cost increases. Therefore, price must rise for producers to be willing to produce more and there is a positive relationship between price and quantity supplied.

Question 2

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  True

Question 3

As a result of an increase in supply, ceteris paribus, the equilibrium price decreases and the equilibrium quantity increases.

Accepted Answer

A) True 
 B)False  True

Question 4

All else being equal, if there is a change in the price of a good, then the supply of that good will change.

Accepted Answer

A) True 
 B)False

Question 5

As a result of an increase in both supply and demand, the equilibrium price decreases while the equilibrium quantity increases.

Accepted Answer

A) True 
 B)False

Question 6

An increase in production due to better technology is represented by a movement along the supply curve.

Accepted Answer

A) True 
 B)False

Question 7

The term quantity supplied refers to

Accepted Answer

A) the minimum quantity producers must sell in order to stay in business. 
B) the quantity where the supply and demand curves cross. 
C) a supply schedule. 
D) the entire supply curve. 
E) the amount of a good producers are willing to sell at a given price. 
A) the minimum quantity producers must sell in order to stay in business. 
B) the quantity where the supply and demand curves cross. 
C) a supply schedule. 
D) the entire supply curve. 
E) the amount of a good producers are willing to sell at a given price.

Question 8

Other things being equal, the quantity supplied decreases as price increases.

Accepted Answer

A) True 
 B)False

Question 9

Economists use the term supply to refer to

Accepted Answer

A) the upward-sloping line that relates consumer expenditures to different output levels. 
B) the downward-sloping line that relates consumer expenditures to different output levels. 
C) a set of price and quantity supplied combinations, everything else held equal. 
D) the amount producers are willing but not able to produce at each price. 
E) a particular quantity supplied at a specific price. 
A) the upward-sloping line that relates consumer expenditures to different output levels. 
B) the downward-sloping line that relates consumer expenditures to different output levels. 
C) a set of price and quantity supplied combinations, everything else held equal. 
D) the amount producers are willing but not able to produce at each price. 
E) a particular quantity supplied at a specific price.

Question 10

The slope of a demand curve can be positive, negative, or zero.

Accepted Answer

A) True 
 B)False

Question 11

Exhibit 3-4  
-Refer to Exhibit 3-4. If S1 and D1 are the original supply and demand curves and they shift to S2 and D2, respectively, then the new equilibrium price and quantity will be

Accepted Answer

A) P2 and Q4. 
B) P4 and Q2. 
C) P1 and Q3. 
D) P3 and Q1. 
E) P4 and Q1. 
A) P2 and Q4. 
B) P4 and Q2. 
C) P1 and Q3. 
D) P3 and Q1. 
E) P4 and Q1.

Question 12

If the price of a product decreases, then the demand curve shifts to the right.

Accepted Answer

A) True 
 B)False

Question 13

Exhibit 3-1  
-Consider the market described by the schedule in Exhibit 3-1. Which of the following is true?

Accepted Answer

A) The law of supply is violated. 
B) There is no equilibrium. 
C) At $5 per unit, people will purchase 100 units. 
D) At $2 per unit, people will purchase 700 units. 
E) The law of demand is violated. 
A) The law of supply is violated. 
B) There is no equilibrium. 
C) At $5 per unit, people will purchase 100 units. 
D) At $2 per unit, people will purchase 700 units. 
E) The law of demand is violated.

Question 14

Suppose the price of beer fall in your city while police officers more strictly enforce the no drink-and-drive policy. Which of the following is the best explanation?

Accepted Answer

The best explanation is (B) be

Question 15

For each of the following four sentences, determine whether the terminology of the supply and demand model is used correctly.

Accepted Answer

Statement (A) is not correct because hig

Question 16

Which of the following causes a movement along the supply curve for a product?

Accepted Answer

A) An increase in the production cost 
B) An increase in the number of sellers 
C) An expectation of a higher future price 
D) An increase in the tax on production 
E) An increase in the price of that product 
A) An increase in the production cost 
B) An increase in the number of sellers 
C) An expectation of a higher future price 
D) An increase in the tax on production 
E) An increase in the price of that product

Question 17

The demand curve for apples is downward-sloping because

Accepted Answer

A) when fewer apples are produced, the money in people's apple budgets does not have to stretch as far. 
B) there must have been an apple blight, so there must be fewer apples to buy. 
C) when apple prices rise, the price of other goods must also be rising, so people cannot afford to buy as much. 
D) at higher apple prices, people will seek other, relatively cheaper alternatives, like pears, oranges, or plums. 
E) at higher prices, apples are more expensive to produce, so fewer are grown. 
A) when fewer apples are produced, the money in people's apple budgets does not have to stretch as far. 
B) there must have been an apple blight, so there must be fewer apples to buy. 
C) when apple prices rise, the price of other goods must also be rising, so people cannot afford to buy as much. 
D) at higher apple prices, people will seek other, relatively cheaper alternatives, like pears, oranges, or plums. 
E) at higher prices, apples are more expensive to produce, so fewer are grown.

Question 18

A price at which quantity demanded equals quantity supplied

Accepted Answer

A) will cause a shortage or surplus. 
B) is an equilibrium price. 
C) is affordable by all consumers in the economy. 
D) is below the equilibrium price. 
E) is above the equilibrium price. 
A) will cause a shortage or surplus. 
B) is an equilibrium price. 
C) is affordable by all consumers in the economy. 
D) is below the equilibrium price. 
E) is above the equilibrium price.

Question 19

Coffee and tea are substitutes so that if the price of tea increases, the

Accepted Answer

A) quantity demanded for coffee increases. 
B) quantity demanded for coffee decreases. 
C) demand for coffee increases. 
D) demand for coffee decreases. 
E) demand for coffee remains the same. 
A) quantity demanded for coffee increases. 
B) quantity demanded for coffee decreases. 
C) demand for coffee increases. 
D) demand for coffee decreases. 
E) demand for coffee remains the same.

Question 20

Market equilibrium predicts all the following except the

Accepted Answer

A) price for which quantity is supplied. 
B) price for which quantity is demanded. 
C) quantity bought. 
D) quantity sold. 
E) amount of consumer income. 
A) price for which quantity is supplied. 
B) price for which quantity is demanded. 
C) quantity bought. 
D) quantity sold. 
E) amount of consumer income.

Exam 3: The Supply and Demand Model

Why does supply slope upward?

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

As a result of an increase in supply, ceteris paribus, the equilibrium price decreases and the equilibrium quantity increases.

All else being equal, if there is a change in the price of a good, then the supply of that good will change.

As a result of an increase in both supply and demand, the equilibrium price decreases while the equilibrium quantity increases.

An increase in production due to better technology is represented by a movement along the supply curve.

The term quantity supplied refers to

Other things being equal, the quantity supplied decreases as price increases.

Economists use the term supply to refer to

The slope of a demand curve can be positive, negative, or zero.

Exhibit 3-4 -Refer to Exhibit 3-4. If S1 and D1 are the original supply and demand curves and they shift to S2 and D2, respectively, then the new equilibrium price and quantity will be

If the price of a product decreases, then the demand curve shifts to the right.

Exhibit 3-1 -Consider the market described by the schedule in Exhibit 3-1. Which of the following is true?

Suppose the price of beer fall in your city while police officers more strictly enforce the no drink-and-drive policy. Which of the following is the best explanation?

For each of the following four sentences, determine whether the terminology of the supply and demand model is used correctly.

Which of the following causes a movement along the supply curve for a product?

The demand curve for apples is downward-sloping because

A price at which quantity demanded equals quantity supplied

Coffee and tea are substitutes so that if the price of tea increases, the

Market equilibrium predicts all the following except the

The Central Idea

Observing and Explaining the Economy

Subtleties of the Supply and Demand Model

The Demand Curve and the Behavior of Consumers

The Supply Curve and the Behavior of Firms

The Efficiency of Markets

Costs and the Changes at Firms Over Time

The Rise and Fall of Industries

Monopoly

Product Differentiation, Monopolistic Competition, and Oligopoly

Antitrust Policy and Regulation

Labor Markets

Taxes, Transfers, and Income Distribution

Public Goods, Externalities, and Government Behavior

Capital and Financial Markets

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

The Economic Fluctuations Model

Using the Economic Fluctuations Model

Fiscal Policy

Monetary Policy

Economic Growth Around the World

International Trade

International Finance

Filters

Exhibit 3-4 -Refer to Exhibit 3-4. If S₁ and D₁ are the original supply and demand curves and they shift to S₂ and D₂, respectively, then the new equilibrium price and quantity will be