Question 1

Market demand is given as Qd = 80 - 2P. Market supply is given as Qs = 2P. What would result if the market price were $10?

Accepted Answer

A)  a shortage of 40 
B)  a surplus of 40 
C)  a surplus of 20 
D)  a shortage of 20 
A)  a shortage of 40 
B)  a surplus of 40 
C)  a surplus of 20 
D)  a shortage of 20 A

Question 2

What happens in a competitive market?

Accepted Answer

A)  There is only one seller of the product. 
B)  Each seller of the product is free to set the price of his product. 
C)  Each seller attempts to compete with other sellers, causing fewer sellers in the market. 
D)  There are so many buyers and sellers that each has a negligible impact on price. 
A)  There is only one seller of the product. 
B)  Each seller of the product is free to set the price of his product. 
C)  Each seller attempts to compete with other sellers, causing fewer sellers in the market. 
D)  There are so many buyers and sellers that each has a negligible impact on price. D

Question 3

What is the relationship between price and quantity supplied?

Accepted Answer

A)  negative, or inverse 
B)  positive, or direct 
C)  nonexistent 
D)  the same as the relationship between price and quantity demanded 
A)  negative, or inverse 
B)  positive, or direct 
C)  nonexistent 
D)  the same as the relationship between price and quantity demanded B

Question 4

Surpluses drive price up while shortages drive price down.

Accepted Answer

A) True 
 B)False

Question 5

When we move up or down a given demand curve, what is held constant?

Accepted Answer

A)  Only price is held constant. 
B)  Income and the price of the good are held constant. 
C)  All nonprice determinants of demand are assumed to be constant. 
D)  All determinants of quantity demanded are held constant. 
A)  Only price is held constant. 
B)  Income and the price of the good are held constant. 
C)  All nonprice determinants of demand are assumed to be constant. 
D)  All determinants of quantity demanded are held constant.

Question 6

What would happen to the equilibrium price and quantity of golf club memberships if the price of landscaping and grass maintenance fell, the price of golf clubs fell, more golf courses decided to offer memberships, and health officials announced that playing golf was good for you?

Accepted Answer

A)  price will fall and the effect on quantity is ambiguous 
B)  price will rise and the effect on quantity is ambiguous 
C)  quantity will fall and the effect on price is ambiguous 
D)  quantity will rise and the effect on price is ambiguous 
A)  price will fall and the effect on quantity is ambiguous 
B)  price will rise and the effect on quantity is ambiguous 
C)  quantity will fall and the effect on price is ambiguous 
D)  quantity will rise and the effect on price is ambiguous

Question 7

Figure 4-5  
-Refer to the Figure 4-5. Which of the four graphs shown illustrates a decrease in quantity supplied?

Accepted Answer

A)  graph A 
B)  graph B 
C)  graph C 
D)  graph D 
A)  graph A 
B)  graph B 
C)  graph C 
D)  graph D

Question 8

Market demand is given as Qd =150 - 3P. Market supply is given as Qs = 2P. What would result if the market price were $25?

Accepted Answer

A)  a shortage of 25 
B)  a surplus of 25 
C)  a surplus of 70 
D)  a shortage of 70 
A)  a shortage of 25 
B)  a surplus of 25 
C)  a surplus of 70 
D)  a shortage of 70

Question 9

Figure 4-6  
-Refer to the Figure 4-6. What is the shift from D1 to D called?

Accepted Answer

A)  an increase in demand 
B)  a decrease in demand 
C)  a decrease in quantity demanded 
D)  an increase in quantity demanded 
A)  an increase in demand 
B)  a decrease in demand 
C)  a decrease in quantity demanded 
D)  an increase in quantity demanded

Question 10

Figure 4-2  
-Refer to the Figure 4-2. What are the equilibrium price and quantity?

Accepted Answer

A)  $15 and 200 
B)  $15 and 600 
C)  $25 and 400 
D)  $35 and 200 
A)  $15 and 200 
B)  $15 and 600 
C)  $25 and 400 
D)  $35 and 200

Question 11

Which of the following would be most likely to increase the price of a new house?

Accepted Answer

A)  higher wages for carpenters, higher wood prices, increases in consumer incomes, higher apartment rents, increases in population, and expectations of higher house prices in the future 
B)  lower wages for carpenters, lower wood prices, increases in consumer incomes, higher apartment rents, increases in population, and expectations of higher house prices in the future 
C)  lower wages for carpenters, higher wood prices, decreases in consumer incomes, higher apartment rents, decreases in population, and expectations of higher house prices in the future 
D)  lower wages for carpenters, lower wood prices, decreases in consumer incomes, lower apartment rents, decreases in population, and expectations of lower house prices in the future 
A)  higher wages for carpenters, higher wood prices, increases in consumer incomes, higher apartment rents, increases in population, and expectations of higher house prices in the future 
B)  lower wages for carpenters, lower wood prices, increases in consumer incomes, higher apartment rents, increases in population, and expectations of higher house prices in the future 
C)  lower wages for carpenters, higher wood prices, decreases in consumer incomes, higher apartment rents, decreases in population, and expectations of higher house prices in the future 
D)  lower wages for carpenters, lower wood prices, decreases in consumer incomes, lower apartment rents, decreases in population, and expectations of lower house prices in the future

Question 12

In a perfectly competitive market, buyers and sellers are price setters.

Accepted Answer

A) True 
 B)False

Question 13

Sophie's Doll House sells its most popular doll for $25. It has just learned that its leading competitor is mass producing an excellent copy and plans to flood the market with their $10 doll in six weeks. What should Sophie's Doll House do?

Accepted Answer

A)  increase the supply of their doll now before the other doll hits the market 
B)  fight fire with fire and decrease supply for six weeks, then increase the supply of its doll too 
C)  continue business as usual, since consumers will not buy the cheaper imitation 
D)  discontinue their doll 
A)  increase the supply of their doll now before the other doll hits the market 
B)  fight fire with fire and decrease supply for six weeks, then increase the supply of its doll too 
C)  continue business as usual, since consumers will not buy the cheaper imitation 
D)  discontinue their doll

Question 14

Market demand is given as Qd = 80 - P. Market supply is given as Qs = 3P. In a perfectly competitive equilibrium, what will be price and quantity traded in the market?

Accepted Answer

A)  price will be $15 and quantity will be 45 
B)  price will be $20 and quantity will be 60 
C)  price will be $40 and quantity will be 20 
D)  price will be $45 and quantity will be 15 
A)  price will be $15 and quantity will be 45 
B)  price will be $20 and quantity will be 60 
C)  price will be $40 and quantity will be 20 
D)  price will be $45 and quantity will be 15

Question 15

Why does market price prevail in a perfectly competitive market?

Accepted Answer

A)  because there are few sellers 
B)  because the market is unregulated 
C)  because there are distinctive products 
D)  because no one has market power 
A)  because there are few sellers 
B)  because the market is unregulated 
C)  because there are distinctive products 
D)  because no one has market power

Question 16

Market demand is given as Qd = 95- P. Market supply is given as Qs = 3P + 15. What would result if the market price were $25?

Accepted Answer

A)  a shortage of 20 
B)  a surplus of 20 
C)  a surplus of 40 
D)  a shortage of 40 
A)  a shortage of 20 
B)  a surplus of 20 
C)  a surplus of 40 
D)  a shortage of 40

Question 17

Holding the other determinants of supply constant, what would a change in price do?

Accepted Answer

A)  result in a change in supply 
B)  have no effect on the quantity supplied 
C)  result in a shift of demand 
D)  result in a movement along a stable supply curve 
A)  result in a change in supply 
B)  have no effect on the quantity supplied 
C)  result in a shift of demand 
D)  result in a movement along a stable supply curve

Question 18

Figure 4-1  
-Refer to the Figure 4-1. What could cause the movement from S to S1?

Accepted Answer

A)  a decrease in the price of the good 
B)  an improvement in technology 
C)  an increase in income 
D)  an increase in input prices 
A)  a decrease in the price of the good 
B)  an improvement in technology 
C)  an increase in income 
D)  an increase in input prices

Question 19

Quantity demanded is equal to quantity supplied, at the equilibrium price.

Accepted Answer

A) True 
 B)False

Question 20

If a seller in a competitive market chooses to charge more than the market price, what would happen?

Accepted Answer

A)  Buyers would tend to buy more from this seller. 
B)  The owners of the raw materials used in production would raise the prices for the raw materials. 
C)  Other sellers would also raise their prices. 
D)  Buyers will tend to make purchases from other sellers. 
A)  Buyers would tend to buy more from this seller. 
B)  The owners of the raw materials used in production would raise the prices for the raw materials. 
C)  Other sellers would also raise their prices. 
D)  Buyers will tend to make purchases from other sellers.

Market demand is given as Qd = 80 - 2P. Market supply is given as Qs = 2P. What would result if the market price were $10?

What happens in a competitive market?

What is the relationship between price and quantity supplied?

Surpluses drive price up while shortages drive price down.

When we move up or down a given demand curve, what is held constant?

What would happen to the equilibrium price and quantity of golf club memberships if the price of landscaping and grass maintenance fell, the price of golf clubs fell, more golf courses decided to offer memberships, and health officials announced that playing golf was good for you?

Figure 4-5 -Refer to the Figure 4-5. Which of the four graphs shown illustrates a decrease in quantity supplied?

Market demand is given as Qd =150 - 3P. Market supply is given as Qs = 2P. What would result if the market price were $25?

Figure 4-6 -Refer to the Figure 4-6. What is the shift from D1 to D called?

Figure 4-2 -Refer to the Figure 4-2. What are the equilibrium price and quantity?

Which of the following would be most likely to increase the price of a new house?

In a perfectly competitive market, buyers and sellers are price setters.

Sophie's Doll House sells its most popular doll for $25. It has just learned that its leading competitor is mass producing an excellent copy and plans to flood the market with their $10 doll in six weeks. What should Sophie's Doll House do?

Market demand is given as Qd = 80 - P. Market supply is given as Qs = 3P. In a perfectly competitive equilibrium, what will be price and quantity traded in the market?

Why does market price prevail in a perfectly competitive market?

Market demand is given as Qd = 95- P. Market supply is given as Qs = 3P + 15. What would result if the market price were $25?

Holding the other determinants of supply constant, what would a change in price do?

Figure 4-1 -Refer to the Figure 4-1. What could cause the movement from S to S1?

Quantity demanded is equal to quantity supplied, at the equilibrium price.

If a seller in a competitive market chooses to charge more than the market price, what would happen?

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

Unemployment and Its Natural Rate

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Small Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary Policy on Aggregate Demand

The Influence of Fiscal Policy on Aggregate Demand

The Short-Run Tradeoff Between Inflation and Unemployment

Five Debates Over Macroeconomic Policy

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Exam 4: The Market Forces of Supply and Demand

Market demand is given as Qd = 80 - 2P. Market supply is given as Qs = 2P. What would result if the market price were $10?

What happens in a competitive market?

What is the relationship between price and quantity supplied?

Surpluses drive price up while shortages drive price down.

When we move up or down a given demand curve, what is held constant?

What would happen to the equilibrium price and quantity of golf club memberships if the price of landscaping and grass maintenance fell, the price of golf clubs fell, more golf courses decided to offer memberships, and health officials announced that playing golf was good for you?

Figure 4-5 -Refer to the Figure 4-5. Which of the four graphs shown illustrates a decrease in quantity supplied?

Market demand is given as Qd =150 - 3P. Market supply is given as Qs = 2P. What would result if the market price were $25?

Figure 4-6 -Refer to the Figure 4-6. What is the shift from D1 to D called?

Figure 4-2 -Refer to the Figure 4-2. What are the equilibrium price and quantity?

Which of the following would be most likely to increase the price of a new house?

In a perfectly competitive market, buyers and sellers are price setters.

Sophie's Doll House sells its most popular doll for $25. It has just learned that its leading competitor is mass producing an excellent copy and plans to flood the market with their $10 doll in six weeks. What should Sophie's Doll House do?

Market demand is given as Qd = 80 - P. Market supply is given as Qs = 3P. In a perfectly competitive equilibrium, what will be price and quantity traded in the market?

Why does market price prevail in a perfectly competitive market?

Market demand is given as Qd = 95- P. Market supply is given as Qs = 3P + 15. What would result if the market price were $25?

Holding the other determinants of supply constant, what would a change in price do?

Figure 4-1 -Refer to the Figure 4-1. What could cause the movement from S to S1?

Quantity demanded is equal to quantity supplied, at the equilibrium price.

If a seller in a competitive market chooses to charge more than the market price, what would happen?

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

Unemployment and Its Natural Rate

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Small Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary Policy on Aggregate Demand

The Influence of Fiscal Policy on Aggregate Demand

The Short-Run Tradeoff Between Inflation and Unemployment

Five Debates Over Macroeconomic Policy

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