Question 1

Explain why a relative price is an opportunity cost.

Accepted Answer

A relative price is the ratio of the pri

Question 2

-In the above figure, if the demand curve is D2, then

Accepted Answer

A)  an increase in price will shift the demand curve to D3. 
B)  there will be a shortage equal to Q2 - Q1. 
C)  the equilibrium price will be P1 and the equilibrium quantity will be Q1. 
D)  the equilibrium price will be P1 and the equilibrium quantity will be Q2. 
A)  an increase in price will shift the demand curve to D3. 
B)  there will be a shortage equal to Q2 - Q1. 
C)  the equilibrium price will be P1 and the equilibrium quantity will be Q1. 
D)  the equilibrium price will be P1 and the equilibrium quantity will be Q2.

Question 3

To say that ʺsupply increasesʺ for any reason, means there is a

Accepted Answer

A)  shift leftward in the supply curve. 
B)  movement rightward along a supply curve. 
C)  shift rightward in the supply curve. 
D)  movement leftward along a supply curve. 
A)  shift leftward in the supply curve. 
B)  movement rightward along a supply curve. 
C)  shift rightward in the supply curve. 
D)  movement leftward along a supply curve.

Question 4

When the price of a pizza decreases from $12 to $10, it is definitely the case that the

Accepted Answer

A)  substitution effect means people buy more pizza. 
B)  quantity demanded of pizza will not change. 
C)  income effect means people buy less pizza. 
D)  None of the above answers is correct. 
A)  substitution effect means people buy more pizza. 
B)  quantity demanded of pizza will not change. 
C)  income effect means people buy less pizza. 
D)  None of the above answers is correct.

Question 5

Wages for workers producing iPods and similar products will rise next year. Walkman Watch asks you to predict the effect of this change in next yearʹs market for iPods. You predict that the major effect will be that the

Accepted Answer

A)  demand curve for an iPod will shift rightward. 
B)  supply curve for an iPod will shift rightward. 
C)  supply curve for an iPod will shift leftward. 
D)  demand curve for an iPod will shift leftward. 
A)  demand curve for an iPod will shift rightward. 
B)  supply curve for an iPod will shift rightward. 
C)  supply curve for an iPod will shift leftward. 
D)  demand curve for an iPod will shift leftward.

Question 6

In a supply and demand figure, the equilibrium price and quantity are found at the

Accepted Answer

A)  vertical intercept of the supply curve. 
B)  horizontal intercept of the demand curve. 
C)  horizontal intercept of the supply and the demand curves. 
D)  point where quantity supplied equals quantity demanded. 
A)  vertical intercept of the supply curve. 
B)  horizontal intercept of the demand curve. 
C)  horizontal intercept of the supply and the demand curves. 
D)  point where quantity supplied equals quantity demanded.

Question 7

-The above figures show the market for hamburger meat. Which figure shows the effect of a decrease in the price of a substitute like hot dogs?

Accepted Answer

A)  Figure A 
B)  Figure B 
C)  Figure C 
D)  Figure D 
A)  Figure A 
B)  Figure B 
C)  Figure C 
D)  Figure D

Question 8

In a market, at the equilibrium price,

Accepted Answer

A)  neither buyers nor sellers can do business at a better price. 
B)  buyers are paying the minimum price they are willing to pay for any amount of output and sellers are charging the maximum price they are willing to charge for any amount of production. 
C)  buyers are willing to pay a higher price, but sellers do not ask for a higher price. 
D)  None of the above is true. 
A)  neither buyers nor sellers can do business at a better price. 
B)  buyers are paying the minimum price they are willing to pay for any amount of output and sellers are charging the maximum price they are willing to charge for any amount of production. 
C)  buyers are willing to pay a higher price, but sellers do not ask for a higher price. 
D)  None of the above is true.

Question 9

In the market for oranges, the demand and supply of oranges decrease by the same amount. The equilibrium quantity will __________and the equilibrium price will __________.

Accepted Answer

A)  decrease; not change 
B)  remain the same; rise 
C)  remain the same; either rise or fall 
D)  decrease; fall 
A)  decrease; not change 
B)  remain the same; rise 
C)  remain the same; either rise or fall 
D)  decrease; fall

Question 10

During the last decade, the price of a computer fell every year and the quantity sold increased every year. This experience suggests that the

Accepted Answer

A)  ʺlaw of supplyʺ was definitely contradicted. 
B)  demand curve shifted rightward. 
C)  supply curve shifted rightward. 
D)  ʺlaw of demandʺ was definitely contradicted. 
A)  ʺlaw of supplyʺ was definitely contradicted. 
B)  demand curve shifted rightward. 
C)  supply curve shifted rightward. 
D)  ʺlaw of demandʺ was definitely contradicted.

Question 11

Cupcakes and granola bars are substitutes in consumption. The price of a granola bar increases so the demand for

Accepted Answer

A)  granola bars will decrease, that is, the demand curve will shift leftward. 
B)  granola bars will increase, that is, the demand curve will shift rightward. 
C)  cupcakes will decrease, that is, the demand curve will shift leftward. 
D)  cupcakes will increase, that is, the demand curve will shift rightward. 
A)  granola bars will decrease, that is, the demand curve will shift leftward. 
B)  granola bars will increase, that is, the demand curve will shift rightward. 
C)  cupcakes will decrease, that is, the demand curve will shift leftward. 
D)  cupcakes will increase, that is, the demand curve will shift rightward.

Question 12

What is the effect on the price and quantity of wooden desks of a rise in the price of wood?

Accepted Answer

A)  The equilibrium quantity of wooden desks decreases and the equilibrium price falls. 
B)  The equilibrium quantity of wooden desks decreases and the equilibrium price rises. 
C)  The equilibrium quantity of wooden desks increases and the equilibrium price falls. 
D)  The equilibrium quantity of wooden desks increases and the equilibrium price rises. 
A)  The equilibrium quantity of wooden desks decreases and the equilibrium price falls. 
B)  The equilibrium quantity of wooden desks decreases and the equilibrium price rises. 
C)  The equilibrium quantity of wooden desks increases and the equilibrium price falls. 
D)  The equilibrium quantity of wooden desks increases and the equilibrium price rises.

Question 13

A bakery can produce either cakes or cookies. If the price of cookies rises, then

Accepted Answer

A)  the supply curve of cake shifts leftward. 
B)  there is a movement downward along the supply curve of cakes. 
C)  the supply curve of cake shifts rightward. 
D)  there is a movement upward along the supply curve of cakes. 
A)  the supply curve of cake shifts leftward. 
B)  there is a movement downward along the supply curve of cakes. 
C)  the supply curve of cake shifts rightward. 
D)  there is a movement upward along the supply curve of cakes.

Question 14

A surplus occurs when the price is

Accepted Answer

A)  equal to the equilibrium price. 
B)  less than the equilibrium price. 
C)  greater than the equilibrium price. 
D)  None of the above because the existence of a surplus is independent of the price of the good. 
A)  equal to the equilibrium price. 
B)  less than the equilibrium price. 
C)  greater than the equilibrium price. 
D)  None of the above because the existence of a surplus is independent of the price of the good.

Question 15

Consumersʹ income declines and, as a result, the demand for margarine increases. Is margarine a normal or an inferior good? Explain.

Accepted Answer

Margarine is an inferior good.

Question 16

-In the figure above, a decrease in the quantity of oil supplied but NOT a decrease in the supply of oil is shown by a movement from

Accepted Answer

A)  point a to point c. 
B)  point a to point b. 
C)  point a to point d. 
D)  point a to point e. 
A)  point a to point c. 
B)  point a to point b. 
C)  point a to point d. 
D)  point a to point e.

Question 17

When does a surplus occur?

Accepted Answer

A surplus occurs when the pric

Question 18

At a price of $4 in the above figure,

Accepted Answer

A)  there is a shortage of 200 units. 
B)  the quantity supplied is 400 units. 
C)  there is a surplus of 200 units. 
D)  the equilibrium quantity is 400 units. 
A)  there is a shortage of 200 units. 
B)  the quantity supplied is 400 units. 
C)  there is a surplus of 200 units. 
D)  the equilibrium quantity is 400 units.

Question 19

What is the difference between a money price and a relative price? When the demand and supply model predicts that the price of coffee will rise, is the model predicting that the money price rises or the relative price rises?

Accepted Answer

The money price of a good is the number

Question 20

All grapefruit juice producers have decided to blend tangerine juice with the grapefruit juice. This blend results in a higher cost of production, but studies show that consumers prefer the taste of the blend to straight grapefruit juice. What will happen to the equilibrium price and quantity of the new ʺblendedʺ grapefruit juice now that it costs more to produce but consumers like it better?

Accepted Answer

A)  The price rises, but the effect on the quantity is uncertain. 
B)  The price falls and the quantity increases. 
C)  The price rises and the quantity increases. 
D)  The effect on the price is uncertain but the quantity increases. 
A)  The price rises, but the effect on the quantity is uncertain. 
B)  The price falls and the quantity increases. 
C)  The price rises and the quantity increases. 
D)  The effect on the price is uncertain but the quantity increases.

Explain why a relative price is an opportunity cost.

-In the above figure, if the demand curve is D₂, then

To say that ʺsupply increasesʺ for any reason, means there is a

When the price of a pizza decreases from $12 to $10, it is definitely the case that the

Wages for workers producing iPods and similar products will rise next year. Walkman Watch asks you to predict the effect of this change in next yearʹs market for iPods. You predict that the major effect will be that the

In a supply and demand figure, the equilibrium price and quantity are found at the

-The above figures show the market for hamburger meat. Which figure shows the effect of a decrease in the price of a substitute like hot dogs?

In a market, at the equilibrium price,

In the market for oranges, the demand and supply of oranges decrease by the same amount. The equilibrium quantity will and the equilibrium price will .

During the last decade, the price of a computer fell every year and the quantity sold increased every year. This experience suggests that the

Cupcakes and granola bars are substitutes in consumption. The price of a granola bar increases so the demand for

What is the effect on the price and quantity of wooden desks of a rise in the price of wood?

A bakery can produce either cakes or cookies. If the price of cookies rises, then

A surplus occurs when the price is

Consumersʹ income declines and, as a result, the demand for margarine increases. Is margarine a normal or an inferior good? Explain.

-In the figure above, a decrease in the quantity of oil supplied but NOT a decrease in the supply of oil is shown by a movement from

When does a surplus occur?

At a price of $4 in the above figure,

What is the difference between a money price and a relative price? When the demand and supply model predicts that the price of coffee will rise, is the model predicting that the money price rises or the relative price rises?

What Is Economics

The Economic Problem

Measuring Gdp and Economic Growth

Monitoring Jobs and Inflation

Economic Growth

Finance, Saving, and Investment

Money, the Price Level, and Inflation

The Exchange Rate and the Balance of Payments

Aggregate Supply and Aggregate Demand

Expenditure Multipliers: the Keynesian Model

U.S Inflation, Unemployment, and Business Cycle

Fiscal Policy

Monetary Policy

International Trade Policy

Review

Filters

Exam 3: Demand and Supply

Explain why a relative price is an opportunity cost.

-In the above figure, if the demand curve is D2, then

To say that ʺsupply increasesʺ for any reason, means there is a

When the price of a pizza decreases from $12 to $10, it is definitely the case that the

Wages for workers producing iPods and similar products will rise next year. Walkman Watch asks you to predict the effect of this change in next yearʹs market for iPods. You predict that the major effect will be that the

In a supply and demand figure, the equilibrium price and quantity are found at the

-The above figures show the market for hamburger meat. Which figure shows the effect of a decrease in the price of a substitute like hot dogs?

In a market, at the equilibrium price,

In the market for oranges, the demand and supply of oranges decrease by the same amount. The equilibrium quantity will __________and the equilibrium price will __________.

During the last decade, the price of a computer fell every year and the quantity sold increased every year. This experience suggests that the

Cupcakes and granola bars are substitutes in consumption. The price of a granola bar increases so the demand for

What is the effect on the price and quantity of wooden desks of a rise in the price of wood?

A bakery can produce either cakes or cookies. If the price of cookies rises, then

A surplus occurs when the price is

Consumersʹ income declines and, as a result, the demand for margarine increases. Is margarine a normal or an inferior good? Explain.

-In the figure above, a decrease in the quantity of oil supplied but NOT a decrease in the supply of oil is shown by a movement from

When does a surplus occur?

At a price of $4 in the above figure,

What is the difference between a money price and a relative price? When the demand and supply model predicts that the price of coffee will rise, is the model predicting that the money price rises or the relative price rises?

What Is Economics

The Economic Problem

Measuring Gdp and Economic Growth

Monitoring Jobs and Inflation

Economic Growth

Finance, Saving, and Investment

Money, the Price Level, and Inflation

The Exchange Rate and the Balance of Payments

Aggregate Supply and Aggregate Demand

Expenditure Multipliers: the Keynesian Model

U.S Inflation, Unemployment, and Business Cycle

Fiscal Policy

Monetary Policy

International Trade Policy

Review

Filters

-In the above figure, if the demand curve is D₂, then

In the market for oranges, the demand and supply of oranges decrease by the same amount. The equilibrium quantity will and the equilibrium price will .