Question 1

Figure 4-4  
-Assume that Figure 4-4 shows demand for soda.A decrease in the price of apple juice will change demand from

Accepted Answer

A)  D1 to D2. 
B)  D2 to D1. 
C)  D2 to D3. 
D)  D1 to D3. 
A)  D1 to D2. 
B)  D2 to D1. 
C)  D2 to D3. 
D)  D1 to D3.

Question 2

Drawing the supply curve and the demand curve on the same graph helps show how price is determined.

Accepted Answer

A) True 
 B)False

Question 3

A decrease in supply will have what effect on equilibrium price and quantity?

Accepted Answer

A)  Price will increase; quantity will decrease. 
B)  Price will decrease; quantity will increase. 
C)  Both price and quantity will increase. 
D)  Both price and quantity will decrease. 
A)  Price will increase; quantity will decrease. 
B)  Price will decrease; quantity will increase. 
C)  Both price and quantity will increase. 
D)  Both price and quantity will decrease.

Question 4

The more firms that are attracted to an industry,the greater will be the quantity of product supplied at any given price.

Accepted Answer

A) True 
 B)False

Question 5

Regulations are sometimes used to "correct" the failures of a market mechanism.

Accepted Answer

A) True 
 B)False

Question 6

​Imagine that the state legislature raises the tax on gasoline by 10 cents/gallon.What most likely happens next?

Accepted Answer

A)  ​Service station operators pass along the tax to you,adding the 10 cents to the price of a gallon of gas. 
B)  ​Service station operators grumble,but pay the tax without passing the cost along to you. 
C)  ​Service station operators pass along as much of the tax to you as they can,probably about 6 cents/gallon. 
D)  ​None of these choices. 
A)  ​Service station operators pass along the tax to you,adding the 10 cents to the price of a gallon of gas. 
B)  ​Service station operators grumble,but pay the tax without passing the cost along to you. 
C)  ​Service station operators pass along as much of the tax to you as they can,probably about 6 cents/gallon. 
D)  ​None of these choices.

Question 7

In relation to prices that would prevail in an uncontrolled market,prices charged by a black market are usually

Accepted Answer

A)  lower,since it is hard for the sellers to locate buyers. 
B)  lower,since it is hard for the buyers to locate sellers. 
C)  higher,since black marketers expect compensation for the risk of being caught. 
D)  higher,since most people enjoy goods more if they are illegal. 
A)  lower,since it is hard for the sellers to locate buyers. 
B)  lower,since it is hard for the buyers to locate sellers. 
C)  higher,since black marketers expect compensation for the risk of being caught. 
D)  higher,since most people enjoy goods more if they are illegal.

Question 8

Why do price ceilings tend to cause persistent imbalances in the market?

Accepted Answer

A)  Quantity demanded exceeds quantity supplied but price cannot rise to remove the shortage. 
B)  Quantity demanded exceeds quantity supplied but price cannot fall to remove the surplus. 
C)  Quantity supplied exceeds quantity demanded but price cannot rise to remove the shortage. 
D)  Quantity supplied exceeds quantity demanded but price cannot fall to remove the surplus. 
A)  Quantity demanded exceeds quantity supplied but price cannot rise to remove the shortage. 
B)  Quantity demanded exceeds quantity supplied but price cannot fall to remove the surplus. 
C)  Quantity supplied exceeds quantity demanded but price cannot rise to remove the shortage. 
D)  Quantity supplied exceeds quantity demanded but price cannot fall to remove the surplus.

Question 9

The supply curve shows

Accepted Answer

A)  the same basic information as the demand curve. 
B)  who will have an opportunity to produce or purchase an item. 
C)  the quantity produced as a function of the price. 
D)  plots of what quantities have been sold over the past few weeks or months. 
A)  the same basic information as the demand curve. 
B)  who will have an opportunity to produce or purchase an item. 
C)  the quantity produced as a function of the price. 
D)  plots of what quantities have been sold over the past few weeks or months.

Question 10

From 2007 to 2008,the Federal Reserve System reduced interest rates,the price that borrowers pay.As a result,economists expected that the supply of money would

Accepted Answer

A)  increase. 
B)  decrease. 
C)  not change. 
D)  Uncertain-economic theory has no answer to this question. 
A)  increase. 
B)  decrease. 
C)  not change. 
D)  Uncertain-economic theory has no answer to this question.

Question 11

Figure 4-16  
-In Figure 4-16,an increase in the number of producers will shift supply from

Accepted Answer

A)  S1 to S2. 
B)  S2 to S1. 
C)  S3 to S2. 
D)  S3 to S1. 
A)  S1 to S2. 
B)  S2 to S1. 
C)  S3 to S2. 
D)  S3 to S1.

Question 12

The demand for home computers has increased,yet the price has fallen.Explain this apparent paradox.

Accepted Answer

Supply has increased by more than demand

Question 13

If the demand curve shifts outward and the supply curve remains the same,price will fall.

Accepted Answer

A) True 
 B)False

Question 14

Figure 4-21  
-A surplus will tend to occur at which price in Figure 4-21?

Accepted Answer

A)  P1 
B)  P2 
C)  P3 
A)  P1 
B)  P2 
C)  P3

Question 15

Price ceilings will likely result in the growth of black markets.

Accepted Answer

A) True 
 B)False

Question 16

The invention of machinery that can double the amount of gold extracted from raw ore will likely lead mining companies to

Accepted Answer

A)  raise the world price of gold to pay for the new machinery. 
B)  lower the world price of gold because any amount can now be produced more cheaply. 
C)  raise the world price of gold because miners' wages must double as their productivity doubles. 
D)  lower the world price of gold only if new mining companies are not allowed to enter the industry. 
A)  raise the world price of gold to pay for the new machinery. 
B)  lower the world price of gold because any amount can now be produced more cheaply. 
C)  raise the world price of gold because miners' wages must double as their productivity doubles. 
D)  lower the world price of gold only if new mining companies are not allowed to enter the industry.

Question 17

Figure 4-4  
-Assume that Figure 4-4 shows demand for MP3 players.An increase in the price of music downloads changes demand from

Accepted Answer

A)  D1 to D2. 
B)  D2 to D1. 
C)  D2 to D3. 
D)  D1 to D3. 
A)  D1 to D2. 
B)  D2 to D1. 
C)  D2 to D3. 
D)  D1 to D3.

Question 18

Figure 4-15  
-Recycling of newspapers has been undermined by its success.The supply of old papers,gathered diligently by those concerned with the environment,has increased dramatically,as has the number of firms that convert the material into recycled newsprint.The quantity demanded has remained relatively stable despite falling prices because newspapers consider recycled newsprint an inferior substitute for regular newsprint.Consequently,the price of recycled newsprint has fallen below the cost of production; recycling firms are going out of business; mountains of old newspapers are left behind.Which graph in Figure 4-15 best illustrates this situation?

Accepted Answer

A)  1 
B)  2 
C)  3 
D)  4 
A)  1 
B)  2 
C)  3 
D)  4

Question 19

Figure 4-22  
-Because of falling oil prices in the past,Libya could afford fewer imported goods.Government controls were established to limit imports of cigarettes.In 1985,the market price of Marlboros rose to $70 a carton.Which graph in Figure 4-22 best depicts this situation?

Accepted Answer

A)  1 
B)  2 
C)  3 
D)  4 
A)  1 
B)  2 
C)  3 
D)  4

Question 20

"The market has failed to provide enough rental housing in New York City.This demonstrates another failure of free markets-they may lead to shortages of necessities." Explain why you agree or disagree.

Accepted Answer

An economist would disagree.The free mar

Figure 4-4 -Assume that Figure 4-4 shows demand for soda.A decrease in the price of apple juice will change demand from

Drawing the supply curve and the demand curve on the same graph helps show how price is determined.

A decrease in supply will have what effect on equilibrium price and quantity?

The more firms that are attracted to an industry,the greater will be the quantity of product supplied at any given price.

Regulations are sometimes used to "correct" the failures of a market mechanism.

Imagine that the state legislature raises the tax on gasoline by 10 cents/gallon.What most likely happens next?

In relation to prices that would prevail in an uncontrolled market,prices charged by a black market are usually

Why do price ceilings tend to cause persistent imbalances in the market?

The supply curve shows

From 2007 to 2008,the Federal Reserve System reduced interest rates,the price that borrowers pay.As a result,economists expected that the supply of money would

Figure 4-16 -In Figure 4-16,an increase in the number of producers will shift supply from

The demand for home computers has increased,yet the price has fallen.Explain this apparent paradox.

If the demand curve shifts outward and the supply curve remains the same,price will fall.

Figure 4-21 -A surplus will tend to occur at which price in Figure 4-21?

Price ceilings will likely result in the growth of black markets.

The invention of machinery that can double the amount of gold extracted from raw ore will likely lead mining companies to

Figure 4-4 -Assume that Figure 4-4 shows demand for MP3 players.An increase in the price of music downloads changes demand from

Figure 4-22 -Because of falling oil prices in the past,Libya could afford fewer imported goods.Government controls were established to limit imports of cigarettes.In 1985,the market price of Marlboros rose to $70 a carton.Which graph in Figure 4-22 best depicts this situation?

"The market has failed to provide enough rental housing in New York City.This demonstrates another failure of free markets-they may lead to shortages of necessities." Explain why you agree or disagree.

What Is Economics

The Economy Myth and Reality

The Fundamental Economic Problem Scarcity and Choice

An Introduction To Macroeconomics

The Goals Of Macroeconomic Policy

Economic Growth Theory And Policy

Aggregate Demand and The Powerful Consumer

Demand Side Equilibrium Unemployment Or Inflation

Bringing In The Supply Side Unemployment and Inflation

Managing Aggregate Demand Fiscal Policy

Money and The Banking System

Monetary Policy Conventional and Unconventional

The Financial Crisis and The Great Recession

The Debate Over Monetary and Fiscal Policy

Budget Deficits In The Short and Long Run

The Trade Off Between Inflation and Unemployment

International Trade and Comparative Advantage

The International Monetary System Order Or Disorder

Exchange Rates and The Macroeconomy

Filters

Exam 4: Supply and Demand An Initial Look

Figure 4-4 -Assume that Figure 4-4 shows demand for soda.A decrease in the price of apple juice will change demand from

Drawing the supply curve and the demand curve on the same graph helps show how price is determined.

A decrease in supply will have what effect on equilibrium price and quantity?

The more firms that are attracted to an industry,the greater will be the quantity of product supplied at any given price.

Regulations are sometimes used to "correct" the failures of a market mechanism.

​Imagine that the state legislature raises the tax on gasoline by 10 cents/gallon.What most likely happens next?

In relation to prices that would prevail in an uncontrolled market,prices charged by a black market are usually

Why do price ceilings tend to cause persistent imbalances in the market?

The supply curve shows

From 2007 to 2008,the Federal Reserve System reduced interest rates,the price that borrowers pay.As a result,economists expected that the supply of money would

Figure 4-16 -In Figure 4-16,an increase in the number of producers will shift supply from

The demand for home computers has increased,yet the price has fallen.Explain this apparent paradox.

If the demand curve shifts outward and the supply curve remains the same,price will fall.

Figure 4-21 -A surplus will tend to occur at which price in Figure 4-21?

Price ceilings will likely result in the growth of black markets.

The invention of machinery that can double the amount of gold extracted from raw ore will likely lead mining companies to

Figure 4-4 -Assume that Figure 4-4 shows demand for MP3 players.An increase in the price of music downloads changes demand from

Figure 4-22 -Because of falling oil prices in the past,Libya could afford fewer imported goods.Government controls were established to limit imports of cigarettes.In 1985,the market price of Marlboros rose to $70 a carton.Which graph in Figure 4-22 best depicts this situation?

"The market has failed to provide enough rental housing in New York City.This demonstrates another failure of free markets-they may lead to shortages of necessities." Explain why you agree or disagree.

What Is Economics

The Economy Myth and Reality

The Fundamental Economic Problem Scarcity and Choice

An Introduction To Macroeconomics

The Goals Of Macroeconomic Policy

Economic Growth Theory And Policy

Aggregate Demand and The Powerful Consumer

Demand Side Equilibrium Unemployment Or Inflation

Bringing In The Supply Side Unemployment and Inflation

Managing Aggregate Demand Fiscal Policy

Money and The Banking System

Monetary Policy Conventional and Unconventional

The Financial Crisis and The Great Recession

The Debate Over Monetary and Fiscal Policy

Budget Deficits In The Short and Long Run

The Trade Off Between Inflation and Unemployment

International Trade and Comparative Advantage

The International Monetary System Order Or Disorder

Exchange Rates and The Macroeconomy

Filters

Imagine that the state legislature raises the tax on gasoline by 10 cents/gallon.What most likely happens next?