Question 1

If a decrease in the price of good Y causes the demand for good Z to decrease, this indicates that

Accepted Answer

A) Y and Z are complements. 
B) Y and Z are substitutes. 
C) Y and Z are unrelated. 
D) the demand for Y is elastic, but the demand for Z is inelastic. 
A) Y and Z are complements. 
B) Y and Z are substitutes. 
C) Y and Z are unrelated. 
D) the demand for Y is elastic, but the demand for Z is inelastic. B

Question 2

If we observe an increase in the price of a good and an increase in the amount of the good bought and sold, this could be explained by

Accepted Answer

A) an increase in the supply of the good. 
B) an increase in the demand for the good. 
C) a decrease in the demand for the good. 
D) a decrease in the supply of the good. 
A) an increase in the supply of the good. 
B) an increase in the demand for the good. 
C) a decrease in the demand for the good. 
D) a decrease in the supply of the good. B

Question 3

Figure 3-1  
-Which of the following is true regarding the market for steak shown in Figure 3-1?

Accepted Answer

A) If the price of steak were $2 per pound, producers would want to supply less steak than consumers would want to buy. 
B) If the price of steak were $4 per pound, producers would want to supply more steak than consumers would want to buy. 
C) If the price of steak were $3 per pound, producers would want to supply the same amount of steak that consumers would want to buy. 
D) All of the above are true regarding the market for steak shown in the figure. 
A) If the price of steak were $2 per pound, producers would want to supply less steak than consumers would want to buy. 
B) If the price of steak were $4 per pound, producers would want to supply more steak than consumers would want to buy. 
C) If the price of steak were $3 per pound, producers would want to supply the same amount of steak that consumers would want to buy. 
D) All of the above are true regarding the market for steak shown in the figure. D

Question 4

Table 3-1
  
-Refer to Table 3-1. If the table represents the willingness to pay of four buyers and the price of the product is $18, then their total consumer surplus is

Accepted Answer

A) $38. 
B) $42. 
C) $46. 
D) $72. 
A) $38. 
B) $42. 
C) $46. 
D) $72.

Question 5

Which of the following does the law of demand specifically imply?

Accepted Answer

A) If the product price increases, quantity demanded will decrease. 
B) If consumer income increases, quantity demanded will increase. 
C) If the product price increases, quantity demanded will increase. 
D) If consumer income increases, quantity demanded will decrease. 
E) If supply increases, demand will increase. 
A) If the product price increases, quantity demanded will decrease. 
B) If consumer income increases, quantity demanded will increase. 
C) If the product price increases, quantity demanded will increase. 
D) If consumer income increases, quantity demanded will decrease. 
E) If supply increases, demand will increase.

Question 6

Figure 3-19  
-Refer to Figure 3-19. If the government mandated a price increase from Pe to a higher price, then

Accepted Answer

A) total surplus would decrease. 
B) consumer surplus would increase. 
C) total surplus would increase, since producer surplus would increase. 
D) total surplus would remain unchanged. 
A) total surplus would decrease. 
B) consumer surplus would increase. 
C) total surplus would increase, since producer surplus would increase. 
D) total surplus would remain unchanged.

Question 7

Which of the following will reduce the supply of motorcycles?

Accepted Answer

A) an increase in the population age 16 to 35, the primary consumers of motorcycles 
B) an increase in taxes imposed on motorcycle producers 
C) a technological improvement reducing the production costs of motorcycles 
D) a government study that reveals motorcycle riders, on average, live 10 years longer than those who don't ride motorcycles 
A) an increase in the population age 16 to 35, the primary consumers of motorcycles 
B) an increase in taxes imposed on motorcycle producers 
C) a technological improvement reducing the production costs of motorcycles 
D) a government study that reveals motorcycle riders, on average, live 10 years longer than those who don't ride motorcycles

Question 8

Figure 3-20  
-Refer to Figure 3-20. At the equilibrium price, consumer surplus is

Accepted Answer

A) $480. 
B) $640. 
C) $1,120. 
D) $1,280. 
A) $480. 
B) $640. 
C) $1,120. 
D) $1,280.

Question 9

Other things being equal, the effect of an increase in the price of milk would be illustrated by

Accepted Answer

A) an upward movement along the demand curve for milk. 
B) a leftward shift in the demand curve for milk. 
C) a downward movement along the demand curve for milk. 
D) a rightward shift in the demand curve for milk. 
A) an upward movement along the demand curve for milk. 
B) a leftward shift in the demand curve for milk. 
C) a downward movement along the demand curve for milk. 
D) a rightward shift in the demand curve for milk.

Question 10

Figure 3-22        
-Refer to Figure 3-22. Which of the four graphs represents the market for pizza delivery in a college town as we go from summer to the beginning of the fall semester?

Accepted Answer

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

Question 11

Corn and soybeans are alternatives that could be grown by most farmers. If government subsidies for ethanol lead to higher corn prices, this will

Accepted Answer

A) increase the supply of corn. 
B) increase the supply of soybeans. 
C) decrease the supply of soybeans. 
D) decrease the supply of corn. 
E) have no effect on the supplies of corn and soybeans. 
A) increase the supply of corn. 
B) increase the supply of soybeans. 
C) decrease the supply of soybeans. 
D) decrease the supply of corn. 
E) have no effect on the supplies of corn and soybeans.

Question 12

Which of the following observations was made famous by Adam Smith in his book The Wealth of Nations?

Accepted Answer

A) There is no such thing as a free lunch. 
B) People buy more when prices are low than when prices are high. 
C) No matter how much people earn, they tend to spend more than they earn. 
D) Households and firms interacting in markets are guided by an "invisible hand" that leads them to desirable market outcomes. 
A) There is no such thing as a free lunch. 
B) People buy more when prices are low than when prices are high. 
C) No matter how much people earn, they tend to spend more than they earn. 
D) Households and firms interacting in markets are guided by an "invisible hand" that leads them to desirable market outcomes.

Question 13

Which of the following is a major implication of the invisible hand concept?

Accepted Answer

A) When directed by competitive market prices, the actions of self-interested individuals will tend to promote overall economic prosperity. 
B) Prosperity cannot be achieved unless the selfish nature of people can be changed. 
C) Competition is harmful to the health of an economy because it results in wasteful duplication. 
D) Government-operated firms tend to have higher efficiency and lower costs than private sector firms. 
A) When directed by competitive market prices, the actions of self-interested individuals will tend to promote overall economic prosperity. 
B) Prosperity cannot be achieved unless the selfish nature of people can be changed. 
C) Competition is harmful to the health of an economy because it results in wasteful duplication. 
D) Government-operated firms tend to have higher efficiency and lower costs than private sector firms.

Question 14

Which of the following best represents the effects of a decrease in the price of belts, other things being equal?

Accepted Answer

A) An upward movement along the demand curve for belts. 
B) A downward movement along the demand curve for belts. 
C) A rightward shift in the demand curve for belts. 
D) A leftward shift in the demand curve for belts. 
A) An upward movement along the demand curve for belts. 
B) A downward movement along the demand curve for belts. 
C) A rightward shift in the demand curve for belts. 
D) A leftward shift in the demand curve for belts.

Question 15

Which of the following is the best description of the effects of an increase in the supply of bread?

Accepted Answer

A) Consumers will pay more for bread. 
B) Bread prices will fall, and bread sales will rise. 
C) A permanent surplus of bread will remain on the market. 
D) Bakers will have higher marginal costs. 
A) Consumers will pay more for bread. 
B) Bread prices will fall, and bread sales will rise. 
C) A permanent surplus of bread will remain on the market. 
D) Bakers will have higher marginal costs.

Question 16

Figure 3-19  
-Refer to Figure 3-19. Sellers whose costs are less than price are represented by which line segment?

Accepted Answer

A) AC 
B) CE 
C) BC 
D) CD 
A) AC 
B) CE 
C) BC 
D) CD

Question 17

If salsa and nacho chips are complements, an increase in the price of nacho chips would

Accepted Answer

A) increase the price of salsa. 
B) decrease the demand for salsa. 
C) increase the demand for salsa. 
D) have no effect on the demand for salsa. 
A) increase the price of salsa. 
B) decrease the demand for salsa. 
C) increase the demand for salsa. 
D) have no effect on the demand for salsa.

Question 18

Which of the following would reduce the supply of baseball hats?

Accepted Answer

A) An increase in the demand for baseball hats. 
B) A new tax imposed on the producers of baseball hats. 
C) A reduction in the price of cloth used to make baseball hats. 
D) All of the above. 
A) An increase in the demand for baseball hats. 
B) A new tax imposed on the producers of baseball hats. 
C) A reduction in the price of cloth used to make baseball hats. 
D) All of the above.

Question 19

When economists say an activity is consistent with economic efficiency, they mean

Accepted Answer

A) a majority of citizens favor the activity. 
B) the benefits that result from the activity exceed the costs. 
C) the number of people who gain from the activity exceeds the number on whom costs are imposed. 
D) the costs that result from the activity exceed the benefits. 
A) a majority of citizens favor the activity. 
B) the benefits that result from the activity exceed the costs. 
C) the number of people who gain from the activity exceeds the number on whom costs are imposed. 
D) the costs that result from the activity exceed the benefits.

Question 20

According to the law of supply,

Accepted Answer

A) producers are willing to supply larger amounts of a good as its price increases. 
B) a direct relationship exists between the price of a good and the amount buyers choose to buy. 
C) an inverse relationship exists between the price of a good and the amount buyers wish to buy. 
D) an inverse relationship exists between the price of a good and the amount producers supply. 
A) producers are willing to supply larger amounts of a good as its price increases. 
B) a direct relationship exists between the price of a good and the amount buyers choose to buy. 
C) an inverse relationship exists between the price of a good and the amount buyers wish to buy. 
D) an inverse relationship exists between the price of a good and the amount producers supply.

If a decrease in the price of good Y causes the demand for good Z to decrease, this indicates that

If we observe an increase in the price of a good and an increase in the amount of the good bought and sold, this could be explained by

Figure 3-1 -Which of the following is true regarding the market for steak shown in Figure 3-1?

Table 3-1 -Refer to Table 3-1. If the table represents the willingness to pay of four buyers and the price of the product is $18, then their total consumer surplus is

Which of the following does the law of demand specifically imply?

Figure 3-19 -Refer to Figure 3-19. If the government mandated a price increase from P_e to a higher price, then

Which of the following will reduce the supply of motorcycles?

Figure 3-20 -Refer to Figure 3-20. At the equilibrium price, consumer surplus is

Other things being equal, the effect of an increase in the price of milk would be illustrated by

Figure 3-22 -Refer to Figure 3-22. Which of the four graphs represents the market for pizza delivery in a college town as we go from summer to the beginning of the fall semester?

Corn and soybeans are alternatives that could be grown by most farmers. If government subsidies for ethanol lead to higher corn prices, this will

Which of the following observations was made famous by Adam Smith in his book The Wealth of Nations?

Which of the following is a major implication of the invisible hand concept?

Which of the following best represents the effects of a decrease in the price of belts, other things being equal?

Which of the following is the best description of the effects of an increase in the supply of bread?

Figure 3-19 -Refer to Figure 3-19. Sellers whose costs are less than price are represented by which line segment?

If salsa and nacho chips are complements, an increase in the price of nacho chips would

Which of the following would reduce the supply of baseball hats?

When economists say an activity is consistent with economic efficiency, they mean

According to the law of supply,

The Economic Approach

Some Tools of the Economist

Supply and Demand: Applications and Extensions

Difficult Cases for the Market, and the Role of Government

The Economics of Political Action

Taking the Nations Economic Pulse

Economic Fluctuations, Unemployment, and Inflation

An Introduction to Basic Macroeconomic Markets

Dynamic Change, Economic Fluctuations, and the Ad-As Model

Fiscal Policy: the Keynesian View and the Historical Development of Macroeconomics

Fiscal Policy, Incentives, and Secondary Effects

Money and the Banking System

Modern Macroeconomics and Monetary Policy

Stabilization Policy, Output, and Employment

Creating an Environment for Growth and Prosperity

Institutions, Policies, and Cross-Country Differences in Income and Growth

Gaining From International Trade

International Finance and the Foreign Exchange Market

Filters

Exam 3: Demand, Supply, and the Market Process

If a decrease in the price of good Y causes the demand for good Z to decrease, this indicates that

If we observe an increase in the price of a good and an increase in the amount of the good bought and sold, this could be explained by

Figure 3-1 -Which of the following is true regarding the market for steak shown in Figure 3-1?

Table 3-1 -Refer to Table 3-1. If the table represents the willingness to pay of four buyers and the price of the product is $18, then their total consumer surplus is

Which of the following does the law of demand specifically imply?

Figure 3-19 -Refer to Figure 3-19. If the government mandated a price increase from Pe to a higher price, then

Which of the following will reduce the supply of motorcycles?

Figure 3-20 -Refer to Figure 3-20. At the equilibrium price, consumer surplus is

Other things being equal, the effect of an increase in the price of milk would be illustrated by

Figure 3-22 -Refer to Figure 3-22. Which of the four graphs represents the market for pizza delivery in a college town as we go from summer to the beginning of the fall semester?

Corn and soybeans are alternatives that could be grown by most farmers. If government subsidies for ethanol lead to higher corn prices, this will

Which of the following observations was made famous by Adam Smith in his book The Wealth of Nations?

Which of the following is a major implication of the invisible hand concept?

Which of the following best represents the effects of a decrease in the price of belts, other things being equal?

Which of the following is the best description of the effects of an increase in the supply of bread?

Figure 3-19 -Refer to Figure 3-19. Sellers whose costs are less than price are represented by which line segment?

If salsa and nacho chips are complements, an increase in the price of nacho chips would

Which of the following would reduce the supply of baseball hats?

When economists say an activity is consistent with economic efficiency, they mean

According to the law of supply,

The Economic Approach

Some Tools of the Economist

Supply and Demand: Applications and Extensions

Difficult Cases for the Market, and the Role of Government

The Economics of Political Action

Taking the Nations Economic Pulse

Economic Fluctuations, Unemployment, and Inflation

An Introduction to Basic Macroeconomic Markets

Dynamic Change, Economic Fluctuations, and the Ad-As Model

Fiscal Policy: the Keynesian View and the Historical Development of Macroeconomics

Fiscal Policy, Incentives, and Secondary Effects

Money and the Banking System

Modern Macroeconomics and Monetary Policy

Stabilization Policy, Output, and Employment

Creating an Environment for Growth and Prosperity

Institutions, Policies, and Cross-Country Differences in Income and Growth

Gaining From International Trade

International Finance and the Foreign Exchange Market

Filters

Figure 3-19 -Refer to Figure 3-19. If the government mandated a price increase from P_e to a higher price, then