Question 1

Peanut butter and jelly are complements. If the price of peanut butter increases, the demand for jelly will increase.

Accepted Answer

A) True 
 B)False  False

Question 2

The income effect of a price change refers to the change in the quantity demanded of a good that results from a change in the price of a complementary product.

Accepted Answer

A) True 
 B)False  False

Question 3

If the United States placed an embargo on Swedish products, what would happen in the U.S. market for Swedish furniture?

Accepted Answer

A)  The supply curve would shift to the left. 
B)  The supply curve would shift to the right. 
C)  The demand curve would shift to the right. 
D)  The demand curve would shift to the left. 
A)  The supply curve would shift to the left. 
B)  The supply curve would shift to the right. 
C)  The demand curve would shift to the right. 
D)  The demand curve would shift to the left. A

Question 4

Figure 3-1  
-Refer to Figure 3-1. A decrease in the price of a complementary good would be represented by a movement from

Accepted Answer

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

Question 5

Figure 3-4  
-Refer to Figure 3-4. At a price of $10, how many units will be sold?

Accepted Answer

A)  200 
B)  400 
C)  600 
D)  800 
A)  200 
B)  400 
C)  600 
D)  800

Question 6

A decrease in the equilibrium quantity for a product will result

Accepted Answer

A)  when the quantity demanded for the product exceeds the quantity supplied. 
B)  when there is a decrease in supply and a decrease in demand for the product. 
C)  when there is an increase in supply and a decrease in demand for the product. 
D)  when there is a decrease in demand and an increase in the number of firms producing the product. 
A)  when the quantity demanded for the product exceeds the quantity supplied. 
B)  when there is a decrease in supply and a decrease in demand for the product. 
C)  when there is an increase in supply and a decrease in demand for the product. 
D)  when there is a decrease in demand and an increase in the number of firms producing the product.

Question 7

If the price of a product is above equilibrium, what forces it down?

Accepted Answer

When the price is above equilibrium, a s

Question 8

Which of the following would cause the equilibrium price of apple juice to decrease and the equilibrium quantity of apple juice to increase?

Accepted Answer

A)  a decrease in the price of apples 
B)  an increase in the price of apples 
C)  an increase in the price of orange juice, a substitute for apple juice 
D)  a decrease in the price of granola bars, a complement for apple juice 
A)  a decrease in the price of apples 
B)  an increase in the price of apples 
C)  an increase in the price of orange juice, a substitute for apple juice 
D)  a decrease in the price of granola bars, a complement for apple juice

Question 9

Tomas increased his consumption of potato chips when the price of pistachios increased. For Tomas, potato chips and pistachios are

Accepted Answer

A)  substitutes. 
B)  both inferior goods. 
C)  complements. 
D)  both luxury goods. 
A)  substitutes. 
B)  both inferior goods. 
C)  complements. 
D)  both luxury goods.

Question 10

Figure 3-5  
-Refer to Figure 3-5. At a price of $5, the quantity sold

Accepted Answer

A)  is 2 units. 
B)  is 4 units. 
C)  is 6 units. 
D)  cannot be determined. 
A)  is 2 units. 
B)  is 4 units. 
C)  is 6 units. 
D)  cannot be determined.

Question 11

If the quantity demanded for a product exceeds the quantity supplied, the market price will rise until

Accepted Answer

A)  the quantity demanded equals the quantity supplied. The product will then no longer be scarce. 
B)  quantity demanded equals quantity supplied. The equilibrium price will then be greater than the market price. 
C)  only wealthy consumers will be able to afford the product. 
D)  quantity demanded equals quantity supplied. The market price will then equal the equilibrium price. 
A)  the quantity demanded equals the quantity supplied. The product will then no longer be scarce. 
B)  quantity demanded equals quantity supplied. The equilibrium price will then be greater than the market price. 
C)  only wealthy consumers will be able to afford the product. 
D)  quantity demanded equals quantity supplied. The market price will then equal the equilibrium price.

Question 12

Vineyards can grow either red wine grapes or white wine grapes on their land. Which of the following would cause the supply of red wine grapes to decrease?

Accepted Answer

A)  an increase in the price of white wine grapes 
B)  a decrease in the price of white wine grapes 
C)  an increase in the demand for red wine grapes 
D)  an increase in the price of red wine 
A)  an increase in the price of white wine grapes 
B)  a decrease in the price of white wine grapes 
C)  an increase in the demand for red wine grapes 
D)  an increase in the price of red wine

Question 13

Figure 3-7  
-Refer to Figure 3-7. Assume that the graphs in this figure represent the demand and supply curves for bicycle helmets. Which panel best describes what happens in this market if there is a substantial increase in the price of bicycles?

Accepted Answer

A)  Panel (a) 
B)  Panel (b) 
C)  Panel (c) 
D)  Panel (d) 
A)  Panel (a) 
B)  Panel (b) 
C)  Panel (c) 
D)  Panel (d)

Question 14

One would speak of a change in the quantity of a good supplied, rather than a change in supply, if

Accepted Answer

A)  supplier expectations about future prices change. 
B)  the price of the good changes. 
C)  the cost of producing the good changes. 
D)  prices of substitutes in production change. 
A)  supplier expectations about future prices change. 
B)  the price of the good changes. 
C)  the cost of producing the good changes. 
D)  prices of substitutes in production change.

Question 15

If consumers believe the price of hybrid vehicles will decrease in the future, this will cause the demand for hybrid vehicles to decrease now.

Accepted Answer

A) True 
 B)False

Question 16

Even when the demand for one good is high, the price of the good is also affected by supply. The textbook illustrates this by comparing the price of two items that were auctioned on the same day. Which of the following describes the results of the auction?

Accepted Answer

A)  A letter written by Abraham Lincoln sold for a higher price than a letter written by John Wilkes Booth. 
B)  A letter written by Abraham Lincoln was sold for a higher price than a letter written by Adam Smith. 
C)  A letter written by John Wilkes Booth sold for a higher price than a letter written by Lee Harvey Oswald. 
D)  A letter written by John Wilkes Booth sold for a higher price than a letter written by Abraham Lincoln. 
A)  A letter written by Abraham Lincoln sold for a higher price than a letter written by John Wilkes Booth. 
B)  A letter written by Abraham Lincoln was sold for a higher price than a letter written by Adam Smith. 
C)  A letter written by John Wilkes Booth sold for a higher price than a letter written by Lee Harvey Oswald. 
D)  A letter written by John Wilkes Booth sold for a higher price than a letter written by Abraham Lincoln.

Question 17

The substitution effect explains why there is a direct relationship between the price of a product and the quantity of the product demanded.

Accepted Answer

A) True 
 B)False

Question 18

What are the two effects that explain the law of demand? Briefly explain each effect.

Accepted Answer

The two effects that explain the law of

Question 19

Suppose consumer preference for organic corn starts to rise while the cost of growing organic corn continues to rise. In the market for organic corn, this would be represented by the equilibrium price ________ and the equilibrium quantity ________.

Accepted Answer

A)  increasing; increasing or decreasing 
B)  decreasing; increasing or decreasing 
C)  increasing or decreasing; increasing 
D)  increasing or decreasing; decreasing 
A)  increasing; increasing or decreasing 
B)  decreasing; increasing or decreasing 
C)  increasing or decreasing; increasing 
D)  increasing or decreasing; decreasing

Question 20

An increase in the demand for LED light bulbs due to changes in consumer tastes, accompanied by an increase in the supply of LED light bulbs as a result of government subsidies, will result in

Accepted Answer

A)  an increase in the equilibrium quantity of LED light bulbs and no change in the equilibrium price. 
B)  an increase in the equilibrium price of LED light bulbs and no change in the equilibrium quantity. 
C)  an increase in the equilibrium price of LED light bulbs; the equilibrium quantity may increase or decrease. 
D)  an increase in the equilibrium quantity of LED light bulbs; the equilibrium price may increase or decrease. 
A)  an increase in the equilibrium quantity of LED light bulbs and no change in the equilibrium price. 
B)  an increase in the equilibrium price of LED light bulbs and no change in the equilibrium quantity. 
C)  an increase in the equilibrium price of LED light bulbs; the equilibrium quantity may increase or decrease. 
D)  an increase in the equilibrium quantity of LED light bulbs; the equilibrium price may increase or decrease.

Exam 3: Where Prices Come From: the Interaction of Demand and Supply

Peanut butter and jelly are complements. If the price of peanut butter increases, the demand for jelly will increase.

The income effect of a price change refers to the change in the quantity demanded of a good that results from a change in the price of a complementary product.

If the United States placed an embargo on Swedish products, what would happen in the U.S. market for Swedish furniture?

Figure 3-1 -Refer to Figure 3-1. A decrease in the price of a complementary good would be represented by a movement from

Figure 3-4 -Refer to Figure 3-4. At a price of $10, how many units will be sold?

A decrease in the equilibrium quantity for a product will result

If the price of a product is above equilibrium, what forces it down?

Which of the following would cause the equilibrium price of apple juice to decrease and the equilibrium quantity of apple juice to increase?

Tomas increased his consumption of potato chips when the price of pistachios increased. For Tomas, potato chips and pistachios are

Figure 3-5 -Refer to Figure 3-5. At a price of $5, the quantity sold

If the quantity demanded for a product exceeds the quantity supplied, the market price will rise until

Vineyards can grow either red wine grapes or white wine grapes on their land. Which of the following would cause the supply of red wine grapes to decrease?

Figure 3-7 -Refer to Figure 3-7. Assume that the graphs in this figure represent the demand and supply curves for bicycle helmets. Which panel best describes what happens in this market if there is a substantial increase in the price of bicycles?

One would speak of a change in the quantity of a good supplied, rather than a change in supply, if

If consumers believe the price of hybrid vehicles will decrease in the future, this will cause the demand for hybrid vehicles to decrease now.

Even when the demand for one good is high, the price of the good is also affected by supply. The textbook illustrates this by comparing the price of two items that were auctioned on the same day. Which of the following describes the results of the auction?

The substitution effect explains why there is a direct relationship between the price of a product and the quantity of the product demanded.

What are the two effects that explain the law of demand? Briefly explain each effect.

Suppose consumer preference for organic corn starts to rise while the cost of growing organic corn continues to rise. In the market for organic corn, this would be represented by the equilibrium price ________ and the equilibrium quantity ________.

An increase in the demand for LED light bulbs due to changes in consumer tastes, accompanied by an increase in the supply of LED light bulbs as a result of government subsidies, will result in

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Economic Efficiency, Government Price Setting, and Taxes

Externalities, Environmental Policy, and Public Goods

Elasticity: the Responsiveness of Demand and Supply

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, Production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: the Competitive Model in a More Realistic Setting

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, Taxes, and the Distribution of Income

Gdp: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money, Banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Inflation, Unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

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Suppose consumer preference for organic corn starts to rise while the cost of growing organic corn continues to rise. In the market for organic corn, this would be represented by the equilibrium price and the equilibrium quantity .