Question 1

The income effect of a price change refers to the impact of a change in

Accepted Answer

A)  income on the price of a good. 
B)  demand when income changes. 
C)  the quantity demanded when income changes. 
D)  the price of a good on a consumer's purchasing power. 
A)  income on the price of a good. 
B)  demand when income changes. 
C)  the quantity demanded when income changes. 
D)  the price of a good on a consumer's purchasing power.

Question 2

If the price of orchids falls, the substitution effect due to the price change will cause

Accepted Answer

A)  an increase in the demand for orchids. 
B)  an increase in the demand for roses, a substitute for orchids. 
C)  an increase in the quantity of orchids demanded. 
D)  an increase in the quantity of orchids supplied. 
A)  an increase in the demand for orchids. 
B)  an increase in the demand for roses, a substitute for orchids. 
C)  an increase in the quantity of orchids demanded. 
D)  an increase in the quantity of orchids supplied.

Question 3

George Gnat subscribes to a monthly pest control service for his home. Last week, the owner of the service informed George that he will have to raise his monthly service fee because of increases in the price of gasoline used by his workers on their service trips. How is the market for pest control services affected by this?

Accepted Answer

A)  There is an increase in the supply of pest control services. 
B)  There is a decrease in the demand for pest control services. 
C)  There is a decrease in the quantity of pest control services supplied. 
D)  There is a decrease in the supply of pest control services. 
A)  There is an increase in the supply of pest control services. 
B)  There is a decrease in the demand for pest control services. 
C)  There is a decrease in the quantity of pest control services supplied. 
D)  There is a decrease in the supply of pest control services.

Question 4

When the price of a normal good falls, consumers buy a larger quantity because of the ________ effect and the ________ effect.

Accepted Answer

A)  substitution; income 
B)  normal; inferior 
C)  substitute; complement 
D)  supply; demand 
A)  substitution; income 
B)  normal; inferior 
C)  substitute; complement 
D)  supply; demand

Question 5

Figure 3-4  
-Refer to Figure 3-4. If the current market price is $15, the market will achieve equilibrium by

Accepted Answer

A)  a price increase, increasing the supply and decreasing the demand. 
B)  a price decrease, decreasing the supply and increasing the demand. 
C)  a price decrease, decreasing the quantity supplied and increasing the quantity demanded. 
D)  a price increase, increasing the quantity supplied and decreasing the quantity demanded. 
A)  a price increase, increasing the supply and decreasing the demand. 
B)  a price decrease, decreasing the supply and increasing the demand. 
C)  a price decrease, decreasing the quantity supplied and increasing the quantity demanded. 
D)  a price increase, increasing the quantity supplied and decreasing the quantity demanded.

Question 6

Figure 3-2  
-Refer to Figure 3-2. An increase in the price of the product would be represented by a movement from

Accepted Answer

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

Question 7

How does the increasing use of digital cameras affect the market for traditional camera film?

Accepted Answer

A)  The demand curve for traditional camera film shifts to the right. 
B)  The quantity of traditional camera film demanded decreases. 
C)  The quantity of traditional camera film demanded increases. 
D)  The demand curve for traditional camera film shifts to the left. 
A)  The demand curve for traditional camera film shifts to the right. 
B)  The quantity of traditional camera film demanded decreases. 
C)  The quantity of traditional camera film demanded increases. 
D)  The demand curve for traditional camera film shifts to the left.

Question 8

The ________ effect of a price change refers to the impact of a change in the price of a good on a consumer's purchasing power.

Accepted Answer

A)  income 
B)  substitution 
C)  demographics 
D)  ceteris paribus 
A)  income 
B)  substitution 
C)  demographics 
D)  ceteris paribus

Question 9

Figure 3-6  
-Refer to Figure 3-6. The figure above represents the market for canvas tote bags. Assume that the price of tote bags is $15. At this price

Accepted Answer

A)  the quantity demanded exceeds the quantity supplied by 75. The price will eventually rise to $25 where quantity demanded will equal quantity supplied. 
B)  the demand exceeds the supply of tote bags by 55. Some consumers will have an incentive to offer to buy tote bags at a higher price. 
C)  there is a shortage, equal to 55 tote bags, that will be eliminated when the price rises to $25. 
D)  there is a shortage equal to 55 tote bags; the price of tote bags will rise until demand is equal to supply. 
A)  the quantity demanded exceeds the quantity supplied by 75. The price will eventually rise to $25 where quantity demanded will equal quantity supplied. 
B)  the demand exceeds the supply of tote bags by 55. Some consumers will have an incentive to offer to buy tote bags at a higher price. 
C)  there is a shortage, equal to 55 tote bags, that will be eliminated when the price rises to $25. 
D)  there is a shortage equal to 55 tote bags; the price of tote bags will rise until demand is equal to supply.

Question 10

"Because apples and oranges are substitutes, an increase in the price of oranges will cause the demand for apples to increase. This initial shift in demand for apples results in a higher price for apples; this higher price will cause the demand curve for apples to shift to the right." Which of the following correctly comments on this statement?

Accepted Answer

A)  The statement will be true if consumer tastes for apples and oranges do not change. 
B)  The statement is false because a change in the price of apples would not change the demand for apples. 
C)  The statement is false because oranges are inferior goods; apples are normal goods. 
D)  The statement is false because one cannot assume that apples and oranges are substitutes for all consumers. 
A)  The statement will be true if consumer tastes for apples and oranges do not change. 
B)  The statement is false because a change in the price of apples would not change the demand for apples. 
C)  The statement is false because oranges are inferior goods; apples are normal goods. 
D)  The statement is false because one cannot assume that apples and oranges are substitutes for all consumers.

Question 11

Figure 3-8  
-Refer to Figure 3-8. The graph in this figure illustrates an initial competitive equilibrium in the market for apples at the intersection of D1 and S1 (point A). If there is an increase in the wages of apple workers and an increase in the price of oranges, a substitute for apples, the equilibrium could move to which point?

Accepted Answer

A)  none of the points shown 
B)  B 
C)  C 
D)  E 
A)  none of the points shown 
B)  B 
C)  C 
D)  E

Question 12

An increase in quantity supplied is represented by a rightward shift of the supply curve.

Accepted Answer

A) True 
 B)False

Question 13

Suppose that when the price of strawberries decreases, Simone increases her purchase of whipped cream. To Simone

Accepted Answer

A)  strawberries and whipped cream are complements. 
B)  strawberries and whipped cream and substitutes. 
C)  strawberries and whipped cream are normal goods. 
D)  strawberries are a normal good and whipped cream is an inferior good. 
A)  strawberries and whipped cream are complements. 
B)  strawberries and whipped cream and substitutes. 
C)  strawberries and whipped cream are normal goods. 
D)  strawberries are a normal good and whipped cream is an inferior good.

Question 14

Figure 3-1  
-Refer to Figure 3-1. If the product represented is an inferior good, an increase in income 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 15

Scarcity is defined as the situation that exists when the quantity demanded for a good is greater than the quantity supplied.

Accepted Answer

A) True 
 B)False

Question 16

Figure 3-1  
-Refer to Figure 3-1. An increase in the expected future price of the product 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 17

If the demand for a product decreases and the supply of the product does not change, equilibrium price and equilibrium quantity will both increase.

Accepted Answer

A) True 
 B)False

Question 18

What would happen in the market for laser eye surgery if insurance companies started to cover a portion of the price of voluntary procedures?

Accepted Answer

A)  Demand will increase, but this will not shift the supply curve. 
B)  Supply will increase, but this will not shift the demand curve. 
C)  Demand and supply will both increase. 
D)  Demand will increase and supply will decrease. 
A)  Demand will increase, but this will not shift the supply curve. 
B)  Supply will increase, but this will not shift the demand curve. 
C)  Demand and supply will both increase. 
D)  Demand will increase and supply will decrease.

Question 19

Which of the following would cause a decrease in the equilibrium price and decrease in the equilibrium quantity of papayas?

Accepted Answer

A)  a decrease in supply and an increase in demand 
B)  a decrease in demand 
C)  an increase in supply and an increase in demand greater than the increase in supply 
D)  a decrease in supply and a decrease in demand 
A)  a decrease in supply and an increase in demand 
B)  a decrease in demand 
C)  an increase in supply and an increase in demand greater than the increase in supply 
D)  a decrease in supply and a decrease in demand

Question 20

If in the market for bananas the supply curve has shifted to the right, then

Accepted Answer

A)  the supply of bananas increased. 
B)  the quantity of bananas supplied has increased. 
C)  the supply of bananas has decreases. 
D)  the quantity of bananas supplied has decreased. 
A)  the supply of bananas increased. 
B)  the quantity of bananas supplied has increased. 
C)  the supply of bananas has decreases. 
D)  the quantity of bananas supplied has decreased.

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

The income effect of a price change refers to the impact of a change in

If the price of orchids falls, the substitution effect due to the price change will cause

When the price of a normal good falls, consumers buy a larger quantity because of the ________ effect and the ________ effect.

Figure 3-4 -Refer to Figure 3-4. If the current market price is $15, the market will achieve equilibrium by

Figure 3-2 -Refer to Figure 3-2. An increase in the price of the product would be represented by a movement from

How does the increasing use of digital cameras affect the market for traditional camera film?

The ________ effect of a price change refers to the impact of a change in the price of a good on a consumer's purchasing power.

Figure 3-6 -Refer to Figure 3-6. The figure above represents the market for canvas tote bags. Assume that the price of tote bags is $15. At this price

An increase in quantity supplied is represented by a rightward shift of the supply curve.

Suppose that when the price of strawberries decreases, Simone increases her purchase of whipped cream. To Simone

Figure 3-1 -Refer to Figure 3-1. If the product represented is an inferior good, an increase in income would be represented by a movement from

Scarcity is defined as the situation that exists when the quantity demanded for a good is greater than the quantity supplied.

Figure 3-1 -Refer to Figure 3-1. An increase in the expected future price of the product would be represented by a movement from

If the demand for a product decreases and the supply of the product does not change, equilibrium price and equilibrium quantity will both increase.

What would happen in the market for laser eye surgery if insurance companies started to cover a portion of the price of voluntary procedures?

Which of the following would cause a decrease in the equilibrium price and decrease in the equilibrium quantity of papayas?

If in the market for bananas the supply curve has shifted to the right, then

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

Filters

When the price of a normal good falls, consumers buy a larger quantity because of the effect and the effect.