Question 1

Taxes cause the equilibrium price of a good to

Accepted Answer

A)  increase. 
B)  decrease. 
C)  remain the same. 
D)  go up only for producers. 
E)  go down only for consumers. 
A)  increase. 
B)  decrease. 
C)  remain the same. 
D)  go up only for producers. 
E)  go down only for consumers. A

Question 2

On January 30, 2012, Starbucks India announced plans to open 50 cafés. What would you expect to happen to the market for coffee in India, assuming all other factors are held constant?

Accepted Answer

A)  The demand for coffee will increase in India. 
B)  The demand for coffee will decrease in India. 
C)  Both the supply and demand for coffee will increase in India. 
D)  The supply for coffee will increase in India. 
E)  The supply for coffee will decrease in India. 
A)  The demand for coffee will increase in India. 
B)  The demand for coffee will decrease in India. 
C)  Both the supply and demand for coffee will increase in India. 
D)  The supply for coffee will increase in India. 
E)  The supply for coffee will decrease in India. D

Question 3

Which of the following could cause the supply curve for the market for oranges to shift to the left?

Accepted Answer

A)  an increase in the income of consumers of oranges 
B)  a decrease in the cost of workers 
C)  an increase in the price of orange juice 
D)  a new study saying that eating oranges will give one heart disease 
E)  a severe hurricane in Florida 
A)  an increase in the income of consumers of oranges 
B)  a decrease in the cost of workers 
C)  an increase in the price of orange juice 
D)  a new study saying that eating oranges will give one heart disease 
E)  a severe hurricane in Florida E

Question 4

According to a supply and demand model for apples, if the average household income decreases at the same time 10 apple orchards go out of business, one would expect the equilibrium

Accepted Answer

A)  price of apples to increase and the equilibrium quantity of apples in the market to decrease. 
B)  price of apples to be indeterminate and the equilibrium quantity of apples in the market to increase. 
C)  quantity of apples in the market to be indeterminate and the equilibrium price of apples to increase. 
D)  quantity of apples in the market to decrease and the equilibrium price of apples to stay the same. 
E)  quantity of apples in the market to decrease and the equilibrium price of apples to be indeterminate. 
A)  price of apples to increase and the equilibrium quantity of apples in the market to decrease. 
B)  price of apples to be indeterminate and the equilibrium quantity of apples in the market to increase. 
C)  quantity of apples in the market to be indeterminate and the equilibrium price of apples to increase. 
D)  quantity of apples in the market to decrease and the equilibrium price of apples to stay the same. 
E)  quantity of apples in the market to decrease and the equilibrium price of apples to be indeterminate.

Question 5

During the winter months, many elderly people leave their homes in northern New York and travel south to Florida or Arizona. What would we expect to happen to the equilibrium price and quantity of items most used by the elderly in northern New York?

Accepted Answer

A)  They would both increase. 
B)  They would both decrease. 
C)  One would increase and one would decrease, but we don't know which would do what. 
D)  The price would increase and the quantity would decrease. 
E)  The price would decrease and the quantity would increase. 
A)  They would both increase. 
B)  They would both decrease. 
C)  One would increase and one would decrease, but we don't know which would do what. 
D)  The price would increase and the quantity would decrease. 
E)  The price would decrease and the quantity would increase.

Question 6

In one year, 15 bowling alleys opened in California. During that same year, ESPN started broadcasting professional bowling on TV, which sparked more interest in the sport. What would we expect to happen to the price and quantity of a game of bowling in California during that year?

Accepted Answer

A)  Equilibrium price will be indeterminate and equilibrium quantity will go down. 
B)  Equilibrium price will go up and equilibrium quantity will go up. 
C)  Equilibrium price will go down and equilibrium quantity will be indeterminate. 
D)  Equilibrium price will be indeterminate and equilibrium quantity will go up. 
E)  Equilibrium price will go up and equilibrium quantity will be indeterminate. 
A)  Equilibrium price will be indeterminate and equilibrium quantity will go down. 
B)  Equilibrium price will go up and equilibrium quantity will go up. 
C)  Equilibrium price will go down and equilibrium quantity will be indeterminate. 
D)  Equilibrium price will be indeterminate and equilibrium quantity will go up. 
E)  Equilibrium price will go up and equilibrium quantity will be indeterminate.

Question 7

A shortage occurs whenever

Accepted Answer

A)  the quantity supplied is greater than the quantity demanded. 
B)  the price is above the equilibrium quantity. 
C)  the quantity supplied is less than the quantity demanded. 
D)  the government places a binding price floor. 
E)  the government places a nonbinding price ceiling. 
A)  the quantity supplied is greater than the quantity demanded. 
B)  the price is above the equilibrium quantity. 
C)  the quantity supplied is less than the quantity demanded. 
D)  the government places a binding price floor. 
E)  the government places a nonbinding price ceiling.

Question 8

When supply shifts to the right and demand stays constant, the equilibrium price _______and the equilibrium quantity_______ .

Accepted Answer

A)  increases; decreases 
B)  increases; increases 
C)  decreases; decreases 
D)  decreases; increases 
E)  stays the same; increases 
A)  increases; decreases 
B)  increases; increases 
C)  decreases; decreases 
D)  decreases; increases 
E)  stays the same; increases

Question 9

When the price is the _______equilibrium price, we would expect there to be a_______ , causing the market to put_______ pressure on the price until it went back to the equilibrium price.

Accepted Answer

A)  above; surplus; upward 
B)  above; shortage; downward 
C)  below; surplus; upward 
D)  below; shortage; downward 
E)  above; surplus; downward 
A)  above; surplus; upward 
B)  above; shortage; downward 
C)  below; surplus; upward 
D)  below; shortage; downward 
E)  above; surplus; downward

Question 10

As the owner of a business, Talia has allowed her employees to do their work on one computer screen while watching movies on a second computer screen. She has noticed, however, that her employees are distracted by being able to watch movies while at work. How would an economist describe this situation?

Accepted Answer

A)  As people watch movies, they become less productive and efficient and there is a leftward movement along the supply curve. 
B)  As people watch movies, they become less productive and efficient and there is a rightward movement along the supply curve. 
C)  As people watch movies, they become less productive and efficient and there is a rightward shift of the supply curve. 
D)  As people watch movies, they become less productive and efficient and there is a leftward shift of the supply curve. 
E)  As people watch movies, they become less productive and efficient and there is a rightward shift of and movement along the supply curve. 
A)  As people watch movies, they become less productive and efficient and there is a leftward movement along the supply curve. 
B)  As people watch movies, they become less productive and efficient and there is a rightward movement along the supply curve. 
C)  As people watch movies, they become less productive and efficient and there is a rightward shift of the supply curve. 
D)  As people watch movies, they become less productive and efficient and there is a leftward shift of the supply curve. 
E)  As people watch movies, they become less productive and efficient and there is a rightward shift of and movement along the supply curve.

Question 11

With no barriers to entry or exit and when firms in a market are operating at a loss, we can expect other firms to exit, causing the _______curve to shift to the _______and making the equilibrium price_______ and the equilibrium quantity_______ .

Accepted Answer

A)  demand; right; increase; increase 
B)  demand; left; decrease; decrease 
C)  supply; right; decrease; increase 
D)  supply; left; increase; increase 
E)  supply; left; increase; decrease 
A)  demand; right; increase; increase 
B)  demand; left; decrease; decrease 
C)  supply; right; decrease; increase 
D)  supply; left; increase; increase 
E)  supply; left; increase; decrease

Question 12

Which following change in the coffee market would shift the supply curve to the right?

Accepted Answer

A)  A study finds that drinking coffee leads to higher grades. 
B)  The wage for employees in the coffee business decreases. 
C)  The income in the economy increases. 
D)  Firms expect the price of coffee to increase in the future. 
E)  Fifty Starbucks coffee shops close down. 
A)  A study finds that drinking coffee leads to higher grades. 
B)  The wage for employees in the coffee business decreases. 
C)  The income in the economy increases. 
D)  Firms expect the price of coffee to increase in the future. 
E)  Fifty Starbucks coffee shops close down.

Question 13

After a new technology is introduced, the price typically falls. What is a possible explanation for this?

Accepted Answer

A)  More people purchase the product and more firms produce the product. 
B)  Fewer people purchase the product and fewer firms produce the product. 
C)  More firms produce the product. 
D)  More people purchase the product. 
E)  Fewer people purchase the product. 
A)  More people purchase the product and more firms produce the product. 
B)  Fewer people purchase the product and fewer firms produce the product. 
C)  More firms produce the product. 
D)  More people purchase the product. 
E)  Fewer people purchase the product.

Question 14

What would happen to the equilibrium price and quantity of shirts if the price of cotton decreases and all else is held constant?

Accepted Answer

A)  The price falls and the quantity rises. 
B)  The price rises and the quantity falls. 
C)  The price falls and the quantity falls. 
D)  The price rises and the quantity rises. 
E)  The price falls and the quantity remains constant. 
A)  The price falls and the quantity rises. 
B)  The price rises and the quantity falls. 
C)  The price falls and the quantity falls. 
D)  The price rises and the quantity rises. 
E)  The price falls and the quantity remains constant.

Question 15

Refer to the accompanying diagram for the questions that follow.
  
-As the life expectancy in the United States increases, which of the following could likely happen to the demand curve for items such as health care, cancer treatments, and nursing facilities, holding all else constant, and why?

Accepted Answer

A)  There would be a decrease because individuals are healthier. 
B)  There would be an increase because the cost of these items is falling. 
C)  There would be an increase because there will be more buyers in these markets. 
D)  There would be a decrease because Social Security benefits are running out. 
E)  They will stay the same because these changes would affect the supply curve and not the demand curve. 
A)  There would be a decrease because individuals are healthier. 
B)  There would be an increase because the cost of these items is falling. 
C)  There would be an increase because there will be more buyers in these markets. 
D)  There would be a decrease because Social Security benefits are running out. 
E)  They will stay the same because these changes would affect the supply curve and not the demand curve.

Question 16

Without using a graph, explain the difference between a movement along a demand curve and a shift in the entire demand curve.

Accepted Answer

A movement along the curve results when

Question 17

Firm A notices that Firm B is making a profit by producing footballs. There is nothing stopping Firm A from entering the football market, so it does. Holding all else constant, the number of firms in the market will

Accepted Answer

A)  increase, causing demand to increase. 
B)  increase, causing the supply to shift down. 
C)  decrease, causing the supply to decrease. 
D)  decrease, causing the supply to increase. 
E)  increase, causing the supply to increase. 
A)  increase, causing demand to increase. 
B)  increase, causing the supply to shift down. 
C)  decrease, causing the supply to decrease. 
D)  decrease, causing the supply to increase. 
E)  increase, causing the supply to increase.

Question 18

How does the market demand reflect the law of demand?

Accepted Answer

A)  As the price increases, each and every buyer purchases a larger quantity of the product. 
B)  As the price decreases, each and every buyer purchases a larger quantity of the product. 
C)  As the price increases, each and every buyer initially purchases a larger quantity of the product but eventually purchases less. 
D)  As the price decreases, each and every buyer initially purchases a larger quantity of the product but eventually purchases more. 
E)  The market demand curve does not reflect the law of demand. 
A)  As the price increases, each and every buyer purchases a larger quantity of the product. 
B)  As the price decreases, each and every buyer purchases a larger quantity of the product. 
C)  As the price increases, each and every buyer initially purchases a larger quantity of the product but eventually purchases less. 
D)  As the price decreases, each and every buyer initially purchases a larger quantity of the product but eventually purchases more. 
E)  The market demand curve does not reflect the law of demand.

Question 19

The change in equilibrium shown in the accompanying figure would be explained by an) _______in the price of an input and an)_______ in the price of a_______ .

Accepted Answer

A)  increase; increase; complement 
B)  decrease; increase; complement 
C)  decrease; increase; substitute 
D)  increase; decrease; complement 
E)  increase; increase; substitute 
A)  increase; increase; complement 
B)  decrease; increase; complement 
C)  decrease; increase; substitute 
D)  increase; decrease; complement 
E)  increase; increase; substitute

Question 20

Compare and contrast the differences between a competitive market and an imperfect market, and give an example of an imperfect market.

Accepted Answer

A competitive market is where there are

Taxes cause the equilibrium price of a good to

On January 30, 2012, Starbucks India announced plans to open 50 cafés. What would you expect to happen to the market for coffee in India, assuming all other factors are held constant?

Which of the following could cause the supply curve for the market for oranges to shift to the left?

According to a supply and demand model for apples, if the average household income decreases at the same time 10 apple orchards go out of business, one would expect the equilibrium

During the winter months, many elderly people leave their homes in northern New York and travel south to Florida or Arizona. What would we expect to happen to the equilibrium price and quantity of items most used by the elderly in northern New York?

In one year, 15 bowling alleys opened in California. During that same year, ESPN started broadcasting professional bowling on TV, which sparked more interest in the sport. What would we expect to happen to the price and quantity of a game of bowling in California during that year?

A shortage occurs whenever

When supply shifts to the right and demand stays constant, the equilibrium price _and the equilibrium quantity_ .

When the price is the ___equilibrium price, we would expect there to be a_ , causing the market to put_____ pressure on the price until it went back to the equilibrium price.

With no barriers to entry or exit and when firms in a market are operating at a loss, we can expect other firms to exit, causing the ___curve to shift to the _and making the equilibrium price_ and the equilibrium quantity___ .

Which following change in the coffee market would shift the supply curve to the right?

After a new technology is introduced, the price typically falls. What is a possible explanation for this?

What would happen to the equilibrium price and quantity of shirts if the price of cotton decreases and all else is held constant?

Refer to the accompanying diagram for the questions that follow. -As the life expectancy in the United States increases, which of the following could likely happen to the demand curve for items such as health care, cancer treatments, and nursing facilities, holding all else constant, and why?

Without using a graph, explain the difference between a movement along a demand curve and a shift in the entire demand curve.

Firm A notices that Firm B is making a profit by producing footballs. There is nothing stopping Firm A from entering the football market, so it does. Holding all else constant, the number of firms in the market will

How does the market demand reflect the law of demand?

The change in equilibrium shown in the accompanying figure would be explained by an) ___in the price of an input and an)_ in the price of a_____ .

Compare and contrast the differences between a competitive market and an imperfect market, and give an example of an imperfect market.

Five Foundations of Economics

Model Building and Gains From Trade

Market Outcomes and Tax Incidence

Price Controls

Introduction to Macroeconomics and Gross Domestic Product

Unemployment

The Price Level and Inflation

Savings, Interest Rates, and the Market for Loanable Funds

Financial Markets and Securities

Economic Growth and the Wealth of Nations

Growth Theory

The Aggregate Demandaggregate Supply Model

The Great Recession, the Great Depression, and Great Macroeconomic Debates

Federal Budgets: the Tools of Fiscal Policy

Fiscal Policy

Money and the Federal Reserve

Monetary Policy Learning Objectives

International Trade

International Finance

Filters

Exam 3: The Market at Work: Supply and Demand

Taxes cause the equilibrium price of a good to

On January 30, 2012, Starbucks India announced plans to open 50 cafés. What would you expect to happen to the market for coffee in India, assuming all other factors are held constant?

Which of the following could cause the supply curve for the market for oranges to shift to the left?

According to a supply and demand model for apples, if the average household income decreases at the same time 10 apple orchards go out of business, one would expect the equilibrium

During the winter months, many elderly people leave their homes in northern New York and travel south to Florida or Arizona. What would we expect to happen to the equilibrium price and quantity of items most used by the elderly in northern New York?

In one year, 15 bowling alleys opened in California. During that same year, ESPN started broadcasting professional bowling on TV, which sparked more interest in the sport. What would we expect to happen to the price and quantity of a game of bowling in California during that year?

A shortage occurs whenever

When supply shifts to the right and demand stays constant, the equilibrium price _______and the equilibrium quantity_______ .

When the price is the _______equilibrium price, we would expect there to be a_______ , causing the market to put_______ pressure on the price until it went back to the equilibrium price.

With no barriers to entry or exit and when firms in a market are operating at a loss, we can expect other firms to exit, causing the _______curve to shift to the _______and making the equilibrium price_______ and the equilibrium quantity_______ .

Which following change in the coffee market would shift the supply curve to the right?

After a new technology is introduced, the price typically falls. What is a possible explanation for this?

What would happen to the equilibrium price and quantity of shirts if the price of cotton decreases and all else is held constant?

Refer to the accompanying diagram for the questions that follow. -As the life expectancy in the United States increases, which of the following could likely happen to the demand curve for items such as health care, cancer treatments, and nursing facilities, holding all else constant, and why?

Without using a graph, explain the difference between a movement along a demand curve and a shift in the entire demand curve.

Firm A notices that Firm B is making a profit by producing footballs. There is nothing stopping Firm A from entering the football market, so it does. Holding all else constant, the number of firms in the market will

How does the market demand reflect the law of demand?

The change in equilibrium shown in the accompanying figure would be explained by an) _______in the price of an input and an)_______ in the price of a_______ .

Compare and contrast the differences between a competitive market and an imperfect market, and give an example of an imperfect market.

Five Foundations of Economics

Model Building and Gains From Trade

Market Outcomes and Tax Incidence

Price Controls

Introduction to Macroeconomics and Gross Domestic Product

Unemployment

The Price Level and Inflation

Savings, Interest Rates, and the Market for Loanable Funds

Financial Markets and Securities

Economic Growth and the Wealth of Nations

Growth Theory

The Aggregate Demandaggregate Supply Model

The Great Recession, the Great Depression, and Great Macroeconomic Debates

Federal Budgets: the Tools of Fiscal Policy

Fiscal Policy

Money and the Federal Reserve

Monetary Policy Learning Objectives

International Trade

International Finance

Filters

When supply shifts to the right and demand stays constant, the equilibrium price _and the equilibrium quantity_ .

When the price is the ___equilibrium price, we would expect there to be a_ , causing the market to put_____ pressure on the price until it went back to the equilibrium price.

With no barriers to entry or exit and when firms in a market are operating at a loss, we can expect other firms to exit, causing the ___curve to shift to the _and making the equilibrium price_ and the equilibrium quantity___ .

The change in equilibrium shown in the accompanying figure would be explained by an) ___in the price of an input and an)_ in the price of a_____ .