Question 1

For suppliers to sell more than the equilibrium quantity, it would mean that:

Accepted Answer

A)  it costs suppliers less to produce the good than its value to buyers. 
B)  it costs suppliers more to produce the good than its value to buyers. 
C)  the gains from trade increase. 
D)  suppliers gain from trade while buyers are unaffected. 
A)  it costs suppliers less to produce the good than its value to buyers. 
B)  it costs suppliers more to produce the good than its value to buyers. 
C)  the gains from trade increase. 
D)  suppliers gain from trade while buyers are unaffected.

Question 2

A market can be described by the equations Qd = 60 - 6P and Qs = 4P. Calculate the equilibrium price and quantity in this market.

Accepted Answer

Equilibrium price is

Question 3

A shortage occurs when:

Accepted Answer

A)  the price of a good is too high. 
B)  a market is at equilibrium. 
C)  the quantity supplied is zero. 
D)  the quantity demanded is greater than the quantity supplied. 
A)  the price of a good is too high. 
B)  a market is at equilibrium. 
C)  the quantity supplied is zero. 
D)  the quantity demanded is greater than the quantity supplied.

Question 4

When the price of a good equals the equilibrium price:

Accepted Answer

A)  there will still be some wasted resources. 
B)  gains from trade are minimized. 
C)  opportunity cost is minimized. 
D)  there are no unexploited gains from trade. 
A)  there will still be some wasted resources. 
B)  gains from trade are minimized. 
C)  opportunity cost is minimized. 
D)  there are no unexploited gains from trade.

Question 5

Gains from trade are maximized in a competitive market when:

Accepted Answer

A)  quantity supplied equals quantity demanded. 
B)  quantity supplied exceeds quantity demanded. 
C)  quantity demanded exceeds quantity supplied. 
D)  quantity supplied equals zero. 
A)  quantity supplied equals quantity demanded. 
B)  quantity supplied exceeds quantity demanded. 
C)  quantity demanded exceeds quantity supplied. 
D)  quantity supplied equals zero.

Question 6

Laboratory experiments by Vernon Smith support:

Accepted Answer

A)  the supply and demand model's usefulness in predicting changes in a free market. 
B)  a market equilibrium where the quantity supplied always exceeds the quantity demanded. 
C)  a market equilibrium where the quantity demanded always exceeds the quantity supplied. 
D)  suspicions that a market equilibrium does not exist in the real world. 
A)  the supply and demand model's usefulness in predicting changes in a free market. 
B)  a market equilibrium where the quantity supplied always exceeds the quantity demanded. 
C)  a market equilibrium where the quantity demanded always exceeds the quantity supplied. 
D)  suspicions that a market equilibrium does not exist in the real world.

Question 7

If firms produce a quantity that is greater than the equilibrium quantity, then unexploited gains from trade exist.

Accepted Answer

A) True 
 B)False

Question 8

(Figure: Market Equilibrium) According to the figure, the equilibrium price and quantity are:

Accepted Answer

A)  $1 and 4 units. 
B)  $4 and 8 units. 
C)  $2 and 4 units. 
D)  $3 and 6 units. 
A)  $1 and 4 units. 
B)  $4 and 8 units. 
C)  $2 and 4 units. 
D)  $3 and 6 units.

Question 9

An early frost in the vineyards of Napa Valley would cause a(n):

Accepted Answer

A)  increase in the demand for wine, increasing price. 
B)  increase in the supply of wine, decreasing price. 
C)  decrease in the demand for wine, decreasing price. 
D)  decrease in the supply of wine, increasing price. 
A)  increase in the demand for wine, increasing price. 
B)  increase in the supply of wine, decreasing price. 
C)  decrease in the demand for wine, decreasing price. 
D)  decrease in the supply of wine, increasing price.

Question 10

Use the following to answer questions: Figure: Demand, Supply Shifts  
-(Figure: Demand, Supply Shifts) In the figure, the initial demand curve is D1 and the initial supply curve is S1. If technological innovations lower the costs of production, what will happen?

Accepted Answer

A)  D1 will shift to D3 and equilibrium price and equilibrium quantity will increase. 
B)  S1 will shift to S2 and equilibrium price will increase but equilibrium quantity will decrease. 
C)  D1 will shift to D2 and equilibrium price and equilibrium quantity will decrease. 
D)  S1 will shift to S3 and equilibrium price will decrease but equilibrium quantity will increase. 
A)  D1 will shift to D3 and equilibrium price and equilibrium quantity will increase. 
B)  S1 will shift to S2 and equilibrium price will increase but equilibrium quantity will decrease. 
C)  D1 will shift to D2 and equilibrium price and equilibrium quantity will decrease. 
D)  S1 will shift to S3 and equilibrium price will decrease but equilibrium quantity will increase.

Question 11

Use the following to answer questions: Figure: Basic Supply and Demand  
-(Figure: Basic Supply and Demand) In the diagram, which of the following statements is TRUE?

Accepted Answer

A)  The equilibrium price is $3, and the equilibrium quantity is 60 units. 
B)  The equilibrium price is $4, and the equilibrium quantity is 60 units. 
C)  The equilibrium price is $2, and the equilibrium quantity is 40 units. 
D)  The equilibrium price is $3, and the equilibrium quantity is 50 units. 
A)  The equilibrium price is $3, and the equilibrium quantity is 60 units. 
B)  The equilibrium price is $4, and the equilibrium quantity is 60 units. 
C)  The equilibrium price is $2, and the equilibrium quantity is 40 units. 
D)  The equilibrium price is $3, and the equilibrium quantity is 50 units.

Question 12

Use the following to answer questions: Figure: Price and Quantity 3  
-(Figure: Price and Quantity 3) At a quantity of 80 units in the figure, it cost sellers ______ to produce the last unit, but buyers value this last unit at ______.

Accepted Answer

A)  $80; $50 
B)  $50; $20 
C)  $20; $80 
D)  $80; $20 
A)  $80; $50 
B)  $50; $20 
C)  $20; $80 
D)  $80; $20

Question 13

In a free market equilibrium, prices and quantities are uniquely:

Accepted Answer

A)  stable. 
B)  unstable. 
C)  moving in the "right" direction. 
D)  moving in the "wrong" direction. 
A)  stable. 
B)  unstable. 
C)  moving in the "right" direction. 
D)  moving in the "wrong" direction.

Question 14

Imagine a free market in which at a price of $10, quantity supplied is 50 units and quantity demanded is 50 units. Equilibrium price in this market:

Accepted Answer

A)  is equal to $10. 
B)  is less than $10. 
C)  is greater than $10. 
D)  differs from $10 in an indeterminate direction. 
A)  is equal to $10. 
B)  is less than $10. 
C)  is greater than $10. 
D)  differs from $10 in an indeterminate direction.

Question 15

In a market diagram, demand and supply cross each other at the equilibrium point.

Accepted Answer

A) True 
 B)False

Question 16

A free market can be described by the equations Qd = 180 - 3P and Qs = -50 + 2P. What are the equilibrium conditions in this market (i.e., find equilibrium P and Q) and what are the maximum gains from trade in this market?

Accepted Answer

The equilibrium pric

Question 17

When Asian countries went into a recession in 1997, the demand for oil _______ and the price of oil ________.

Accepted Answer

A)  increased; increased 
B)  decreased; increased 
C)  decreased; decreased 
D)  increased; decreased 
A)  increased; increased 
B)  decreased; increased 
C)  decreased; decreased 
D)  increased; decreased

Question 18

Figure: Supply Shift   In the figure, the supply curve shifted from S0 to S1. To describe this movement, we would say that:

Accepted Answer

A)  demand decreased, which caused a decrease in supply. 
B)  supply decreased, which caused a decrease in quantity demanded. 
C)  supply decreased, which caused a decrease in demand. 
D)  supply increased, which caused a decrease in quantity demanded. 
A)  demand decreased, which caused a decrease in supply. 
B)  supply decreased, which caused a decrease in quantity demanded. 
C)  supply decreased, which caused a decrease in demand. 
D)  supply increased, which caused a decrease in quantity demanded.

Question 19

Use the following to answer questions: Figure: Gains from Trade  
-(Figure: Gains from Trade) Refer to the figure. What are the unexploited gains from trade at the free market equilibrium?

Accepted Answer

A)  $1,000 
B)  $500 
C)  $0 
D)  $1,500 
A)  $1,000 
B)  $500 
C)  $0 
D)  $1,500

Question 20

Vernon Smith, Nobel Prize-winning economist, revolutionized economics by testing the model of demand and supply in experimental settings.

Accepted Answer

A) True 
 B)False

Exam 4: Equilibrium: How Supply and Demand Determine Prices

For suppliers to sell more than the equilibrium quantity, it would mean that:

A market can be described by the equations Qd = 60 - 6P and Qs = 4P. Calculate the equilibrium price and quantity in this market.

A shortage occurs when:

When the price of a good equals the equilibrium price:

Gains from trade are maximized in a competitive market when:

Laboratory experiments by Vernon Smith support:

If firms produce a quantity that is greater than the equilibrium quantity, then unexploited gains from trade exist.

(Figure: Market Equilibrium) According to the figure, the equilibrium price and quantity are:

An early frost in the vineyards of Napa Valley would cause a(n):

Use the following to answer questions: Figure: Demand, Supply Shifts -(Figure: Demand, Supply Shifts) In the figure, the initial demand curve is D1 and the initial supply curve is S1. If technological innovations lower the costs of production, what will happen?

Use the following to answer questions: Figure: Basic Supply and Demand -(Figure: Basic Supply and Demand) In the diagram, which of the following statements is TRUE?

Use the following to answer questions: Figure: Price and Quantity 3 -(Figure: Price and Quantity 3) At a quantity of 80 units in the figure, it cost sellers ______ to produce the last unit, but buyers value this last unit at ______.

In a free market equilibrium, prices and quantities are uniquely:

Imagine a free market in which at a price of $10, quantity supplied is 50 units and quantity demanded is 50 units. Equilibrium price in this market:

In a market diagram, demand and supply cross each other at the equilibrium point.

A free market can be described by the equations Qd = 180 - 3P and Qs = -50 + 2P. What are the equilibrium conditions in this market (i.e., find equilibrium P and Q) and what are the maximum gains from trade in this market?

When Asian countries went into a recession in 1997, the demand for oil _______ and the price of oil ________.

Figure: Supply Shift In the figure, the supply curve shifted from S0 to S1. To describe this movement, we would say that:

Use the following to answer questions: Figure: Gains from Trade -(Figure: Gains from Trade) Refer to the figure. What are the unexploited gains from trade at the free market equilibrium?

Vernon Smith, Nobel Prize-winning economist, revolutionized economics by testing the model of demand and supply in experimental settings.

The Big Ideas

The Power of Trade and Comparative Advantage

Supply and Demand

Price Ceilings and Floors

GDP and the Measurement of Progress

The Wealth of Nations and Economic Growth

Growth, Capital Accumulation and the Economics of Ideas: Catching up Vs the Cutting Edge

Saving, Investment, and the Financial System

Stock Markets and Personal Finance

Unemployment and Labor Force Participation

Inflation and the Quantity Theory of Money

Business Fluctuations: Aggregate Demand and Supply

Transmission and Amplification Mechanisms

The Federal Reserve System and Open Market Operations

Monetary Policy

The Federal Budget: Taxes and Spending

Fiscal Policy

International Trade

International Finance

Political Economy and Public Choice

Filters

A market can be described by the equations Q_d = 60 - 6P and Q_s = 4P. Calculate the equilibrium price and quantity in this market.

Use the following to answer questions: Figure: Demand, Supply Shifts -(Figure: Demand, Supply Shifts) In the figure, the initial demand curve is D₁ and the initial supply curve is S₁. If technological innovations lower the costs of production, what will happen?

Use the following to answer questions: Figure: Price and Quantity 3 -(Figure: Price and Quantity 3) At a quantity of 80 units in the figure, it cost sellers to produce the last unit, but buyers value this last unit at .

A free market can be described by the equations Q_d= 180 - 3P and Q_s = -50 + 2P. What are the equilibrium conditions in this market (i.e., find equilibrium P and Q) and what are the maximum gains from trade in this market?

When Asian countries went into a recession in 1997, the demand for oil _ and the price of oil __.

Figure: Supply Shift In the figure, the supply curve shifted from S₀ to S₁. To describe this movement, we would say that: