Question 1

What is the difference between a "change in demand" and a "change in quantity demanded"? Graph your answer.

Accepted Answer

A change in demand refers to a shift in

Question 2

If there is a surplus of a good, sellers will:

Accepted Answer

A)  lower the price in order to increase quantity demanded. 
B)  raise the price in order to decrease quantity demanded. 
C)  compete with buyers. 
D)  know that the buyers overvalue the good. 
A)  lower the price in order to increase quantity demanded. 
B)  raise the price in order to decrease quantity demanded. 
C)  compete with buyers. 
D)  know that the buyers overvalue the good.

Question 3

Use the following to answer questions: Figure: Market Changes  
-(Figure: Market Changes) Refer to the figures. If these figures represent the market for new cars, which figure shows the effect of an economic recession?

Accepted Answer

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

Question 4

When the demand curve shifts, equilibrium price and quantity exchanged move in opposite directions.

Accepted Answer

A) True 
 B)False

Question 5

The Arab Oil Embargo of 1973, the Iranian Revolution of 1979, and the Gulf War of 1991 all affected oil prices by:

Accepted Answer

A)  increasing the demand for oil. 
B)  reducing the supply of oil. 
C)  reducing the demand for oil. 
D)  increasing the supply of oil. 
A)  increasing the demand for oil. 
B)  reducing the supply of oil. 
C)  reducing the demand for oil. 
D)  increasing the supply of oil.

Question 6

Suppose the price of oil is falling due to a drop-off in demand after the summer driving season. Explain what a group of oil-producing nations (like OPEC) that control a significant amount of the world's oil supplies could do in order to keep prices (and hence profits) high.

Accepted Answer

OPEC nations would want to dec

Question 7

In order for the gains of trade to be maximized, everyone whose willingness to pay for the good is greater than zero must receive it.

Accepted Answer

A) True 
 B)False

Question 8

What effect did the 1997 East Asian recession in countries such as South Korea, Indonesia, and Thailand have on the oil market?

Accepted Answer

A)  The recession decreased income, made the world more dependent on oil, and increased oil demand and prices. 
B)  The recession led to high unemployment, and reduced the demand for driving and the supply of oil. 
C)  The recession decreased income, and reduced the demand for oil and oil prices. 
D)  The recession led to high unemployment, increased demand for Sunday driving, and higher oil prices. 
A)  The recession decreased income, made the world more dependent on oil, and increased oil demand and prices. 
B)  The recession led to high unemployment, and reduced the demand for driving and the supply of oil. 
C)  The recession decreased income, and reduced the demand for oil and oil prices. 
D)  The recession led to high unemployment, increased demand for Sunday driving, and higher oil prices.

Question 9

The equilibrium quantity is the quantity at which:

Accepted Answer

A)  consumers' willingness to pay equals producers' willingness to sell. 
B)  buyers have no unsatisfied wants. 
C)  gains from trade are minimized. 
D)  suppliers' production is maximized. 
A)  consumers' willingness to pay equals producers' willingness to sell. 
B)  buyers have no unsatisfied wants. 
C)  gains from trade are minimized. 
D)  suppliers' production is maximized.

Question 10

When a market is competitive:

Accepted Answer

A)  buyers compete with sellers to try to get lower prices. 
B)  buyers compete with other buyers, raising prices; and sellers compete with sellers, lowering prices. 
C)  everybody competes with everybody else. 
D)  buyers compete with sellers and sellers compete with one another, but buyers do not compete with one another. 
A)  buyers compete with sellers to try to get lower prices. 
B)  buyers compete with other buyers, raising prices; and sellers compete with sellers, lowering prices. 
C)  everybody competes with everybody else. 
D)  buyers compete with sellers and sellers compete with one another, but buyers do not compete with one another.

Question 11

Economic growth in China and India has reduced the world supply of oil.

Accepted Answer

A) True 
 B)False

Question 12

Gains from trade are maximized when:

Accepted Answer

A)  the market price is higher than the equilibrium price. 
B)  the market price is less than the equilibrium price. 
C)  the market price is equal to the equilibrium price. 
D)  there are additional potential trades available that have not been completed. 
A)  the market price is higher than the equilibrium price. 
B)  the market price is less than the equilibrium price. 
C)  the market price is equal to the equilibrium price. 
D)  there are additional potential trades available that have not been completed.

Question 13

An increase in demand causes an increase in quantity supplied, which causes a decrease in price.

Accepted Answer

A) True 
 B)False

Question 14

For each good produced in a free market economy, demand and supply determine:

Accepted Answer

A)  the price of the good, but not the quantity. 
B)  the quantity of the good, but not the price. 
C)  both the price and the quantity of the good. 
D)  neither price nor quantity; sellers determine the price. 
A)  the price of the good, but not the quantity. 
B)  the quantity of the good, but not the price. 
C)  both the price and the quantity of the good. 
D)  neither price nor quantity; sellers determine the price.

Question 15

In a free market setting where quantity supplied is 40 units and quantity demanded is 50 units, price will:

Accepted Answer

A)  rise. 
B)  fall. 
C)  remain the same. 
D)  move in an indeterminate direction. 
A)  rise. 
B)  fall. 
C)  remain the same. 
D)  move in an indeterminate direction.

Question 16

If market transactions equal the equilibrium quantity, there may still be unexploited gains from trade.

Accepted Answer

A) True 
 B)False

Question 17

Free markets maximize consumer plus producer surplus regardless of the level of competition.

Accepted Answer

A) True 
 B)False

Question 18

If a market has a surplus, how will the market respond?

Accepted Answer

A)  The price will fall and the quantity supplied will fall. 
B)  The price will fall and the quantity supplied will rise. 
C)  The price will rise and the quantity supplied will fall. 
D)  The price will rise and the quantity supplied will rise. 
A)  The price will fall and the quantity supplied will fall. 
B)  The price will fall and the quantity supplied will rise. 
C)  The price will rise and the quantity supplied will fall. 
D)  The price will rise and the quantity supplied will rise.

Question 19

When you move along a demand curve:

Accepted Answer

A)  only price is held constant. 
B)  income and the price of the good are held constant. 
C)  all non-price determinants of demand are held constant. 
D)  all determinants of quantity demanded are held constant. 
A)  only price is held constant. 
B)  income and the price of the good are held constant. 
C)  all non-price determinants of demand are held constant. 
D)  all determinants of quantity demanded are held constant.

Question 20

Use the following to answer questions: Figure: Price and Quantity 2  
-(Figure: Price and Quantity 2) At a cost of $20 per unit in the diagram, the demanders whose wants are satisfied are represented by the section of the demand curve between a price of:

Accepted Answer

A)  $100 and $80. 
B)  $100 and $50. 
C)  $0 and $100. 
D)  $20 and $80. 
A)  $100 and $80. 
B)  $100 and $50. 
C)  $0 and $100. 
D)  $20 and $80.

Exam 4: Equilibrium: How Supply and Demand Determine Prices

What is the difference between a "change in demand" and a "change in quantity demanded"? Graph your answer.

If there is a surplus of a good, sellers will:

Use the following to answer questions: Figure: Market Changes -(Figure: Market Changes) Refer to the figures. If these figures represent the market for new cars, which figure shows the effect of an economic recession?

When the demand curve shifts, equilibrium price and quantity exchanged move in opposite directions.

The Arab Oil Embargo of 1973, the Iranian Revolution of 1979, and the Gulf War of 1991 all affected oil prices by:

Suppose the price of oil is falling due to a drop-off in demand after the summer driving season. Explain what a group of oil-producing nations (like OPEC) that control a significant amount of the world's oil supplies could do in order to keep prices (and hence profits) high.

In order for the gains of trade to be maximized, everyone whose willingness to pay for the good is greater than zero must receive it.

What effect did the 1997 East Asian recession in countries such as South Korea, Indonesia, and Thailand have on the oil market?

The equilibrium quantity is the quantity at which:

When a market is competitive:

Economic growth in China and India has reduced the world supply of oil.

Gains from trade are maximized when:

An increase in demand causes an increase in quantity supplied, which causes a decrease in price.

For each good produced in a free market economy, demand and supply determine:

In a free market setting where quantity supplied is 40 units and quantity demanded is 50 units, price will:

If market transactions equal the equilibrium quantity, there may still be unexploited gains from trade.

Free markets maximize consumer plus producer surplus regardless of the level of competition.

If a market has a surplus, how will the market respond?

When you move along a demand curve:

Use the following to answer questions: Figure: Price and Quantity 2 -(Figure: Price and Quantity 2) At a cost of $20 per unit in the diagram, the demanders whose wants are satisfied are represented by the section of the demand curve between a price of:

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