Question 1

When the price of a good decreases:

Accepted Answer

A)  the quantity demanded increases. 
B)  demand increases. 
C)  the quantity supplied increases. 
D)  supply increases. 
A)  the quantity demanded increases. 
B)  demand increases. 
C)  the quantity supplied increases. 
D)  supply increases.

Question 2

Figure: Price Adjustment   Refer to the figure. If the price of the product is $14, there is a:

Accepted Answer

A)  shortage of 30 units of the product, and the price will rise to $16. 
B)  surplus of 20 units of the product, and the price will rise to $16. 
C)  shortage of 50 units of the product, and the price will rise to $16. 
D)  surplus of 40 units of the product, and the price will rise to $16. 
A)  shortage of 30 units of the product, and the price will rise to $16. 
B)  surplus of 20 units of the product, and the price will rise to $16. 
C)  shortage of 50 units of the product, and the price will rise to $16. 
D)  surplus of 40 units of the product, and the price will rise to $16.

Question 3

Use the following to answer questions: Table: Equilibrium Price, Quantity $$\begin{array} { c c c } 
\hline \boldsymbol { P } & \boldsymbol { Q } _ { \mathbf { d } } & \boldsymbol { Q } _ { \mathbf { s } } \
\hline \$ 10 & 50 & 30 \
12 & 45 & 35 \
14 & 40 & 40 \
16 & 35 & 45 \
18 & 30 & 50 \
\hline
\end{array}$$
-(Table: Equilibrium Price, Quantity) Refer to the table. If the price in the market was $12, there would be a:

Accepted Answer

A)  shortage of 10 units. 
B)  shortage of 45 units. 
C)  surplus of 10 units. 
D)  surplus of 35 units. 
A)  shortage of 10 units. 
B)  shortage of 45 units. 
C)  surplus of 10 units. 
D)  surplus of 35 units.

Question 4

The September 11 terrorist attacks turned many people away from flying. The demand and supply model would predict which of the following events in the airline travel market?

Accepted Answer

A)  The supply of airline travel would decrease, resulting in a higher equilibrium price and lower equilibrium quantity. 
B)  The supply of airline travel would increase, resulting in a lower equilibrium price and higher equilibrium quantity. 
C)  The demand for airline travel would decrease, resulting in a lower equilibrium price and lower equilibrium quantity. 
D)  The supply and demand for airline travel would decrease, resulting in a higher equilibrium price and higher equilibrium quantity. 
A)  The supply of airline travel would decrease, resulting in a higher equilibrium price and lower equilibrium quantity. 
B)  The supply of airline travel would increase, resulting in a lower equilibrium price and higher equilibrium quantity. 
C)  The demand for airline travel would decrease, resulting in a lower equilibrium price and lower equilibrium quantity. 
D)  The supply and demand for airline travel would decrease, resulting in a higher equilibrium price and higher equilibrium quantity.

Question 5

In a market, the equilibrium condition is given by the following:

Accepted Answer

A)  quantity demanded = quantity supplied 
B)  quantity demanded × quantity supplied 
C)  quantity demanded / quantity supplied 
D)  price × quantity demanded = quantity supplied 
A)  quantity demanded = quantity supplied 
B)  quantity demanded × quantity supplied 
C)  quantity demanded / quantity supplied 
D)  price × quantity demanded = quantity supplied

Question 6

Suppose there is an increase in demand in a market and no change in the supply. What will happen to the market equilibrium price and quantity?

Accepted Answer

A)  Equilibrium price will rise; equilibrium quantity will rise. 
B)  Equilibrium price will rise; equilibrium quantity will fall. 
C)  Equilibrium price will fall; equilibrium quantity will rise. 
D)  Equilibrium price will fall; equilibrium quantity will fall. 
A)  Equilibrium price will rise; equilibrium quantity will rise. 
B)  Equilibrium price will rise; equilibrium quantity will fall. 
C)  Equilibrium price will fall; equilibrium quantity will rise. 
D)  Equilibrium price will fall; equilibrium quantity will fall.

Question 7

How is a class in which students are graded on a curve like a competitive market?

Accepted Answer

A)  In both cases, the quantity supplied equals the quantity demanded. 
B)  In a competitive market, demanders compete against one another for goods, the same way students compete for grades. 
C)  In a competitive market, demanders compete against suppliers for goods, the same way students compete for grades. 
D)  If the price is too high, demanders should blame suppliers, the same way students should blame professors for bad grades. 
A)  In both cases, the quantity supplied equals the quantity demanded. 
B)  In a competitive market, demanders compete against one another for goods, the same way students compete for grades. 
C)  In a competitive market, demanders compete against suppliers for goods, the same way students compete for grades. 
D)  If the price is too high, demanders should blame suppliers, the same way students should blame professors for bad grades.

Question 8

Use the following to answer questions: Figure: Basic Supply and Demand  
-(Figure: Basic Supply and Demand) In the diagram, the market price is stable only at a price of:

Accepted Answer

A)  $2. 
B)  $3. 
C)  $4. 
D)  $50. 
A)  $2. 
B)  $3. 
C)  $4. 
D)  $50.

Question 9

In Vernon Smith's supply and demand lab experiment:

Accepted Answer

A)  Smith knew the true demand and supply curves, but the subjects did not. 
B)  the subjects did not know their own willingness to pay or sell. 
C)  it took a long time to arrive at equilibrium. 
D)  there were many unrealized gains from trade. 
A)  Smith knew the true demand and supply curves, but the subjects did not. 
B)  the subjects did not know their own willingness to pay or sell. 
C)  it took a long time to arrive at equilibrium. 
D)  there were many unrealized gains from trade.

Question 10

The sum of consumer and producer surplus increases when producers sell more than the market equilibrium quantity.

Accepted Answer

A) True 
 B)False

Question 11

In a competitive market:

Accepted Answer

A)  buyers compete with other buyers, and sellers compete with other sellers. 
B)  buyers compete with sellers, and sellers compete with buyers. 
C)  sellers alone determine the equilibrium price. 
D)  buyers alone determine the equilibrium price. 
A)  buyers compete with other buyers, and sellers compete with other sellers. 
B)  buyers compete with sellers, and sellers compete with buyers. 
C)  sellers alone determine the equilibrium price. 
D)  buyers alone determine the equilibrium price.

Question 12

In a free market setting where quantity supplied is 50 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 13

Figure: Four Panel 1   Which of the four panels shows an increase in the quantity supplied?

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

In markets for manufactured goods, a new form of 3-D printing that lowers production costs will lead to:

Accepted Answer

A)  an increase in demand, a decrease in quantity demanded, and an increase in price. 
B)  an increase in supply, an increase in quantity demanded, and a decrease in price. 
C)  a decrease in demand, an increase in quantity supplied, and a decrease in price. 
D)  an increase in supply, a increase in quantity demanded, and an increase in price. 
A)  an increase in demand, a decrease in quantity demanded, and an increase in price. 
B)  an increase in supply, an increase in quantity demanded, and a decrease in price. 
C)  a decrease in demand, an increase in quantity supplied, and a decrease in price. 
D)  an increase in supply, a increase in quantity demanded, and an increase in price.

Question 15

If the equilibrium price is achieved, all willing demanders become buyers.

Accepted Answer

A) True 
 B)False

Question 16

Use the following to answer questions: Figure: Demand and Supply  
-(Figure: Demand and Supply) Refer to the figure. Which statement is TRUE?

Accepted Answer

A)  The gains from trade are maximized at 20 units of output. 
B)  At 16 units of output, there are unexploited gains from trade. 
C)  Buyers are willing to pay $20 for the 16th unit of output and it costs sellers $60 to produce that unit. 
D)  A free market is likely to produce less than 12 units of output. 
A)  The gains from trade are maximized at 20 units of output. 
B)  At 16 units of output, there are unexploited gains from trade. 
C)  Buyers are willing to pay $20 for the 16th unit of output and it costs sellers $60 to produce that unit. 
D)  A free market is likely to produce less than 12 units of output.

Question 17

If supply increases, ceteris paribus, market price will be ______ at the new equilibrium point.

Accepted Answer

A)  higher 
B)  lower 
C)  the same 
D)  either higher or lower 
A)  higher 
B)  lower 
C)  the same 
D)  either higher or lower

Question 18

If the price of Nike Air Force 1 sneakers is below the equilibrium price:

Accepted Answer

A)  competition will eventually push the price up. 
B)  there will be a surplus of sneakers. 
C)  quantity demanded will increase as the price rises to meet the equilibrium price. 
D)  quantity supplied will be greater than quantity demanded. 
A)  competition will eventually push the price up. 
B)  there will be a surplus of sneakers. 
C)  quantity demanded will increase as the price rises to meet the equilibrium price. 
D)  quantity supplied will be greater than quantity demanded.

Question 19

If the market for iPads experiences a surplus, then the:

Accepted Answer

A)  supply of iPads will fall. 
B)  demand for iPads will rise. 
C)  price of iPads will rise. 
D)  price of iPads will fall. 
A)  supply of iPads will fall. 
B)  demand for iPads will rise. 
C)  price of iPads will rise. 
D)  price of iPads will fall.

Question 20

Use the following to answer questions: Figure: Market Changes  
-The U.S. government limits the importation of Chinese-made bras. What effect does this trade restriction have on the market for bras?

Accepted Answer

A)  The equilibrium price will increase and the equilibrium quantity will decrease. 
B)  The demand for bras will increase, leading to a lower equilibrium price. 
C)  The equilibrium price will increase and the equilibrium quantity will increase. 
D)  The equilibrium price will decrease, leading to a higher equilibrium quantity. 
A)  The equilibrium price will increase and the equilibrium quantity will decrease. 
B)  The demand for bras will increase, leading to a lower equilibrium price. 
C)  The equilibrium price will increase and the equilibrium quantity will increase. 
D)  The equilibrium price will decrease, leading to a higher equilibrium quantity.

Exam 4: Equilibrium: How Supply and Demand Determine Prices

When the price of a good decreases:

Figure: Price Adjustment Refer to the figure. If the price of the product is $14, there is a:

Use the following to answer questions: Table: Equilibrium Price, Quantity \ 10 50 30 12 45 35 14 40 40 16 35 45 18 30 50 -(Table: Equilibrium Price, Quantity) Refer to the table. If the price in the market was $12, there would be a:

The September 11 terrorist attacks turned many people away from flying. The demand and supply model would predict which of the following events in the airline travel market?

In a market, the equilibrium condition is given by the following:

Suppose there is an increase in demand in a market and no change in the supply. What will happen to the market equilibrium price and quantity?

How is a class in which students are graded on a curve like a competitive market?

Use the following to answer questions: Figure: Basic Supply and Demand -(Figure: Basic Supply and Demand) In the diagram, the market price is stable only at a price of:

In Vernon Smith's supply and demand lab experiment:

The sum of consumer and producer surplus increases when producers sell more than the market equilibrium quantity.

In a competitive market:

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

Figure: Four Panel 1 Which of the four panels shows an increase in the quantity supplied?

In markets for manufactured goods, a new form of 3-D printing that lowers production costs will lead to:

If the equilibrium price is achieved, all willing demanders become buyers.

Use the following to answer questions: Figure: Demand and Supply -(Figure: Demand and Supply) Refer to the figure. Which statement is TRUE?

If supply increases, ceteris paribus, market price will be ______ at the new equilibrium point.

If the price of Nike Air Force 1 sneakers is below the equilibrium price:

If the market for iPads experiences a surplus, then the:

Use the following to answer questions: Figure: Market Changes -The U.S. government limits the importation of Chinese-made bras. What effect does this trade restriction have on the market for bras?

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