Question 1

Which statement most accurately explains the upward trend in the market price of oil since around the year 2000?

Accepted Answer

A)  The supply of oil has increased faster than the demand for oil has increased. 
B)  Both the demand for and the supply of oil has decreased. 
C)  The demand for oil has increased faster than the supply of oil has increased. 
D)  The demand for oil has decreased while the supply of oil has increased. 
A)  The supply of oil has increased faster than the demand for oil has increased. 
B)  Both the demand for and the supply of oil has decreased. 
C)  The demand for oil has increased faster than the supply of oil has increased. 
D)  The demand for oil has decreased while the supply of oil has increased.

Question 2

If the equilibrium quantity in a market is 200, resources will be wasted and society made poorer if 250 units are produced.

Accepted Answer

A) True 
 B)False

Question 3

Use the following to answer questions: Figure: Chocolate  
-(Figure: Chocolate) If the price in the diagram is $5, what will happen?

Accepted Answer

A)  The price will increase because of a shortage. 
B)  The price will decrease because of a shortage. 
C)  The price will increase because of a surplus. 
D)  The price will decrease because of a surplus. 
A)  The price will increase because of a shortage. 
B)  The price will decrease because of a shortage. 
C)  The price will increase because of a surplus. 
D)  The price will decrease because of a surplus.

Question 4

For most of human history, salt was a rare and valuable commodity that had to be either mined or extracted from the ocean through evaporation. This changed when modern chemistry allowed humans to produce it in factories. How did this development affect the market for salt?

Accepted Answer

A)  Demand increased, causing the price to rise. 
B)  Demand increased, causing the price to fall. 
C)  Supply increased, causing the price to rise. 
D)  Supply increased, causing the price to fall. 
A)  Demand increased, causing the price to rise. 
B)  Demand increased, causing the price to fall. 
C)  Supply increased, causing the price to rise. 
D)  Supply increased, causing the price to fall.

Question 5

If demand decreases, 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 6

When supply decreases there is a ______ at the old equilibrium price, which puts ______ pressure on price until the market reaches the new equilibrium.

Accepted Answer

A)  surplus; downward 
B)  surplus; upward 
C)  shortage; upward 
D)  shortage; downward 
A)  surplus; downward 
B)  surplus; upward 
C)  shortage; upward 
D)  shortage; downward

Question 7

The quantity demanded for wireless computer mouses is Qd = 500 - 1.75P, and the quantity supplied is Qs = 450 + 0.25P.
a. Calculate the equilibrium price and quantity.
b. Is total surplus maximized at 440 mouses? Explain.
c. If the market price is currently $10, is there a shortage or surplus of mouses? How do you know?
d. If the market price is $40, is there a shortage or surplus of mouses? How do you know?

Accepted Answer

a. Q_d= Q_s. 500 - 1. 75P = 450 + 0. 25P 50

Question 8

When producers produce more than the equilibrium quantity:

Accepted Answer

A)  resources are wasted producing goods at a higher cost than consumers are willing to pay. 
B)  the market is operating at an abnormally high level of efficiency. 
C)  sellers have an incentive to reduce their price. 
D)  buyers have an incentive to offer a higher price. 
A)  resources are wasted producing goods at a higher cost than consumers are willing to pay. 
B)  the market is operating at an abnormally high level of efficiency. 
C)  sellers have an incentive to reduce their price. 
D)  buyers have an incentive to offer a higher price.

Question 9

An increase in the price of a good will decrease DEMAND for that good.

Accepted Answer

A) True 
 B)False

Question 10

A shortage occurs when consumers want to buy more goods than sellers are making available.

Accepted Answer

A) True 
 B)False

Question 11

An increase in the demand for organic foods will lead to:

Accepted Answer

A)  an increase in the price, and hence an increase in the supply of organic foods. 
B)  an increase in the price, and hence an increase in the quantity supplied of organic foods. 
C)  a decrease in the price, and hence a decrease in the supply of organic foods. 
D)  a decrease in the price, and hence a decrease in the quantity supplied of organic foods. 
A)  an increase in the price, and hence an increase in the supply of organic foods. 
B)  an increase in the price, and hence an increase in the quantity supplied of organic foods. 
C)  a decrease in the price, and hence a decrease in the supply of organic foods. 
D)  a decrease in the price, and hence a decrease in the quantity supplied of organic foods.

Question 12

A technological innovation in the production of golf balls increases ______, causing the price to ______ and the ______.

Accepted Answer

A)  supply; fall; quantity demanded to increase 
B)  the quantity supplied; fall; quantity demanded to increase 
C)  supply; rise; demand to decrease 
D)  supply; fall; demand to increase 
A)  supply; fall; quantity demanded to increase 
B)  the quantity supplied; fall; quantity demanded to increase 
C)  supply; rise; demand to decrease 
D)  supply; fall; demand to increase

Question 13

Which of the following is a contribution of economist Vernon Smith?

Accepted Answer

A)  the idea of movements along the supply and demand curves 
B)  the discovery of equilibrium price 
C)  experimental evidence of equilibrium price 
D)  the theory of demand shocks 
A)  the idea of movements along the supply and demand curves 
B)  the discovery of equilibrium price 
C)  experimental evidence of equilibrium price 
D)  the theory of demand shocks

Question 14

The United Nations estimates that Earth's population growth rate will slow down by the year 2050 at which time population may start to decrease. If technological change allows the supply of oil to increase at a constant rate, and nothing else changes, what effect will a slowdown in population growth have on the price of oil?

Accepted Answer

A)  Demand will increase during this period, and the price of oil will continue to increase beyond 2050. 
B)  Demand will increase more slowly during this period but since supply is growing at a constant rate, the rate of price increase will fall, and ultimately the price of oil may begin to fall. 
C)  Demand will increase, raising the quantity supplied. Since the quantity supplied will increase, the price must go down. 
D)  The supply of oil will fall and prices will rise. 
A)  Demand will increase during this period, and the price of oil will continue to increase beyond 2050. 
B)  Demand will increase more slowly during this period but since supply is growing at a constant rate, the rate of price increase will fall, and ultimately the price of oil may begin to fall. 
C)  Demand will increase, raising the quantity supplied. Since the quantity supplied will increase, the price must go down. 
D)  The supply of oil will fall and prices will rise.

Question 15

Figure: Supply-Driven Price Change   Refer to the figure. When the supply curve shifts from S0 to S1, the equilibrium price rises to:

Accepted Answer

A)  $12 and the equilibrium quantity falls to 70. 
B)  $10 and the equilibrium quantity falls to 100. 
C)  $12 and the equilibrium quantity falls to 40. 
D)  $10 and the equilibrium quantity falls to 70. 
A)  $12 and the equilibrium quantity falls to 70. 
B)  $10 and the equilibrium quantity falls to 100. 
C)  $12 and the equilibrium quantity falls to 40. 
D)  $10 and the equilibrium quantity falls to 70.

Question 16

In a competitive market, buyers compete with sellers.

Accepted Answer

A) True 
 B)False

Question 17

Five new sellers enter a market (that previously had seven) and begin producing a good. Which of the following choices explains what happens to the equilibrium Q and P?

Accepted Answer

A)  The demand curve will shift to the right, and the equilibrium P and Q will both rise. 
B)  The supply curve will shift to the right, the equilibrium P will fall, and the equilibrium Q will rise. 
C)  The supply curve will shift to the left, the equilibrium P will fall, and the equilibrium Q will rise. 
D)  The supply curve will shift to the right, the equilibrium P will rise, and the equilibrium Q will fall. 
A)  The demand curve will shift to the right, and the equilibrium P and Q will both rise. 
B)  The supply curve will shift to the right, the equilibrium P will fall, and the equilibrium Q will rise. 
C)  The supply curve will shift to the left, the equilibrium P will fall, and the equilibrium Q will rise. 
D)  The supply curve will shift to the right, the equilibrium P will rise, and the equilibrium Q will fall.

Question 18

When the price of a good increases, demand for the good will:

Accepted Answer

A)  increase. 
B)  decrease. 
C)  be unaffected. 
D)  depend on the corresponding change in supply. 
A)  increase. 
B)  decrease. 
C)  be unaffected. 
D)  depend on the corresponding change in supply.

Question 19

Imagine a free market in which quantity supplied is 50 units and quantity demanded is 50 units at the current price. The market is experiencing a(n):

Accepted Answer

A)  equilibrium. 
B)  surplus. 
C)  shortage. 
D)  shift. 
A)  equilibrium. 
B)  surplus. 
C)  shortage. 
D)  shift.

Question 20

After a hurricane in Florida destroys half of the orange crop, economists predict:

Accepted Answer

A)  an increase in both orange prices and orange sales. 
B)  a decrease in both orange prices and orange sales. 
C)  an increase in orange prices and a decrease in orange sales. 
D)  a decrease in orange prices and an increase in orange sales. 
A)  an increase in both orange prices and orange sales. 
B)  a decrease in both orange prices and orange sales. 
C)  an increase in orange prices and a decrease in orange sales. 
D)  a decrease in orange prices and an increase in orange sales.

Which statement most accurately explains the upward trend in the market price of oil since around the year 2000?

If the equilibrium quantity in a market is 200, resources will be wasted and society made poorer if 250 units are produced.

Use the following to answer questions: Figure: Chocolate -(Figure: Chocolate) If the price in the diagram is $5, what will happen?

For most of human history, salt was a rare and valuable commodity that had to be either mined or extracted from the ocean through evaporation. This changed when modern chemistry allowed humans to produce it in factories. How did this development affect the market for salt?

If demand decreases, ceteris paribus, market price will be ______ at the new equilibrium point.

When supply decreases there is a at the old equilibrium price, which puts pressure on price until the market reaches the new equilibrium.

When producers produce more than the equilibrium quantity:

An increase in the price of a good will decrease DEMAND for that good.

A shortage occurs when consumers want to buy more goods than sellers are making available.

An increase in the demand for organic foods will lead to:

A technological innovation in the production of golf balls increases , causing the price to and the __.

Which of the following is a contribution of economist Vernon Smith?

Figure: Supply-Driven Price Change Refer to the figure. When the supply curve shifts from S₀ to S₁, the equilibrium price rises to:

In a competitive market, buyers compete with sellers.

Five new sellers enter a market (that previously had seven) and begin producing a good. Which of the following choices explains what happens to the equilibrium Q and P?

When the price of a good increases, demand for the good will:

Imagine a free market in which quantity supplied is 50 units and quantity demanded is 50 units at the current price. The market is experiencing a(n):

After a hurricane in Florida destroys half of the orange crop, economists predict:

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

Exam 4: Equilibrium: How Supply and Demand Determine Prices

Which statement most accurately explains the upward trend in the market price of oil since around the year 2000?

If the equilibrium quantity in a market is 200, resources will be wasted and society made poorer if 250 units are produced.

Use the following to answer questions: Figure: Chocolate -(Figure: Chocolate) If the price in the diagram is $5, what will happen?

For most of human history, salt was a rare and valuable commodity that had to be either mined or extracted from the ocean through evaporation. This changed when modern chemistry allowed humans to produce it in factories. How did this development affect the market for salt?

If demand decreases, ceteris paribus, market price will be ______ at the new equilibrium point.

When supply decreases there is a ______ at the old equilibrium price, which puts ______ pressure on price until the market reaches the new equilibrium.

When producers produce more than the equilibrium quantity:

An increase in the price of a good will decrease DEMAND for that good.

A shortage occurs when consumers want to buy more goods than sellers are making available.

An increase in the demand for organic foods will lead to:

A technological innovation in the production of golf balls increases ______, causing the price to ______ and the ______.

Which of the following is a contribution of economist Vernon Smith?

Figure: Supply-Driven Price Change Refer to the figure. When the supply curve shifts from S0 to S1, the equilibrium price rises to:

In a competitive market, buyers compete with sellers.

Five new sellers enter a market (that previously had seven) and begin producing a good. Which of the following choices explains what happens to the equilibrium Q and P?

When the price of a good increases, demand for the good will:

Imagine a free market in which quantity supplied is 50 units and quantity demanded is 50 units at the current price. The market is experiencing a(n):

After a hurricane in Florida destroys half of the orange crop, economists predict:

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

When supply decreases there is a at the old equilibrium price, which puts pressure on price until the market reaches the new equilibrium.

A technological innovation in the production of golf balls increases , causing the price to and the __.

Figure: Supply-Driven Price Change Refer to the figure. When the supply curve shifts from S₀ to S₁, the equilibrium price rises to: