Question 1

Why did Vernon Smith win the Nobel Prize in Economics in 2002?

Accepted Answer

A)  He created the theory of supply and demand. 
B)  He used laboratory experiments as a tool to confirm the theory of supply and demand. 
C)  He was able to disprove the theory of supply and demand. 
D)  This is a trick question, because Vernon Smith did not win the Nobel Prize. 
A)  He created the theory of supply and demand. 
B)  He used laboratory experiments as a tool to confirm the theory of supply and demand. 
C)  He was able to disprove the theory of supply and demand. 
D)  This is a trick question, because Vernon Smith did not win the Nobel Prize.

Question 2

What is the difference between a change in the demand and a change in quantity demanded?

Accepted Answer

A)  A change in demand requires a movement along the demand curve, a change in quantity demanded does not. 
B)  A change in demand shifts the entire curve, a change in quantity demanded means price changed. 
C)  A change in quantity demanded means consumer preferences have changed. 
D)  A change in demand creates a new market equilibrium, a change in quantity demanded does not. 
A)  A change in demand requires a movement along the demand curve, a change in quantity demanded does not. 
B)  A change in demand shifts the entire curve, a change in quantity demanded means price changed. 
C)  A change in quantity demanded means consumer preferences have changed. 
D)  A change in demand creates a new market equilibrium, a change in quantity demanded does not.

Question 3

If supply decreases and its slope remains the same, consumer surplus:

Accepted Answer

A)  increases. 
B)  decreases. 
C)  stays the same. 
D)  cannot be determined given the information provided. 
A)  increases. 
B)  decreases. 
C)  stays the same. 
D)  cannot be determined given the information provided.

Question 4

A demand curve shows the relationship between:

Accepted Answer

A)  quantity demanded and quantity supplied, which are positively related. 
B)  quantity demanded and quantity supplied, which are negatively related. 
C)  price and quantity demanded, which are positively related. 
D)  price and quantity demanded, which are negatively related. 
A)  quantity demanded and quantity supplied, which are positively related. 
B)  quantity demanded and quantity supplied, which are negatively related. 
C)  price and quantity demanded, which are positively related. 
D)  price and quantity demanded, which are negatively related.

Question 5

The yearly shortage of Super Bowl tickets implies that the price of Super Bowl tickets is:

Accepted Answer

A)  set at the equilibrium price since they always sell out. 
B)  above the equilibrium price. 
C)  below the equilibrium price. 
D)  not set by supply and demand, but instead set by the NFL. 
A)  set at the equilibrium price since they always sell out. 
B)  above the equilibrium price. 
C)  below the equilibrium price. 
D)  not set by supply and demand, but instead set by the NFL.

Question 6

Why is consuming a quantity above equilibrium wasteful?

Accepted Answer

A)  because there are willing buyers of the good who do not purchase it 
B)  because resources are used without making society better off 
C)  because it creates a shortage, which generates waste 
D)  because it creates a surplus, which generates waste 
A)  because there are willing buyers of the good who do not purchase it 
B)  because resources are used without making society better off 
C)  because it creates a shortage, which generates waste 
D)  because it creates a surplus, which generates waste

Question 7

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

Accepted Answer

A)  larger 
B)  smaller 
C)  the same 
D)  either larger or smaller 
A)  larger 
B)  smaller 
C)  the same 
D)  either larger or smaller

Question 8

If market demand decreases:

Accepted Answer

A)  equilibrium price and quantity will both increase. 
B)  equilibrium price and quantity will both decrease. 
C)  equilibrium price will increase but equilibrium quantity will decrease. 
D)  equilibrium price will decrease but equilibrium quantity will increase. 
A)  equilibrium price and quantity will both increase. 
B)  equilibrium price and quantity will both decrease. 
C)  equilibrium price will increase but equilibrium quantity will decrease. 
D)  equilibrium price will decrease but equilibrium quantity will increase.

Question 9

Figure: Demand Shift   In the figure, the demand curve shifted from D0 to D1. To describe this movement, we would say that:

Accepted Answer

A)  demand increased, which caused an increase in supply. 
B)  quantity demanded increased, which caused an increase in supply. 
C)  demand increased, which caused an increase in quantity supplied. 
D)  quantity demanded increased, which caused an increase in quantity supplied. 
A)  demand increased, which caused an increase in supply. 
B)  quantity demanded increased, which caused an increase in supply. 
C)  demand increased, which caused an increase in quantity supplied. 
D)  quantity demanded increased, which caused an increase in quantity supplied.

Question 10

The formation of the Organization of the Petroleum Exporting Countries (OPEC) made it easier for these oil-producing countries to act together and successfully limit the supply of oil, thus raising prices.

Accepted Answer

A) True 
 B)False

Question 11

In a free market, the market moves to an equilibrium because buyers compete against sellers to get the lowest possible prices.

Accepted Answer

A) True 
 B)False

Question 12

Tim values treats for his dog at $10 per box, and John values them at $6 per box. If the price of dog treats is $3 per box but only one box is available between these two buyers, then gains from trade will be maximized when:

Accepted Answer

A)  Tim buys the treats. 
B)  John buys the treats. 
C)  either buys the treats, since they both value them more than the market price. 
D)  consumer surplus is equal to $3. 
A)  Tim buys the treats. 
B)  John buys the treats. 
C)  either buys the treats, since they both value them more than the market price. 
D)  consumer surplus is equal to $3.

Question 13

Figure: Four Panel 2   Which of the four panels shows an increase in income on an inferior good?

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

A market can be described by the equations Qd = 100 - P and Qs = P. What are the equilibrium price and quantity in this market?

Accepted Answer

A)  The equilibrium price is $50 and the equilibrium quantity is 50 units. 
B)  The equilibrium price is $100 and the equilibrium quantity is 100 units. 
C)  The equilibrium price is $0 and the equilibrium quantity is 0 units. 
D)  The equilibrium price is $0 and the equilibrium quantity is 100 units. 
A)  The equilibrium price is $50 and the equilibrium quantity is 50 units. 
B)  The equilibrium price is $100 and the equilibrium quantity is 100 units. 
C)  The equilibrium price is $0 and the equilibrium quantity is 0 units. 
D)  The equilibrium price is $0 and the equilibrium quantity is 100 units.

Question 15

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 supply curve for the product shifted to the right such that 10 more units of the good are supplied at every price, what is the new equilibrium price?

Accepted Answer

A)  $12 
B)  $14 
C)  $16 
D)  $18 
A)  $12 
B)  $14 
C)  $16 
D)  $18

Question 16

When there is a surplus of a good:

Accepted Answer

A)  sellers will lower the price in order to increase quantity demanded. 
B)  sellers will raise the price in order to decrease quantity demanded. 
C)  sellers will compete with buyers. 
D)  this is an indication the buyers do not value the good. 
A)  sellers will lower the price in order to increase quantity demanded. 
B)  sellers will raise the price in order to decrease quantity demanded. 
C)  sellers will compete with buyers. 
D)  this is an indication the buyers do not value the good.

Question 17

A decrease in the supply of milk will lead to a decrease in the QUANTITY DEMANDED of milk.

Accepted Answer

A) True 
 B)False

Question 18

An increase in the price of corn will lead to a decrease in the DEMAND for corn.

Accepted Answer

A) True 
 B)False

Question 19

If demand 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 20

An increase in the wages of fruit pickers will ultimately lead to a decrease in the supply of fruit and hence an increase in the price of fruit.

Accepted Answer

A) True 
 B)False

Why did Vernon Smith win the Nobel Prize in Economics in 2002?

What is the difference between a change in the demand and a change in quantity demanded?

If supply decreases and its slope remains the same, consumer surplus:

A demand curve shows the relationship between:

The yearly shortage of Super Bowl tickets implies that the price of Super Bowl tickets is:

Why is consuming a quantity above equilibrium wasteful?

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

If market demand decreases:

Figure: Demand Shift In the figure, the demand curve shifted from D₀ to D₁. To describe this movement, we would say that:

The formation of the Organization of the Petroleum Exporting Countries (OPEC) made it easier for these oil-producing countries to act together and successfully limit the supply of oil, thus raising prices.

In a free market, the market moves to an equilibrium because buyers compete against sellers to get the lowest possible prices.

Tim values treats for his dog at $10 per box, and John values them at $6 per box. If the price of dog treats is $3 per box but only one box is available between these two buyers, then gains from trade will be maximized when:

Figure: Four Panel 2 Which of the four panels shows an increase in income on an inferior good?

A market can be described by the equations Q_d = 100 - P and Q_s = P. What are the equilibrium price and quantity in this market?

When there is a surplus of a good:

A decrease in the supply of milk will lead to a decrease in the QUANTITY DEMANDED of milk.

An increase in the price of corn will lead to a decrease in the DEMAND for corn.

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

An increase in the wages of fruit pickers will ultimately lead to a decrease in the supply of fruit and hence an increase in the price of fruit.

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

Why did Vernon Smith win the Nobel Prize in Economics in 2002?

What is the difference between a change in the demand and a change in quantity demanded?

If supply decreases and its slope remains the same, consumer surplus:

A demand curve shows the relationship between:

The yearly shortage of Super Bowl tickets implies that the price of Super Bowl tickets is:

Why is consuming a quantity above equilibrium wasteful?

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

If market demand decreases:

Figure: Demand Shift In the figure, the demand curve shifted from D0 to D1. To describe this movement, we would say that:

The formation of the Organization of the Petroleum Exporting Countries (OPEC) made it easier for these oil-producing countries to act together and successfully limit the supply of oil, thus raising prices.

In a free market, the market moves to an equilibrium because buyers compete against sellers to get the lowest possible prices.

Tim values treats for his dog at $10 per box, and John values them at $6 per box. If the price of dog treats is $3 per box but only one box is available between these two buyers, then gains from trade will be maximized when:

Figure: Four Panel 2 Which of the four panels shows an increase in income on an inferior good?

A market can be described by the equations Qd = 100 - P and Qs = P. What are the equilibrium price and quantity in this market?

When there is a surplus of a good:

A decrease in the supply of milk will lead to a decrease in the QUANTITY DEMANDED of milk.

An increase in the price of corn will lead to a decrease in the DEMAND for corn.

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

An increase in the wages of fruit pickers will ultimately lead to a decrease in the supply of fruit and hence an increase in the price of fruit.

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

Figure: Demand Shift In the figure, the demand curve shifted from D₀ to D₁. To describe this movement, we would say that:

A market can be described by the equations Q_d = 100 - P and Q_s = P. What are the equilibrium price and quantity in this market?