Question 1

-Refer to the above figure. Which diagram shows the effect on the market of Corn Flakes when the demand for Corn Flakes has increased?

Accepted Answer

A) graph C 
B) graph D 
C) neither graph 
D) both graphs 
A) graph C 
B) graph D 
C) neither graph 
D) both graphs

Question 2

Briefly discuss the determinants of supply other than price.

Accepted Answer

An increase in the costs of inputs used

Question 3

The price of a new car is $40,000 while the price of a five-year old car of the same brand is $16,000. The next year the price of the new car increases to $44,000 and the price of a five-year old car of the same brand is $17,600. The relative price of the used car

Accepted Answer

A) decreased by $2,400. 
B) decreased by 10 percent. 
C) increased by 10 percent. 
D) remained constant at 0.4. 
A) decreased by $2,400. 
B) decreased by 10 percent. 
C) increased by 10 percent. 
D) remained constant at 0.4.

Question 4

When income falls,

Accepted Answer

A) the demand for a normal goods rises. 
B) the demand for an inferior goods rises. 
C) there is a movement downward along the demand curve for a normal good. 
D) there is a movement downward along the demand curve for an inferior good. 
A) the demand for a normal goods rises. 
B) the demand for an inferior goods rises. 
C) there is a movement downward along the demand curve for a normal good. 
D) there is a movement downward along the demand curve for an inferior good.

Question 5

-In a free market economy, the market clearing (equilibrium)price in the above table would adjust to

Accepted Answer

A) $1. 
B) $3. 
C) $4. 
D) $5. 
A) $1. 
B) $3. 
C) $4. 
D) $5.

Question 6

Suppose an individual experiences a permanent increase in income. As a result of this increased income, further assume that the individual eats dinner at restaurants more frequently each month. This information suggests that dinners at restaurants for this individual are

Accepted Answer

A) an inferior good. 
B) a substitute good. 
C) a normal good. 
D) both complimentary and inferior. 
A) an inferior good. 
B) a substitute good. 
C) a normal good. 
D) both complimentary and inferior.

Question 7

Which of the following is true of the activities of ticket scalpers?

Accepted Answer

A) These activities cannot generate profits for the scalpers unless ticket prices are currently below market clearing levels. 
B) These activities help reduce the quantities of excess tickets supplied for events in which ticket surpluses currently exist. 
C) Engaging in these activities enable scalpers to push the price above the market clearing level. 
D) Engaging in these activities enable scalpers to push the price below the market clearing level. 
A) These activities cannot generate profits for the scalpers unless ticket prices are currently below market clearing levels. 
B) These activities help reduce the quantities of excess tickets supplied for events in which ticket surpluses currently exist. 
C) Engaging in these activities enable scalpers to push the price above the market clearing level. 
D) Engaging in these activities enable scalpers to push the price below the market clearing level.

Question 8

-According to the above table, a surplus exists when

Accepted Answer

A) the price is $1 per unit. 
B) the price is $2 per unit. 
C) the price is $3 per unit. 
D) the price is greater than $3 per unit. 
A) the price is $1 per unit. 
B) the price is $2 per unit. 
C) the price is $3 per unit. 
D) the price is greater than $3 per unit.

Question 9

A shift of the demand curve to the left represents

Accepted Answer

A) an increase in demand. 
B) a decrease in demand. 
C) an increase in quantity demanded. 
D) a decrease in quantity demanded. 
A) an increase in demand. 
B) a decrease in demand. 
C) an increase in quantity demanded. 
D) a decrease in quantity demanded.

Question 10

-Refer to the above figure. A surplus will exist when

Accepted Answer

A) the price is between $0 and $6. 
B) the price equals $6. 
C) the price equals $10. 
D) quantity demanded equals 15. 
A) the price is between $0 and $6. 
B) the price equals $6. 
C) the price equals $10. 
D) quantity demanded equals 15.

Question 11

Two goods are substitutes when

Accepted Answer

A) an increase in the price of one reduces the demand for the other. 
B) an increase in the price of one raises the demand for the other. 
C) the two goods are used together. 
D) the two goods have the same price. 
A) an increase in the price of one reduces the demand for the other. 
B) an increase in the price of one raises the demand for the other. 
C) the two goods are used together. 
D) the two goods have the same price.

Question 12

A movement along a supply curve is induced by a change in

Accepted Answer

A) input prices. 
B) taxes and subsidies. 
C) price expectations. 
D) the product's own price. 
A) input prices. 
B) taxes and subsidies. 
C) price expectations. 
D) the product's own price.

Question 13

With reference to the difference between a change in demand and a change in quantity demanded, which of the following is true?

Accepted Answer

A) If a good's price goes down, then demand for the good will decrease. 
B) If a good's price goes down, then quantity demanded will increase. 
C) If demand increases, then the demand curve will shift to the left. 
D) If price rises and quantity demanded decreases, then the demand curve will shift to the left. 
A) If a good's price goes down, then demand for the good will decrease. 
B) If a good's price goes down, then quantity demanded will increase. 
C) If demand increases, then the demand curve will shift to the left. 
D) If price rises and quantity demanded decreases, then the demand curve will shift to the left.

Question 14

Distinguish between a change in quantity supplied and a change in supply.

Accepted Answer

A change in quantity supplied is a movem

Question 15

Which of the following statements is FALSE about the demand curve?

Accepted Answer

A) An increase in demand shifts the demand curve to the left, closer to the price axis. 
B) When only the price of a good changes, there is movement along the demand curve but no change in demand. 
C) A change in demand is graphically shown by shifting the entire demand curve. 
D) When demand decreases, there is a drop in the quantity demanded at each price. 
A) An increase in demand shifts the demand curve to the left, closer to the price axis. 
B) When only the price of a good changes, there is movement along the demand curve but no change in demand. 
C) A change in demand is graphically shown by shifting the entire demand curve. 
D) When demand decreases, there is a drop in the quantity demanded at each price.

Question 16

Refer to the above figure. Other things being equal, if price is at P2 , then we would expect

Accepted Answer

A) price to decline until an equilibrium is achieved at P0. 
B) consumers to reduce their offering price for the good. 
C) an excess quantity demanded to occur. 
D) consumers to bid against each other for goods and force the price still higher. 
A) price to decline until an equilibrium is achieved at P0. 
B) consumers to reduce their offering price for the good. 
C) an excess quantity demanded to occur. 
D) consumers to bid against each other for goods and force the price still higher.

Question 17

An increase in demand for a good can be caused by

Accepted Answer

A) a decrease in the price of a substitute good. 
B) a reduction in income if the good is a normal good. 
C) a decrease in the price of a complementary good. 
D) an increase in price of a complementary good. 
A) a decrease in the price of a substitute good. 
B) a reduction in income if the good is a normal good. 
C) a decrease in the price of a complementary good. 
D) an increase in price of a complementary good.

Question 18

A demand curve

Accepted Answer

A) slopes down because of the inverse relationship between price and quantity demanded. 
B) slopes up because of the direct relationship between price and quantity demanded. 
C) can slope up or down depending on the tastes of the consumer. 
D) is vertical for necessities, upward sloping for luxury goods, and downward sloping for all other goods. 
A) slopes down because of the inverse relationship between price and quantity demanded. 
B) slopes up because of the direct relationship between price and quantity demanded. 
C) can slope up or down depending on the tastes of the consumer. 
D) is vertical for necessities, upward sloping for luxury goods, and downward sloping for all other goods.

Question 19

A market is in equilibrium when

Accepted Answer

A) the quantity demanded equals the quantity supplied at the market clearing price. 
B) the horizontal axis crosses the vertical axis. 
C) buyers do not desire for the price to be any lower. 
D) the equilibrium price is below the market price. 
A) the quantity demanded equals the quantity supplied at the market clearing price. 
B) the horizontal axis crosses the vertical axis. 
C) buyers do not desire for the price to be any lower. 
D) the equilibrium price is below the market price.

Question 20

An expected increase in the future price of automobiles will lead to

Accepted Answer

A) an outward shift in demand for automobiles today. 
B) a reduction in the demand for gasoline today. 
C) a movement down the demand schedule for automobiles. 
D) no predictable impact on today's demand for automobiles. 
A) an outward shift in demand for automobiles today. 
B) a reduction in the demand for gasoline today. 
C) a movement down the demand schedule for automobiles. 
D) no predictable impact on today's demand for automobiles.

Exam 3: Demand and Supply

-Refer to the above figure. Which diagram shows the effect on the market of Corn Flakes when the demand for Corn Flakes has increased?

Briefly discuss the determinants of supply other than price.

The price of a new car is $40,000 while the price of a five-year old car of the same brand is $16,000. The next year the price of the new car increases to $44,000 and the price of a five-year old car of the same brand is $17,600. The relative price of the used car

When income falls,

-In a free market economy, the market clearing (equilibrium)price in the above table would adjust to

Suppose an individual experiences a permanent increase in income. As a result of this increased income, further assume that the individual eats dinner at restaurants more frequently each month. This information suggests that dinners at restaurants for this individual are

Which of the following is true of the activities of ticket scalpers?

-According to the above table, a surplus exists when

A shift of the demand curve to the left represents

-Refer to the above figure. A surplus will exist when

Two goods are substitutes when

A movement along a supply curve is induced by a change in

With reference to the difference between a change in demand and a change in quantity demanded, which of the following is true?

Distinguish between a change in quantity supplied and a change in supply.

Which of the following statements is FALSE about the demand curve?

Refer to the above figure. Other things being equal, if price is at P2 , then we would expect

An increase in demand for a good can be caused by

A demand curve

A market is in equilibrium when

An expected increase in the future price of automobiles will lead to

The Nature of Economics

Scarcity and the World of Trade-Offs

Extensions of Demand and Supply Analysis

Public Spending and Public Choice

Funding the Public Sector

Demand and Supply Elasticity

Consumer Choice

Rents, Profits, and the Financial Environment of Business

The Firm: Cost and Output Determination

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Regulation and Antitrust Policy in a Globalized Economy

The Labor Market: Demand, Supply and Outsourcing

Unions and Labor Market Monopoly Power

Income, Poverty, and Health Care

Environmental Economics

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

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