Question 1

The price of a new textbook increases from $75 to $90 while the price of used copies of the textbook increases from $50 to $65. Other things equal, we would expect to observe

Accepted Answer

A) the quantity demanded of the used textbook to increase while the quantity demanded of the new textbook to fall. 
B) the quantity demanded of both to fall. 
C) the demand for the new textbook to increase while the demand for the used textbook to decrease. 
D) the quantity demanded of the used textbook to decrease and the quantity demanded of the new textbook to increase. 
A) the quantity demanded of the used textbook to increase while the quantity demanded of the new textbook to fall. 
B) the quantity demanded of both to fall. 
C) the demand for the new textbook to increase while the demand for the used textbook to decrease. 
D) the quantity demanded of the used textbook to decrease and the quantity demanded of the new textbook to increase.

Question 2

An increase in demand is represented by a

Accepted Answer

A) shift of the demand curve to the left. 
B) shift of the demand curve to the right. 
C) movement down the demand curve. 
D) movement up the demand curve. 
A) shift of the demand curve to the left. 
B) shift of the demand curve to the right. 
C) movement down the demand curve. 
D) movement up the demand curve.

Question 3

Which of the following are complementary goods?

Accepted Answer

A) sport utility vehicles and gasoline 
B) butter and margarine 
C) beer and wine 
D) DVDs and videocassettes 
A) sport utility vehicles and gasoline 
B) butter and margarine 
C) beer and wine 
D) DVDs and videocassettes

Question 4

Which of the following statements is consistent with an increase in supply?

Accepted Answer

A) The price of labor input has increased. 
B) There has been an advance in technology. 
C) Consumers' incomes have increased. 
D) The market price has decreased. 
A) The price of labor input has increased. 
B) There has been an advance in technology. 
C) Consumers' incomes have increased. 
D) The market price has decreased.

Question 5

Explain why there is a direct relationship between price and quantity supplied.

Accepted Answer

For firms to produce more of a good per

Question 6

Pam graduates from law school and gets a position in a law firm. At the same time the price of hamburger falls while other food prices have stayed the same. She notices that she buys less hamburger than she did before. Is she violating the law of demand?

Accepted Answer

A) Yes, since she is buying less hamburger at a lower price. 
B) Yes, since she is buying less hamburger in a relatively short period of time and we wouldn't expect her tastes to have changed. 
C) No, since the law of demand refers to relative price changes and the price of hamburger falling is an absolute price change. 
D) No, since other things are not held constant, such as her income. 
A) Yes, since she is buying less hamburger at a lower price. 
B) Yes, since she is buying less hamburger in a relatively short period of time and we wouldn't expect her tastes to have changed. 
C) No, since the law of demand refers to relative price changes and the price of hamburger falling is an absolute price change. 
D) No, since other things are not held constant, such as her income.

Question 7

If the price of an item can freely adjust, a market will

Accepted Answer

A) always move towards equilibrium. 
B) always have an excess quantity demanded. 
C) always have an excess quantity supplied. 
D) never move towards equilibrium because prices are always increasing. 
A) always move towards equilibrium. 
B) always have an excess quantity demanded. 
C) always have an excess quantity supplied. 
D) never move towards equilibrium because prices are always increasing.

Question 8

In any given market, prices are determined by

Accepted Answer

A) specialization of labor. 
B) transactions costs. 
C) supply and demand. 
D) comparative advantage. 
A) specialization of labor. 
B) transactions costs. 
C) supply and demand. 
D) comparative advantage.

Question 9

The law of supply implies that the supply curve is

Accepted Answer

A) flat. 
B) upward sloping. 
C) downward sloping. 
D) vertical. 
A) flat. 
B) upward sloping. 
C) downward sloping. 
D) vertical.

Question 10

In economic terminology, a normal good is a good

Accepted Answer

A) on which a monetary value cannot be placed. 
B) that is liked only by normal people. 
C) for which demand increases when price increases. 
D) for which demand increases when income increases. 
A) on which a monetary value cannot be placed. 
B) that is liked only by normal people. 
C) for which demand increases when price increases. 
D) for which demand increases when income increases.

Question 11

If a demand curve shifts, we know that

Accepted Answer

A) the price of the good itself is not a factor. 
B) the price of the good itself is a factor. 
C) the price of the good and supply are the major factors. 
D) the price of the good and demand are major factors. 
A) the price of the good itself is not a factor. 
B) the price of the good itself is a factor. 
C) the price of the good and supply are the major factors. 
D) the price of the good and demand are major factors.

Question 12

-Refer to the above figure. For a normal good, the rightward shift of the curve could have been caused by

Accepted Answer

A) a technological improvement. 
B) an increase in the cost of inputs. 
C) an increase in income. 
D) a decrease in income. 
A) a technological improvement. 
B) an increase in the cost of inputs. 
C) an increase in income. 
D) a decrease in income.

Question 13

-According to the above table, at a price of $8 per unit, other things constant,

Accepted Answer

A) consumers will continue to bid prices upward. 
B) there will be no tendency for the market to approach an equilibrium. 
C) a surplus of 100 units will exist. 
D) a shortage of 80 units will exist. 
A) consumers will continue to bid prices upward. 
B) there will be no tendency for the market to approach an equilibrium. 
C) a surplus of 100 units will exist. 
D) a shortage of 80 units will exist.

Question 14

Which of the following best represents the law of demand?

Accepted Answer

A) As the price of a good decreases, the demand for the good increases. 
B) As the price of a good increases, the quantity demanded of that good decreases. 
C) As the demand for a good increases, the price of that good increases. 
D) As the price of a good decreases, the demand curve for that good shifts to the right. 
A) As the price of a good decreases, the demand for the good increases. 
B) As the price of a good increases, the quantity demanded of that good decreases. 
C) As the demand for a good increases, the price of that good increases. 
D) As the price of a good decreases, the demand curve for that good shifts to the right.

Question 15

-Refer to the above table. The market quantity supplied when the price is $7 is

Accepted Answer

A) 0 
B) 20 
C) 29 
D) 38 
A) 0 
B) 20 
C) 29 
D) 38

Question 16

-According to the above figure, a shortage is shown between which two points?

Accepted Answer

A) A and E 
B) C and B 
C) A and B 
D) E and F 
A) A and E 
B) C and B 
C) A and B 
D) E and F

Question 17

-What happens as the result of a shortage?

Accepted Answer

A) There is downward pressure on prices. 
B) There is upward pressure on prices. 
C) Consumers begin to view the good as an inferior good because they have a hard time finding it. 
D) Supply of the good decreases. 
A) There is downward pressure on prices. 
B) There is upward pressure on prices. 
C) Consumers begin to view the good as an inferior good because they have a hard time finding it. 
D) Supply of the good decreases.

Question 18

In general, any ceteris paribus determinant of supply that is favorable to production will

Accepted Answer

A) cause a movement along the supply curve. 
B) shift the supply curve to the right. 
C) shift the demand curve to the left. 
D) shift the supply curve to the left. 
A) cause a movement along the supply curve. 
B) shift the supply curve to the right. 
C) shift the demand curve to the left. 
D) shift the supply curve to the left.

Question 19

-According to the above figure for a gasoline market, what happens when the price per gallon of gasoline jumps from $1 to $4?

Accepted Answer

A) A gasoline surplus is replaces by a gas shortage. 
B) The market moves from a shortage of 40 million gallons/day to a surplus of 50 million gallons/day. 
C) The market shortage is replaced by market equilibrium. 
D) A surplus of 40 million gallons/day results. 
A) A gasoline surplus is replaces by a gas shortage. 
B) The market moves from a shortage of 40 million gallons/day to a surplus of 50 million gallons/day. 
C) The market shortage is replaced by market equilibrium. 
D) A surplus of 40 million gallons/day results.

Question 20

Explain how a market demand curve is found.

Accepted Answer

The market demand curve is the horizonta

Exam 3: Demand and Supply

The price of a new textbook increases from $75 to $90 while the price of used copies of the textbook increases from $50 to $65. Other things equal, we would expect to observe

An increase in demand is represented by a

Which of the following are complementary goods?

Which of the following statements is consistent with an increase in supply?

Explain why there is a direct relationship between price and quantity supplied.

Pam graduates from law school and gets a position in a law firm. At the same time the price of hamburger falls while other food prices have stayed the same. She notices that she buys less hamburger than she did before. Is she violating the law of demand?

If the price of an item can freely adjust, a market will

In any given market, prices are determined by

The law of supply implies that the supply curve is

In economic terminology, a normal good is a good

If a demand curve shifts, we know that

-Refer to the above figure. For a normal good, the rightward shift of the curve could have been caused by

-According to the above table, at a price of $8 per unit, other things constant,

Which of the following best represents the law of demand?

-Refer to the above table. The market quantity supplied when the price is $7 is

-According to the above figure, a shortage is shown between which two points?

-What happens as the result of a shortage?

In general, any ceteris paribus determinant of supply that is favorable to production will

-According to the above figure for a gasoline market, what happens when the price per gallon of gasoline jumps from $1 to $4?

Explain how a market demand curve is found.

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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