Question 1

Why do airlines tend to lower ticket prices in the winter?

Accepted Answer

A)  Supply is relatively variable, and a drop in demand lowers equilibrium price. 
B)  Demand is relatively variable, and a drop in supply lowers equilibrium price. 
C)  A drop in both supply and demand lowers equilibrium price. 
D)  Supply is relatively fixed, and a drop in demand lowers equilibrium price. 
E)  Demand is relatively fixed, and a drop in supply lowers equilibrium price. 
A)  Supply is relatively variable, and a drop in demand lowers equilibrium price. 
B)  Demand is relatively variable, and a drop in supply lowers equilibrium price. 
C)  A drop in both supply and demand lowers equilibrium price. 
D)  Supply is relatively fixed, and a drop in demand lowers equilibrium price. 
E)  Demand is relatively fixed, and a drop in supply lowers equilibrium price. D

Question 2

In 1989, Hurricane Hugo devastated Charleston, South Carolina, leaving residents with no electricity for light or refrigeration, and completely cut off from the outside world by fallen trees and washed-out roads.Consequently, the price of ice rose 1,000 percent and generators 300 percent.Tree removal firms were charging $4,000 to cut up a single tree.Outraged, the city government enacted an emergency law prohibiting price "gouging." This law is an example of

Accepted Answer

A)  the cost disease of services. 
B)  a price ceiling. 
C)  the laissez-faire rule. 
D)  the indispensable necessity syndrome. 
A)  the cost disease of services. 
B)  a price ceiling. 
C)  the laissez-faire rule. 
D)  the indispensable necessity syndrome. B

Question 3

If the demand curve shifts outward and the supply curve remains the same, price will fall.

Accepted Answer

A) True 
 B)False  False

Question 4

Cost-reducing technological advancements allow suppliers to earn more profits but have no noticeable effect on the supply curve.

Accepted Answer

A) True 
 B)False

Question 5

Table 4-1
Use this table for the following questions.
 $\begin{array}{ccc}
 & \text { Quantity } & \text { Quantity } \
\underline { \text { Price} } &  \underline { \text { Demanded } } & \underline { \text { Supplied} } \
\$ 10 & 1,000 & 5,500 \
9 & 2,000 & 5,000 \
8 & 3,000 & 4,500 \
7 & 4,000 & 4,000 \
6 & 5,000 & 3,500 \
5 & 6,000 & 3,000 \
4 & 7,000 & 2,500 \
3 & 8,000 & 2,000 \
2 & 9,000 & 1,500 \
1 & 10,000 & 1,000
\end{array}$
-Refer to Table 4-1.What is the equilibrium price in the example above?

Accepted Answer

A)  $9 
B)  $8 
C)  $7 
D)  $6 
E)  $5 
A)  $9 
B)  $8 
C)  $7 
D)  $6 
E)  $5

Question 6

The United States typically experiences a large surplus of milk annually.This is caused by

Accepted Answer

A)  a price ceiling in the market. 
B)  not enough demand for milk. 
C)  a price floor in the market. 
D)  overproduction of milk by the cows. 
A)  a price ceiling in the market. 
B)  not enough demand for milk. 
C)  a price floor in the market. 
D)  overproduction of milk by the cows.

Question 7

If demand increases, the equilibrium price and equilibrium quantity will both fall, everything else being equal.

Accepted Answer

A) True 
 B)False

Question 8

If the supply curve for housing has the normal positive slope, rent controls will likely

Accepted Answer

A)  increase the amount of housing. 
B)  improve the quality of housing. 
C)  aggravate the housing shortage. 
D)  help low-income families find suitable housing. 
E)  increase the demand for housing. 
A)  increase the amount of housing. 
B)  improve the quality of housing. 
C)  aggravate the housing shortage. 
D)  help low-income families find suitable housing. 
E)  increase the demand for housing.

Question 9

Price ceilings set a legal maximum price on a product or commodity.

Accepted Answer

A) True 
 B)False

Question 10

An increase in price will decrease demand.

Accepted Answer

A) True 
 B)False

Question 11

Figure 4-21
  
-A surplus will tend to occur at which price in Figure 4-21?

Accepted Answer

A)  P₁ 
B)  P₂ 
C)  P₃ 
A)  P₁ 
B)  P₂ 
C)  P₃

Question 12

Black-market prices are below equilibrium prices because sellers want to sell large quantities.

Accepted Answer

A) True 
 B)False

Question 13

As more firms are attracted to an industry, the supply curve can be expected to shift to the right.

Accepted Answer

A) True 
 B)False

Question 14

Advertising has no effect on the demand schedule for a good.

Accepted Answer

A) True 
 B)False

Question 15

How will a decrease in price tend to affect supply?

Accepted Answer

A)  Supply will increase. 
B)  Supply will decrease. 
C)  Supply will not change. 
D)  Uncertain. 
A)  Supply will increase. 
B)  Supply will decrease. 
C)  Supply will not change. 
D)  Uncertain.

Question 16

The demand for a textbook written by Schwarz and Mobley is Q = 20,000 - 50P; supply is Q = 2,000 + 100P.Students complain about the high price of textbooks, resulting in a price ceiling and, unfortunately, a shortage of texts.Below what price will shortages occur?

Accepted Answer

A shortage will occur if the price ceili

Question 17

Which of the following is an example of a price floor?

Accepted Answer

A)  rent controls 
B)  maximum prices for gasoline 
C)  usury laws that set maximum interest rates 
D)  the minimum wage 
A)  rent controls 
B)  maximum prices for gasoline 
C)  usury laws that set maximum interest rates 
D)  the minimum wage

Question 18

The quantity of newspapers sold will decline if

Accepted Answer

A)  newsprint becomes more expensive. 
B)  the printers' union makes wage concessions. 
C)  prices are reduced. 
D)  magazine prices rise. 
A)  newsprint becomes more expensive. 
B)  the printers' union makes wage concessions. 
C)  prices are reduced. 
D)  magazine prices rise.

Question 19

An individual's demand schedule

Accepted Answer

A)  provides information about what quantity a consumer is willing and able to buy at each price. 
B)  tells a buyer how many other buyers will try to purchase an item. 
C)  is a schedule that regulates monthly sales of scarce goods and services. 
D)  is of no use without its accompanying supply schedule. 
A)  provides information about what quantity a consumer is willing and able to buy at each price. 
B)  tells a buyer how many other buyers will try to purchase an item. 
C)  is a schedule that regulates monthly sales of scarce goods and services. 
D)  is of no use without its accompanying supply schedule.

Question 20

George Washington's troops at Valley Forge were almost destroyed by price controls.

Accepted Answer

A) True 
 B)False

Exam 4: Supply and Demand: An Initial Look

Why do airlines tend to lower ticket prices in the winter?

If the demand curve shifts outward and the supply curve remains the same, price will fall.

Cost-reducing technological advancements allow suppliers to earn more profits but have no noticeable effect on the supply curve.

Table 4-1 Use this table for the following questions. Quantity Quantity \ 10 1,000 5,500 9 2,000 5,000 8 3,000 4,500 7 4,000 4,000 6 5,000 3,500 5 6,000 3,000 4 7,000 2,500 3 8,000 2,000 2 9,000 1,500 1 10,000 1,000 -Refer to Table 4-1.What is the equilibrium price in the example above?

The United States typically experiences a large surplus of milk annually.This is caused by

If demand increases, the equilibrium price and equilibrium quantity will both fall, everything else being equal.

If the supply curve for housing has the normal positive slope, rent controls will likely

Price ceilings set a legal maximum price on a product or commodity.

An increase in price will decrease demand.

Figure 4-21 -A surplus will tend to occur at which price in Figure 4-21?

Black-market prices are below equilibrium prices because sellers want to sell large quantities.

As more firms are attracted to an industry, the supply curve can be expected to shift to the right.

Advertising has no effect on the demand schedule for a good.

How will a decrease in price tend to affect supply?

The demand for a textbook written by Schwarz and Mobley is Q = 20,000 - 50P; supply is Q = 2,000 + 100P.Students complain about the high price of textbooks, resulting in a price ceiling and, unfortunately, a shortage of texts.Below what price will shortages occur?

Which of the following is an example of a price floor?

The quantity of newspapers sold will decline if

An individual's demand schedule

George Washington's troops at Valley Forge were almost destroyed by price controls.

What Is Economics?

The Economy: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Consumer Choice: Individual and Market Demand

Demand and Elasticity

Production, Inputs, and Cost: Building Blocks for Supply Analysis

Output, Price, and Profit: The Importance of Marginal Analysis

Securities: Business Finance, and the Economy: The Tail that Wags the Dog?

The Firm and the Industry under Perfect Competition

Monopoly

Between Competition and Monopoly

Limiting Market Power: Regulation and Antitrust

The Case for Free Markets I: The Price System

The Shortcomings of Free Markets

The Market's Prime Achievement: Innovation and Growth

Externalities, the Environment, and Natural Resources

Taxation and Resource Allocation

Pricing the Factors of Production

Labor and Entrepreneurship: The Human Inputs

Poverty, Inequality, and Discrimination

An Introduction to Macroeconomics

The Goals of Macroeconomic Policy

Economic Growth: Theory and Policy

Aggregate Demand and the Powerful Consumer

Demand-Side Equilibrium: Unemployment or Inflation?

Bringing in the Supply Side: Unemployment and Inflation?

Managing Aggregate Demand: Fiscal Policy

Money and the Banking System

Monetary Policy: Conventional and Unconventional

The Financial Crisis and the Great Recession

The Debate over Monetary and Fiscal Policy

Budget Deficits in the Short and Long Run

The Trade-Off between Inflation and Unemployment

International Trade and Comparative Advantage

The International Monetary System: Order or Disorder?

Exchange Rates and the Macroeconomy

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