Question 1

Changes in the size of an industry may cause supply to shift.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following will tend to occur if price controls are imposed on a product?

Accepted Answer

A)  persistent shortages 
B)  illegal markets 
C)  illicit channels of distribution 
D)  industry investment slows or stops 
E)  All of the above are correct. 
A)  persistent shortages 
B)  illegal markets 
C)  illicit channels of distribution 
D)  industry investment slows or stops 
E)  All of the above are correct.

Question 3

At equilibrium, quantity demanded equals quantity supplied.

Accepted Answer

A) True 
 B)False

Question 4

Suppose the numbers in parentheses represent two points on a line: (59 billion quarts; $4) and (78 billion quarts; $6).The line is most likely a

Accepted Answer

A)  production possibilities frontier for milk. 
B)  supply curve for milk. 
C)  demand curve for milk. 
D)  ray through the origin. 
E)  time series line. 
A)  production possibilities frontier for milk. 
B)  supply curve for milk. 
C)  demand curve for milk. 
D)  ray through the origin. 
E)  time series line.

Question 5

From 2007 to 2008, the Federal Reserve System reduced interest rates, the price which borrowers pay.As a result, economists expected the quantity of money demanded to

Accepted Answer

A)  increase. 
B)  decrease. 
C)  not change. 
D)  not change, although the demand schedule itself will shift outward. 
A)  increase. 
B)  decrease. 
C)  not change. 
D)  not change, although the demand schedule itself will shift outward.

Question 6

Ticket "scalping" is an example of

Accepted Answer

A)  experimental economics. 
B)  the limitation of the volume of transactions. 
C)  the development of a black market. 
D)  favoritism. 
A)  experimental economics. 
B)  the limitation of the volume of transactions. 
C)  the development of a black market. 
D)  favoritism.

Question 7

Which of the following is not a symptom associated with a price floor?

Accepted Answer

A)  Excess of quantity demanded over quantity supplied. 
B)  Sellers offering discounts in disguised forms. 
C)  Problem of disposal created by excess supply. 
D)  Survival of inefficient businesses. 
A)  Excess of quantity demanded over quantity supplied. 
B)  Sellers offering discounts in disguised forms. 
C)  Problem of disposal created by excess supply. 
D)  Survival of inefficient businesses.

Question 8

Firms often seek to borrow money to expand their capital stock, and the price they pay for that money is the interest rate.What happens to quantity of money demanded if the interest rate increases?

Accepted Answer

A)  It increases. 
B)  It decreases. 
C)  It does not change. 
D)  Uncertain-the law of demand does not apply to money. 
A)  It increases. 
B)  It decreases. 
C)  It does not change. 
D)  Uncertain-the law of demand does not apply to money.

Question 9

Show graphically the effect of technological advance on the price of music downloads.In a separate graph show what happens to the price of CDs as a secondary effect of the new download technology.

Accepted Answer

Figure 4-27
 @#IMG-DLM& 
The first graph shows a r

Question 10

Figure 4-6
  
-Grapes can be used for wine or for raisins.Which graph in Figure 4-6 best depicts the effects on the U.S.raisin market of a decrease in purchases of domestic wines?

Accepted Answer

A)  1 
B)  2 
C)  3 
D)  4 
A)  1 
B)  2 
C)  3 
D)  4

Question 11

Throughout history, governments have used price controls to

Accepted Answer

A)  protect buyers. 
B)  protect sellers. 
C)  serve the "public interest." 
D)  All of the above are correct. 
A)  protect buyers. 
B)  protect sellers. 
C)  serve the "public interest." 
D)  All of the above are correct.

Question 12

An increase in the price of poultry would lead to

Accepted Answer

A)  a decrease in quantity demanded of fish and an increase in the demand for poultry. 
B)  a decrease in quantity demanded of poultry and an increase in the demand for fish. 
C)  an increase in quantity demanded of fish and a decrease in the demand for poultry. 
D)  an increase in quantity demanded of poultry and a decrease in the demand for fish. 
A)  a decrease in quantity demanded of fish and an increase in the demand for poultry. 
B)  a decrease in quantity demanded of poultry and an increase in the demand for fish. 
C)  an increase in quantity demanded of fish and a decrease in the demand for poultry. 
D)  an increase in quantity demanded of poultry and a decrease in the demand for fish.

Question 13

What is the economic reasoning behind the proposal to legalize drugs?

Accepted Answer

A)  Legal drugs will greatly increase the supply, which will reduce the price Americans pay to foreign producers of the drugs. 
B)  All forms of government restrictions on behavior are immoral, and ought to be removed. 
C)  Legal drugs will be much cheaper than illegal drugs, which will reduce incentive for crime to obtain money for drugs and to protect drug "businesses." 
D)  Legal drugs will be more expensive than illegal drugs, and the market system will encourage more production, thus lowering the price. 
E)  Dealing with supply is always easier than dealing with demand, and legalization accomplishes that. 
A)  Legal drugs will greatly increase the supply, which will reduce the price Americans pay to foreign producers of the drugs. 
B)  All forms of government restrictions on behavior are immoral, and ought to be removed. 
C)  Legal drugs will be much cheaper than illegal drugs, which will reduce incentive for crime to obtain money for drugs and to protect drug "businesses." 
D)  Legal drugs will be more expensive than illegal drugs, and the market system will encourage more production, thus lowering the price. 
E)  Dealing with supply is always easier than dealing with demand, and legalization accomplishes that.

Question 14

Demand curves can be affected by the prices of related goods.

Accepted Answer

A) True 
 B)False

Question 15

Draw a graph of a market in equilibrium.Describe what might cause a change in demand or supply and how this would affect the diagram.Indicate how the equilibrium price and quantity will change.

Accepted Answer

The (completed) diagram should look like

Question 16

If price rises, what happens to demand for a product?

Accepted Answer

A)  It increases. 
B)  It decreases. 
C)  It does not change. 
D)  Uncertain-economic theory has no answer to this question. 
A)  It increases. 
B)  It decreases. 
C)  It does not change. 
D)  Uncertain-economic theory has no answer to this question.

Question 17

Price ceilings lead to market surpluses.

Accepted Answer

A) True 
 B)False

Question 18

Figure 4-21
  
-A shortage 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 19

Why does quantity supplied increase when price increases?

Accepted Answer

A)  Producers find it more profitable to make the item. 
B)  People "drop out" of the market, so buyers find it more abundant. 
C)  As demand decreases with a high price, surpluses appear. 
D)  All of the above. 
A)  Producers find it more profitable to make the item. 
B)  People "drop out" of the market, so buyers find it more abundant. 
C)  As demand decreases with a high price, surpluses appear. 
D)  All of the above.

Question 20

A black market develops only when quantity demanded exceeds quantity supplied.

Accepted Answer

A) True 
 B)False

Exam 4: Supply and Demand: An Initial Look

Changes in the size of an industry may cause supply to shift.

Which of the following will tend to occur if price controls are imposed on a product?

At equilibrium, quantity demanded equals quantity supplied.

Suppose the numbers in parentheses represent two points on a line: (59 billion quarts; $4) and (78 billion quarts; $6).The line is most likely a

From 2007 to 2008, the Federal Reserve System reduced interest rates, the price which borrowers pay.As a result, economists expected the quantity of money demanded to

Ticket "scalping" is an example of

Which of the following is not a symptom associated with a price floor?

Firms often seek to borrow money to expand their capital stock, and the price they pay for that money is the interest rate.What happens to quantity of money demanded if the interest rate increases?

Show graphically the effect of technological advance on the price of music downloads.In a separate graph show what happens to the price of CDs as a secondary effect of the new download technology.

Figure 4-6 -Grapes can be used for wine or for raisins.Which graph in Figure 4-6 best depicts the effects on the U.S.raisin market of a decrease in purchases of domestic wines?

Throughout history, governments have used price controls to

An increase in the price of poultry would lead to

What is the economic reasoning behind the proposal to legalize drugs?

Demand curves can be affected by the prices of related goods.

Draw a graph of a market in equilibrium.Describe what might cause a change in demand or supply and how this would affect the diagram.Indicate how the equilibrium price and quantity will change.

If price rises, what happens to demand for a product?

Price ceilings lead to market surpluses.

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

Why does quantity supplied increase when price increases?

A black market develops only when quantity demanded exceeds quantity supplied.

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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