Question 1

The laws of supply and demand did not apply to elephant tusks.

Accepted Answer

A) True 
 B)False

Question 2

Give an example of a price floor. Draw a corresponding diagram and explain why there is a continuing surplus.

Accepted Answer

The example used in the text is price su

Question 3

A shortage occurs when price is higher than the market equilibrium.

Accepted Answer

A) True 
 B)False

Question 4

Demand shifts due to changes in price.

Accepted Answer

A) True 
 B)False

Question 5

"The market has failed to provide enough rental housing in New York City. This demonstrates another failure of free markets-they may lead to shortages of necessities." Explain why you agree or disagree.

Accepted Answer

An economist would disagree. The free ma

Question 6

Are markets always in equilibrium?

Accepted Answer

A) Yes, they are always at the equilibrium point, or very close to it. 
B) Yes, because few things tend to alter supply and demand. 
C) No, but if there is no interference, they tend to move toward equilibrium. 
D) No, they never "settle down" into a stable price and quantity. 
E) Uncertain, economic theory has no answer to this question. 
A) Yes, they are always at the equilibrium point, or very close to it. 
B) Yes, because few things tend to alter supply and demand. 
C) No, but if there is no interference, they tend to move toward equilibrium. 
D) No, they never "settle down" into a stable price and quantity. 
E) Uncertain, economic theory has no answer to this question.

Question 7

The price of natural gas fell and the quantity sold also fell. Everything else being equal, it is consistent that

Accepted Answer

A) the price of oil fell. 
B) natural gas workers received large wage increases. 
C) more efficient gas drilling equipment was installed. 
D) consumer incomes rose. 
E) the supply of natural gas fell. 
A) the price of oil fell. 
B) natural gas workers received large wage increases. 
C) more efficient gas drilling equipment was installed. 
D) consumer incomes rose. 
E) the supply of natural gas fell.

Question 8

Which of the following is a characteristic of a market where a price floor is in place?

Accepted Answer

A) The market quantity demanded exceeds the market quantity supplied. 
B) Fewer regulations are needed since the government sets the price. 
C) Fewer units are purchased than would be the case without the price floor. 
D) A smaller number of sellers than in markets without price floors. 
A) The market quantity demanded exceeds the market quantity supplied. 
B) Fewer regulations are needed since the government sets the price. 
C) Fewer units are purchased than would be the case without the price floor. 
D) A smaller number of sellers than in markets without price floors.

Question 9

Imagine that the state legislature raises the tax on gasoline by 10 cents\gallon. What most likely happens next?

Accepted Answer

A) Service station operators pass along the tax to you, adding the 10 cents to the price of a gallon of gas. 
B) Service station operators grumble, but pay the tax without passing the cost along to you. 
C) Service station operators pass along as much of the tax to you as they can, perhaps around 6 cents\gallon. 
D) The tax does not affect the outcome in the gasoline market. 
A) Service station operators pass along the tax to you, adding the 10 cents to the price of a gallon of gas. 
B) Service station operators grumble, but pay the tax without passing the cost along to you. 
C) Service station operators pass along as much of the tax to you as they can, perhaps around 6 cents\gallon. 
D) The tax does not affect the outcome in the gasoline market.

Question 10

The following are the equations for the supply and demand curves in the market for weezils:
    where Q  d  is the quantity demanded, Q  s  is the quantity supplied, and P is the price per weezil in dollars.
Refer to Exhibit 4-1. According to the data given, the equilibrium price of a weezil is

Accepted Answer

A) $3. 
B) $5. 
C) $11. 
D) $14. 
A) $3. 
B) $5. 
C) $11. 
D) $14.

Question 11

An increase in consumer income will shift both the supply and demand curves.

Accepted Answer

A) True 
 B)False

Question 12

The more firms that are attracted to an industry, the greater will be the quantity of product supplied at any given price.

Accepted Answer

A) True 
 B)False

Question 13

When people suddenly want to buy something, supply increases.

Accepted Answer

A) True 
 B)False

Question 14

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 the quantity of money supplied if the interest rate increases?

Accepted Answer

A) It increases. 
B) It decreases. 
C) It does not change. 
D) It depends entirely on the interest rate. 
A) It increases. 
B) It decreases. 
C) It does not change. 
D) It depends entirely on the interest rate.

Question 15

In 1966, the Catholic Church eliminated the centuries-old requirement that members abstain from eating meat on Fridays. Catholics customarily ate fish on Friday. Following the removal of this requirement, it was found that the

Accepted Answer

A) demand curve for fish shifted to the right. 
B) demand curve for fish shifted to the left. 
C) demand for meat decreased. 
D) price of fish increased. 
A) demand curve for fish shifted to the right. 
B) demand curve for fish shifted to the left. 
C) demand for meat decreased. 
D) price of fish increased.

Question 16

A report on the dangers of cholesterol would likely shift the demand curve for beef downward and to the left.

Accepted Answer

A) True 
 B)False

Question 17

Economists emphasize the importance of ____ in analyzing demand.

Accepted Answer

A) quantity 
B) market potential 
C) wants and needs 
D) price 
E) sales opportunities 
A) quantity 
B) market potential 
C) wants and needs 
D) price 
E) sales opportunities

Question 18

The major drawback of a price ceiling is

Accepted Answer

A) it causes a surplus. 
B) government regulations of this kind are difficult to enforce. 
C) it causes a shortage. 
D) there is no drawback. 
A) it causes a surplus. 
B) government regulations of this kind are difficult to enforce. 
C) it causes a shortage. 
D) there is no drawback.

Question 19

Price floors are only effective below the market equilibrium.

Accepted Answer

A) True 
 B)False

Question 20

During the American Revolution, Washington's army nearly starved to death after price controls were enacted to "help" buy food for the army at affordable prices. The Continental Congress later passed a law that

Accepted Answer

A) exhorted the public to obey the law and help supply food to the army. 
B) passed tax increases to punish those who refused to sell the food. 
C) revised the American Law of Supply and Demand. 
D) overrode local ordinances and essentially repealed the price controls. 
E) called for the repeal of other price control measures. 
A) exhorted the public to obey the law and help supply food to the army. 
B) passed tax increases to punish those who refused to sell the food. 
C) revised the American Law of Supply and Demand. 
D) overrode local ordinances and essentially repealed the price controls. 
E) called for the repeal of other price control measures.

Exam 4: Supply and Demand: an Initial Look

The laws of supply and demand did not apply to elephant tusks.

Give an example of a price floor. Draw a corresponding diagram and explain why there is a continuing surplus.

A shortage occurs when price is higher than the market equilibrium.

Demand shifts due to changes in price.

"The market has failed to provide enough rental housing in New York City. This demonstrates another failure of free markets-they may lead to shortages of necessities." Explain why you agree or disagree.

Are markets always in equilibrium?

The price of natural gas fell and the quantity sold also fell. Everything else being equal, it is consistent that

Which of the following is a characteristic of a market where a price floor is in place?

Imagine that the state legislature raises the tax on gasoline by 10 cents\gallon. What most likely happens next?

The following are the equations for the supply and demand curves in the market for weezils: where Q d is the quantity demanded, Q s is the quantity supplied, and P is the price per weezil in dollars. Refer to Exhibit 4-1. According to the data given, the equilibrium price of a weezil is

An increase in consumer income will shift both the supply and demand curves.

The more firms that are attracted to an industry, the greater will be the quantity of product supplied at any given price.

When people suddenly want to buy something, supply increases.

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 the quantity of money supplied if the interest rate increases?

In 1966, the Catholic Church eliminated the centuries-old requirement that members abstain from eating meat on Fridays. Catholics customarily ate fish on Friday. Following the removal of this requirement, it was found that the

A report on the dangers of cholesterol would likely shift the demand curve for beef downward and to the left.

Economists emphasize the importance of ____ in analyzing demand.

The major drawback of a price ceiling is

Price floors are only effective below the market equilibrium.

During the American Revolution, Washington's army nearly starved to death after price controls were enacted to "help" buy food for the army at affordable prices. The Continental Congress later passed a law that

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

The Financial Markets and the Economy: the Tail That Wags the Dog

The Firm and the Industry Under Perfect Competition

The Case for Free Markets: the Price System

Monopoly

Between Competition and Monopoly

Limiting Market Power: Antitrust and Regulation

The Shortcomings of Free Markets

Externalities, Externaliteis, the Environment, and Natural Resources

Taxation and Resource Allocation

Pricing the Factors of Production

Labor and Entrepreneurship: the Human Inputs

Poverty, Inequality, and Discrimination

International Trade and Comparative Advantage

Contemporary Issues in the Us Economy

Filters

The following are the equations for the supply and demand curves in the market for weezils: where Q _d is the quantity demanded, Q _s is the quantity supplied, and P is the price per weezil in dollars. Refer to Exhibit 4-1. According to the data given, the equilibrium price of a weezil is