Question 1

If an increase in the price of good X causes the demand for good Y to decrease, this indicates that

Accepted Answer

A)  X and Y are complements. 
B)  X and Y are substitutes. 
C)  X and Y are unrelated. 
D)  the demand for X is elastic, but the demand for Y is inelastic. 
A)  X and Y are complements. 
B)  X and Y are substitutes. 
C)  X and Y are unrelated. 
D)  the demand for X is elastic, but the demand for Y is inelastic. A

Question 2

Figure 3-7   In Figure 3-7, suppose D1 and S1 indicate the initial conditions in the market for ice cream. Which of the following changes would tend to cause the shift from D1 to D2 in the market for ice cream?

Accepted Answer

A)  a decrease in the price of sugar, an ingredient used to produce ice cream 
B)  an increase in the price of frozen yogurt, a substitute for ice cream 
C)  abnormally cold weather that decreased consumer desire for ice cream 
D)  an increase in the price of milk, an ingredient used to produce ice cream 
A)  a decrease in the price of sugar, an ingredient used to produce ice cream 
B)  an increase in the price of frozen yogurt, a substitute for ice cream 
C)  abnormally cold weather that decreased consumer desire for ice cream 
D)  an increase in the price of milk, an ingredient used to produce ice cream B

Question 3

Which of the following would lead to an increase in the demand for computer software?

Accepted Answer

A)  a decrease in the price of computer software 
B)  a decrease in the price of personal computers 
C)  an decrease in the cost of producing computer software 
D)  an decrease in personal income 
A)  a decrease in the price of computer software 
B)  a decrease in the price of personal computers 
C)  an decrease in the cost of producing computer software 
D)  an decrease in personal income B

Question 4

Just before Valentine's Day, the price of roses increases dramatically. This is because

Accepted Answer

A)  self-interested individuals try to charge more for a good than consumers are willing to pay. 
B)  demand increases while the supply of roses remains relatively constant. 
C)  the supply curve of roses is highly elastic. 
D)  the demand for roses is relatively inelastic most of the year, but becomes more elastic as demand increases. 
A)  self-interested individuals try to charge more for a good than consumers are willing to pay. 
B)  demand increases while the supply of roses remains relatively constant. 
C)  the supply curve of roses is highly elastic. 
D)  the demand for roses is relatively inelastic most of the year, but becomes more elastic as demand increases.

Question 5

Other things constant, a decrease in consumer income will

Accepted Answer

A)  decrease the demand for large-screen television sets. 
B)  increase the demand for large-screen television sets. 
C)  cause a movement along the demand curve for large-screen television sets, but it will not shift the demand curve. 
D)  have no impact on the quantity demanded or the demand curve for large-screen television sets. 
A)  decrease the demand for large-screen television sets. 
B)  increase the demand for large-screen television sets. 
C)  cause a movement along the demand curve for large-screen television sets, but it will not shift the demand curve. 
D)  have no impact on the quantity demanded or the demand curve for large-screen television sets.

Question 6

A cold spell in Florida extensively reduced the orange crop, and as a result, California oranges commanded a higher price. Which of the following statements best explains the situation?

Accepted Answer

A)  The supply of Florida oranges fell, causing the supply of California oranges to increase as well as their price. 
B)  The supply of Florida oranges fell, causing the supply of California oranges to decrease and their price to increase. 
C)  The supply of Florida oranges fell, causing their price to increase and the demand for California oranges to increase. 
D)  The demand for Florida oranges was reduced by the freeze, causing an increase in the price of California oranges and a greater demand for them. 
A)  The supply of Florida oranges fell, causing the supply of California oranges to increase as well as their price. 
B)  The supply of Florida oranges fell, causing the supply of California oranges to decrease and their price to increase. 
C)  The supply of Florida oranges fell, causing their price to increase and the demand for California oranges to increase. 
D)  The demand for Florida oranges was reduced by the freeze, causing an increase in the price of California oranges and a greater demand for them.

Question 7

A technological breakthrough lowers the cost of manufacturing microwave ovens. As a result, the market changes to a new equilibrium because of

Accepted Answer

A)  an upward movement along the demand curve for microwave ovens. 
B)  a rightward shift in the demand curve for microwave ovens. 
C)  a rightward shift in the supply curve for microwave ovens. 
D)  a shortage of microwave ovens. 
A)  an upward movement along the demand curve for microwave ovens. 
B)  a rightward shift in the demand curve for microwave ovens. 
C)  a rightward shift in the supply curve for microwave ovens. 
D)  a shortage of microwave ovens.

Question 8

If we observe an increase in the price of a good and an increase in the amount of the good bought and sold, this could be explained by

Accepted Answer

A)  an increase in the supply of the good. 
B)  an increase in the demand for the good. 
C)  a decrease in the demand for the good. 
D)  a decrease in the supply of the good. 
A)  an increase in the supply of the good. 
B)  an increase in the demand for the good. 
C)  a decrease in the demand for the good. 
D)  a decrease in the supply of the good.

Question 9

If the supply of a good decreased, what would be the effect on the equilibrium price and quantity?

Accepted Answer

A)  Price would increase, and quantity would decrease. 
B)  Price would decrease, and quantity would decrease. 
C)  Price would increase, and quantity would increase. 
D)  Price would decrease, and quantity would increase. 
A)  Price would increase, and quantity would decrease. 
B)  Price would decrease, and quantity would decrease. 
C)  Price would increase, and quantity would increase. 
D)  Price would decrease, and quantity would increase.

Question 10

If an increase in the price of peaches reduces the demand for cream, this indicates that peaches and cream are

Accepted Answer

A)  normal goods. 
B)  inferior goods. 
C)  complements. 
D)  substitutes. 
A)  normal goods. 
B)  inferior goods. 
C)  complements. 
D)  substitutes.

Question 11

If a major hurricane were to destroy the sugarcane crop in Louisiana, there would be

Accepted Answer

A)  a decrease in the supply of sugarcane. 
B)  an increase in the supply of sugarcane. 
C)  a decrease in the demand for sugarcane. 
D)  an increase in the demand for sugarcane. 
A)  a decrease in the supply of sugarcane. 
B)  an increase in the supply of sugarcane. 
C)  a decrease in the demand for sugarcane. 
D)  an increase in the demand for sugarcane.

Question 12

Use the figure below to answer the following question(s). Figure 3-8
  In Figure 3-8, if the initial demand and supply for soybeans were D1 and S1, how would a decrease in the cost of producing soybeans affect the market for soybeans?

Accepted Answer

A)  Demand would increase to D2, price would increase to P2, and the quantity would increase to S. 
B)  Supply would increase to S2, price would decrease to P0, and the quantity would increase to S. 
C)  Both demand and supply would increase so the price would remain at P1, but the quantity would increase to T. 
D)  None of the above would occur. 
A)  Demand would increase to D2, price would increase to P2, and the quantity would increase to S. 
B)  Supply would increase to S2, price would decrease to P0, and the quantity would increase to S. 
C)  Both demand and supply would increase so the price would remain at P1, but the quantity would increase to T. 
D)  None of the above would occur.

Question 13

If Georgia experiences a late frost that damages the peach crop, we should expect the

Accepted Answer

A)  supply curve for peaches to shift to the right and the price of peaches to fall. 
B)  supply curve for peaches to shift to the left and the price of peaches to rise. 
C)  demand curve for peaches to shift to the left and the price of peaches to fall. 
D)  demand curve for peaches to shift to the right and the price of peaches to rise. 
A)  supply curve for peaches to shift to the right and the price of peaches to fall. 
B)  supply curve for peaches to shift to the left and the price of peaches to rise. 
C)  demand curve for peaches to shift to the left and the price of peaches to fall. 
D)  demand curve for peaches to shift to the right and the price of peaches to rise.

Question 14

If a large percentage increase in the price of a good results in a small percentage reduction in the quantity demanded of the good, demand is said to be

Accepted Answer

A)  horizontal. 
B)  relatively inelastic. 
C)  relatively elastic. 
D)  income proof. 
A)  horizontal. 
B)  relatively inelastic. 
C)  relatively elastic. 
D)  income proof.

Question 15

If you were a government official and wanted to raise the price of wheat, which of the following actions would you take?

Accepted Answer

A)  Take wheat from government storage and sell it. 
B)  Encourage farmers to use more fertilizer. 
C)  Lower the price of rye. 
D)  Subsidize purchases of farm equipment. 
E)  Encourage farmers to grow less wheat. 
A)  Take wheat from government storage and sell it. 
B)  Encourage farmers to use more fertilizer. 
C)  Lower the price of rye. 
D)  Subsidize purchases of farm equipment. 
E)  Encourage farmers to grow less wheat.

Question 16

Which of the following about demand is true?

Accepted Answer

A)  The height of the demand curve for a product at a given quantity represents the marginal value derived by the consumption of that unit. 
B)  The height of the demand curve for a product at a given quantity reflects the total value consumers derive from all units of the good consumed. 
C)  The total area above the demand curve for a product is equal to consumer surplus. 
D)  At every quantity, the height of the demand curve for a product represents the cost of producing that unit. 
A)  The height of the demand curve for a product at a given quantity represents the marginal value derived by the consumption of that unit. 
B)  The height of the demand curve for a product at a given quantity reflects the total value consumers derive from all units of the good consumed. 
C)  The total area above the demand curve for a product is equal to consumer surplus. 
D)  At every quantity, the height of the demand curve for a product represents the cost of producing that unit.

Question 17

A terrible storm wipes out 70 percent of the peanut crop. Explain and show graphically how this will affect the market for peanut butter and the market for jelly, a complementary good.

Accepted Answer

Higher peanut prices will shift the supp

Question 18

Assume that supply increases slightly and demand increases greatly. Which of the following will happen?

Accepted Answer

A)  Equilibrium price will fall and equilibrium quantity will rise. 
B)  Equilibrium price will rise and equilibrium quantity will fall. 
C)  Equilibrium price will rise and equilibrium quantity will rise. 
D)  Equilibrium price will fall and equilibrium quantity will fall. 
E)  Neither equilibrium price nor equilibrium quantity will change. 
A)  Equilibrium price will fall and equilibrium quantity will rise. 
B)  Equilibrium price will rise and equilibrium quantity will fall. 
C)  Equilibrium price will rise and equilibrium quantity will rise. 
D)  Equilibrium price will fall and equilibrium quantity will fall. 
E)  Neither equilibrium price nor equilibrium quantity will change.

Question 19

If we observe an increase in the price of a good and a decrease in the amount of the good bought and sold, this could be explained by

Accepted Answer

A)  an increase in the supply of the good. 
B)  an increase in the demand for the good. 
C)  a decrease in the demand for the good. 
D)  a decrease in the supply of the good. 
A)  an increase in the supply of the good. 
B)  an increase in the demand for the good. 
C)  a decrease in the demand for the good. 
D)  a decrease in the supply of the good.

Question 20

If the demand for coffee makers increases,

Accepted Answer

A)  the quantity demanded will decrease. 
B)  equilibrium price will increase and equilibrium quantity will decrease. 
C)  equilibrium price will decrease and equilibrium quantity will increase. 
D)  quantity supplied will increase. 
E)  quantity supplied will decrease. 
A)  the quantity demanded will decrease. 
B)  equilibrium price will increase and equilibrium quantity will decrease. 
C)  equilibrium price will decrease and equilibrium quantity will increase. 
D)  quantity supplied will increase. 
E)  quantity supplied will decrease.

If an increase in the price of good X causes the demand for good Y to decrease, this indicates that

Figure 3-7 In Figure 3-7, suppose D₁ and S₁ indicate the initial conditions in the market for ice cream. Which of the following changes would tend to cause the shift from D₁ to D₂ in the market for ice cream?

Which of the following would lead to an increase in the demand for computer software?

Just before Valentine's Day, the price of roses increases dramatically. This is because

Other things constant, a decrease in consumer income will

A cold spell in Florida extensively reduced the orange crop, and as a result, California oranges commanded a higher price. Which of the following statements best explains the situation?

A technological breakthrough lowers the cost of manufacturing microwave ovens. As a result, the market changes to a new equilibrium because of

If we observe an increase in the price of a good and an increase in the amount of the good bought and sold, this could be explained by

If the supply of a good decreased, what would be the effect on the equilibrium price and quantity?

If an increase in the price of peaches reduces the demand for cream, this indicates that peaches and cream are

If a major hurricane were to destroy the sugarcane crop in Louisiana, there would be

Use the figure below to answer the following question(s). Figure 3-8 In Figure 3-8, if the initial demand and supply for soybeans were D₁ and S₁, how would a decrease in the cost of producing soybeans affect the market for soybeans?

If Georgia experiences a late frost that damages the peach crop, we should expect the

If a large percentage increase in the price of a good results in a small percentage reduction in the quantity demanded of the good, demand is said to be

If you were a government official and wanted to raise the price of wheat, which of the following actions would you take?

Which of the following about demand is true?

A terrible storm wipes out 70 percent of the peanut crop. Explain and show graphically how this will affect the market for peanut butter and the market for jelly, a complementary good.

Assume that supply increases slightly and demand increases greatly. Which of the following will happen?

If we observe an increase in the price of a good and a decrease in the amount of the good bought and sold, this could be explained by

If the demand for coffee makers increases,

The Economic Approach

Some Tools of the Economist

Supply and Demand: Applications and Extensions

Difficult Cases for the Market, and the Role of Government

The Economics of Political Action

Taking the Nations Economic Pulse

Economic Fluctuations, Unemployment, and Inflation

An Introduction to Basic Macroeconomic Markets

Dynamic Change, Economic Fluctuations, and the Ad--As Model

Fiscal Policy: The Keynesian View and the Historical Development of Macroeconomics

Fiscal Policy: Incentives, and Secondary Effects

Money and the Banking System

Modern Macroeconomics and Monetary Policy

Stabilization Policy, Output, and Employment

Creating an Environment for Growth and Prosperity

Institutions, Policies, and Cross-Country Differences in Income and Growth

Gaining From International Trade

International Finance and the Foreign Exchange Market

Special Topics

Filters

Exam 3: Demand, Supply, and the Market Process

If an increase in the price of good X causes the demand for good Y to decrease, this indicates that

Figure 3-7 In Figure 3-7, suppose D1 and S1 indicate the initial conditions in the market for ice cream. Which of the following changes would tend to cause the shift from D1 to D2 in the market for ice cream?

Which of the following would lead to an increase in the demand for computer software?

Just before Valentine's Day, the price of roses increases dramatically. This is because

Other things constant, a decrease in consumer income will

A cold spell in Florida extensively reduced the orange crop, and as a result, California oranges commanded a higher price. Which of the following statements best explains the situation?

A technological breakthrough lowers the cost of manufacturing microwave ovens. As a result, the market changes to a new equilibrium because of

If we observe an increase in the price of a good and an increase in the amount of the good bought and sold, this could be explained by

If the supply of a good decreased, what would be the effect on the equilibrium price and quantity?

If an increase in the price of peaches reduces the demand for cream, this indicates that peaches and cream are

If a major hurricane were to destroy the sugarcane crop in Louisiana, there would be

Use the figure below to answer the following question(s). Figure 3-8 In Figure 3-8, if the initial demand and supply for soybeans were D1 and S1, how would a decrease in the cost of producing soybeans affect the market for soybeans?

If Georgia experiences a late frost that damages the peach crop, we should expect the

If a large percentage increase in the price of a good results in a small percentage reduction in the quantity demanded of the good, demand is said to be

If you were a government official and wanted to raise the price of wheat, which of the following actions would you take?

Which of the following about demand is true?

A terrible storm wipes out 70 percent of the peanut crop. Explain and show graphically how this will affect the market for peanut butter and the market for jelly, a complementary good.

Assume that supply increases slightly and demand increases greatly. Which of the following will happen?

If we observe an increase in the price of a good and a decrease in the amount of the good bought and sold, this could be explained by

If the demand for coffee makers increases,

The Economic Approach

Some Tools of the Economist

Supply and Demand: Applications and Extensions

Difficult Cases for the Market, and the Role of Government

The Economics of Political Action

Taking the Nations Economic Pulse

Economic Fluctuations, Unemployment, and Inflation

An Introduction to Basic Macroeconomic Markets

Dynamic Change, Economic Fluctuations, and the Ad--As Model

Fiscal Policy: The Keynesian View and the Historical Development of Macroeconomics

Fiscal Policy: Incentives, and Secondary Effects

Money and the Banking System

Modern Macroeconomics and Monetary Policy

Stabilization Policy, Output, and Employment

Creating an Environment for Growth and Prosperity

Institutions, Policies, and Cross-Country Differences in Income and Growth

Gaining From International Trade

International Finance and the Foreign Exchange Market

Special Topics

Filters

Figure 3-7 In Figure 3-7, suppose D₁ and S₁ indicate the initial conditions in the market for ice cream. Which of the following changes would tend to cause the shift from D₁ to D₂ in the market for ice cream?

Use the figure below to answer the following question(s). Figure 3-8 In Figure 3-8, if the initial demand and supply for soybeans were D₁ and S₁, how would a decrease in the cost of producing soybeans affect the market for soybeans?