Question 1

Which of the following does the law of demand specifically imply?

Accepted Answer

A) If the product price increases, quantity demanded will decrease. 
B) If consumer income increases, quantity demanded will increase. 
C) If the product price increases, quantity demanded will increase. 
D) If consumer income increases, quantity demanded will decrease. 
E) If supply increases, demand will increase. 
A) If the product price increases, quantity demanded will decrease. 
B) If consumer income increases, quantity demanded will increase. 
C) If the product price increases, quantity demanded will increase. 
D) If consumer income increases, quantity demanded will decrease. 
E) If supply increases, demand will increase. A

Question 2

Assume that corn and soybeans are alternatives that could be grown by most farmers. An increase in the price of corn will

Accepted Answer

A) increase the supply of corn. 
B) increase the supply of soybeans. 
C) decrease the supply of soybeans. 
D) decrease the supply of corn. 
E) have no effect on the supplies of corn and soybeans. 
A) increase the supply of corn. 
B) increase the supply of soybeans. 
C) decrease the supply of soybeans. 
D) decrease the supply of corn. 
E) have no effect on the supplies of corn and soybeans. C

Question 3

When the quantity demanded and quantity supplied in a market are equal, the market is said to be in

Accepted Answer

A) fixation. 
B) excess supply. 
C) equilibrium. 
D) excess demand. 
A) fixation. 
B) excess supply. 
C) equilibrium. 
D) excess demand. C

Question 4

"A reduction in gasoline prices caused the demand for gasoline to increase. The lower gas prices also led to an increase in demand for large cars, causing their prices to rise." These statements

Accepted Answer

A) are essentially correct. 
B) contain one error; the lower gasoline prices would cause an increase in the quantity demanded of gasoline, not an increase in demand. 
C) contain one error; the lower gasoline prices would increase the quantity demanded of large cars, not the demand. 
D) contain two errors; the lower gasoline prices would cause the quantity of gasoline demanded (rather than the demand) to increase, and the lower gasoline price would cause an increase in quantity demanded (rather than the demand) for large cars. 
A) are essentially correct. 
B) contain one error; the lower gasoline prices would cause an increase in the quantity demanded of gasoline, not an increase in demand. 
C) contain one error; the lower gasoline prices would increase the quantity demanded of large cars, not the demand. 
D) contain two errors; the lower gasoline prices would cause the quantity of gasoline demanded (rather than the demand) to increase, and the lower gasoline price would cause an increase in quantity demanded (rather than the demand) for large cars.

Question 5

The demand schedule for a good

Accepted Answer

A) indicates the relationship between the price of the good and the price of other goods. 
B) indicates the quantities of the good that people will buy at various prices. 
C) illustrates the quantity producers will provide at alternative prices. 
D) is determined primarily by the cost of producing the good. 
A) indicates the relationship between the price of the good and the price of other goods. 
B) indicates the quantities of the good that people will buy at various prices. 
C) illustrates the quantity producers will provide at alternative prices. 
D) is determined primarily by the cost of producing the good.

Question 6

Profits and losses play an important role in helping

Accepted Answer

A) to signal to government which businesses are suffering losses so that they can be subsidized. 
B) consumers decide which products they value the most by looking at each firm's profit. 
C) to allocate scarce resources in a manner that maximizes the value created to society. 
D) ensure that the total profits in the economy exactly equal the total losses. 
A) to signal to government which businesses are suffering losses so that they can be subsidized. 
B) consumers decide which products they value the most by looking at each firm's profit. 
C) to allocate scarce resources in a manner that maximizes the value created to society. 
D) ensure that the total profits in the economy exactly equal the total losses.

Question 7

Producers are willing to offer greater quantities for sale at higher prices because

Accepted Answer

A) they have the incentive to pay the increasing opportunity cost of resources necessary to attract them from alternative uses 
B) they will decrease their profits by expanding production at higher prices 
C) the government orders them to do so 
D) lower prices attract new firms, which have higher costs of production 
E) they hire superior quality, higher-priced resources as production expands 
A) they have the incentive to pay the increasing opportunity cost of resources necessary to attract them from alternative uses 
B) they will decrease their profits by expanding production at higher prices 
C) the government orders them to do so 
D) lower prices attract new firms, which have higher costs of production 
E) they hire superior quality, higher-priced resources as production expands

Question 8

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

Accepted Answer

A) vertical. 
B) relatively inelastic. 
C) relatively elastic. 
D) robust. 
A) vertical. 
B) relatively inelastic. 
C) relatively elastic. 
D) robust.

Question 9

Two products that serve similar purposes for a consumer would be referred to as

Accepted Answer

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

Question 10

An increase in demand will cause

Accepted Answer

A) an increase in supply. 
B) a decrease in supply. 
C) an increase in quantity supplied. 
D) a decrease in quantity supplied. 
E) a decrease in equilibrium price. 
A) an increase in supply. 
B) a decrease in supply. 
C) an increase in quantity supplied. 
D) a decrease in quantity supplied. 
E) a decrease in equilibrium price.

Question 11

Which of the following would most likely cause the supply of wheat to increase?

Accepted Answer

A) a decrease in the price of corn, a substitute for wheat 
B) a technological advance that lowers the cost of producing wheat 
C) an increase in the cost of producing wheat 
D) a change in consumer preferences, causing them to prefer plain white bread to whole-wheat bread 
A) a decrease in the price of corn, a substitute for wheat 
B) a technological advance that lowers the cost of producing wheat 
C) an increase in the cost of producing wheat 
D) a change in consumer preferences, causing them to prefer plain white bread to whole-wheat bread

Question 12

Saccharin and aspartame are both low-calorie substitutes for sugar. If saccharin is found to cause cancer,

Accepted Answer

A) the price of aspartame will increase. 
B) the price of sugar will decrease. 
C) the price of saccharin will increase. 
D) the demand curves for aspartame and sugar will shift leftward. 
E) aspartame and sugar will be complements. 
A) the price of aspartame will increase. 
B) the price of sugar will decrease. 
C) the price of saccharin will increase. 
D) the demand curves for aspartame and sugar will shift leftward. 
E) aspartame and sugar will be complements.

Question 13

The total economic cost of producing a good or service is called the

Accepted Answer

A) comparative value of construction. 
B) social consequence of resources. 
C) marginal valuation of output. 
D) opportunity cost of production. 
A) comparative value of construction. 
B) social consequence of resources. 
C) marginal valuation of output. 
D) opportunity cost of production.

Question 14

Graphically, the area that represents the difference between the market price and the minimum price required to induce suppliers to produce a good is called

Accepted Answer

A) consumer surplus. 
B) producer surplus. 
C) marginal cost. 
D) triangular arbitrage. 
A) consumer surplus. 
B) producer surplus. 
C) marginal cost. 
D) triangular arbitrage.

Question 15

According to the law of supply, as the price of a good increases,

Accepted Answer

A) buyers will buy more of the good. 
B) buyers will buy less of the good. 
C) sellers will produce more of the good. 
D) sellers will produce less of the good. 
A) buyers will buy more of the good. 
B) buyers will buy less of the good. 
C) sellers will produce more of the good. 
D) sellers will produce less of the good.

Question 16

Which of the following would most likely cause the current demand for natural gas to decrease?

Accepted Answer

A) an increase in consumer income 
B) an increase in the price of natural gas 
C) a decrease in the price of electricity, a substitute for natural gas 
D) the expectation that the price of natural gas will rise sharply next month 
A) an increase in consumer income 
B) an increase in the price of natural gas 
C) a decrease in the price of electricity, a substitute for natural gas 
D) the expectation that the price of natural gas will rise sharply next month

Question 17

The price elasticity of demand for a commodity is determined primarily by the

Accepted Answer

A) size of the consumer surplus. 
B) availability of good substitutes for the good. 
C) incomes of consumers. 
D) availability of complementary goods. 
A) size of the consumer surplus. 
B) availability of good substitutes for the good. 
C) incomes of consumers. 
D) availability of complementary goods.

Question 18

Two goods are considered substitutes if

Accepted Answer

A) a decrease in the demand for one leads to a decrease in the supply of the other. 
B) an increase in the demand for one leads to a decrease in the supply of the other. 
C) an increase in the price of one leads to an increase in the demand for the other. 
D) a decrease in the price of one leads to an increase in the demand for the other. 
E) a decrease in the supply of one leads producers to switch to production of the other. 
A) a decrease in the demand for one leads to a decrease in the supply of the other. 
B) an increase in the demand for one leads to a decrease in the supply of the other. 
C) an increase in the price of one leads to an increase in the demand for the other. 
D) a decrease in the price of one leads to an increase in the demand for the other. 
E) a decrease in the supply of one leads producers to switch to production of the other.

Question 19

Which one of the following would most likely increase the demand for wheat?

Accepted Answer

A) an increase in the price of soybeans, a substitute product 
B) a decrease in the price of corn, a substitute product 
C) the development of a hybrid seed that doubles wheat yields per acre 
D) a decrease in the price of wheat 
A) an increase in the price of soybeans, a substitute product 
B) a decrease in the price of corn, a substitute product 
C) the development of a hybrid seed that doubles wheat yields per acre 
D) a decrease in the price of wheat

Question 20

For a typical product, a decrease in consumer income will cause the market demand for the product to

Accepted Answer

A) decrease, which is a shift to the left of the demand curve. 
B) decrease, which is a shift to the right of the demand curve. 
C) increase, which is a shift to the left of the demand curve. 
D) increase, which is a shift to the right of the demand curve. 
A) decrease, which is a shift to the left of the demand curve. 
B) decrease, which is a shift to the right of the demand curve. 
C) increase, which is a shift to the left of the demand curve. 
D) increase, which is a shift to the right of the demand curve.

Exam 3: A: Supply, Demand, and the Market Process

Which of the following does the law of demand specifically imply?

Assume that corn and soybeans are alternatives that could be grown by most farmers. An increase in the price of corn will

When the quantity demanded and quantity supplied in a market are equal, the market is said to be in

"A reduction in gasoline prices caused the demand for gasoline to increase. The lower gas prices also led to an increase in demand for large cars, causing their prices to rise." These statements

The demand schedule for a good

Profits and losses play an important role in helping

Producers are willing to offer greater quantities for sale at higher prices because

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

Two products that serve similar purposes for a consumer would be referred to as

An increase in demand will cause

Which of the following would most likely cause the supply of wheat to increase?

Saccharin and aspartame are both low-calorie substitutes for sugar. If saccharin is found to cause cancer,

The total economic cost of producing a good or service is called the

Graphically, the area that represents the difference between the market price and the minimum price required to induce suppliers to produce a good is called

According to the law of supply, as the price of a good increases,

Which of the following would most likely cause the current demand for natural gas to decrease?

The price elasticity of demand for a commodity is determined primarily by the

Two goods are considered substitutes if

Which one of the following would most likely increase the demand for wheat?

For a typical product, a decrease in consumer income will cause the market demand for the product to

The Economic Approach

A: Some Tools of the Economist

B: Some Tools of the Economist

B: Supply, Demand, and the Market Process

A: Supply and Demand: Applications and Extensions

B: Supply and Demand: Applications and Extensions

Difficult Cases for the Market and the Role of Government

The Economics of Collective Decision-Making

Consumer Choice and Elasticity

A: Costs and the Supply of Goods

B: Costs and the Supply of Goods

A: Price Takers and the Competitive Process

B: Price Takers and the Competitive Process

Price-Searcher Markets With Low Entry Barriers

A: Price-Searcher Markets With High Entry Barriers

B: Price-Searcher Markets With High Entry Barriers

The Supply of and Demand for Productive Resources

Earnings, Productivity, and the Job Market

Investment, the Capital Market, and the Wealth of Nations

Income Inequality and Poverty

Appendix: Government Spending and Taxation

Appendix: the Economics of Social Security

Appendix: the Stock Market: Its Function, Performance, and Potential As an Investment Opportunity

Appendix: Great Debates in Economics: Keynes Versus Hayek

Appendix: the Crisis of 2008: Causes and Lessons for the Future

Appendix: Lessons From the Great Depression

Appendix: the Economics of Healthcare

Appendix:education: Problems and Performance

Appendix: Earnings Differences Between Men and Women

Appendix: the Question of Resource Exhaustion

Appendix: Do Labor Unions Increase the Wages of Workers

Appendix: Difficult Environmental Cases and the Role of Government

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