Question 1

-In a free market economy, the market clearing (equilibrium)price in the above table would adjust to

Accepted Answer

A) $1. 
B) $3. 
C) $4. 
D) $5. 
A) $1. 
B) $3. 
C) $4. 
D) $5.

Question 2

Suppose that today, consumers expect the price of a gallon of gasoline to double in the future. Then today the gasoline

Accepted Answer

A) demand curve will shift to the right. 
B) demand curve will shift to the left. 
C) supply curve will shift to the right. 
D) supply curve will shift to the left. 
A) demand curve will shift to the right. 
B) demand curve will shift to the left. 
C) supply curve will shift to the right. 
D) supply curve will shift to the left.

Question 3

When producers anticipate that the price of their product will increase in the future

Accepted Answer

A) the supply curve will shift to the right. 
B) the supply curve will shift to the left. 
C) the current production will move along on the supply curve. 
D) they will immediately lobby Congress to adjust prices now. 
A) the supply curve will shift to the right. 
B) the supply curve will shift to the left. 
C) the current production will move along on the supply curve. 
D) they will immediately lobby Congress to adjust prices now.

Question 4

-Refer to the above figure. Which diagram shows the effect on the market of Corn Flakes when the demand for Corn Flakes has increased?

Accepted Answer

A) graph C 
B) graph D 
C) neither graph 
D) both graphs 
A) graph C 
B) graph D 
C) neither graph 
D) both graphs

Question 5

-If the market price falls from P₀ to P₁ in the above figure, then

Accepted Answer

A) a new equilibrium quantity is established. 
B) there is a shortage equal to the distance EF. 
C) there will be a further tendency for price to fall. 
D) there is a surplus of goods on the market equal to the distance Q₁, Q₂. 
A) a new equilibrium quantity is established. 
B) there is a shortage equal to the distance EF. 
C) there will be a further tendency for price to fall. 
D) there is a surplus of goods on the market equal to the distance Q₁, Q₂.

Question 6

The price of bread in terms of gallons of milk per loaf is 0.6 and the price a gallon of milk in terms of pounds of butter per gallon is 1.2. What is the relative price of bread to butter?

Accepted Answer

A) 1.39 
B) 0.6 
C) 0.72 
D) 0.50 
A) 1.39 
B) 0.6 
C) 0.72 
D) 0.50

Question 7

The law of demand includes the statement "other things being equal." These other things include all of the following EXCEPT

Accepted Answer

A) the price of that good in the law of demand. 
B) consumers' income. 
C) consumers' tastes and preferences. 
D) the number of potential buyers. 
A) the price of that good in the law of demand. 
B) consumers' income. 
C) consumers' tastes and preferences. 
D) the number of potential buyers.

Question 8

Which of the following does NOT cause a shift in demand?

Accepted Answer

A) change in income 
B) change in tastes 
C) change in the price of the good 
D) change in the price of a related good 
A) change in income 
B) change in tastes 
C) change in the price of the good 
D) change in the price of a related good

Question 9

The relationship between quantity supplied and the price of output is such that

Accepted Answer

A) an increase in quantity will automatically lead to a reduction in price. 
B) an increase in price will lead to an increase in quantity supplied. 
C) an increase in price will produce an inward shift in the supply curve. 
D) quantity will decrease as the number of firms increases. 
A) an increase in quantity will automatically lead to a reduction in price. 
B) an increase in price will lead to an increase in quantity supplied. 
C) an increase in price will produce an inward shift in the supply curve. 
D) quantity will decrease as the number of firms increases.

Question 10

The supply curve will shift to the left when

Accepted Answer

A) the supply of the product increases. 
B) the demand for the product decreases. 
C) some producers leave the industry. 
D) the product becomes fashionable. 
A) the supply of the product increases. 
B) the demand for the product decreases. 
C) some producers leave the industry. 
D) the product becomes fashionable.

Question 11

Which of the following will NOT affect the position of the market supply curve for a good?

Accepted Answer

A) The government grants a subsidy to the producers for each unit of a good that they produce. 
B) The price of the good increases. 
C) The number of sellers in the market increases. 
D) There is an increase in the prices of the inputs used in production. 
A) The government grants a subsidy to the producers for each unit of a good that they produce. 
B) The price of the good increases. 
C) The number of sellers in the market increases. 
D) There is an increase in the prices of the inputs used in production.

Question 12

John believes that when the price of a good increases people will purchase more of the good. This statement is

Accepted Answer

A) consistent with the law of demand. 
B) inconsistent with the law of demand. 
C) referring to money prices. 
D) consistent with the law of supply. 
A) consistent with the law of demand. 
B) inconsistent with the law of demand. 
C) referring to money prices. 
D) consistent with the law of supply.

Question 13

The law of demand is based on the observation that

Accepted Answer

A) people buy less of a product when the product becomes less fashionable. 
B) people buy more of a product when the price falls. 
C) people are indifferent to price changes. 
D) stores go out of business if they lower prices. 
A) people buy less of a product when the product becomes less fashionable. 
B) people buy more of a product when the price falls. 
C) people are indifferent to price changes. 
D) stores go out of business if they lower prices.

Question 14

Which of the following is NOT true about the equilibrium price?

Accepted Answer

A) the price where a change in quantity supplied occurs 
B) the price where the demand curve intersects the supply curve 
C) the price where quantity demanded equals quantity supplied 
D) the price where there is neither excess quantity demanded or excess quantity supplied 
A) the price where a change in quantity supplied occurs 
B) the price where the demand curve intersects the supply curve 
C) the price where quantity demanded equals quantity supplied 
D) the price where there is neither excess quantity demanded or excess quantity supplied

Question 15

Which of the following are complementary goods?

Accepted Answer

A) sport utility vehicles and gasoline 
B) butter and margarine 
C) beer and wine 
D) DVDs and videocassettes 
A) sport utility vehicles and gasoline 
B) butter and margarine 
C) beer and wine 
D) DVDs and videocassettes

Question 16

When there is an excess quantity supplied in the market

Accepted Answer

A) the price of the product will increase, causing a decrease in demand and an increase in supply. 
B) the price of the product will increase, causing a decrease in quantity demanded and an increase in supply. 
C) the price of the product will decrease, causing an increase in quantity demanded and a decrease in quantity supplied. 
D) the price will increase, causing a decrease in demand and an increase in quantity supplied. 
A) the price of the product will increase, causing a decrease in demand and an increase in supply. 
B) the price of the product will increase, causing a decrease in quantity demanded and an increase in supply. 
C) the price of the product will decrease, causing an increase in quantity demanded and a decrease in quantity supplied. 
D) the price will increase, causing a decrease in demand and an increase in quantity supplied.

Question 17

-Refer to the above table. Suppose Buyer 2 leaves the market. What is the new market quantity of DVDs demanded at a price of $10?

Accepted Answer

A) 33 
B) 25 
C) 22 
D) 8 
A) 33 
B) 25 
C) 22 
D) 8

Question 18

The law of demand states that

Accepted Answer

A) people demand less at lower prices. 
B) the quantity demanded is directly related to price. 
C) the quantity demanded is inversely related to price. 
D) changes in price and changes in quantity demanded move in the same direction. 
A) people demand less at lower prices. 
B) the quantity demanded is directly related to price. 
C) the quantity demanded is inversely related to price. 
D) changes in price and changes in quantity demanded move in the same direction.

Question 19

There will be an increase in supply when

Accepted Answer

A) a consumer's income increases. 
B) there is an improvement in technology. 
C) the demand curve shifts. 
D) the market price rises from $3 to $4. 
A) a consumer's income increases. 
B) there is an improvement in technology. 
C) the demand curve shifts. 
D) the market price rises from $3 to $4.

Question 20

In 1950, a phone call at a pay phone cost 5 cents and a first-class stamp cost 3 cents. Today, those prices are 50 cents and 49 cents respectively. What has happened to the price of each good relative to the other?
 What has happened to the price of each good relative to all other goods?

Accepted Answer

The price of a phone call has decreased

-In a free market economy, the market clearing (equilibrium)price in the above table would adjust to

Suppose that today, consumers expect the price of a gallon of gasoline to double in the future. Then today the gasoline

When producers anticipate that the price of their product will increase in the future

-Refer to the above figure. Which diagram shows the effect on the market of Corn Flakes when the demand for Corn Flakes has increased?

-If the market price falls from P₀ to P₁ in the above figure, then

The price of bread in terms of gallons of milk per loaf is 0.6 and the price a gallon of milk in terms of pounds of butter per gallon is 1.2. What is the relative price of bread to butter?

The law of demand includes the statement "other things being equal." These other things include all of the following EXCEPT

Which of the following does NOT cause a shift in demand?

The relationship between quantity supplied and the price of output is such that

The supply curve will shift to the left when

Which of the following will NOT affect the position of the market supply curve for a good?

John believes that when the price of a good increases people will purchase more of the good. This statement is

The law of demand is based on the observation that

Which of the following is NOT true about the equilibrium price?

Which of the following are complementary goods?

When there is an excess quantity supplied in the market

-Refer to the above table. Suppose Buyer 2 leaves the market. What is the new market quantity of DVDs demanded at a price of $10?

The law of demand states that

There will be an increase in supply when

In 1950, a phone call at a pay phone cost 5 cents and a first-class stamp cost 3 cents. Today, those prices are 50 cents and 49 cents respectively. What has happened to the price of each good relative to the other? What has happened to the price of each good relative to all other goods?

The Nature of Economics

Scarcity and the World of Trade-Offs

Extensions of Demand and Supply Analysis

Public Spending and Public Choice

Funding the Public Sector

The Macroeconomy: Unemployment, Inflation, and Deflation

Global Economic Growth and Development

Real GDP and the Price Level in the Long Run

Classical and Keynesian Macro Analyses

Consumption, Real GDP, and the Multiplier

Fiscal Policy

Deficit Spending and the Public Debt

Money Banking and Central Banking

Domestic and International Dimensions of Monetary Policy

Stabilization in an Integrated World Economy

Policies and Prospects for Global Economic Growth

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

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Exam 3: Demand and Supply

-In a free market economy, the market clearing (equilibrium)price in the above table would adjust to

Suppose that today, consumers expect the price of a gallon of gasoline to double in the future. Then today the gasoline

When producers anticipate that the price of their product will increase in the future

-Refer to the above figure. Which diagram shows the effect on the market of Corn Flakes when the demand for Corn Flakes has increased?

-If the market price falls from P₀ to P₁ in the above figure, then

The price of bread in terms of gallons of milk per loaf is 0.6 and the price a gallon of milk in terms of pounds of butter per gallon is 1.2. What is the relative price of bread to butter?

The law of demand includes the statement "other things being equal." These other things include all of the following EXCEPT

Which of the following does NOT cause a shift in demand?

The relationship between quantity supplied and the price of output is such that

The supply curve will shift to the left when

Which of the following will NOT affect the position of the market supply curve for a good?

John believes that when the price of a good increases people will purchase more of the good. This statement is

The law of demand is based on the observation that

Which of the following is NOT true about the equilibrium price?

Which of the following are complementary goods?

When there is an excess quantity supplied in the market

-Refer to the above table. Suppose Buyer 2 leaves the market. What is the new market quantity of DVDs demanded at a price of $10?

The law of demand states that

There will be an increase in supply when

In 1950, a phone call at a pay phone cost 5 cents and a first-class stamp cost 3 cents. Today, those prices are 50 cents and 49 cents respectively. What has happened to the price of each good relative to the other? What has happened to the price of each good relative to all other goods?

The Nature of Economics

Scarcity and the World of Trade-Offs

Extensions of Demand and Supply Analysis

Public Spending and Public Choice

Funding the Public Sector

The Macroeconomy: Unemployment, Inflation, and Deflation

Global Economic Growth and Development

Real GDP and the Price Level in the Long Run

Classical and Keynesian Macro Analyses

Consumption, Real GDP, and the Multiplier

Fiscal Policy

Deficit Spending and the Public Debt

Money Banking and Central Banking

Domestic and International Dimensions of Monetary Policy

Stabilization in an Integrated World Economy

Policies and Prospects for Global Economic Growth

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

Filters