Question 1

Figure 4-21
  
-At price P1 in Figure 4-21,what will tend to happen?

Accepted Answer

A) There will be a shortage, and the price will fall. 
B) There will be a shortage, and the price will rise. 
C) There will be a surplus, and the price will rise. 
D) There will be a surplus, and the price will fall. 
E) Equilibrium will occur in the market. 
A) There will be a shortage, and the price will fall. 
B) There will be a shortage, and the price will rise. 
C) There will be a surplus, and the price will rise. 
D) There will be a surplus, and the price will fall. 
E) Equilibrium will occur in the market.

Question 2

A decrease in the price of VCRs will increase demand for video cassettes.

Accepted Answer

A) True 
 B)False

Question 3

When price is above the equilibrium level,competitive price cutting will continue as long as quantity supplied exceeds quantity demanded.

Accepted Answer

A) True 
 B)False

Question 4

Advertising has no effect on the demand schedule for a good.

Accepted Answer

A) True 
 B)False

Question 5

When a demand schedule is drawn as a graph,

Accepted Answer

A) price is measured on the vertical axis. 
B) quantity is measured on the horizontal axis. 
C) the resulting curve has a negative slope. 
D) the other variables (besides price and quantity) are held constant. 
E) All of the above are correct. 
A) price is measured on the vertical axis. 
B) quantity is measured on the horizontal axis. 
C) the resulting curve has a negative slope. 
D) the other variables (besides price and quantity) are held constant. 
E) All of the above are correct.

Question 6

"Equilibrium" is a situation in which there are no inherent forces to produce change.

Accepted Answer

A) True 
 B)False

Question 7

If the U.S.government starts to sell off its stockpile of cheese,

Accepted Answer

A) consumers will be less willing to purchase cheese. 
B) the equilibrium quantity demanded will rise. 
C) farmers will hoard the cheese they produce. 
D) the quantity of cheese that spoils before sale will rise. 
A) consumers will be less willing to purchase cheese. 
B) the equilibrium quantity demanded will rise. 
C) farmers will hoard the cheese they produce. 
D) the quantity of cheese that spoils before sale will rise.

Question 8

Figure 4-16
  
-Assume that Figure 4-16 shows the supply of soda.An increase in the price of syrup used in the production of soda will shift supply from

Accepted Answer

A) S1 to S2. 
B) S2 to S1. 
C) S2 to S3. 
D) S1 to S3. 
A) S1 to S2. 
B) S2 to S1. 
C) S2 to S3. 
D) S1 to S3.

Question 9

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 10

A supply curve slopes upward because quantity supplied is higher when price is higher.

Accepted Answer

A) True 
 B)False

Question 11

Normally an increase in the supply of a good will cause

Accepted Answer

A) a shift of consumer preferences in favor of that good. 
B) consumers to use more of that good and less of others. 
C) a shift of consumer preferences away from that good. 
D) consumers to use less of that good and more of others. 
A) a shift of consumer preferences in favor of that good. 
B) consumers to use more of that good and less of others. 
C) a shift of consumer preferences away from that good. 
D) consumers to use less of that good and more of others.

Question 12

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 13

Equilibrium price and quantity are determined by the intersection of the demand and supply curves.

Accepted Answer

A) True 
 B)False

Question 14

Some medical authorities announced in the late 1980s that an acne medicine named Retin-A also had previously unknown wrinkle-reducing properties.An economist would expect to find that,after this announcement,the price of Retin-A ____ and the quantity sold ____.

Accepted Answer

A) rose; fell 
B) rose; rose 
C) fell; fell 
D) fell; rose 
A) rose; fell 
B) rose; rose 
C) fell; fell 
D) fell; rose

Question 15

The mechanism of supply and demand is

Accepted Answer

A) a fundamental tool in both microeconomics and macroeconomics. 
B) the only real "law" of economics. 
C) a fundamental tool only in microeconomics. 
D) a fundamental tool only in macroeconomics. 
A) a fundamental tool in both microeconomics and macroeconomics. 
B) the only real "law" of economics. 
C) a fundamental tool only in microeconomics. 
D) a fundamental tool only in macroeconomics.

Question 16

A demand schedule shows the time over which different quantities will be demanded.

Accepted Answer

A) True 
 B)False

Question 17

How do legal controls on prices lead to corruption?

Accepted Answer

A) Persons who benefit from the controls are willing to bribe officials to keep the controls in place. 
B) Persons who make the laws may favor certain groups at the expense of others. 
C) Selling in the black market is very profitable, and persons therefore willingly break the law. 
D) Discrimination may occur as a means to limit buying or selling select groups. 
E) All of the above are correct. 
A) Persons who benefit from the controls are willing to bribe officials to keep the controls in place. 
B) Persons who make the laws may favor certain groups at the expense of others. 
C) Selling in the black market is very profitable, and persons therefore willingly break the law. 
D) Discrimination may occur as a means to limit buying or selling select groups. 
E) All of the above are correct.

Question 18

Figure 4-19
  
-Equilibrium in a market is

Accepted Answer

A) a situation in which there are no inherent forces that produce change. 
B) the natural state of affairs in the market. 
C) the actual price and quantity that will exist in a market. 
D) the best price and quantity that can exist in a market. 
E) All of the above are correct. 
A) a situation in which there are no inherent forces that produce change. 
B) the natural state of affairs in the market. 
C) the actual price and quantity that will exist in a market. 
D) the best price and quantity that can exist in a market. 
E) All of the above are correct.

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

When price is above the equilibrium level,suppliers offer more than demanders wish to buy.

Accepted Answer

A) True 
 B)False

Exam 4: Supply and Demand: An Initial Look

Figure 4-21 -At price P1 in Figure 4-21,what will tend to happen?

A decrease in the price of VCRs will increase demand for video cassettes.

When price is above the equilibrium level,competitive price cutting will continue as long as quantity supplied exceeds quantity demanded.

Advertising has no effect on the demand schedule for a good.

When a demand schedule is drawn as a graph,

"Equilibrium" is a situation in which there are no inherent forces to produce change.

If the U.S.government starts to sell off its stockpile of cheese,

Figure 4-16 -Assume that Figure 4-16 shows the supply of soda.An increase in the price of syrup used in the production of soda will shift supply from

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?

A supply curve slopes upward because quantity supplied is higher when price is higher.

Normally an increase in the supply of a good will cause

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

Equilibrium price and quantity are determined by the intersection of the demand and supply curves.

Some medical authorities announced in the late 1980s that an acne medicine named Retin-A also had previously unknown wrinkle-reducing properties.An economist would expect to find that,after this announcement,the price of Retin-A ____ and the quantity sold ____.

The mechanism of supply and demand is

A demand schedule shows the time over which different quantities will be demanded.

How do legal controls on prices lead to corruption?

Figure 4-19 -Equilibrium in a market is

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

When price is above the equilibrium level,suppliers offer more than demanders wish to buy.

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 Markets 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

International Trade and Comparative Advantage

Filters

Figure 4-21 -At price P₁ in Figure 4-21,what will tend to happen?

Some medical authorities announced in the late 1980s that an acne medicine named Retin-A also had previously unknown wrinkle-reducing properties.An economist would expect to find that,after this announcement,the price of Retin-A and the quantity sold .