Question 1

Elle decreased her consumption of bananas when the price of peanut butter increased.For Elle,peanut butter and bananas are

Accepted Answer

A)  substitutes in consumption. 
B)  both inferior goods. 
C)  complements in consumption. 
D)  both luxury goods. 
A)  substitutes in consumption. 
B)  both inferior goods. 
C)  complements in consumption. 
D)  both luxury goods.

Question 2

One reason that consumers and businesses might not act rationally is

Accepted Answer

A)  it is difficult to obtain enough information about the elasticities of demand and supply. 
B)  they may not realise their actions are inconsistent with their goals. 
C)  consumer tastes change constantly. 
D)  they do not always value fairness when they make choices. 
A)  it is difficult to obtain enough information about the elasticities of demand and supply. 
B)  they may not realise their actions are inconsistent with their goals. 
C)  consumer tastes change constantly. 
D)  they do not always value fairness when they make choices.

Question 3

Which of the following would cause an increase in the equilibrium price and an increase in the equilibrium quantity of watermelons?

Accepted Answer

A)  An increase in demand and an increase in supply. 
B)  An increase in supply. 
C)  An increase in supply and an increase in demand greater than the increase in supply. 
D)  A decrease in demand and an increase in supply. 
A)  An increase in demand and an increase in supply. 
B)  An increase in supply. 
C)  An increase in supply and an increase in demand greater than the increase in supply. 
D)  A decrease in demand and an increase in supply.

Question 4

A(n)________ is represented by a leftward shift of the demand curve while a(n)________ is represented by a movement along a given demand curve.

Accepted Answer

A)  decrease in demand; increase in demand 
B)  decrease in demand; increase in quantity demanded 
C)  increase in demand; decrease in quantity demanded 
D)  decrease in quantity demanded; decrease in demand 
A)  decrease in demand; increase in demand 
B)  decrease in demand; increase in quantity demanded 
C)  increase in demand; decrease in quantity demanded 
D)  decrease in quantity demanded; decrease in demand

Question 5

If the price of refillable butane lighters was to decrease,then

Accepted Answer

A)  the demand for butane would decrease. 
B)  the demand for butane would increase. 
C)  the quantity of butane demanded would increase. 
D)  the quantity of butane demanded would decrease. 
A)  the demand for butane would decrease. 
B)  the demand for butane would increase. 
C)  the quantity of butane demanded would increase. 
D)  the quantity of butane demanded would decrease.

Question 6

If the population increases and input prices decrease,the equilibrium quantity of a product will definitely increase.

Accepted Answer

A) True 
 B)False

Question 7

A shortage is defined as the situation that exists when the quantity of a good supplied is greater than the quantity demanded.

Accepted Answer

A) True 
 B)False

Question 8

A common mistake made by consumers is the failure to ignore the sunk costs of their actions.

Accepted Answer

A) True 
 B)False

Question 9

Figure 3-8  
-Refer to Figure 3-8.The graph in this figure illustrates an initial competitive equilibrium in the market for apples at the intersection of D1 and S1 point A If there is an increase in the wages of apple workers and an increase in the price of oranges, a substitute for apples, the equilibrium could move to which point?

Accepted Answer

A)  None of the points shown 
B)  B 
C)  C 
D)  E 
A)  None of the points shown 
B)  B 
C)  C 
D)  E

Question 10

Which of the following is a common mistake made by consumers?

Accepted Answer

A)  Taking into account the implicit costs of an activity. 
B)  Ignoring sunk costs. 
C)  Being overly optimistic about their future behaviour. 
D)  Being overly pessimistic about their future behaviour. 
A)  Taking into account the implicit costs of an activity. 
B)  Ignoring sunk costs. 
C)  Being overly optimistic about their future behaviour. 
D)  Being overly pessimistic about their future behaviour.

Question 11

If the demand curve for a product shifts to the left and the supply curve for the product shifts to the left,the equilibrium quantity will decrease.

Accepted Answer

A) True 
 B)False

Question 12

An increase in the demand for lobster due to changes in consumer tastes,accompanied by a decrease in the supply of lobster as a result of bad weather reducing the number of fishermen trapping lobster,will result in

Accepted Answer

A)  a decrease in the equilibrium quantity of lobster and no change in the equilibrium price. 
B)  an increase in the equilibrium price of lobster and no change in the equilibrium quantity. 
C)  an increase in the equilibrium price of lobster; the equilibrium quantity may increase or decrease. 
D)  a decrease in the equilibrium quantity of lobster; the equilibrium price may increase or decrease. 
A)  a decrease in the equilibrium quantity of lobster and no change in the equilibrium price. 
B)  an increase in the equilibrium price of lobster and no change in the equilibrium quantity. 
C)  an increase in the equilibrium price of lobster; the equilibrium quantity may increase or decrease. 
D)  a decrease in the equilibrium quantity of lobster; the equilibrium price may increase or decrease.

Question 13

Figure 3-8  
-Refer to Figure 3-8.The graph in this figure illustrates an initial competitive equilibrium in the market for apples at the intersection of D1 and S1 (point
A. The equilibrium point will move from A to E.

Accepted Answer

A)  If the price of oranges, a substitute for apples, decreases and the wages of apple workers increase, how will the equilibrium point change? 
B)  The equilibrium point will move from A to B. 
C)  The equilibrium point will move from A to C. 
D)  The equilibrium will first move from A to B, then return to A. 
A)  If the price of oranges, a substitute for apples, decreases and the wages of apple workers increase, how will the equilibrium point change? 
B)  The equilibrium point will move from A to B. 
C)  The equilibrium point will move from A to C. 
D)  The equilibrium will first move from A to B, then return to A.

Question 14

The income effect of a price change refers to the change in the quantity demanded of a good that results from a change in the price of a complementary product.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following is evidence of a surplus of bananas?

Accepted Answer

A)  Firms raise the price of bananas. 
B)  The price of bananas is lowered in order to increase sales. 
C)  The equilibrium price of bananas rises due to an increase in demand. 
D)  The quantity demanded of bananas is greater than the quantity supplied. 
A)  Firms raise the price of bananas. 
B)  The price of bananas is lowered in order to increase sales. 
C)  The equilibrium price of bananas rises due to an increase in demand. 
D)  The quantity demanded of bananas is greater than the quantity supplied.

Question 16

An increase in the price of off-road vehicles will result in

Accepted Answer

A)  a smaller quantity of off-road vehicles supplied. 
B)  a larger quantity of off-road vehicles supplied. 
C)  an increase in the demand for off-road vehicles. 
D)  a decrease in the supply of off-road vehicles. 
A)  a smaller quantity of off-road vehicles supplied. 
B)  a larger quantity of off-road vehicles supplied. 
C)  an increase in the demand for off-road vehicles. 
D)  a decrease in the supply of off-road vehicles.

Question 17

Figure 3-8  
-Refer to Figure 3-8.The graph in this figure illustrates an initial competitive equilibrium in the market for apples at the intersection of D1 and S2 point B Which of the following changes would cause the equilibrium to change to point C?

Accepted Answer

A)  A positive change in the technology used to produce apples and a decrease in the price of oranges, a substitute for apples. 
B)  An increase in the wages of apple workers and an increase in the price of oranges, a substitute for apples. 
C)  An increase in the number of apple producers and a decrease in the number of apple trees as a result of disease. 
D)  A decrease in the wages of apple workers and an increase in the price of oranges, a substitute for apples. 
A)  A positive change in the technology used to produce apples and a decrease in the price of oranges, a substitute for apples. 
B)  An increase in the wages of apple workers and an increase in the price of oranges, a substitute for apples. 
C)  An increase in the number of apple producers and a decrease in the number of apple trees as a result of disease. 
D)  A decrease in the wages of apple workers and an increase in the price of oranges, a substitute for apples.

Question 18

Psychologists Daniel Kahneman and Amos Tversky conducted the following experiments by asking a sample of people the following questions: Scenario A: 'Imagine that you have decided to see a play and paid the admission price of $10 per ticket.As you enter the theatre you discover that you have lost the ticket.The seat was not marked and the ticket cannot be recovered.Would you pay $10 for another ticket?'
Scenario B: 'Imagine that you have decided to see a play where admission is $10 per ticket.As you enter the theatre you discover that you have lost a $10 bill.Would you still pay $10 for a ticket for the play?'
As long as additional tickets are available,there's no meaningful difference between losing $10 in cash before buying a ticket,and losing the $10 ticket after buying it.In both cases,you are out $10.Yet,far more subjects (88 per cent)in Scenario B say they would pay $10 for another ticket and see the play,while in Scenario A only 46 per cent of the subjects say they would be willing to spend another $10 to see the play.
Which of the following is the best explanation for the results of the experiment?

Accepted Answer

A)  The endowment effect applies in Scenario A since people already own the ticket and therefore it is more valuable but this is not so in Scenario B. 
B)  In Scenario B, people had not anticipated spending an additional $10 so in effect the price of the ticket is $20 and not $10 whereas in Scenario A, the price of the ticket is still $10. 
C)  In Scenario A, people make an immediate connection between the lost ticket and the play and feel poorer by incorrectly assigning a greater value to the value of the ticket, whereas in Scenario B they do not make the connection between the lost $10 bill and the play. 
D)  The net benefit derived from watching the play is lower in Scenario A where the effective cost is $20 compared to the net benefit in Scenario B. 
A)  The endowment effect applies in Scenario A since people already own the ticket and therefore it is more valuable but this is not so in Scenario B. 
B)  In Scenario B, people had not anticipated spending an additional $10 so in effect the price of the ticket is $20 and not $10 whereas in Scenario A, the price of the ticket is still $10. 
C)  In Scenario A, people make an immediate connection between the lost ticket and the play and feel poorer by incorrectly assigning a greater value to the value of the ticket, whereas in Scenario B they do not make the connection between the lost $10 bill and the play. 
D)  The net benefit derived from watching the play is lower in Scenario A where the effective cost is $20 compared to the net benefit in Scenario B.

Question 19

Behavioural economics is the study of situations in which people make rational choices.

Accepted Answer

A) True 
 B)False

Question 20

What is the difference between an 'increase in demand' and an 'increase in quantity demanded'?

Accepted Answer

A)  There is no difference between the two terms; they both refer to a shift of the demand curve. 
B)  An 'increase in demand' is represented by a rightward shift of the demand curve while an 'increase in quantity demanded' is represented by a movement along a given demand curve. 
C)  There is no difference between the two terms; they both refer to a movement downward along a given demand curve. 
D)  An 'increase in demand' is represented by a movement along a given demand curve, while an 'increase in quantity demanded' is represented by a rightward shift of the demand curve. 
A)  There is no difference between the two terms; they both refer to a shift of the demand curve. 
B)  An 'increase in demand' is represented by a rightward shift of the demand curve while an 'increase in quantity demanded' is represented by a movement along a given demand curve. 
C)  There is no difference between the two terms; they both refer to a movement downward along a given demand curve. 
D)  An 'increase in demand' is represented by a movement along a given demand curve, while an 'increase in quantity demanded' is represented by a rightward shift of the demand curve.

Elle decreased her consumption of bananas when the price of peanut butter increased.For Elle,peanut butter and bananas are

One reason that consumers and businesses might not act rationally is

Which of the following would cause an increase in the equilibrium price and an increase in the equilibrium quantity of watermelons?

A(n) is represented by a leftward shift of the demand curve while a(n) is represented by a movement along a given demand curve.

If the price of refillable butane lighters was to decrease,then

If the population increases and input prices decrease,the equilibrium quantity of a product will definitely increase.

A shortage is defined as the situation that exists when the quantity of a good supplied is greater than the quantity demanded.

A common mistake made by consumers is the failure to ignore the sunk costs of their actions.

Which of the following is a common mistake made by consumers?

If the demand curve for a product shifts to the left and the supply curve for the product shifts to the left,the equilibrium quantity will decrease.

An increase in the demand for lobster due to changes in consumer tastes,accompanied by a decrease in the supply of lobster as a result of bad weather reducing the number of fishermen trapping lobster,will result in

Figure 3-8 -Refer to Figure 3-8.The graph in this figure illustrates an initial competitive equilibrium in the market for apples at the intersection of D₁ and S₁ (point A. The equilibrium point will move from A to E.

The income effect of a price change refers to the change in the quantity demanded of a good that results from a change in the price of a complementary product.

Which of the following is evidence of a surplus of bananas?

An increase in the price of off-road vehicles will result in

Figure 3-8 -Refer to Figure 3-8.The graph in this figure illustrates an initial competitive equilibrium in the market for apples at the intersection of D₁ and S₂ point B Which of the following changes would cause the equilibrium to change to point C?

Behavioural economics is the study of situations in which people make rational choices.

What is the difference between an 'increase in demand' and an 'increase in quantity demanded'?

Economics: Foundations and Models

Choices and Trade-Offs in the Market

Elasticity: The Responsiveness of Demand and Supply

Economic Efficiency,government Price Setting and Taxes

Technology,production and Costs

Firms in Perfectly Competitive Markets

Monopoly Markets

Monopolistic Competition and Oligopoly

The Markets for Labour and Other Factors of Production

Government Intervention in the Market

Social Policy and Inequality

Gdp: Measuring Total Production, income and Economic Growth

Unemployment and Inflation

Aggregate Demand and Aggregate Supply Analysis

Money,banks and the Reserve Bank of Australia

Monetary Policy

Fiscal Policy

Comparative Advantage and the Gains From International Trade

Macroeconomics in an Open Economy

Filters

Exam 3: Where Prices Come From: the Interaction of Demand and Supply

Elle decreased her consumption of bananas when the price of peanut butter increased.For Elle,peanut butter and bananas are

One reason that consumers and businesses might not act rationally is

Which of the following would cause an increase in the equilibrium price and an increase in the equilibrium quantity of watermelons?

A(n)________ is represented by a leftward shift of the demand curve while a(n)________ is represented by a movement along a given demand curve.

If the price of refillable butane lighters was to decrease,then

If the population increases and input prices decrease,the equilibrium quantity of a product will definitely increase.

A shortage is defined as the situation that exists when the quantity of a good supplied is greater than the quantity demanded.

A common mistake made by consumers is the failure to ignore the sunk costs of their actions.

Which of the following is a common mistake made by consumers?

If the demand curve for a product shifts to the left and the supply curve for the product shifts to the left,the equilibrium quantity will decrease.

An increase in the demand for lobster due to changes in consumer tastes,accompanied by a decrease in the supply of lobster as a result of bad weather reducing the number of fishermen trapping lobster,will result in

Figure 3-8 -Refer to Figure 3-8.The graph in this figure illustrates an initial competitive equilibrium in the market for apples at the intersection of D1 and S1 (point A. The equilibrium point will move from A to E.

The income effect of a price change refers to the change in the quantity demanded of a good that results from a change in the price of a complementary product.

Which of the following is evidence of a surplus of bananas?

An increase in the price of off-road vehicles will result in

Figure 3-8 -Refer to Figure 3-8.The graph in this figure illustrates an initial competitive equilibrium in the market for apples at the intersection of D1 and S2 point B Which of the following changes would cause the equilibrium to change to point C?

Behavioural economics is the study of situations in which people make rational choices.

What is the difference between an 'increase in demand' and an 'increase in quantity demanded'?

Economics: Foundations and Models

Choices and Trade-Offs in the Market

Elasticity: The Responsiveness of Demand and Supply

Economic Efficiency,government Price Setting and Taxes

Technology,production and Costs

Firms in Perfectly Competitive Markets

Monopoly Markets

Monopolistic Competition and Oligopoly

The Markets for Labour and Other Factors of Production

Government Intervention in the Market

Social Policy and Inequality

Gdp: Measuring Total Production, income and Economic Growth

Unemployment and Inflation

Aggregate Demand and Aggregate Supply Analysis

Money,banks and the Reserve Bank of Australia

Monetary Policy

Fiscal Policy

Comparative Advantage and the Gains From International Trade

Macroeconomics in an Open Economy

Filters

A(n) is represented by a leftward shift of the demand curve while a(n) is represented by a movement along a given demand curve.

Figure 3-8 -Refer to Figure 3-8.The graph in this figure illustrates an initial competitive equilibrium in the market for apples at the intersection of D₁ and S₁ (point A. The equilibrium point will move from A to E.

Figure 3-8 -Refer to Figure 3-8.The graph in this figure illustrates an initial competitive equilibrium in the market for apples at the intersection of D₁ and S₂ point B Which of the following changes would cause the equilibrium to change to point C?