Question 1

When the price of a good rises,consumers buy a smaller quantity because of the ________ effect and the ________ effect.

Accepted Answer

A) substitution; income 
B) normal; inferior 
C) substitute; complement; 
D) supply; demand 
A) substitution; income 
B) normal; inferior 
C) substitute; complement; 
D) supply; demand

Question 2

Figure 3-8  
-Refer to Figure 3-8.The graph in this figure illustrates an initial competitive equilibrium in the market for motorcycles at the intersection of D1 and S1 (point A).If there is a surplus of motorcycles how will the equilibrium point change?

Accepted Answer

A) The equilibrium point will move from A to B. 
B) The equilibrium point will move from A to C. 
C) There will be no change in the equilibrium point. 
D) The equilibrium point will move from A to E. 
A) The equilibrium point will move from A to B. 
B) The equilibrium point will move from A to C. 
C) There will be no change in the equilibrium point. 
D) The equilibrium point will move from A to E.

Question 3

Technological advancements have led to lower prices and an increase in the sale of color laser printers.How does this affect the market for laser printer ink cartridges?

Accepted Answer

A) The demand curve for laser printer ink cartridges shifts to the right. 
B) The demand curve for laser printer ink cartridges shifts to the left. 
C) The quantity of laser printer ink cartridges demanded increases. 
D) The quantity of laser printer ink cartridges demanded decreases. 
A) The demand curve for laser printer ink cartridges shifts to the right. 
B) The demand curve for laser printer ink cartridges shifts to the left. 
C) The quantity of laser printer ink cartridges demanded increases. 
D) The quantity of laser printer ink cartridges demanded decreases.

Question 4

Suppose that when the price of ice cream increases,Liza decreases her purchase of hot fudge.To Liza,

Accepted Answer

A) ice cream and hot fudge are complements. 
B) ice cream and hot fudge and substitutes. 
C) ice cream and hot fudge are normal goods. 
D) ice cream is a normal good and hot fudge is an inferior good. 
A) ice cream and hot fudge are complements. 
B) ice cream and hot fudge and substitutes. 
C) ice cream and hot fudge are normal goods. 
D) ice cream is a normal good and hot fudge is an inferior good.

Question 5

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

Accepted Answer

A) A 
B) B 
C) C 
D) E 
A) A 
B) B 
C) C 
D) E

Question 6

Let D = demand,S = supply,P = equilibrium price,Q = equilibrium quantity.What happens in the market for sushi if the Surgeon General announces that a majority of the raw fish that is imported to make sushi contains high levels of toxic mercury?

Accepted Answer

A) D decreases,S no change,P and Q decrease 
B) S decreases,D no change,P increases,Q decreases 
C) D and S decrease,P and Q decrease 
D) D no change,S increases,P decreases,Q decreases 
A) D decreases,S no change,P and Q decrease 
B) S decreases,D no change,P increases,Q decreases 
C) D and S decrease,P and Q decrease 
D) D no change,S increases,P decreases,Q decreases

Question 7

Which of the following would cause both the equilibrium price and equilibrium quantity of barley (assume that barley is an inferior good)to increase?

Accepted Answer

A) an increase in consumer income 
B) a drought that sharply reduces barley output 
C) a decrease in consumer income 
D) unusually good weather that results in a bumper crop of barley 
A) an increase in consumer income 
B) a drought that sharply reduces barley output 
C) a decrease in consumer income 
D) unusually good weather that results in a bumper crop of barley

Question 8

If an increase in income leads to in an increase in the demand for sushi,then sushi is

Accepted Answer

A) a normal good. 
B) a neutral good. 
C) a complement. 
D) a necessity. 
A) a normal good. 
B) a neutral good. 
C) a complement. 
D) a necessity.

Question 9

An ________ is represented by a rightward shift of the demand curve while an ________ is represented by a movement along a given demand curve.

Accepted Answer

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

Question 10

Consider the collectors' market for first editions of two popular children's books,Harry Potter and the Order of the Phoenix by J.K.Rowling and Ruby in the Smoke by Philip Pullman.Sales of the Harry Potter novel are much greater than sales of Ruby in the Smoke yet the price of the Harry Potter novel is much lower than the price of Pullman's novel.
a.On one large diagram,draw a demand and supply graph for first editions of Harry Potter and the Order of the Phoenix and another demand and supply graph for first editions of Ruby in the Smoke.
b.Show how it is possible for the price of the Harry Potter novel to be much lower than the price of Pullman's novel,even though the demand for the Harry Potter novel is much greater than the demand for Ruby in the Smoke.
c.Provide a written explanation to accompany your graphical illustration.

Accepted Answer

a.and b.See the figure below. @#IMG-DLM& c.The dem

Question 11

Even when the demand for one good is high,the price of the good is also affected by supply.The textbook illustrates this by comparing the price of two items that were auctioned on the same day.Which of the following describes the results of the auction?

Accepted Answer

A) A letter written by Abraham Lincoln sold for a higher price than a letter written by John Wilkes Booth. 
B) A letter written by Abraham Lincoln was sold for a higher price than a letter written by Adam Smith. 
C) A letter written by John Wilkes Booth sold for a higher price than a letter written by Lee Harvey Oswald. 
D) A letter written by John Wilkes Booth sold for a higher price than a letter written by Abraham Lincoln. 
A) A letter written by Abraham Lincoln sold for a higher price than a letter written by John Wilkes Booth. 
B) A letter written by Abraham Lincoln was sold for a higher price than a letter written by Adam Smith. 
C) A letter written by John Wilkes Booth sold for a higher price than a letter written by Lee Harvey Oswald. 
D) A letter written by John Wilkes Booth sold for a higher price than a letter written by Abraham Lincoln.

Question 12

Which of the following statements is true?

Accepted Answer

A) An increase in demand causes an increase in equilibrium price; the increase in price causes supply to increase. 
B) A decrease in supply causes equilibrium price to rise; the increase in price then results in a decrease in quantity demanded. 
C) If both demand and supply decrease,there must be a decrease in equilibrium price; equilibrium quantity may either increase or decrease. 
D) If demand increases and supply decreases one cannot determine if equilibrium price will increase or decrease without knowing which change is greater. 
A) An increase in demand causes an increase in equilibrium price; the increase in price causes supply to increase. 
B) A decrease in supply causes equilibrium price to rise; the increase in price then results in a decrease in quantity demanded. 
C) If both demand and supply decrease,there must be a decrease in equilibrium price; equilibrium quantity may either increase or decrease. 
D) If demand increases and supply decreases one cannot determine if equilibrium price will increase or decrease without knowing which change is greater.

Question 13

Figure 3-6  
-Refer to Figure 3-6.The figure above represents the market for coffee grinders.Assume that the price of coffee grinders is $50.At this price:

Accepted Answer

A) the quantity supplied exceeds the quantity supplied by 100.The price will eventually fall to $25 where quantity demanded will equal quantity supplied. 
B) the supply exceeds the demand by 90.Some producers will have an incentive to offer to sell coffee grinders at a lower price. 
C) there is a surplus equal to 90 coffee grinders that will be eliminated when the price falls to $25. 
D) there is a surplus equal to 90 coffee grinders and the price of coffee grinders will fall until demand is equal to supply. 
A) the quantity supplied exceeds the quantity supplied by 100.The price will eventually fall to $25 where quantity demanded will equal quantity supplied. 
B) the supply exceeds the demand by 90.Some producers will have an incentive to offer to sell coffee grinders at a lower price. 
C) there is a surplus equal to 90 coffee grinders that will be eliminated when the price falls to $25. 
D) there is a surplus equal to 90 coffee grinders and the price of coffee grinders will fall until demand is equal to supply.

Question 14

Figure 3-4  
-Refer to Figure 3-4.If the price is $25,

Accepted Answer

A) there would be a surplus of 300 units. 
B) there would be a shortage of 300 units. 
C) there would be a surplus of 200 units. 
D) there would be a shortage of 200 units. 
A) there would be a surplus of 300 units. 
B) there would be a shortage of 300 units. 
C) there would be a surplus of 200 units. 
D) there would be a shortage of 200 units.

Question 15

Apple's decision in 2002 to focus on developing a smartphone rather than a tablet computer exemplifies the

Accepted Answer

A) refusal of firms to invest in more than one project where unlimited resources are involved. 
B) refusal of firms to invest in more than one project where limited resources are involved. 
C) trade-off that firms face due to unlimited resources. 
D) trade-off that firms face due to limited resources. 
A) refusal of firms to invest in more than one project where unlimited resources are involved. 
B) refusal of firms to invest in more than one project where limited resources are involved. 
C) trade-off that firms face due to unlimited resources. 
D) trade-off that firms face due to limited resources.

Question 16

If the price of a product is expected to increase in the future,the supply today will increase.

Accepted Answer

A) True 
 B)False

Question 17

If an increase in income leads to an decrease in the demand for salami,then salami is

Accepted Answer

A) an inferior good. 
B) a neutral good. 
C) a necessity. 
D) a normal good. 
A) an inferior good. 
B) a neutral good. 
C) a necessity. 
D) a normal good.

Question 18

If the price of train tickets decreases,what will be the impact in the market for bus travel ?

Accepted Answer

A) The demand curve for bus travel shifts to the right. 
B) The quantity of bus travel demanded increases. 
C) The demand curve for bus travel shifts to the left. 
D) The quantity of bus travel demanded decreases. 
A) The demand curve for bus travel shifts to the right. 
B) The quantity of bus travel demanded increases. 
C) The demand curve for bus travel shifts to the left. 
D) The quantity of bus travel demanded decreases.

Question 19

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 substitute product.

Accepted Answer

A) True 
 B)False

Question 20

If the number of firms producing electric cars increases and consumer preference for electric cars increases,the equilibrium quantity of electric cars will definitely increase.

Accepted Answer

A) True 
 B)False

When the price of a good rises,consumers buy a smaller quantity because of the effect and the effect.

Figure 3-8 -Refer to Figure 3-8.The graph in this figure illustrates an initial competitive equilibrium in the market for motorcycles at the intersection of D₁ and S₁ (point A).If there is a surplus of motorcycles how will the equilibrium point change?

Technological advancements have led to lower prices and an increase in the sale of color laser printers.How does this affect the market for laser printer ink cartridges?

Suppose that when the price of ice cream increases,Liza decreases her purchase of hot fudge.To Liza,

Let D = demand,S = supply,P = equilibrium price,Q = equilibrium quantity.What happens in the market for sushi if the Surgeon General announces that a majority of the raw fish that is imported to make sushi contains high levels of toxic mercury?

Which of the following would cause both the equilibrium price and equilibrium quantity of barley (assume that barley is an inferior good)to increase?

If an increase in income leads to in an increase in the demand for sushi,then sushi is

An is represented by a rightward shift of the demand curve while an is represented by a movement along a given demand curve.

Even when the demand for one good is high,the price of the good is also affected by supply.The textbook illustrates this by comparing the price of two items that were auctioned on the same day.Which of the following describes the results of the auction?

Which of the following statements is true?

Figure 3-6 -Refer to Figure 3-6.The figure above represents the market for coffee grinders.Assume that the price of coffee grinders is $50.At this price:

Figure 3-4 -Refer to Figure 3-4.If the price is $25,

Apple's decision in 2002 to focus on developing a smartphone rather than a tablet computer exemplifies the

If the price of a product is expected to increase in the future,the supply today will increase.

If an increase in income leads to an decrease in the demand for salami,then salami is

If the price of train tickets decreases,what will be the impact in the market for bus travel ?

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 substitute product.

If the number of firms producing electric cars increases and consumer preference for electric cars increases,the equilibrium quantity of electric cars will definitely increase.

Economics: Foundations and Models

Trade-Offs,comparative Advantage,and the Market System

Economic Efficiency, government Price Setting, and Taxes

The Economics of Health Care

Firms,the Stock Market,and Corporate Governance

Comparative Advantage and the Gains From International Trade

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Inflation, unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

Filters

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

When the price of a good rises,consumers buy a smaller quantity because of the ________ effect and the ________ effect.

Figure 3-8 -Refer to Figure 3-8.The graph in this figure illustrates an initial competitive equilibrium in the market for motorcycles at the intersection of D1 and S1 (point A).If there is a surplus of motorcycles how will the equilibrium point change?

Technological advancements have led to lower prices and an increase in the sale of color laser printers.How does this affect the market for laser printer ink cartridges?

Suppose that when the price of ice cream increases,Liza decreases her purchase of hot fudge.To Liza,

Let D = demand,S = supply,P = equilibrium price,Q = equilibrium quantity.What happens in the market for sushi if the Surgeon General announces that a majority of the raw fish that is imported to make sushi contains high levels of toxic mercury?

Which of the following would cause both the equilibrium price and equilibrium quantity of barley (assume that barley is an inferior good)to increase?

If an increase in income leads to in an increase in the demand for sushi,then sushi is

An ________ is represented by a rightward shift of the demand curve while an ________ is represented by a movement along a given demand curve.

Even when the demand for one good is high,the price of the good is also affected by supply.The textbook illustrates this by comparing the price of two items that were auctioned on the same day.Which of the following describes the results of the auction?

Which of the following statements is true?

Figure 3-6 -Refer to Figure 3-6.The figure above represents the market for coffee grinders.Assume that the price of coffee grinders is $50.At this price:

Figure 3-4 -Refer to Figure 3-4.If the price is $25,

Apple's decision in 2002 to focus on developing a smartphone rather than a tablet computer exemplifies the

If the price of a product is expected to increase in the future,the supply today will increase.

If an increase in income leads to an decrease in the demand for salami,then salami is

If the price of train tickets decreases,what will be the impact in the market for bus travel ?

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 substitute product.

If the number of firms producing electric cars increases and consumer preference for electric cars increases,the equilibrium quantity of electric cars will definitely increase.

Economics: Foundations and Models

Trade-Offs,comparative Advantage,and the Market System

Economic Efficiency, government Price Setting, and Taxes

The Economics of Health Care

Firms,the Stock Market,and Corporate Governance

Comparative Advantage and the Gains From International Trade

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Inflation, unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

Filters

When the price of a good rises,consumers buy a smaller quantity because of the effect and the effect.

Figure 3-8 -Refer to Figure 3-8.The graph in this figure illustrates an initial competitive equilibrium in the market for motorcycles at the intersection of D₁ and S₁ (point A).If there is a surplus of motorcycles how will the equilibrium point change?

An is represented by a rightward shift of the demand curve while an is represented by a movement along a given demand curve.