Question 1

Which of the following is the correct way to describe equilibrium in a market?

Accepted Answer

A)  At equilibrium, demand equals supply. 
B)  At equilibrium, quantity demanded equals quantity supplied. 
C)  At equilibrium, market forces no longer apply. 
D)  At equilibrium, scarcity is eliminated. 
A)  At equilibrium, demand equals supply. 
B)  At equilibrium, quantity demanded equals quantity supplied. 
C)  At equilibrium, market forces no longer apply. 
D)  At equilibrium, scarcity is eliminated.

Question 2

A decrease in the demand for soft drinks due to changes in consumer tastes,accompanied by an increase in the supply of soft drinks as a result of reductions in input prices,will result in

Accepted Answer

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

Question 3

Figure 3-5  
-Refer to Figure 3-5.At a price of $10,the quantity sold

Accepted Answer

A)  is 2 units. 
B)  is 4 units. 
C)  is 6 units. 
D)  is 8 units. 
A)  is 2 units. 
B)  is 4 units. 
C)  is 6 units. 
D)  is 8 units.

Question 4

What is behavioural economics?

Accepted Answer

A)  The study of how people make wealth-maximising decisions. 
B)  The study of how people behave in the face of scarcity. 
C)  The study of situations in which people act in ways that are not economically rational. 
D)  The study of how people make decisions at the margin. 
A)  The study of how people make wealth-maximising decisions. 
B)  The study of how people behave in the face of scarcity. 
C)  The study of situations in which people act in ways that are not economically rational. 
D)  The study of how people make decisions at the margin.

Question 5

What is the endowment effect?

Accepted Answer

A)  The tendency of people to be unwilling to sell something they already own even if they are offered a price that is greater than what they would be willing to pay to buy the good if they did not already own it. 
B)  The tendency of people to be unwilling to sell something they already own because of its sentimental value. 
C)  The tendency of people to overstate the value of a good they already own even though similar items can be purchased at a lower price. 
D)  The sum total of assets that a person has acquired over the years. 
A)  The tendency of people to be unwilling to sell something they already own even if they are offered a price that is greater than what they would be willing to pay to buy the good if they did not already own it. 
B)  The tendency of people to be unwilling to sell something they already own because of its sentimental value. 
C)  The tendency of people to overstate the value of a good they already own even though similar items can be purchased at a lower price. 
D)  The sum total of assets that a person has acquired over the years.

Question 6

What would happen in the market for laser eye surgery if insurance companies started to cover a portion of the price of voluntary procedures?

Accepted Answer

A)  Demand will increase, but this will not shift the supply curve. 
B)  Supply will increase, but this will not shift the demand curve. 
C)  Demand and supply will both increase. 
D)  Demand will increase and supply will decrease. 
A)  Demand will increase, but this will not shift the supply curve. 
B)  Supply will increase, but this will not shift the demand curve. 
C)  Demand and supply will both increase. 
D)  Demand will increase and supply will decrease.

Question 7

If a demand curve shifts to the right,then

Accepted Answer

A)  demand has increased. 
B)  quantity demanded has increased. 
C)  demand has decreased. 
D)  quantity demanded has decreased. 
A)  demand has increased. 
B)  quantity demanded has increased. 
C)  demand has decreased. 
D)  quantity demanded has decreased.

Question 8

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 9

Figure 3-4  
-Refer to Figure 3-4.If the current market price is $15,the market will achieve equilibrium by

Accepted Answer

A)  a price increase, increasing the supply and decreasing the demand. 
B)  a price decrease, decreasing the supply and increasing the demand. 
C)  a price decrease, decreasing the quantity supplied and increasing the quantity demanded. 
D)  a price increase, increasing the quantity supplied and decreasing the quantity demanded. 
A)  a price increase, increasing the supply and decreasing the demand. 
B)  a price decrease, decreasing the supply and increasing the demand. 
C)  a price decrease, decreasing the quantity supplied and increasing the quantity demanded. 
D)  a price increase, increasing the quantity supplied and decreasing the quantity demanded.

Question 10

Danielle Ocean pays for monthly pool maintenance for her home swimming pool.Last week the owner of the pool service informed Danielle that he will have to raise his monthly service fee because of increases in the price of pool chemicals.How is the market for pool maintenance services affected by this?

Accepted Answer

A)  There is an increase in the supply of pool maintenance services. 
B)  There is a decrease in the demand for pool maintenance services. 
C)  There is a decrease in the quantity of pool maintenance services supplied. 
D)  There is a decrease in the supply of pool maintenance services. 
A)  There is an increase in the supply of pool maintenance services. 
B)  There is a decrease in the demand for pool maintenance services. 
C)  There is a decrease in the quantity of pool maintenance services supplied. 
D)  There is a decrease in the supply of pool maintenance services.

Question 11

When deciding on which new products to develop,a firm must devote people,time and money to designing a new product.Because any firm has only limited resources,it

Accepted Answer

A)  should wait until its competitors develop a similar product before deciding on devoting resources to its own product development. 
B)  is not able to develop more than one new product at a time. 
C)  must be certain that the product it chooses to develop will be successful or it will not be able to stay in business. 
D)  faces a trade-off, because resources used to develop one product will not be available to develop another product. 
A)  should wait until its competitors develop a similar product before deciding on devoting resources to its own product development. 
B)  is not able to develop more than one new product at a time. 
C)  must be certain that the product it chooses to develop will be successful or it will not be able to stay in business. 
D)  faces a trade-off, because resources used to develop one product will not be available to develop another product.

Question 12

A change in all of the following variables will change the market demand for a product except

Accepted Answer

A)  the price of the product. 
B)  population and demographics. 
C)  income. 
D)  tastes. 
A)  the price of the product. 
B)  population and demographics. 
C)  income. 
D)  tastes.

Question 13

Figure 3-6  
-Refer to Figure 3-6.The figure above represents the market for canvas tote bags.Assume that the price of tote bags is $15.At this price,

Accepted Answer

A)  the quantity demanded exceeds the quantity supplied of tote bags by 75. The price will eventually rise to $25, where quantity demanded will equal quantity supplied. 
B)  the demand exceeds the supply of tote bags by 55. Some consumers will have an incentive to offer to buy tote bags at a higher price. 
C)  there is a shortage, equal to 55 tote bags, that will be eliminated when the price rises to $25. 
D)  there is a shortage equal to 55 tote bags; the price of tote bags will rise until demand is equal to supply. 
A)  the quantity demanded exceeds the quantity supplied of tote bags by 75. The price will eventually rise to $25, where quantity demanded will equal quantity supplied. 
B)  the demand exceeds the supply of tote bags by 55. Some consumers will have an incentive to offer to buy tote bags at a higher price. 
C)  there is a shortage, equal to 55 tote bags, that will be eliminated when the price rises to $25. 
D)  there is a shortage equal to 55 tote bags; the price of tote bags will rise until demand is equal to supply.

Question 14

Which of the following statements is true?

Accepted Answer

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

Question 15

In June,buyers of titanium expect that the price of titanium will fall in July.What happens in the titanium market in June,holding everything else constant?

Accepted Answer

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

Question 16

If,in response to an increase in the price of chocolate,the quantity of chocolate demanded decreases,economists would describe this as

Accepted Answer

A)  a decrease in demand. 
B)  a decrease in quantity demanded. 
C)  a change in consumer income. 
D)  a decrease in consumers' taste for chocolate. 
A)  a decrease in demand. 
B)  a decrease in quantity demanded. 
C)  a change in consumer income. 
D)  a decrease in consumers' taste for chocolate.

Question 17

An inferior good is a good for which the quantity demanded decreases as the price increases,holding everything else constant.

Accepted Answer

A) True 
 B)False

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

If consumers believe the price of LCD televisions will decrease in the future,this will cause the demand for LCD televisions to increase now.

Accepted Answer

A) True 
 B)False

Question 20

A decrease in the price of GPS systems will result in

Accepted Answer

A)  a smaller quantity of GPS systems supplied. 
B)  a larger quantity of GPS systems supplied. 
C)  a decrease in the demand for GPS systems. 
D)  an increase in the supply of GPS systems. 
A)  a smaller quantity of GPS systems supplied. 
B)  a larger quantity of GPS systems supplied. 
C)  a decrease in the demand for GPS systems. 
D)  an increase in the supply of GPS systems.

Which of the following is the correct way to describe equilibrium in a market?

A decrease in the demand for soft drinks due to changes in consumer tastes,accompanied by an increase in the supply of soft drinks as a result of reductions in input prices,will result in

Figure 3-5 -Refer to Figure 3-5.At a price of $10,the quantity sold

What is behavioural economics?

What is the endowment effect?

What would happen in the market for laser eye surgery if insurance companies started to cover a portion of the price of voluntary procedures?

If a demand curve shifts to the right,then

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?

Figure 3-4 -Refer to Figure 3-4.If the current market price is $15,the market will achieve equilibrium by

When deciding on which new products to develop,a firm must devote people,time and money to designing a new product.Because any firm has only limited resources,it

A change in all of the following variables will change the market demand for a product except

Figure 3-6 -Refer to Figure 3-6.The figure above represents the market for canvas tote bags.Assume that the price of tote bags is $15.At this price,

Which of the following statements is true?

In June,buyers of titanium expect that the price of titanium will fall in July.What happens in the titanium market in June,holding everything else constant?

If,in response to an increase in the price of chocolate,the quantity of chocolate demanded decreases,economists would describe this as

An inferior good is a good for which the quantity demanded decreases as the price increases,holding everything else constant.

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

If consumers believe the price of LCD televisions will decrease in the future,this will cause the demand for LCD televisions to increase now.

A decrease in the price of GPS systems will result in

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Market Efficiency and Market Failure

The Economics of Healthcare

Firms,the Stock Market,and Corporate Governance

Consumer Choice and Elasticity

Technology, production, and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust

Monopolistic Competition and Oligopoly

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System and Business Cycles

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Comparative Advantage, international Trade, and Exchange Rates

Filters

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

Which of the following is the correct way to describe equilibrium in a market?

A decrease in the demand for soft drinks due to changes in consumer tastes,accompanied by an increase in the supply of soft drinks as a result of reductions in input prices,will result in

Figure 3-5 -Refer to Figure 3-5.At a price of $10,the quantity sold

What is behavioural economics?

What is the endowment effect?

What would happen in the market for laser eye surgery if insurance companies started to cover a portion of the price of voluntary procedures?

If a demand curve shifts to the right,then

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?

Figure 3-4 -Refer to Figure 3-4.If the current market price is $15,the market will achieve equilibrium by

When deciding on which new products to develop,a firm must devote people,time and money to designing a new product.Because any firm has only limited resources,it

A change in all of the following variables will change the market demand for a product except

Figure 3-6 -Refer to Figure 3-6.The figure above represents the market for canvas tote bags.Assume that the price of tote bags is $15.At this price,

Which of the following statements is true?

In June,buyers of titanium expect that the price of titanium will fall in July.What happens in the titanium market in June,holding everything else constant?

If,in response to an increase in the price of chocolate,the quantity of chocolate demanded decreases,economists would describe this as

An inferior good is a good for which the quantity demanded decreases as the price increases,holding everything else constant.

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

If consumers believe the price of LCD televisions will decrease in the future,this will cause the demand for LCD televisions to increase now.

A decrease in the price of GPS systems will result in

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Market Efficiency and Market Failure

The Economics of Healthcare

Firms,the Stock Market,and Corporate Governance

Consumer Choice and Elasticity

Technology, production, and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust

Monopolistic Competition and Oligopoly

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System and Business Cycles

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Comparative Advantage, international Trade, and Exchange Rates

Filters

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?