Question 1

As the number of firms in a market decreases,the supply curve will shift to the left and the equilibrium price will rise.

Accepted Answer

A) True 
 B)False

Question 2

What are the two effects that explain the Law of Demand? Briefly explain each effect.

Accepted Answer

The two effects that explain the Law of

Question 3

Suppose that when the price of hamburgers decreases,the Ruiz family increases their purchases of ketchup.To the Ruiz family,

Accepted Answer

A)  hamburgers and ketchup are complements. 
B)  hamburgers and ketchup and substitutes. 
C)  hamburgers and ketchup are normal goods. 
D)  hamburgers are normal goods and hot dogs are inferior goods. 
A)  hamburgers and ketchup are complements. 
B)  hamburgers and ketchup and substitutes. 
C)  hamburgers and ketchup are normal goods. 
D)  hamburgers are normal goods and hot dogs are inferior goods.

Question 4

The supply curve for watches

Accepted Answer

A)  shows the supply of watches consumers are willing and able to buy at any given price. 
B)  is downward sloping. 
C)  shows the relationship between the quantity of watches firms are willing and able to supply and the quantity of watches consumers are willing and able to purchase. 
D)  shows the relationship between the price of watches and the quantity of watches supplied. 
A)  shows the supply of watches consumers are willing and able to buy at any given price. 
B)  is downward sloping. 
C)  shows the relationship between the quantity of watches firms are willing and able to supply and the quantity of watches consumers are willing and able to purchase. 
D)  shows the relationship between the price of watches and the quantity of watches supplied.

Question 5

Which of the following statements is true?

Accepted Answer

A)  An increase in demand 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 demand 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 6

The following appeared in a Florida newspaper a week after a hurricane hit the state."Floridians are relieved that the storm produced no fatalities but homeowners face weeks,if not months,of rebuilding.Matters are made worse by the soaring prices of plywood and other building materials that always follow in a hurricane's path.Complaints of profiteering and price gouging have not deterred firms from raising their prices by over 100 percent." Which of the following offers the best explanation for the price increases referred to in the article?

Accepted Answer

A)  The hurricane reduced the number of suppliers of building materials. 
B)  The hurricane created an artificial shortage of building materials. 
C)  The hurricane caused an increase in the demand for building materials. 
D)  There was a reduction in supply as firms shipped plywood and other materials to locations not affected by the storm. 
A)  The hurricane reduced the number of suppliers of building materials. 
B)  The hurricane created an artificial shortage of building materials. 
C)  The hurricane caused an increase in the demand for building materials. 
D)  There was a reduction in supply as firms shipped plywood and other materials to locations not affected by the storm.

Question 7

A decrease in the equilibrium price for a product will result

Accepted Answer

A)  when the quantity demanded for the product exceeds the quantity supplied. 
B)  when there is a decrease in supply and a decrease in demand for the product. 
C)  when there is an increase in supply and a decrease in demand for the product. 
D)  when there is a decrease in demand and a decrease in the number of firms producing the product. 
A)  when the quantity demanded for the product exceeds the quantity supplied. 
B)  when there is a decrease in supply and a decrease in demand for the product. 
C)  when there is an increase in supply and a decrease in demand for the product. 
D)  when there is a decrease in demand and a decrease in the number of firms producing the product.

Question 8

Which of the following is expected to occur as the baby-boom generation ages?

Accepted Answer

A)  The demand for baby clothes should increase. 
B)  The demand for prescription drugs should decrease. 
C)  The demand for medical services should increase. 
D)  The demand for larger houses should increase. 
A)  The demand for baby clothes should increase. 
B)  The demand for prescription drugs should decrease. 
C)  The demand for medical services should increase. 
D)  The demand for larger houses should increase.

Question 9

Figure 3-1  
-Refer to Figure 3-1.An increase in population would be represented by a movement from

Accepted Answer

A)  A to B. 
B)  B to A. 
C)  D1 to D2. 
D)  D2 to D1. 
A)  A to B. 
B)  B to A. 
C)  D1 to D2. 
D)  D2 to D1.

Question 10

Quantity supplied refers to the amount of a good or service that a firm is willing and able to supply at a given price.

Accepted Answer

A) True 
 B)False

Question 11

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 12

Discuss the correct and incorrect economic analysis in the following statements.
"If good weather in Hawaii creates a bumper crop of pineapples,the supply of pineapples will increase.This will result in a price decrease,which will then cause the supply of pineapples to decrease."

Accepted Answer

The supply of pineapples will

Question 13

If the price of a product is above equilibrium,what forces it down?

Accepted Answer

When the price is above equilibrium,a su

Question 14

Figure 3-2  
-Refer to Figure 3-2.An increase in price of inputs would be represented by a movement from

Accepted Answer

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

Question 15

The ________ effect refers to the change in quantity demanded for a good that results from the effect of a change in the good's price on consumer's purchasing power.

Accepted Answer

A)  ceteris paribus 
B)  population 
C)  substitution 
D)  income 
A)  ceteris paribus 
B)  population 
C)  substitution 
D)  income

Question 16

Assume that the hourly price for the services of tarot card readers has risen and sales of these services have also risen.One can conclude that

Accepted Answer

A)  the law of demand has been violated. 
B)  the number of tarot card readers has increased. 
C)  the demand for tarot card readers has increased. 
D)  tarot card readers are deliberately charging high prices because they provide services for superstitious clients. 
A)  the law of demand has been violated. 
B)  the number of tarot card readers has increased. 
C)  the demand for tarot card readers has increased. 
D)  tarot card readers are deliberately charging high prices because they provide services for superstitious clients.

Question 17

The demand by all the consumers of a given good or service is the ________ for the good or service.

Accepted Answer

A)  market demand 
B)  quantity demanded 
C)  law of demand 
D)  scheduled demand 
A)  market demand 
B)  quantity demanded 
C)  law of demand 
D)  scheduled demand

Question 18

In the United States during the recession of 2007-2009,

Accepted Answer

A)  the total number of jobs declined, but jobs in health care increased. 
B)  jobs in health care declined at a faster rate than overall jobs in the economy. 
C)  demand for medical services declined, which resulted in a decline in available jobs in the medical field. 
D)  despite the large decrease in demand for medical services, the number of jobs in health care remained virtually unchanged. 
A)  the total number of jobs declined, but jobs in health care increased. 
B)  jobs in health care declined at a faster rate than overall jobs in the economy. 
C)  demand for medical services declined, which resulted in a decline in available jobs in the medical field. 
D)  despite the large decrease in demand for medical services, the number of jobs in health care remained virtually unchanged.

Question 19

Figure 3-6  
-Refer to Figure 3-6.The figure above represents the market for canvas tote bags.Compare the conditions in the market when the price is $50 and when the price is $35.Which of the following describes how the market differs at these prices?

Accepted Answer

A)  At each price there is a surplus; the surplus is greater at $35 than at $50. 
B)  The difference between quantity supplied and quantity demanded is greater at $50 than at $35. 
C)  At each price there is a surplus; firms will lower the equilibrium price in order to eliminate the surplus. 
D)  At each price the supply of tote bags exceeds that demand for tote bags. 
A)  At each price there is a surplus; the surplus is greater at $35 than at $50. 
B)  The difference between quantity supplied and quantity demanded is greater at $50 than at $35. 
C)  At each price there is a surplus; firms will lower the equilibrium price in order to eliminate the surplus. 
D)  At each price the supply of tote bags exceeds that demand for tote bags.

Question 20

Let D= demand,S = supply,P = equilibrium price,Q= equilibrium quantity.What happens in the market for tropical hardwood trees if the governments restrict the amount of forest lands that can be logged?

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 increase 
D)  D no change, S decreases, P increases, Q increases 
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 increase 
D)  D no change, S decreases, P increases, Q increases

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

As the number of firms in a market decreases,the supply curve will shift to the left and the equilibrium price will rise.

What are the two effects that explain the Law of Demand? Briefly explain each effect.

Suppose that when the price of hamburgers decreases,the Ruiz family increases their purchases of ketchup.To the Ruiz family,

The supply curve for watches

Which of the following statements is true?

A decrease in the equilibrium price for a product will result

Which of the following is expected to occur as the baby-boom generation ages?

Figure 3-1 -Refer to Figure 3-1.An increase in population would be represented by a movement from

Quantity supplied refers to the amount of a good or service that a firm is willing and able to supply at a given price.

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

Discuss the correct and incorrect economic analysis in the following statements. "If good weather in Hawaii creates a bumper crop of pineapples,the supply of pineapples will increase.This will result in a price decrease,which will then cause the supply of pineapples to decrease."

If the price of a product is above equilibrium,what forces it down?

Figure 3-2 -Refer to Figure 3-2.An increase in price of inputs would be represented by a movement from

The ________ effect refers to the change in quantity demanded for a good that results from the effect of a change in the good's price on consumer's purchasing power.

Assume that the hourly price for the services of tarot card readers has risen and sales of these services have also risen.One can conclude that

The demand by all the consumers of a given good or service is the ________ for the good or service.

In the United States during the recession of 2007-2009,

Figure 3-6 -Refer to Figure 3-6.The figure above represents the market for canvas tote bags.Compare the conditions in the market when the price is $50 and when the price is $35.Which of the following describes how the market differs at these prices?

Let D= demand,S = supply,P = equilibrium price,Q= equilibrium quantity.What happens in the market for tropical hardwood trees if the governments restrict the amount of forest lands that can be logged?

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Economic Efficiency, government Price Setting, and Taxes

Externalities, environmental Policy, and Public Goods

Elasticity: The Responsiveness of Demand and Supply

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: The Competitive Model in a More Realistic Setting

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, taxes, and the Distribution of Income

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

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