Question 1

Figure 3-2  
-Refer to Figure 3-2.An increase in the price of substitutes in production 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 2

Assume there is a shortage in the market for digital music players.Which of the following statements correctly describes this situation?

Accepted Answer

A)  The demand for digital music players is greater than the supply of digital music players. 
B)  Some consumers will be unable to obtain digital music players at the market price and will have an incentive to offer to buy the product at a higher price. 
C)  The price of digital music players will rise in response to the shortage; as the price rises the quantity demanded will increase and the quantity supplied will decrease. 
D)  the shortage will cause an increase in the equilibrium price of digital music players. 
A)  The demand for digital music players is greater than the supply of digital music players. 
B)  Some consumers will be unable to obtain digital music players at the market price and will have an incentive to offer to buy the product at a higher price. 
C)  The price of digital music players will rise in response to the shortage; as the price rises the quantity demanded will increase and the quantity supplied will decrease. 
D)  the shortage will cause an increase in the equilibrium price of digital music players.

Question 3

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 4

Figure 3-2  
-Refer to Figure 3-2.An increase in the number of firms in the market 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 5

The income effect explains why there is an inverse relationship between the price of a product and the quantity of the product demanded.

Accepted Answer

A) True 
 B)False

Question 6

Figure 3-4  
-Refer to Figure 3-4.If the price is $10,

Accepted Answer

A)  there would be a surplus of 600 units. 
B)  there would be a shortage of 600 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 600 units. 
B)  there would be a shortage of 600 units. 
C)  there would be a surplus of 200 units. 
D)  there would be a shortage of 200 units.

Question 7

In January,buyers of gold expect that the price of gold will rise in February.What happens in the gold market in January,holding all else constant?

Accepted Answer

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

Question 8

Prices of California Merlot wine (assume that this is a normal good)have risen steadily in recent years.Over this same period,prices for French oak barrels used for wine storage have dropped and consumer incomes have risen.Which of the following best explains the rising prices of California Merlots?

Accepted Answer

A)  The supply curve for Merlot has shifted to the right while the demand curve for Merlot has shifted to the left. 
B)  The demand curve for Merlot has shifted to the right more than the supply curve has shifted to the right. 
C)  The demand curve and the supply curve for Merlot have both shifted to the left. 
D)  The supply curve for Merlot has shifted to the right more than the demand curve has shifted to the right. 
A)  The supply curve for Merlot has shifted to the right while the demand curve for Merlot has shifted to the left. 
B)  The demand curve for Merlot has shifted to the right more than the supply curve has shifted to the right. 
C)  The demand curve and the supply curve for Merlot have both shifted to the left. 
D)  The supply curve for Merlot has shifted to the right more than the demand curve has shifted to the right.

Question 9

Figure 3-3  
-Refer to Figure 3-3.The figure above shows the supply and demand curves for two markets: the market for original Picasso paintings and the market for designer jeans.Which graph most likely represents which market?

Accepted Answer

A)  Graph B represents the market for original Picasso paintings and Graph A represents the market for designer jeans. 
B)  Graph A represents the market for original Picasso paintings and Graph B represents the market for designer jeans. 
C)  Graph A represents both the market for original Picasso paintings and designer jeans. 
D)  Graph B represents both the market for original Picasso paintings and designer jeans. 
A)  Graph B represents the market for original Picasso paintings and Graph A represents the market for designer jeans. 
B)  Graph A represents the market for original Picasso paintings and Graph B represents the market for designer jeans. 
C)  Graph A represents both the market for original Picasso paintings and designer jeans. 
D)  Graph B represents both the market for original Picasso paintings and designer jeans.

Question 10

Figure 3-7  
-Refer to Figure 3-7.Assume that the graphs in this figure represent the demand and supply curves for almonds.Which panel best describes what happens in this market when there is an increase in the productivity of almond harvesters?

Accepted Answer

A)  Panel (a) 
B)  Panel (b) 
C)  Panel (c) 
D)  Panel (d) 
A)  Panel (a) 
B)  Panel (b) 
C)  Panel (c) 
D)  Panel (d)

Question 11

From a supply perspective,what impact would an increase in the price of motorcycles have on the market for motorcycles?

Accepted Answer

An increase in the price of mo

Question 12

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 13

If,in the market for oranges,the supply has increased then

Accepted Answer

A)  the supply curve for oranges has shifted to the right. 
B)  the supply curve for oranges has shifted to the left. 
C)  there has been a movement upwards along the supply curve for oranges. 
D)  there has been a movement downwards along the supply curve for oranges. 
A)  the supply curve for oranges has shifted to the right. 
B)  the supply curve for oranges has shifted to the left. 
C)  there has been a movement upwards along the supply curve for oranges. 
D)  there has been a movement downwards along the supply curve for oranges.

Question 14

One would speak of a change in the quantity of a good supplied,rather than a change in supply,if

Accepted Answer

A)  supplier expectations about future prices change. 
B)  the price of the good changes. 
C)  the cost of producing the good changes. 
D)  prices of substitutes in production change. 
A)  supplier expectations about future prices change. 
B)  the price of the good changes. 
C)  the cost of producing the good changes. 
D)  prices of substitutes in production change.

Question 15

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 16

During the recession of 2007-2009,despite falling income levels,the fast-food chain Subway experienced increased sales.The increase in demand for Subway sandwiches despite the decline in income indicates that Subway sandwiches are considered

Accepted Answer

A)  normal goods. 
B)  inferior goods. 
C)  complementary goods. 
D)  substitute goods. 
A)  normal goods. 
B)  inferior goods. 
C)  complementary goods. 
D)  substitute goods.

Question 17

Technological advances have resulted in lower prices for digital cameras.What is the impact of this on the market for traditional (non-digital)cameras?

Accepted Answer

A)  The demand curve for traditional cameras shifts to the right. 
B)  The supply curve for traditional cameras shifts to the right. 
C)  The demand curve for traditional cameras shifts to the left. 
D)  The supply curve for traditional cameras shifts to the left. 
A)  The demand curve for traditional cameras shifts to the right. 
B)  The supply curve for traditional cameras shifts to the right. 
C)  The demand curve for traditional cameras shifts to the left. 
D)  The supply curve for traditional cameras shifts to the left.

Question 18

Figure 3-7  
-Refer to Figure 3-7.Assume that the graphs in this figure represent the demand and supply curves for women's clothing.Which panel best describes what happens in this market when the wages of seamstresses rise?

Accepted Answer

A)  Panel (a) 
B)  Panel (b) 
C)  Panel (c) 
D)  Panel (d) 
A)  Panel (a) 
B)  Panel (b) 
C)  Panel (c) 
D)  Panel (d)

Question 19

Scarcity is defined as the situation that exists when the quantity demanded for a good is greater than the quantity supplied.

Accepted Answer

A) True 
 B)False

Question 20

What is the ceteris paribus condition?

Accepted Answer

The ceteris paribus condition

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

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

Assume there is a shortage in the market for digital music players.Which of the following statements correctly describes this situation?

Figure 3-2 -Refer to Figure 3-2.An increase in the number of firms in the market would be represented by a movement from

The income effect explains why there is an inverse relationship between the price of a product and the quantity of the product demanded.

Figure 3-4 -Refer to Figure 3-4.If the price is $10,

In January,buyers of gold expect that the price of gold will rise in February.What happens in the gold market in January,holding all else constant?

Figure 3-3 -Refer to Figure 3-3.The figure above shows the supply and demand curves for two markets: the market for original Picasso paintings and the market for designer jeans.Which graph most likely represents which market?

Figure 3-7 -Refer to Figure 3-7.Assume that the graphs in this figure represent the demand and supply curves for almonds.Which panel best describes what happens in this market when there is an increase in the productivity of almond harvesters?

From a supply perspective,what impact would an increase in the price of motorcycles have on the market for motorcycles?

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,in the market for oranges,the supply has increased then

One would speak of a change in the quantity of a good supplied,rather than a change in supply,if

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:

During the recession of 2007-2009,despite falling income levels,the fast-food chain Subway experienced increased sales.The increase in demand for Subway sandwiches despite the decline in income indicates that Subway sandwiches are considered

Technological advances have resulted in lower prices for digital cameras.What is the impact of this on the market for traditional (non-digital)cameras?

Figure 3-7 -Refer to Figure 3-7.Assume that the graphs in this figure represent the demand and supply curves for women's clothing.Which panel best describes what happens in this market when the wages of seamstresses rise?

Scarcity is defined as the situation that exists when the quantity demanded for a good is greater than the quantity supplied.

What is the ceteris paribus condition?

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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