Question 1

If supply and demand both simultaneously increase

Accepted Answer

A)  the market clearing price definitely rises, and the equilibrium quantity definitely falls. 
B)  the market clearing price definitely rises, and the effect on the equilibrium quantity is indeterminate. 
C)  the market clearing price definitely falls, and the effect on the equilibrium quantity is indeterminate. 
D)  the effect on the market clearing price is indeterminate, and the equilibrium quantity definitely rises. 
A)  the market clearing price definitely rises, and the equilibrium quantity definitely falls. 
B)  the market clearing price definitely rises, and the effect on the equilibrium quantity is indeterminate. 
C)  the market clearing price definitely falls, and the effect on the equilibrium quantity is indeterminate. 
D)  the effect on the market clearing price is indeterminate, and the equilibrium quantity definitely rises.

Question 2

Assume that CDs are a normal good and that the price of stereo equipment falls while the labor costs of producing CDs increase. What will happen in the market for CDs?

Accepted Answer

Since stereo equipment is a complementar

Question 3

-According to the above figure, the market clearing wage rate is

Accepted Answer

A)  We. 
B)  Wm. 
C)  We - Wm. 
D)  Wm + We. 
A)  We. 
B)  Wm. 
C)  We - Wm. 
D)  Wm + We.

Question 4

If demand and supply both increase

Accepted Answer

A)  the equilibrium quantity definitely will increase and market clearing price definitely will decrease. 
B)  the equilibrium quantity definitely will increase and market clearing price definitely will increase. 
C)  the equilibrium quantity definitely will increase but the change in market clearing price cannot be determined without more information. 
D)  market clearing price definitely will increase but the change in the equilibrium quantity cannot be determined without further information. 
A)  the equilibrium quantity definitely will increase and market clearing price definitely will decrease. 
B)  the equilibrium quantity definitely will increase and market clearing price definitely will increase. 
C)  the equilibrium quantity definitely will increase but the change in market clearing price cannot be determined without more information. 
D)  market clearing price definitely will increase but the change in the equilibrium quantity cannot be determined without further information.

Question 5

If producers must receive a higher price to be induced to produce any quantity, we can conclude that

Accepted Answer

A)  supply decreased. 
B)  demand decreased. 
C)  both supply and demand increased. 
D)  demand increased. 
A)  supply decreased. 
B)  demand decreased. 
C)  both supply and demand increased. 
D)  demand increased.

Question 6

-Assume that the initial demand and supply curves in the above figure are DA and SA, respectively. The initial equilibrium price and quantity are

Accepted Answer

A)  P1 and E. 
B)  P3 and F. 
C)  P1 and G. 
D)  P2 and F. 
A)  P1 and E. 
B)  P3 and F. 
C)  P1 and G. 
D)  P2 and F.

Question 7

For a given market demand curve, if the market clearing price increases, then the amount of producer surplus will

Accepted Answer

A)  decrease. 
B)  increase. 
C)  become negative. 
D)  none of the above due to insufficient information. 
A)  decrease. 
B)  increase. 
C)  become negative. 
D)  none of the above due to insufficient information.

Question 8

Price ceilings often generate

Accepted Answer

A)  market clearing prices. 
B)  rapid increases in supply to meet the excess demand. 
C)  equilibriums that utilize rationing by price. 
D)  black markets. 
A)  market clearing prices. 
B)  rapid increases in supply to meet the excess demand. 
C)  equilibriums that utilize rationing by price. 
D)  black markets.

Question 9

Voluntary exchange

Accepted Answer

A)  is the only way to eliminate scarcity. 
B)  is a nonprice rationing device. 
C)  is trading so that the consumer and producers are better off. 
D)  involves no transactions costs. 
A)  is the only way to eliminate scarcity. 
B)  is a nonprice rationing device. 
C)  is trading so that the consumer and producers are better off. 
D)  involves no transactions costs.

Question 10

Which one of the following statements is TRUE?

Accepted Answer

A)  An effective price ceiling results in a surplus of the good. 
B)  An effective price floor results in a shortage of the good. 
C)  When the market clearing price of a good is the equilibrium, then everyone can afford it. 
D)  The market clearing price of a good reflects its relative scarcity. 
A)  An effective price ceiling results in a surplus of the good. 
B)  An effective price floor results in a shortage of the good. 
C)  When the market clearing price of a good is the equilibrium, then everyone can afford it. 
D)  The market clearing price of a good reflects its relative scarcity.

Question 11

In which of the following situations will market clearing price decrease and the equilibrium quantity increase?

Accepted Answer

A)  an increase in demand with no change in supply 
B)  an increase in supply with no change in demand 
C)  a decrease in supply with no change in demand 
D)  a decrease in demand with no change in supply 
A)  an increase in demand with no change in supply 
B)  an increase in supply with no change in demand 
C)  a decrease in supply with no change in demand 
D)  a decrease in demand with no change in supply

Question 12

An increase in supply causes

Accepted Answer

A)  quantity supplied to decrease. 
B)  supply and price to increase. 
C)  price to decrease. 
D)  price to increase. 
A)  quantity supplied to decrease. 
B)  supply and price to increase. 
C)  price to decrease. 
D)  price to increase.

Question 13

Which of the following statements about markets is correct? I. A market helps resources move to their highest-valued uses by means of prices changes.
II) A market represents the exchanges of both buyers and sellers.

Accepted Answer

A)  I only 
B)  II only 
C)  Both I and II 
D)  Neither I nor II 
A)  I only 
B)  II only 
C)  Both I and II 
D)  Neither I nor II

Question 14

Federally provided agricultural subsidies in the United States have ________ with the passage of the 2002 Farm Security Act and the 2007 Food, Security, and Bioenergy Act.

Accepted Answer

A)  been abolished 
B)  been maintained 
C)  increased to the level of EU price supports 
D)  been made a function of tax revenues 
A)  been abolished 
B)  been maintained 
C)  increased to the level of EU price supports 
D)  been made a function of tax revenues

Question 15

The textbook points out that rent controls have

Accepted Answer

A)  benefited upper-income or existing tenants. 
B)  had no effect on the market for housing. 
C)  greatly benefited the homeless. 
D)  attracted increases in low-income housing. 
A)  benefited upper-income or existing tenants. 
B)  had no effect on the market for housing. 
C)  greatly benefited the homeless. 
D)  attracted increases in low-income housing.

Question 16

An increase in supply, other things being equal, will cause which of the following to occur?

Accepted Answer

A)  quantity supplied to decrease. 
B)  quantity demanded to increase. 
C)  a rightward shift in the demand curve as the price falls. 
D)  a leftward shift in the demand curves as the price increases. 
A)  quantity supplied to decrease. 
B)  quantity demanded to increase. 
C)  a rightward shift in the demand curve as the price falls. 
D)  a leftward shift in the demand curves as the price increases.

Question 17

Suppose that the market for coffee is in equilibrium at a price of $9.50 per pound and a monthly quantity of 20 million pounds. News of a drought in Brazil arrives so that people know that the supply of coffee months from now will be sharply reduced. What, if anything, will happen in the coffee market now? Explain.

Accepted Answer

The expectations of reduced su

Question 18

When the government sets a price floor which is below the equilibrium price

Accepted Answer

A)  a surplus will develop. 
B)  a shortage will develop. 
C)  the equilibrium price will be maintained. 
D)  a price ceiling will follow. 
A)  a surplus will develop. 
B)  a shortage will develop. 
C)  the equilibrium price will be maintained. 
D)  a price ceiling will follow.

Question 19

Firms that produce 90 percent of all phone cameras have shut down their facilities for maintenance. In the phone camera market this will lead to

Accepted Answer

A)  an increase in price and a decrease in quantity. 
B)  an increase in price and an increase in quantity. 
C)  a decrease in price and a decrease in quantity. 
D)  a decrease in price and an increase in quantity. 
A)  an increase in price and a decrease in quantity. 
B)  an increase in price and an increase in quantity. 
C)  a decrease in price and a decrease in quantity. 
D)  a decrease in price and an increase in quantity.

Question 20

Roses are more expensive on Valentine's Day than at other times of the year, yet sales of roses are highest on that day. How does economic theory account for this?

Accepted Answer

A)  An increase in demand pushes up the market clearing price of roses. 
B)  People buying the roses are irrational. 
C)  Roses are not subject to the law of demand. 
D)  Florists know that there are no substitutes for roses, so they take advantage of consumers on Valentine's Day. 
A)  An increase in demand pushes up the market clearing price of roses. 
B)  People buying the roses are irrational. 
C)  Roses are not subject to the law of demand. 
D)  Florists know that there are no substitutes for roses, so they take advantage of consumers on Valentine's Day.

Exam 4: Extensions of Demand and Supply Analysis

If supply and demand both simultaneously increase

Assume that CDs are a normal good and that the price of stereo equipment falls while the labor costs of producing CDs increase. What will happen in the market for CDs?

-According to the above figure, the market clearing wage rate is

If demand and supply both increase

If producers must receive a higher price to be induced to produce any quantity, we can conclude that

-Assume that the initial demand and supply curves in the above figure are DA and SA, respectively. The initial equilibrium price and quantity are

For a given market demand curve, if the market clearing price increases, then the amount of producer surplus will

Price ceilings often generate

Voluntary exchange

Which one of the following statements is TRUE?

In which of the following situations will market clearing price decrease and the equilibrium quantity increase?

An increase in supply causes

Which of the following statements about markets is correct? I. A market helps resources move to their highest-valued uses by means of prices changes. II) A market represents the exchanges of both buyers and sellers.

Federally provided agricultural subsidies in the United States have ________ with the passage of the 2002 Farm Security Act and the 2007 Food, Security, and Bioenergy Act.

The textbook points out that rent controls have

An increase in supply, other things being equal, will cause which of the following to occur?

When the government sets a price floor which is below the equilibrium price

Firms that produce 90 percent of all phone cameras have shut down their facilities for maintenance. In the phone camera market this will lead to

Roses are more expensive on Valentine's Day than at other times of the year, yet sales of roses are highest on that day. How does economic theory account for this?

The Nature of Economics

Scarcity and the World of Trade-Offs

Demand and Supply

Public Spending and Public Choice

Funding the Public Sector

The Macroeconomy: Unemployment, Inflation, and Deflation

Measuring the Economys Performance

Global Economic Growth and Development

Real GDP and the Price Level in the Long Run

Classical and Keynesian Macro Analyses

Consumption, Real GDP, and the Multiplier

Fiscal Policy

Deficit Spending and the Public Debt

Money, Banking, and Central Banking

Domestic and International Dimensions of Monetary Policy

Stabilization in an Integrated World Economy

Policies and Prospects for Global Economic Growth

Demand and Supply Elasticity

Consumer Choice

Rents, Profits, and the Financial Environment of Business

The Firm: Cost and Output Determination

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Regulation and Antitrust Policy in a Globalized Economy

The Labor Market: Demand, Supply and Outsourcing

Unions and Labor Market Monopoly Power

Income, Poverty, and Health Care

Environmental Economics

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

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