Question 1

Exhibit 3-1  
-Consider the market represented by the schedule in Exhibit 3-1.At equilibrium,

Accepted Answer

A) there is a surplus of 500 units. 
B) there is a shortage of 500 units. 
C) the market price is $4 per unit. 
D) the market price is $1 per unit and the quantity traded is 100 units. 
E) 500 units are traded at a price of $3 per unit. 
A) there is a surplus of 500 units. 
B) there is a shortage of 500 units. 
C) the market price is $4 per unit. 
D) the market price is $1 per unit and the quantity traded is 100 units. 
E) 500 units are traded at a price of $3 per unit. E

Question 2

Suppose supply and demand are represented by the following equations:
QD = 25 - 0.4P
QS = 7 + 0.2P
If supply changes so that
QS = 13 + 0.2P
calculate the change in equilibrium price that results.

Accepted Answer

Calculate the initial equilibrium price.
25 - 0.4P = 7 + 0.2P $\Rightarrow$ 18 = 0.6P $\Rightarrow$ P = 30
Calculate the new equilibrium price.
25 - 0.4P = 13 + 0.2P $\Rightarrow$ 12 = 0.6P $\Rightarrow$ P = 20
The difference between the two prices is 30 - 20 = 10.

Question 3

What is the difference between a decrease in demand and a decrease in quantity demanded?

Accepted Answer

A decrease in demand is a shift of the entire demand curve to the left,whereas a decrease in quantity demanded is a movement along a demand curve upward and to the left.

Question 4

The law of demand is represented by

Accepted Answer

A) the positive slope of the demand curve. 
B) the negative slope of the demand curve. 
C) a shift of the demand curve to the right when price increases. 
D) a shift of the demand curve to the left when price decreases. 
E) a shift of the demand curve when income changes. 
A) the positive slope of the demand curve. 
B) the negative slope of the demand curve. 
C) a shift of the demand curve to the right when price increases. 
D) a shift of the demand curve to the left when price decreases. 
E) a shift of the demand curve when income changes.

Question 5

According to the law of demand,when the price of a BMW or a Gucci purse increases,the quantity demanded for these goods will also increase because the goods have become more prestigious.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following is not held constant when constructing a demand curve for good X?

Accepted Answer

A) Price of good X 
B) Consumer tastes 
C) Prices of other goods 
D) Consumer expectations 
E) Consumer income 
A) Price of good X 
B) Consumer tastes 
C) Prices of other goods 
D) Consumer expectations 
E) Consumer income

Question 7

An increase in consumer income causes a movement up along the demand curve.

Accepted Answer

A) True 
 B)False

Question 8

An increase in production due to better technology is represented by a movement along the supply curve.

Accepted Answer

A) True 
 B)False

Question 9

What is the underlying cause of the law of supply?

Accepted Answer

The incentive to pro

Question 10

The supply and demand model consists of the following three elements:

Accepted Answer

A) math,geometry,and simultaneous equations. 
B) supply,demand,and production possibilities. 
C) inputs,outputs,and production. 
D) utility,profit maximization,and regulation. 
E) price,quantity,and equilibrium. 
A) math,geometry,and simultaneous equations. 
B) supply,demand,and production possibilities. 
C) inputs,outputs,and production. 
D) utility,profit maximization,and regulation. 
E) price,quantity,and equilibrium.

Question 11

Exhibit 3-4  
-In Exhibit 3-4,which of the following is the most likely reason for the shift of the demand curve from D1 to D2?

Accepted Answer

A) An increase in the price of the good 
B) A decrease in the price of the good 
C) An increase in the number of consumers 
D) An increase in the supply of the good 
E) A decrease in the supply of the good 
A) An increase in the price of the good 
B) A decrease in the price of the good 
C) An increase in the number of consumers 
D) An increase in the supply of the good 
E) A decrease in the supply of the good

Question 12

Why does supply slope upward?

Accepted Answer

As more of a good is produced,

Question 13

Which of the following statements is false?

Accepted Answer

A) The supply and demand model serves to illustrate market behavior. 
B) Supply and demand must be combined for either to be useful in explaining and predicting market behavior. 
C) Supply illustrates the behavior of firms in a market. 
D) Demand illustrates the behavior of consumers in a market. 
E) Market equilibrium is not an important element of the supply and demand model. 
A) The supply and demand model serves to illustrate market behavior. 
B) Supply and demand must be combined for either to be useful in explaining and predicting market behavior. 
C) Supply illustrates the behavior of firms in a market. 
D) Demand illustrates the behavior of consumers in a market. 
E) Market equilibrium is not an important element of the supply and demand model.

Question 14

The U.S.surgeon general warns that animal fat in the diet is unhealthy.With the discovery that longhorn beef cattle have little body fat,you would expect

Accepted Answer

A) ranchers to be more willing to produce longhorn cattle as the price rises. 
B) the number of longhorn cattle to dwindle as they are slaughtered. 
C) the price of longhorn beef to fall as it becomes more popular. 
D) it will become increasingly difficult to obtain longhorn beef. 
E) little in the beef market to change. 
A) ranchers to be more willing to produce longhorn cattle as the price rises. 
B) the number of longhorn cattle to dwindle as they are slaughtered. 
C) the price of longhorn beef to fall as it becomes more popular. 
D) it will become increasingly difficult to obtain longhorn beef. 
E) little in the beef market to change.

Question 15

Which of the following would be a likely cause for the increases in gasoline prices in the late-2000s?

Accepted Answer

A) Decreases in gasoline demand 
B) Reductions in U.S.refinery capacity 
C) Lower production costs for gasoline 
D) A recession in the early 2000s 
E) Increases in oil supply from the Middle East 
A) Decreases in gasoline demand 
B) Reductions in U.S.refinery capacity 
C) Lower production costs for gasoline 
D) A recession in the early 2000s 
E) Increases in oil supply from the Middle East

Question 16

Consider the market for pop music played on compact discs.If there is a decrease in the number of pop music programs broadcast on radio,we can expect

Accepted Answer

A) the profits of the pop music industry to decrease. 
B) the demand for pop music to decrease. 
C) the demand for compact discs to increase. 
D) less pop music to be listened to on compact discs. 
E) the price of compact discs to decline. 
A) the profits of the pop music industry to decrease. 
B) the demand for pop music to decrease. 
C) the demand for compact discs to increase. 
D) less pop music to be listened to on compact discs. 
E) the price of compact discs to decline.

Question 17

Which of the following is the most likely reason for the increase in the price of roses on Valentine's Day?

Accepted Answer

A) An increase in the supply of roses 
B) An increase in the demand for roses 
C) The expectation of an increase in the price of roses after Valentine's Day 
D) A decrease in consumer income 
E) An increase in the prices of other flowers 
A) An increase in the supply of roses 
B) An increase in the demand for roses 
C) The expectation of an increase in the price of roses after Valentine's Day 
D) A decrease in consumer income 
E) An increase in the prices of other flowers

Question 18

Exhibit 3-1  
-Consider the market described by the schedule in Exhibit 3-1.At a price of $5 per unit,

Accepted Answer

A) the quantity traded is 1,000 units. 
B) there is a shortage. 
C) the quantity sold is 1,800 units. 
D) there is a surplus of 1,100 units. 
E) the quantity purchased is 1,000 units. 
A) the quantity traded is 1,000 units. 
B) there is a shortage. 
C) the quantity sold is 1,800 units. 
D) there is a surplus of 1,100 units. 
E) the quantity purchased is 1,000 units.

Question 19

An increase in production costs shifts the supply curve leftward.

Accepted Answer

A) True 
 B)False

Question 20

If goods A and B are substitutes,then the demand for good A increases when the price of good B decreases.

Accepted Answer

A) True 
 B)False

Exam 3: The Supply and Demand Model

Exhibit 3-1 -Consider the market represented by the schedule in Exhibit 3-1.At equilibrium,

Suppose supply and demand are represented by the following equations: QD = 25 - 0.4P QS = 7 + 0.2P If supply changes so that QS = 13 + 0.2P calculate the change in equilibrium price that results.

What is the difference between a decrease in demand and a decrease in quantity demanded?

The law of demand is represented by

According to the law of demand,when the price of a BMW or a Gucci purse increases,the quantity demanded for these goods will also increase because the goods have become more prestigious.

Which of the following is not held constant when constructing a demand curve for good X?

An increase in consumer income causes a movement up along the demand curve.

An increase in production due to better technology is represented by a movement along the supply curve.

What is the underlying cause of the law of supply?

The supply and demand model consists of the following three elements:

Exhibit 3-4 -In Exhibit 3-4,which of the following is the most likely reason for the shift of the demand curve from D1 to D2?

Why does supply slope upward?

Which of the following statements is false?

The U.S.surgeon general warns that animal fat in the diet is unhealthy.With the discovery that longhorn beef cattle have little body fat,you would expect

Which of the following would be a likely cause for the increases in gasoline prices in the late-2000s?

Consider the market for pop music played on compact discs.If there is a decrease in the number of pop music programs broadcast on radio,we can expect

Which of the following is the most likely reason for the increase in the price of roses on Valentine's Day?

Exhibit 3-1 -Consider the market described by the schedule in Exhibit 3-1.At a price of $5 per unit,

An increase in production costs shifts the supply curve leftward.

If goods A and B are substitutes,then the demand for good A increases when the price of good B decreases.

The Central Idea

Observing and Explaining the Economy

Subtleties of the Supply and Demand Model: Price Floors,price Ceilings,and Elasticity

The Demand Curve and the Behavior of Consumers

The Supply Curve and the Behavior of Firms

The Interaction of People in Markets

Costs and the Changes at Firms Over Time

The Rise and Fall of Industries

Monopoly

Product Differentiation, monopolistic Competition, and Oligopoly

Antitrust Policy and Regulation

Labor Markets

Taxes, transfers, and Income Distribution

Public Goods, externalities, and Government Behavior

Capital and Financial Markets

Macroeconomics: the Big Picture

Measuring the Production, income, and Spending of Nations

The Spending Allocation Model

Unemployment and Employment

Productivity and Economic Growth

Money and Inflation

The Nature and Causes of Economic Fluctuations

The Economic Fluctuations Model

Using the Economic Fluctuations Model

Fiscal Policy

Monetary Policy

Economic Growth and Globalization

International Trade

International Finance

Reading,understanding,and Creating Graphs

Consumer Theory With Indifference Curves

Producer Theory With Isoquants

Present Discounted Value

The Miracle of Compound Growth

Deriving the Growth Accounting Formula

Deriving the Formula for the Keynesian Multiplier and the Forward-Looking Consumption Model

Filters

Suppose supply and demand are represented by the following equations: Q_D = 25 - 0.4P Q_S = 7 + 0.2P If supply changes so that Q_S = 13 + 0.2P calculate the change in equilibrium price that results.

Exhibit 3-4 -In Exhibit 3-4,which of the following is the most likely reason for the shift of the demand curve from D₁ to D₂?