Question 1

If a decrease in income leads to an increase in the demand for sardines,then sardines are

Accepted Answer

A) an inferior good. 
B) a neutral good. 
C) a necessity. 
D) a normal good. 
A) an inferior good. 
B) a neutral good. 
C) a necessity. 
D) a normal good.

Question 2

The phrase "demand has decreased" means that

Accepted Answer

A) a demand curve has shifted to the left. 
B) there has been an upward movement along a demand curve. 
C) there has been a downward movement along a demand curve. 
D) a demand curve has shifted to the right. 
A) a demand curve has shifted to the left. 
B) there has been an upward movement along a demand curve. 
C) there has been a downward movement along a demand curve. 
D) a demand curve has shifted to the right.

Question 3

A shortage is defined as the situation that exists when the quantity of a good supplied is greater than the quantity demanded.

Accepted Answer

A) True 
 B)False

Question 4

Table 3-3
 $$\begin{array} { | c | c | c | c | c | } 
\hline  \begin{array} { c } 
\text { Kona Coffee } \
\text { Price per lb. } \
\text { (dollars) }
\end{array} & \begin{array} { c } 
\text { Luke's } \
\text { Quantity } \
\text { Demanded } \
\text { (lbs.) }
\end{array} & \begin{array} { c } 
\text { Ravi's } \
\text { Quantity } \
\text { Demanded } \
\text { (lbs.) }
\end{array} & \begin{array} { c } 
\text { Rest af } \
\text { Market } \
\text { Quantity } \
\text { Demanded } \
\text { (lbs.) }
\end{array} & \begin{array} { c } 
\text { Market } \
\text { Quantity } \
\text { Demanded } \
\text { (lbs.) }
\end{array} \
\hline \$ 10 & 3 & 0 & 23 & \
\hline 8 & 9 & 3 & 32 & \
\hline 6 & 14 & 7 & 68 & \
\hline 5 & 18 & 12 & 85 & \
\hline 4 & 22 & 18 & 110 & \
\hline
\end{array}$$
-Refer to Table 3-3.The table above shows the demand schedules for Kona coffee of two individuals (Luke and Ravi)and the rest of the market.If the price of Kona coffee falls from $6 to $4,the market quantity demanded would

Accepted Answer

A) decrease by 89 lbs. 
B) increase by 26 lbs. 
C) increase by 61 lbs. 
D) increase by 110 lbs. 
A) decrease by 89 lbs. 
B) increase by 26 lbs. 
C) increase by 61 lbs. 
D) increase by 110 lbs.

Question 5

The income effect of a price change results in a

Accepted Answer

A) shift of the demand curve when income changes. 
B) movement along the demand curve due to a change in relative prices. 
C) shift of the demand curve due to a change in purchasing power brought about by the price change. 
D) movement along the demand curve due to a change in purchasing power brought about by the price change. 
A) shift of the demand curve when income changes. 
B) movement along the demand curve due to a change in relative prices. 
C) shift of the demand curve due to a change in purchasing power brought about by the price change. 
D) movement along the demand curve due to a change in purchasing power brought about by the price change.

Question 6

If a union successfully negotiates for higher wages and benefits for steel workers,what impact would this have on supply and demand in the market for steel,assuming no other changes take place in this market?

Accepted Answer

An increase in wages and benefits will s

Question 7

Figure 3-8  
-Refer to Figure 3-8.The graph in this figure illustrates an initial competitive equilibrium in the market for motorcycles at the intersection of D1 and S1 (point A).If there is an increase in the wages of motorcycle workers and an increase in the price of motorcycle insurance,a complement to motorcycles,the equilibrium could move to which point?

Accepted Answer

A) A 
B) B 
C) C 
D) E 
A) A 
B) B 
C) C 
D) E

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

Assume there is a surplus in the market for hybrid automobiles.Which of the following statements correctly describes this situation?

Accepted Answer

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

Question 10

If an increase in income leads to an increase in the demand for sushi,then sushi is

Accepted Answer

A) a normal good. 
B) a neutral good. 
C) a complement. 
D) a necessity. 
A) a normal good. 
B) a neutral good. 
C) a complement. 
D) a necessity.

Question 11

Suppose a negative technological change in the production of disease-resistant wheat caused the price of wheat to rise.Holding everything else constant,how would this affect the market for corn (a substitute for wheat)?

Accepted Answer

A) The supply of corn would decrease and the equilibrium price of corn would increase. 
B) The demand for corn would increase and the equilibrium price of corn would increase. 
C) The demand for corn would decrease because consumers could afford to buy less wheat and corn. 
D) The demand for corn would increase and the equilibrium price of corn would decrease. 
A) The supply of corn would decrease and the equilibrium price of corn would increase. 
B) The demand for corn would increase and the equilibrium price of corn would increase. 
C) The demand for corn would decrease because consumers could afford to buy less wheat and corn. 
D) The demand for corn would increase and the equilibrium price of corn would decrease.

Question 12

A change in which variable will change the market demand for a product?

Accepted Answer

A) the price of the product 
B) population 
C) technology 
D) the prices of substitutes in production 
A) the price of the product 
B) population 
C) technology 
D) the prices of substitutes in production

Question 13

Electric car enthusiasts want to buy more electric cars at a lower price.All of the following events would have this effect except

Accepted Answer

A) technological advancement in the production of electric car batteries. 
B) an increase in the number of manufacturers of electric cars. 
C) a decrease in the price of lithium,which is used in the electric car batteries. 
D) an increase in the price of gasoline. 
A) technological advancement in the production of electric car batteries. 
B) an increase in the number of manufacturers of electric cars. 
C) a decrease in the price of lithium,which is used in the electric car batteries. 
D) an increase in the price of gasoline.

Question 14

Figure 3-5  
-Refer to Figure 3-5.In a free market such as that depicted above,a surplus is eliminated 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 15

Which of the following would cause a decrease in the equilibrium price and decrease in the equilibrium quantity of papayas?

Accepted Answer

A) a decrease in supply and an increase in demand 
B) a decrease in demand 
C) an increase in supply and an increase in demand greater than the increase in supply 
D) a decrease in supply and a decrease in demand 
A) a decrease in supply and an increase in demand 
B) a decrease in demand 
C) an increase in supply and an increase in demand greater than the increase in supply 
D) a decrease in supply and a decrease in demand

Question 16

The law of demand implies,holding everything else constant,that as the price of bagels increases

Accepted Answer

A) the quantity of bagels demanded will decrease. 
B) the demand for bagels will decrease. 
C) the quantity of bagels demanded will increase. 
D) the demand for bagels will increase. 
A) the quantity of bagels demanded will decrease. 
B) the demand for bagels will decrease. 
C) the quantity of bagels demanded will increase. 
D) the demand for bagels will increase.

Question 17

An decrease in supply is caused by a decrease in the price of the product.

Accepted Answer

A) True 
 B)False

Question 18

A positive technological change will cause the supply of a good to increase.

Accepted Answer

A) True 
 B)False

Question 19

Harvey Rabbitt pays for monthly cable TV service.Last week the cable company informed Harvey that his monthly cable price would go down because the city council has granted approval for three new cable companies to service his area.How is the market for cable TV services affected by this?

Accepted Answer

A) There is an increase in the supply of cable TV service. 
B) There is a decrease in the demand for cable TV service. 
C) There is a decrease in the quantity of cable TV service supplied. 
D) There is a decrease in the supply of cable TV service. 
A) There is an increase in the supply of cable TV service. 
B) There is a decrease in the demand for cable TV service. 
C) There is a decrease in the quantity of cable TV service supplied. 
D) There is a decrease in the supply of cable TV service.

Question 20

If the price of a product is expected to increase in the future,the supply today will increase.

Accepted Answer

A) True 
 B)False

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

If a decrease in income leads to an increase in the demand for sardines,then sardines are

The phrase "demand has decreased" means that

A shortage is defined as the situation that exists when the quantity of a good supplied is greater than the quantity demanded.

The income effect of a price change results in a

If a union successfully negotiates for higher wages and benefits for steel workers,what impact would this have on supply and demand in the market for steel,assuming no other changes take place in this market?

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

Assume there is a surplus in the market for hybrid automobiles.Which of the following statements correctly describes this situation?

If an increase in income leads to an increase in the demand for sushi,then sushi is

Suppose a negative technological change in the production of disease-resistant wheat caused the price of wheat to rise.Holding everything else constant,how would this affect the market for corn (a substitute for wheat)?

A change in which variable will change the market demand for a product?

Electric car enthusiasts want to buy more electric cars at a lower price.All of the following events would have this effect except

Figure 3-5 -Refer to Figure 3-5.In a free market such as that depicted above,a surplus is eliminated by

Which of the following would cause a decrease in the equilibrium price and decrease in the equilibrium quantity of papayas?

The law of demand implies,holding everything else constant,that as the price of bagels increases

An decrease in supply is caused by a decrease in the price of the product.

A positive technological change will cause the supply of a good to increase.

Harvey Rabbitt pays for monthly cable TV service.Last week the cable company informed Harvey that his monthly cable price would go down because the city council has granted approval for three new cable companies to service his area.How is the market for cable TV services affected by this?

If the price of a product is expected to increase in the future,the supply today will increase.

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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