Question 1

Market equilibrium occurs where the quantity supplied is equal to the quantity demanded.

Accepted Answer

A) True 
 B)False

Question 2

What would happen in the market for knee replacement surgery if insurance companies started to cover a smaller portion of the cost of the surgery?

Accepted Answer

A) Demand will decrease,but this will not shift the supply curve. 
B) Supply will decrease,but this will not shift the demand curve. 
C) Demand and supply will both decrease. 
D) Demand will decrease and supply will increase. 
A) Demand will decrease,but this will not shift the supply curve. 
B) Supply will decrease,but this will not shift the demand curve. 
C) Demand and supply will both decrease. 
D) Demand will decrease and supply will increase.

Question 3

Which of the following statements is true?

Accepted Answer

A) A decrease in demand causes a decrease in equilibrium price;the decrease in price causes supply to decrease. 
B) A decrease in demand causes equilibrium price to fall;the decrease in price then results in a decrease in quantity supplied. 
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) A decrease in demand causes a decrease in equilibrium price;the decrease in price causes supply to decrease. 
B) A decrease in demand causes equilibrium price to fall;the decrease in price then results in a decrease in quantity supplied. 
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 4

Figure 3-2  
-Refer to Figure 3-2.A decrease in the price of the product 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

In 2004,hurricanes damaged a large portion of Florida's orange crop.As a result of this,many orange growers were not able to supply fruit to the market.If,following the hurricane,the price remained at its pre-hurricane level,we would expect to see

Accepted Answer

A) a surplus of oranges. 
B) the quantity demanded equal to the quantity supplied. 
C) a shortage of oranges. 
D) an increase in the demand for oranges. 
A) a surplus of oranges. 
B) the quantity demanded equal to the quantity supplied. 
C) a shortage of oranges. 
D) an increase in the demand for oranges.

Question 6

Table 3-1
 $$\begin{array} { | c | c | c | c | c | } 
\hline \begin{array} { c } 
\text { Loose Leaf } \
\text { Tea } \
\text { Priceper lb. } \
\text { (dollars) }
\end{array} & \begin{array} { c } 
\text { Sunil's } \
\text { Quantity } \
\text { Demanded } \
\text { (lbs) }
\end{array} & \begin{array} { c } 
\text { Mia's } \
\text { Quantity } \
\text { Demanded } \
\text { (lbs) }
\end{array} & \begin{array} { c } 
\text { Rest af } \
\text { Market } \
\text { Quantity } \
\text { Demanded } \
\text { (lbs) }
\end{array} & \begin{array} { c } 
\text { Market } \
\text { Quantity } \
\text { Demanded } \
\text { (lbs) }
\end{array} \
\hline \$ 8 & 4 & 0 & 30 & \
\hline 6 & 7 & 2 & 40 & \
\hline 5 & 9 & 3 & 51 & \
\hline 4 & 12 & 5 & 64 & \
\hline 3 & 15 & 8 & 90 & \
\hline
\end{array}$$
-Refer to Table 3-1.The table above shows the demand schedules for loose-leaf tea of two individuals (Sunil and Mia)and the rest of the market.If the price of loose-leaf tea rises from $3 to $4,the market quantity demanded would

Accepted Answer

A) decrease by 32 lbs. 
B) increase by 64 lbs. 
C) increase by 32 lbs. 
D) decrease by 64 lbs. 
A) decrease by 32 lbs. 
B) increase by 64 lbs. 
C) increase by 32 lbs. 
D) decrease by 64 lbs.

Question 7

If the price of smartphones was to increase,then

Accepted Answer

A) the demand for smartphone apps would decrease. 
B) the demand for smartphone apps would increase. 
C) the quantity of smartphone apps demanded would increase. 
D) the quantity of smartphone apps demanded would decrease. 
A) the demand for smartphone apps would decrease. 
B) the demand for smartphone apps would increase. 
C) the quantity of smartphone apps demanded would increase. 
D) the quantity of smartphone apps demanded would decrease.

Question 8

Figure 3-6  
-Refer to Figure 3-6.The figure above represents the market for coffee grinders.Compare the conditions in the market when the price is $15 and when the price is $21.Which of the following describes how the market differs at these prices?

Accepted Answer

A) At each price there is a shortage;the shortage is greater at $15 than at $21. 
B) The difference between quantity supplied and quantity demanded is greater at $21 than at $15. 
C) At each price there is a shortage;firms will raise the equilibrium price in order to eliminate the shortage. 
D) At each price the demand for coffee grinders exceeds the supply of coffee grinders. 
A) At each price there is a shortage;the shortage is greater at $15 than at $21. 
B) The difference between quantity supplied and quantity demanded is greater at $21 than at $15. 
C) At each price there is a shortage;firms will raise the equilibrium price in order to eliminate the shortage. 
D) At each price the demand for coffee grinders exceeds the supply of coffee grinders.

Question 9

Figure 3-8  
-Refer to Figure 3-8.The graph in this figure illustrates an initial competitive equilibrium in the market for apples at the intersection of D1 and S1 (point A).If there is a shortage of apples,how will the equilibrium point change?

Accepted Answer

A) The equilibrium point will move from A to B. 
B) The equilibrium point will move from A to C. 
C) There will be no change in the equilibrium point. 
D) The equilibrium point will move from A to E. 
A) The equilibrium point will move from A to B. 
B) The equilibrium point will move from A to C. 
C) There will be no change in the equilibrium point. 
D) The equilibrium point will move from A to E.

Question 10

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 11

Market equilibrium occurs where supply equals demand.

Accepted Answer

A) True 
 B)False

Question 12

Figure 3-2  
-Refer to Figure 3-2.A technological advancement 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 13

Assume that both the demand curve and the supply curve for DVD players shift to the left but the supply curve shifts more than the demand curve.As a result

Accepted Answer

A) both the equilibrium price and quantity of DVD players will decrease. 
B) the equilibrium price of DVD players will decrease;the equilibrium quantity may increase or decrease. 
C) the equilibrium price of DVD players may increase or decrease;the equilibrium quantity will increase. 
D) the equilibrium price of DVD players will increase;the equilibrium quantity will decrease. 
A) both the equilibrium price and quantity of DVD players will decrease. 
B) the equilibrium price of DVD players will decrease;the equilibrium quantity may increase or decrease. 
C) the equilibrium price of DVD players may increase or decrease;the equilibrium quantity will increase. 
D) the equilibrium price of DVD players will increase;the equilibrium quantity will decrease.

Question 14

Suppose that in October,market analysts predict that the price of platinum will fall in November.What happens in the platinum market in October,holding everything else constant?

Accepted Answer

A) The supply curve shifts to the right. 
B) The supply curve shifts to the left. 
C) The quantity of platinum demanded and the quantity of platinum supplied both increase. 
D) The demand curve shifts to the right. 
A) The supply curve shifts to the right. 
B) The supply curve shifts to the left. 
C) The quantity of platinum demanded and the quantity of platinum supplied both increase. 
D) The demand curve shifts to the right.

Question 15

Factory incentives on cell phones have encouraged consumers to upgrade their phones.How does this affect the market for bluetooth headsets?

Accepted Answer

A) The quantity of bluetooth headsets demanded increases. 
B) The quantity of bluetooth headsets demanded decreases. 
C) The demand for bluetooth headsets increases. 
D) The demand for bluetooth headsets decreases. 
A) The quantity of bluetooth headsets demanded increases. 
B) The quantity of bluetooth headsets demanded decreases. 
C) The demand for bluetooth headsets increases. 
D) The demand for bluetooth headsets decreases.

Question 16

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 17

If the price of grapefruit rises,the substitution effect due to the price change will cause

Accepted Answer

A) a decrease in the demand for grapefruit. 
B) a decrease in the demand for oranges,a substitute for grapefruit. 
C) a decrease in the quantity of grapefruit demanded. 
D) a decrease in the quantity of grapefruit supplied. 
A) a decrease in the demand for grapefruit. 
B) a decrease in the demand for oranges,a substitute for grapefruit. 
C) a decrease in the quantity of grapefruit demanded. 
D) a decrease in the quantity of grapefruit supplied.

Question 18

Which of the following would cause an increase in the equilibrium price and decrease in the equilibrium quantity of watermelon?

Accepted Answer

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

Question 19

One would speak of a movement along a supply curve for a good,rather than a change in supply,if

Accepted Answer

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

Question 20

Which of the following would cause a decrease in the supply of peanut butter?

Accepted Answer

A) a decrease in the price of jelly (assuming that peanut butter and jelly are complements) 
B) a decrease in the price of peanut butter 
C) an increase the price of peanuts 
D) an increase in the technology used to produce peanut butter 
A) a decrease in the price of jelly (assuming that peanut butter and jelly are complements) 
B) a decrease in the price of peanut butter 
C) an increase the price of peanuts 
D) an increase in the technology used to produce peanut butter

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

Market equilibrium occurs where the quantity supplied is equal to the quantity demanded.

What would happen in the market for knee replacement surgery if insurance companies started to cover a smaller portion of the cost of the surgery?

Which of the following statements is true?

Figure 3-2 -Refer to Figure 3-2.A decrease in the price of the product would be represented by a movement from

In 2004,hurricanes damaged a large portion of Florida's orange crop.As a result of this,many orange growers were not able to supply fruit to the market.If,following the hurricane,the price remained at its pre-hurricane level,we would expect to see

If the price of smartphones was to increase,then

Figure 3-6 -Refer to Figure 3-6.The figure above represents the market for coffee grinders.Compare the conditions in the market when the price is $15 and when the price is $21.Which of the following describes how the market differs at these prices?

Figure 3-8 -Refer to Figure 3-8.The graph in this figure illustrates an initial competitive equilibrium in the market for apples at the intersection of D1 and S1 (point A).If there is a shortage of apples,how will the equilibrium point change?

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

Market equilibrium occurs where supply equals demand.

Figure 3-2 -Refer to Figure 3-2.A technological advancement would be represented by a movement from

Assume that both the demand curve and the supply curve for DVD players shift to the left but the supply curve shifts more than the demand curve.As a result

Suppose that in October,market analysts predict that the price of platinum will fall in November.What happens in the platinum market in October,holding everything else constant?

Factory incentives on cell phones have encouraged consumers to upgrade their phones.How does this affect the market for bluetooth headsets?

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?

If the price of grapefruit rises,the substitution effect due to the price change will cause

Which of the following would cause an increase in the equilibrium price and decrease in the equilibrium quantity of watermelon?

One would speak of a movement along a supply curve for a good,rather than a change in supply,if

Which of the following would cause a decrease in the supply of peanut butter?

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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