Question 1

The discussion of Figure 2.2 in the text indicates that quantity demanded for most goods tends to increase as income rises. However, the quantity of bananas demanded in the U.S. tends to decrease as income rises. Under this condition, we expect that an increase in consumer income shifts the demand curve for bananas:

Accepted Answer

A)  rightward 
B)  no shift. 
C)  leftward. 
D)  upward.

Question 2

Assume that the current market price is below the market clearing level. We would expect:

Accepted Answer

A)  a surplus to accumulate. 
B)  downward pressure on the current market price. 
C)  upward pressure on the current market price. 
D)  lower production during the next time period.

Question 3

Which of the following represents the price elasticity of demand?

Accepted Answer

A)   
B)  (  ) + (
 ) 
C)  (  ) × (
 ) 
D)  (  ) - (
 )

Question 4

If two goods are substitutes, the cross-price elasticity of demand must be

Accepted Answer

A)  negative. 
B)  positive. 
C)  zero. 
D)  infinite.

Question 5

Suppose the equilibrium price of milk is $3 per gallon but the federal government sets the market price at $4 per gallon. The market mechanism will force the milk price back down to $3 per gallon unless the government:

Accepted Answer

A)  rations the excess demand for milk among consumers. 
B)  buys the excess supply of milk and removes it from the market. 
C)  Both A and B are plausible actions. 
D)  The government cannot maintain the price above the equilibrium level.

Question 6

The cross-price elasticity between a pair of complementary goods will be

Accepted Answer

A)  positive. 
B)  negative. 
C)  zero. 
D)  positive or zero depending upon the strength of the relationship.

Question 7

Scenario 2.1:
The demand for books is: QS1U1B1dS1U1B0 = 120 - P
The supply of books is: QS1U1B1sS1U1B0 = 5P
-Refer to Scenario 2.1. If P = $25, which of the following is true?

Accepted Answer

A)  Quantity supplied is greater than quantity demanded. 
B)  Quantity supplied is less than quantity demanded. 
C)  Quantity supplied equals quantity demanded. 
D)  There is a shortage.

Question 8

An important determinant of the amount of grains harvested next year by Ethiopian farmers is the amount of seeds planted this year. Given that Western nations have guaranteed to donate five hundred tons of grain next year, this year the Ethiopian farmers will:

Accepted Answer

A)  plant more seeds as the food aid establishes a minimum price for grain. 
B)  plant more seeds as the farmers' confidence is restored. 
C)  plant the same amount of seeds as they would have without the food aid. 
D)  plant fewer seeds as consumers demand for grain is completely price elastic. 
E)  plant fewer seeds as the price of grain will be lower with the food aid.

Question 9

Plastic and steel are substitutes in the production of body panels for certain automobiles. If the price of plastic increases, with other things remaining the same, we would expect:

Accepted Answer

A)  the price of steel to fall. 
B)  the demand curve for steel to shift to the right. 
C)  the demand curve for plastic to shift to the left. 
D)  nothing to happen to steel because it is only a substitute for plastic. 
E)  the demand curve for steel to shift to the left.

Question 10

By 2020, automobile market analysts expect that the demand for electric autos will increase as buyers become more familiar with the technology. However, the costs of producing electric autos may increase because of higher costs for inputs (e.g., rare earth elements), or they may decrease as the manufacturers learn better assembly methods (i.e., learning by doing). What is the expected impact of these changes on the equilibrium price and quantity for electric autos?

Accepted Answer

A)  Unambiguously higher equilibrium price and quantity 
B)  Unambiguously higher price, and equilibrium quantity may be higher or lower 
C)  Unambiguously higher quantity, and equilibrium price may be higher or lower 
D)  We cannot form any unambiguous expectations for either price or quantity

Question 11

The cross-price elasticity of demand for peanut butter with respect to the price of jelly is -0.3. If we expect the price of jelly to decline by 15%, what is the expected change in the quantity demanded for peanut butter?

Accepted Answer

A)  +15% 
B)  +45% 
C)  +4.5% 
D)  -4.5%

Question 12

Which of the following will cause the demand curve for Beatles' compact discs to shift to the right?

Accepted Answer

A)  An increase in the price of the discs 
B)  A decrease in consumers' incomes 
C)  An increase in the price of Phil Collins' latest compact disc (a substitute) 
D)  all of the above 
E)  none of the above

Question 13

Which of these measures the responsiveness of the quantity of one good demanded to an increase in the price of another good?

Accepted Answer

A)  price elasticity. 
B)  income elasticity. 
C)  cross-price elasticity. 
D)  cross substitution elasticity.

Question 14

A freeze in Florida's orange growing regions will:

Accepted Answer

A)  result in a sharp increase in the price of oranges in the short run because demand and supply are highly inelastic. 
B)  result in a sharp increase in the price of oranges in the short run because demand and supply are highly elastic. 
C)  result in a sharp decrease in the price of oranges in the short run because demand is highly inelastic and supply is highly elastic. 
D)  result in little change in the price of oranges in the short run because supply is infinitely elastic.

Question 15

Due to capacity constraints, the price elasticity of supply for most products is:

Accepted Answer

A)  the same in the long run and the short run. 
B)  greater in the long run than the short run. 
C)  greater in the short run than in the long run. 
D)  too uncertain to be estimated.

Question 16

In recent years, the world demand curve for copper shifted rightward due to continued economic growth in China and other emerging economies. Also, the costs of extracting the copper increased due to higher energy prices. As a result, we observed:

Accepted Answer

A)  higher equilibrium copper prices and unambiguously lower quantities. 
B)  higher equilibrium copper prices and unambiguously higher quantities. 
C)  higher equilibrium copper prices and either higher or lower quantities. 
D)  lower equilibrium copper prices and either higher or lower quantities.

Question 17

Scenario 2.1:
The demand for books is: QS1U1B1dS1U1B0 = 120 - P
The supply of books is: QS1U1B1sS1U1B0 = 5P
-Refer to Scenario 2.1. If P = $15, which of the following is true?

Accepted Answer

A)  There is a surplus equal to 30. 
B)  There is a shortage equal to 30. 
C)  There is a surplus, but it is impossible to determine how large. 
D)  There is a shortage, but it is impossible to determine how large.

Question 18

For computers and other business equipment, small changes in business earnings tend to generate relatively large short-run changes in the demand for this equipment. In the long run, the responsiveness of demand for business equipment with respect to income changes tends to be:

Accepted Answer

A)  even more responsive. 
B)  less responsive. 
C)  equally responsive. 
D)  none of the above

Question 19

Suppose biochemists discover an enzyme that can double the amount of ethanol that may be derived from a given amount of biomass. Based on this technological development, we expect the:

Accepted Answer

A)  supply curve for ethanol to shift leftward. 
B)  supply curve for ethanol to shift rightward. 
C)  demand curve for ethanol to shift leftward. 
D)  demand curve for ethanol to shift rightward.

Question 20

Which of the following will NOT cause a rightward shift in the demand curve for beer?

Accepted Answer

A)  A change in the price of beer 
B)  A health study indicating positive health benefits of moderate beer consumption 
C)  An increase in the price of French wine (a substitute) 
D)  A decrease in the price of potato chips (a complement) 
E)  none of the above

Exam 2: The Basics of Supply and Demand

Assume that the current market price is below the market clearing level. We would expect:

Which of the following represents the price elasticity of demand?

If two goods are substitutes, the cross-price elasticity of demand must be

Suppose the equilibrium price of milk is $3 per gallon but the federal government sets the market price at $4 per gallon. The market mechanism will force the milk price back down to $3 per gallon unless the government:

The cross-price elasticity between a pair of complementary goods will be

Scenario 2.1: The demand for books is: Q_d = 120 - P The supply of books is: Q_s = 5P -Refer to Scenario 2.1. If P = $25, which of the following is true?

An important determinant of the amount of grains harvested next year by Ethiopian farmers is the amount of seeds planted this year. Given that Western nations have guaranteed to donate five hundred tons of grain next year, this year the Ethiopian farmers will:

Plastic and steel are substitutes in the production of body panels for certain automobiles. If the price of plastic increases, with other things remaining the same, we would expect:

The cross-price elasticity of demand for peanut butter with respect to the price of jelly is -0.3. If we expect the price of jelly to decline by 15%, what is the expected change in the quantity demanded for peanut butter?

Which of the following will cause the demand curve for Beatles' compact discs to shift to the right?

Which of these measures the responsiveness of the quantity of one good demanded to an increase in the price of another good?

A freeze in Florida's orange growing regions will:

Due to capacity constraints, the price elasticity of supply for most products is:

In recent years, the world demand curve for copper shifted rightward due to continued economic growth in China and other emerging economies. Also, the costs of extracting the copper increased due to higher energy prices. As a result, we observed:

Scenario 2.1: The demand for books is: Q_d = 120 - P The supply of books is: Q_s = 5P -Refer to Scenario 2.1. If P = $15, which of the following is true?

For computers and other business equipment, small changes in business earnings tend to generate relatively large short-run changes in the demand for this equipment. In the long run, the responsiveness of demand for business equipment with respect to income changes tends to be:

Suppose biochemists discover an enzyme that can double the amount of ethanol that may be derived from a given amount of biomass. Based on this technological development, we expect the:

Which of the following will NOT cause a rightward shift in the demand curve for beer?

Exam 2: The Basics of Supply and Demand

Assume that the current market price is below the market clearing level. We would expect:

Which of the following represents the price elasticity of demand?

If two goods are substitutes, the cross-price elasticity of demand must be

Suppose the equilibrium price of milk is $3 per gallon but the federal government sets the market price at $4 per gallon. The market mechanism will force the milk price back down to $3 per gallon unless the government:

The cross-price elasticity between a pair of complementary goods will be

Scenario 2.1: The demand for books is: Qd = 120 - P The supply of books is: Qs = 5P -Refer to Scenario 2.1. If P = $25, which of the following is true?

An important determinant of the amount of grains harvested next year by Ethiopian farmers is the amount of seeds planted this year. Given that Western nations have guaranteed to donate five hundred tons of grain next year, this year the Ethiopian farmers will:

Plastic and steel are substitutes in the production of body panels for certain automobiles. If the price of plastic increases, with other things remaining the same, we would expect:

The cross-price elasticity of demand for peanut butter with respect to the price of jelly is -0.3. If we expect the price of jelly to decline by 15%, what is the expected change in the quantity demanded for peanut butter?

Which of the following will cause the demand curve for Beatles' compact discs to shift to the right?

Which of these measures the responsiveness of the quantity of one good demanded to an increase in the price of another good?

A freeze in Florida's orange growing regions will:

Due to capacity constraints, the price elasticity of supply for most products is:

In recent years, the world demand curve for copper shifted rightward due to continued economic growth in China and other emerging economies. Also, the costs of extracting the copper increased due to higher energy prices. As a result, we observed:

Scenario 2.1: The demand for books is: Qd = 120 - P The supply of books is: Qs = 5P -Refer to Scenario 2.1. If P = $15, which of the following is true?

For computers and other business equipment, small changes in business earnings tend to generate relatively large short-run changes in the demand for this equipment. In the long run, the responsiveness of demand for business equipment with respect to income changes tends to be:

Suppose biochemists discover an enzyme that can double the amount of ethanol that may be derived from a given amount of biomass. Based on this technological development, we expect the:

Which of the following will NOT cause a rightward shift in the demand curve for beer?

Scenario 2.1: The demand for books is: Q_d = 120 - P The supply of books is: Q_s = 5P -Refer to Scenario 2.1. If P = $25, which of the following is true?

Scenario 2.1: The demand for books is: Q_d = 120 - P The supply of books is: Q_s = 5P -Refer to Scenario 2.1. If P = $15, which of the following is true?