Question 1

Figure 2.1.2
-Refer to Figure 2.1.2. The price of coffee is currently $6.00. and quantity demanded is 7 million pounds. Then there is a notable increase in the preference for coffee over other substitutes, like tea. Which move best describes this change?

Accepted Answer

A)  A move from B to A 
B)  A move from B to C 
C)  A move from B to A, and then to C 
D)  A move from B to C, and then to A

Question 2

Which of the following represents the income elasticity of demand?

Accepted Answer

A)   
B)   +
 
C)   ×
 
D)   -

Question 3

Figure 2.5.6
-In order to fit linear supply and demand curves to data, we need to find the parameters, a, b, c, and d, of the corresponding functions. One procedure for finding those values uses the known values of:

Accepted Answer

A)  the demand equation and income elasticity of demand. 
B)  the price and quantity of equilibrium and the elasticities of supply and demand. 
C)  any two known values of price and quantity and income elasticity of demand. 
D)  the price elasticity of demand and supply and the income elasticity of demand.

Question 4

The battery packs used in electric and hybrid automobiles are one of the largest cost components for manufacturing these cars. As the price of these batteries decline, we expect that the:

Accepted Answer

A)  supply curve for electric and hybrid autos will shift rightward. 
B)  supply curve for electric and hybrid autos will shift leftward. 
C)  demand curve for electric and hybrid autos will shift rightward. 
D)  demand curve for electric and hybrid autos will shift leftward.

Question 5

Figure 2.5.3
-An industry in which sales tend to magnify cyclical changes in gross domestic product and national income is called:

Accepted Answer

A)  a cyclical industry. 
B)  a counter-cyclical industry. 
C)  a fluctuating industry. 
D)  a dismal industry.

Question 6

The price elasticity of supply refers to:

Accepted Answer

A)  a change in the supply of one good when prices in the economy change. 
B)  the substitution of one productive activity for another based on price changes that favor the production of certain goods. 
C)  the responsiveness of suppliers to changes in economic variables, except price. 
D)  the percentage change in the quantity supplied of one good resulting from a 1-percent increase in the price of that good.

Question 7

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

Accepted Answer

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

Question 8

Figure 2.6.2
-When demand is written as Q = a - bP, and P* and Q* are the equilibrium values for price and quantity, which of the following is the value of the price elasticity of demand, ED?

Accepted Answer

A)  -a(P*/Q*) 
B)  -b(P*/Q*) 
C)  -a/b 
D)  -b/a

Question 9

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 10

Figure 2.1.1
-Refer to Figure 2.1.1 above. Lower material costs-indeed lower costs of any kind-make production more profitable. Starting at point A, which of the following best represents this assertion?

Accepted Answer

A)  The move from A to B 
B)  The move from A to C 
C)  A move from A to B, and then to C 
D)  A move from A to C, and then to B

Question 11

Assume that steak and potatoes are complements. When the price of steak goes up, the demand curve for potatoes:

Accepted Answer

A)  shifts to the left. 
B)  shifts to the right. 
C)  remains constant. 
D)  shifts to the right initially and then returns to its original position.

Question 12

Figure 2.4.2
-Refer to Figure 2.4.2 above. Fill in the blanks. For any price higher than P*, the quantity demanded ________, while for any price lower than P*, the quantity demanded ________.

Accepted Answer

A)  drops to zero; increases without limit 
B)  drops to zero; remains constant 
C)  increases without limit; does not exist 
D)  does not exist; is unpredictable

Question 13

Figure 2.5.2
-Refer to Figure 2.5.2 above. Which of the following best represents the demand for cars in the short run (SR) and in the long run (LR)?

Accepted Answer

A)  Panel A. 
B)  Panel B 
C)  None of the above. Both are perfectly elastic. 
D)  None of the above. Both are perfectly inelastic.

Question 14

Figure 2.4.1
-Refer to Figure 2.4.1. Between points E and F, demand is:

Accepted Answer

A)  completely inelastic. 
B)  inelastic, but not completely inelastic. 
C)  unit elastic. 
D)  elastic, but not infinitely elastic. 
E)  infinitely elastic.

Question 15

Figure 2.2.1
-Refer to Figure 2.2.1 above. At a price of $1.50, there is:

Accepted Answer

A)  an excess of quantity demanded over quantity supplied. 
B)  an excess of quantity supplied over quantity demanded. 
C)  an alternative equilibrium between supply and demand. 
D)  a surplus of coffee in the market.

Question 16

Figure 2.3.2
-Figure 2.3.2 above is a reproduction of Figure 2.9 in the textbook, which describes the market for mineral resources across time. The downward-sloping line that crosses the equilibrium points is called:

Accepted Answer

A)  the market decline curve. 
B)  the market rise path. 
C)  the long-run path of price and consumption. 
D)  the industry supply curve.

Question 17

Figure 2.5.5
-Refer to Figure 2.5.5 above. The textbook attributes the changes in the price of coffee in New York to:

Accepted Answer

A)  worldwide swings in coffee demand. 
B)  changes in income and preferences. 
C)  droughts in Brazil. 
D)  changes in speculative demand.

Question 18

If the actual price were below the equilibrium price in the market for bread, a:

Accepted Answer

A)  surplus would develop that cannot be eliminated over time. 
B)  shortage would develop, which market forces would eliminate over time. 
C)  surplus would develop, which market forces would eliminate over time. 
D)  shortage would develop, which market forces would tend to exacerbate.

Question 19

When the government controls the price of a product, causing the market price to be above the free market equilibrium price,

Accepted Answer

A)  all producers gain. 
B)  both producers and consumers gain. 
C)  only consumers gain. 
D)  some, but not all, sellers can find buyers for their goods.

Question 20

Figure 2.1.1
-Refer to Figure 2.1.1 above. Starting from point A, how do the firms in the market react when the price of coffee increases from $6.00 to $7.50 per pound?

Accepted Answer

A)  The supply curve shifts to the right and the quantity supplied increases to 10 million pounds per year. 
B)  The supply curve shifts from S1 to S2, but the market moves from A to B, so the quantity supplied increases to 9 million pounds per year. 
C)  The market moves from A to B temporarily, but eventually will settle at point C, where the quantity supplied will be 10 million pounds. 
D)  The supply curve does not shift, but the quantity supplied increases from 7 to 9 million pounds per year.

Exam 2: The Basics of Supply and Demand

Figure 2.1.2 -Refer to Figure 2.1.2. The price of coffee is currently $6.00. and quantity demanded is 7 million pounds. Then there is a notable increase in the preference for coffee over other substitutes, like tea. Which move best describes this change?

Which of the following represents the income elasticity of demand?

Figure 2.5.6 -In order to fit linear supply and demand curves to data, we need to find the parameters, a, b, c, and d, of the corresponding functions. One procedure for finding those values uses the known values of:

The battery packs used in electric and hybrid automobiles are one of the largest cost components for manufacturing these cars. As the price of these batteries decline, we expect that the:

Figure 2.5.3 -An industry in which sales tend to magnify cyclical changes in gross domestic product and national income is called:

The price elasticity of supply refers to:

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

Figure 2.6.2 -When demand is written as Q = a - bP, and P* and Q* are the equilibrium values for price and quantity, which of the following is the value of the price elasticity of demand, E_D?

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:

Figure 2.1.1 -Refer to Figure 2.1.1 above. Lower material costs-indeed lower costs of any kind-make production more profitable. Starting at point A, which of the following best represents this assertion?

Assume that steak and potatoes are complements. When the price of steak goes up, the demand curve for potatoes:

Figure 2.4.2 -Refer to Figure 2.4.2 above. Fill in the blanks. For any price higher than P, the quantity demanded , while for any price lower than P, the quantity demanded .

Figure 2.5.2 -Refer to Figure 2.5.2 above. Which of the following best represents the demand for cars in the short run (SR) and in the long run (LR) ?

Figure 2.4.1 -Refer to Figure 2.4.1. Between points E and F, demand is:

Figure 2.2.1 -Refer to Figure 2.2.1 above. At a price of $1.50, there is:

Figure 2.3.2 -Figure 2.3.2 above is a reproduction of Figure 2.9 in the textbook, which describes the market for mineral resources across time. The downward-sloping line that crosses the equilibrium points is called:

Figure 2.5.5 -Refer to Figure 2.5.5 above. The textbook attributes the changes in the price of coffee in New York to:

If the actual price were below the equilibrium price in the market for bread, a:

When the government controls the price of a product, causing the market price to be above the free market equilibrium price,

Figure 2.1.1 -Refer to Figure 2.1.1 above. Starting from point A, how do the firms in the market react when the price of coffee increases from $6.00 to $7.50 per pound?

Exam 2: The Basics of Supply and Demand

Figure 2.1.2 -Refer to Figure 2.1.2. The price of coffee is currently $6.00. and quantity demanded is 7 million pounds. Then there is a notable increase in the preference for coffee over other substitutes, like tea. Which move best describes this change?

Which of the following represents the income elasticity of demand?

Figure 2.5.6 -In order to fit linear supply and demand curves to data, we need to find the parameters, a, b, c, and d, of the corresponding functions. One procedure for finding those values uses the known values of:

The battery packs used in electric and hybrid automobiles are one of the largest cost components for manufacturing these cars. As the price of these batteries decline, we expect that the:

Figure 2.5.3 -An industry in which sales tend to magnify cyclical changes in gross domestic product and national income is called:

The price elasticity of supply refers to:

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

Figure 2.6.2 -When demand is written as Q = a - bP, and P* and Q* are the equilibrium values for price and quantity, which of the following is the value of the price elasticity of demand, ED?

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:

Figure 2.1.1 -Refer to Figure 2.1.1 above. Lower material costs-indeed lower costs of any kind-make production more profitable. Starting at point A, which of the following best represents this assertion?

Assume that steak and potatoes are complements. When the price of steak goes up, the demand curve for potatoes:

Figure 2.4.2 -Refer to Figure 2.4.2 above. Fill in the blanks. For any price higher than P*, the quantity demanded ________, while for any price lower than P*, the quantity demanded ________.

Figure 2.5.2 -Refer to Figure 2.5.2 above. Which of the following best represents the demand for cars in the short run (SR) and in the long run (LR) ?

Figure 2.4.1 -Refer to Figure 2.4.1. Between points E and F, demand is:

Figure 2.2.1 -Refer to Figure 2.2.1 above. At a price of $1.50, there is:

Figure 2.3.2 -Figure 2.3.2 above is a reproduction of Figure 2.9 in the textbook, which describes the market for mineral resources across time. The downward-sloping line that crosses the equilibrium points is called:

Figure 2.5.5 -Refer to Figure 2.5.5 above. The textbook attributes the changes in the price of coffee in New York to:

If the actual price were below the equilibrium price in the market for bread, a:

When the government controls the price of a product, causing the market price to be above the free market equilibrium price,

Figure 2.1.1 -Refer to Figure 2.1.1 above. Starting from point A, how do the firms in the market react when the price of coffee increases from $6.00 to $7.50 per pound?

Figure 2.6.2 -When demand is written as Q = a - bP, and P* and Q* are the equilibrium values for price and quantity, which of the following is the value of the price elasticity of demand, E_D?

Figure 2.4.2 -Refer to Figure 2.4.2 above. Fill in the blanks. For any price higher than P, the quantity demanded , while for any price lower than P, the quantity demanded .