Question 1

An increase in the quantity of a product supplied is caused by an increase in the price of the product.

Accepted Answer

A) True 
 B)False

Question 2

As the number of firms in a market increases, the supply curve will shift to the right and the equilibrium quantity will rise.

Accepted Answer

A) True 
 B)False

Question 3

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.

Question 4

Figure 3-1 
-Refer to Figure 3-1. If the product represented is an inferior good, a decrease in income would be represented by a movement from

Accepted Answer

A)  A to B. 
B)  B to A. 
C)  D1 to D2. 
D)  D2 to D1.

Question 5

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 D2 and S1 (point C). Which of the following changes would cause the equilibrium to change to point B?

Accepted Answer

A)  a positive change in the technology used to produce motorcycles and decrease in the price of motorcycle insurance, a complement to motorcycles 
B)  an increase in the wages of motorcycle workers and a decrease in the price of motorcycle insurance, a complement to motorcycles 
C)  an increase in the number of motorcycle producers and an increase in the number of consumers who prefer riding motorcycles 
D)  an increase in the wages of motorcycle workers and an increase in the price of motorcycle insurance, a complement to motorcycles

Question 6

If the price of prime rib falls, the income effect due to the price change will cause

Accepted Answer

A)  an increase in the demand for prime rib. 
B)  an increase in the demand for flank steak, a substitute for prime rib. 
C)  an increase in the quantity of prime rib demanded. 
D)  an increase in the quantity of prime rib supplied.

Question 7

If, in response to an increase in the price of pineapples, the quantity of pineapples demanded decreases, then economists would describe this as

Accepted Answer

A)  an decrease in demand. 
B)  a decrease in quantity demanded. 
C)  a change in consumer income. 
D)  a decrease in consumers' taste for pineapples.

Question 8

Figure 3-2 
-Refer to Figure 3-2. A decrease in the number of firms in the market 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.

Question 9

Assume that the demand curve for MP3 players shifts to the right and the supply curve for MP3 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 MP3 players will decrease. 
B)  the equilibrium price of MP3 players will decrease; the equilibrium quantity will increase. 
C)  the equilibrium price of MP3 players may increase or decrease; the equilibrium quantity will decrease. 
D)  the equilibrium price of MP3 players will increase; the equilibrium quantity will decrease.

Question 10

According to the Australian Wool Innovation, severe drought conditions in Australia contributed to the lowest level of wool production in 50 years. This record low production has driven up prices sharply in Australian wool markets. Meanwhile, the price of raw cotton increased significantly for the first time in many years.
a. Illustrate this observation with one demand and supply graph for the market for Australian wool and another demand and supply graph for raw cotton.
b. Make sure that your graphs clearly show (1) the initial equilibrium before the decrease in the supply of Australian wool and (2) the final equilibrium.
c. Use arrows to indicate any shifts in the demand and supply curves for each market.
d. Label your graphs fully and write an explanation of your work.

Accepted Answer

The answer of According to the Australian Wool Innovation, severe...

Question 11

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 12

Ranchers can raise either cattle or sheep on their land. Which of the following would cause the supply of sheep to increase?

Accepted Answer

A)  an increase in the price of sheep 
B)  a decrease in the price of cattle 
C)  an increase in the demand for cattle 
D)  an increase in the price of sheep feed

Question 13

Figure 3-1 
-Refer to Figure 3-1. A decrease in the expected future price of the product would be represented by a movement from

Accepted Answer

A)  A to B. 
B)  B to A. 
C)  D1 to D2. 
D)  D2 to D1.

Question 14

It is possible for a market for a good to experience a surplus and a shortage at the same time.

Accepted Answer

A) True 
 B)False

Question 15

Figure 3-1 
-Refer to Figure 3-1. A decrease in the price of a substitute good would be represented by a movement from

Accepted Answer

A)  A to B. 
B)  B to A. 
C)  D1 to D2. 
D)  D2 to D1.

Question 16

If in the market for apples the supply has decreased, then

Accepted Answer

A)  the supply curve for apples has shifted to the right. 
B)  there has been a movement upwards along the supply curve for apples. 
C)  the supply curve for apples has shifted to the left. 
D)  there has been a movement downwards along the supply curve for apples.

Question 17

What is the ceteris paribus condition?

Accepted Answer

The answer of What is the ceteris paribus condition?...

Question 18

Which of the following is evidence of a surplus of bananas?

Accepted Answer

A)  Firms raise the price of bananas. 
B)  The price of bananas is lowered in order to increase sales. 
C)  The equilibrium price of bananas rises due to an increase in demand. 
D)  The quantity of bananas demanded is greater than the quantity supplied.

Question 19

Table 3-3
 
-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 rises from $4 to $5, the market quantity demanded would

Accepted Answer

A)  decrease by 35 lbs. 
B)  increase by 115 lbs. 
C)  increase by 35 lbs. 
D)  decrease by 115 lbs.

Question 20

The substitution effect explains why there is an inverse relationship between the price of a product and the quantity of the product demanded.

Accepted Answer

A) True 
 B)False

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

An increase in the quantity of a product supplied is caused by an increase in the price of the product.

As the number of firms in a market increases, the supply curve will shift to the right and the equilibrium quantity will rise.

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?

Figure 3-1 -Refer to Figure 3-1. If the product represented is an inferior good, a decrease in income would be represented by a movement from

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 D₂ and S₁ (point C) . Which of the following changes would cause the equilibrium to change to point B?

If the price of prime rib falls, the income effect due to the price change will cause

If, in response to an increase in the price of pineapples, the quantity of pineapples demanded decreases, then economists would describe this as

Figure 3-2 -Refer to Figure 3-2. A decrease in the number of firms in the market would be represented by a movement from

Assume that the demand curve for MP3 players shifts to the right and the supply curve for MP3 players shift to the left, but the supply curve shifts more than the demand curve. As a result

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

Ranchers can raise either cattle or sheep on their land. Which of the following would cause the supply of sheep to increase?

Figure 3-1 -Refer to Figure 3-1. A decrease in the expected future price of the product would be represented by a movement from

It is possible for a market for a good to experience a surplus and a shortage at the same time.

Figure 3-1 -Refer to Figure 3-1. A decrease in the price of a substitute good would be represented by a movement from

If in the market for apples the supply has decreased, then

What is the ceteris paribus condition?

Which of the following is evidence of a surplus of bananas?

Table 3-3 -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 rises from $4 to $5, the market quantity demanded would

The substitution effect explains why there is an inverse relationship between the price of a product and the quantity of the product demanded.

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

An increase in the quantity of a product supplied is caused by an increase in the price of the product.

As the number of firms in a market increases, the supply curve will shift to the right and the equilibrium quantity will rise.

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?

Figure 3-1 -Refer to Figure 3-1. If the product represented is an inferior good, a decrease in income would be represented by a movement from

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 D2 and S1 (point C) . Which of the following changes would cause the equilibrium to change to point B?

If the price of prime rib falls, the income effect due to the price change will cause

If, in response to an increase in the price of pineapples, the quantity of pineapples demanded decreases, then economists would describe this as

Figure 3-2 -Refer to Figure 3-2. A decrease in the number of firms in the market would be represented by a movement from

Assume that the demand curve for MP3 players shifts to the right and the supply curve for MP3 players shift to the left, but the supply curve shifts more than the demand curve. As a result

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

Ranchers can raise either cattle or sheep on their land. Which of the following would cause the supply of sheep to increase?

Figure 3-1 -Refer to Figure 3-1. A decrease in the expected future price of the product would be represented by a movement from

It is possible for a market for a good to experience a surplus and a shortage at the same time.

Figure 3-1 -Refer to Figure 3-1. A decrease in the price of a substitute good would be represented by a movement from

If in the market for apples the supply has decreased, then

What is the ceteris paribus condition?

Which of the following is evidence of a surplus of bananas?

Table 3-3 -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 rises from $4 to $5, the market quantity demanded would

The substitution effect explains why there is an inverse relationship between the price of a product and the quantity of the product demanded.

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 D₂ and S₁ (point C) . Which of the following changes would cause the equilibrium to change to point B?