Question 1

Use the following to answer questions: Table: Equilibrium Adjustment $$\begin{array} { c c c } 
\hline \text { Price } & \text { Quantity Demanded } & \text { Quantity Supplied } \
\hline \$ 10 & 100 & 160 \
8 & 120 & 145 \
6 & 130 & 130 \
4 & 140 & 115 \
2 & 150 & 100 \
\hline
\end{array}$$
-(Table: Equilibrium Adjustment) Refer to the table. The equilibrium price is:

Accepted Answer

A)  $2. 
B)  $4. 
C)  $6. 
D)  $8.

Question 2

Figure: Demand-Driven Price Change  Refer to the figure. When the demand curve shifts from D0 to D1, the equilibrium price rises to:

Accepted Answer

A)  $9 and the equilibrium quantity rises to 120. 
B)  $9 and the equilibrium quantity rises to 160. 
C)  $8 and the equilibrium quantity rises to 140. 
D)  $8 and the equilibrium quantity rises to 160.

Question 3

Higher gasoline prices have led to a decrease in the demand for large SUVs. Consequently, in the market for SUVs, economists are predicting:

Accepted Answer

A)  an increase in both the price and quantity of sales. 
B)  a decrease in both the price and quantity of sales. 
C)  an increase in price and a decrease in the quantity of sales. 
D)  a decrease in price and an increase in the quantity of sales.

Question 4

Technological advances have increased the supply of digital cameras. As a result the:

Accepted Answer

A)  demand for digital cameras will increase, putting downward pressure on the price of digital cameras. 
B)  quantity demanded for digital cameras will increase. 
C)  quantity supplied of digitals cameras will increase, putting downward pressure on the price of digital cameras. 
D)  demand and supply of digital cameras will both increase.

Question 5

An increase in demand and a decrease in supply occur in a market. What happens to the equilibrium price and quantity?

Accepted Answer

A)  The equilibrium price decreases; the change in the equilibrium quantity is uncertain. 
B)  The equilibrium price decreases; the equilibrium quantity increases. 
C)  The equilibrium price increases; the change in the equilibrium quantity is uncertain 
D)  The equilibrium price increases; the equilibrium quantity decreases.

Question 6

In free markets, shortages lead to:

Accepted Answer

A)  lower prices. 
B)  higher prices. 
C)  surpluses. 
D)  unexploited gains from trade.

Question 7

When the market price is above the equilibrium, the price will increase over time.

Accepted Answer

A) True 
 B)False

Question 8

Use the following to answer questions: Figure: Price and Quantity 3 
-(Figure: Price and Quantity 3) Which of the following statements is TRUE at a market's equilibrium price and quantity?
I. Consumer surplus plus producer surplus is maximized.
II. Goods are purchased by buyers who value them the most.
III. The lowest-cost producers manufacture the goods.
IV. The gains from trade are minimized.

Accepted Answer

A)  I and IV only 
B)  II and III only 
C)  I, II, and III only 
D)  I, II, III, and IV

Question 9

Imagine a free market in which at a price of $10, quantity supplied is 50 units and quantity demanded is 40 units. Equilibrium price in this market:

Accepted Answer

A)  is equal to $10. 
B)  is less than $10. 
C)  is greater than $10. 
D)  differs from $10 in an indeterminate direction.

Question 10

Lead, an input in the production of ammunition, increased in price from $0.60/lb in 2006 to over $1.50/lb in 2007. A possible explanation for this is that demand has increased faster than supply has increased.

Accepted Answer

A) True 
 B)False

Question 11

An increase in the price of granite would result in a decrease in the DEMAND for granite countertops.

Accepted Answer

A) True 
 B)False

Question 12

Figure: Basic Supply and Demand
M 
In a free market, as illustrated in the diagram, total gains from trade are greatest when:

Accepted Answer

A)  60 units are sold at a price of $2. 
B)  40 units are sold at a price of $3. 
C)  60 units are sold at a price of $4. 
D)  50 units are sold at a price of $3.

Question 13

Suppose that a market is characterized as follows: consumers are willing and able to purchase 100 units and sellers are willing and able to sell 70 units. Which of the following statements are true?

Accepted Answer

A)  There is a shortage of 30 units. 
B)  The market is in equilibrium. 
C)  The price in the market will decrease. 
D)  Quantity demanded will increase.

Question 14

What effect do computer chip sellers' expectations of falling chip prices in the coming months have on the current computer chip market?

Accepted Answer

A)  The supply of computer chips increases, pushing down the equilibrium price and quantity. 
B)  The supply of computer chips increases, pushing down the equilibrium price and increasing the equilibrium quantity. 
C)  The demand for computer chips increases, pushing down the equilibrium price and increasing the equilibrium quantity. 
D)  The demand for computer chips decreases, pushing down the equilibrium price and increasing the equilibrium quantity.

Question 15

Use the following to answer questions: Figure: Market Changes 
-(Figure: Market Changes) Refer to the figures. If these figures represent the market for blue jeans, which figure shows the effect of an increase in the price of denim, a raw material used to make jeans?

Accepted Answer

A)  Figure A 
B)  Figure B 
C)  Figure C 
D)  Figure D

Question 16

Which of the following would cause the current supply of iPods to increase?

Accepted Answer

A)  an economic boom, which increases the amount that people are willing to spend on personal electronics 
B)  a decrease in the price of songs on iTunes 
C)  producers expecting that the future price of iPods will decrease 
D)  an increase in the wages offered to technicians building iPods

Question 17

Use the following to answer questions: Table: Equilibrium Price, Quantity $$\begin{array} { c c c } 
\hline \boldsymbol { P } & \boldsymbol { Q } _ { \mathbf { d } } & \boldsymbol { Q } _ { \mathbf { s } } \
\hline \$ 10 & 50 & 30 \
12 & 45 & 35 \
14 & 40 & 40 \
16 & 35 & 45 \
18 & 30 & 50 \
\hline
\end{array}$$
-(Table: Equilibrium Price, Quantity) Refer to the table. The equilibrium P and Q are:

Accepted Answer

A)  $10 and 50. 
B)  $12 and 35. 
C)  $40 and 14. 
D)  $14 and 40.

Question 18

If the market price is above the equilibrium price, which of the following will occur?

Accepted Answer

A)  Quantity demanded will exceed quantity supplied and the market price will eventually fall. 
B)  Quantity demanded will exceed quantity supplied and the market price will eventually rise. 
C)  Quantity supplied will exceed quantity demanded and the market price will eventually fall. 
D)  Quantity supplied will exceed quantity demanded, and the market price will eventually rise.

Question 19

In the long run, will the market price for a good/service always equals the equilibrium price? Explain why or why not.

Accepted Answer

The answer of In the long run, will the market...

Question 20

In 1980 when Iraq attacked Iran, the price of oil _______ because of a(n) ______.

Accepted Answer

A)  increased; disruption in the supply of oil 
B)  increased; decrease in the demand for oil 
C)  fell; increased demand for oil 
D)  fell; increased quantity of oil supplied

Exam 4: Equilibrium: How Supply and Demand Determine Prices

Figure: Demand-Driven Price Change Refer to the figure. When the demand curve shifts from D₀ to D₁, the equilibrium price rises to:

Higher gasoline prices have led to a decrease in the demand for large SUVs. Consequently, in the market for SUVs, economists are predicting:

Technological advances have increased the supply of digital cameras. As a result the:

An increase in demand and a decrease in supply occur in a market. What happens to the equilibrium price and quantity?

In free markets, shortages lead to:

When the market price is above the equilibrium, the price will increase over time.

Imagine a free market in which at a price of $10, quantity supplied is 50 units and quantity demanded is 40 units. Equilibrium price in this market:

Lead, an input in the production of ammunition, increased in price from $0.60/lb in 2006 to over $1.50/lb in 2007. A possible explanation for this is that demand has increased faster than supply has increased.

An increase in the price of granite would result in a decrease in the DEMAND for granite countertops.

Figure: Basic Supply and Demand M In a free market, as illustrated in the diagram, total gains from trade are greatest when:

Suppose that a market is characterized as follows: consumers are willing and able to purchase 100 units and sellers are willing and able to sell 70 units. Which of the following statements are true?

What effect do computer chip sellers' expectations of falling chip prices in the coming months have on the current computer chip market?

Use the following to answer questions: Figure: Market Changes -(Figure: Market Changes) Refer to the figures. If these figures represent the market for blue jeans, which figure shows the effect of an increase in the price of denim, a raw material used to make jeans?

Which of the following would cause the current supply of iPods to increase?

If the market price is above the equilibrium price, which of the following will occur?

In the long run, will the market price for a good/service always equals the equilibrium price? Explain why or why not.

In 1980 when Iraq attacked Iran, the price of oil _ because of a(n) .