Question 1

Exhibit 4-9 The diagram below represents the market for butter.  Refer to Exhibit 4-9.If the current price of butter equals $2,you would expect to find:

Accepted Answer

A)  the market in equilibrium at 3,000 pounds per year. 
B)  the market in equilibrium at 8,000 pounds per year. 
C)  that the market is not in equilibrium, and that the quantity supplied is greater than the quantity demanded. 
D)  that the market is not in equilibrium, and that the quantity demanded is greater than the quantity supplied.

Question 2

When there is an excess quantity demanded of a product at the current price,then:

Accepted Answer

A)  the price will tend to fall. 
B)  the price will tend to rise. 
C)  the price must be above the equilibrium price. 
D)  producers will reduce output and sales will fall.

Question 3

If there is a decrease in demand

Accepted Answer

A)  firms would be willing to supply less of the good than before at each possible price. 
B)  buyers are willing to purchase less of the good than before at each possible price. 
C)  buyer's taste for the good has increased. 
D)  the price of the product has increased, causing consumers to buy less of the product.

Question 4

A leftward shift in supply could be caused by:

Accepted Answer

A)  an improvement in productive technology. 
B)  a decrease in income. 
C)  some firms leaving the industry. 
D)  a fall in the price of inputs to the industry.

Question 5

According to the substitution effect,an increase in the price of oranges will:

Accepted Answer

A)  cause consumers to consume fewer apples because more money is spent on oranges. 
B)  cause consumers to spend more on oranges because a higher price signals that oranges are better than apples. 
C)  cause consumers to replace some oranges with other fruit that is now relatively cheaper than oranges. 
D)  leave consumers with less money to spend on all goods.

Question 6

If the price of tennis rackets were to increase,we would expect:

Accepted Answer

A)  the demand for tennis balls to increase. 
B)  the demand for tennis balls to decrease. 
C)  the supply of tennis balls to increase, leading to a movement along the demand curve for tennis balls. 
D)  the supply of tennis balls to decrease.

Question 7

At the equilibrium price,the quantity of the good that buyers are willing and able to buy

Accepted Answer

A)  is greater than the quantity that sellers are willing and able to sell. 
B)  exactly equals the quantity that sellers are willing and able to sell. 
C)  is less than the quantity that sellers are willing and able to sell. 
D)  there is no scarcity.

Question 8

When a demand schedule is drawn in a graph:

Accepted Answer

A)  price is measured on the vertical axis. 
B)  quantity is measured on the horizontal axis. 
C)  other variables are held constant. 
D)  all of the above are correct.

Question 9

If watermelons are normal goods,the demand for them will rise as the income of consumers rises.

Accepted Answer

A) True 
 B)False

Question 10

According to the law of supply,when the price of a good increases we would predict that:

Accepted Answer

A)  less will be produced. 
B)  less will be consumed. 
C)  more will be produced. 
D)  more will be consumed.

Question 11

When a surplus exists in a market,sellers

Accepted Answer

A)  raise price, which increases quantity demanded and decreases quantity supplied, until the surplus is eliminated. 
B)  raise price, which decreases quantity demanded and increases quantity supplied, until the surplus is eliminated. 
C)  lower price, which increases quantity demanded and decreases quantity supplied, until the surplus is eliminated. 
D)  lower price, which decreases quantity demanded and increases quantity supplied, until the surplus is eliminated.

Question 12

Which of the following events would cause an upward movement along the demand curve for olives?

Accepted Answer

A)  The number of people who purchase olives decreases. 
B)  Consumer income decreases, and olives are a normal good. 
C)  The price of pickles decreases, and pickles are a substitute for olives. 
D)  The price of olives rises.

Question 13

When the price of corn falls,the market supply of wheat (which can be grown using the same land)is likely to increase.

Accepted Answer

A) True 
 B)False

Question 14

If the price of Good A increases and the demand for Good B increases as well,Goods A and B are most likely complements.

Accepted Answer

A) True 
 B)False

Question 15

Which of these statements best represents the law of demand?

Accepted Answer

A)  When buyers' tastes for a good increase, they buy more of the good. 
B)  When the size of the consumer population rises, buyers purchase more of most goods. 
C)  When the price of a good decreases, buyers purchase more of the good. 
D)  Changes in preferences lead to changes in demand.

Question 16

Which of the following relationships reflect the law of supply?

Accepted Answer

A)  QS => ? P 
B)  ¯ P => ¯ S 
C)  P => ? QS 
D)  ¯ P => ? QS

Question 17

If input prices fall,it will lower the cost of production,causing the supply curve to shift to the right.

Accepted Answer

A) True 
 B)False

Question 18

When a shortage exists in a market,sellers

Accepted Answer

A)  raise price, which increases quantity demanded and decreases quantity supplied until the shortage is eliminated. 
B)  raise price, which decreases quantity demanded and increases quantity supplied until the shortage is eliminated. 
C)  lower price, which increases quantity demanded and decreases quantity supplied until the shortage is eliminated. 
D)  lower price, which decreases quantity demanded and increases quantity supplied until the shortage is eliminated.

Question 19

Andy views beer and pizza as complements to one another.If the price of pizza decreases,economists would expect:

Accepted Answer

A)  Andy's demand for pizza to increase. 
B)  Andy's demand for pizza to decrease. 
C)  Andy's quantity of pizza demanded to decrease. 
D)  Andy's demand for beer to increase.

Question 20

If an increase in the price of Good X causes a decrease in the demand for Good Y,we can conclude that:

Accepted Answer

A)  Goods X and Y are complements. 
B)  Goods X and Y are substitutes. 
C)  Goods X and Y are normal goods. 
D)  the price of Good Y will increase.

Exam 4: Demand, Supply, and Market Equilibrium

Exhibit 4-9 The diagram below represents the market for butter. Refer to Exhibit 4-9.If the current price of butter equals $2,you would expect to find:

When there is an excess quantity demanded of a product at the current price,then:

If there is a decrease in demand

A leftward shift in supply could be caused by:

According to the substitution effect,an increase in the price of oranges will:

If the price of tennis rackets were to increase,we would expect:

At the equilibrium price,the quantity of the good that buyers are willing and able to buy

When a demand schedule is drawn in a graph:

If watermelons are normal goods,the demand for them will rise as the income of consumers rises.

According to the law of supply,when the price of a good increases we would predict that:

When a surplus exists in a market,sellers

Which of the following events would cause an upward movement along the demand curve for olives?

When the price of corn falls,the market supply of wheat (which can be grown using the same land)is likely to increase.

If the price of Good A increases and the demand for Good B increases as well,Goods A and B are most likely complements.

Which of these statements best represents the law of demand?

Which of the following relationships reflect the law of supply?

If input prices fall,it will lower the cost of production,causing the supply curve to shift to the right.

When a shortage exists in a market,sellers

Andy views beer and pizza as complements to one another.If the price of pizza decreases,economists would expect:

If an increase in the price of Good X causes a decrease in the demand for Good Y,we can conclude that: