Question 1

Figure 3-2 
-Refer to Figure 3-2.A technological advancement 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 2

As the number of firms in a market decreases,the supply curve will shift to the left and the equilibrium price will fall.

Accepted Answer

A) True 
 B)False

Question 3

An decrease in supply is caused by a decrease in the price of the product.

Accepted Answer

A) True 
 B)False

Question 4

The demand for soft drinks in the United States has been ________ while the global demand has been ________.

Accepted Answer

A) increasing; increasing 
B) increasing; decreasing 
C) decreasing; increasing 
D) decreasing; decreasing

Question 5

If tablet computers are considered substitutes for e-readers,the increase in the price of tablet computers would,all else equal,

Accepted Answer

A) increase the demand for e-readers. 
B) decrease the demand for e-readers. 
C) increase the quantity of e-readers demanded. 
D) decrease the quantity of e-readers demanded.

Question 6

In each of the following situations,list what will happen to the equilibrium price and the equilibrium quantity for a particular product,which is an inferior good.
a.The population decreases and productivity increases
b.The income increases and the price of inputs increase
c.The number of firms in the market decreases and income decreases
d.Consumer preference decreases and the price of a complement increases
e.The price of a substitute in consumption increases and the price of a substitute in production increases

Accepted Answer

The answer of In each of the following situations,list what...

Question 7

Which of the following would cause both the equilibrium price and equilibrium quantity of oysters (assume that oysters are a normal good)to decrease?

Accepted Answer

A) an increase in consumer income 
B) an oil spill that sharply reduces oyster output 
C) a decrease in consumer income 
D) a technological advancement in the production of oysters

Question 8

Figure 3-4 
-Refer to Figure 3-4.At a price of $20,how many units will be sold?

Accepted Answer

A) 400 
B) 500 
C) 600 
D) 800

Question 9

Let D = demand,S = supply,P = equilibrium price,Q = equilibrium quantity.What happens in the market for solar panels if the government offers tax breaks to encourage manufacturers to produce more solar panels?

Accepted Answer

A) D increases,S no change,P and Q increase 
B) S increases,D no change,P decreases,Q increases 
C) D and S increase,P and Q decrease 
D) D no change,S increases,P decreases,Q decreases

Question 10

An increase in the demand for LED light bulbs due to changes in consumer tastes,accompanied by an increase in the supply of LED light bulbs as a result of government subsidies,will result in

Accepted Answer

A) an increase in the equilibrium quantity of LED light bulbs and no change in the equilibrium price. 
B) an increase in the equilibrium price of LED light bulbs and no change in the equilibrium quantity. 
C) an increase in the equilibrium price of LED light bulbs; the equilibrium quantity may increase or decrease. 
D) an increase in the equilibrium quantity of LED light bulbs; the equilibrium price may increase or decrease.

Question 11

A surplus occurs when the market price is lower than the equilibrium price.

Accepted Answer

A) True 
 B)False

Question 12

By drawing a demand curve with price on the vertical axis and quantity on the horizontal axis,economists assume that the most important determinant of the demand for a good is

Accepted Answer

A) consumer income. 
B) consumer tastes and preferences. 
C) the price of the good. 
D) the quality of the good.

Question 13

Table 3-2
 
-Refer to Table 3-2.The table above shows the demand schedules for cashews of two individuals (Jordy and Amy)and the rest of the market.At a price of $10,the quantity demanded in the market would be

Accepted Answer

A) 2 lbs. 
B) 48 lbs. 
C) 50 lbs 
D) 52 lbs.

Question 14

Suppose that when the price of pickles decreases,Teddy increases his purchase of ketchup.To Teddy,

Accepted Answer

A) pickles and ketchup are complements. 
B) pickles and ketchup and substitutes. 
C) pickles and ketchup are normal goods. 
D) pickles are a normal good and ketchup is an inferior good.

Question 15

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 demanded of prime rib. 
D) an increase in the quantity supplied of prime rib.

Question 16

Figure 3-5 
-Refer to Figure 3-5.At a price of $0,

Accepted Answer

A) there would be a surplus of 8 units. 
B) there would be a surplus of 0 units. 
C) there would be a shortage of 0 units. 
D) there would be a shortage of 8 units.

Question 17

Studies have shown that drinking one glass of red wine per day may help prevent heart disease.Assume this is true,and a fungal disease destroys a large portion of the grape harvest of California vineyards.In the market for red wine,these two developments would

Accepted Answer

A) increase demand and increase supply,resulting in an increase in the equilibrium quantity and a decrease in the equilibrium price of red wine. 
B) increase demand and decrease supply resulting in a decrease in both the equilibrium quantity and the equilibrium price of red wine. 
C) increase demand and decrease supply,resulting in an increase in the equilibrium price and an uncertain effect on the equilibrium quantity of red wine. 
D) increase demand and decrease supply,resulting in an increase in both the equilibrium price and the equilibrium quantity of red wine.

Question 18

If the price of beef jerky rises,the substitution effect due to the price change will cause

Accepted Answer

A) an increase in the demand for beef jerky. 
B) an increase in the demand for hot sauce,a complement for beef jerky. 
C) an increase in the quantity of beef jerky demanded. 
D) a decrease in the quantity of beef jerky demanded.

Question 19

George Gnat subscribes to a monthly pest control service for his home.Last week the owner of the service informed George that he will have to raise his monthly service fee because of increases in the price of gasoline used by his workers on their service trips.How is the market for pest control services affected by this?

Accepted Answer

A) There is an increase in the supply of pest control services. 
B) There is a decrease in the demand for pest control services. 
C) There is a decrease in the quantity supplied of pest control services. 
D) There is a decrease in the supply of pest control services.

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

Figure 3-2 -Refer to Figure 3-2.A technological advancement would be represented by a movement from

As the number of firms in a market decreases,the supply curve will shift to the left and the equilibrium price will fall.

An decrease in supply is caused by a decrease in the price of the product.

The demand for soft drinks in the United States has been while the global demand has been .

If tablet computers are considered substitutes for e-readers,the increase in the price of tablet computers would,all else equal,

Which of the following would cause both the equilibrium price and equilibrium quantity of oysters (assume that oysters are a normal good) to decrease?

Figure 3-4 -Refer to Figure 3-4.At a price of $20,how many units will be sold?

Let D = demand,S = supply,P = equilibrium price,Q = equilibrium quantity.What happens in the market for solar panels if the government offers tax breaks to encourage manufacturers to produce more solar panels?

An increase in the demand for LED light bulbs due to changes in consumer tastes,accompanied by an increase in the supply of LED light bulbs as a result of government subsidies,will result in

A surplus occurs when the market price is lower than the equilibrium price.

By drawing a demand curve with price on the vertical axis and quantity on the horizontal axis,economists assume that the most important determinant of the demand for a good is

Table 3-2 -Refer to Table 3-2.The table above shows the demand schedules for cashews of two individuals (Jordy and Amy) and the rest of the market.At a price of $10,the quantity demanded in the market would be

Suppose that when the price of pickles decreases,Teddy increases his purchase of ketchup.To Teddy,

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

Figure 3-5 -Refer to Figure 3-5.At a price of $0,

Studies have shown that drinking one glass of red wine per day may help prevent heart disease.Assume this is true,and a fungal disease destroys a large portion of the grape harvest of California vineyards.In the market for red wine,these two developments would

If the price of beef jerky rises,the substitution effect due to the price change will cause

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