Question 1

If the demand for a product increases and the supply of the same product increases,the equilibrium price will increase.

Accepted Answer

A) True 
 B)False

Question 2

If the number of firms producing mouthwash increases and consumer preference for mouthwash increases,the equilibrium price of mouthwash will definitely increase.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following would shift the supply curve for MP3 players to the right?

Accepted Answer

A)  An increase in the price of a substitute in production. 
B)  An increase in consumer income (assuming that all MP3 players are normal goods). 
C)  A decrease in the number of firms that produce MP3 players. 
D)  A decrease in the price of an input used to produce MP3 players.

Question 4

A change in which variable will change the market demand for a product?

Accepted Answer

A)  The price of the product 
B)  Population 
C)  Technology 
D)  The prices of substitutes in production

Question 5

Suppose that when the price of raspberries increases,Lonnie increases his purchases of papayas.To Lonnie,

Accepted Answer

A)  raspberries and papayas are complements. 
B)  raspberries and papayas are inferior goods. 
C)  raspberries and papayas are normal goods. 
D)  raspberries and papayas are substitutes.

Question 6

Figure 3-8 
-Refer to Figure 3-8.The graph in this figure illustrates an initial competitive equilibrium in the market for apples at the intersection of D1 and S1 (point A) If the price of oranges, a substitute for apples, decreases and the wages of apple workers increase, how will the equilibrium point change?

Accepted Answer

A)  The equilibrium point will move from A to E. 
B)  The equilibrium point will move from A to B. 
C)  The equilibrium point will move from A to C. 
D)  The equilibrium will first move from A to B, then return to A.

Question 7

Draw a demand curve and label it D1.On the graph,illustrate an increase in demand and a decrease in demand,and label the curves D2 and D3,respectively.Starting on demand curve D1,explain the shift that would result from each of the following events:
a.an increase in income and the good is a normal good
b.an increase in income and the good is an inferior good
c.a decrease in the price of a substitute good
d.a decrease in the price of a complementary good
e.an increase in the taste for the good
f.a decrease in population
g.an increase in the expected future price of the good

Accepted Answer

The answer of Draw a demand curve and label it...

Question 8

Figure 3-8 
-Refer to Figure 3-8.The graph in this figure illustrates an initial competitive equilibrium in the market for apples 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 apples and a decrease in the price of oranges, a substitute for apples. 
B)  An increase in the wages of apple workers and an increase in the price of oranges, a substitute for apples. 
C)  An increase in the number of apple producers and a decrease in the number of apple trees as a result of disease. 
D)  A decrease in the wages of apple workers and an increase in the price of oranges, a substitute for apples.

Question 9

Figure 3-7 
-Refer to Figure 3-7.Assume that the graphs in this figure represent the demand and supply curves for used clothing,an inferior good.Which panel describes what happens in this market as a result of a decrease in income?

Accepted Answer

A)  Panel (a) 
B)  Panel (b) 
C)  Panel (c) 
D)  Panel (d)

Question 10

Figure 3-8 
-Refer to Figure 3-8.The graph in this figure illustrates an initial competitive equilibrium in the market for apples at the intersection of D1 and S1 (point A) If there is a shortage of apples how will the equilibrium point change?

Accepted Answer

A)  The equilibrium point will move from A to B. 
B)  The equilibrium point will move from A to C. 
C)  There will be no change in the equilibrium point. 
D)  The equilibrium point will move from A to E.

Question 11

Explain the endowment effect.

Accepted Answer

The answer of Explain the endowment effect....

Question 12

Behavioural economists examine choices that consumers make that are not economically rational.Economists generally assume that people are rational; that is,they weigh the benefits and costs of an action and choose an action only if the benefits outweigh the costs.Why do consumers not act rationally when the result is that they make themselves worse off?

Accepted Answer

The answer of Behavioural economists examine choices that consumers make...

Question 13

Figure 3-6 
-Refer to Figure 3-6.The figure above represents the market for canvas tote bags.Assume that the market price is $35.Which of the following statements is true?

Accepted Answer

A)  There is a surplus that will cause the price to decrease; quantity demanded will then increase and quantity supplied will decrease until the price equals $25. 
B)  There is a surplus that will cause the price to decrease; quantity supplied will then increase and quantity demanded will decrease until the price equals $25. 
C)  There will be a surplus that will cause the price to decrease; demand will then increase and supply will decrease until the price equals $25. 
D)  There is a surplus that will cause the price to increase; quantity demanded will then decrease and quantity supplied will increase until the price equals $25.

Question 14

All else being equal,the decrease in consumer preference predicted by Apple for its iPhone 5 would be represented by a

Accepted Answer

A)  shift of the supply curve for iPhones to the right. 
B)  shift of the supply curve for iPhones to the left. 
C)  shift of the demand curve for iPhones to the right. 
D)  shift of the demand curve for iPhones to the left.

Question 15

Figure 3-4 
-Refer to Figure 3-4.If the price is $10,

Accepted Answer

A)  there would be a surplus of 600 units. 
B)  there would be a shortage of 600 units. 
C)  there would be a surplus of 200 units. 
D)  there would be a shortage of 200 units.

Question 16

The income effect of a price change refers to the impact of a change in

Accepted Answer

A)  income on the price of a good. 
B)  demand when income changes. 
C)  the quantity demanded when income changes. 
D)  the price of a good on a consumer's purchasing power.

Question 17

Which of the following would cause an increase in the equilibrium price and an increase in the equilibrium quantity of watermelons?

Accepted Answer

A)  An increase in demand and an increase in supply. 
B)  An increase in supply. 
C)  An increase in supply and an increase in demand greater than the increase in supply. 
D)  A decrease in demand and an increase in supply.

Question 18

Standard economic theory asserts that sunk costs are irrelevant in making economic decisions,yet studies conducted by behavioural economists reveal that sunk costs often affect economic decisions.Which of the following could explain this observation?

Accepted Answer

A)  People measure the value of a good in terms of its purchase price. 
B)  Even though sunk costs cannot be recovered, they have been incurred and therefore should be treated as part of the product's value. 
C)  If consumers maximise their utility, it makes sense to consider the full purchase price of a product in their consumption decisions. 
D)  Sunk costs have a higher opportunity cost than costs that can be recovered.

Question 19

Figure 3-7 
-Refer to Figure 3-7.Assume that the graphs in this figure represent the demand and supply curves for women's clothing.Which panel best describes what happens in this market when the wages of seamstresses rise?

Accepted Answer

A)  Panel (a) 
B)  Panel (b) 
C)  Panel (c) 
D)  Panel (d)

Question 20

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.

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

If the demand for a product increases and the supply of the same product increases,the equilibrium price will increase.

If the number of firms producing mouthwash increases and consumer preference for mouthwash increases,the equilibrium price of mouthwash will definitely increase.

Which of the following would shift the supply curve for MP3 players to the right?

A change in which variable will change the market demand for a product?

Suppose that when the price of raspberries increases,Lonnie increases his purchases of papayas.To Lonnie,

Figure 3-8 -Refer to Figure 3-8.The graph in this figure illustrates an initial competitive equilibrium in the market for apples at the intersection of D₂ and S₁ (point C) Which of the following changes would cause the equilibrium to change to point B?

Figure 3-7 -Refer to Figure 3-7.Assume that the graphs in this figure represent the demand and supply curves for used clothing,an inferior good.Which panel describes what happens in this market as a result of a decrease in income?

Figure 3-8 -Refer to Figure 3-8.The graph in this figure illustrates an initial competitive equilibrium in the market for apples at the intersection of D₁ and S₁ (point A) If there is a shortage of apples how will the equilibrium point change?

Explain the endowment effect.

Figure 3-6 -Refer to Figure 3-6.The figure above represents the market for canvas tote bags.Assume that the market price is $35.Which of the following statements is true?

All else being equal,the decrease in consumer preference predicted by Apple for its iPhone 5 would be represented by a

Figure 3-4 -Refer to Figure 3-4.If the price is $10,

The income effect of a price change refers to the impact of a change in

Which of the following would cause an increase in the equilibrium price and an increase in the equilibrium quantity of watermelons?

Standard economic theory asserts that sunk costs are irrelevant in making economic decisions,yet studies conducted by behavioural economists reveal that sunk costs often affect economic decisions.Which of the following could explain this observation?

Figure 3-7 -Refer to Figure 3-7.Assume that the graphs in this figure represent the demand and supply curves for women's clothing.Which panel best describes what happens in this market when the wages of seamstresses rise?

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

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

If the demand for a product increases and the supply of the same product increases,the equilibrium price will increase.

If the number of firms producing mouthwash increases and consumer preference for mouthwash increases,the equilibrium price of mouthwash will definitely increase.

Which of the following would shift the supply curve for MP3 players to the right?

A change in which variable will change the market demand for a product?

Suppose that when the price of raspberries increases,Lonnie increases his purchases of papayas.To Lonnie,

Figure 3-8 -Refer to Figure 3-8.The graph in this figure illustrates an initial competitive equilibrium in the market for apples at the intersection of D2 and S1 (point C) Which of the following changes would cause the equilibrium to change to point B?

Figure 3-7 -Refer to Figure 3-7.Assume that the graphs in this figure represent the demand and supply curves for used clothing,an inferior good.Which panel describes what happens in this market as a result of a decrease in income?

Figure 3-8 -Refer to Figure 3-8.The graph in this figure illustrates an initial competitive equilibrium in the market for apples at the intersection of D1 and S1 (point A) If there is a shortage of apples how will the equilibrium point change?

Explain the endowment effect.

Figure 3-6 -Refer to Figure 3-6.The figure above represents the market for canvas tote bags.Assume that the market price is $35.Which of the following statements is true?

All else being equal,the decrease in consumer preference predicted by Apple for its iPhone 5 would be represented by a

Figure 3-4 -Refer to Figure 3-4.If the price is $10,

The income effect of a price change refers to the impact of a change in

Which of the following would cause an increase in the equilibrium price and an increase in the equilibrium quantity of watermelons?

Standard economic theory asserts that sunk costs are irrelevant in making economic decisions,yet studies conducted by behavioural economists reveal that sunk costs often affect economic decisions.Which of the following could explain this observation?

Figure 3-7 -Refer to Figure 3-7.Assume that the graphs in this figure represent the demand and supply curves for women's clothing.Which panel best describes what happens in this market when the wages of seamstresses rise?

Figure 3-1 -Refer to Figure 3-1.A decrease in the price of a substitute good 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 apples at the intersection of D₂ and S₁ (point C) Which of the following changes would cause the equilibrium to change to point B?

Figure 3-8 -Refer to Figure 3-8.The graph in this figure illustrates an initial competitive equilibrium in the market for apples at the intersection of D₁ and S₁ (point A) If there is a shortage of apples how will the equilibrium point change?