Question 1

The income effect refers to the impact of a change in

Accepted Answer

A)   income on the price of a good
B)   the general price level caused by a change in the price of another good
C)   the price of a good on real income
D)   the price of a substitute for the good under consideration
E)   demand when income changesF) A) and E)
G) A) and D)

Question 2

Exhibit 4-4
 
-In Exhibit 4-4,suppose a price floor is established at $20.00.What is the result?

Accepted Answer

A)   a shortage of 10 units
B)   a surplus of 10 units
C)   a shortage of 20 units
D)   a surplus of 20 units
E)   there is no change from the situation that exists at the equilibrium priceF) A) and C)
G) A) and B)

Question 3

Tax preparation services and IRS tax publications can be considered substitutes.

Accepted Answer

A) True 
 B)False

Question 4

If the demand for bicycles increases,

Accepted Answer

A)   the quantity demanded decreases
B)   equilibrium price increases and equilibrium quantity decreases
C)   equilibrium price decreases and equilibrium quantity increases
D)   quantity supplied increases
E)   quantity supplied decreasesF) B) and E)
G) A) and C)

Question 5

If demand increases and supply decreases,

Accepted Answer

A)   equilibrium price will fall and equilibrium quantity will rise
B)   equilibrium price and quantity will both rise
C)   equilibrium quantity will rise;equilibrium price will either rise or fall
D)   equilibrium price will fall;equilibrium quantity will either rise or fall
E)   equilibrium price will rise;equilibrium quantity will either rise,fall,or remain unchangedF) None of the above
G) A) and C)

Question 6

Suppose a market is in equilibrium and then a price floor is established below the equilibrium price.Which of the following will happen?

Accepted Answer

A)   quantity demanded will increase
B)   a surplus will develop
C)   a shortage will develop
D)   the quantity sold will rise
E)   the market will remain in equilibriumF) B) and D)
G) A) and B)

Question 7

Exhibit 4-1
 
-If the price of the good described in Exhibit 4-1 is $1.20,then there is a

Accepted Answer

A)   shortage of 30 units
B)   surplus of 30 units
C)   shortage of 60 units
D)   surplus of 60 units
E)   surplus of 20 unitsF) B) and D)
G) C) and D)

Question 8

As the use of DVDs becomes more widespread,we would expect all of the following except one.Which is the exception?

Accepted Answer

A)   The prices of CDs will decrease.
B)   The demand curve for CD players will shift leftward.
C)   The supply curve of CD players will shift rightward.
D)   The demand curve for CDs will shift leftward.
E)   Firms will move their resources away from CD production to DVD production.F) A) and D)
G) B) and D)

Question 9

Which of the following statements about the substitution effect of a price change is true?

Accepted Answer

A)   It is caused by a change in relative prices.
B)   It affects the consumer's ability,rather than willingness,to purchase a good.
C)   It assumes that the consumer substitutes more expensive goods for cheaper ones when income increases.
D)   It is usually equal to the income effect.
E)   It may cause the consumer to buy less of the good when its price falls.F) C) and E)
G) A) and C)

Question 10

In what way is consumer demand different from consumer wants?

Accepted Answer

A)   Demand is only for necessities.
B)   Demand is only for luxuries.
C)   Demand takes into account the ability to pay.
D)   Consumer wants are only for luxuries.
E)   Consumer wants are only for necessities.F) D) and E)
G) All of the above

Question 11

The most important characteristic of the equilibrium price is that it

Accepted Answer

A)   guarantees that producers earn profit
B)   clears the market,leaving neither a surplus nor a shortage
C)   maximizes the quantity demanded
D)   minimizes the quantity demanded
E)   guarantees that all buyers who desire the product will get itF) None of the above
G) A) and B)

Question 12

Suppose the current equilibrium price of pizza is $5.If the government decides the price of pizza cannot rise above $4,the result of this policy would be

Accepted Answer

A)   a shortage
B)   a surplus
C)   that the market would remain in equilibrium but with a larger quantity bought and sold than at $5
D)   at the $4 price,the quantity sold would be greater than the quantity bought
E)   a shift of demand to the rightF) A) and B)
G) A) and E)

Question 13

Over the last few years,demand for DVDs has increased,and yet their equilibrium price has fallen.Which of the following best explains this situation?

Accepted Answer

A)   When the price falls,the quantity supplied increases.
B)   There has been a shortage of DVDs.
C)   The supply of DVDs must have decreased.
D)   The demand curve for DVDs slopes upward,so an increase in demand leads to a lower price.
E)   The supply of DVDs must have increased more than the demand for DVDs increased.F) A) and E)
G) B) and D)

Question 14

An increase in the number of producers of a good will

Accepted Answer

A)   increase the market supply because the price will rise
B)   increase the market supply only if market demand increases too
C)   increase the market supply because market supply is the sum of all individual supply curves
D)   increase the market supply only if all suppliers have an identical supply curves
E)   decrease the market supply because firms compete with each other and each firm will supply moreF) None of the above
G) B) and E)

Question 15

In the market for chewing gum,the current price is 50 cents per pack and 100,000 packs are sold.Which of the following events would lead to a new equilibrium price of 60 cents and quantity of 90,000 packs?

Accepted Answer

A)   an increase in the price of other kinds of candy
B)   an increase in the price of the ingredients used to make chewing gum
C)   a decrease in the number of young people in the population
D)   an agreement by workers in the chewing gum industry to work for lower wages
E)   an increase in incomeF) D) and E)
G) B) and E)

Question 16

Exhibit 4-15
 
-In Exhibit 4-15 representing the market for cookies,a shift in the supply curve from S' to S can be determined by:

Accepted Answer

A)   An increase in the price of cookies
B)   An increase in the price of alternative goods
C)   A decrease in the price of cookies
D)   An increase in the price of relevant resources
E)   An increase in the number of producersF) B) and C)
G) None of the above

Question 17

Supply curves generally slope upward because of all of the following reasons except one.Which is the exception?

Accepted Answer

A)   Producers are willing to offer more of a good at higher prices.
B)   A higher price attracts resources from less-valued uses.
C)   Producers must be compensated for the rising opportunity cost of additional output.
D)   Producers have a greater incentive to sell more as the price increases.
E)   The price of a good usually must fall to induce an increase in quantity supplied.F) All of the above
G) B) and E)

Question 18

A decrease in demand for a good could mean that

Accepted Answer

A)   consumers are willing to pay a higher price for each quantity of the good
B)   consumers are willing to buy larger quantities of the good at each price
C)   the demand curve has undergone a parallel shift to the right
D)   the demand curve has undergone a nonparallel shift to the right
E)   the demand curve has shifted to the leftF) A) and B)
G) A) and C)

Question 19

If both supply and demand increase,then the change in equilibrium quantity is indeterminate.

Accepted Answer

A) True 
 B)False

Question 20

What is the effect of a reduction in the price of steel on the equilibrium price and quantity of automobiles?

Accepted Answer

A)   Both equilibrium price and equilibrium quantity rise.
B)   Both equilibrium price and equilibrium quantity fall.
C)   Equilibrium price rises and equilibrium quantity falls.
D)   Equilibrium price falls and equilibrium quantity rises.
E)   Both equilibrium price and equilibrium quantity remain unchanged.F) All of the above
G) A) and E)

Exam 4: Demand, supply, and Markets

If the demand for bicycles increases,

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What is the effect of a reduction in the price of steel on the equilibrium price and quantity of automobiles?

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The most important characteristic of the equilibrium price is that it

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In the market for chewing gum,the current price is 50 cents per pack and 100,000 packs are sold.Which of the following events would lead to a new equilibrium price of 60 cents and quantity of 90,000 packs?

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Exhibit 4-4 -In Exhibit 4-4,suppose a price floor is established at $20.00.What is the result?

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Tax preparation services and IRS tax publications can be considered substitutes.

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A decrease in demand for a good could mean that

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Suppose a market is in equilibrium and then a price floor is established below the equilibrium price.Which of the following will happen?

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Suppose the current equilibrium price of pizza is $5.If the government decides the price of pizza cannot rise above $4,the result of this policy would be

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Exhibit 4-15 -In Exhibit 4-15 representing the market for cookies,a shift in the supply curve from S' to S can be determined by:

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An increase in the number of producers of a good will

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As the use of DVDs becomes more widespread,we would expect all of the following except one.Which is the exception?

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Exhibit 4-1 -If the price of the good described in Exhibit 4-1 is $1.20,then there is a

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Over the last few years,demand for DVDs has increased,and yet their equilibrium price has fallen.Which of the following best explains this situation?

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If demand increases and supply decreases,

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Which of the following statements about the substitution effect of a price change is true?

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Supply curves generally slope upward because of all of the following reasons except one.Which is the exception?

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In what way is consumer demand different from consumer wants?

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The income effect refers to the impact of a change in

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If both supply and demand increase,then the change in equilibrium quantity is indeterminate.

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