Question 1

What combination of changes would most likely decrease the equilibrium quantity?

Accepted Answer

A)  when supply increases and demand decreases
B)  when demand increases and supply decreases
C)  when demand decreases and supply decreases
D)  when supply increases and demand increases

Question 2

A price fixed below the equilibrium price of a product will cause a shortage of that product.

Accepted Answer

A) True 
 B)False

Question 3

When economists say that the demand for a product has increased, they mean that:

Accepted Answer

A)  consumers are now willing to purchase more of this product at each possible price.
B)  the product has become particularly scarce for some reason.
C)  the product price has fallen and as a consequence consumers are buying a larger quantity of the product.
D)  the demand curve has shifted to the left.

Question 4

Immigration to Canada from many parts of the world has increased the demand for a whole range of ethnic goods and services, particularly in:

Accepted Answer

A)  Southern Ontario and British Columbia.
B)  Alberta and Quebec.
C)  Newfoundland and Nova Scotia.
D)  New Brunswick and Quebec.

Question 5

If the supply of a product decreases and demand increases, the equilibrium price and quantity will increase.

Accepted Answer

A) True 
 B)False

Question 6

The demand for commodity X is represented by the equation P = 10 - 0.2Q and supply by the equation P = 2 + 0.2Q.Refer to the above information.After the change in demand, the new equilibrium price is:

Accepted Answer

A)  $2
B)  $4
C)  $6
D)  $7

Question 7

Which diagram above illustrates the effects on the peanut butter market as a result of a higher wage rate for peanut workers?

Accepted Answer

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

Question 8

If the supply and demand curves for a product both decrease, we can say that equilibrium:

Accepted Answer

A)  quantity must fall and equilibrium price must rise.
B)  price must fall, but equilibrium quantity may either rise, fall, or remain unchanged.
C)  quantity must decline, but equilibrium price may either rise, fall, or remain unchanged.
D)  quantity and equilibrium price must both decline.

Question 9

If two goods are close substitutes:

Accepted Answer

A)  consumers will always buy the one that has the highest price.
B)  a fall in the price of one will decrease the demand for the other.
C)  an increase in the price of one causes the demand for the other to decrease.
D)  a decrease in the price of one causes an increase in the demand for the other.

Question 10

When the price of a product falls, the purchasing power of our money income rises and thus permits us to purchase more of the product.This statement describes:

Accepted Answer

A)  an inferior good.
B)  the rationing function of prices.
C)  the substitution effect.
D)  the income effect.

Question 11

What is the likely effect on the market for wine of a simultaneous increase in both consumer incomes and producer taxes on wine?

Accepted Answer

A)  an increase in both price and quantity
B)  an increase in price and a decrease in output
C)  a decrease in price and an indeterminate effect on quantity
D)  an increase in price and an indeterminate effect on quantity

Question 12

Refer to the diagram, which shows demand and supply conditions in the competitive market for product X.A shift in the demand curve from D0 to D1 might be caused by a(n) : 0 to D1 might be caused by a(n) :   A) decrease in income if X is an inferior good. B) increase in the price of complementary good Y. C) increase in money incomes if X is a normal good. D) increase in the price of substitute product Y." class="answers-bank-image d-inline" rel="preload" >

Accepted Answer

A)  decrease in income if X is an inferior good.
B)  increase in the price of complementary good Y.
C)  increase in money incomes if X is a normal good.
D)  increase in the price of substitute product Y.

Question 13

A headline reads "Lumber Prices Up Sharply." In a competitive market, this situation would lead to a(n) :

Accepted Answer

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

Question 14

If an effective ceiling price is placed on gasoline then:

Accepted Answer

A)  the quantity demanded will exceed the quantity supplied.
B)  the ceiling price will be below the equilibrium price.
C)  the federal government must establish some formal system for rationing it to consumers.
D)  all of the above are likely outcomes.

Question 15

The minimum wage imposes a legal floor under the wage of the least skilled worker.

Accepted Answer

A) True 
 B)False

Question 16

If an increase in consumer incomes causes the demand curve for product Z to shift to the left, then it can be said that product Z is a(n) :

Accepted Answer

A)  normal good.
B)  luxury good.
C)  inferior good.
D)  inexpensive good.

Question 17

Graphically, the market supply curve is:

Accepted Answer

A)  steeper than any individual producer's supply curve which comprises it.
B)  greater than the sum of the individual producers' supply curves.
C)  the horizontal sum of individual producers' supply curves.
D)  the vertical sum of individual producers' supply curves.

Question 18

On a graph, an increase in quantity demanded is represented by a:

Accepted Answer

A)  leftward shift of the demand curve.
B)  rightward shift of the demand curve.
C)  movement upward and to the left along the demand curve.
D)  movement downward and to the right along the demand curve.

Question 19

Superstar rock singers may set concert ticket prices below the equilibrium level because:

Accepted Answer

A)  it is too costly to estimate the equilibrium price.
B)  equilibrium ticket prices would be illegal.
C)  it lowers their gross income which has consequent tax advantages.
D)  the behaviour of fans in attempting to get tickets generates publicity and sold-out concerts promote record sales.

Question 20

If peanut butter and grape jelly are complementary products, which diagram above illustrates the effect on the peanut butter market as a result of a decrease in the price of grape jelly?

Accepted Answer

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

Exam 3: Part B: Demand, Supply, and Market Equilibrium

On a graph, an increase in quantity demanded is represented by a:

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If an effective ceiling price is placed on gasoline then:

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Immigration to Canada from many parts of the world has increased the demand for a whole range of ethnic goods and services, particularly in:

Correct AnswerverifiedShow Answer

When the price of a product falls, the purchasing power of our money income rises and thus permits us to purchase more of the product.This statement describes:

Correct AnswerverifiedShow Answer

A price fixed below the equilibrium price of a product will cause a shortage of that product.

Correct AnswerverifiedShow Answer

A headline reads "Lumber Prices Up Sharply." In a competitive market, this situation would lead to a(n) :

Correct AnswerverifiedShow Answer

Graphically, the market supply curve is:

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If two goods are close substitutes:

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Superstar rock singers may set concert ticket prices below the equilibrium level because:

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What combination of changes would most likely decrease the equilibrium quantity?

Correct AnswerverifiedShow Answer

What is the likely effect on the market for wine of a simultaneous increase in both consumer incomes and producer taxes on wine?

Correct AnswerverifiedShow Answer

If peanut butter and grape jelly are complementary products, which diagram above illustrates the effect on the peanut butter market as a result of a decrease in the price of grape jelly?

Correct AnswerverifiedShow Answer

When economists say that the demand for a product has increased, they mean that:

Correct AnswerverifiedShow Answer

The demand for commodity X is represented by the equation P = 10 - 0.2Q and supply by the equation P = 2 + 0.2Q.Refer to the above information.After the change in demand, the new equilibrium price is:

Correct AnswerverifiedShow Answer

If the supply of a product decreases and demand increases, the equilibrium price and quantity will increase.

Correct AnswerverifiedShow Answer

If an increase in consumer incomes causes the demand curve for product Z to shift to the left, then it can be said that product Z is a(n) :

Correct AnswerverifiedShow Answer

Refer to the diagram, which shows demand and supply conditions in the competitive market for product X.A shift in the demand curve from D0 to D1 might be caused by a(n) :

Correct AnswerverifiedShow Answer

Which diagram above illustrates the effects on the peanut butter market as a result of a higher wage rate for peanut workers?

Correct AnswerverifiedShow Answer

If the supply and demand curves for a product both decrease, we can say that equilibrium:

Correct AnswerverifiedShow Answer

The minimum wage imposes a legal floor under the wage of the least skilled worker.

Correct AnswerverifiedShow Answer

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Refer to the diagram, which shows demand and supply conditions in the competitive market for product X.A shift in the demand curve from D₀ to D₁ might be caused by a(n) :

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