Question 1

TABLE 3-1
 
-Refer to Table 3-1. It illustrates the demand schedules for gourmet ice cream of two individuals and the rest of the market. At $4, what would the quantity demanded in the market be?

Accepted Answer

A)   12
B)   22
C)   31
D)   39

Question 2

What are the five things that will shift a demand curve to the right?

Accepted Answer

• A decrease in the price of a complemen...

Question 3

What does an upward-sloping supply curve show?

Accepted Answer

A)   Suppliers expand production as the product price falls.
B)   Suppliers are willing to increase production of their goods if they receive higher prices for them.
C)   Buyers are willing to pay more for particularly scarce products.
D)   Buyers are willing to buy more as the product price falls.

Question 4

According to the substitution effect, what impact will an increase in the price of oranges have on consumers?

Accepted Answer

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

Question 5

A competitive market has many buyers and sellers, each with very little market power.

Accepted Answer

A) True 
 B)False

Question 6

If there are widespread press reports about the dangers of contracting "mad cow disease" by consuming beef from Canada, what is the likely economic effect on the U.S. demand curve for beef from Canada?

Accepted Answer

A)   no change
B)   a shift of the demand curve for beef to the right
C)   a movement down along the demand curve for beef to the right
D)   a shift of the demand curve for beef to the left

Question 7

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

Accepted Answer

A) True 
 B)False

Question 8

What is the difference between a change in demand and a change in quantity demanded?

Accepted Answer

A change in quantity demanded is caused ...

Question 9

If the demand for milk is downward sloping, then what will an increase in the price of milk result in?

Accepted Answer

A)   a decrease in the demand for milk
B)   an increase in the demand for milk
C)   an increase in the quantity of milk demanded
D)   a decrease in the quantity of milk demanded

Question 10

What do the income and substitution effects provide an explanation for?

Accepted Answer

A)   why the supply curve is vertical
B)   why the supply curve is horizontal
C)   why the demand curve is upward sloping
D)   why the demand curve is downward sloping

Question 11

A market demand curve is constructed by horizontally summing individual demand curves.

Accepted Answer

A) True 
 B)False

Question 12

Ceteris paribus, if the price of lumber increases, we would expect an increase in the supply of lumber.

Accepted Answer

A) True 
 B)False

Question 13

Why does the quantity of a good demanded decrease when its price increases?

Accepted Answer

A)   Complements become relatively cheaper when the price of a good increases.
B)   Consumer preferences change when the price of a good changes.
C)   The nominal income of consumers falls when the price of a good increases.
D)   Substitutes become relatively cheaper when the price of a good increases.

Question 14

Which of the following statements about the demand curve for a typical good is the most accurate?

Accepted Answer

A)   It has an inverse slope because as the price goes up, the good has more profitability.
B)   It has a negative slope because consumer incomes fall as the price of the good rises.
C)   It has a negative slope because some consumers switch to other goods as the price rises.
D)   It has a negative slope because the good has less "snob appeal" as its price falls.

Question 15

Roxanne considers movie tickets and DVD rentals to be substitute forms of entertainment. What will an increase in the price of a DVD rental likely result in for Roxanne?

Accepted Answer

A)   a decrease in her quantity of movie tickets demanded
B)   an increase in her demand for movie tickets
C)   an increase in her quantity of DVD rentals demanded
D)   a decrease in her supply of movie tickets

Question 16

What will occur in the market if producers expect the price of computers to fall in the near future?

Accepted Answer

A)   The supply of computers will rise in the future.
B)   The supply of computers will rise today.
C)   The quantity supplied of computers will rise today.
D)   The supply for computers will fall today.

Question 17

In a competitive market, how are prices determined?

Accepted Answer

A)   by the interaction of many buyers and many sellers
B)   by the interaction of many buyers with the largest seller
C)   by the government, who sets the prices that sellers can charge
D)   by the largest buyer, who sets the price that all firms sell at

Question 18

Ceteris paribus, which of the following statements describes a market when transportation costs are high relative to selling prices?

Accepted Answer

A)   There are numerous markets that are geographically limited.
B)   There are few markets that are geographically limited.
C)   There are numerous markets that are global in scope.
D)   There are few markets that are global in scope.

Question 19

What is the difference between a change in quantity supplied and a change in supply?

Accepted Answer

A)   A change in supply and a change in the quantity supplied are the same thing.
B)   A change in quantity supplied is a change in the amount people want to sell, while a change in supply is a change in the amount they actually sell.
C)   A change in quantity supplied is caused by a change in a good's own price, while a change in supply is caused by a change in some other variable, such as input prices, prices of related goods, expectations, or taxes.
D)   A change in supply is caused by a change in a good's own price, while a change in the quantity supplied is caused by a change in some other variable, such as input prices, prices of related goods, expectations, or taxes.

Question 20

Increasing government taxation or regulation of an industry generally increases the supply of goods.

Accepted Answer

A) True 
 B)False

Exam 3: Supply and Demand

What do the income and substitution effects provide an explanation for?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If the demand for milk is downward sloping, then what will an increase in the price of milk result in?

Correct AnswerverifiedShow Answer

What are the five things that will shift a demand curve to the right?

Correct Answerverified• A decrease in the price of a complemen...View AnswerShow Answer

TABLE 3-1 -Refer to Table 3-1. It illustrates the demand schedules for gourmet ice cream of two individuals and the rest of the market. At $4, what would the quantity demanded in the market be?

Correct AnswerverifiedShow Answer

According to the substitution effect, what impact will an increase in the price of oranges have on consumers?

Correct AnswerverifiedShow Answer

What is the difference between a change in quantity supplied and a change in supply?

Correct AnswerverifiedShow Answer

Increasing government taxation or regulation of an industry generally increases the supply of goods.

Correct AnswerverifiedShow Answer

What is the difference between a change in demand and a change in quantity demanded?

Correct AnswerverifiedA change in quantity demanded is caused ...View AnswerShow Answer

A market demand curve is constructed by horizontally summing individual demand curves.

Correct AnswerverifiedShow Answer

A competitive market has many buyers and sellers, each with very little market power.

Correct AnswerverifiedShow Answer

Why does the quantity of a good demanded decrease when its price increases?

Correct AnswerverifiedShow Answer

In a competitive market, how are prices determined?

Correct AnswerverifiedShow Answer

If there are widespread press reports about the dangers of contracting "mad cow disease" by consuming beef from Canada, what is the likely economic effect on the U.S. demand curve for beef from Canada?

Correct AnswerverifiedShow Answer

Which of the following statements about the demand curve for a typical good is the most accurate?

Correct AnswerverifiedShow Answer

Ceteris paribus, if the price of lumber increases, we would expect an increase in the supply of lumber.

Correct AnswerverifiedShow Answer

What does an upward-sloping supply curve show?

Correct AnswerverifiedShow Answer

Ceteris paribus, which of the following statements describes a market when transportation costs are high relative to selling prices?

Correct AnswerverifiedShow Answer

Roxanne considers movie tickets and DVD rentals to be substitute forms of entertainment. What will an increase in the price of a DVD rental likely result in for Roxanne?

Correct AnswerverifiedShow Answer

What will occur in the market if producers expect the price of computers to fall in the near future?

Correct AnswerverifiedShow Answer

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• A decrease in the price of a complemen...
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A change in quantity demanded is caused ...
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