Question 1

An agricultural economist reports that corn prices are very high this year and that corn growers are earning substantial profits. He concludes that government action is needed to direct more farmers to grow corn. Is such action necessary? Why or why not?

Accepted Answer

No government action is necessary to dir...

Question 2

Figure 3-20 
Refer to Figure 3-20. At the equilibrium price, consumer surplus is

Accepted Answer

A)   $480.
B)   $640.
C)   $1,120.
D)   $1,280.

Question 3

Two students are walking by a department store window that has on display a $400 dress. The English major declares, "I want that dress but can't afford it." The economics major replies, "No, you don't." Explain the logic of this reply.

Accepted Answer

This is a version of the old economics j...

Question 4

The price of a good will tend to rise when

Accepted Answer

A)   there is excess demand for the good.
B)   there is excess supply of the good.
C)   demand for the good decreases.
D)   the supply of the good increases.

Question 5

Which of the following observations was made famous by Adam Smith in his book The Wealth of Nations?

Accepted Answer

A)   There is no such thing as a free lunch.
B)   People buy more when prices are low than when prices are high.
C)   No matter how much people earn, they tend to spend more than they earn.
D)   Households and firms interacting in markets are guided by an "invisible hand" that leads them to desirable market outcomes.

Question 6

A decrease in the supply of a good will

Accepted Answer

A)   decrease the demand for the good.
B)   cause the price of the good to fall.
C)   lead to an increase in the price of the good.
D)   increase the quantity of the good bought and sold.

Question 7

A decrease in the expected future price of a good will cause the current demand for the good to

Accepted Answer

A)   decrease, which is a shift to the left of the demand curve.
B)   decrease, which is a shift to the right of the demand curve.
C)   increase, which is a shift to the left of the demand curve.
D)   increase, which is a shift to the right of the demand curve.

Question 8

Figure 3-15 1? A)  BCE B)  ACF C)  ABED D)  DEF" class="answers-bank-image d-inline" rel="preload" >
Refer to Figure 3-15. Which area represents producer surplus when the price is P 1?

Accepted Answer

A)   BCE
B)   ACF
C)   ABED
D)   DEF

Question 9

Which of the following is necessary for the invisible hand of market prices to work properly?

Accepted Answer

A)   buyers and sellers who generally tend to disregard their own self-interest
B)   democratic political procedures and highly regulated markets
C)   price controls that restrict the movement of market prices
D)   competition and property rights that are well-defined and enforced

Question 10

When an unusually bad frost reduces the apple crop in Washington state, the price of canned apple juice may rise immediately in supermarkets, even though the juice on the shelves was made from last year's plentiful crop. The invisible hand theory tells us that the profit-seeking merchants who raise their prices in such situations

Accepted Answer

A)   are hurting the economy, since the juice now on the shelves was produced at a lower cost.
B)   are profiting by rationing the juice, which is now more scarce to the consumers willing to pay the most for the now more limited supply.
C)   are ignoring the motivating function of prices, which the invisible hand theory holds should be set according to the cost paid by the merchant.
D)   will not actually profit since they are ignoring a basic economic rule: Only raise prices when consumer demand increases.

Question 11

Which of the following would most likely cause the current demand for DVD players to fall?

Accepted Answer

A)   an increase in consumer income
B)   an increase in the price of DVD players
C)   an increase in the price of Blu-ray players, a substitute good
D)   the expectation that the price of DVD players will decrease sharply during the next six months

Question 12

Figure 3-22

Refer to Figure 3-22. Which of the four graphs represents the market for winter coats as we progress from winter to spring?

Accepted Answer

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

Question 13

Use the figure below to answer the following question(s) .
Figure 3-13

Refer to Figure 3-13. The market for margarine was initially in equilibrium at point e. Other things constant, a decrease in the price of butter, a close substitute for margarine, would likely move the equilibrium in this market toward point

Accepted Answer

A)   r.
B)   s.
C)   t.
D)   u.

Question 14

If air travel and bus travel are substitutes,

Accepted Answer

A)   an increase in the price of bus travel will decrease the demand for air travel.
B)   a decrease in the price of bus travel will decrease the demand for air travel.
C)   an increase in the price of bus travel will generally have no effect on the demand for air travel.
D)   an increase in the price of bus travel will shift the demand curve for air travel to the left.

Question 15

When Adam Smith said economic activity was directed by an "invisible hand," he was referring to the fact that

Accepted Answer

A)   competitive markets motivate altruistic individuals to pursue productive activities that only serve their private interests.
B)   when economic activity is directed by competitive markets, the actions of self-interested individuals will generally serve the public interest.
C)   invisible forces will lead to economic chaos unless wise central planning directs economic activity.
D)   scarcity is largely the result of invisible forces that would be eliminated if individuals were free to pursue their own self-interests.

Question 16

Use the figure below to answer the following question(s) .
Figure 3-14

Refer to Figure 3-14. The gasoline market was initially in equilibrium at point e. Other things constant, a decrease in the price of crude oil, an important ingredient used to produce gasoline, would likely move the equilibrium in this market toward point

Accepted Answer

A)   r.
B)   s.
C)   t.
D)   u.

Question 17

The law of demand refers to the

Accepted Answer

A)   decrease in price that can be expected as more units of a product are demanded.
B)   increase in price that results from an increase in demand for a good of limited supply.
C)   inverse relationship between the price of a good and the quantity demanded.
D)   increase in the quantity of a good available when its price increases.

Question 18

Suppose both the equilibrium price and quantity fall for a particular product. Which of the following best explains this situation?

Accepted Answer

A)   Supply and demand simultaneously increased and the shift in supply was greater than the shift in demand.
B)   Supply and demand simultaneously increased and the shift in supply was less than the shift in demand.
C)   Supply and demand simultaneously decreased and the shift in supply was greater than the shift in demand.
D)   Supply and demand simultaneously decreased and the shift in supply was less than the shift in demand.

Question 19

Figure 3-15 1? A)  BCE B)  ACF C)  ABED D)  DEF" class="answers-bank-image d-inline" rel="preload" >
Refer to Figure 3-15. Which area represents producer surplus when the price is P 1?

Accepted Answer

A)   BCE
B)   ACF
C)   ABED
D)   DEF

Question 20

An increase in supply will cause

Accepted Answer

A)   an increase in demand.
B)   a decrease in demand.
C)   an increase in quantity demanded.
D)   a decrease in quantity demanded.
E)   an increase in equilibrium price.

Exam 3: Demand, Supply, and the Market Process

Suppose both the equilibrium price and quantity fall for a particular product. Which of the following best explains this situation?

Correct Answer
verified

Two students are walking by a department store window that has on display a $400 dress. The English major declares, "I want that dress but can't afford it." The economics major replies, "No, you don't." Explain the logic of this reply.

Correct Answer
verified
This is a version of the old economics j...
View Answer

An increase in supply will cause

Correct Answer
verified

Which of the following would most likely cause the current demand for DVD players to fall?

Correct Answer
verified

When Adam Smith said economic activity was directed by an "invisible hand," he was referring to the fact that

Correct Answer
verified

Correct Answer
verified

Figure 3-22 Refer to Figure 3-22. Which of the four graphs represents the market for winter coats as we progress from winter to spring?

Correct Answer
verified

Which of the following is necessary for the invisible hand of market prices to work properly?

Correct Answer
verified

An agricultural economist reports that corn prices are very high this year and that corn growers are earning substantial profits. He concludes that government action is needed to direct more farmers to grow corn. Is such action necessary? Why or why not?

Correct Answer
verified
No government action is necessary to dir...
View Answer

A decrease in the expected future price of a good will cause the current demand for the good to

Correct Answer
verified

Figure 3-20 Refer to Figure 3-20. At the equilibrium price, consumer surplus is

Correct Answer
verified

Correct Answer
verified

Figure 3-15 Refer to Figure 3-15. Which area represents producer surplus when the price is P ₁?

Correct Answer
verified

If air travel and bus travel are substitutes,

Correct Answer
verified

Which of the following observations was made famous by Adam Smith in his book The Wealth of Nations?

Correct Answer
verified

The law of demand refers to the

Correct Answer
verified

Figure 3-15 Refer to Figure 3-15. Which area represents producer surplus when the price is P ₁?

Correct Answer
verified

The price of a good will tend to rise when

Correct Answer
verified

A decrease in the supply of a good will

Correct Answer
verified

Correct Answer
verified

Exam 3: Demand, Supply, and the Market Process

Suppose both the equilibrium price and quantity fall for a particular product. Which of the following best explains this situation?

Correct AnswerverifiedShow Answer

Two students are walking by a department store window that has on display a $400 dress. The English major declares, "I want that dress but can't afford it." The economics major replies, "No, you don't." Explain the logic of this reply.

Correct AnswerverifiedThis is a version of the old economics j...View AnswerShow Answer

An increase in supply will cause

Correct AnswerverifiedShow Answer

Which of the following would most likely cause the current demand for DVD players to fall?

Correct AnswerverifiedShow Answer

When Adam Smith said economic activity was directed by an "invisible hand," he was referring to the fact that

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Figure 3-22 Refer to Figure 3-22. Which of the four graphs represents the market for winter coats as we progress from winter to spring?

Correct AnswerverifiedShow Answer

Which of the following is necessary for the invisible hand of market prices to work properly?

Correct AnswerverifiedShow Answer

An agricultural economist reports that corn prices are very high this year and that corn growers are earning substantial profits. He concludes that government action is needed to direct more farmers to grow corn. Is such action necessary? Why or why not?

Correct AnswerverifiedNo government action is necessary to dir...View AnswerShow Answer

A decrease in the expected future price of a good will cause the current demand for the good to

Correct AnswerverifiedShow Answer

Figure 3-20 Refer to Figure 3-20. At the equilibrium price, consumer surplus is

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Figure 3-15 Refer to Figure 3-15. Which area represents producer surplus when the price is P 1?

Correct AnswerverifiedShow Answer

If air travel and bus travel are substitutes,

Correct AnswerverifiedShow Answer

Which of the following observations was made famous by Adam Smith in his book The Wealth of Nations?

Correct AnswerverifiedShow Answer

The law of demand refers to the

Correct AnswerverifiedShow Answer

Figure 3-15 Refer to Figure 3-15. Which area represents producer surplus when the price is P 1?

Correct AnswerverifiedShow Answer

The price of a good will tend to rise when

Correct AnswerverifiedShow Answer

A decrease in the supply of a good will

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified
This is a version of the old economics j...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
No government action is necessary to dir...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Figure 3-15 Refer to Figure 3-15. Which area represents producer surplus when the price is P ₁?

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Figure 3-15 Refer to Figure 3-15. Which area represents producer surplus when the price is P ₁?

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified