Question 1

Suppose that the equilibrium price of rice falls and the equilibrium quantity falls.Which of the following best fits the observed data?

Accepted Answer

A)   An increase in demand with supply constant.
B)   An increase in demand coupled with a decrease in supply.
C)   An increase in demand coupled with an increase in supply.
D)   A decrease in demand with supply constant.

Question 2

When a market is not in equilibrium:

Accepted Answer

A)   government intervention is required to achieve equilibrium.
B)   firms will increase contributions to political action committees.
C)   the economic motives of sellers and buyers will move the market to its equilibrium.
D)   it will simply stay in a state of disequilibrium.

Question 3

Suppose that the technology used to manufacture laptops has improved.The likely result would be:

Accepted Answer

A)   an increase in supply of laptops.
B)   an increase in quantity supplied of laptops.
C)   a decrease in supply of laptops.
D)   a decrease in quantity supplied of laptops.

Question 4

Assume both the demand and the supply of bagels increase.Which of the following outcomes is certain to occur?

Accepted Answer

A)   The equilibrium price of bagels will rise.
B)   The equilibrium quantity of bagels will rise.
C)   The equilibrium price of bagels will fall.
D)   The equilibrium quantity of bagels will fall.

Question 5

A movement along a demand curve from one price-quantity combination to another is called:

Accepted Answer

A)   a change in quantity demanded.
B)   a shift in the demand curve.
C)   a change in demand.
D)   a change in quantity supplied.

Question 6

"Holding all other relevant factors constant,consumers will purchase more of a good as the price falls." This statement reflects the behavior underlying:

Accepted Answer

A)   the demand curve.
B)   an increase in demand.
C)   the supply curve.
D)   a decrease in the demand curve.

Question 7

A seller's reservation price is generally equal to:

Accepted Answer

A)   the buyer's reservation price.
B)   the seller's opportunity cost.
C)   the seller's marginal benefit.
D)   the market price.

Question 8

Suppose one observes that when the price of peanut butter increases,the demand for jelly increases.One must conclude that:

Accepted Answer

A)   peanut butter and jelly are complements.
B)   peanut butter and jelly are substitutes.
C)   peanut butter and jelly are normal goods.
D)   peanut butter and jelly are inferior goods.

Question 9

One reason for the ________ slope of the demand curve is that as prices fall ________.

Accepted Answer

A)   upward;people expect goods to be of lower quality.
B)   upward;more people purchase the good.
C)   downward;more people find that the price is less than their reservation price.
D)   downward;fewer people find that the price equals their reservation price.

Question 10

The supply curve illustrates that firms:

Accepted Answer

A)   increase the supply of a good when its price rises.
B)   increase the quantity supplied of a good when its price rises.
C)   decrease the quantity supplied of a good when input prices fall.
D)   decrease the quantity supplied to earn higher profits.

Question 11

When a slice of pizza at the student union sold for $2,Moe did not purchase any.When the price fell to $1.75,Moe purchased a slice each day for lunch.Moe's reservation price for a slice of pizza must be:

Accepted Answer

A)   less than $1.75.
B)   at least $1.75 but less than $2.
C)   exactly $1.75.
D)   exactly $2.00.

Question 12

The equilibrium price and quantity of any good or service is established by:

Accepted Answer

A)   only demanders.
B)   only suppliers.
C)   government regulations.
D)   both demanders and suppliers.

Question 13

When the supply of a good decreases,consumers will eventually:

Accepted Answer

A)   decrease their demand.
B)   increase their preferences for the good.
C)   decrease their quantity demanded.
D)   increase their quantity demanded.

Question 14

As the price of a good rises:

Accepted Answer

A)   firms earn larger profits.
B)   more firms can cover their opportunity costs of producing the good.
C)   firms find they can raise price by even more.
D)   government regulation becomes more justified.

Question 15

Suppose one knows two facts: first,the market for prescription drugs experiences chronic shortages and second,government sets the price for prescription drugs.One can conclude that the:

Accepted Answer

A)   government has set the price too high.
B)   government has set the price above the equilibrium price.
C)   buyers are hoarding prescription drugs.
D)   government has set the price below the equilibrium price.

Question 16

If both supply and demand decrease simultaneously,the new equilibrium price is ___________ and the new equilibrium quantity is _________________.

Accepted Answer

A)   lower;lower
B)   lower;indeterminate
C)   indeterminate;higher
D)   indeterminate;lower

Question 17

In order to understand how the price of a good is determined in the free market,one must account for the desires of:

Accepted Answer

A)   purchasers exclusively.
B)   sellers exclusively.
C)   governmental agencies exclusively.
D)   purchasers and sellers.

Question 18

In Cuba,a bureaucratic committee makes the production decisions for the country's firms and factories.Therefore,Cuba is an example of a:

Accepted Answer

A)   centralized economy.
B)   capitalist economy.
C)   mixed economy.
D)   pure free-market economy.

Question 19

In a free market,if the price of a good is below the equilibrium price,then;

Accepted Answer

A)   government needs to set a higher price.
B)   suppliers,dissatisfied with growing inventories,will raise the price.
C)   demanders,to acquire the good,will bid the price higher.
D)   suppliers,dissatisfied with growing inventories,will lower the price.

Question 20

The situation described in the book as "Smart for One,Dumb for All" occurs when:

Accepted Answer

A)   individuals,when acting rationally,benefit society as a whole.
B)   individuals make better decisions when acting alone than when in groups.
C)   individuals,when acting rationally,fail to take advantage of all opportunities for social benefit.
D)   a market is in equilibrium.

Exam 3: Supply and Demand

When a slice of pizza at the student union sold for $2,Moe did not purchase any.When the price fell to $1.75,Moe purchased a slice each day for lunch.Moe's reservation price for a slice of pizza must be:

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Suppose one knows two facts: first,the market for prescription drugs experiences chronic shortages and second,government sets the price for prescription drugs.One can conclude that the:

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Suppose one observes that when the price of peanut butter increases,the demand for jelly increases.One must conclude that:

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The situation described in the book as "Smart for One,Dumb for All" occurs when:

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Suppose that the technology used to manufacture laptops has improved.The likely result would be:

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"Holding all other relevant factors constant,consumers will purchase more of a good as the price falls." This statement reflects the behavior underlying:

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As the price of a good rises:

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In a free market,if the price of a good is below the equilibrium price,then;

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In Cuba,a bureaucratic committee makes the production decisions for the country's firms and factories.Therefore,Cuba is an example of a:

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If both supply and demand decrease simultaneously,the new equilibrium price is ___________ and the new equilibrium quantity is _________________.

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A movement along a demand curve from one price-quantity combination to another is called:

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One reason for the ________ slope of the demand curve is that as prices fall ________.

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A seller's reservation price is generally equal to:

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The supply curve illustrates that firms:

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The equilibrium price and quantity of any good or service is established by:

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Suppose that the equilibrium price of rice falls and the equilibrium quantity falls.Which of the following best fits the observed data?

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In order to understand how the price of a good is determined in the free market,one must account for the desires of:

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When a market is not in equilibrium:

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Assume both the demand and the supply of bagels increase.Which of the following outcomes is certain to occur?

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When the supply of a good decreases,consumers will eventually:

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If both supply and demand decrease simultaneously,the new equilibrium price is _ and the new equilibrium quantity is _______.

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One reason for the slope of the demand curve is that as prices fall .

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