Question 1

In response to the general public's complaints about "price gouging" by sellers, the government could impose a price floor.

Accepted Answer

A) True 
 B)False

Question 2

If there is a surplus of a product, its price

Accepted Answer

A)   is below the equilibrium level.
B)   is above the equilibrium level.
C)   will rise in the near future.
D)   is in equilibrium.

Question 3

Over time, the equilibrium price of a gigabyte of computer memory has fallen, while the equilibrium quantity purchased has increased. Based on this we can conclude that

Accepted Answer

A)   decreases in the demand for computer memory have exceeded increases in supply.
B)   decreases in the supply of computer memory have exceeded increases in demand.
C)   increases in the demand for computer memory have exceeded increases in supply.
D)   increases in the supply of computer memory have exceeded increases in demand.

Question 4

Because successive units of a good produce less and less additional satisfaction, the price must fall to encourage a buyer to purchase more units of the good. This statement is most consistent with which explanation for the law of demand?

Accepted Answer

A)   diminishing marginal utility
B)   the rationing function of prices
C)   the substitution effect
D)   the income effect

Question 5

When the price of a product falls, the purchasing power of our money income rises and thus permits consumers 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 6

Answer the question on the basis of the given supply and demand data for wheat.  Equilibrium price will be

Accepted Answer

A)   $4.
B)   $3.
C)   $2.
D)   $1.

Question 7

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

Accepted Answer

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

Question 8

If the price of oil increases significantly, buyers and sellers of gasoline will both expect the price of gasoline to also increase. If sellers of gasoline act on their expectations more than the buyers do, then

Accepted Answer

A)   the equilibrium price of gasoline will increase, while the equilibrium quantity will decrease.
B)   the equilibrium price of gasoline will increase, while the equilibrium quantity will increase.
C)   the equilibrium price of gasoline will decrease, while the equilibrium quantity will decrease.
D)   the equilibrium price of gasoline will decrease, while the equilibrium quantity will increase.

Question 9

When economists describe "a market," they mean

Accepted Answer

A)   a place where stocks and bonds are traded.
B)   a communication network that allow individuals to keep in touch with each other.
C)   a hypothetical place where the production of goods and services takes place.
D)   a system that allows buyers and sellers to interact with one another.

Question 10

In order to derive a market demand curve from individuals' demand curves, we add up the

Accepted Answer

A)   various individuals' quantities demanded at each price level.
B)   various prices that each buyer is willing and able to pay.
C)   incomes of all buyers, assuming that their tastes remain constant.
D)   total number of buyers in the market at each time period.

Question 11

A surplus of a product will arise when price is

Accepted Answer

A)   above equilibrium, with the result that quantity demanded exceeds quantity supplied.
B)   above equilibrium, with the result that quantity supplied exceeds quantity demanded.
C)   below equilibrium, with the result that quantity demanded exceeds quantity supplied.
D)   below equilibrium, with the result that quantity supplied exceeds quantity demanded.

Question 12

Which of the following is a determinant of supply?

Accepted Answer

A)   tastes and preferences of buyers
B)   price of a complementary good
C)   consumer income
D)   product taxes and subsidies

Question 13

If a legal ceiling price is set above the equilibrium price,

Accepted Answer

A)   a shortage of the product will occur.
B)   a surplus of the product will occur.
C)   a black market will evolve.
D)   neither the equilibrium price nor the equilibrium quantity will be affected.

Question 14

Plastics manufacturers can make either toys or plastic containers. If the prices and profitability of plastic toys increase, then the

Accepted Answer

A)   demand for plastic containers will decrease.
B)   supply of plastic containers will increase.
C)   demand for plastic containers will increase.
D)   supply of plastic containers will decrease.

Question 15

If there is a surplus in a market, competition among the sellers will drive price down.

Accepted Answer

A) True 
 B)False

Question 16

Suppose that corn prices rise significantly. If farmers expect the price of corn to continue rising relative to other crops, then we would expect

Accepted Answer

A)   the supply of ethanol, a corn-based product, to increase.
B)   consumer demand for wheat to fall.
C)   the supply to increase as farmers plant more corn.
D)   the supply to fall as farmers plant more of other crops.

Question 17

A news story states that "DVDs lose their appeal as consumers switch to online streaming for movies." In a competitive market for DVDs, this situation would lead to a(n)

Accepted Answer

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

Question 18

With a downsloping demand curve and an upsloping supply curve for a product, placing an excise tax on this product will

Accepted Answer

A)   increase equilibrium price and quantity.
B)   decrease equilibrium price and quantity.
C)   decrease equilibrium price and increase equilibrium quantity.
D)   increase equilibrium price and decrease equilibrium quantity.

Question 19

A leftward shift of the supply curve for oil in the United States is most likely to result from

Accepted Answer

A)   a decrease in the fees that oil companies must pay for drilling licenses.
B)   an increase in the subsidy for oil exploration and drilling.
C)   a decrease in the world price of oil.
D)   an increase in the costs of exploration and drilling for oil.

Question 20

As a result of a fall in the price of gasoline, consumers can afford to buy more gasoline for more driving trips. This is an illustration of

Accepted Answer

A)   the income effect.
B)   the substitution effect.
C)   diminishing marginal utility.
D)   consumer sovereignty.

Exam 3: Demand, Supply, and Market Equilibrium

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

When economists describe "a market," they mean

Correct AnswerverifiedShow Answer

Over time, the equilibrium price of a gigabyte of computer memory has fallen, while the equilibrium quantity purchased has increased. Based on this we can conclude that

Correct AnswerverifiedShow Answer

Answer the question on the basis of the given supply and demand data for wheat. Equilibrium price will be

Correct AnswerverifiedShow Answer

With a downsloping demand curve and an upsloping supply curve for a product, placing an excise tax on this product will

Correct AnswerverifiedShow Answer

A news story states that "DVDs lose their appeal as consumers switch to online streaming for movies." In a competitive market for DVDs, this situation would lead to a(n)

Correct AnswerverifiedShow Answer

Plastics manufacturers can make either toys or plastic containers. If the prices and profitability of plastic toys increase, then the

Correct AnswerverifiedShow Answer

In order to derive a market demand curve from individuals' demand curves, we add up the

Correct AnswerverifiedShow Answer

As a result of a fall in the price of gasoline, consumers can afford to buy more gasoline for more driving trips. This is an illustration of

Correct AnswerverifiedShow Answer

A surplus of a product will arise when price is

Correct AnswerverifiedShow Answer

If a legal ceiling price is set above the equilibrium price,

Correct AnswerverifiedShow Answer

If there is a surplus of a product, its price

Correct AnswerverifiedShow Answer

Suppose that corn prices rise significantly. If farmers expect the price of corn to continue rising relative to other crops, then we would expect

Correct AnswerverifiedShow Answer

Which of the following is a determinant of supply?

Correct AnswerverifiedShow Answer

If the price of oil increases significantly, buyers and sellers of gasoline will both expect the price of gasoline to also increase. If sellers of gasoline act on their expectations more than the buyers do, then

Correct AnswerverifiedShow Answer

If there is a surplus in a market, competition among the sellers will drive price down.

Correct AnswerverifiedShow Answer

Because successive units of a good produce less and less additional satisfaction, the price must fall to encourage a buyer to purchase more units of the good. This statement is most consistent with which explanation for the law of demand?

Correct AnswerverifiedShow Answer

A leftward shift of the supply curve for oil in the United States is most likely to result from

Correct AnswerverifiedShow Answer

In response to the general public's complaints about "price gouging" by sellers, the government could impose a price floor.

Correct AnswerverifiedShow Answer

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