Question 1

In which statement(s)  are "demand" and "quantity demanded" used correctly? (I)  "An increase in the price of coffee will reduce the quantity demanded of coffee."
(II)  "An increase in the price of coffee will reduce the demand for cream used in coffee."

Accepted Answer

A)   in both statements I and II
B)   in statement I only
C)   in statement II only
D)   in neither statements I nor II

Question 2

Last year, 1,000 cases of bottled water were sold at $5; this year, 1,200 cases were sold at $7. These data could be explained by the

Accepted Answer

A)   supply and demand curves shifting to the right.
B)   supply and demand curves shifting to the left.
C)   supply curve shifting to the left, with no change in demand.
D)   demand curve shifting to the right, with no change in supply.

Question 3

Which of the following events would decrease producer surplus?

Accepted Answer

A)   Sellers' costs stay the same and the price of the good increases.
B)   Sellers' costs increase and the price of the good stays the same.
C)   Sellers' costs decrease and the price of the good increases.
D)   All of the above are correct.

Question 4

Assume that corn and soybeans are alternatives that could be grown by most farmers. An increase in the price of corn will

Accepted Answer

A)   increase the supply of corn.
B)   increase the supply of soybeans.
C)   decrease the supply of soybeans.
D)   decrease the supply of corn.
E)   have no effect on the supplies of corn and soybeans.

Question 5

An important assumption that is made when constructing a demand schedule is that

Accepted Answer

A)   only price and quantity matter in determining demand.
B)   people always want a certain amount of a product.
C)   demand is too important to be left to the economists.
D)   all other determinants of demand are held constant.
E)   demand has a positive slope.

Question 6

Graphically, the area that represents the difference between the market price and the minimum price required to induce suppliers to produce a good is called

Accepted Answer

A)   consumer surplus.
B)   producer surplus.
C)   marginal cost.
D)   triangular arbitrage.

Question 7

A decrease in the price of a good would

Accepted Answer

A)   increase the demand for the good.
B)   increase the quantity demanded for the good.
C)   decrease the demand for the good.
D)   decrease the quantity supplied of the good.

Question 8

The current demand for a good would decrease if

Accepted Answer

A)   the price of a complementary good rose.
B)   the price of a substitute good rose.
C)   consumers suddenly believed the price of the good would be sharply higher in the future.
D)   consumer income increased.

Question 9

Which of the following events would increase producer surplus?

Accepted Answer

A)   Sellers' costs stay the same and the price of the good increases.
B)   Sellers' costs increase and the price of the good stays the same.
C)   Sellers' costs increase and the price of the good decreases.
D)   All of the above are correct.

Question 10

In which statement(s)  is "supply" used correctly? (I)  "An increase in the price of eggs will increase the supply of eggs."
(II)  "As the cost of producing eggs rises, the supply of eggs will tend to fall."

Accepted Answer

A)   in both statements I and II
B)   in statement I only
C)   in statement II only
D)   in neither statements I nor II

Question 11

If a large percentage increase in the price of a good results in a small percentage reduction in the quantity demanded of the good, demand is said to be

Accepted Answer

A)   horizontal.
B)   relatively inelastic.
C)   relatively elastic.
D)   income proof.

Question 12

Because the height of the demand curve measures the marginal value of the good to consumers, the fact that a demand curve slopes downward to the right illustrates that

Accepted Answer

A)   as more of a product is consumed, consumers will value additional units less.
B)   as more of a product is consumed, consumers will value additional units more.
C)   the value of additional units of the good is unrelated to the amount consumed.
D)   the cost of production for a good generally rises as more of it is produced.

Question 13

Saccharin and aspartame are both low-calorie substitutes for sugar. If saccharin is found to cause cancer,

Accepted Answer

A)   the price of aspartame will increase.
B)   the price of sugar will decrease.
C)   the price of saccharin will increase.
D)   the demand curves for aspartame and sugar will shift leftward.
E)   aspartame and sugar will be complements.

Question 14

Suppose a major civil war broke out in an important oil-producing nation. What impact would this have on the market for oil?

Accepted Answer

A)   The supply of oil would fall.
B)   The supply of oil would rise.
C)   The demand for oil would fall.
D)   The demand for oil would rise.

Question 15

According to the law of supply,

Accepted Answer

A)   producers are willing to supply larger amounts of a good as its price increases.
B)   a direct relationship exists between the price of a good and the amount buyers choose to buy.
C)   an inverse relationship exists between the price of a good and the amount buyers wish to buy.
D)   an inverse relationship exists between the price of a good and the amount producers supply.

Question 16

When economists say an activity is consistent with economic efficiency, they mean

Accepted Answer

A)   a majority of citizens favor the activity.
B)   the benefits that result from the activity exceed the costs.
C)   the number of people who gain from the activity exceeds the number on whom costs are imposed.
D)   the costs that result from the activity exceed the benefits.

Question 17

A shortage occurs whenever

Accepted Answer

A)   quantity demanded exceeds quantity supplied at the equilibrium price.
B)   price is less than equilibrium price.
C)   quantity demanded is less than quantity supplied.
D)   goods are scarce.
E)   some of the people who need the product are not willing and able to buy it at the equilibrium price.

Question 18

When the market for a good is in equilibrium,

Accepted Answer

A)   consumer surplus will equal producer surplus.
B)   the total value created for consumers will equal the total cost of production for business firms.
C)   all units valued more highly than the opportunity cost of production will be supplied.
D)   all units that have value will be produced, regardless of their cost of production.

Question 19

When the quantity demanded and quantity supplied in a market are equal, the market is said to be in

Accepted Answer

A)   fixation.
B)   excess supply.
C)   equilibrium.
D)   excess demand.

Question 20

Profits and losses play an important role in helping

Accepted Answer

A)   to signal to government which businesses are suffering losses so that they can be subsidized.
B)   consumers decide which products they value the most by looking at each firm's profit.
C)   to allocate scarce resources in a manner that maximizes the value created to society.
D)   ensure that the total profits in the economy exactly equal the total losses.

Exam 3: A : Supply, Demand, and the Market Process

Assume that corn and soybeans are alternatives that could be grown by most farmers. An increase in the price of corn will

Correct AnswerverifiedShow Answer

Profits and losses play an important role in helping

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Suppose a major civil war broke out in an important oil-producing nation. What impact would this have on the market for oil?

Correct AnswerverifiedShow Answer

A decrease in the price of a good would

Correct AnswerverifiedShow Answer

When the market for a good is in equilibrium,

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If a large percentage increase in the price of a good results in a small percentage reduction in the quantity demanded of the good, demand is said to be

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A shortage occurs whenever

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Last year, 1,000 cases of bottled water were sold at $5; this year, 1,200 cases were sold at $7. These data could be explained by the

Correct AnswerverifiedShow Answer

In which statement(s) is "supply" used correctly? (I) "An increase in the price of eggs will increase the supply of eggs." (II) "As the cost of producing eggs rises, the supply of eggs will tend to fall."

Correct AnswerverifiedShow Answer

Which of the following events would decrease producer surplus?

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Which of the following events would increase producer surplus?

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Because the height of the demand curve measures the marginal value of the good to consumers, the fact that a demand curve slopes downward to the right illustrates that

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Graphically, the area that represents the difference between the market price and the minimum price required to induce suppliers to produce a good is called

Correct AnswerverifiedShow Answer

According to the law of supply,

Correct AnswerverifiedShow Answer

The current demand for a good would decrease if

Correct AnswerverifiedShow Answer

When economists say an activity is consistent with economic efficiency, they mean

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Saccharin and aspartame are both low-calorie substitutes for sugar. If saccharin is found to cause cancer,

Correct AnswerverifiedShow Answer

An important assumption that is made when constructing a demand schedule is that

Correct AnswerverifiedShow Answer

In which statement(s) are "demand" and "quantity demanded" used correctly? (I) "An increase in the price of coffee will reduce the quantity demanded of coffee." (II) "An increase in the price of coffee will reduce the demand for cream used in coffee."

Correct AnswerverifiedShow Answer

When the quantity demanded and quantity supplied in a market are equal, the market is said to be in

Correct AnswerverifiedShow Answer

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