Question 1

Which of the following might explain why the price of DVD players has been falling?

Accepted Answer

A)   an increase in consumer income
B)   a decrease in the price of high-definition Blu-ray players
C)   a decrease in the price of DVDs
D)   an increase in the price of gasoline

Question 2

Consider the market for electric guitars, a normal good. Use well-labeled supply and demand diagrams to illustrate the effects of the following events on the market for electric guitars. a. Consumer income increases b. The price of wood increases c. The price of electric amplifiers decreases d. A decrease in the price of bass guitars, a substitute for electric guitars e. The government eliminates taxes on the producers of electric guitars. f. Many new electric guitar companies are started from an influx of immigrants.

Accepted Answer

The answer of Consider the market for electric guitars, a...

Question 3

Reference: Ref 4-2 (Figure: Market Equilibrium)  Refer to the figure. At a price of $3, quantity supplied is ______ and quantity demanded is ______, leading to a _______.

Accepted Answer

A)   6; 2; surplus of 4 units
B)   2; 6; shortage of 8 units
C)   2; 4; surplus of 2 units
D)   4; 2; shortage of 2 units

Question 4

Why did Vernon Smith win the Nobel Prize in Economics in 2002?

Accepted Answer

A)   He created the theory of supply and demand.
B)   He used laboratory experiments as a tool to confirm the theory of supply and demand.
C)   He was able to disprove the theory of supply and demand.
D)   This is a trick question, because Vernon Smith did not win the Nobel Prize.

Question 5

Suppose that the equilibrium price in the market is $10. If the current market price is $7.50:

Accepted Answer

A)   the equilibrium price will fall to $7.50.
B)   competition among buyers will increase the current price.
C)   the current price will fall below $7.50 as sellers compete for market share.
D)   There is not enough information provided to answer the question.

Question 6

Reference: Ref 4-3 (Table: Equilibrium Price, Quantity)  Refer to the table. If the price in the market was $12, there would be a:

Accepted Answer

A)   shortage of 10 units.
B)   shortage of 45 units.
C)   surplus of 10 units.
D)   surplus of 35 units.

Question 7

OPEC is able to raise oil prices by:

Accepted Answer

A)   increasing the demand for oil.
B)   decreasing the supply of oil by cutting production.
C)   decreasing transportation costs, a complement to oil.
D)   subsidizing the oil production of developing countries.

Question 8

A free market can be described by the equations Qd = 100 - P and Qs = -20 + P. What are the equilibrium conditions in this market (that is, find equilibrium P and Q) and what are the maximum gains from trade in this market?

Accepted Answer

Price is $60, and eq...

Question 9

(Figure: Price Adjustment)  Refer to the figure. If the price of the product is $14, there is a:

Accepted Answer

A)   shortage of 30 units of the product, and the price will rise to $16.
B)   surplus of 20 units of the product, and the price will rise to $16.
C)   shortage of 50 units of the product, and the price will rise to $16.
D)   surplus of 40 units of the product, and the price will rise to $16.

Question 10

In a free market when there are unexploited gains from trade:

Accepted Answer

A)   the market is slow to adjust to this situation.
B)   there are sellers who are unwilling to sell at prices buyers are willing to pay.
C)   there are buyers who are willing to pay more for goods than sellers are asking.
D)   an equilibrium price and quantity have been reached.

Question 11

Immediately after a hurricane, it is likely that the quantity demanded for tree cutting/removal services will ______ the quantity supplied, causing the price of tree cutting/removal services to ______.

Accepted Answer

A)   equal; remain unchanged
B)   be less than; rise
C)   exceed; rise
D)   decrease; fall

Question 12

An early frost in the vineyards of Napa Valley would cause a(n) :

Accepted Answer

A)   increase in the demand for wine, increasing price.
B)   increase in the supply of wine, decreasing price.
C)   decrease in the demand for wine, decreasing price.
D)   decrease in the supply of wine, increasing price.

Question 13

An increase in supply and a decrease in demand occur in a market. What happens to the equilibrium price and quantity?

Accepted Answer

A)   The equilibrium price decreases; the change in the equilibrium quantity is ambiguous.
B)   The equilibrium price decreases; the equilibrium quantity increases.
C)   The equilibrium price increases; the change in the equilibrium quantity is ambiguous.
D)   The equilibrium price increases; the equilibrium quantity decreases.

Question 14

Reference: Ref 4-3 (Table: Equilibrium Price, Quantity)  Refer to the table. If the demand curve for the product shifted to the right such that 10 more units of the good are demanded at every price, what is the new equilibrium price?

Accepted Answer

A)   $12
B)   $14
C)   $16
D)   $18

Question 15

Reference: Ref 4-1 (Figure: Equilibrium)  Refer to the figure. The equilibrium quantity (in units)  is:

Accepted Answer

A)   8.
B)   10.
C)   16.
D)   12.

Question 16

In free markets, shortages lead to:

Accepted Answer

A)   lower prices.
B)   higher prices.
C)   surpluses.
D)   unexploited gains from trade.

Question 17

Reference: Ref 4-4 (Table: Equilibrium Adjustment)  Refer to the table. If the price in the free market is $2, then a:

Accepted Answer

A)   surplus of 50 units would exist and price would fall.
B)   surplus of 50 units would exist and price would rise.
C)   shortage of 50 units would exist and price would rise.
D)   shortage of 50 units would exist and price would fall.

Question 18

A market can be described by the equations Qd = 50 - 3P and Qs = 2P. What are the equilibrium price and quantity in this market?

Accepted Answer

A)   The equilibrium price is $20 and the equilibrium quantity is 10 units.
B)   The equilibrium price is $50 and the equilibrium quantity is 100 units.
C)   The equilibrium price is $30 and the equilibrium quantity is 10 units.
D)   The equilibrium price is $10 and the equilibrium quantity is 20 units.

Question 19

Gains from trade are maximized at the:

Accepted Answer

A)   equilibrium price and quantity.
B)   midpoint on the demand curve.
C)   point where output is maximized.
D)   vertical intercept on the supply curve.

Question 20

Reference: Ref 4-4 (Table: Equilibrium Adjustment)  Refer to the table. The equilibrium price is:

Accepted Answer

A)   $2.
B)   $4.
C)   $6.
D)   $8.

Exam 4: Equilibrium: How Supply and Demand Determine Prices

Suppose that the equilibrium price in the market is $10. If the current market price is $7.50:

Correct Answer
verified

A free market can be described by the equations Qd = 100 - P and Qs = -20 + P. What are the equilibrium conditions in this market (that is, find equilibrium P and Q) and what are the maximum gains from trade in this market?

Correct Answer
verified
Price is $60, and eq...
View Answer

OPEC is able to raise oil prices by:

Correct Answer
verified

Immediately after a hurricane, it is likely that the quantity demanded for tree cutting/removal services will the quantity supplied, causing the price of tree cutting/removal services to .

Correct Answer
verified

Reference: Ref 4-4 (Table: Equilibrium Adjustment) Refer to the table. The equilibrium price is:

Correct Answer
verified

Reference: Ref 4-2 (Figure: Market Equilibrium) Refer to the figure. At a price of $3, quantity supplied is and quantity demanded is , leading to a ___.

Correct Answer
verified

(Figure: Price Adjustment) Refer to the figure. If the price of the product is $14, there is a:

Correct Answer
verified

Reference: Ref 4-3 (Table: Equilibrium Price, Quantity) Refer to the table. If the price in the market was $12, there would be a:

Correct Answer
verified

Why did Vernon Smith win the Nobel Prize in Economics in 2002?

Correct Answer
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Reference: Ref 4-1 (Figure: Equilibrium) Refer to the figure. The equilibrium quantity (in units) is:

Correct Answer
verified

Reference: Ref 4-4 (Table: Equilibrium Adjustment) Refer to the table. If the price in the free market is $2, then a:

Correct Answer
verified

An early frost in the vineyards of Napa Valley would cause a(n) :

Correct Answer
verified

Gains from trade are maximized at the:

Correct Answer
verified

In free markets, shortages lead to:

Correct Answer
verified

A market can be described by the equations Qd = 50 - 3P and Qs = 2P. What are the equilibrium price and quantity in this market?

Correct Answer
verified

An increase in supply and a decrease in demand occur in a market. What happens to the equilibrium price and quantity?

Correct Answer
verified

Reference: Ref 4-3 (Table: Equilibrium Price, Quantity) Refer to the table. If the demand curve for the product shifted to the right such that 10 more units of the good are demanded at every price, what is the new equilibrium price?

Correct Answer
verified

In a free market when there are unexploited gains from trade:

Correct Answer
verified

Correct Answer
verified

Which of the following might explain why the price of DVD players has been falling?

Correct Answer
verified

Exam 4: Equilibrium: How Supply and Demand Determine Prices

Suppose that the equilibrium price in the market is $10. If the current market price is $7.50:

Correct AnswerverifiedShow Answer

A free market can be described by the equations Qd = 100 - P and Qs = -20 + P. What are the equilibrium conditions in this market (that is, find equilibrium P and Q) and what are the maximum gains from trade in this market?

Correct AnswerverifiedPrice is $60, and eq...View AnswerShow Answer

OPEC is able to raise oil prices by:

Correct AnswerverifiedShow Answer

Immediately after a hurricane, it is likely that the quantity demanded for tree cutting/removal services will ______ the quantity supplied, causing the price of tree cutting/removal services to ______.

Correct AnswerverifiedShow Answer

Reference: Ref 4-4 (Table: Equilibrium Adjustment) Refer to the table. The equilibrium price is:

Correct AnswerverifiedShow Answer

Reference: Ref 4-2 (Figure: Market Equilibrium) Refer to the figure. At a price of $3, quantity supplied is ______ and quantity demanded is ______, leading to a _______.

Correct AnswerverifiedShow Answer

(Figure: Price Adjustment) Refer to the figure. If the price of the product is $14, there is a:

Correct AnswerverifiedShow Answer

Reference: Ref 4-3 (Table: Equilibrium Price, Quantity) Refer to the table. If the price in the market was $12, there would be a:

Correct AnswerverifiedShow Answer

Why did Vernon Smith win the Nobel Prize in Economics in 2002?

Correct AnswerverifiedShow Answer

Reference: Ref 4-1 (Figure: Equilibrium) Refer to the figure. The equilibrium quantity (in units) is:

Correct AnswerverifiedShow Answer

Reference: Ref 4-4 (Table: Equilibrium Adjustment) Refer to the table. If the price in the free market is $2, then a:

Correct AnswerverifiedShow Answer

An early frost in the vineyards of Napa Valley would cause a(n) :

Correct AnswerverifiedShow Answer

Gains from trade are maximized at the:

Correct AnswerverifiedShow Answer

In free markets, shortages lead to:

Correct AnswerverifiedShow Answer

A market can be described by the equations Qd = 50 - 3P and Qs = 2P. What are the equilibrium price and quantity in this market?

Correct AnswerverifiedShow Answer

An increase in supply and a decrease in demand occur in a market. What happens to the equilibrium price and quantity?

Correct AnswerverifiedShow Answer

Reference: Ref 4-3 (Table: Equilibrium Price, Quantity) Refer to the table. If the demand curve for the product shifted to the right such that 10 more units of the good are demanded at every price, what is the new equilibrium price?

Correct AnswerverifiedShow Answer

In a free market when there are unexploited gains from trade:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following might explain why the price of DVD players has been falling?

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified
Price is $60, and eq...
View Answer

Correct Answer
verified

Immediately after a hurricane, it is likely that the quantity demanded for tree cutting/removal services will the quantity supplied, causing the price of tree cutting/removal services to .

Correct Answer
verified

Correct Answer
verified

Reference: Ref 4-2 (Figure: Market Equilibrium) Refer to the figure. At a price of $3, quantity supplied is and quantity demanded is , leading to a ___.

Correct Answer
verified

Correct Answer
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