Question 1

Velcro is becoming more and more popular for a variety of uses, including as fasteners for shoes. What should happen to the equilibrium price and quantity for shoelaces as a result?

Accepted Answer

A)  Both price and quantity will increase.
B)  Both price and quantity will decrease.
C)  Price will increase and quantity decrease.
D)  Price will decrease and quantity increase.
E)  Nothing.

Question 2

Which of the following would decrease the supply of sugar?

Accepted Answer

A)  The demand for sugar increases.
B)  A technological advance lowers the cost of producing sugar.
C)  The price of artificial sweeteners rises dramatically.
D)  The tariff (tax)  on imported sugar increases.

Question 3

In the orange market, what impact would an increase in the price of oil that orange growers burn to keep oranges from freezing in the winter have on the market?

Accepted Answer

A)  It would shift the supply curve to the right.
B)  It would shift the supply curve to the left.
C)  It would shift the demand curve to the left.
D)  It would shift the demand curve to the right.

Question 4

Consider the market for grapes. An increase in the wage paid to grape pickers will cause the

Accepted Answer

A)  demand curve for grapes to shift to the right, resulting in a higher equilibrium price for grapes and a reduction in the quantity consumed.
B)  demand curve for grapes to shift to the left, resulting in a lower equilibrium price for grapes and an increase in the quantity consumed.
C)  supply curve for grapes to shift to the left, resulting in a lower equilibrium price for grapes and a decrease in the quantity consumed.
D)  supply curve for grapes to shift to the left, resulting in a higher equilibrium price for grapes and a decrease in the quantity consumed.

Question 5

Suppose the demand for tacos decreases. What will happen to producer surplus in the market for tacos?

Accepted Answer

A)  It increases.
B)  It decreases.
C)  It remains unchanged.
D)  It may increase, decrease, or remain unchanged.

Question 6

Graphically, what impact would an increase in the price of jet fuel have on the market for air travel?

Accepted Answer

A)  It would shift the supply curve for air travel to the right.
B)  It would shift the supply curve for air travel to the left.
C)  It would shift the demand curve for air travel to the right.
D)  It would shift the demand curve for air travel to the left.

Question 7

Which of the following would lead to an increase in the demand for gasoline in Universityville, a typical college town?

Accepted Answer

A)  the local bus service beginning to offer free bus transportation to students
B)  homecoming weekend when many former alumni visit the local college
C)  a large protest by a campus environmental group urging people to walk or ride their bikes rather than drive
D)  an increase in the tuition charged by the local college, which reduces student enrollment

Question 8

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 9

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 10

An increase in the price of a good normally increases the

Accepted Answer

A)  demand for its substitutes
B)  supply of complements for the good
C)  purchasing power of consumers' dollar incomes
D)  money income of the consumer

Question 11

Which of the following would be the best example of consumer surplus?

Accepted Answer

A)  Jane pays $30 a month for phone service even though it is worth $70 to her.
B)  Sam refuses to pay $10 for a hair cut because it is only worth $8 to him.
C)  Fred buys a car for $4,000, the maximum amount that he would be willing to pay for it.
D)  When Sue purchases a candy bar for $.50, she uses a $20 bill to pay for it.

Question 12

Table 3-1
 
-Refer to Table 3-1. If the table represents the willingness to pay of four buyers and the price of the product is $15, then who would be willing to purchase the product?

Accepted Answer

A)  Mike
B)  Mike and Sandy
C)  Mike, Sandy, and Jonathan
D)  Mike, Sandy, Jonathan, and Haley

Question 13

Which of the following would lead to an increase in the demand for fast food in Houston?

Accepted Answer

A)  an increase in Houston's population
B)  a decrease in average consumer income in Houston
C)  a front page newspaper article in Houston stating that fast food is very bad for your health
D)  a decrease in the average price charged by sit-down restaurants

Question 14

A new hormone will increase the amount of milk each cow produces. If this hormone is adopted by many dairies, what will be the effect on the milk market?

Accepted Answer

A)  An increase in supply, higher equilibrium price, and lower equilibrium quantity.
B)  A decrease in supply, lower equilibrium price, and lower equilibrium quantity.
C)  An increase in supply, lower equilibrium price, and higher equilibrium quantity.
D)  An increase in supply, higher equilibrium price, and higher equilibrium quantity.
E)  A decrease in supply, lower equilibrium price, and higher equilibrium quantity.

Question 15

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 16

Suppose the prices of petroleum products, including gasoline and fuel oil, fell sharply. Which of the following would most likely occur as the result of the lower prices of petroleum products?

Accepted Answer

A)  a reduction in the consumption of gasoline
B)  an increase in demand for solar heating systems
C)  an increase in demand for smaller, more efficient automobiles
D)  a reduction in the demand for home insulation products

Question 17

Andrew decides that he would pay as much as $3,000 for a new laptop computer. He buys the computer and realizes consumer surplus of $700. How much did Andrew pay for his computer?

Accepted Answer

A)  $700
B)  $2,300
C)  $3,000
D)  $3,700

Question 18

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 19

When economists say that market equilibrium is consistent with economic efficiency, they mean

Accepted Answer

A)  the total gains from trade (the combined area of producer and consumer surplus)  are smaller than potentially could be the case at a different price and quantity.
B)  all units creating more benefit than cost have been produced.
C)  some units have been produced that cost more than the benefits they create.
D)  consumers and producers have made decisions without properly taking into account the market price.

Question 20

According to the law of supply,

Accepted Answer

A)  more of a good is desired by consumers as the price falls.
B)  less of a good is desired by consumers as the price rises.
C)  more of a good will be offered by suppliers as the price rises.
D)  less of a good will be offered by suppliers as the price rises.

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

According to the law of supply,

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When economists say that market equilibrium is consistent with economic efficiency, they mean

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Suppose the prices of petroleum products, including gasoline and fuel oil, fell sharply. Which of the following would most likely occur as the result of the lower prices of petroleum products?

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Which of the following would lead to an increase in the demand for fast food in Houston?

Correct AnswerverifiedShow Answer

In the orange market, what impact would an increase in the price of oil that orange growers burn to keep oranges from freezing in the winter have on the market?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Andrew decides that he would pay as much as $3,000 for a new laptop computer. He buys the computer and realizes consumer surplus of $700. How much did Andrew pay for his computer?

Correct AnswerverifiedShow Answer

Which of the following would be the best example of consumer surplus?

Correct AnswerverifiedShow Answer

Which of the following would lead to an increase in the demand for gasoline in Universityville, a typical college town?

Correct AnswerverifiedShow Answer

Velcro is becoming more and more popular for a variety of uses, including as fasteners for shoes. What should happen to the equilibrium price and quantity for shoelaces as a result?

Correct AnswerverifiedShow Answer

A new hormone will increase the amount of milk each cow produces. If this hormone is adopted by many dairies, what will be the effect on the milk market?

Correct AnswerverifiedShow Answer

Suppose the demand for tacos decreases. What will happen to producer surplus in the market for tacos?

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

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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Table 3-1 -Refer to Table 3-1. If the table represents the willingness to pay of four buyers and the price of the product is $15, then who would be willing to purchase the product?

Correct AnswerverifiedShow Answer

Which of the following would decrease the supply of sugar?

Correct AnswerverifiedShow Answer

Graphically, what impact would an increase in the price of jet fuel have on the market for air travel?

Correct AnswerverifiedShow Answer

An increase in the price of a good normally increases the

Correct AnswerverifiedShow Answer

Consider the market for grapes. An increase in the wage paid to grape pickers will cause the

Correct AnswerverifiedShow Answer

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