Question 1

The substitution effect explains why there is a direct relationship between the price of a product and the quantity of the product demanded.

Accepted Answer

A) True 
 B)False

Question 2

Figure 3-1
 
-Refer to Figure 3-1.An increase in population would be represented by a movement from

Accepted Answer

A)  A to B.
B)  B to A.
C)  D₁ to D₂.
D)  D₂ to D₁.

Question 3

If the population increases and input prices decrease, the equilibrium quantity of a product will definitely increase.

Accepted Answer

A) True 
 B)False

Question 4

Figure 3-7
 
-Refer to Figure 3-7.Assume that the graphs in this figure represent the demand and supply curves for bicycle helmets.Which panel best describes what happens in this market if there is a substantial increase in the price of bicycles?

Accepted Answer

A)  Panel (a) 
B)  Panel (b) 
C)  Panel (c) 
D)  Panel (d)

Question 5

Suppose a negative technological change in the production of disease-resistant wheat caused the price of wheat to rise.Holding everything else constant, how would this affect the market for corn (a substitute for wheat) ?

Accepted Answer

A)  The supply of corn would decrease and the equilibrium price of corn would increase.
B)  The demand for corn would increase and the equilibrium price of corn would increase.
C)  The demand for corn would decrease because consumers could afford to buy less wheat and corn.
D)  The demand for corn would increase and the equilibrium price of corn would decrease.

Question 6

Technological advancements have led to lower prices and an increase in the sale of digital cameras.How does this affect the digital photo printing paper market?

Accepted Answer

A)  The demand curve for digital photo printing paper shifts to the right.
B)  The demand curve for digital photo printing paper shifts to the left.
C)  The supply curve for digital photo printing paper shifts to the right.
D)  The supply curve for digital photo printing paper shifts to the left.

Question 7

If in the market for oranges the supply has increased, then

Accepted Answer

A)  the supply curve for oranges has shifted to the right.
B)  the supply curve for oranges has shifted to the left.
C)  there has been a movement upwards along the supply curve for oranges.
D)  there has been a movement downwards along the supply curve for oranges.

Question 8

Figure 3-5
 
-Refer to Figure 3-5.In a free market such as that depicted above, a surplus is eliminated by

Accepted Answer

A)  a price increase, increasing the supply and decreasing the demand.
B)  a price decrease, decreasing the supply and increasing the demand.
C)  a price decrease, decreasing the quantity supplied and increasing the quantity demanded.
D)  a price increase, increasing the quantity supplied and decreasing the quantity demanded. C

Question 9

The income effect of a price change refers to the impact of a change in

Accepted Answer

A)  income on the price of a good.
B)  demand when income changes.
C)  the quantity demanded when income changes.
D)  the price of a good on a consumer's purchasing power.

Question 10

Figure 3-4
 
-Refer to Figure 3-4.If the current market price is $10, the market will achieve equilibrium by

Accepted Answer

A)  a price increase, increasing the supply and decreasing the demand.
B)  a price decrease, decreasing the supply and increasing the demand.
C)  a price decrease, decreasing the quantity supplied and increasing the quantity demanded.
D)  a price increase, increasing the quantity supplied and decreasing the quantity demanded.

Question 11

What is the law of supply? What does this law imply about the shape of the supply curve?

Accepted Answer

The law of supply states that, holding everything else constant, an increase in price causes an increase in quantity supplied.The positive relationship between price and quantity supplied gives rise to an upward-sloping supply curve.

Question 12

Figure 3-6
 
-Refer to Figure 3-6.The figure above represents the market for canvas tote bags.Compare the conditions in the market when the price is $50 and when the price is $35.Which of the following describes how the market differs at these prices?

Accepted Answer

A)  At each price there is a surplus; the surplus is greater at $35 than at $50.
B)  The difference between quantity supplied and quantity demanded is greater at $50 than at $35.
C)  At each price there is a surplus; firms will lower the equilibrium price in order to eliminate the surplus.
D)  At each price the supply of tote bags exceeds that demand for tote bags.

Question 13

Ranchers can raise either cattle or sheep on their land.Which of the following would cause the supply of sheep to increase?

Accepted Answer

A)  an increase in the price of sheep
B)  a decrease in the price of cattle
C)  an increase in the demand for cattle
D)  an increase in the price of sheep feed

Question 14

Positive technological change in the production of LCD televisions caused the price of LCD televisions to fall.Holding everything else constant, how would this affect the market for Blu-ray players (a complement to LCD televisions) ?

Accepted Answer

A)  The supply of Blu-ray players would increase and the equilibrium price of Blu-ray players would decrease.
B)  The demand for Blu-ray players would increase and the equilibrium price of Blu-ray players would increase.
C)  The demand for Blu-ray players would decrease because consumers could afford to buy fewer LCD televisions and Blu-ray players.
D)  The demand for Blu-ray players would increase and the equilibrium price of Blu-ray players would decrease.

Question 15

Holding everything else constant, an increase in the price of MP3 players will result in

Accepted Answer

A)  a decrease in the quantity of MP3 players supplied.
B)  a decrease in the demand for MP3 players.
C)  an increase in the supply of MP3 players.
D)  a decrease in the quantity of MP3 players demanded. D

Question 16

Figure 3-5
 
-Refer to Figure 3-5.At a price of $10, the quantity sold

Accepted Answer

A)  is 2 units.
B)  is 4 units.
C)  is 6 units.
D)  is 8 units.

Question 17

Discuss the correct and incorrect economic analysis in the following statement.
"The United Auto Workers Union has successfully negotiated a 9 percent increase in wages for its workers.This increase in the wage rate causes an increase in demand for automobiles, since many consumers now have greater incomes, and also a decrease in the supply of automobiles because the cost of production has increased.These effects cancel each other out resulting in no change in equilibrium price and quantity in the automobile market."

Accepted Answer

The wage rate is a determinant of the su...

Question 18

If a firm expects that the price of its product will be higher in the future than it is today, then

Accepted Answer

A)  the firm will go out of business.
B)  the firm has an incentive to increase supply now and decrease supply in the future.
C)  the firm has an incentive to decrease quantity supplied now and increase quantity supplied in the future.
D)  the firm has an incentive to decrease supply now and increase supply in the future.

Question 19

Holding everything else constant, a decrease in the price of bicycles will result in

Accepted Answer

A)  a decrease in the quantity of bicycles demanded.
B)  an increase in the demand for bicycles.
C)  a decrease in the supply of bicycles.
D)  an increase in the quantity of bicycles demanded.

Question 20

Figure 3-7
 
-Refer to Figure 3-7.Assume that the graphs in this figure represent the demand and supply curves for used clothing, an inferior good.Which panel describes what happens in this market as a result of a decrease in income?

Accepted Answer

A)  Panel (a) 
B)  Panel (b) 
C)  Panel (c) 
D)  Panel (d)

Exam 3: Where Prices Come From: the Interaction of Demand and Supply

The substitution effect explains why there is a direct relationship between the price of a product and the quantity of the product demanded.

Correct Answer
verified

Figure 3-1 -Refer to Figure 3-1.An increase in population would be represented by a movement from

Correct Answer
verified

If the population increases and input prices decrease, the equilibrium quantity of a product will definitely increase.

Correct Answer
verified

Figure 3-7 -Refer to Figure 3-7.Assume that the graphs in this figure represent the demand and supply curves for bicycle helmets.Which panel best describes what happens in this market if there is a substantial increase in the price of bicycles?

Correct Answer
verified

Suppose a negative technological change in the production of disease-resistant wheat caused the price of wheat to rise.Holding everything else constant, how would this affect the market for corn (a substitute for wheat) ?

Correct Answer
verified

Technological advancements have led to lower prices and an increase in the sale of digital cameras.How does this affect the digital photo printing paper market?

Correct Answer
verified

If in the market for oranges the supply has increased, then

Correct Answer
verified

Figure 3-5 -Refer to Figure 3-5.In a free market such as that depicted above, a surplus is eliminated by

Correct Answer
verified
C

The income effect of a price change refers to the impact of a change in

Correct Answer
verified

Figure 3-4 -Refer to Figure 3-4.If the current market price is $10, the market will achieve equilibrium by

Correct Answer
verified

What is the law of supply? What does this law imply about the shape of the supply curve?

Correct Answer
verified
The law of supply states that, holding everything else constant, an increase in price causes an increase in quantity supplied.The positive relationship between price and quantity supplied gives rise to an upward-sloping supply curve.

Figure 3-6 -Refer to Figure 3-6.The figure above represents the market for canvas tote bags.Compare the conditions in the market when the price is $50 and when the price is $35.Which of the following describes how the market differs at these prices?

Correct Answer
verified

Ranchers can raise either cattle or sheep on their land.Which of the following would cause the supply of sheep to increase?

Correct Answer
verified

Positive technological change in the production of LCD televisions caused the price of LCD televisions to fall.Holding everything else constant, how would this affect the market for Blu-ray players (a complement to LCD televisions) ?

Correct Answer
verified

Holding everything else constant, an increase in the price of MP3 players will result in

Correct Answer
verified
D

Figure 3-5 -Refer to Figure 3-5.At a price of $10, the quantity sold

Correct Answer
verified

Correct Answer
verified
The wage rate is a determinant of the su...
View Answer

If a firm expects that the price of its product will be higher in the future than it is today, then

Correct Answer
verified

Holding everything else constant, a decrease in the price of bicycles will result in

Correct Answer
verified

Figure 3-7 -Refer to Figure 3-7.Assume that the graphs in this figure represent the demand and supply curves for used clothing, an inferior good.Which panel describes what happens in this market as a result of a decrease in income?

Correct Answer
verified

Exam 3: Where Prices Come From: the Interaction of Demand and Supply

The substitution effect explains why there is a direct relationship between the price of a product and the quantity of the product demanded.

Correct AnswerverifiedShow Answer

Figure 3-1 -Refer to Figure 3-1.An increase in population would be represented by a movement from

Correct AnswerverifiedShow Answer

If the population increases and input prices decrease, the equilibrium quantity of a product will definitely increase.

Correct AnswerverifiedShow Answer

Figure 3-7 -Refer to Figure 3-7.Assume that the graphs in this figure represent the demand and supply curves for bicycle helmets.Which panel best describes what happens in this market if there is a substantial increase in the price of bicycles?

Correct AnswerverifiedShow Answer

Suppose a negative technological change in the production of disease-resistant wheat caused the price of wheat to rise.Holding everything else constant, how would this affect the market for corn (a substitute for wheat) ?

Correct AnswerverifiedShow Answer

Technological advancements have led to lower prices and an increase in the sale of digital cameras.How does this affect the digital photo printing paper market?

Correct AnswerverifiedShow Answer

If in the market for oranges the supply has increased, then

Correct AnswerverifiedShow Answer

Figure 3-5 -Refer to Figure 3-5.In a free market such as that depicted above, a surplus is eliminated by

Correct AnswerverifiedC

The income effect of a price change refers to the impact of a change in

Correct AnswerverifiedShow Answer

Figure 3-4 -Refer to Figure 3-4.If the current market price is $10, the market will achieve equilibrium by

Correct AnswerverifiedShow Answer

What is the law of supply? What does this law imply about the shape of the supply curve?

Correct AnswerverifiedThe law of supply states that, holding everything else constant, an increase in price causes an increase in quantity supplied.The positive relationship between price and quantity supplied gives rise to an upward-sloping supply curve.

Figure 3-6 -Refer to Figure 3-6.The figure above represents the market for canvas tote bags.Compare the conditions in the market when the price is $50 and when the price is $35.Which of the following describes how the market differs at these prices?

Correct AnswerverifiedShow Answer

Ranchers can raise either cattle or sheep on their land.Which of the following would cause the supply of sheep to increase?

Correct AnswerverifiedShow Answer

Positive technological change in the production of LCD televisions caused the price of LCD televisions to fall.Holding everything else constant, how would this affect the market for Blu-ray players (a complement to LCD televisions) ?

Correct AnswerverifiedShow Answer

Holding everything else constant, an increase in the price of MP3 players will result in

Correct AnswerverifiedD

Figure 3-5 -Refer to Figure 3-5.At a price of $10, the quantity sold

Correct AnswerverifiedShow Answer

Correct AnswerverifiedThe wage rate is a determinant of the su...View AnswerShow Answer

If a firm expects that the price of its product will be higher in the future than it is today, then

Correct AnswerverifiedShow Answer

Holding everything else constant, a decrease in the price of bicycles will result in

Correct AnswerverifiedShow Answer

Figure 3-7 -Refer to Figure 3-7.Assume that the graphs in this figure represent the demand and supply curves for used clothing, an inferior good.Which panel describes what happens in this market as a result of a decrease in income?

Correct AnswerverifiedShow Answer

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C

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The law of supply states that, holding everything else constant, an increase in price causes an increase in quantity supplied.The positive relationship between price and quantity supplied gives rise to an upward-sloping supply curve.

Correct Answer
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Correct Answer
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Correct Answer
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D

Correct Answer
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The wage rate is a determinant of the su...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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