Question 1

When the market price is below the equilibrium price, the quantity of the good demanded exceeds the quantity supplied.

Accepted Answer

A) True 
 B)False

Question 2

Funsters, Inc., the largest toy company in the country, sells its most popular doll for $15. It has just learned that its leading competitor, Toysorama, is mass-producing an excellent copy and plans to flood the market with their $5 doll in six weeks. Funsters should

Accepted Answer

A)   "fight fire with fire" by decreasing supply of its doll for six weeks and then increasing the supply.
B)   increase the supply of its doll now before the other doll hits the market.
C)   increase the price of its doll now.
D)   discontinue its doll.E) A) and B)
F) A) and D)

Question 3

Suppose consumers expect the price of a good to be higher in the future than it is today. Would the current demand for the good increase or decrease?

Accepted Answer

The curren...

Question 4

Figure 4-9
Panel a)  Panel b) 
  
-Refer to Figure 4-9. The graphs show the demand for cigarettes. In Panel a) , the arrows are consistent with which of the following events?

Accepted Answer

A)   Tobacco and marijuana are complements, and the price of marijuana decreased.
B)   Tobacco is a "gateway drug," and the price of marijuana increased.
C)   The price of cigarettes increased.
D)   The arrows are consistent with all of these events.E) A) and D)
F) C) and D)

Question 5

Figure 4-7 
-Refer to Figure 4-7. The movement from Db to Da could be caused by

Accepted Answer

A)   a decrease in price.
B)   an increase in the price of a complement.
C)   a technological advance.
D)   an increase in the price of a substitute.E) All of the above
F) A) and D)

Question 6

In competitive markets, buyers

Accepted Answer

A)   are price takers, but sellers are price setters.
B)   are price setters, but sellers are price takers.
C)   and sellers are price takers.
D)   and sellers are price setters.E) A) and D)
F) C) and D)

Question 7

Refer to Figure 4-28. Using the points on the figure, describe the change that would occur if the price of this good increases.

Accepted Answer

The answer of Refer to Figure 4-28. Using the points...

Question 8

Figure 4-16 
-Refer to Figure 4-16. The shift from S to S' in the market for peaches could be caused by an)

Accepted Answer

A)   increase in the price of peaches.
B)   decrease in the price of pears.
C)   increase in income.
D)   decrease in the labor costs of the workers who pick peaches.E) A) and D)
F) A) and C)

Question 9

A decrease in input costs to firms in a market will result in an)

Accepted Answer

A)   decrease in equilibrium price and an increase in equilibrium quantity.
B)   decrease in equilibrium price and a decrease in equilibrium quantity.
C)   increase in equilibrium price and a decrease in equilibrium quantity.
D)   increase in equilibrium price and an increase in equilibrium quantity.E) All of the above
F) A) and B)

Question 10

Which of the following events would cause the price of oranges to fall?

Accepted Answer

A)   There is a shortage of oranges.
B)   The FDA announces that bananas cause strokes, and oranges and bananas are substitutes.
C)   The price of land throughout Florida decreases, and Florida produces a significant proportion of the nation's oranges.
D)   All of the above are correct.E) All of the above
F) B) and C)

Question 11

Which of the following would cause price to decrease?

Accepted Answer

A)   a decrease in supply
B)   an increase in demand
C)   a surplus of the good
D)   a shortage of the goodE) B) and D)
F) None of the above

Question 12

Figure 4-19 
-Refer to Figure 4-19. If price in this market is currently $14, then there would be an)

Accepted Answer

A)   surplus of 20 units. The law of supply and demand predicts that the price will rise from $14 to a higher price.
B)   excess supply of 20 units. The law of supply and demand predicts that the price will fall from $14 to a lower price.
C)   surplus of 40 units. The law of supply and demand predicts that the price will rise from $14 to a higher price.
D)   excess supply of 40 units. The law of supply and demand predicts that the price will fall from $14 to a lower price.E) A) and D)
F) B) and C)

Question 13

What will happen to the equilibrium price and quantity of new cars if the price of gasoline rises, the price of steel rises, public transportation becomes cheaper and more comfortable, and auto-workers negotiate higher wages?

Accepted Answer

A)   Price will fall, and the effect on quantity is ambiguous.
B)   Price will rise, and the effect on quantity is ambiguous.
C)   Quantity will fall, and the effect on price is ambiguous.
D)   Quantity will rise, and the effect on price is ambiguous.E) B) and D)
F) B) and C)

Question 14

Figure 4-15 
-Refer to Figure 4-15. Which of the following would cause the supply curve to shift from Supply A to Supply C in the market for beach towels?

Accepted Answer

A)   an increase in the price of beach towels
B)   an expectation by firms that the price of beach towels will increase in the very near future
C)   a decrease in the price of cotton
D)   a decrease in the number of firms selling beach towelsE) All of the above
F) B) and D)

Question 15

Prices allocate a market economy's scarce resources.

Accepted Answer

A) True 
 B)False

Question 16

The difference between a supply schedule and a supply curve is that a supply schedule

Accepted Answer

A)   incorporates demand and a supply curve does not.
B)   incorporates profit and a supply curve does not.
C)   can shift, but a supply curve cannot shift.
D)   is a table, and a supply curve is drawn on a graph.E) B) and D)
F) A) and C)

Question 17

Table 4-3
 
-Refer to Table 4-3. If these are the only four buyers in the market, then the market quantity demanded at a price of $1 is

Accepted Answer

A)   4 units.
B)   7.75 units.
C)   14 units.
D)   31 units.E) B) and C)
F) C) and D)

Question 18

Figure 4-22 
-Refer to Figure 4-22. At a price of $20, there is a

Accepted Answer

A)   surplus of 4 units.
B)   surplus of 8 units.
C)   shortage of 4 units.
D)   shortage of 8 units.E) A) and D)
F) A) and B)

Question 19

Adam Smith suggested that an invisible had guides market economies. In this analogy, what is the baton that the invisible hand uses to conduct the economic orchestra?

Accepted Answer

A)   the government
B)   prices
C)   subsidies
D)   the Federal ReserveE) A) and C)
F) A) and B)

Question 20

Table 4-10
The following table shows the number of cases of water each seller is willing to sell at the prices listed.
 
-Refer to Table 4-10. If Alpine Springs and Dew Good are the only two suppliers in this market, by how much does the market quantity supplied change with each $3 increase in price?

Accepted Answer

A)   -200 cases
B)   -100 cases
C)   100 cases
D)   200 casesE) B) and C)
F) C) and D)

Exam 4: The Market Forces of Supply and Demand

Figure 4-9 Panel a) Panel b) -Refer to Figure 4-9. The graphs show the demand for cigarettes. In Panel a) , the arrows are consistent with which of the following events?

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Figure 4-19 -Refer to Figure 4-19. If price in this market is currently $14, then there would be an)

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A decrease in input costs to firms in a market will result in an)

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When the market price is below the equilibrium price, the quantity of the good demanded exceeds the quantity supplied.

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Which of the following would cause price to decrease?

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Figure 4-7 -Refer to Figure 4-7. The movement from Db to Da could be caused by

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Refer to Figure 4-28. Using the points on the figure, describe the change that would occur if the price of this good increases.

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Table 4-10 The following table shows the number of cases of water each seller is willing to sell at the prices listed. -Refer to Table 4-10. If Alpine Springs and Dew Good are the only two suppliers in this market, by how much does the market quantity supplied change with each $3 increase in price?

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What will happen to the equilibrium price and quantity of new cars if the price of gasoline rises, the price of steel rises, public transportation becomes cheaper and more comfortable, and auto-workers negotiate higher wages?

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Which of the following events would cause the price of oranges to fall?

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Figure 4-15 -Refer to Figure 4-15. Which of the following would cause the supply curve to shift from Supply A to Supply C in the market for beach towels?

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Prices allocate a market economy's scarce resources.

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The difference between a supply schedule and a supply curve is that a supply schedule

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Adam Smith suggested that an invisible had guides market economies. In this analogy, what is the baton that the invisible hand uses to conduct the economic orchestra?

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Suppose consumers expect the price of a good to be higher in the future than it is today. Would the current demand for the good increase or decrease?

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Figure 4-22 -Refer to Figure 4-22. At a price of $20, there is a

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Funsters, Inc., the largest toy company in the country, sells its most popular doll for $15. It has just learned that its leading competitor, Toysorama, is mass-producing an excellent copy and plans to flood the market with their $5 doll in six weeks. Funsters should

Correct AnswerverifiedShow Answer

Figure 4-16 -Refer to Figure 4-16. The shift from S to S' in the market for peaches could be caused by an)

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In competitive markets, buyers

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Table 4-3 -Refer to Table 4-3. If these are the only four buyers in the market, then the market quantity demanded at a price of $1 is

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The curren...
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