Question 1

With a downward sloping demand curve and an upward sloping supply curve for a product,an increase in incomes will:

Accepted Answer

A)   increase equilibrium price and quantity if the product is a normal good.
B)   decrease equilibrium price and quantity if the product is a normal good.
C)   have no effect on equilibrium price and quantity.
D)   reduce the quantity demanded,but not shift the demand curve.E) B) and C)
F) A) and D)

Question 2

An increase in the price of corn:

Accepted Answer

A)   will eventually increase the cost of corn-fed beef and,the price of hamburgers.
B)   will eventually decrease the price of corn syrup and,the price of soft drinks.
C)   will eventually reduce the price of corn-tortillas.
D)   will eventually decrease the cost of corn-fed beef and,increase the price of steak.E) B) and C)
F) A) and D)

Question 3

-If peanut butter and grape jelly are complementary products,which diagram above illustrates the effect on the peanut butter market as a result of a decrease in the price of grape jelly?

Accepted Answer

A)   A
B)   B
C)   C
D)   DE) B) and D)
F) B) and C)

Question 4

One reason why the quantity demanded of a good increases when its price falls is that the:

Accepted Answer

A)   lower price shifts the supply curve to the left.
B)   lower price shifts the demand curve to the left.
C)   lower price shifts the demand curve to the right.
D)   lower price increases the real incomes of buyers,enabling them to buy more.E) B) and D)
F) All of the above

Question 5

Surpluses drive market prices up;shortages drive them down.

Accepted Answer

A) True 
 B)False

Question 6

When the price of one fruit increases,consumers buy more of another fruit.This situation is an illustration of:

Accepted Answer

A)   the income effect.
B)   the substitution effect.
C)   diminishing marginal utility.
D)   the rationing function of prices.E) A) and B)
F) B) and D)

Question 7

Which statement is not correct?

Accepted Answer

A)   If demand increases and supply decreases,price will rise and the quantity exchanged may either rise or fall.
B)   If supply increases and demand decreases,price will fall and the quantity exchanged may either rise or fall.
C)   If supply declines and demand remains constant,price will rise and the quantity exchanged will rise.
D)   If demand and supply increase,the quantity exchanged will rise and price may either rise or fall.E) B) and C)
F) A) and B)

Question 8

A news story states that "Videotapes lose their appeal as consumers switch to DVDs for movies." In a competitive market for the purchase of videotapes of movies,this situation would lead to a(n) :

Accepted Answer

A)   increase in the price of videotapes and the quantity sold.
B)   decrease in the price of videotapes and the quantity sold.
C)   increase in the price of videotapes and decrease in the quantity sold.
D)   decrease in the price of videotapes and increase in the quantity sold.E) A) and B)
F) None of the above

Question 9

For most commodities,purchases tend to rise with increases in buyers' incomes,and fall with decreases in buyers' incomes.Such commodities are known as:

Accepted Answer

A)   inferior goods.
B)   direct goods.
C)   average goods.
D)   normal goods.E) A) and D)
F) A) and C)

Question 10

We observe a market in which the price has risen and the quantity sold has risen as well.This could be caused by a(n) :

Accepted Answer

A)   increase in demand.
B)   increase in supply.
C)   decrease in demand.
D)   decrease in supply.E) None of the above
F) A) and B)

Question 11

The location of the supply curve of a product depends on:

Accepted Answer

A)   the technology used to produce it.
B)   the prices of resources used in its production.
C)   the number of sellers in the market.
D)   all of the above.E) A) and B)
F) A) and C)

Question 12

-The equation for the demand curve in the above diagram:

Accepted Answer

A)   is P = 70 - Q.
B)   is P = 35 - 2Q.
C)   is P = 35 - .5Q.
D)   cannot be determined from the information given.E) B) and C)
F) None of the above

Question 13

Which of the following would usually be an inferior good?

Accepted Answer

A)   French wines
B)   generic beer
C)   theatre tickets
D)   steakE) A) and B)
F) B) and C)

Question 14

An inferior good is:

Accepted Answer

A)   one whose demand curve will shift rightward as incomes rise.
B)   one whose price and quantity demanded varies directly.
C)   one which has not been approved by the federal Ministry of Agriculture.
D)   one whose demand curve will shift leftward as income rise.E) A) and B)
F) A) and C)

Question 15

-Which of the above diagrams illustrate(s) the effect of an increase in automobile worker wages on the market for automobiles?

Accepted Answer

A)   A only
B)   B only
C)   C only
D)   D onlyE) All of the above
F) B) and C)

Question 16

By an "increase in demand" we mean:

Accepted Answer

A)   that product price has fallen so consumers move down to a new point on the demand curve.
B)   the quantity demanded at each price in a set of prices is greater.
C)   the quantity demanded at each price in a set of prices is smaller.
D)   none of the above.E) None of the above
F) C) and D)

Question 17

-Refer to the above graph.X and Y are complementary products.Which one of the lines in the graph best illustrates this relationship?

Accepted Answer

A)   A
B)   B
C)   C
D)   DE) A) and B)
F) All of the above

Question 18

There will be a surplus of a product when:

Accepted Answer

A)   price is below the equilibrium level.
B)   the supply curve is downward sloping and the demand curve is upward sloping.
C)   the demand and supply curves fail to intersect.
D)   consumers want to buy less than producers offer for sale.E) B) and C)
F) C) and D)

Question 19

An increase in demand for oil and an increase in supply of oil will:

Accepted Answer

A)   decrease price and increase quantity.
B)   increase price and decrease quantity.
C)   increase quantity,but whether it increases price depends on how much each curve shifts.
D)   increase price,but whether it increases quantity depends on how much each curve shifts.E) A) and D)
F) None of the above

Question 20

A television station reports that the price of orange juice has declined but the quantity sold has increased.This situation would be caused by a(n) :

Accepted Answer

A)   increase in demand.
B)   increase in supply.
C)   decrease in demand.
D)   decrease in supply.E) A) and C)
F) A) and B)

Exam 3: Demand, Supply, and Market Equilibrium

An inferior good is:

Correct AnswerverifiedShow Answer

-Which of the above diagrams illustrate(s) the effect of an increase in automobile worker wages on the market for automobiles?

Correct AnswerverifiedShow Answer

A news story states that "Videotapes lose their appeal as consumers switch to DVDs for movies." In a competitive market for the purchase of videotapes of movies,this situation would lead to a(n) :

Correct AnswerverifiedShow Answer

When the price of one fruit increases,consumers buy more of another fruit.This situation is an illustration of:

Correct AnswerverifiedShow Answer

For most commodities,purchases tend to rise with increases in buyers' incomes,and fall with decreases in buyers' incomes.Such commodities are known as:

Correct AnswerverifiedShow Answer

-If peanut butter and grape jelly are complementary products,which diagram above illustrates the effect on the peanut butter market as a result of a decrease in the price of grape jelly?

Correct AnswerverifiedShow Answer

A television station reports that the price of orange juice has declined but the quantity sold has increased.This situation would be caused by a(n) :

Correct AnswerverifiedShow Answer

An increase in the price of corn:

Correct AnswerverifiedShow Answer

-The equation for the demand curve in the above diagram:

Correct AnswerverifiedShow Answer

We observe a market in which the price has risen and the quantity sold has risen as well.This could be caused by a(n) :

Correct AnswerverifiedShow Answer

-Refer to the above graph.X and Y are complementary products.Which one of the lines in the graph best illustrates this relationship?

Correct AnswerverifiedShow Answer

Which statement is not correct?

Correct AnswerverifiedShow Answer

By an "increase in demand" we mean:

Correct AnswerverifiedShow Answer

Surpluses drive market prices up;shortages drive them down.

Correct AnswerverifiedShow Answer

Which of the following would usually be an inferior good?

Correct AnswerverifiedShow Answer

With a downward sloping demand curve and an upward sloping supply curve for a product,an increase in incomes will:

Correct AnswerverifiedShow Answer

There will be a surplus of a product when:

Correct AnswerverifiedShow Answer

One reason why the quantity demanded of a good increases when its price falls is that the:

Correct AnswerverifiedShow Answer

The location of the supply curve of a product depends on:

Correct AnswerverifiedShow Answer

An increase in demand for oil and an increase in supply of oil will:

Correct AnswerverifiedShow Answer

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