Question 1

A government subsidy to the producers of a product

Accepted Answer

A)   reduces product supply.
B)   increases product supply.
C)   reduces product demand.
D)   increases product demand.E) A) and B)
F) B) and C)

Question 2

In markets where the supply curve is vertical, changes in

Accepted Answer

A)   demand will not cause the equilibrium price to change.
B)   supply will not cause the equilibrium price to change.
C)   demand will not cause the equilibrium quantity to change.
D)   supply will not cause the equilibrium quantity to change.E) None of the above
F) B) and C)

Question 3

A price floor in a competitive market will result in persistent shortages of a product.

Accepted Answer

A) True 
 B)False

Question 4

If demand increases and supply simultaneously decreases, equilibrium price will rise.

Accepted Answer

A) True 
 B)False

Question 5

A government-set price floor on a product

Accepted Answer

A)   does not interfere with the rationing function of price in a market system.
B)   will drive resources away from the production of the product.
C)   will attract more resources toward the production of the product.
D)   is intended to benefit the buyers of the product.E) All of the above
F) A) and D)

Question 6

All of the following are assumed to be constant when the supply curve for a product is drawn, except the

Accepted Answer

A)   price of the product.
B)   production technology used by the firm.
C)   number of producers.
D)   price of inputs used to make the product.E) None of the above
F) A) and B)

Question 7

Since their introduction, prices of Blu-ray players have fallen and the quantity purchased has increased. This statement

Accepted Answer

A)   suggests that the supply of Blu-ray players has increased.
B)   suggests that the demand for Blu-ray players has increased.
C)   constitutes an exception to the law of demand in that they suggest an upward-sloping demand curve.
D)   constitutes an exception to the law of supply in that they suggest a downward-sloping supply curve.E) None of the above
F) A) and B)

Question 8

In constructing a demand curve for product X,

Accepted Answer

A)   consumer preferences are allowed to vary.
B)   the prices of other goods are assumed constant.
C)   money incomes are allowed to vary.
D)   the supply curve of product X is assumed constant.E) A) and B)
F) A) and C)

Question 9

A decrease in the demand for recreational fishing boats might be caused by an increase in the

Accepted Answer

A)   income of sports fishers.
B)   price of outboard motors.
C)   size and number of fish available.
D)   price of sailing boats.E) A) and D)
F) C) and D)

Question 10

Allocative efficiency is concerned with

Accepted Answer

A)   producing the combination of goods most desired by society.
B)   achieving the full employment of all available resources.
C)   producing every good with the least-cost combination of inputs.
D)   reducing the concavity of the production possibilities curve.E) All of the above
F) B) and C)

Question 11

If the price of a product decreases, we would expect

Accepted Answer

A)   demand to increase.
B)   quantity supplied to decrease.
C)   supply to decrease.
D)   quantity supplied to increase.E) A) and B)
F) A) and C)

Question 12

When central planners in a command economy end up having a huge surplus of shoes and widespread shortages of bread in their economy, they have failed to attain

Accepted Answer

A)   productive efficiency.
B)   allocative efficiency.
C)   minimum opportunity costs.
D)   maximum process and revenues.E) B) and D)
F) B) and C)

Question 13

All of the following would affect the position of the supply curve for cranberries, except the

Accepted Answer

A)   popularity of cranberry drinks.
B)   price of agricultural land for cranberries.
C)   cost of fertilizers for cranberry production.
D)   development of a new pest control for cranberries.E) All of the above
F) B) and C)

Question 14

In the foreign exchange market, if Canadian companies import more products from the U.S., then the demand for Canadian dollars will increase.

Accepted Answer

A) True 
 B)False

Question 15

If the demand curve for product B shifts to the right as the price of product A declines, then

Accepted Answer

A)   both A and B are inferior goods.
B)   A is a superior good and B is an inferior good.
C)   A is an inferior good and B is a superior good.
D)   A and B are complementary goods.E) B) and C)
F) None of the above

Question 16

Assume that the demand curve for product C is downsloping. If the price of C falls from $2.00 to $1.75,

Accepted Answer

A)   a smaller quantity of C will be demanded.
B)   a larger quantity of C will be demanded.
C)   the demand for C will increase.
D)   the demand for C will decrease.E) A) and D)
F) B) and C)

Question 17

Assume the demand curve for product X shifts to the right. This might be caused by

Accepted Answer

A)   a decline in income if X is an inferior good.
B)   a decline in the price of Z if X and Z are substitute goods.
C)   a change in consumer tastes that is unfavorable to X.
D)   an increase in the price of Y if X and Y are complementary goods.E) A) and B)
F) A) and C)

Question 18

If product Y is an inferior good, a decrease in consumer incomes will

Accepted Answer

A)   make buyers want to buy less of Product Y.
B)   not affect the sales of product Y.
C)   shift the demand curve for product Y to the left.
D)   shift the demand curve for product Y to the right.E) A) and D)
F) C) and D)

Question 19

Assuming competitive markets with typical supply and demand curves, which of the following statements is correct?

Accepted Answer

A)   An increase in supply with a decrease in demand will result in an increase in price.
B)   An increase in supply with no change in demand will result in an increase in price.
C)   An increase in supply with no change in demand will result in a decline in sales.
D)   An increase in demand with no change in supply will result in an increase in sales.E) A) and D)
F) A) and B)

Question 20

Assume that the graphs show a competitive market for the product stated in the question.   Select the graph above that best shows the change in the market specified in the following situation: the market for digital cameras, when the productivity of workers in the digital camera industry increases.

Accepted Answer

A)   Graph A
B)   Graph B
C)   Graph C
D)   Graph DE) All of the above
F) None of the above

Exam 3: Demand, Supply, and Market Equilibrium

In constructing a demand curve for product X,

Correct AnswerverifiedShow Answer

If demand increases and supply simultaneously decreases, equilibrium price will rise.

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Assume that the demand curve for product C is downsloping. If the price of C falls from $2.00 to $1.75,

Correct AnswerverifiedShow Answer

A decrease in the demand for recreational fishing boats might be caused by an increase in the

Correct AnswerverifiedShow Answer

Since their introduction, prices of Blu-ray players have fallen and the quantity purchased has increased. This statement

Correct AnswerverifiedShow Answer

If product Y is an inferior good, a decrease in consumer incomes will

Correct AnswerverifiedShow Answer

Assume that the graphs show a competitive market for the product stated in the question. Select the graph above that best shows the change in the market specified in the following situation: the market for digital cameras, when the productivity of workers in the digital camera industry increases.

Correct AnswerverifiedShow Answer

Assume the demand curve for product X shifts to the right. This might be caused by

Correct AnswerverifiedShow Answer

All of the following are assumed to be constant when the supply curve for a product is drawn, except the

Correct AnswerverifiedShow Answer

A price floor in a competitive market will result in persistent shortages of a product.

Correct AnswerverifiedShow Answer

In the foreign exchange market, if Canadian companies import more products from the U.S., then the demand for Canadian dollars will increase.

Correct AnswerverifiedShow Answer

When central planners in a command economy end up having a huge surplus of shoes and widespread shortages of bread in their economy, they have failed to attain

Correct AnswerverifiedShow Answer

If the price of a product decreases, we would expect

Correct AnswerverifiedShow Answer

If the demand curve for product B shifts to the right as the price of product A declines, then

Correct AnswerverifiedShow Answer

In markets where the supply curve is vertical, changes in

Correct AnswerverifiedShow Answer

All of the following would affect the position of the supply curve for cranberries, except the

Correct AnswerverifiedShow Answer

A government subsidy to the producers of a product

Correct AnswerverifiedShow Answer

A government-set price floor on a product

Correct AnswerverifiedShow Answer

Assuming competitive markets with typical supply and demand curves, which of the following statements is correct?

Correct AnswerverifiedShow Answer

Allocative efficiency is concerned with

Correct AnswerverifiedShow Answer

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