Question 1

The price elasticity of demand for a good or service is determined primarily by the

Accepted Answer

A)   size of the consumer surplus.
B)   availability of substitutes for the good.
C)   incomes of consumers.
D)   availability of complementary goods.E) A) and D)
F) A) and B)

Question 2

If the quantity of a good supplied is not very sensitive to the price of the good, economists say the supply of the good is relatively

Accepted Answer

A)   inelastic.
B)   elastic.
C)   robust.
D)   inverse.E) A) and B)
F) A) and C)

Question 3

The price of chicken increases as the result of higher beef prices. This indicates that

Accepted Answer

A)   chicken and beef are substitutes.
B)   chicken and beef are complements.
C)   the market demand for beef is inelastic.
D)   the market demand for chicken is elastic.E) B) and D)
F) None of the above

Question 4

When economists say the quantity supplied of a product has decreased, they mean the

Accepted Answer

A)   supply curve has shifted to the left.
B)   supply curve has shifted to the right.
C)   price of the product has risen, and consequently, suppliers are producing more of it.
D)   price of the product has fallen, and consequently, suppliers are producing less of it.E) All of the above
F) A) and B)

Question 5

The height of the demand curve for a product indicates the

Accepted Answer

A)   minimum price consumers are willing to pay for an additional unit of it.
B)   minimum quantity consumers are willing to purchase at the current price.
C)   maximum price consumers are willing to pay for an additional unit of it.
D)   minimum price required to induce suppliers to produce an additional unit of it.E) B) and C)
F) None of the above

Question 6

Which of the following would most likely decrease the current demand for DVD players?

Accepted Answer

A)   an increase in consumer income
B)   an increase in the prices of television sets, a complement for DVD players
C)   an expectation that the price of DVD players would rise sharply in the near future
D)   an increase in the price of VCRs, a substitute for DVD playersE) B) and D)
F) C) and D)

Question 7

Under competitive conditions, market prices

Accepted Answer

A)   generally convey little information about the value and cost of goods.
B)   do not usually have much of an effect on the decisions of individuals.
C)   are incapable of coordinating the actions of buyers and sellers.
D)   generally bring the self-interest of individuals into harmony with the general welfare.E) A) and D)
F) B) and C)

Question 8

A movement along a demand curve

Accepted Answer

A)   is called a change in demand.
B)   is the result of a change in the price of the good.
C)   can be caused by many things.
D)   means the product is inelastic.E) A) and B)
F) A) and C)

Question 9

How will an increase in the price of coffee affect the market for cocoa, a substitute good?

Accepted Answer

A)   The supply of cocoa will increase, leading to a reduction in the price of cocoa.
B)   The supply of cocoa will decrease, leading to an increase in the price of cocoa.
C)   The demand for cocoa will increase, leading to an increase in the price of cocoa.
D)   The demand for cocoa will decrease, leading to a reduction in the price of cocoa.E) C) and D)
F) A) and D)

Question 10

If people expect the price of shorts to rise next month, the demand for shorts will

Accepted Answer

A)   decrease now.
B)   increase now.
C)   stay the same now and increase next month.
D)   stay the same now and decrease next month.
E)   stay the same now and next month.F) A) and B)
G) C) and D)

Question 11

How would a decrease in the cost of production affect the market for video games?

Accepted Answer

A)   Supply would decrease, leading to an increase in price and a reduction in quantity sold.
B)   Supply would decrease, leading to a reduction in price and a reduction in quantity sold.
C)   Supply would increase, leading to an increase in price and an increase in quantity sold.
D)   Supply would increase, leading to a reduction in price and an increase in quantity sold.E) B) and D)
F) A) and C)

Question 12

Figure 3-15 1 to P2? A)  BCE B)  ACF C)  ABED D)  AFEB" class="answers-bank-image d-inline" rel="preload" > Refer to Figure 3-15. Which area represents the increase in producer surplus when the price rises from P1 to P2?

Accepted Answer

A)   BCE
B)   ACF
C)   ABED
D)   AFEBE) C) and D)
F) A) and B)

Question 13

Which of the following is a function performed by market prices?

Accepted Answer

A)   Market prices communicate information to buyers and sellers.
B)   Market prices coordinate the decisions of buyers and sellers.
C)   Market prices motivate entrepreneurs to produce those products that are currently most desired relative to their costs of production.
D)   All of the above are functions performed by market prices.E) B) and D)
F) None of the above

Question 14

Consumer surplus

Accepted Answer

A)   is the difference between total willingness to pay and the total amount actually paid.
B)   guarantees that the market value of a good in money is equal to the total economic value of the good.
C)   is always negative because of diminishing marginal utility.
D)   is the total area under a consumer's demand curve.E) A) and B)
F) B) and C)

Question 15

The current demand for automobiles would decrease if

Accepted Answer

A)   the price of gasoline fell.
B)   consumer income rose.
C)   consumers suddenly believed the price of automobiles would be sharply lower in the near future.
D)   consumers suddenly believed the price of automobiles would be sharply higher in the near future.E) B) and C)
F) A) and D)

Question 16

Figure 3-19  Refer to Figure 3-19. Sellers whose costs are greater than price are represented by segment

Accepted Answer

A)   AC
B)   CE
C)   BC
D)   CDE) None of the above
F) A) and D)

Question 17

An important assumption that is made when constructing a demand schedule is that

Accepted Answer

A)   only price and quantity matter in determining demand.
B)   people always want a certain amount of a product.
C)   demand is too important to be left to the economists.
D)   all other determinants of demand are held constant.
E)   demand has a positive slope.F) A) and C)
G) C) and D)

Question 18

If the demand for a good decreased, what would be the effect on the equilibrium price and quantity?

Accepted Answer

A)   Price would increase, and quantity would decrease.
B)   Price would decrease, and quantity would decrease.
C)   Price would increase, and quantity would increase.
D)   Price would decrease, and quantity would increase.E) A) and C)
F) B) and C)

Question 19

The maximum price that consumers are willing to pay for the hundredth unit of a good can be found as

Accepted Answer

A)   the height of the supply curve at a quantity of 100.
B)   the height of the demand curve at a quantity of 100.
C)   the difference between the height of the supply and demand curves at a quantity of 100.
D)   none of the above.E) None of the above
F) All of the above

Question 20

If Mateo is paid $25,000 to sell his crop of tomatoes even though he would have been willing to have sold the crop for as little as $20,000, this indicates that

Accepted Answer

A)   Mateo received no producer surplus from the transaction.
B)   Mateo received $5,000 of producer surplus from the transaction.
C)   Mateo received $20,000 of producer surplus from the transaction.
D)   Mateo received $25,000 of producer surplus from the transaction.E) B) and D)
F) All of the above

Exam 3: Demand, Supply, and the Market Process

Figure 3-19 Refer to Figure 3-19. Sellers whose costs are greater than price are represented by segment

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Consumer surplus

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If the demand for a good decreased, what would be the effect on the equilibrium price and quantity?

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Under competitive conditions, market prices

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Which of the following would most likely decrease the current demand for DVD players?

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The maximum price that consumers are willing to pay for the hundredth unit of a good can be found as

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The price of chicken increases as the result of higher beef prices. This indicates that

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Which of the following is a function performed by market prices?

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How would a decrease in the cost of production affect the market for video games?

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An important assumption that is made when constructing a demand schedule is that

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The price elasticity of demand for a good or service is determined primarily by the

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A movement along a demand curve

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If Mateo is paid $25,000 to sell his crop of tomatoes even though he would have been willing to have sold the crop for as little as $20,000, this indicates that

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When economists say the quantity supplied of a product has decreased, they mean the

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The current demand for automobiles would decrease if

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How will an increase in the price of coffee affect the market for cocoa, a substitute good?

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If people expect the price of shorts to rise next month, the demand for shorts will

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If the quantity of a good supplied is not very sensitive to the price of the good, economists say the supply of the good is relatively

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The height of the demand curve for a product indicates the

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Figure 3-15 Refer to Figure 3-15. Which area represents the increase in producer surplus when the price rises from P1 to P2?

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Figure 3-15 Refer to Figure 3-15. Which area represents the increase in producer surplus when the price rises from P₁ to P₂?

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