Question 1

If the price of grapefruit rises,the substitution effect due to the price change will cause

Accepted Answer

A)   a decrease in the demand for grapefruit.
B)   a decrease in the demand for oranges, a substitute for grapefruit.
C)   a decrease in the quantity demanded of grapefruit.
D)   a decrease in the quantity supplied of grapefruit.

Question 2

What are the two effects that explain the law of demand? Briefly explain each effect.

Accepted Answer

The two effects that explain the law of ...

Question 3

Select the phrase that correctly completes the following statement.'An increase in input prices caused a decrease in the supply of baseballs; as a result,________.'

Accepted Answer

A)   the price of baseballs increased, and the demand for baseballs decreased
B)   the equilibrium quantity of baseballs increased
C)   the price of baseballs increased, and the quantity demanded of baseballs decreased
D)   the price of baseballs increased. The higher price caused the supply of baseballs to increase.

Question 4

In each of the following situations,list what will happen to the equilibrium price and the equilibrium quantity for a particular product,which is a normal good.
a.The population increases and the price of inputs increase.
b.The price of a complement increases and technology advances.
c.The number of firms in the market increases and income increases.
d.Price is expected to increase in the future.
e.Consumer preference increases and the price of a substitute in production decreases.

Accepted Answer

a.Price increases; quantity may increase...

Question 5

If the price of petrol decreases,what will be the impact in the market for public transportation?

Accepted Answer

A)   The demand curve for public transportation shifts to the right.
B)   The quantity of public transportation demanded increases.
C)   The demand curve for public transportation shifts to the left.
D)   The quantity of public transportation demanded decreases.

Question 6

A decrease in the equilibrium quantity for a product will result

Accepted Answer

A)   when the quantity demanded for the product exceeds the quantity supplied.
B)   when there is a decrease in supply and a decrease in demand for the product.
C)   when there is an increase in supply and a decrease in demand for the product.
D)   when there is a decrease in demand and a decrease in the number of firms producing the product.

Question 7

Which of the following statements is true?

Accepted Answer

A)   An increase in demand causes a change in equilibrium price; the change in price does not cause a further change in demand or supply.
B)   A decrease in supply causes equilibrium price to rise; the increase in price then results in a decrease in demand.
C)   If both demand and supply increase, there must be an increase in equilibrium price; equilibrium quantity may either increase or decrease.
D)   If demand decreases and supply increases, one cannot determine if equilibrium price will increase or decrease without knowing which change is greater.

Question 8

Which of the following is evidence of a shortage of walnuts?

Accepted Answer

A)   Firms lower the price of walnuts.
B)   The price of cashews is lowered in order to make up for the walnut shortage.
C)   The equilibrium price of walnuts falls due to a decrease in demand.
D)   The quantity demanded of walnuts is greater than the quantity supplied.

Question 9

The demand by all the consumers of a given good or service is the ________ for the good or service.

Accepted Answer

A)   market demand
B)   quantity demanded
C)   law of demand
D)   scheduled demand

Question 10

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.

Question 11

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 12

As the number of firms in a market increases,the supply curve will shift to the right and the equilibrium quantity will rise.

Accepted Answer

A) True 
 B)False

Question 13

Assume that the hourly price for the services of tarot card readers has risen and sales of these services have also risen.One can conclude that

Accepted Answer

A)   the law of demand has been violated.
B)   the number of tarot card readers has increased.
C)   the demand for tarot card readers has increased.
D)   tarot card readers are deliberately charging high prices because they provide services for superstitious clients.

Question 14

The income effect of a price change refers to the change in the quantity demanded of a good that results from a change in purchasing power as a result of the price change.

Accepted Answer

A) True 
 B)False

Question 15

Arnold Kim began blogging about Apple products during his fourth year of medical school.Kim's website,MacRumors.com,became so successful that he decided to give up his medical career and work full time on his website,despite the nearly $200 000 he had invested in his education.In making his decision,Kim decided to ignore the money and time he spent on his education.Economists would say that Kim made a

Accepted Answer

A)   rational decision to ignore these sunk costs.
B)   poor decision since he had already invested his time and money on his medical career.
C)   poor decision since doctors are in greater demand than bloggers.
D)   hasty decision by not waiting to recoup his financial investment before giving up his medical career.

Question 16

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 17

Scarcity is defined as the situation that exists when the quantity demanded for a good is greater than the quantity supplied.

Accepted Answer

A) True 
 B)False

Question 18

Let D = demand,S = supply,P = equilibrium price,Q = equilibrium quantity.What happens in the market for tropical hardwood trees if the government restricts the amount of forest lands that can be logged?

Accepted Answer

A)   D decreases, S no change, P and Q decrease
B)   S decreases, D no change, P increases, Q decreases
C)   D and S decrease, P and Q increase
D)   D no change, S decreases, P increases, Q increases

Question 19

Which of the following is evidence of a surplus of bananas?

Accepted Answer

A)   Firms raise the price of bananas.
B)   The price of bananas is lowered in order to increase sales.
C)   The equilibrium price of bananas rises due to an increase in demand.
D)   The quantity demanded of bananas is greater than the quantity supplied.

Question 20

The phrase 'demand has decreased' means that

Accepted Answer

A)   a demand curve has shifted to the left.
B)   there has been an upward movement along a demand curve.
C)   there has been a downward movement along a demand curve.
D)   a demand curve has shifted to the right.

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

The income effect of a price change refers to the change in the quantity demanded of a good that results from a change in purchasing power as a result of the price change.

Correct Answer
verified

If the price of grapefruit rises,the substitution effect due to the price change will cause

Correct Answer
verified

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

Correct Answer
verified

As the number of firms in a market increases,the supply curve will shift to the right and the equilibrium quantity will rise.

Correct Answer
verified

Assume that the hourly price for the services of tarot card readers has risen and sales of these services have also risen.One can conclude that

Correct Answer
verified

Which of the following is evidence of a shortage of walnuts?

Correct Answer
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What are the two effects that explain the law of demand? Briefly explain each effect.

Correct Answer
verified
The two effects that explain the law of ...
View Answer

Correct Answer
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Which of the following statements is true?

Correct Answer
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Which of the following is evidence of a surplus of bananas?

Correct Answer
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Correct Answer
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a.Price increases; quantity may increase...
View Answer

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

Let D = demand,S = supply,P = equilibrium price,Q = equilibrium quantity.What happens in the market for tropical hardwood trees if the government restricts the amount of forest lands that can be logged?

Correct Answer
verified

Scarcity is defined as the situation that exists when the quantity demanded for a good is greater than the quantity supplied.

Correct Answer
verified

A decrease in the equilibrium quantity for a product will result

Correct Answer
verified

If the price of petrol decreases,what will be the impact in the market for public transportation?

Correct Answer
verified

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

Correct Answer
verified

The demand by all the consumers of a given good or service is the ________ for the good or service.

Correct Answer
verified

The phrase 'demand has decreased' means that

Correct Answer
verified

Select the phrase that correctly completes the following statement.'An increase in input prices caused a decrease in the supply of baseballs; as a result,________.'

Correct Answer
verified

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

The income effect of a price change refers to the change in the quantity demanded of a good that results from a change in purchasing power as a result of the price change.

Correct AnswerverifiedShow Answer

If the price of grapefruit rises,the substitution effect due to the price change will cause

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

As the number of firms in a market increases,the supply curve will shift to the right and the equilibrium quantity will rise.

Correct AnswerverifiedShow Answer

Assume that the hourly price for the services of tarot card readers has risen and sales of these services have also risen.One can conclude that

Correct AnswerverifiedShow Answer

Which of the following is evidence of a shortage of walnuts?

Correct AnswerverifiedShow Answer

What are the two effects that explain the law of demand? Briefly explain each effect.

Correct AnswerverifiedThe two effects that explain the law of ...View AnswerShow Answer

Correct AnswerverifiedShow Answer

Which of the following statements is true?

Correct AnswerverifiedShow Answer

Which of the following is evidence of a surplus of bananas?

Correct AnswerverifiedShow Answer

Correct Answerverifieda.Price increases; quantity may increase...View AnswerShow 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

Let D = demand,S = supply,P = equilibrium price,Q = equilibrium quantity.What happens in the market for tropical hardwood trees if the government restricts the amount of forest lands that can be logged?

Correct AnswerverifiedShow Answer

Scarcity is defined as the situation that exists when the quantity demanded for a good is greater than the quantity supplied.

Correct AnswerverifiedShow Answer

A decrease in the equilibrium quantity for a product will result

Correct AnswerverifiedShow Answer

If the price of petrol decreases,what will be the impact in the market for public transportation?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The demand by all the consumers of a given good or service is the ________ for the good or service.

Correct AnswerverifiedShow Answer

The phrase 'demand has decreased' means that

Correct AnswerverifiedShow Answer

Select the phrase that correctly completes the following statement.'An increase in input prices caused a decrease in the supply of baseballs; as a result,________.'

Correct AnswerverifiedShow Answer

Correct Answer
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The two effects that explain the law of ...
View Answer

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Correct Answer
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Correct Answer
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a.Price increases; quantity may increase...
View Answer

Correct Answer
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