Question 1

If Z is an inferior good, a decrease in money income will shift the:

Accepted Answer

A)  supply curve for Z to the left.
B)  supply curve for Z to the right.
C)  demand curve for Z to the left.
D)  demand curve for Z to the right.E) B) and C)
F) A) and B)

Question 2

When product prices change, consumers are inclined to purchase larger amounts of the now cheaper products and less of the now dearer products.This describes:

Accepted Answer

A)  the cost effect.
B)  the price effect.
C)  the income effect.
D)  the substitution effect.E) A) and B)
F) All of the above

Question 3

Which of the following will cause a decrease in market equilibrium price and an increase in equilibrium quantity?

Accepted Answer

A)  an increase in supply
B)  an increase in demand
C)  a decrease in supply
D)  a decrease in demandE) All of the above
F) C) and D)

Question 4

If peanut butter and cheese spread are substitute products, which diagram above illustrates the effect on the peanut butter market of a decrease in the price of cheese spread?

Accepted Answer

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

Question 5

The demand for commodity X is represented by the equation P = 10 - 0.2Q and supply by the equation P = 2 + 0.2Q.Refer to the above information.After the change in demand, the new equilibrium quantity is:

Accepted Answer

A)  10
B)  20
C)  15
D)  30E) A) and B)
F) A) and C)

Question 6

According to the rationing function of prices, a competitive market will:

Accepted Answer

A)  achieve an equilibrium price.
B)  eliminate shortages.
C)  eliminate surplus.
D)  all of these.E) A) and C)
F) None of the above

Question 7

1 to S3? A) a decrease in the price of fertilizer B) an increase in the price of irrigation equipment C) an increase in consumer incomes D) a change in consumer tastes in favour of cornbread" class="answers-bank-image d-inline" rel="preload" > Refer to the above diagram, which shows three supply curves for corn.Which of the following would cause the change in the supply of corn illustrated by the shift from S1 to S3?

Accepted Answer

A)  a decrease in the price of fertilizer
B)  an increase in the price of irrigation equipment
C)  an increase in consumer incomes
D)  a change in consumer tastes in favour of cornbreadE) None of the above
F) A) and D)

Question 8

If the supply schedule for a product is upward sloping and the price of that product declines from $100 to $75, the:

Accepted Answer

A)  supply of the product will shift to the left.
B)  supply of the product will shift to the right.
C)  quantity supplied of the product will decline.
D)  quantity supplied of the product will increase.E) A) and D)
F) A) and C)

Question 9

One can say with certainty that equilibrium quantity will increase when supply:

Accepted Answer

A)  and demand both decrease.
B)  increases and demand decreases.
C)  decreases and demand increases.
D)  and demand both increase.E) All of the above
F) C) and D)

Question 10

In a competitive market the equilibrium price and quantity occur where:

Accepted Answer

A)  the downward sloping demand curve intersects the upward sloping supply curve.
B)  the upward sloping demand curve intersects the downward sloping supply curve.
C)  consumers and suppliers bargain to a mutually acceptable price.
D)  quantity demanded exceeds quantity supplied or vice versa.E) None of the above
F) B) and C)

Question 11

The demand curve shows the relationship between:

Accepted Answer

A)  money income and quantity demanded.
B)  price and production costs.
C)  price and quantity demanded.
D)  consumer tastes and the quantity demanded.E) A) and B)
F) B) and D)

Question 12

An "increase in the quantity supplied" suggests a:

Accepted Answer

A)  rightward shift of the supply curve.
B)  movement up along the supply curve.
C)  movement down along the supply curve.
D)  leftward shift of the supply curve.E) B) and C)
F) A) and B)

Question 13

Tennis rackets and ballpoint pens are:

Accepted Answer

A)  substitute goods.
B)  complementary goods.
C)  inferior goods.
D)  independent goods.E) A) and B)
F) A) and C)

Question 14

Shortages and surpluses can occur in markets other than those in which government imposes the price floors and ceilings.This phenomenon could be explained by the action of seller(s) :

Accepted Answer

A)  because they set the prices in advance of sales and these prices happen to be below the equilibrium prices.
B)  because they set the prices in advance of sales and these prices happen to be above the equilibrium prices.
C)  because they do not set the prices in advance.
D)  because they set the prices in advance of sales and these prices happen to be below or above equilibrium prices.E) B) and C)
F) B) and D)

Question 15

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

Question 16

We observe a market where the price has risen and the quantity being sold has declined.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) B) and C)
F) A) and D)

Question 17

The further a ceiling price is below the equilibrium price, the smaller will be the shortage of the product.

Accepted Answer

A) True 
 B)False

Question 18

If consumer tastes or preferences for a product increase, the demand for the product will tend to decrease.

Accepted Answer

A) True 
 B)False

Question 19

The higher a price floor is above the equilibrium price, the greater will be the surplus output.

Accepted Answer

A) True 
 B)False

Question 20

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) C) and D)
F) None of the above

Exam 3: Part B: Demand, Supply, and Market Equilibrium

If Z is an inferior good, a decrease in money income will shift the:

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Tennis rackets and ballpoint pens are:

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In a competitive market the equilibrium price and quantity occur where:

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One can say with certainty that equilibrium quantity will increase when supply:

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An inferior good is:

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The further a ceiling price is below the equilibrium price, the smaller will be the shortage of the product.

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If consumer tastes or preferences for a product increase, the demand for the product will tend to decrease.

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Refer to the above diagram, which shows three supply curves for corn.Which of the following would cause the change in the supply of corn illustrated by the shift from S1 to S3?

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We observe a market where the price has risen and the quantity being sold has declined.This could be caused by a(n) :

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The equation for the demand curve in the above diagram:

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An "increase in the quantity supplied" suggests a:

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When product prices change, consumers are inclined to purchase larger amounts of the now cheaper products and less of the now dearer products.This describes:

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If the supply schedule for a product is upward sloping and the price of that product declines from $100 to $75, the:

Correct AnswerverifiedShow Answer

If peanut butter and cheese spread are substitute products, which diagram above illustrates the effect on the peanut butter market of a decrease in the price of cheese spread?

Correct AnswerverifiedShow Answer

The higher a price floor is above the equilibrium price, the greater will be the surplus output.

Correct AnswerverifiedShow Answer

Shortages and surpluses can occur in markets other than those in which government imposes the price floors and ceilings.This phenomenon could be explained by the action of seller(s) :

Correct AnswerverifiedShow Answer

Which of the following will cause a decrease in market equilibrium price and an increase in equilibrium quantity?

Correct AnswerverifiedShow Answer

The demand curve shows the relationship between:

Correct AnswerverifiedShow Answer

According to the rationing function of prices, a competitive market will:

Correct AnswerverifiedShow Answer

The demand for commodity X is represented by the equation P = 10 - 0.2Q and supply by the equation P = 2 + 0.2Q.Refer to the above information.After the change in demand, the new equilibrium quantity is:

Correct AnswerverifiedShow Answer

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Refer to the above diagram, which shows three supply curves for corn.Which of the following would cause the change in the supply of corn illustrated by the shift from S₁ to S₃?

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