Question 1

A and B are substitute goods, but A and C are complementary goods. If the cost of producing A decreases, then the demand for

Accepted Answer

A)   both B and C will decrease.
B)   both B and C will increase.
C)   B will increase and the demand for C will decrease.
D)   B will decrease and the demand for C will increase.E) A) and B)
F) A) and C)

Question 2

In the following question you are asked to determine, other things equal, the effects of a given change in a determinant of demand or supply for product X upon (1)  the demand (D)  for, or supply (S)  of, X; (2)  the equilibrium price (P)  of X; and (3)  the equilibrium quantity (Q)  of X. A decrease in the number of consumers of product X will

Accepted Answer

A)   decrease S, decrease P, and decrease Q.
B)   increase D, increase P, and increase Q.
C)   decrease D, decrease P, and decrease Q.
D)   decrease D, decrease P, and increase Q.E) A) and B)
F) A) and C)

Question 3

In the following question you are asked to determine, other things equal, the effects of a given change in a determinant of demand or supply for product X upon (1)  the demand (D)  for, or supply (S)  of, X; (2)  the equilibrium price (P)  of X; and (3)  the equilibrium quantity (Q)  of X. An increase in the price of a product that is a complement to X will

Accepted Answer

A)   decrease S, decrease P, and decrease Q.
B)   decrease D, decrease P, and decrease Q.
C)   increase D, increase P, and increase Q.
D)   increase D, increase P, and decrease Q.E) None of the above
F) B) and D)

Question 4

Suppose that a more efficient way to produce a good is discovered, thus lowering production costs for the good. This will cause a(n)

Accepted Answer

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

Question 5

If consumer incomes increase, the demand for product X

Accepted Answer

A)   will necessarily remain unchanged.
B)   may shift either to the right or left.
C)   will necessarily shift to the right.
D)   will necessarily shift to the left.E) A) and D)
F) A) and C)

Question 6

If the supply of a product decreases and the demand for that product simultaneously increases, then equilibrium

Accepted Answer

A)   price must rise, but equilibrium quantity may rise, fall, or remain unchanged.
B)   price must rise and equilibrium quantity must fall.
C)   price and equilibrium quantity must both increase.
D)   price and equilibrium quantity must both decline.E) A) and D)
F) All of the above

Question 7

Suppose that tacos and pizza are substitutes, and that soda and pizza are complements. We would expect an increase in the price of pizza to

Accepted Answer

A)   reduce the demand for tacos and increase the demand for soda.
B)   reduce the demand for soda and increase the demand for tacos.
C)   increase the demand for both soda and tacos.
D)   reduce the demand for both soda and tacos.E) A) and C)
F) C) and D)

Question 8

A higher price reduces the quantity demanded for a product because

Accepted Answer

A)   the purchasing power of individuals increases.
B)   the financial assets of individuals increase.
C)   individuals will buy more of the product and less of its substitutes.
D)   individuals can afford less of the product and will switch to substitutes.E) C) and D)
F) All of the above

Question 9

Which of the following will not cause a change in the demand for product A?

Accepted Answer

A)   a change in the number of buyers
B)   a change in the price of A
C)   a decline in consumer incomes
D)   a decrease in the price of close-substitute product BE) All of the above
F) B) and C)

Question 10

Steve went to his favorite hamburger restaurant with $3, expecting to buy a $2 hamburger and a $1 soda. When he arrived, he discovered that hamburgers were on sale for $1 each, so Steve bought two hamburgers and a soda. Steve's response to the decrease in the price of hamburgers is best explained by

Accepted Answer

A)   the substitution effect.
B)   the income effect.
C)   the price effect.
D)   a rightward shift in the demand curve for hamburgers.E) None of the above
F) A) and B)

Question 11

In cases where sellers have a fixed number of units of a product to sell, the supply curve will be horizontal.

Accepted Answer

A) True 
 B)False

Question 12

If products C and D are close substitutes, an increase in the price of C will

Accepted Answer

A)   tend to cause the price of D to fall.
B)   shift the demand curve for C to the left and the demand curve for D to the right.
C)   shift the demand curve for D to the right.
D)   shift the demand curves of both products to the right.E) A) and D)
F) B) and C)

Question 13

Which of the following is most likely to be an inferior good?

Accepted Answer

A)   gold watches
B)   ocean cruises
C)   used clothing
D)   steakE) B) and C)
F) B) and D)

Question 14

Which statement is true about supply?

Accepted Answer

A)   There is an inverse relationship between price and quantity supplied.
B)   Supply refers to the amount of inventory that sellers have in their warehouses.
C)   As price decreases, producers are willing to put more of the good on the market for sale.
D)   To entice producers to offer more of a good on the market for sale, price must rise.E) B) and D)
F) None of the above

Question 15

Assume in a competitive market that price is initially below the equilibrium level. We can predict that price will

Accepted Answer

A)   decrease, quantity demanded will decrease, and quantity supplied will increase.
B)   decrease and quantity demanded and quantity supplied will both decrease.
C)   increase, quantity demanded will increase, and quantity supplied will decrease.
D)   increase, quantity demanded will decrease, and quantity supplied will increase.E) A) and B)
F) All of the above

Question 16

(Consider This)  Suppose that salsa manufacturers sell 2 million bottles at $3.50 in one year and 3 million bottles at $3 in the next year. Based on this information, we can conclude that the

Accepted Answer

A)   law of supply has been violated.
B)   law of demand has been violated.
C)   demand for salsa has increased.
D)   supply of salsa has increased.E) A) and D)
F) A) and B)

Question 17

The demand for most products varies directly with changes in consumer incomes. Such products are known as

Accepted Answer

A)   complementary goods.
B)   competitive goods.
C)   inferior goods.
D)   normal goods.E) C) and D)
F) B) and D)

Question 18

Which of the following factors is a "demand shifter" for new houses?

Accepted Answer

A)   the price of lumber
B)   wages for construction workers
C)   the price of new houses
D)   the interest rates on mortgage loansE) A) and D)
F) C) and D)

Question 19

There is a surplus of tomatoes in the market. This implies that

Accepted Answer

A)   the current price is set above the equilibrium level.
B)   the price will be rising, as a result.
C)   supply of tomatoes is more than the demand.
D)   quantity demanded is more than quantity supplied.E) A) and B)
F) A) and C)

Question 20

The market system automatically corrects a surplus condition in a competitive market by

Accepted Answer

A)   raising the price of the commodity in question while increasing the quantity demanded.
B)   raising the price of the commodity in question while decreasing the quantity demanded.
C)   reducing the price of the commodity in question while increasing the quantity demanded.
D)   reducing the price of the commodity in question while decreasing the quantity demanded.E) C) and D)
F) None of the above

Exam 3: Demand, Supply, and Market Equilibrium

A and B are substitute goods, but A and C are complementary goods. If the cost of producing A decreases, then the demand for

Correct Answer
verified

Correct Answer
verified

There is a surplus of tomatoes in the market. This implies that

Correct Answer
verified

(Consider This) Suppose that salsa manufacturers sell 2 million bottles at $3.50 in one year and 3 million bottles at $3 in the next year. Based on this information, we can conclude that the

Correct Answer
verified

Which statement is true about supply?

Correct Answer
verified

Correct Answer
verified

Which of the following factors is a "demand shifter" for new houses?

Correct Answer
verified

Suppose that a more efficient way to produce a good is discovered, thus lowering production costs for the good. This will cause a(n)

Correct Answer
verified

In cases where sellers have a fixed number of units of a product to sell, the supply curve will be horizontal.

Correct Answer
verified

The market system automatically corrects a surplus condition in a competitive market by

Correct Answer
verified

Which of the following is most likely to be an inferior good?

Correct Answer
verified

The demand for most products varies directly with changes in consumer incomes. Such products are known as

Correct Answer
verified

If the supply of a product decreases and the demand for that product simultaneously increases, then equilibrium

Correct Answer
verified

Suppose that tacos and pizza are substitutes, and that soda and pizza are complements. We would expect an increase in the price of pizza to

Correct Answer
verified

Assume in a competitive market that price is initially below the equilibrium level. We can predict that price will

Correct Answer
verified

Steve went to his favorite hamburger restaurant with $3, expecting to buy a $2 hamburger and a $1 soda. When he arrived, he discovered that hamburgers were on sale for $1 each, so Steve bought two hamburgers and a soda. Steve's response to the decrease in the price of hamburgers is best explained by

Correct Answer
verified

If products C and D are close substitutes, an increase in the price of C will

Correct Answer
verified

A higher price reduces the quantity demanded for a product because

Correct Answer
verified

If consumer incomes increase, the demand for product X

Correct Answer
verified

Which of the following will not cause a change in the demand for product A?

Correct Answer
verified

Exam 3: Demand, Supply, and Market Equilibrium

A and B are substitute goods, but A and C are complementary goods. If the cost of producing A decreases, then the demand for

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

There is a surplus of tomatoes in the market. This implies that

Correct AnswerverifiedShow Answer

(Consider This) Suppose that salsa manufacturers sell 2 million bottles at $3.50 in one year and 3 million bottles at $3 in the next year. Based on this information, we can conclude that the

Correct AnswerverifiedShow Answer

Which statement is true about supply?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following factors is a "demand shifter" for new houses?

Correct AnswerverifiedShow Answer

Suppose that a more efficient way to produce a good is discovered, thus lowering production costs for the good. This will cause a(n)

Correct AnswerverifiedShow Answer

In cases where sellers have a fixed number of units of a product to sell, the supply curve will be horizontal.

Correct AnswerverifiedShow Answer

The market system automatically corrects a surplus condition in a competitive market by

Correct AnswerverifiedShow Answer

Which of the following is most likely to be an inferior good?

Correct AnswerverifiedShow Answer

The demand for most products varies directly with changes in consumer incomes. Such products are known as

Correct AnswerverifiedShow Answer

If the supply of a product decreases and the demand for that product simultaneously increases, then equilibrium

Correct AnswerverifiedShow Answer

Suppose that tacos and pizza are substitutes, and that soda and pizza are complements. We would expect an increase in the price of pizza to

Correct AnswerverifiedShow Answer

Assume in a competitive market that price is initially below the equilibrium level. We can predict that price will

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If products C and D are close substitutes, an increase in the price of C will

Correct AnswerverifiedShow Answer

A higher price reduces the quantity demanded for a product because

Correct AnswerverifiedShow Answer

If consumer incomes increase, the demand for product X

Correct AnswerverifiedShow Answer

Which of the following will not cause a change in the demand for product A?

Correct AnswerverifiedShow Answer

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