Question 1

Figure 3-23
 
-Refer to Figure 3-23. The movement from point A to point B on the graph would be caused by

Accepted Answer

A)   an increase in price.
B)   a decrease in price.
C)   a decrease in the price of a substitute good.
D)   an increase in income.

Question 2

According to Adam Smith, what is the primary source of a nation's wealth?

Accepted Answer

A)   The amount of gold and silver in the government's possession.
B)   A spirit of cooperation in which people share according to their means.
C)   Strong central planning authorities.
D)   The people's ability to produce products and trade in free markets.

Question 3

When a conflict arises in a major oil-exporting area of the world, such as the Middle East, the price of gasoline already in the storage tanks at local gas stations usually increases. Which of the following best explains this occurrence?

Accepted Answer

A)   Gas station owners anticipate consumers will buy more gasoline as gasoline prices increase.
B)   Gas station owners are attempting to repeal the laws of supply and demand.
C)   Gas station owners anticipate higher replacement costs for their supply of gasoline and, therefore, raise their prices in response to this higher expected cost.
D)   A decline in consumer demand generally causes gas station owners to raise their prices.

Question 4

An increase in the demand for tattoos will lead to a

Accepted Answer

A)   higher price and a larger quantity sold.
B)   lower price and a larger quantity sold.
C)   higher price and a smaller quantity sold.
D)   lower price and a smaller quantity sold.

Question 5

Assume that supply increases greatly and demand increases slightly. Which of the following will happen?

Accepted Answer

A)   Equilibrium price will fall and equilibrium quantity will rise.
B)   Equilibrium price will rise and equilibrium quantity will fall.
C)   Equilibrium price will rise and equilibrium quantity will rise.
D)   Equilibrium price will fall and equilibrium quantity will fall.
E)   Neither equilibrium price nor equilibrium quantity will change.

Question 6

Figure 3-16
 
-Refer to Figure 3-16. When the price falls from P₂ to P₁, producer surplus

Accepted Answer

A)   decreases by an amount equal to C.
B)   decreases by an amount equal to A + B.
C)   decreases by an amount equal to A + C.
D)   increases by an amount equal to A + B.

Question 7

Between 1994 and 2004, the monthly charge for cellular phone service decreased from $120 per month to $30 per month. At the same time, the number of subscribers increased from less than 10 million to more than 75 million. Which of the following provides the best explanation for these changes?

Accepted Answer

A)   an increase in consumer income between 1994 and 2004
B)   a reduction in the price of residential phone service, a substitute for cellular phone service
C)   an increase in the wages of workers in the cellular phone industry
D)   technological improvements that reduced the cost of supplying cellular phone service

Question 8

Figure 3-22

-Refer to Figure 3-22. Which of the four graphs represents the market for cars as a result of the adoption of new technology on assembly lines?

Accepted Answer

A)   A
B)   B
C)   C
D)   D

Question 9

Use the figure below to answer the following question(s) .
Figure 3-13
 
-Refer to Figure 3-13. The market for margarine was initially in equilibrium at point

Accepted Answer

A)   r.
B)   s.
C)   t.
D)   u.
E)   Other things constant, an increase in the price of soybean oil, an important ingredient used to produce margarine, would likely move the equilibrium in this market toward point

Question 10

An agricultural economist reports that corn prices are very high this year and that corn growers are earning substantial profits. He concludes that government action is needed to direct more farmers to grow corn. Is such action necessary? Why or why not?

Accepted Answer

No government action is necessary to dir...

Question 11

Figure 3-22

-Refer to Figure 3-22. Suppose the events depicted in graphs A and C were illustrated together on a single graph. A definitive result of the two events would be

Accepted Answer

A)   an increase in the equilibrium quantity.
B)   an increase in the equilibrium price.
C)   an instance in which the law of demand fails to hold.
D)   All of the above are correct.

Question 12

After a hurricane in Florida knocked out the regional water supply for several days, the demand for bottled water increased sharply. In a market economy, how will this increase in demand affect the equilibrium price and quantity of bottled water?

Accepted Answer

A)   Price will increase, and quantity will decrease.
B)   Price will decrease, and quantity will decrease.
C)   Price will decrease, and quantity will increase.
D)   Price will increase, and quantity will increase.

Question 13

How would a decrease in consumer income affect the market for new furniture?

Accepted Answer

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

Question 14

Use the figure below to answer the following question(s) .
Figure 3-13
 
-Refer to Figure 3-13. The market for margarine was initially in equilibrium at point

Accepted Answer

A)   r.
B)   s.
C)   t.
D)   u.
E)   Other things constant, a decrease in the price of butter, a close substitute for margarine, would likely move the equilibrium in this market toward point

Question 15

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

Accepted Answer

A)   BCE
B)   ACF
C)   DEF
D)   AFEB

Question 16

Which of the following observations was made famous by Adam Smith in his book The Wealth of Nations?

Accepted Answer

A)   There is no such thing as a free lunch.
B)   People buy more when prices are low than when prices are high.
C)   No matter how much people earn, they tend to spend more than they earn.
D)   Households and firms interacting in markets are guided by an "invisible hand" that leads them to desirable market outcomes.

Question 17

Which of the following would most likely cause the price of wheat to decline?

Accepted Answer

A)   an increase in the production costs of corn, a substitute for wheat
B)   a decrease in the price of soybeans, a substitute for wheat
C)   an increase in the price of fertilizer, a resource used to produce wheat
D)   a sandwich craze among Americans, causing increased demand for whole-wheat bread

Question 18

Which of the following is most likely to result in higher prices of tickets at movie theatres near your campus?

Accepted Answer

A)   an unexpected increase in enrollment at your college
B)   lower electricity rates that reduces the cost of keeping the theater at a comfortable temperature
C)   lower prices for video tape and DVD movie rentals in the stores near your campus
D)   an increase in tuition at your school that lowers enrollment

Question 19

Prices direct economic activity in a market economy by

Accepted Answer

A)   influencing the actions of buyers and sellers.
B)   reducing scarcity of the goods and services produced.
C)   eliminating the need for government intervention.
D)   allocating goods and services in the most equitable way.

Question 20

Figure 3-18
 
-Refer to Figure 3-18. When the price falls from P₁ to P₂, which area represents the increase in consumer surplus to new buyers entering the market?

Accepted Answer

A)   ABD
B)   ACF
C)   BCDE
D)   DEF

Exam 3: B : Supply, Demand, and the Market Process

Figure 3-22 -Refer to Figure 3-22. Which of the four graphs represents the market for cars as a result of the adoption of new technology on assembly lines?

Correct AnswerverifiedShow Answer

Figure 3-18 -Refer to Figure 3-18. When the price falls from P₁ to P₂, which area represents the increase in consumer surplus to new buyers entering the market?

Correct AnswerverifiedShow Answer

Use the figure below to answer the following question(s) . Figure 3-13 -Refer to Figure 3-13. The market for margarine was initially in equilibrium at point

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Use the figure below to answer the following question(s) . Figure 3-13 -Refer to Figure 3-13. The market for margarine was initially in equilibrium at point

Correct AnswerverifiedShow Answer

Figure 3-16 -Refer to Figure 3-16. When the price falls from P₂ to P₁, producer surplus

Correct AnswerverifiedShow Answer

Which of the following is most likely to result in higher prices of tickets at movie theatres near your campus?

Correct AnswerverifiedShow Answer

An increase in the demand for tattoos will lead to a

Correct AnswerverifiedShow Answer

Which of the following would most likely cause the price of wheat to decline?

Correct AnswerverifiedShow Answer

Prices direct economic activity in a market economy by

Correct AnswerverifiedShow Answer

Between 1994 and 2004, the monthly charge for cellular phone service decreased from $120 per month to $30 per month. At the same time, the number of subscribers increased from less than 10 million to more than 75 million. Which of the following provides the best explanation for these changes?

Correct AnswerverifiedShow Answer

When a conflict arises in a major oil-exporting area of the world, such as the Middle East, the price of gasoline already in the storage tanks at local gas stations usually increases. Which of the following best explains this occurrence?

Correct AnswerverifiedShow Answer

How would a decrease in consumer income affect the market for new furniture?

Correct AnswerverifiedShow Answer

Assume that supply increases greatly and demand increases slightly. Which of the following will happen?

Correct AnswerverifiedShow Answer

Which of the following observations was made famous by Adam Smith in his book The Wealth of Nations?

Correct AnswerverifiedShow Answer

Figure 3-23 -Refer to Figure 3-23. The movement from point A to point B on the graph would be caused by

Correct AnswerverifiedShow Answer

An agricultural economist reports that corn prices are very high this year and that corn growers are earning substantial profits. He concludes that government action is needed to direct more farmers to grow corn. Is such action necessary? Why or why not?

Correct AnswerverifiedNo government action is necessary to dir...View AnswerShow Answer

According to Adam Smith, what is the primary source of a nation's wealth?

Correct AnswerverifiedShow Answer

Figure 3-22 -Refer to Figure 3-22. Suppose the events depicted in graphs A and C were illustrated together on a single graph. A definitive result of the two events would be

Correct AnswerverifiedShow Answer

After a hurricane in Florida knocked out the regional water supply for several days, the demand for bottled water increased sharply. In a market economy, how will this increase in demand affect the equilibrium price and quantity of bottled water?

Correct AnswerverifiedShow Answer

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No government action is necessary to dir...
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