Question 1

Most markets in the economy are highly competitive.

Accepted Answer

A) True 
 B)False

Question 2

Suppose that Amanda receives a pay increase. We would expect

Accepted Answer

A)   to observe Amanda moving down and to the right along her given demand curve.
B)   Amanda's demand for inferior goods to decrease.
C)   Amanda's demand for each of two goods that are complements to increase.
D)   Amanda's demand for normal goods to decrease.E) B) and D)
F) B) and C)

Question 3

For the general population, a 10 percent increase in the price of cigarettes leads to a

Accepted Answer

A)   1 percent reduction in the quantity demanded of cigarettes.
B)   4 percent reduction in the quantity demanded of cigarettes.
C)   10 percent reduction in the quantity demanded of cigarettes.
D)   12 percent reduction in the quantity demanded of cigarettes.E) A) and B)
F) C) and D)

Question 4

If the demand for a good falls when income falls, then the good is called an inferior good.

Accepted Answer

A) True 
 B)False

Question 5

Figure 4-26 
-Refer to Figure 4-26. Which of the following movements would illustrate the effect in the market for paper napkins as a result of a "Go Green" advertising campaign encouraging people to use cloth napkins?

Accepted Answer

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

Question 6

Assume a market is perfectly competitive. When a new producer enters the market, the

Accepted Answer

A)   price in the market increases.
B)   price in the market decreases.
C)   price in the market does not change.
D)   market is no longer a competitive market.E) B) and D)
F) B) and C)

Question 7

Figure 4-9
Panel (a)  Panel (b)   
-Refer to Figure 4-9. The graphs show the demand for cigarettes. In Panel (b) , the arrows are consistent with which of the following events?

Accepted Answer

A)   an increase in the price of cigarettes
B)   placing a tax on cigarettes
C)   the prohibition of cigarette advertisements on television
D)   decreasing the price of marijuana, given that tobacco and marijuana are complementsE) A) and B)
F) A) and C)

Question 8

If the demand for a product decreases, then we would expect equilibrium price

Accepted Answer

A)   to increase and equilibrium quantity to decrease.
B)   to decrease and equilibrium quantity to increase.
C)   and equilibrium quantity to both increase.
D)   and equilibrium quantity to both decrease.E) All of the above
F) B) and C)

Question 9

The two words economists use most often are

Accepted Answer

A)   inflation and trade.
B)   supply and demand.
C)   competition and prices.
D)   markets and equilibrium.E) A) and D)
F) A) and B)

Question 10

In a market economy, supply and demand are important because they

Accepted Answer

A)   are direct policy tools used by government agencies to regulate the economy.
B)   illustrate when an market is in equilibrium, but they are not helpful when a market is out of equilibrium.
C)   can be used to predict the impact on the economy of various events and policies.
D)   All of the above are correct.E) B) and D)
F) None of the above

Question 11

If textbooks and study guides are complements, then an increase in the price of textbooks will result in

Accepted Answer

A)   more textbooks being sold.
B)   more study guides being sold.
C)   fewer study guides being sold.
D)   no difference in the quantity sold of either good.E) A) and B)
F) A) and C)

Question 12

If consumers often purchase muffins to eat while they drink their lattés at local coffee shops, what would happen to the equilibrium price and quantity of lattés if the price of muffins rises?

Accepted Answer

A)   Both the equilibrium price and quantity would increase.
B)   Both the equilibrium price and quantity would decrease.
C)   The equilibrium price would increase, and the equilibrium quantity would decrease.
D)   The equilibrium price would decrease, and the equilibrium quantity would increase.E) A) and C)
F) C) and D)

Question 13

Figure 4-27
Panel (a)  Panel (b)    Panel (c)  Panel (d)   
-Refer to Figure 4-27. Which of the four panels illustrates a decrease in quantity supplied?

Accepted Answer

A)   Panel (a) 
B)   Panel (b) 
C)   Panel (c) 
D)   Panel (d) E) None of the above
F) A) and B)

Question 14

A university's football stadium is always sold out, and students who wait in line for hours may be turned away. This indicates

Accepted Answer

A)   the ticket price is above the equilibrium price.
B)   the ticket price is below the equilibrium price.
C)   the ticket price is at the equilibrium price.
D)   nothing about the equilibrium price.E) A) and B)
F) C) and D)

Question 15

Figure 4-13 
-Refer to Figure 4-13. If Producer A and Producer B are the only producers in the market, then the market quantity supplied when the price is $4 is

Accepted Answer

A)   4 units.
B)   8 units.
C)   12 units.
D)   16 units.E) All of the above
F) A) and D)

Question 16

Ford Motor Company announces that next month it will offer $3,000 rebates on new Mustangs. As a result of this information, today's demand curve for Mustangs

Accepted Answer

A)   shifts to the right.
B)   shifts to the left.
C)   shifts either to the right or to the left, but we cannot determine the direction of the shift from the given information.
D)   will not shift; rather, the demand curve for Mustangs will shift to the right next month.E) All of the above
F) C) and D)

Question 17

A movement upward and to the right along a supply curve is called a(n)

Accepted Answer

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

Question 18

A decrease in the price of peanut butter will increase both the equilibrium price and quantity in the market for jelly.

Accepted Answer

A) True 
 B)False

Question 19

Monopolists are price takers.

Accepted Answer

A) True 
 B)False

Question 20

Supply and demand together determine the price and quantity of a good sold in a market.

Accepted Answer

A) True 
 B)False

Exam 4: The Market Forces of Supply and Demand

Suppose that Amanda receives a pay increase. We would expect

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A decrease in the price of peanut butter will increase both the equilibrium price and quantity in the market for jelly.

Correct AnswerverifiedShow Answer

If textbooks and study guides are complements, then an increase in the price of textbooks will result in

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Figure 4-9 Panel (a) Panel (b) -Refer to Figure 4-9. The graphs show the demand for cigarettes. In Panel (b) , the arrows are consistent with which of the following events?

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A movement upward and to the right along a supply curve is called a(n)

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Assume a market is perfectly competitive. When a new producer enters the market, the

Correct AnswerverifiedShow Answer

For the general population, a 10 percent increase in the price of cigarettes leads to a

Correct AnswerverifiedShow Answer

If consumers often purchase muffins to eat while they drink their lattés at local coffee shops, what would happen to the equilibrium price and quantity of lattés if the price of muffins rises?

Correct AnswerverifiedShow Answer

If the demand for a good falls when income falls, then the good is called an inferior good.

Correct AnswerverifiedShow Answer

Supply and demand together determine the price and quantity of a good sold in a market.

Correct AnswerverifiedShow Answer

Most markets in the economy are highly competitive.

Correct AnswerverifiedShow Answer

A university's football stadium is always sold out, and students who wait in line for hours may be turned away. This indicates

Correct AnswerverifiedShow Answer

Figure 4-13 -Refer to Figure 4-13. If Producer A and Producer B are the only producers in the market, then the market quantity supplied when the price is $4 is

Correct AnswerverifiedShow Answer

The two words economists use most often are

Correct AnswerverifiedShow Answer

Ford Motor Company announces that next month it will offer $3,000 rebates on new Mustangs. As a result of this information, today's demand curve for Mustangs

Correct AnswerverifiedShow Answer

Monopolists are price takers.

Correct AnswerverifiedShow Answer

Figure 4-26 -Refer to Figure 4-26. Which of the following movements would illustrate the effect in the market for paper napkins as a result of a "Go Green" advertising campaign encouraging people to use cloth napkins?

Correct AnswerverifiedShow Answer

If the demand for a product decreases, then we would expect equilibrium price

Correct AnswerverifiedShow Answer

Figure 4-27 Panel (a) Panel (b) Panel (c) Panel (d) -Refer to Figure 4-27. Which of the four panels illustrates a decrease in quantity supplied?

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In a market economy, supply and demand are important because they

Correct AnswerverifiedShow Answer

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