Question 1

You can spend $10 for lunch and you would like to purchase two cheeseburgers. When you get to the restaurant, you find out the price for cheeseburger has increased from $5 to $6, so you decide to purchase just one cheeseburger. This is best described as:

Accepted Answer

A)   the substitution effect of a price change.
B)   the income effect of a price change.
C)   a decrease in the buyer's reservation price.
D)   an increase in the buyer's reservation price.

Question 2

You have noticed that there is a persistent shortage of teachers in an inner-city school district in your state. Based on this observation, you suspect that:

Accepted Answer

A)   the wage for teachers in that district is higher than the wage in other districts.
B)   the wage for teachers in that district is lower than the equilibrium wage.
C)   there is an excess supply of teachers in other districts.
D)   the demand for teachers in the inner-city school district is too low.

Question 3

A market equilibrium:

Accepted Answer

A)   is socially optimal.
B)   leaves unexploited opportunities for individuals.
C)   might not maximize total economic surplus.
D)   is never socially optimal.

Question 4

Refer to the figure below. Assume demand remains unchanged at D1. If supply shifts from S1 to S2, then the equilibrium price will ______ and the equilibrium quantity will ______.

Accepted Answer

A)   rise; fall
B)   rise; rise
C)   fall; fall
D)   fall; rise

Question 5

Which of the following is NOT a characteristic of rent controls?

Accepted Answer

A)   Greater availability of apartments.
B)   Excess demand for apartments.
C)   Fewer newly built apartment buildings.
D)   Lower expenditures on maintenance.

Question 6

After the price of Revlon nail polish increased, Jen stopped buying Revlon nail polish and started buying a cheaper brand of nail polish instead. This is called:

Accepted Answer

A)   the substitution effect of a price change.
B)   the income effect of a price change.
C)   a decrease in the buyer's reservation price.
D)   a decrease in the seller's reservation price.

Question 7

An outcome is socially optimal if it:

Accepted Answer

A)   is an equilibrium outcome.
B)   leaves no unexploited opportunities for individuals.
C)   it is determined by the government.
D)   maximizes total economic surplus.

Question 8

A market equilibrium might not maximize total economic surplus because:

Accepted Answer

A)   efficiency is not an important social goal.
B)   in a market equilibrium individuals do not act rationally.
C)   in a market equilibrium individuals do not exploit all opportunities for individual gain.
D)   sometimes goods entail costs and benefits that do not fall on buyers and sellers.

Question 9

A demand curve is ______ sloping because ______.

Accepted Answer

A)   downward; of increasing opportunity costs
B)   upward; people prefer to purchase high-quality consumer goods
C)   downward; reservation prices tend to fall over time
D)   downward; fewer people are willing to buy an item at higher prices

Question 10

Refer to the figure below. Moving from demand curve D1 to demand curve D2 illustrates a(n) :

Accepted Answer

A)   increase in quantity demanded.
B)   increase in demand.
C)   decrease in demand.
D)   decrease in quantity demanded.

Question 11

Suppose that both the supply of iPads and the demand for iPads decrease. One can predict that the:

Accepted Answer

A)   equilibrium price will rise, but the change in equilibrium quantity is uncertain.
B)   equilibrium price and quantity will fall.
C)   equilibrium price and quantity will rise.
D)   equilibrium quantity will fall, but the change in equilibrium price is uncertain.

Question 12

Suppose that the equilibrium price of pickles falls while the equilibrium quantity rises. The most likely explanation for these changes is:

Accepted Answer

A)   a decrease in demand for pickles.
B)   an increase in demand for pickles.
C)   a decrease in the supply of pickles.
D)   an increase in the supply of pickles.

Question 13

The price of bananas will increase in response to:

Accepted Answer

A)   an excess supply of bananas.
B)   an excess demand for bananas.
C)   an increase quantity of bananas supplied.
D)   an increase in the supply of bananas.

Question 14

When the supply curve shifts to the left and there is no change in demand:

Accepted Answer

A)   the market cannot reestablish an equilibrium.
B)   the equilibrium price will fall.
C)   the equilibrium quantity will rise.
D)   the equilibrium price will rise.

Question 15

Suppose that as the price of apples rises, people switch from eating apples to eating oranges. This is known as:

Accepted Answer

A)   the normal effect of a price change.
B)   the income effect of a price change.
C)   a decrease in the demand for apples.
D)   the substitution effect of a price change.

Question 16

Refer to the table below. The equilibrium price in this market is:

Accepted Answer

A)   between $20 and $30.
B)   between $30 and $40.
C)   between $40 and $50.
D)   nonexistent.

Question 17

Suppose that Tom bought a bike from Helen for $195. If Helen's reservation price was $185, and Tom's reservation price was $215, the total economic surplus from this transaction was:

Accepted Answer

A)   $30
B)   $185
C)   $195
D)   $215

Question 18

The situation described in the book as "smart for one, dumb for all" occurs when:

Accepted Answer

A)   individuals act rationally, so there are no unexploited opportunities for society as a whole.
B)   individuals act rationally, but there are still unexploited opportunities for society as a whole.
C)   individuals make better decisions when they are alone than when they are part of a group.
D)   individuals make better decisions when they are part of a group than when they are alone.

Question 19

Refer to the figure below. What might cause a shift from the original demand curve to the new demand curve?

Accepted Answer

A)   An expectation that coffee prices will fall in the future.
B)   An increase in the price of coffee creamer.
C)   A decrease in the price of tea.
D)   An increase in consumers' tastes for coffee.

Question 20

Suppose you bought a concert ticket from Ticketmaster for $50, but when you get to the concert, there are a large number of people waiting outside who offer to pay you more than $50 for your ticket. What is probably true?

Accepted Answer

A)   There is an excess demand for tickets at the Ticketmaster price.
B)   The Ticketmaster price was above the equilibrium price.
C)   There is an excess supply of tickets at the Ticketmaster price.
D)   The Ticketmaster price is the equilibrium price.

Exam 2: Supply and Demand

Refer to the figure below. Moving from demand curve D1 to demand curve D2 illustrates a(n) :

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A market equilibrium might not maximize total economic surplus because:

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After the price of Revlon nail polish increased, Jen stopped buying Revlon nail polish and started buying a cheaper brand of nail polish instead. This is called:

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Suppose you bought a concert ticket from Ticketmaster for $50, but when you get to the concert, there are a large number of people waiting outside who offer to pay you more than $50 for your ticket. What is probably true?

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Which of the following is NOT a characteristic of rent controls?

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A demand curve is ______ sloping because ______.

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When the supply curve shifts to the left and there is no change in demand:

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Suppose that as the price of apples rises, people switch from eating apples to eating oranges. This is known as:

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Refer to the figure below. Assume demand remains unchanged at D1. If supply shifts from S1 to S2, then the equilibrium price will ______ and the equilibrium quantity will ______.

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The price of bananas will increase in response to:

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A market equilibrium:

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The situation described in the book as "smart for one, dumb for all" occurs when:

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Refer to the figure below. What might cause a shift from the original demand curve to the new demand curve?

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Suppose that the equilibrium price of pickles falls while the equilibrium quantity rises. The most likely explanation for these changes is:

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An outcome is socially optimal if it:

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Suppose that both the supply of iPads and the demand for iPads decrease. One can predict that the:

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Refer to the table below. The equilibrium price in this market is:

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You have noticed that there is a persistent shortage of teachers in an inner-city school district in your state. Based on this observation, you suspect that:

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You can spend $10 for lunch and you would like to purchase two cheeseburgers. When you get to the restaurant, you find out the price for cheeseburger has increased from $5 to $6, so you decide to purchase just one cheeseburger. This is best described as:

Correct AnswerverifiedShow Answer

Suppose that Tom bought a bike from Helen for $195. If Helen's reservation price was $185, and Tom's reservation price was $215, the total economic surplus from this transaction was:

Correct AnswerverifiedShow Answer

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A demand curve is sloping because .

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Refer to the figure below. Assume demand remains unchanged at D1. If supply shifts from S1 to S2, then the equilibrium price will and the equilibrium quantity will .

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