ECO Q & A
Suppose that at prices of $1, $2, $3, $4, and $5 forproduct Z, the corresponding quantities suppliedare 3, 4, 5, 6, and 7 units,respectively. Which of the following would increase the quantities supplied of Z to, say, 6, 8, 10, 12, and 14 units at these prices?
A. improved technology for producing Z
an increase in the prices of the resources used to make Z
an increase in theexcise tax on productZ
increases in theincomes of the buyers of Z
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-03 Describesupply and explain how it can change.
Test Bank: I Topic: Supply
Suppose that corn prices rise significantly. If farmers expect the price of corn to continue risingrelative to other crops, then we would expect
the supply of ethanol, a corn-based product, to increase.
consumer demand for wheat to fall.
C. the supply to increase as farmers plant more corn.
D. the supply to fall as farmers plant more of other crops.
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-03 Describesupply and explain how it can change.
Test Bank: I Topic: Supply
(1) Qd(2) Qd(3) Price(4) Qs(5) Qs5040$1070806050960708060850609070740501008063040 89.
Refer to the table.Ifdemand is represented by columns (3) and (1)and supply is represented by columns (3) and (4),equilibrium price and quantitywill be
A. $10 and 60 units.
B. $9 and 60 units.
$8 and 80 units.
$8 and 60 units.
AACSB: Knowledge Application
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-04 Relate how supply and demand interactto determine market equilibrium.
Test Bank: I Topic: Market Equilibrium
(1) Qd(2) Qd(3) Price(4) Qs(5) Qs5040$1070806050960708060850609070740501008063040 90.
Refer to the table.Inrelation to column (3), a change from column (2) to column (1) would indicate a(n)
A. increase in demand.
decrease in demand.
increase in supply.
decrease in supply.
AACSB: Knowledge Application
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-02 Describedemand and explain how it can change. LearningObjective: 03-04 Relate how supply and demand interactto determine market equilibrium.
Test Bank: I Topic: Demand
Topic: Market Equilibrium
(1) Qd(2) Qd(3) Price(4) Qs(5) Qs5040$1070806050960708060850609070740501008063040 91.
Refer to the table.Inrelation to column (3), a change from column (5) to column (4) would indicate a(n)
increase in demand.
decrease in demand.
increase in supply.
D. decrease in supply.
AACSB: Knowledge Application
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-03 Describesupply and explain how it can change. LearningObjective: 03-04 Relate how supply and demand interactto determine market equilibrium.
Test Bank: I Topic: Market Equilibrium
Topic: Supply
92.
(1) Qd(2) Qd(3) Price(4) Qs(5) Qs5040$1070806050960708060850609070740501008063040
Refer to the table.Suppose that demand is represented by columns (3) and (2) and supply is represented by columns (3) and (5). If the price were artificially set at $9,
A. the market would clear.
B. a surplus of 20 units would occur.
a shortage of 20 units would occur.
demand would change from columns (3) and (2) tocolumns (3) and (1).
AACSB: Analytical Thinking
Blooms: Remember Difficulty: 01 Easy
Learning Objective: 03-06 Identifywhat government-set prices are and how they can cause product surpluses and shortages.
Test Bank: I Topic: Application: Government-Set Prices
(1) Qd(2) Qd(3) Price(4) Qs(5) Qs5040$1070806050960708060850609070740501008063040 93.
Refer to the table.Suppose that demand is represented by columns (3) and (2) and supply is represented by columns (3) and (5). If the price were artificially set at $6,
the market would clear.
a surplus of 40 units wouldoccur.
C. a shortage of 40 units would occur.
D. demand would change from columns (3) and (2) to columns (3) and (1).
AACSB: Knowledge Application
Blooms: Remember Difficulty: 01 Easy
Learning Objective: 03-06 Identifywhat government-set prices are and how they can cause product surpluses and shortages.
Test Bank: I Topic: Application: Government-Set Prices
(1) Qd(2) Qd(3) Price(4) Qs(5) Qs5040$1070806050960708060850609070740501008063040 94.
Refer to the table.Inrelation to column (3), a change from column (1) to column (2) would mostly likelybe caused by
A. reduced taste for the good.
an increase in input prices.
consumers expecting that prices will be higher in the future.
government subsidizing production of the good.
AACSB: Knowledge Application
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-04 Relate how supply and demand interactto determine market equilibrium. Learning Objective: 03-06 Identify what government-set prices are and how they can cause productsurpluses and shortages.
Test Bank: I Topic: Application: Government-Set Prices
Topic: Market Equilibrium
(1) Qd(2) Qd(3) Price(4) Qs(5) Qs5040$1070806050960708060850609070740501008063040 95.
Refer to the table.Inrelation to column (3), a change from column (4) to column (5) would most likelybe caused by
A. government placing an excise tax on the good.
B. an improvement in production technology.
an increase in consumer income.
an increase in input prices.
AACSB: Knowledge Application
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-04 Relate how supply and demand interactto determine market equilibrium. Learning Objective: 03-06 Identify what government-set prices are and how they can cause productsurpluses and shortages.
Test Bank: I Topic: Application: Government-Set Prices
Topic: Market Equilibrium
96.
Answer the questionon the basis of the given supplyand demand data for wheat.
Bushels Demanded Per Month
Price PerBushel
Bushels Supplied Per Month
45
$5
77
50
4
73
56
3
68
61
2
61
67
1
57
Equilibrium price will be
A. $4.
B. $3.
C. $2.
D. $1.
97.
Answer the questionon the basis of the given supplyand demand data for wheat.
Bushels Demanded Per Month
Price PerBushel
Bushels Supplied Per Month
45
$5
77
50
4
73
56
3
68
61
2
61
67
1
57
If the price in this market was $4,
the market would clear; quantitydemanded would equal quantity supplied.
buyers would want to purchase more wheat than is currently being supplied.
C. farmers would not be able to sell all their wheat.
D. there would be a shortage of wheat.
AACSB: Knowledge Application
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-04 Relate how supply and demand interactto determine market equilibrium.
Test Bank: I Topic: Market Equilibrium
98.
Answer the questionon the basis of the given supplyand demand data for wheat.
Bushels Demanded Per Month
Price PerBushel
Bushels Supplied Per Month
45
$5
77
50
4
73
56
3
68
61
2
61
67
1
57
If price was initially $4 and free to fluctuate, we would expect the
A. quantity supplied to continue to exceed the quantitydemanded.
B. quantity of wheat suppliedtodecline as a resultof the subsequent price change.
quantity of wheat demandedto fall as a result of the subsequent price change.
price of wheat to rise.
AACSB: Knowledge Application
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-04 Relate how supply and demand interactto determine market equilibrium.
Test Bank: I Topic: Market Equilibrium
99.
Refer to the diagram. The equilibrium price and quantityin this market will be
A. $1.00 and 200. B. $1.60 and 130. C.$0.50 and 130. D. $1.60 and290.
AACSB: Knowledge Application
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-04 Relate how supply and demand interactto determine market equilibrium.
Test Bank: I Topic: Market Equilibrium
100.
Refer to the diagram. A surplus of 160units would be encountered if the price was
A. $1.10, that is, $1.60 minus $.50.
B. $1.60.
C. $1.00.
D. $0.50.
AACSB: Knowledge Application
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-04 Relate how supply and demand interactto determine market equilibrium.
Test Bank: I Topic: Market Equilibrium
101.
Refer to the diagram. A shortageof 160 units would be encountered if price was
A. $1.10, that is, $1.60 minus $.50. B. $1.60.
C. $1.00.
D. $0.50.
AACSB: Knowledge Application
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-04 Relate how supply and demand interactto determine market equilibrium.
Test Bank: I Topic: Market Equilibrium
If there is a surplus ofa product, its price
A. is below the equilibrium level.
B. is above the equilibrium level.
will rise in the near future.
is in equilibrium.
AACSB: Knowledge Application
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-04 Relate how supply and demand interactto determine market equilibrium.
Test Bank: I Topic: Market Equilibrium
A market is in equilibrium
provided thereis no surplus of theproduct.
at all prices above thatshown by the intersection of the supply and demandcurves.
C. if the amount producers want to sell is equal to the amount consumerswant to buy.
D. whenever the demand curve is downsloping and the supply curve is upsloping.
AACSB: Knowledge Application
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-04 Relate how supply and demand interactto determine market equilibrium.
Test Bank: I Topic: Market Equilibrium
If the demand and supply curves for product X are stable, a government-mandated increase in the price of X will
increase the supplyof X and decreasethe demand for X.
increase the demand for X and decreasethe supply of X.
C. increase the quantity supplied of X and decrease thequantity demanded of X.
D. decrease the quantity supplied of X and increase thequantity demanded of X.
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Remember Difficulty: 01 Easy
Learning Objective: 03-06 Identifywhat government-set prices are and how they can cause product surpluses and shortages.
Test Bank: I Topic: Application: Government-Set Prices
At the equilibrium price,
A. quantity supplied may exceed quantitydemanded or vice versa.
B. there are no pressures on price toeither rise or fall.
there are forces that cause price to rise.
there are forces that cause price to fall.
AACSB: Knowledge Application
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-04 Relate how supply and demand interactto determine market equilibrium.
Test Bank: I Topic: Market Equilibrium
106.
Refer to the diagram. A price of$60 in this market will resultin
equilibrium.
a shortage of 50 units.
a surplus of 50 units.
D. a surplus of 100 units.
AACSB: Knowledge Application
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-04 Relate how supply and demand interactto determine market equilibrium.
Test Bank: I Topic: Market Equilibrium
107.
Refer to the diagram. A price of$20 in this market will resultin a
shortage of 50 units.
surplus of 50 units.
surplus of 100 units.
D. shortage of 100 units.
AACSB: Knowledge Application
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-04 Relate how supply and demand interactto determine market equilibrium.
Test Bank: I Topic: Market Equilibrium
108.
Refer to the diagram. The highest price that buyers will be willingand able to pay for 100 units of this productis
A. $30.
B. $60.
C. $40.
D. $20.
AACSB: Knowledge Application
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-04 Relate how supply and demand interactto determine market equilibrium.
Test Bank: I Topic: Market Equilibrium
109.
Refer to the diagram. If this is a competitive market, price and quantitywill move toward
$60 and 100, respectively.
$60 and 200, respectively.
C. $40 and 150, respectively.
D. $20 and 150, respectively.
AACSB: Knowledge Application
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-04 Relate how supply and demand interactto determine market equilibrium.
Test Bank: I Topic: Market Equilibrium
At the point where the demand and supplycurves for a productintersect,
the selling price and the buying price need not be equal.
the market may, or may not, be in equilibrium.
either a shortage or a surplus of the product might exist,depending on the degree ofcompetition.
D. the quantity that consumers want to purchaseand the amount producerschoose to sell arethe same.
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-04 Relate how supply and demand interactto determine market equilibrium.
Test Bank: I Topic: Market Equilibrium
The rationing function of prices refers to the
tendency of supply and demand toshift in oppositedirections.
fact that ration coupons are needed to alleviate wartime shortagesof goods.
C. capacity of a competitive market to equalizequantity demandedandquantity supplied.
D. ability of themarket system togenerate an equitable distribution of income.
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-04 Relate how supply and demand interactto determine market equilibrium.
Test Bank: I Topic: Market Equilibrium
If there is a shortage of productX, and the priceis free to change,
A. fewer resources will be allocated to theproduction of this good.
B. the price of the product will rise.
the price of the product will decline.
the supply curve will shift to the left and the demand curve to the right,eliminating the shortage.
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-04 Relate how supply and demand interactto determine market equilibrium.
Test Bank: I Topic: Market Equilibrium
At the current price, there is a shortage of a product. We would expect price to
A. increase, quantity demanded to increase, and quantitysupplied to decrease.
B. increase, quantity demanded to decrease, and quantitysupplied to increase.
increase, quantity demanded toincrease, and quantitysupplied to increase.
decrease, quantitydemanded to increase, and quantitysupplied to decrease.
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-04 Relate how supply and demand interactto determine market equilibrium.
Test Bank: I Topic: Market Equilibrium
A surplus of a product will arise when price is
A. above equilibrium, with the result that quantity demanded exceeds quantity supplied.
B. above equilibrium, with the resultthat quantity suppliedexceeds quantity demanded.
below equilibrium, with the result that quantity demandedexceeds quantity supplied.
below equilibrium, with the resultthat quantity supplied exceeds quantity demanded.
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-04 Relate how supply and demand interactto determine market equilibrium.
Test Bank: I Topic: Market Equilibrium
If price is above the equilibrium level,competition among sellers to reduce theresulting
A. surplus will increase quantity demanded and decrease quantitysupplied.
shortage will decrease quantity demanded and increasequantity supplied.
surplus will decrease quantity demandedand increase quantitysupplied.
shortage will increase quantity demanded and decrease quantity supplied.
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-04 Relate how supply and demand interactto determine market equilibrium.
Test Bank: I Topic: Market Equilibrium
If we say that a price is too high to clear themarket, we mean that
quantity demanded exceeds quantity supplied.
the equilibrium price is above the current price.
C. quantity supplied exceeds quantity demanded.
D. the price of thegood is likely to rise.
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-04 Relate how supply and demand interactto determine market equilibrium.
Test Bank: I Topic: Market Equilibrium
Assume in a competitive market that price is initially above the equilibrium level. We can predict that price will
decrease, quantity demanded will decrease, andquantity supplied will increase.
decrease andquantity demanded and quantitysupplied will both decrease.
C. decrease, quantity demanded will increase, and quantity suppliedwill decrease.
D. increase, quantity demanded will decrease, and quantity suppliedwill increase.
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-04 Relate how supply and demand interactto determine market equilibrium.
Test Bank: I Topic: Market Equilibrium
Assume in a competitive market that price is initially below the equilibrium level.Wecan predict that price will
decrease, quantitydemanded will decrease, and quantity suppliedwill increase.
decrease andquantity demanded and quantitysupplied will both decrease.
increase, quantity demanded will increase,andquantity supplied will decrease.
D. increase, quantity demanded will decrease, and quantity suppliedwill increase.
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-04 Relate how supply and demand interactto determine market equilibrium.
Test Bank: I Topic: Market Equilibrium
A product market is in equilibrium
whenever there is no surplus of the product.
whenever there is no shortageof the product.
when consumers want to buy more of the product than producers offer for sale.
D. where the demand and supplycurves intersect.
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-04 Relate how supply and demand interactto determine market equilibrium.
Test Bank: I Topic: Market Equilibrium
There will be a surplus of a productwhen
price is below the equilibrium level.
the supply curve is downward slopingand the demand curve is upward sloping.
the demand and supply curves fail to intersect.
D. consumers want to buy less than producersoffer for sale.
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-04 Relate how supply and demand interactto determine market equilibrium.
Test Bank: I Topic: Market Equilibrium
Camille's Creations and Julia's Jewels both sell beads in a competitive market.Ifat the market price of $5 both are runningout of beads to sell (they can't keepupwith the quantitydemanded at that price),thenwe would expect both Camille's and Julia'sto
A. raise their price and reduce their quantity supplied.
B. raise their price and increase their quantitysupplied.
lower their price and reduce their quantity supplied.
lower their price and increase their quantity supplied.
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-04 Relate how supply and demand interactto determine market equilibrium.
Test Bank: I Topic: Market Equilibrium
Productive efficiency refersto
A. the use of the least-cost method of production.
the production of the product mix most wanted by society.
the full employment of all available resources.
production at some point inside of the production possibilities curve.
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-04 Relate how supply and demand interactto determine market equilibrium.
Test Bank: I Topic: Market Equilibrium
If an economy producesits most wantedgoods but uses outdated production methods, it is
A. achieving productive efficiency but not allocative efficiency.
B. not achieving productive efficiency.
achieving both productive and allocative efficiency.
engaged in roundabout production.
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-04 Relate how supply and demand interactto determine market equilibrium.
Test Bank: I Topic: Market Equilibrium
Allocative efficiencyis concerned with
A. producing the combination of goods most desired by society.
achieving the full employment of all available resources.
producing every good withthe least-cost combination of inputs.
reducing the concavity of the production possibilities curve.
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-04 Relate how supply and demand interactto determine market equilibrium.
Test Bank: I Topic: Market Equilibrium
Allocative efficiencyinvolves determining
which output mix will result in the most rapid rate of economic growth.
which production possibilities curve reflects the lowest opportunity costs.
C. the mix of output that will maximizesociety's satisfaction.