ECON STUDY Guide
LearningObjective: 03-04 Relate how supply and demand interactto determine market equilibrium.
Test Bank: I Topic: Market Equilibrium
Allocative efficiency refersto
A. the use of the least-cost method of production.
B. 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: KnowledgeApplication Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
LearningObjective: 03-04 Relate how supply and demand interactto determine market equilibrium.
Test Bank: I Topic: Market Equilibrium
Which of the following statements is true about productive and allocative efficiency?
A. Realizing allocative efficiency implies that productive efficiency has been realized.
Productive efficiency can only occur if there is also allocative efficiency.
Society can achieve either productive efficiency or allocative efficiency, but not both simultaneously.
Productive efficiency and allocative efficiency can only occur together;neither can occur without the other.
AACSB: KnowledgeApplication Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
LearningObjective: 03-04 Relate how supply and demand interactto determine market equilibrium.
Test Bank: I Topic: Market Equilibrium
Other things equal, an excise tax on a productwill
A. increase its supply.
B. increase its price.
increase the quantity sold.
increase its demand.
AACSB: KnowledgeApplication Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-05 Explain how changes in supply and demand affect equilibrium prices and quantities.
Test Bank: I Topic: Changesin Supply, Demand, and Equilibrium
Assuming conventional supply and demand curves, changes in thedeterminants of both supplyand demand will generally
A. alter both equilibrium price and quantity.
alter equilibrium quantity but not equilibrium price.
alter equilibrium price but not equilibrium quantity.
have noeffect on equilibrium price or quantity.
AACSB: KnowledgeApplication Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-05 Explain how changes in supply and demand affect equilibrium prices and quantities.
Test Bank: I Topic: Changesin Supply, Demand, and Equilibrium
Which of the following will cause a decrease in market equilibrium price and an increase in equilibrium quantity?
A. anincrease in supply
an increasein demand
a decrease in supply
a decrease in demand
AACSB: KnowledgeApplication Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-05 Explain how changes in supply and demand affect equilibrium prices and quantities.
Test Bank: I Topic: Changesin Supply, Demand, and Equilibrium
Suppose that in each of four successive years, producers sell more of their product and at lower prices.This could be explained
by small annual increases in supply accompanied by large annual increases in demand.
in terms of a stablesupply curve and increasing demand.
C. in terms of a stable demand curve and increasing supply.
D. as an exception to thelawof supply.
AACSB: KnowledgeApplication Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-05 Explain how changes in supply and demand affect equilibrium prices and quantities.
Test Bank: I Topic: Changesin Supply, Demand, and Equilibrium
Which of the following statements is correct?
A. If demand increases and supplydecreases, equilibrium price will fall.
B. If supply increases and demand decreases, equilibrium price will fall.
If demand decreases and supply increases, equilibrium price will rise.
If supply declines anddemand remains constant,equilibrium price will fall.
AACSB: KnowledgeApplication Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-05 Explain how changes in supply and demand affect equilibrium prices and quantities.
Test Bank: I Topic: Changesin Supply, Demand, and Equilibrium
In which of the following instances is the effecton equilibrium price (whether it rises, falls, or remains unchanged) dependent on the magnitudeof the shifts in supply anddemand?
A. demandrises and supplyrises
supply falls and demand remains constant
demand rises and supply falls
supply rises and demand falls
AACSB: KnowledgeApplication Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-05 Explain how changes in supply and demand affect equilibrium prices and quantities.
Test Bank: I Topic: Changesin Supply, Demand, and Equilibrium
135.
Refer to the diagram,which shows demand and supply conditions in the competitive market for product X.If the initial demand and supply curves are D0 and S0, equilibrium price and quantity will be
A. 0F and 0C, respectively.
0G and 0B, respectively.
0F and 0A, respectively.
0E and0B, respectively.
AACSB: KnowledgeApplication
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-05 Explain how changes in supply and demand affect equilibrium prices and quantities.
Test Bank: I Topic: Changesin Supply, Demand, and Equilibrium
136.
Refer to thediagram, which shows demand and supply conditionsin the competitive market for product X. Given D0, if thesupply curve moved from S0 to S1, then
A. supply has increased and equilibrium quantityhas decreased.
B. supply has decreased and equilibrium quantity has decreased.
there has been an increase in the quantity supplied.
supply has increased and price has risen to 0G.
AACSB: KnowledgeApplication
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-05 Explain how changes in supply and demand affect equilibrium prices and quantities.
Test Bank: I Topic: Changesin Supply, Demand, and Equilibrium
137.
Refer to thediagram, which shows demand and supply conditionsin the competitive market for product X.Ifsupply is S1 and demandD0, then
at any price above 0G a shortagewould occur.
0F represents a pricethatwould result in a surplus of AC.
a surplus of GH would occur.
D. 0F represents a price that would result in a shortage of AC.
AACSB: KnowledgeApplication
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-05 Explain how changes in supply and demand affect equilibrium prices and quantities.
Test Bank: I Topic: Changesin Supply, Demand, and Equilibrium
138.
Refer to the diagram,which shows demand and supply conditions in the competitive market for product X. A shift in the demandcurve from D0
to D1 might be caused by a(n)
A. decreasein income if X is an inferiorgood.
B. increase in the price ofcomplementary good Y.
increase in money incomes if X is a normal good.
increase in theprice of substitute product Y.
AACSB: KnowledgeApplication
Blooms: Understand Difficulty: 02 Medium
LearningObjective: 03-02 Describedemand and explain how it can change. Learning Objective: 03-05 Explain how changes in supply and demand affect equilibrium prices and quantities.
Test Bank: I Topic: Changesin Supply, Demand, and Equilibrium
Topic: Demand
139.
Refer to the diagram,which shows demand and supply conditions in the competitive market for product X.Other things equal, a shift of the supplycurve from S0 to S1 might be caused by a(n)
A. increase in thewagerates paid to laborers employedin the production of X.
government subsidyper unit of output paid to firms producing X.
decline in the price of the basic raw materialused in producingX.
increase in thenumber of firms producingX.
AACSB: KnowledgeApplication
Blooms: Understand Difficulty: 02 Medium
LearningObjective: 03-03 Describesupply and explain how it can change. Learning Objective: 03-05 Explain how changes in supply and demand affect equilibrium prices and quantities.
Test Bank: I Topic: Changesin Supply, Demand, and Equilibrium
Topic: Supply
If the supply anddemand curves for a product both decrease, then equilibrium
quantity must fall and equilibrium price must rise.
price must fall, but equilibrium quantity may rise, fall, or remain unchanged.
C. quantity must decline, but equilibrium price may rise, fall, or remain unchanged.
D. quantity and equilibrium price must both decline.
AACSB: KnowledgeApplication Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-05 Explain how changes in supply and demand affect equilibrium prices and quantities.
Test Bank: I Topic: Changesin Supply, Demand, and Equilibrium
If the supply of a product decreases and the demand for that product simultaneously increases, then equilibrium
A. price must rise, but equilibrium quantity may rise, fall, or remain unchanged.
price must rise and equilibrium quantitymust fall.
price and equilibrium quantity must both increase.
price and equilibrium quantitymust both decline.
AACSB: KnowledgeApplication Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-05 Explain how changes in supply and demand affect equilibrium prices and quantities.
Test Bank: I Topic: Changesin Supply, Demand, and Equilibrium
Assuming competitivemarkets with typical supplyand demand curves, which of the following statements is correct?
An increase in supply with a decreasein demand will result in an increasein price.
An increasein supply with no change in demand will resultin an increasein price.
An increasein supply with no change in demand will resultin a declinein sales.
D. An increase in demand with nochange in supplywill result in an increase in sales.
AACSB: KnowledgeApplication Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-05 Explain how changes in supply and demand affect equilibrium prices and quantities.
Test Bank: I Topic: Changesin Supply, Demand, and Equilibrium
143.
Refer to the diagram,inwhich S1 and D1 represent the original supply and demand curves and S2 andD2 the new curves.Inthis market
A. supply has decreasedand equilibrium price has increased.
B. demand has increased and equilibrium price has decreased.
demand has decreasedand equilibrium price has decreased.
demand has increased and equilibrium price has increased.
AACSB: KnowledgeApplication
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-05 Explain how changes in supply and demand affect equilibrium prices and quantities.
Test Bank: I Topic: Changesin Supply, Demand, and Equilibrium
144.
Refer to the diagram,inwhich S1 and D1 represent the original supply anddemand curves and S2 andD2 the new curves. In this market
A. the equilibrium positionhas shifted from M to K.
B. anincrease in demand has been more than offsetby an increase in supply.
the new equilibrium price and quantity are both greater than originally.
point M shows the new equilibrium position.
AACSB: KnowledgeApplication
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-05 Explain how changes in supply and demand affect equilibrium prices and quantities.
Test Bank: I Topic: Changesin Supply, Demand, and Equilibrium
145.
Refer to the diagram,inwhich S1 and D1 represent the original supply anddemand curves and S2 andD2 the new curves. In this market the indicatedshift in supply may havebeen caused by
A. an increase in the wages paid to workers producing this good.
B. the development of more efficientmachinery for producing this commodity.
this product becoming less fashionable.
an increase in consumer incomes.
AACSB: KnowledgeApplication
Blooms: Understand Difficulty: 02 Medium
LearningObjective: 03-03 Describesupply and explain how it can change. Learning Objective: 03-05 Explain how changes in supply and demand affect equilibrium prices and quantities.
Test Bank: I Topic: Changesin Supply, Demand, and Equilibrium
Topic: Supply
146.
Refer to the diagram,inwhich S1 and D1 represent the original supply anddemand curves and S2 andD2 the new curves. In this market the indicatedshift in demand may have been caused by
a declinein the number of buyers in the market.
a decline in the price of a substitute good.
C. anincrease in incomes if the product is a normal good.
D. an increase in incomes if the product is an inferiorgood.
AACSB: KnowledgeApplication Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
LearningObjective: 03-02 Describedemand and explain how it can change. Learning Objective: 03-05 Explain how changes in supply and demand affect equilibrium prices and quantities.
Test Bank: I Topic: Changesin Supply, Demand, and Equilibrium
Topic: Demand
147.
In the following question you are asked todetermine, other things equal, the effects of a given change in a determinant of demand orsupply for product X upon (1) thedemand (D) for, or supply (S) of,X;(2) the equilibrium price (P) of X; and (3) theequilibrium quantity (Q) of X.
If X is a normal good, an increase in income will
A. increase D,increase P, and increase Q.
increase D, increase P, and decrease Q.
increase S, increase P, and increase Q.
decrease D, increase P,and increase Q.
AACSB: KnowledgeApplication Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-05 Explain how changes in supply and demand affect equilibrium prices and quantities.
Test Bank: I Topic: Changesin Supply, Demand, and Equilibrium
148.
In the following question you are asked todetermine, other things equal, the effects of a given change in a determinant of demand orsupply for product X upon (1) thedemand (D) for, or supply (S) of,X;(2) the equilibrium price (P) of X; and (3) theequilibrium quantity (Q) of X.
An increase in the price of a productthat is a close substitute for X will
decrease D, increase P,anddecrease Q.
increase D, increase P, and decrease Q.
C. increase D,increase P, and increase Q.
D. increase D, decrease P, and increaseQ.
AACSB: KnowledgeApplication Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-05 Explain how changes in supply and demand affect equilibrium prices and quantities.
Test Bank: I Topic: Changesin Supply, Demand, and Equilibrium
149.
In the following question you are asked todetermine, other things equal, the effects of a given change in a determinant of demand orsupply for product X upon (1) thedemand (D) for, or supply (S) of,X;(2) the equilibrium price (P) of X; and (3) theequilibrium quantity (Q) of X.
A decrease in the number of consumersof product X will
decrease S, decrease P, and decrease Q.
increase D, increase P, and increase Q.
C. decrease D, decrease P,anddecrease Q.
D. decreaseD, decreaseP, and increaseQ.
AACSB: KnowledgeApplication Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-05 Explain how changes in supply and demand affect equilibrium prices and quantities.
Test Bank: I Topic: Changesin Supply, Demand, and Equilibrium
150.
In the following question you are asked todetermine, other things equal, the effects of a given change in a determinant of demand orsupply for product X upon (1) thedemand (D) for, or supply (S) of,X;(2) the equilibrium price (P) of X; and (3) theequilibrium quantity (Q) of X.
An increase in the prices of resources used to produce X will
increase S, increase P, and increase Q.
increase D, increase P, and increase Q.
decrease S, decreaseP, and decrease Q.
D. decrease S, increaseP, and decreaseQ.
AACSB: KnowledgeApplication Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-05 Explain how changes in supply and demand affect equilibrium prices and quantities.
Test Bank: I Topic: Changesin Supply, Demand, and Equilibrium
151.
In the following question you are asked todetermine, other things equal, the effects of a given change in a determinant of demand orsupply for product X upon (1) thedemand (D) for, or supply (S) of,X;(2) the equilibrium price (P) of X; and (3) theequilibrium quantity (Q) of X.
An improvement in thetechnology used to produceX will
decrease S, increase P,anddecrease Q.
decrease S, increaseP, and increase Q.
C. increase S, decrease P, and increaseQ.
D. decreaseD, decreaseP, and decreaseQ.
AACSB: KnowledgeApplication Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-05 Explain how changes in supply and demand affect equilibrium prices and quantities.
Test Bank: I Topic: Changesin Supply, Demand, and Equilibrium
152.
In the following question you are asked todetermine, other things equal, the effects of a given change in a determinant of demand orsupply for product X upon (1) thedemand (D) for, or supply (S) of,X;(2) the equilibrium price (P) of X; and (3) theequilibrium quantity (Q) of X.
A reductionin the number of firms producingX will
increase D,increase P, and increase Q.
increase S, decrease P, and increase Q.
C. decrease S, increaseP, and decreaseQ.
D. decreaseS, decrease P,and increase Q.
AACSB: KnowledgeApplication Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-05 Explain how changes in supply and demand affect equilibrium prices and quantities.
Test Bank: I Topic: Changesin Supply, Demand, and Equilibrium
153.
In the following question you are asked todetermine, other things equal, the effects of a given change in a determinant of demand orsupply for product X upon (1) thedemand (D) for, or supply (S) of,X;(2) the equilibrium price (P) of X; and (3) theequilibrium quantity (Q) of X.
An increase in the price of a productthat is a complementto X will
A. decreaseS, decrease P,anddecrease Q.
B. decrease D, decrease P, and decrease Q.
increase D, increase P, and increase Q.
increase D,increase P, and decrease Q.
AACSB: KnowledgeApplication Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-05 Explain how changes in supply and demand affect equilibrium prices and quantities.
Test Bank: I Topic: Changesin Supply, Demand, and Equilibrium
154.
In the following question you are asked todetermine, other things equal, the effects of a given change in a determinant of demand orsupply for product X upon (1) thedemand (D) for, or supply (S) of,X;(2) the equilibrium price (P) of X; and (3) theequilibrium quantity (Q) of X.
If X is an inferiorgood, a decrease in income will
decrease D, decreaseP, and decreaseQ.
decrease D, decrease P, and increaseQ.
increase S, decrease P, and increase Q.
D. increase D,increase P, and increase Q.
AACSB: KnowledgeApplication Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-05 Explain how changes in supply and demand affect equilibrium prices and quantities.
Test Bank: I Topic: Changesin Supply, Demand, and Equilibrium
155.
In the following question you are asked todetermine, other things equal, the effects of a given change in a determinant of demand orsupply for product X upon (1) thedemand (D) for, or supply (S) of,X;(2) the equilibrium price (P) of X; and (3) theequilibrium quantity (Q) of X.
Consumer expectations that the price of X will rise sharplyin the future will
A. increase S, increase P, and increase Q.
B. increase D, increase P, and increase Q.
decrease S, increaseP, and increase Q.
increase D, decrease P, and increaseQ.
AACSB: KnowledgeApplication Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-05 Explain how changes in supply and demand affect equilibrium prices and quantities.
Test Bank: I Topic: Changesin Supply, Demand, and Equilibrium
Data from the registrar's office at GiganticState University indicatethat over the past 20 years tuition and enrollment have both increased. From this information we can concludethat
higher education is an exceptionto the law of demand.
the supplyof education provided by GSU hasalso increased over the20-year period.
C. factors such as school-agepopulation, incomes, and preferences for education have increasedover the 20-yearperiod.
D. GSU's supply curve of educationis downsloping.
AACSB: KnowledgeApplication Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-05 Explain how changes in supply and demand affect equilibrium prices and quantities.
Test Bank: I Topic: Changesin Supply, Demand, and Equilibrium
One can say with certaintythat equilibrium price will decline when supply
A. and demand both decrease.
B. increases anddemand decreases.
decreases and demand increases.
and demand both increase.
AACSB: KnowledgeApplication Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-05 Explain how changes in supply and demand affect equilibrium prices and quantities.
Test Bank: I Topic: Changesin Supply, Demand, and Equilibrium
Suppose that in 2007, Ford sold 500,000 Mustangs at an averageprice of $18,800 per car; in 2008,600,000 Mustangs were sold atan average price of$19,500 per car.These statements
suggest that the demand for Mustangs decreased between 2007 and 2008.
suggest that the supply of Mustangs must have increased between 2007 and2008.
C. suggest that the demand for Mustangs increased between 2007 and 2008.
D. constitute an exceptionto the law of demand in that they suggest an upslopingdemand curve.
AACSB: KnowledgeApplication Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
LearningObjective: 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
Since their introduction,prices of Blu-rayplayers have fallen and the quantity purchased has increased.Thisstatement
A. suggests that the supply of Blu-rayplayers has increased.
suggests that the demand for Blu-ray players has increased.
constitutes an exceptionto the law of demand in that they suggest an upward-sloping demand curve.
constitutes an exceptionto the law of supplyin that they suggest a downward-sloping supply curve.
AACSB: KnowledgeApplication Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
LearningObjective: 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
160.
Which of the diagramsillustrates the effect of an increase in automobile worker wages on the market for automobiles?
A only
B only
C only
D. Donly
AACSB: KnowledgeApplication
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-05 Explain how changes in supply and demand affect equilibrium prices and quantities.
Test Bank: I Topic: Changesin Supply, Demand, and Equilibrium
161.
Which of the diagramsillustrate(s) the effect of a decline in the price of personalcomputers on the market for software?
A. Aonly
A and D
B only
D only
AACSB: KnowledgeApplication
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-05 Explain how changes in supply and demand affect equilibrium prices and quantities.
Test Bank: I Topic: Changesin Supply, Demand, and Equilibrium
162.
Which of the diagramsillustrate(s) the effect of a decrease in incomes on the market for second-hand clothing?
A. A and C
B. Aonly
B only
C only
AACSB: KnowledgeApplication
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-05 Explain how changes in supply and demand affect equilibrium prices and quantities.
Test Bank: I Topic: Changesin Supply, Demand, and Equilibrium
163.
Which of the diagramsillustrates the effect of a governmental subsidy on the market for AIDS research?
A only
B only
C. Conly
D. D only
AACSB: KnowledgeApplication
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-05 Explain how changes in supply and demand affect equilibrium prices and quantities.
Test Bank: I Topic: Changesin Supply, Demand, and Equilibrium
164.
Which of the diagramsillustrate(s) the effect of a decline in the price of irrigation equipment on the market for corn?
A. B only
B. Conly
B and C
D only
AACSB: KnowledgeApplication
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-05 Explain how changes in supply and demand affect equilibrium prices and quantities.
Test Bank: I Topic: Changesin Supply, Demand, and Equilibrium
With a downsloping demand curve and an upsloping supply curvefora product, an increasein consumer income will
A. increase equilibrium price and quantity if the product is a normal good.
decrease equilibrium price and quantityif the productis a normal good.
have no effect on equilibrium price and quantity.
reduce thequantity demanded but not shift the demand curve.
AACSB: KnowledgeApplication Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-05 Explain how changes in supply and demand affect equilibrium prices and quantities.
Test Bank: I Topic: Changesin Supply, Demand, and Equilibrium
With a downsloping demand cu