Question 1

A price fixed above the equilibrium price of a product will cause a shortage of that product.

Accepted Answer

A) True 
 B)False

Question 2

What is the likely effect on the market for wine of a simultaneous increase in both consumer incomes and producer taxes on wine?

Accepted Answer

A)  an increase in both price and quantity
B)  an increase in price and a decrease in output
C)  a decrease in price and an indeterminate effect on quantity
D)  an increase in price and an indeterminate effect on quantityE) A) and B)
F) B) and C)

Question 3

1 and D1 represent the original supply and demand curves and S2 and D2 the new curves.In this market: A) supply has decreased and equilibrium price has increased. B) demand and Supply have increased and equilibrium price has decreased. C) demand has decreased and equilibrium price has decreased. D) demand has increased and equilibrium price has increased." class="answers-bank-image d-inline" rel="preload" > Refer to the above diagram, in which S1 and D1 represent the original supply and demand curves and S2 and D2 the new curves.In this market:

Accepted Answer

A)  supply has decreased and equilibrium price has increased.
B)  demand and Supply have increased and equilibrium price has decreased.
C)  demand has decreased and equilibrium price has decreased.
D)  demand has increased and equilibrium price has increased.E) None of the above
F) All of the above

Question 4

The law of supply is illustrated by a curve which is:

Accepted Answer

A)  horizontal.
B)  downward sloping.
C)  vertical.
D)  upward sloping.E) All of the above
F) B) and C)

Question 5

An unusually bountiful crop of coffee beans might:

Accepted Answer

A)  increase the supply of coffee.
B)  increase the price of coffee.
C)  decrease the quantity of coffee consumed.
D)  increase the price of tea.E) A) and D)
F) A) and C)

Question 6

Immigration to Canada from many parts of the world has increased the demand for a whole range of ethnic goods and services, particularly in:

Accepted Answer

A)  Southern Ontario and British Columbia.
B)  Alberta and Quebec.
C)  Newfoundland and Nova Scotia.
D)  New Brunswick and Quebec.E) None of the above
F) C) and D)

Question 7

If an effective legal ceiling is imposed on credit card interest rates:

Accepted Answer

A)  such credit would be less readily available.
B)  annual credit card fees would fall.
C)  the product prices charged by merchants who issue credit cards would fall.
D)  more credit cards will be issued.E) A) and B)
F) A) and C)

Question 8

Assume in a competitive market that price is initially below the equilibrium level.We can predict that price will:

Accepted Answer

A)  decrease, quantity demanded will decrease, and quantity supplied will increase.
B)  decrease and quantity demanded and quantity supplied will both decrease.
C)  decrease, quantity demanded will increase, and quantity supplied will decrease.
D)  increase, quantity demanded will decrease, and quantity supplied will increase.E) A) and C)
F) B) and C)

Question 9

The law of supply states that, ceteris paribus, there is an inverse relationship between the price of a good and the quantity supplied of the good.

Accepted Answer

A) True 
 B)False

Question 10

Suppose that a severe freeze destroys a sizable portion of the lettuce crop.As a result:

Accepted Answer

A)  quantity supplied will decrease, equilibrium price will increase and, demand will decrease.
B)  supply will decrease, equilibrium price will fall and, demand will increase.
C)  supply will decrease, equilibrium price will increase and, quantity demanded will decrease.
D)  cannot be determined from the information given.E) B) and D)
F) B) and C)

Question 11

Other things equal, the provision of a per unit subsidy for a product will:

Accepted Answer

A)  increase its supply.
B)  increase its price.
C)  decrease the quantity sold.
D)  decrease its demand.E) A) and B)
F) A) and C)

Question 12

A government set minimum wage:

Accepted Answer

A)  imposes a legal ceiling above the wage of the least skilled worker.
B)  is one of the reasons why price level falls during recessions.
C)  imposes a legal floor under the wage of the most skilled worker.
D)  imposes a legal floor under the wage of the least skilled worker.E) All of the above
F) B) and C)

Question 13

In recent years, there has been a rapid increase in consumption of sushi in Canada and yet, the price of sushi has remained relatively stable.An explanation for this phenomenon could be:

Accepted Answer

A)  although the demand for sushi has gone up, the supply of fish (an input in the production of sushi)  has declined as well.
B)  while the demand for sushi has gone up, the supply of sushi has increase by about the same magnitude and therefore, the price has stayed relatively stable.
C)  while the demand for sushi has gone up, the supply of sushi has decreased by about the same magnitude and therefore, the price has stayed relatively stable.
D)  while the demand for sushi has gone up, the supply of sushi has not changed and therefore, the price has stayed relatively stable.E) A) and B)
F) A) and C)

Question 14

At any above-equilibrium price:

Accepted Answer

A)  quantity demanded exceeds quantity supplied.
B)  the equilibrium price is above the current price.
C)  quantity supplied exceeds quantity demanded.
D)  the price of the good is likely to rise.E) A) and B)
F) None of the above

Question 15

On a graph, an increase in quantity demanded is represented by a:

Accepted Answer

A)  leftward shift of the demand curve.
B)  rightward shift of the demand curve.
C)  movement upward and to the left along the demand curve.
D)  movement downward and to the right along the demand curve.E) None of the above
F) B) and D)

Question 16

The market system corrects a shortage by:

Accepted Answer

A)  lowering the product price to decrease production.
B)  raising the product price to increase production.
C)  lowering the product price to increase production.
D)  raising the product price to decrease production.E) C) and D)
F) A) and B)

Question 17

Price ceilings and price floors:

Accepted Answer

A)  cause surpluses and shortages respectively.
B)  make the rationing function of free markets more efficient.
C)  interfere with the rationing function of prices.
D)  shift demand and supply curves and therefore have no effect on the rationing function of prices.E) None of the above
F) A) and B)

Question 18

Economists use the term "demand" as:

Accepted Answer

A)  a particular price-quantity combination on a stable demand curve.
B)  the total amount spent on a particular commodity over a stipulated time period.
C)  an upsloping line on a graph which relates consumer purchases and product price.
D)  a schedule of various combinations of market prices and amounts demanded.E) A) and C)
F) B) and C)

Question 19

If two goods are complements:

Accepted Answer

A)  they are consumed jointly.
B)  an increase in the price of one will reduce the demand for the other.
C)  a decrease in the price of one will increase the demand for the other.
D)  all of the above will be true.E) A) and B)
F) A) and C)

Question 20

With a downward sloping demand curve and an upward sloping supply curve for a product, placing an excise tax on this product will:

Accepted Answer

A)  increase equilibrium price and quantity.
B)  decrease equilibrium price and quantity.
C)  decrease equilibrium price and increase equilibrium quantity.
D)  increase equilibrium price and decrease equilibrium quantity.E) A) and C)
F) B) and D)

Exam 3: B: Demand, Supply, and Market Equilibrium

A price fixed above the equilibrium price of a product will cause a shortage of that product.

Correct AnswerverifiedShow Answer

The law of supply is illustrated by a curve which is:

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If an effective legal ceiling is imposed on credit card interest rates:

Correct AnswerverifiedShow Answer

Suppose that a severe freeze destroys a sizable portion of the lettuce crop.As a result:

Correct AnswerverifiedShow Answer

If two goods are complements:

Correct AnswerverifiedShow Answer

The law of supply states that, ceteris paribus, there is an inverse relationship between the price of a good and the quantity supplied of the good.

Correct AnswerverifiedShow Answer

Assume in a competitive market that price is initially below the equilibrium level.We can predict that price will:

Correct AnswerverifiedShow Answer

Economists use the term "demand" as:

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The market system corrects a shortage by:

Correct AnswerverifiedShow Answer

At any above-equilibrium price:

Correct AnswerverifiedShow Answer

With a downward sloping demand curve and an upward sloping supply curve for a product, placing an excise tax on this product will:

Correct AnswerverifiedShow Answer

On a graph, an increase in quantity demanded is represented by a:

Correct AnswerverifiedShow Answer

In recent years, there has been a rapid increase in consumption of sushi in Canada and yet, the price of sushi has remained relatively stable.An explanation for this phenomenon could be:

Correct AnswerverifiedShow Answer

Immigration to Canada from many parts of the world has increased the demand for a whole range of ethnic goods and services, particularly in:

Correct AnswerverifiedShow Answer

Refer to the above diagram, in which S1 and D1 represent the original supply and demand curves and S2 and D2 the new curves.In this market:

Correct AnswerverifiedShow Answer

Other things equal, the provision of a per unit subsidy for a product will:

Correct AnswerverifiedShow Answer

An unusually bountiful crop of coffee beans might:

Correct AnswerverifiedShow Answer

What is the likely effect on the market for wine of a simultaneous increase in both consumer incomes and producer taxes on wine?

Correct AnswerverifiedShow Answer

A government set minimum wage:

Correct AnswerverifiedShow Answer

Price ceilings and price floors:

Correct AnswerverifiedShow Answer

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Refer to the above diagram, in which S₁ and D₁ represent the original supply and demand curves and S₂ and D₂ the new curves.In this market:

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