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Last summer,real estate prices in your town soared.You started noticing more "For Sale" signs in your neighbors' yards.You conclude that:


A) people don't like to live in your neighborhood anymore.
B) when housing prices rose,they started to exceed some of your neighbors' reservation prices.
C) the demand curve for housing in your town has shifted to the left while supply remained constant.
D) the supply curve for housing in your town has shifted to the right while demand has remained constant.

E) B) and D)
F) B) and C)

Correct Answer

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At the beginning of the fall semester,college towns experience large increases in their populations,causing a(n) :


A) decrease in the quantity of apartments demanded.
B) increase in the supply of apartments.
C) increase in the demand for apartments.
D) decrease in the quantity of apartments supplied.

E) All of the above
F) C) and D)

Correct Answer

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You notice that your grocery store always has day-old bakery products at a reduced price.Why might that be?


A) At the original price,the quantity demanded was greater than the quantity supplied.
B) At the original price,there was a shortage of bakery products.
C) The original price was an equilibrium price because it was established in a free market.
D) At the original price,quantity supplied was greater than quantity demanded.

E) A) and B)
F) None of the above

Correct Answer

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A market comprised of a downward-sloping demand curve that intersects an upward-sloping supply curve is said to be stable because:


A) price will never change.
B) quantity will never change.
C) demand will never change.
D) at any price other than equilibrium,forces in the market move price towards the equilibrium.

E) A) and D)
F) B) and C)

Correct Answer

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The quantity of Revlon nail polish demanded by Jen decreased after the price of Revlon nail polish increased.Jen decides to find a cheaper brand of nail polish.This is called a(n) :


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

E) A) and D)
F) None of the above

Correct Answer

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Assume the demand for coffee increases while the supply decreases.Which of the following outcomes is certain to occur?


A) The equilibrium price of coffee will rise.
B) The equilibrium quantity of coffee will rise.
C) The equilibrium price of coffee will fall.
D) The equilibrium quantity of coffee will fall.

E) B) and C)
F) All of the above

Correct Answer

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Suppose that two recent studies conclude that increased fiber in the diet does not reduce the risk of developing colon cancer as was previously thought.The likely result will be that the:


A) quantity demanded of high-fiber foods will fall.
B) demand for high-fiber foods will decrease.
C) supply of high-fiber foods will increase.
D) price of high-fiber foods will rise.

E) A) and B)
F) C) and D)

Correct Answer

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"As the price of personal computers continues to fall,demand increases." This headline is inaccurate because:


A) a change in the price of personal computers shifts the demand curve.
B) a change in the price of personal computers shifts the supply curve.
C) the statement is backwards: increased demand leads to lower prices.
D) a falling price for personal computers increases quantity demanded,not demand.

E) C) and D)
F) None of the above

Correct Answer

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Assume consumers eat either rice or pasta for dinner every night.If the price of rice increases,in the pasta market one would expect to see:


A) an increase in the quantity of pasta demanded.
B) an increase in the demand for pasta.
C) a decrease in the quantity of pasta demanded.
D) a decrease in the demand for pasta.

E) A) and B)
F) All of the above

Correct Answer

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An increase in the demand for GM automobiles results in:


A) a lower equilibrium price for GM automobiles.
B) an increase in the quantity supplied of GM automobiles.
C) an increase in the supply of GM automobiles.
D) a lower equilibrium quantity of GM automobiles.

E) B) and C)
F) B) and D)

Correct Answer

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According to the textbook,government price controls fail because:


A) they are not enforced.
B) legislation cannot repeal basic economic motives.
C) bureaucrats lack accurate market data.
D) firms ignore the restrictions.

E) B) and D)
F) A) and D)

Correct Answer

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Everyone in the neighborhood has been complaining about the deteriorating condition of the park,but nobody has cleaned it up.Why not?


A) There is an excess demand for parks in the neighborhood.
B) There is an excess supply of parks in the neighborhood.
C) The reservation price for a clean park exceeds the cost of cleaning it.
D) No single person's reservation price to clean the park makes it worth cleaning it.

E) All of the above
F) A) and D)

Correct Answer

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Which of the following is NOT a determinant of demand for gasoline?


A) Consumers' incomes.
B) The price of diesel.
C) The price of automobiles.
D) The quantity of gasoline supplied.

E) A) and B)
F) All of the above

Correct Answer

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Efficiency occurs when:


A) a market is in equilibrium.
B) the socially optimal quantity of goods and services is being produced.
C) the individually rational quantity of goods and services is being produced.
D) the government does not interfere with market prices.

E) B) and C)
F) C) and D)

Correct Answer

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Suppose that both the equilibrium price and quantity of ketchup fall.The most consistent explanation for these observations is:


A) a decrease in demand for ketchup with no change in supply.
B) an increase in demand for ketchup with no change in supply.
C) an increase in demand for ketchup and a decrease in the supply of ketchup.
D) an increase in the supply of ketchup with no change in demand.

E) B) and D)
F) A) and B)

Correct Answer

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Suppose you bought three tickets to a concert in advance at the University ticket window.At the last minute one friend cancelled,so you could use only two of those tickets.You scalped,or sold,the third ticket just outside the entrance to the concert for slightly more than the price you had originally paid.Which transaction occurred in a market?


A) Only the advance purchase and sale at the University window was a market transaction.
B) Only the transaction that occurred the evening of the concert was a market transaction.
C) Both transactions,the one at the University ticket window as well as the sale at the concert entrance,occurred in markets.
D) Neither the advance sale at the University ticket window nor the sale the night of the concert occurred in markets.

E) None of the above
F) B) and D)

Correct Answer

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Gertie saw a pair of jeans that she was willing to buy for $35.The price tag,though,said they were $29.99.Therefore:


A) Gertie should not buy the jeans because they will be of lower quality than she expected.
B) Gertie should not buy the jeans because the price is not equal to her reservation price.
C) Gertie should buy the jeans because the price is less than her reservation price.
D) Gertie should buy the jeans because the price is more than her reservation price.

E) None of the above
F) A) and D)

Correct Answer

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In a free market,if the price of a good is above the equilibrium price,then;


A) suppliers,dissatisfied with growing inventories,will raise the price.
B) demanders,wanting to ensure they acquire the good,will bid the price lower.
C) government needs to set a lower price.
D) suppliers,dissatisfied with growing inventories,will lower the price.

E) B) and C)
F) B) and D)

Correct Answer

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If supply decreases while demand increases simultaneously,the new equilibrium price is ___________ and the new equilibrium quantity is _________________.


A) lower;lower
B) lower;indeterminate
C) indeterminate;higher
D) higher;indeterminate

E) B) and C)
F) A) and C)

Correct Answer

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Suppose that the equilibrium price of T-shirts increases and the equilibrium quantity falls.Which of the following best fits the observed data?


A) An increase in demand with supply constant.
B) A decrease in supply with demand constant.
C) An increase in demand coupled with an increase in supply.
D) A decrease in demand with supply constant.

E) B) and C)
F) All of the above

Correct Answer

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