3-40 The diagram above represents the market for crantankles. From the diagram, it is clear that the equilibrium price of crantankles is
3-1 Which of the following goods obeys the
law of demand?
A. The demand for children. B. The demand for divorces.
C. The demand for marriages. D. The demand for A's in this course.
E. All of the above.
3-2 Due to a fad, the demand and price for diamond jewelry increases
(without immediatelty raising the prices of resources used to
make diamond jewelry). A jeweler, seeing the higher prices for
diamond jewelry, decides to give his wife a diamond bracelet.
Does this violate the law of demand?
A. No, the law of demand says that as a price goes up, the quantity
demanded of a good will increase.
B. No, since the income of the jeweler may have gone up,
and the law of demand says that price and quantity demanded are
inversely related if income is kept constant.
C. Yes, the law of demand says that if price rises for any reason,
quantity demanded will fall.
D. Yes, the law of demand says that if income rises, quantity
demanded will fall.
E. No, the law of demand has nothing to do with price or quantity
demanded.
3-3 According to the law of demand, the lower the price of vacations,
the more vacations Chris should take. Yet, Chris always takes
only one vacation per year. What is the best explanation?
A. Chris may take a longer vacation or travel farther if
prices go down, thus purchasing a greater quality or quantity
of vacation as price falls.
B. Chris's behavior makes no sense. Chris is not economizing.
C. Chris is violating the law of demand.
D. Chris is obeying the law of demand but violating the law of
supply.
E. Chris probably pays little attention to the price of vacations,
and thus the law of demand is irrelevant to Chris.
3-4 One study on health care has found that 94% of the people
who now do not visit the doctor for a yearly check-up would be
more likely to do so if the price of a doctor's visit was reduced.
From this study, you can conclude...
A. that the current price of doctor visits is too high.
B. that there is a shortage of doctors.
C. that there are too many doctors that specialize and not enough
that do check-ups.
D. that there is a price ceiling on doctor visits.
E. that doctor visits obey the law of demand.
3-5 Which phrase in this line of thought is economically incorrect?
A. If the tax on cigarettes is increased, the price of cigarettes
will rise.
B. When the price of cigarettes rises, the demand for cigarettes
will fall.
C. With lower demand for cigarettes, the price will tend to fall.
D. With lower demand for cigarettes, the quantity purchased will
fall.
E. If the quantity purchased falls, so must the quantity sold,
in equilibrium.
3-6 Which of the following goods obey the law of demand?
A. The demand for water.
B. The demand for doctor visits.
C. The demand for air conditioning in Phoenix.
D. All of the above.
E. None of the above; all of the goods listed are needs,
whose use or consumption does not fall as price rises.
3-7 Which of the following is true?
A. Three factors that will each reduce the supply of Napa county
wine include a drought in Napa county, higher prices for Napa
county wine, and higher wages for Napa county grape pickers.
B. If the government fixed the price of farm products above the
equilibrium price, demand would increase.
C. An increase in the price of inputs used in the construction
industry would cause housing prices to rise and the demand for
housing to thus decline.
D. If a new tax on cigarettes causes their price to increase,
demand for cigarettes will fall.
E. The height of a demand curve for good A represents the
maximum amount a consumer of good A would be willing to pay for
one unit of it.
3-8 The demand curve shows the relationship between the price
of a good and the quantity demanded of that good, other thing
being constant. The "other things" being held constant
include all of the following except
A. income. B. prices of complement goods.
C. the price of the good. D. prices of substitute goods.
E. consumer tastes, fads or scares.
3-9 "If gasoline were taxed, the price of gasoline would
rise. Consequently, the demand for gasoline would fall, causing
the price of gasoline to fall to the original level. Thus, a gasoline
tax may not change the quantity of gasoline purchased." This
statement
A. is correct.
B. is incorrect; after demand falls price will fall , but not
back to the original level.
C. is incorrect; demand and quantity demanded are confused.
D. is incorrect; since demand has decreased, the tax has an effect.
E. is incorrect; demand will increase when price rises.
3-10 If the price that a consumer must pay to obtain a product
increases,
| A. quantity demanded will decrease. | B. the demand curve will shift to the right. |
| C. demand will decrease | D. A, B , and C will all happen. |
| E. none of the above will happen. |
3-13 Health insurance pays part of the price
of a doctor's visit. Thus, as more people acquire health insurance,
A. the quantity of visits to the doctor will not change, since
no one will get sick just because the doctor visit is less expensive.
B. people will make more visits to the doctor, according
to the law of demand.
C. people will make fewer visits to the doctor, according to the
law of demand.
D. people will view the price of seeing the doctor in the same
way as they would if they did not have insurance.
E. none of the above.
3-14 When considering the desire for items like water or air conditioning
(in Arizona) we can say that
A. demand for such goods will not obey the "law of demand."
B. since they are necessities, the quantity desired will not depend
on price.
C. the demand curve for such items will not be downward-sloping.
D. all of the above.
E. none of the above.
3-15 In 1995, the average four-person household in the U.S. used
about 400 gallons of water per day. Water rates are almost never
more than $.001 (one-tenth of a cent) per gallon. If water prices
doubled,
A. large numbers of poor and elderly would die of thirst.
B. the quantity of water used by a family in a year would probably
not change at all.
C. people would reduce some uses of water, even if they
did not drink less of it.
D. all of the above.
E. none of the above.
3-16 When a family's income rises, they tend to buy more restaurant
meals. This is true even though the price of restaurant meals
has not changed. Such a change in quantity demanded with no change
in price
A. disproves the law of demand; the only thing that can increase
quantity demanded is a reduction in price.
B. is consistent with the law of demand, which says that the quantity
demanded will only change if income changes.
C. is consistent with the law of demand, which says that price
increases will increase quantity demanded, but also allows for
other things to change quantity demanded as well.
D .is consistent with the law of demand, which says that
price reductions will increase quantity demanded, but also allows
for other things to change quantity demanded as well.
E. disproves the law of demand, which says that a rise in income
will reduce the quantity demanded of goods.
3-17 Demand is
A. the relationship between cost and quantity produced.
B. the same as "quantity demanded".
C. the same as price.
D. usually shown by a vertical (straight up and down) "demand
curve".
E. the relationship between quantity demanded and price
3-18 Which of the following indicates increasing marginal opportunity
costs?
A. Supply curves that slope up. B. Demand curves that slope
down.
C. Supply curves that slope down. D. Demand curves that slope
up.
E. Production possibilities curves that slope up.
3-19 Which of the following is the result of
diminishing marginal utility?
A. Supply curves that slope up. B. Demand curves that slope
down.
C. Supply curves that slope down. D. Demand curves that slope
up.
E. Production possibilities curves that slope up.
3-20 The "Demand Curve" is usually drawn as
A. downward sloping as we move from left to right.
B. upward sloping as we move from left to right.
C. a production possibilities curve.
D. horizontal.
E. vertical.
3-21 The Law of Demand states that
A. price and quantity demanded are inversely related.
B. at a higher price, a smaller quantity is desired by a purchaser.
C. the demand curve will be a downward-sloping line or curve.
D. all of the above.
E. parking is not allowed in a "Demand Zone".
3-22 If the prices of all new cars were, by law, limited to $1000
A. many more new cars would be purchased each year.
B. buyers would see no decrease in the quality of new cars.
C. since more cars would be sold, more new car producers and dealers
would enter the market.
D. the number of car producers would fall, and fewer cars
would be made.
E. more new cars would be made each year.
3-23 Consumer surplus
A. is a measure of how many more consumers than producers there
are for a product.
B. is the excess of the price buyers would be willing to
pay for a good over the price they actually pay for the good.
C. is a measure of how many more producers than consumers there
are for a product.
D. occurs when price is kept artificially low.
E. occurs when price is kept artificially high.
3-24 Potential Phoenix College students were asked if they would
be more likely to attend P.C. if the student fees were eliminated.
96% said that they would. This demonstrates that
A. the cost of going to Phoenix College is too high.
B. the cost of going to Phoenix College is too low.
C. people who go to Phoenix College now are not making a good
decision.
D. people are more likely to engage in an activity if the
marginal cost is lower.
E. other community colleges should worry about enrollment.
3-25 The "Supply Curve" is usually drawn as
A. upward sloping as we move from left to right.
B. downward sloping as we move from left to right.
C. an "X" D. horizontal. E. vertical.
3-26 A shortage is said to exist in the market of a good
if (and only if)
A. price is kept artificially high.
B. price is at "equilibrium".
C. price is kept artificially low.
D. the demand curve slopes downward.
E. the good has an upward-sloping demand curve.
3-27 Homer gets fifty cents worth of pleasure
from the first donut he eats, but only forty-five cents worth
of pleasure from the second donut he eats in the same sitting.
This is an example of
A. the donut pleasure relationship.
B. production possibilities.
C. opportunity cost.
D. comparative advantage.
E. diminishing marginal utility.
3-28 When a market is in equilibrium,
A. marginal cost exceeds marginal utility for the good.
B. price will tend to rise for the good.
C. price will tend to fall for the good.
D. price will neither tend to rise nor to fall.
E. quantity demanded will exceed quantity supplied.
3-29 If the number of parking spaces available for students on
campus is regularly smaller than the number of students looking
for parking spaces, the persistent shortage of spaces indicates
that
A. the price for parking is lower than equilibrium.
B. the price for parking is higher than equilibrium.
C. the equilibrium price for parking is being charged.
D. requiring students to carpool is the only way to relieve the
shortage.
E. students don't respond to incentives regarding their driving
habits.
3-30 Equilibrium in a market is indicated by
A. surpluses of the good.
B. shortages of the good.
C. both shortages and surpluses of the good at the same time.
D. neither surpluses nor shortages of the good.
E. surpluses of the good if it is a luxury and shortages if the
good is a necessity.
3-31 When a market is in equilibrium,
A. quantity demanded equals quantity supplied.
B. there is no tendency for price to change.
C. the marginal utility of buyers is just about equal to the marginal
cost of sellers.
D. every unit of the good which is valued more highly than its
cost will be produced and sold.
E. all of the above are correct.
3-32 At equilibrium,
A. producers gain at the expense of consumers.
B. the consumers gain at the expense of producers.
C. producers have a surplus but consumers do not.
D. producer surplus must be less than consumer surplus.
E. the total gains from trade to buyers and sellers is
maximized.
3-33 The opportunity cost of producing a good and bringing it
to market is reflected in the good's
A. supply curve
B. demand curve
C. producer surplus
D. consumer surplus
E. surplus
3-34 Marginal utility that buyers get from
consumption of a good is indicated by
A. consumer surplus.
B. producer surplus.
C. the demand curve.
D. the supply curve.
E. the buyers' consumers digest.
3-35 Which of the following is true?
A. If price were to be above the equilibrium level, the price
will tend to rise further.
B. If there is a shortage of a good, the price will tend
to rise.
C. A surplus of a good generally means that the good is no longer
scarce.
D. Consumer surplus is the excess of quantity demanded over quantity
supplied.
E. Producer surplus is the excess of quantity supplied over quantity
demanded
3-36 If the current market price of plotskins is greater than
the marginal opportunity cost of making them,
A. resources will eventually move into the making of more
plotskins.
B. price will remain unchanged as long as supply and demand do
not change.
C. the market price of plotskins will rise over time.
D. fewer producers will wish to produce plotskins in the future.
E. the market is in equilibrium.
3-37 Suppose Krusty dolls currently sell for $30 in Springfield,
but the same dolls sell for $40 in Shelbyville. Also suppose that
there are no taxes on the dolls and that the cost of transporting
the dolls between the towns is $2 per doll. Over time,
A. the dolls will move from Shelbyville to Springfield until the
price in Springfield is $40.
B. the dolls will move from Shelbyville to Springfield until the
price in Shelbyville is $30.
C. the dolls will move from Springfield to Shelbyville
until the price in Springfield is $2 less than the price in Shelbyville.
D. the dolls will move from Springfield to Shelbyville until the
price in Springfield is $40.
E. the dolls will move from Springfield to Shelbyville until the
price in Shelbyville is $30.
3-38 If there are no legal barriers prohibiting trades and shipping
of products, transportable goods will tend to sell for
A. the same price in all markets.
B. the same price in all markets except for differences
caused by taxes and transportation costs.
C. different prices in all markets, even when prices and transportation
costs do not differ.
D. the same prices in all markets, except for differences in profit
rates.
E. the same prices in all markets, except for differences in the
cost of living.
3-39 If there are no legal barriers prohibiting trades and shipping
of products, transportable goods will tend to sell for the same
price in all markets, except for differences caused by taxes and
transportation costs. This is known as
A. the production possibilities concept.
B. the price equalization principle.
C. the market shipping hypothesis.
D. the transactions cost concept.
E. the efficient markets hypothesis.
3-40 The diagram above represents the market for crantankles.
From the diagram, it is clear that the equilibrium price of crantankles
is
| A. $14 | B. $12 | C. $10 |
| D. $8 | E. $2 |
| A. 15 thousand | B. 12 thousand | C. 10 thousand |
| D. 8 thousand | E. 5 thousand |
| A. 15 thousand | B. 12 thousand | C. 10 thousand |
| D. 8 thousand | E. 16 thousand |
| A. 15 thousand | B. 12 thousand | C. 10 thousand |
| D. 8 thousand | E. 16 thousand |
| A. 15 thousand | B. 12 thousand | C. 10 thousand |
| D. 8 thousand | E. 6 thousand |
| A. 15 thousand | B. 18 thousand | C. 10 thousand |
| D. 8 thousand | E. 16 thousand |
| A. $40 | B. $30 | C. $10 |
| D. $70 | E. $75 |
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Chapter 3Questions