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In the diagrams below, the subscript "1" refers to the initial position of the curve, while the subscript "2" refers to the final position after the curve shifts. In the diagrams below, the subscript 1 refers to the initial position of the curve, while the subscript 2 refers to the final position after the curve shifts. Which diagram above illustrates the effects on the peanut butter market, if severe flooding destroys a large portion of the peanut crop in the economy? A) A B) B C) C D) D Which diagram above illustrates the effects on the peanut butter market, if severe flooding destroys a large portion of the peanut crop in the economy?


A) A
B) B
C) C
D) D

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

Correct Answer

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Which is most likely to be observed in a community where legal ceilings are imposed on residential rents?


A) Poor people will be able to find adequate housing
B) Homeowners will reduce their own use of housing space, making more available to others
C) Those whose needs for housing are most urgent will be able to obtain the space they want
D) People moving into the community will have difficulty locating residential space to rent

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

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"Price" in the statement of the Law of Supply refers to:


A) The amount that buyers are willing and able to pay for each unit of the product
B) The cost of producing each unit of the product
C) The total revenues that sellers receives for selling a given quantity of the product
D) The total amount that buyers pay in order to acquire a given quantity of the product

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

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If product Y is an inferior good, a decrease in consumer incomes will:


A) Make buyers want to buy less of Product Y
B) Not affect the sales of product Y
C) Shift the demand curve for product Y to the left
D) Shift the demand curve for product Y to the right

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

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Which of the following factors will decrease the current demand for a product?


A) An expected increase in the future price of the product
B) A decrease in the current price of a substitute product
C) A decrease in the current price of a complementary product
D) An increase in the current price of a substitute product

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

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Which of the following goods would most probably be an inferior good?


A) French wines
B) Generic beer
C) Theater tickets
D) Steak

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

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Answer the question based on the following supply and demand schedules in units per week for a product. Answer the question based on the following supply and demand schedules in units per week for a product. Refer to the above table. If demand increased by 100 units at each price level, and the government set a price ceiling of $40, then there will be: A) A shortage B) A surplus C) No shortage or surplus D) Decrease in supply Refer to the above table. If demand increased by 100 units at each price level, and the government set a price ceiling of $40, then there will be:


A) A shortage
B) A surplus
C) No shortage or surplus
D) Decrease in supply

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

Correct Answer

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Answer the question based on the following supply and demand schedules in units per week for a product. Answer the question based on the following supply and demand schedules in units per week for a product. Refer to the above table. If the government introduced a guaranteed price floor of $40 and agreed to purchase surplus output, then the government's total support payments to producers would be: A) $3,000 per week B) $3,500 per week C) $4,000 per week D) $2,500 per week Refer to the above table. If the government introduced a guaranteed price floor of $40 and agreed to purchase surplus output, then the government's total support payments to producers would be:


A) $3,000 per week
B) $3,500 per week
C) $4,000 per week
D) $2,500 per week

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

Correct Answer

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An increase in the demand for corn is more than offset by an increase in its supply. As a result the equilibrium price will:


A) Increase and the equilibrium quantity will decrease
B) Increase and the equilibrium quantity will increase
C) Decrease and the equilibrium quantity will decrease
D) Decrease and the equilibrium quantity will increase

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

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In markets where the supply curve is vertical, changes in:


A) Demand will not cause the equilibrium price to change
B) Supply will not cause the equilibrium price to change
C) Demand will not cause the equilibrium quantity to change
D) Supply will not cause the equilibrium quantity to change

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

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A newspaper reports that the average price of new homes in a certain city had decreased, and the number of new homes sold had also decreased. This situation is probably caused by:


A) Declining costs of construction materials and services in that city
B) Declining incomes of people in that city
C) Higher government subsidies to new homebuyers in that city
D) A rising population in that city

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

Correct Answer

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When the government requires ethanol from corn to be used as an additive to gasoline, the supply of corn decreases.

A) True
B) False

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In cases where the supply curve is vertical, any change in demand will cause only a change in price but no change in quantity.

A) True
B) False

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Refer to the above graph with three demand curves. An increase in quantity demanded would be illustrated by a change from: A) Point 4 to point 6 B) Point 5 to point 1 C) Point 4 to point 1 D) Point 2 to point 5 Refer to the above graph with three demand curves. An "increase in quantity demanded" would be illustrated by a change from:


A) Point 4 to point 6
B) Point 5 to point 1
C) Point 4 to point 1
D) Point 2 to point 5

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

Correct Answer

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What will happen to the equilibrium quantity and price of salmon in a competitive market when there is an equal decrease in demand and supply?


A) Equilibrium quantity and price will both increase
B) Equilibrium quantity and price will both decrease
C) Equilibrium quantity will decrease and equilibrium price will stay the same
D) Equilibrium quantity will stay the same and equilibrium price will increase

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

Correct Answer

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All of the following are assumed to be constant when the supply curve for a product is drawn, except the:


A) Price of the product
B) State of technology
C) Number of producers
D) Price of inputs used to make the product

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

Correct Answer

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Assume that the graphs show a competitive market for the product stated in the question. Assume that the graphs show a competitive market for the product stated in the question. Select the graph above that best shows the change in the market specified in the following situation: In the market for wheat, when the cost of fertilizer decreases. A) Graph A B) Graph B C) Graph C D) Graph D Assume that the graphs show a competitive market for the product stated in the question. Select the graph above that best shows the change in the market specified in the following situation: In the market for wheat, when the cost of fertilizer decreases. A) Graph A B) Graph B C) Graph C D) Graph D Select the graph above that best shows the change in the market specified in the following situation: In the market for wheat, when the cost of fertilizer decreases.


A) Graph A
B) Graph B
C) Graph C
D) Graph D

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

Correct Answer

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A television station reports that the price of orange juice has declined but the quantity traded has increased. This situation could be caused by a(n) :


A) Increased preference for orange juice among buyers
B) Significant decrease in the harvest of oranges in the nation's orchards
C) Improvement in the technology of producing orange juice
D) Decrease in income, and orange juice is a normal good

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

Correct Answer

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In a market with supply and demand curves as shown above, a price ceiling of $2.50 will result in: A) A surplus of 10 units B) A shortage of 10 units C) No shortage or surplus D) A black market price greater than $2.50 In a market with supply and demand curves as shown above, a price ceiling of $2.50 will result in:


A) A surplus of 10 units
B) A shortage of 10 units
C) No shortage or surplus
D) A black market price greater than $2.50

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

Correct Answer

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In the diagrams below, the subscript "1" refers to the initial position of the curve, while the subscript "2" refers to the final position after the curve shifts. In the diagrams below, the subscript 1 refers to the initial position of the curve, while the subscript 2 refers to the final position after the curve shifts. Which diagram above illustrates the effect on the natural-gas market, with the widespread use of fracking or hydraulic fracturing by gas-drilling companies? A) A B) B C) C D) D Which diagram above illustrates the effect on the natural-gas market, with the widespread use of "fracking" or hydraulic fracturing by gas-drilling companies?


A) A
B) B
C) C
D) D

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

Correct Answer

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