Deck 4: Labor and Financial Markets

Question 1

A)10.
B)250.
C)100 and 400.
D)275.5.

Answer 1

B

Question 2

A market can be described by the equations Qd = 100 - P and Qs= P. What are the equilibrium price and quantity in thismarket?

A)The equilibrium price is $50 and the equilibrium quantity is 50 units.
B)The equilibrium price is $100 and the equilibrium quantity is 100 units.
C)The equilibrium price is $0 and the equilibrium quantity is 0 units.
D)The equilibrium price is $0 and the equilibrium quantity is 100 units.

Answer 2

A

Question 3

A market can be described by the equations Qd = 50 - 3P and Qs= 2P. What are the equilibrium price and quantity in thismarket?

A)The equilibrium price is $20 and the equilibrium quantity is 10 units.
B)The equilibrium price is $50 and the equilibrium quantity is 100 units.
C)The equilibrium price is $30 and the equilibrium quantity is 10 units.
D)The equilibrium price is $10 and the equilibrium quantity is 20 units.

Answer 3

D

Question 4

In a market, the equilibrium condition is given by thefollowing:

A)quantity demanded = quantity supplied (True Answer )Correct
B)quantity demanded × quantity supplied
C)quantity demanded/quantity supplied
D)price × quantity demanded = quantity supplied

Question 5

In free markets, shortages lead to:

A)lower prices.
B)higher prices.
C)surpluses.
D)unexploited gains from trade.

Question 6

(Figure: Market Equilibrium) Refer to the figure. At a price of$1, the market is characterized by a(n):

A)excess supply of 2 units.
B)excess demand of 4 units.
C)surplus of 4 units.
D)shortage of 6 units.

Question 7

(Figure: Market Equilibrium) According to the figure, theequilibrium price and quantity are:

A)$1 and 4.
B)$4 and 8.
C)$2 and 4.
D)$3 and 6.

Question 8

(Figure: Supply-Driven Price Change) Refer to the figure.When the supply curve shifts from S0 to S₁, the equilibriumprice rises to:

A)$12 and the equilibrium quantity falls to 70.(True Answer )Correct
B)$10 and the equilibrium quantity falls to 100.
C)$12 and the equilibrium quantity falls to 40.
D)$10 and the equilibrium quantity falls to 70.

Question 9

(Figure: Equilibrium) Refer to the figure. The equilibriumprice (in $) is:

A)8.
B)10.
C)16.
D)12.

Question 10

If sellers want to sell more products than buyers are willing topurchase, we know that:

A)the current price is less than the equilibrium price.
B)quantity demanded exceeds quantity supplied.
C)the current price is greater than the equilibrium price.(True Answer )Correct
D)the demand curve will likely increase.

Question 11

(Figure: Equilibrium) Refer to the figure. The equilibriumquantity (in units) is:

A)8.
B)10.
C)16.
D)12.

Question 12

Suppose that the equilibrium price in the market is $10. If thecurrent market price is $7.50:

A)the equilibrium price will fall to $7.50.
B)competition among buyers will increase the current price.
C)the current price will fall below $7.50 as sellers compete for market share.
D)There is not enough information provided to answer the question.

Question 13

The key condition for equilibrium to occur in a market is:

A)the demand curve equals the supply curve.
B)quantity demanded equals quantity supplied.(True Answer )Correct
C)price equals quantity.
D)demand for one good equals demand for all other goods.

Question 14

(Table: Equilibrium Price, Quantity) Refer to the table. Theequilibrium P and Q are:

A)$10 and 50.
B)$12 and 35.
C)$40 and 14.
D)$14 and 40.

Question 15

(Figure: Market Equilibrium) Refer to the figure. At a price of$3, quantity supplied is ______ and quantity demanded is______, leading to a _______.

A)6; 2; surplus of 4 units
B)2; 6; shortage of 8 units
C)2; 4; surplus of 2 units
D)4; 2; shortage of 2 units

Question 16

Immediately after a hurricane, it is likely that the quantitydemanded for tree cutting/removal services will ______ thequantity supplied, causing the price of tree cutting/removalservices to ______.

A)equal; remain unchanged
B)be less than; rise
C)exceed; rise
D)decrease; fall

Question 17

A)shortage of 30 units of the product, and the price will rise to $16.
B)surplus of 20 units of the product, and the price will rise to $16.
C)shortage of 50 units of the product, and the price will rise to $16.
D)surplus of 40 units of the product, and the price will rise to $16.

Question 18

(Table: Equilibrium Price, Quantity) Refer to the table. If theprice in the market was $16, there would be a:

A)shortage of 10 units.
B)shortage of 35 units.
C)surplus of 10 units.
D)surplus of 45 units.

Question 19

(Figure: Demand-Driven Price Change) Refer to the figure.When the demand curve shifts from D0 to D₁, the equilibriumprice rises to:

A)$9 and the equilibrium quantity rises to 120.
B)$9 and the equilibrium quantity rises to 160.
C)$8 and the equilibrium quantity rises to 140.
D)$8 and the equilibrium quantity rises to 160.

Question 20

Suppose that a market is characterized as follows: consumersare willing and able to purchase 100 units and sellers arewilling and able to sell 70 units. Which of the followingstatements are true?

A)There is a shortage of 30 units.
B)The market is not in equilibrium.
C)The price in the market will increase.
D)All of the answers are correct.

Question 21

(Table: Equilibrium Adjustment) Refer to the table. Theequilibrium price is:

A)$2.
B)$4.
C)$6.
D)$8.

Question 22

Which of the following statements is TRUE regarding freemarkets?
I) The sum of consumer surplus and producer surplus aremaximized
II)The sellers with the highest costs of production sell thegoods
III) The buyers with the highest willingness to pay purchase thegoods.IV. The government must subsidize firms to ensure that thereare no unexploited gains from trade.

A)I only
B)I, II, and III only
C)II, III, and IV only
D)I and III only

Question 23

(Figure: Demand and Supply) Refer to the figure. At theequilibrium quantity, total surplus is:

A)$960.
B)$480.
C)$320.
D)$240

Question 24

Figure: Demand and Supply (Figure: Demand and Supply) Refer to the figure. Which of thefollowing statements is TRUE?
I) Buyers are willing to pay $20 for the 16th unit of output andit costs sellers $60 to produce that unit
II)The gains from trade are maximized at 20 units of output
III) At four units of output, there are unexploited gains fromtrade.IV. A free market is likely to produce less than 12 units ofoutput.

A)II only
B)I and II only
C)I and III only
D)II, III, and IV only

Question 25

(Table: Equilibrium Price, Quantity) Refer to the table. If theprice in the market was $12, there would be a:

A)shortage of 10 units.
B)shortage of 45 units.
C)surplus of 10 units.
D)surplus of 35 units.

Question 26

Why did Vernon Smith win the Nobel Prize in Economics in 2002?

A)He created the theory of supply and demand.
B)He used laboratory experiments as a tool to confirm the theory of supply and demand.
C)He was able to disprove the theory of supply and demand.
D)This is a trick question, because Vernon Smith did not win the Nobel Prize.

Question 27

(Figure: Gains from Trade) Refer to the figure. What are thetotal gains from trade at the free market equilibrium?

A)$1,000
B)$500
C)$0
D)$1,500

Question 28

A free market achieves an equilibrium price and quantity dueto:

A)the actions of buyers and sellers.
B)increased competition among sellers.
C)government regulations placed on market participants.
D)buyers' ability to affect market outcomes.

Question 29

The September 11 terrorist attacks turned many people awayfrom flying. The demand and supply model would predictwhich of the following events in the airline travel market?

A)The supply of airline travel would decrease, resulting in a higher equilibrium price and lower equilibrium
Quantity.
B)The supply of airline travel would increase, resulting in a lower equilibrium price and higher equilibrium
Quantity.
C)The demand for airline travel would decrease, resulting in a lower equilibrium price and lower equilibrium quantity.(True
Answer )Correct
D)The supply and demand for airline travel would decrease, resulting in a higher equilibrium price and higher equilibrium
Quantity.

Question 30

(Table: Equilibrium Price, Quantity) Refer to the table. If thedemand curve for the product shifted to the right such that 10more units of the good are demanded at every price, what is thenew equilibrium price?

A)$12
B)$14
C)$16
D)$18

Question 31

Gains from trade are maximized at the:

A)equilibrium price and quantity.
B)midpoint on the demand curve.
C)point where output is maximized.
D)vertical intercept on the supply curve.

Question 32

(Table: Equilibrium Price, Quantity) Refer to the table. If thesupply curve for the product shifted to the right such that 20more units of the good are supplied at every price, what is thenew equilibrium price?

A)$10
B)$12
C)$14
D)$16

Question 33

At a free market equilibrium:

A)quantity demanded equals quantity supplied.
B)consumer surplus and producer surplus are maximized.
C)there are no unexploited gains from trade.
D)All of the answers are correct.

Question 34

For each good produced in a free market economy, demandand supply determine:

A)the price of the good, but not the quantity.
B)the quantity of the good, but not the price.
C)both the price and the quantity of the good.(True Answer )Correct
D)neither price nor quantity, sellers determine the price.

Question 35

In a free market in which an equilibrium price and quantityprevails:

A)consumer surplus is less than producer surplus.
B)consumer surplus is greater than producer surplus.
C)consumer surplus is the same as producer surplus.
D)consumer surplus and producer surplus are maximized.

Question 36

(Table: Equilibrium Adjustment) Refer to the table. If the pricein the free market is $8, then a:

A)surplus of 25 units would exist and price would tend to fall.
B)surplus of 25 units would exist and price would tend to rise.
C)shortage of 25 units would exist and price would tend to rise.
D)shortage of 25 units would exist and price would tend to fall.

Question 37

Five new sellers enter a market (that previously had seven) andbegin producing a good. Which of the following choices explainswhat happens to the equilibrium Q and P?

A)The demand curve will shift to the right, and the equilibrium P and Q will both rise.
B)The supply curve will shift to the right, the equilibrium P will fall, and the equilibrium Q will rise.
C)The supply curve will shift to the left, the equilibrium P will fall, and the equilibrium Q will rise.
D)The supply curve will shift to the right, the equilibrium P will rise, and the equilibrium Q will fall.

Question 38

(Table: Equilibrium Price, Quantity) Refer to the table. If thesupply curve for the product shifted to the right such that 10more units of the good are supplied at every price, what is thenew equilibrium price?

A)$12
B)$14
C)$16
D)$18

Question 39

When there is a shortage of 1,000 units of a particular good:

A)the price of the good will rise.
B)the price of the good will fall.
C)the quantity demanded of the good will equal 1,000 units.
D)there will be no change in the price of the good.

Question 40

Gains from trade are maximized when:

A)the market price is higher than the equilibrium price.
B)the market price is less than the equilibrium price.
C)the market price is equal to the equilibrium price.(True Answer )Correct
D)there are additional potential trades available that have not been completed.

Question 41

Technological advances have increased the supply of digitalcameras. As a result the:

A)demand for digital cameras will increase, putting downward pressure on the price of digital cameras.
B)quantity demanded for digital cameras will increase.(True Answer )Correct
C)quantity supplied of digitals cameras will increase, putting downward pressure on the price of digital cameras.
D)demand and supply of digital cameras will both increase.

Question 42

Brazilian rosewood is renowned for its tonal qualities andgorgeous figuring on acoustic guitars. However, Brazilianrosewood is now banned from use in the construction of newguitars. What will likely happen to the price of used Brazilianrosewood guitars over time?

A)The price for used Brazilian rosewood guitars will increase because there will be a smaller supply of Brazilian rosewood
Guitars on the used market.
B)The price for used Brazilian rosewood guitars will decrease as fewer people decide to sell their guitars.
C)The price of used Brazilian rosewood guitars will increase at first and then decrease, since an increase in demand raises
Prices causing people to buy less of the product.
D)The price for used Brazilian rosewood guitars will increase as more people try to cash in by selling their increasingly rare
Guitars.

Question 43

(Figure: Demand, Supply Shifts) In the figure, the initialdemand curve is D₁ and the initial supply curve is S₁. Resourceprices in this market increase; at the same time, the consumerpopulation declines as migration causes an outflow ofpopulation to other regions. What happens to the supply curveand/or demand curve?

A)S₁ shifts to S₂ but then shifts back to S₁.D₁ remains at D₁.
B)S₁ shifts to S₃ and D₁ shifts to D₂.
C)S₁ shifts to S₂ and D₁ shifts to D₃.
D)S₁ shifts to S₂ and D₁ shifts to D₂.

Question 44

(Figure: Supply Shift) In the figure, the supply curve shiftedfrom S0 to S₁. To describe this movement, we would say that:Figure: Supply Shift

A)demand decreased, which caused a decrease in supply.
B)supply decreased, which caused a decrease in quantity demanded.
C)supply decreased, which caused a decrease in demand.
D)supply increased, which caused a decrease in quantity demanded.

Question 45

The U.S. government limits the importation of Chinese-madebras. What effect does this trade restriction have on the marketfor bras?

A)The equilibrium price will increase and the equilibrium quantity will decrease.
B)The demand for bras will increase, leading to a lower equilibrium price.
C)The equilibrium price will increase and the equilibrium quantity will increase.
D)The equilibrium price will decrease, leading to a higher equilibrium quantity.

Question 46

Which of the following might explain why the price of DVDplayers has been falling?

A)an increase in consumer income
B)a decrease in the price of high-definition Blu-ray players
C)a decrease in the price of DVDs
D)an increase in the price of gasoline

Question 47

When you move along a demand curve:

A)only price is held constant.
B)income and the price of the good are held constant.
C)all non-price determinants of demand are held constant.
D)all determinants of quantity demanded are held constant.

Question 48

Figure: Demand, Supply Shifts (Figure: Demand, Supply Shifts) In the figure, the initialdemand curve is D₁ and the initial supply curve is S₁. Iftechnological innovations lower the costs of production, whatwill happen?

A)D₁ will shift to D₃ and equilibrium price and equilibrium quantity will increase.
B)S₁ will shift to S₂ and equilibrium price will increase but equilibrium quantity will decrease.
C)D₁ will shift to D₂ and equilibrium price and equilibrium quantity will decrease.
D)S₁ will shift to S₃ and equilibrium price will decrease but equilibrium quantity will increase.

Question 49

(Figure: Market Changes) Refer to the figures. If the figuresrepresent the market for wool sweaters, which figure shows theeffect of an unseasonably warm winter?

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

Question 50

(Figure: Demand Shift) In the figure, the demand curve shiftedfrom D0 to D₁. To describe this movement, we would say that:

A)demand increased, which caused an increase in supply.
B)quantity demanded increased, which caused an increase in supply.
C)demand increased, which caused an increase in quantity supplied.
D)quantity demanded increased, which caused an increase in quantity supplied.

Question 51

An early frost in the vineyards of Napa Valley would causea(n):

A)increase in the demand for wine, increasing price.
B)increase in the supply of wine, decreasing price.
C)decrease in the demand for wine, decreasing price.
D)decrease in the supply of wine, increasing price.(True Answer )Correct

Question 52

Which of the following would NOT lead to a decrease in theprice of domestic automobiles?

A)an increase in the price of foreign-made automobiles (True Answer )Correct
B)an economic recession, which decreases consumer income
C)a decrease in the wages paid to union auto workers
D)an increase in the number of domestic automakers

Question 53

Which of the following would cause the current supply of iPodsto increase?

A)an economic boom, which increases the amount that people are willing to spend on personal electronics
B)a decrease in the price of songs on iTunes
C)the expectation that the future price of iPods will decrease
D)an increase in the wages offered to manufacturers of iPods

Question 54

Suppose there is an increase in demand in a market and nochange in the supply. What will happen to the marketequilibrium price and quantity?

A)Equilibrium price will rise; equilibrium quantity will rise.
B)Equilibrium price will rise; equilibrium quantity will fall.
C)Equilibrium price will fall; equilibrium quantity will rise.
D)Equilibrium price will fall; equilibrium quantity will fall.

Question 55

Which of the following would increase the demand for beef?

A)lower pork prices
B)higher consumer income
C)higher prices of feed grains used to feed beef cattle
D)an increase in the price of beef

Question 56

(Figure: Market Changes) Refer to the figures. If the figuresrepresent the market for a popular soda, which figure showsthe effect of an increase in the price of a competing energydrink?

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

Question 57

(Figure: Demand, Supply Shifts) In the figure, the initialdemand curve is D₁ and the initial supply curve is S₁. If thisdepicts the equilibrium in the market for computer printers,what will happen when the price of computers increases?

A)There is not enough information to determine what will happen.
B)D₁ will shift to D₂.
C)D₁ will shift to D₃.
D)S₁ will shift to S₃.

Question 58

An increase in supply and a decrease in demand occur in amarket. What happens to the equilibrium price and quantity?

A)The equilibrium price decreases; the change in the equilibrium quantity is ambiguous.
B)The equilibrium price decreases; the equilibrium quantity increases.
C)The equilibrium price increases; the change in the equilibrium quantity is ambiguous.
D)The equilibrium price increases; the equilibrium quantity decreases.

Question 59

Figure: Market Changes (Figure: Market Changes) Refer to the figures. If these figuresrepresent the market for blue jeans, which figure shows theeffect of an increase in the price of denim, a raw material usedto make jeans?

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

Question 60

After adjusting for inflation, a comparison of the price of legwarmers reveals that the price of leg warmers was significantlyhigher in the 1980s than it is today. Which of the following canexplain this?

A)Jeans become preferable to leg warmers, decreasing the demand for leg warmers.
B)Leg warmers were fashionable in the 1980s (fact), and hence the high demand drove prices up in the 1980s.
C)An increase in the price of cotton used to make leg warmers has led to a decrease in the price of leg warmers
Today.
D)The expected increase in the price of leg warmers has led to a decrease in the price of leg warmers today.

Question 61

The Arab Oil Embargo of 1973, the Iranian Revolution of 1979,and the growth of China and India all affected oil prices by:

A)increasing the demand for oil.
B)reducing the supply of oil.
C)increasing the supply of oil.
D)None of the answers is correct.

Question 62

If a frost destroys half of the orange crop in Florida, theequilibrium price of oranges will rise.

Question 63

The price of professional sports tickets is high; therefore, youshould blame the owners for taking advantage of the fans, notthe other buyers for outbidding you.

Question 64

When the price of a good increases, demand for the good will:

A)increase.
B)decrease.
C)be unaffected.
D)depend on the corresponding change in supply.

Question 65

A market surplus can be defined as a situation where thenumber of units sold in a market is greater than the number ofunits purchased in that market.

Question 66

At the equilibrium price, quantity demanded is equal toquantity supplied.

Question 67

Which choice explains how the OPEC crisis of 1973 affected oilprices?

A)The supply of oil was reduced, leading to a rise in oil prices.
B)The supply of oil was increased, leading to a fall in oil prices.
C)The demand for oil increased, leading to a rise in oil prices.
D)The demand for oil decreased, leading to a fall in oil prices.

Question 68

In 1980 when Iraq attacked Iran, the price of oil _______because of a(n) ______.

A)increased; disruption in the supply of oil (True Answer )Correct
B)increased; decrease in the demand for oil
C)fell; increased demand for oil
D)fell; increased quantity of oil supplied

Question 69

OPEC is able to raise oil prices by:

A)increasing the demand for oil.
B)decreasing the supply of oil by cutting production.(True Answer )Correct
C)decreasing transportation costs, a complement to oil.
D)subsidizing the oil production of developing countries.

Question 70

A market shortage can be defined as a situation where thenumber of units purchased in a market is greater than thenumber of units sold in that market.

Question 71

In a free market equilibrium, the gains from trade are alwaysgreater for consumers than for producers.

Question 72

There is no difference in saying that there is a change in supplyand in saying there is a change in the quantity supplied.

Question 73

Economic growth in China has led to more Chinese peopleowning cars which:

A)increased demand for oil, causing oil prices to rise.(True Answer )Correct
B)decreased demand for oil, causing oil prices to rise.
C)increased demand for oil but decreased supply, causing oil prices to increase rapidly.
D)increased demand and supply of oil, causing oil prices to increase rapidly.

Question 74

When Asian countries went into a recession in 1997, thedemand for oil _______ and the price of oil ________.

A)increased; increased
B)decreased; increased
C)decreased; decreased
D)increased; decreased

Question 75

In a free market equilibrium, demand equals supply at theequilibrium price.

Question 76

A shortage will occur at any price below equilibrium price anda surplus will occur at any price above equilibrium price.

Question 77

The government plans to increase cigarette taxes in six months.Since consumers should expect the future price of cigarettes toincrease, the current demand for cigarettes will increase, andthe price of cigarettes will rise even before the tax isimplemented.

Question 78

Surpluses drive price up while shortages drive price down.

Question 79

The free market maximizes the gains from trade, producing thelevel of output that maximizes total surplus.

Question 80

When the price of a good decreases:

A)the quantity demanded increases.
B)demand increases.
C)the quantity supplied increases.
D)supply increases.