Question 1

The mechanism of supply and demand is
A) a fundamental tool in both microeconomics and macroeconomics.
B) the only real "law" of economics.
C) a fundamental tool only in microeconomics.
D) a fundamental tool only in macroeconomics.

Accepted Answer

The mechanism of supply and demand is a fundamental tool in both microeconomics and macroeconomics. It is used to analyze and explain how prices and quantities are determined in the market. In microeconomics, it looks at the behavior of individual firms and consumers while in macroeconomics, it analyzes the behavior of the entire economy. It is not the only law of economics as there are other concepts such as production, consumption, inflation, and monetary policy.

Question 2

During the American Revolution,the Pennsylvania legislature enacted price controls on essential commodities.The result of this legislation was
A) a large increase in the availability of those items,ending shortages.
B) a severe shortage of those essential commodities.
C) an increase in the price of those items,thus alleviating shortages.
D) new efforts to increase production of those commodities.
E) a minor inconvenience as persons adjusted to the new law.

Accepted Answer

Price controls often lead to shortages because suppliers may not have enough incentive to produce or distribute the item at the controlled price. This was likely the case during the American Revolution when price controls were enacted on essential commodities. The result was a severe shortage of those items.

Question 3

One motive for "battling the invisible hand" is
A) unhappiness about the prices that occur in free markets.
B) envy toward those who apparently benefit from certain prices.
C) a desire to have government "correct" some problems.
D) an attempt to produce justice between buyers and sellers.
E) All of the above are correct.

Accepted Answer

The answer of One motive for "battling the invisible hand"...

Question 4

When used in a professional or technical sense,the law of supply and demand refers to
A) some vague influences on economic affairs.
B) the fact that prices go up when commodities are scarce.
C) the market forces that show how prices and quantities are determined.
D) the controls that regulate the amount of scarce goods that each consumer can purchase.

Accepted Answer

The law of supply and demand refers to market forces that determine the prices and quantities of goods and services. It is a fundamental principle of economics that is used to explain how markets work. Option A is incorrect as it implies that the law of supply and demand is not a precise concept. Option B is partially correct but does not fully capture the essence of the law of supply and demand. Option D is incorrect as it refers to controls, which are not part of the law of supply and demand.

Question 5

While demand shifts have an effect on equilibrium price and quantity,supply shifts have no such effect.

Accepted Answer

Supply shifts do have an effect on equilibrium price and quantity. When supply increases, the equilibrium price will decrease and the equilibrium quantity will increase. When supply decreases, the opposite will occur.

Question 6

Price ceilings will likely result in the growth of black markets.

Accepted Answer

When prices are artificially lowered by price ceilings, demand for the product may exceed the supply. This leads to shortages, and some buyers may be willing to pay more than the ceiling price to obtain the product. This creates a black market where the product is sold illegally at a higher price than the ceiling price.

Question 7

The demand curve for a typical good has
A) a negative slope because some consumers switch to other goods as the price of the good rises.
B) a negative slope because the supply of the good rises as demand rises.
C) a negative slope because the good has less "snob appeal" as its price falls.
D) an inverse slope because as the price goes up,the good has more profitability.
E) a positive slope because price is a clear indicator of need.

Accepted Answer

The negative slope of the demand curve is due to the fact that as the price of a good increases, some consumers will switch to other, less expensive, substitutes. This results in a decrease in the quantity demanded. Conversely, as the price of a good decreases, more consumers are willing to purchase it, resulting in an increase in quantity demanded.

Question 8

Price controls usually enhance efficiency in the allocation of resources.

Accepted Answer

Price controls can create market distortions, leading to inefficiencies in resource allocation. When prices are artificially held below the market equilibrium price, it can lead to excess demand, shortages, and rationing of goods. Similarly, when prices are artificially held above the market equilibrium price, excess supply can occur, leading to surplus production and wasted resources. Therefore, price controls generally do not enhance efficiency in the allocation of resources.

Question 9

Any change that shifts the supply curve outward to the right,and does not affect ​the demand durve will lower the equilibrium price and raise the equilibrium.

Accepted Answer

An outward shift in the supply curve indicates an increase in the quantity supplied at every price level. This would result in a surplus of goods, which would put downward pressure on prices, leading to a lower equilibrium price. At the same time, the increase in supply would lead to an increase in the quantity demanded, pushing the equilibrium quantity higher. Therefore, the statement is true.

Question 10

During the Revolutionary War,the Pennsylvania legislature attempted to help the Continental Army by enacting
A) wage floors for soldiers in the army.
B) bonuses for soldiers who re-enlisted.
C) laws to buy food for the soldiers stationed in Pennsylvania.
D) price controls on essential commodities.
E) All of the above are correct.

Accepted Answer

The answer of During the Revolutionary War,the Pennsylvania legislature attempted...

Question 11

Any ​event that causes either the demand curve or the supply curve to shift will also change the equilibrium price and quantity.

Accepted Answer

Any shift in the demand or supply curve will cause a new intersection point and a new equilibrium price and quantity. For example, if there is an increase in demand for a product, the demand curve will shift to the right, causing an increase in the equilibrium price and quantity. If there is a decrease in supply for a product, the supply curve will shift to the left, causing an increase in equilibrium price and a decrease in equilibrium quantity.

Question 12

One effect of market intervention is resource misallocation.

Accepted Answer

Market intervention, such as price controls or subsidies, can disrupt the natural supply and demand forces of the market, leading to an inefficient allocation of resources. This is often because prices no longer accurately reflect the true value of goods and services, leading to surpluses or shortages.

Question 13

Assume the demand schedule for cookies is downward sloping.If the price of cookies falls from $1.50 to $1.25 per dozen,
A) the demand for cookies will fall.
B) the demand for cookies will rise.
C) a larger quantity of cookies will be demanded.
D) a smaller quantity of cookies will be demanded.

Accepted Answer

According to the law of demand, when the price of a good decreases, the quantity demanded of that good increases. Therefore, a lower price of cookies from $1.50 to $1.25 per dozen will result in a larger quantity of cookies demanded, making choice C the correct answer.

Question 14

Sugar price supports ensure an abundance of sugar,and hence reasonable prices for consumers.

Accepted Answer

Sugar price supports artificially inflate the price of sugar by placing tariffs on imported sugar and providing subsidies to domestic sugar producers. This encourages overproduction and results in a surplus of sugar. This surplus often leads to the government buying up excess sugar and storing it, which can cost taxpayers money. Additionally, high sugar prices can lead to increased prices for products that contain sugar, such as candy and soda, which can hurt consumers.

Question 15

The most basic investigative tool of economics is the
A) concept of scarcity.
B) mechanism of supply and demand.
C) coordination and trade syndrome.
D) inflation-unemployment trade-off.
E) regulation of business.

Accepted Answer

The mechanism of supply and demand is the most basic investigative tool of economics because it explains how prices are determined in a market economy through the interaction of supply (how much of a good or service is available) and demand (how much of a good or service people want). This fundamental concept is central to understanding economic behavior and market operations.

Question 16

The demand curve for a good connects points describing how much consumers
A) actually bought at different prices during a particular period.
B) actually bought at different prices in different periods.
C) would have been willing and able to buy at different prices during a particular period.
D) would have been willing and able to buy at different prices in different periods.

Accepted Answer

The demand curve shows the quantity of a good that consumers would be willing and able to purchase at different prices during a particular period. It does not show the actual amount purchased, and it is not directly related to different periods unless the demand conditions (such as market size, consumer preferences, and income levels) change over time. Therefore, option C is the most accurate description of the demand curve.

Question 17

Price controls are usually enacted in response to
A) popular opinion.
B) governmental studies.
C) scholarly research on the effects of high prices.
D) laws enacted in other countries.
E) All of the above are correct.

Accepted Answer

Price controls are usually enacted in response to popular opinion, as people may feel that the price of certain goods or services is too high and demand government intervention. However, price controls may not always be the most effective solution and may have unintended consequences.

Question 18

During the American Revolution,Washington's army nearly starved to death after price controls were enacted to "help" buy food for the army at affordable prices.The Continental Congress later passed a law which
A) exhorted the public to obey the law and help supply food to the army.
B) passed tax increases to punish those who refused to sell the food.
C) revised the American Law of Supply and Demand.
D) overrode local ordinances and essentially repealed the price controls.
E) called for the repeal of other price control measures.

Accepted Answer

The answer of During the American Revolution,Washington's army nearly starved...

Question 19

A demand schedule is a table showing how the ____ of some product during a specified period of time changes as ____ changes,holding all other determinants of quantity demanded constant.
A) demand; the price of its complement
B) demand; the quantity supplied
C) quantity demanded; the price of its substitute
D) quantity demanded; the price of that product

Accepted Answer

A demand schedule shows the relationship between the quantity of a product demanded during a specific period and the price of that product. Therefore, the correct choice is D, which refers to the quantity demanded and the price of the product. The other choices are incorrect because they do not accurately describe the purpose of a demand schedule.

Question 20

Shortages normally accompany an effective price floor.

Accepted Answer

The answer of Shortages normally accompany an effective price floor....

Quiz 4: Supply and Demand An Initial Look

The mechanism of supply and demand is

During the American Revolution,the Pennsylvania legislature enacted price controls on essential commodities.The result of this legislation was

One motive for "battling the invisible hand" is

When used in a professional or technical sense,the law of supply and demand refers to

While demand shifts have an effect on equilibrium price and quantity,supply shifts have no such effect.

Price ceilings will likely result in the growth of black markets.

The demand curve for a typical good has

Price controls usually enhance efficiency in the allocation of resources.

Any change that shifts the supply curve outward to the right,and does not affect the demand durve will lower the equilibrium price and raise the equilibrium.

During the Revolutionary War,the Pennsylvania legislature attempted to help the Continental Army by enacting

Any event that causes either the demand curve or the supply curve to shift will also change the equilibrium price and quantity.

One effect of market intervention is resource misallocation.

Assume the demand schedule for cookies is downward sloping.If the price of cookies falls from $1.50 to $1.25 per dozen,

Sugar price supports ensure an abundance of sugar,and hence reasonable prices for consumers.

The most basic investigative tool of economics is the

The demand curve for a good connects points describing how much consumers

Price controls are usually enacted in response to

During the American Revolution,Washington's army nearly starved to death after price controls were enacted to "help" buy food for the army at affordable prices.The Continental Congress later passed a law which

A demand schedule is a table showing how the of some product during a specified period of time changes as changes,holding all other determinants of quantity demanded constant.

Shortages normally accompany an effective price floor.

Quiz 4: Supply and Demand An Initial Look

The mechanism of supply and demand is

During the American Revolution,the Pennsylvania legislature enacted price controls on essential commodities.The result of this legislation was

One motive for "battling the invisible hand" is

When used in a professional or technical sense,the law of supply and demand refers to

While demand shifts have an effect on equilibrium price and quantity,supply shifts have no such effect.

Price ceilings will likely result in the growth of black markets.

The demand curve for a typical good has

Price controls usually enhance efficiency in the allocation of resources.

Any change that shifts the supply curve outward to the right,and does not affect ​the demand durve will lower the equilibrium price and raise the equilibrium.

During the Revolutionary War,the Pennsylvania legislature attempted to help the Continental Army by enacting

Any ​event that causes either the demand curve or the supply curve to shift will also change the equilibrium price and quantity.

One effect of market intervention is resource misallocation.

Assume the demand schedule for cookies is downward sloping.If the price of cookies falls from $1.50 to $1.25 per dozen,

Sugar price supports ensure an abundance of sugar,and hence reasonable prices for consumers.

The most basic investigative tool of economics is the

The demand curve for a good connects points describing how much consumers

Price controls are usually enacted in response to

During the American Revolution,Washington's army nearly starved to death after price controls were enacted to "help" buy food for the army at affordable prices.The Continental Congress later passed a law which

A demand schedule is a table showing how the ____ of some product during a specified period of time changes as ____ changes,holding all other determinants of quantity demanded constant.

Shortages normally accompany an effective price floor.

Any change that shifts the supply curve outward to the right,and does not affect the demand durve will lower the equilibrium price and raise the equilibrium.

Any event that causes either the demand curve or the supply curve to shift will also change the equilibrium price and quantity.

A demand schedule is a table showing how the of some product during a specified period of time changes as changes,holding all other determinants of quantity demanded constant.