Chapter 3_version1

Chapter 3: Exercises for Mid Exam

Exam Overview

• Purpose: Assess understanding of economic principles related to supply, demand, and market equilibrium.

• Format: Multiple choice questions covering key concepts.

Page 1: Basic Concepts of Supply and Demand

• Question 1: Possible reason for an increase in the supply of cell phones. Options:

  • A) More cell phone towers have been built.

  • B) Consumer preference for cell phones has increased.

  • C) Better technology allows for lower production costs.

  • D) Consumers expect landlines to become obsolete.

• Question 2: Analyzes market effects when a government price of a good is set at $36. Options:

  • A) Shortage (excess demand) of 7,000 units.

  • B) Surplus (excess supply) of 7,000 units.

  • C) Surplus (excess supply) of 9,000 units.

  • D) Shortage (excess demand) of 2,000 units.

Page 2: Market Equilibrium Analysis

• Question 3: Identify equilibrium price and quantity from a graph. Options:

  • A) $20; 10

  • B) $5; 30

  • C) $10; 20

  • D) $15; 30

• Question 4: Demand schedules showing individual demands for barbells. Equilibrium price determination from given data:

  • Options: A) $1.50, B) $0.50, C) $2.00, D) Cannot be determined.

Page 3: Market Changes and Characteristics

• Question 5: Impacts of an increase in the price of ice cream. Options:

  • A) Inward shift of demand curve.

  • B) Movement left along the demand curve.

  • C) Outward shift of demand curve.

  • D) Movement right along demand curve.

• Question 6: Characteristics defining a perfectly competitive market:

  • A) Standardized good, full information, no transaction costs, price-taking participants.

  • B) Standardized good, full information, no transaction costs, price-making participants.

  • C) Standardized good, same info for buyers/sellers, low transaction costs, price-taking participants.

  • D) Standardized information, finished good, no transaction costs, price-making participants.

• Question 7: Nature of perfectly competitive markets:

  • A) Common type of market.

  • B) Rare in reality.

  • C) Found in industrial sectors.

  • D) Consists principally of consumer goods.

• Question 8: Definition of demand:

  • A) Amount able to buy but not necessarily want.

  • B) Amount willing and able to buy at alternative prices.

  • C) Amount willing and able to sell.

  • D) Amount wanted but may not be able to buy.

Page 4: Demand and Supply Analysis

• Question 9: Effects at a price of $5 on a market's supply and demand. Options:

  • A) Shortage (excess demand) of 30 units.

  • B) Surplus (excess supply) of 20 units.

  • C) Shortage (excess demand) of 10 units.

  • D) Shortage (excess demand) of 20 units.

• Question 10: Effect of increased oil prices on ride-on mower demand and supply:

  • A) Demand decreases; supply increases.

  • B) Demand decreases; supply decreases.

  • C) Demand increases; supply increases.

  • D) Demand increases; supply decreases.

• Question 11: Impact of drought on fruit market:

  • A) Decrease in demand for fruitcake, no change to supply.

  • B) Increase in supply of fruitcake.

  • C) Decrease in supply of fruitcake.

  • D) Increase in demand for fruitcake, no change to supply.

Page 5: Equilibrium Changes

• Question 12: Market equilibrium response to a decrease in demand:

  • A) Price rises; quantity falls.

  • B) Price and quantity rise.

  • C) Price falls; quantity rises.

  • D) Price and quantity fall.

• Question 13: Definition of market:

  • A) Exchange contract.

  • B) Store.

  • C) Market.

  • D) Mall.

• Question 14: Effects of an unusually large apple crop:

  • A) Decreased supply, increasing price and decreasing quantity.

  • B) Increased supply, decreasing price and increasing quantity.

  • C) Decreased demand, reducing both price and quantity.

  • D) Increased demand, increasing both price and quantity.

• Question 15: Market equilibrium with increased supply:

  • A) Price rises; quantity falls.

  • B) Price falls; quantity rises.

  • C) Price and quantity rise.

  • D) Price and quantity fall.

Page 6: Answer Key

• 1. C

• 2. B

• 3. C

• 4. D

• 5. B

• 6. A

• 7. B

• 8. B

• 9. D

• 10. B

• 11. C

• 12. D

• 13. C

• 14. B

• 15. B