Understanding Economics International Edition 13th Edition by Russell S. Sobel – Test Bank

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ISBN-10 ‏ : ‎ 0538756187
ISBN-13 ‏ : ‎ 978-0538756181
Publisher ‏ : ‎ South-Western; International
ed of 13th revised ed edition (21 May 2010)

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SKU:000786000647

Understanding Economics International Edition 13th Edition by Russell S. Sobel – Test Bank

Understanding Economics Chapter 3—Supply, Demand, and the Market Process

MULTIPLE CHOICE

1.Which of the following would most likely increase the demand for peanut butter?

a.

a decrease in the price of jelly, a good that is often used with peanut butter

b.

the discovery that excessive consumption of peanut butter is harmful to one’s health

c.

crop failures that raise the price of peanuts

d.

the invention of a new product that consumers think is a good substitute for peanut butter

ANS:APTS:1OBJ:Suggested Quiz

2.Producers are willing to offer greater quantities for sale at higher prices because

a.

they have the incentive to pay the increasing opportunity cost of resources necessary to attract them from alternative uses

b.

they will decrease their profits by expanding production at higher prices

c.

the government orders them to do so

d.

lower prices attract new firms, which have higher costs of production

e.

they hire superior quality, higher-priced resources as production expands

ANS:APTS:1OBJ:Suggested Quiz

3.If Harry only pays $25,000 to purchase a new car even though he would have been willing to pay as much as $35,000 for the car, this indicates that

a.

Harry is an irrational consumer.

b.

The seller earned a $10,000 profit on the sale of the car.

c.

Harry reaped $10,000 of consumer surplus from the transaction.

d.

The seller received $10,000 worth of producer surplus on the transaction.

ANS:CPTS:1OBJ:Suggested Quiz

4.The number of people willing to buy tickets to the Super Bowl is invariably greater than the number of tickets (and seats) available. This is evidence that the price of the tickets is

a.

higher than the equilibrium price.

b.

equal to the equilibrium price since the number of tickets bought equals the number sold.

c.

lower than the equilibrium price.

d.

higher than the equilibrium price when the demand is inelastic but lower when the demand is elastic.

ANS:CPTS:1OBJ:Suggested Quiz

5.”A reduction in gasoline prices caused the demand for gasoline to increase. The lower gas prices also led to an increase in demand for large cars, causing their prices to rise.” These statements

a.

are essentially correct.

b.

contain one error; the lower gasoline prices would cause an increase in the quantity demanded of gasoline, not an increase in demand.

c.

contain one error; the lower gasoline prices would increase the quantity demanded of large cars, not the demand.

d.

contain two errors; the lower gasoline prices would cause the quantity of gasoline demanded (rather than the demand) to increase, and the lower gasoline price would cause an increase in quantity demanded (rather than the demand) for large cars.

ANS:BPTS:1OBJ:Suggested Quiz

6.A cold spell in Florida extensively reduced the orange crop, and as a result, California oranges commanded a higher price. Which of the following statements best explains the situation?

a.

The supply of Florida oranges fell, causing the supply of California oranges to increase as well as their price.

b.

The supply of Florida oranges fell, causing the supply of California oranges to decrease and their price to increase.

c.

The supply of Florida oranges fell, causing their price to increase and the demand for California oranges to increase.

d.

The demand for Florida oranges was reduced by the freeze, causing an increase in the price of California oranges and a greater demand for them.

ANS:CPTS:1OBJ:Suggested Quiz

7.When the market for a good is in equilibrium,

a.

consumer surplus will equal producer surplus.

b.

the total value created for consumers will equal the total cost of production for business firms.

c.

all units valued more highly than the opportunity cost of production will be supplied.

d.

all units that have value will be produced, regardless of their cost of production.

ANS:CPTS:1OBJ:Suggested Quiz

8.Assume that corn and soybeans are alternatives that could be grown by most farmers. An increase in the price of corn will

a.

increase the supply of corn.

b.

increase the supply of soybeans.

c.

decrease the supply of soybeans.

d.

decrease the supply of corn.

e.

have no effect on the supplies of corn and soybeans.

ANS:CPTS:1OBJ:Suggested Quiz

9.If cable TV service and satellite TV service are substitutes,

a.

a decrease in the price of cable will decrease the demand for satellite TV.

b.

an increase in the price of cable will decrease the demand for satellite TV.

c.

an increase in the price of cable will generally have no effect on the demand for satellite TV.

d.

an increase in the price of cable will shift the demand curve for satellite TV to the left.

ANS:APTS:1OBJ:Suggested Quiz

10.The invisible hand principle indicates that competitive markets can help promote the efficient use of resources

a.

only if buyers and sellers really care, personally, about economic efficiency.

b.

even when each market participant cares only about their own self interest rather than about the overall efficiency of resource use.

c.

even if business firms fail to produce goods efficiently.

d.

if, and only if, businesses recognize their social obligation to keep costs low and use resources wisely.

ANS:BPTS:1OBJ:Suggested Quiz

11.The curve that shows the relationship between the price of a good and the quantity that consumers are willing to purchase at each price is the

a.

supply curve.

b.

demand curve.

c.

production possibilities curve.

d.

consumption curve.

ANS: B PTS: 1 TOP: Consumer Choice and the Law of Demand

12.The demand schedule for a good

a.

indicates the relationship between the price of the good and the price of other goods.

b.

indicates the quantities of the good that people will buy at various prices.

c.

illustrates the quantity producers will provide at alternative prices.

d.

is determined primarily by the cost of producing the good.

ANS: B PTS: 1 TOP: Consumer Choice and the Law of Demand

13.Assume the demand curve 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.

ANS: C PTS: 1 TOP: Consumer Choice and the Law of Demand

14.Each point on the demand curve indicates

a.

the demand for the product.

b.

the quantity demanded at that price.

c.

the amount that people need.

d.

the amount people want to buy at different income levels.

ANS: B PTS: 1 TOP: Consumer Choice and the Law of Demand

15.An important assumption that is made when constructing a demand schedule is that

a.

only price and quantity matter in determining demand.

b.

people always want a certain amount of a product.

c.

demand is too important to be left to the economists.

d.

all other determinants of demand are held constant.

e.

demand has a positive slope.

ANS: D PTS: 1 TOP: Consumer Choice and the Law of Demand

16.Willingness to pay

a.

measures the value that a buyer places on a good.

b.

is the amount a seller actually receives for a good minus the minimum amount the seller is willing to accept.

c.

is the maximum amount a buyer is willing to pay minus the minimum amount a seller is willing to accept.

d.

is the amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it.

ANS: A PTS: 1 TOP: Consumer Choice and the Law of Demand

17.Which of the following does the law of demand specifically imply?

a.

If the product price increases, quantity demanded will decrease.

b.

If consumer income increases, quantity demanded will increase.

c.

If the product price increases, quantity demanded will increase.

d.

If consumer income increases, quantity demanded will decrease.

e.

If supply increases, demand will increase.

ANS: A PTS: 1 TOP: Consumer Choice and the Law of Demand

18.A demand curve for concert tickets would show the

a.

number of tickets the box office is willing to sell at various prices.

b.

number of people who need tickets.

c.

quality of people who want to buy these concert tickets.

d.

number of tickets that will be purchased at various prices.

ANS: D PTS: 1 TOP: Consumer Choice and the Law of Demand

19.At a price of $5, Sam buys 10 units of a product; when the price increases to $6, Sam buys 8 units. Which of the following is correct about Sam’s behavior?

a.

Sam’s demand has decreased.

b.

Sam’s demand has increased.

c.

Sam’s quantity demanded has decreased, and his demand has not changed.

d.

Sam’s quantity demanded has increased, and his demand has increased.

e.

Sam’s demand has increased, and his quantity demanded has decreased.

ANS: C PTS: 1 TOP: Consumer Choice and the Law of Demand

20.The law of demand is simply a reflection of the

a.

law of comparative advantage.

b.

production possibilities curve.

c.

work of Alfred Marshall who formulated the law.

d.

basic principle of economics: Incentives influence behavior in a predictable fashion.

ANS: D PTS: 1 TOP: Consumer Choice and the Law of Demand

21.The law of demand refers to the

a.

decrease in price that can be expected as more units of a product are demanded.

b.

increase in price that results from an increase in demand for a good of limited supply.

c.

inverse relationship between the price of a good and the quantity demanded.

d.

increase in the quantity of a good available when its price increases.

ANS: C PTS: 1 TOP: Consumer Choice and the Law of Demand

22.In economics, the demand for a good refers to the amount of the good people

a.

would like to have if the good were free.

b.

are willing to buy at various prices.

c.

need to achieve a minimum standard of living.

d.

will buy at alternative income levels.

ANS: B PTS: 1 TOP: Consumer Choice and the Law of Demand

23.The law of demand refers to the

a.

inverse relationship between the price of a good and the willingness of consumers to buy it.

b.

price increase that results from an increase in demand for a good of limited supply.

c.

inverse relationship between the price of a good and the quantity offered for sale.

d.

increase in the quantity of a good available when its price increases.

ANS: A PTS: 1 TOP: Consumer Choice and the Law of Demand

24.The law of demand indicates that

a.

every physical good has a use.

b.

when people want a good badly enough, they will find a way to pay for it.

c.

the desire for a good is unrelated to its price.

d.

the quantity of a good that people will buy is inversely related to the price of the good.

ANS: D PTS: 1 TOP: Consumer Choice and the Law of Demand

25.The law of demand indicates that as the price of a good decreases,

a.

producers sell less of it.

b.

producers sell more of it.

c.

consumers buy less of it.

d.

consumers buy more of it.

ANS: D PTS: 1 TOP: Consumer Choice and the Law of Demand

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