Chapter 1

Question 1

_____________ looks at the economy as a whole, whereas ________________ studies the behavior of individual decision-making units.

Answer 1

Macroeconomics; Microeconomics

Question 2

According to the law of demand, the quantity of a good demanded in a given time period:

Answer 2

Increases as its price falls, ceteris paribus.

Question 3

An increase in the price of apples causes a(n) _______ for apples.

Answer 3

decrease in the quantity demanded

Question 4

Ceteris paribus is an important assumption used in economics, and translates to:

Answer 4

Holding all else constant

Question 5

Market supply and market demand curves are similar in that both:

Answer 5

Can be derived by adding horizontally all the curves of the individuals in the market.

Question 6

Which of the following is a determinant of supply?

Answer 6

The prices of the factors of production.

Question 7

A shift in supply is defined as a change in:

Answer 7

Supply because of a change in a non-price determinant.

Question 8

The term market mechanism refers to:

Answer 8

The use of market prices and sales to determine resource allocation

Question 9

When the current price is above the market-clearing level we would expect:

Answer 9

quantity supplied to exceed quantity demanded.

Question 10

The demand of a good is D=119 -9.8P; the supply of it is S=9P -34. The market price is 5.7. Please find the amount of the shortage in the market.

Answer 10

D = Demand Multiplied by Price
S = Supply Multiplied by Price
Demand is GREATER than the Supply = D-S = Demand - Supply = Quantity Supplied
Solu = 45.84

Question 11

The demand of a good is D=104 -3.3P; the supply of it is S=3P -24. Please find the equilibrium price.

Answer 11

Demand = Supply in this scenario. Find the E Price by adding the highest Demand and highest Supply and lowest and lowest, then divide the highest by the lowest.
Solu = 20.32/20.31

Question 12

The demand of a good is D=104 -3.9P; the supply of it is S=3.9P -22. Please find the equilibrium quantity.

Answer 12

Find the E Price as before then solve for Demand by multiplying it by the E Price
Solu = 41

Question 13

The demand of a good is D=115 -9.1P; the supply of it is S=8P -39. The market price is 10.6. Please find the amount of the surplus in the market.

Answer 13

Solve for Demand and Supply, then subtract the Supply by the Demand. Or
S-D = Surplus
Solu = 27.26

Question 14

The quantity supplied of a good on a market is 25; its quantity demanded is 36. Please find the shortage on the market.

Answer 14

Qd - Qs = Shortage ( Quantity Demanded - Quantity Supplied = Shortage)
Solu = 11

Question 15

The quantity supplied of a good on a market is 36; its quantity demanded is 22. Please find the surplus on the market.

Answer 15

Qs - Qd = Surplus (Quantity Supplied- Quantity Demanded = Surplus)
Solu = 14

Question 16

The quantity demanded of a good is 25. There is a shortage of 4 units on the market. Please find the quantity supplied on the market.

Answer 16

Qd - Shortage units = Qs ( Quantity Demand - Shortage = Quantity Supplied)

Solu = 21

Question 17

The quantity demanded of a good is 11. There is a surplus of 12 units on the market. Please find the quantity supplied on the market.

Answer 17

Qd + Surplus = Qs (Quantity Demanded + Surplus = Quantity Supplied)

Question 18

If the equilibrium price has decreased, and the equilibrium quantity has increased in the market for toothpaste, what could have caused this?

Answer 18

When input price decreases, the supply increase, think of supply. In this case fluoride.

Question 19

Which of the following is not held constant along a given supply curve for a good?

Answer 19

Price

Question 20

Which of the following would advocate a laissez faire economic policy? (hint, scottish philosopher)

Answer 20

Adam Smith

Question 21

Sometimes referred to as the Father of Economics, _____________________ wrote Wealth of Nations in 1776. (

Answer 21

Adam Smith

Question 22

Karl Marx believed that the best use of resources would result from:

Answer 22

Government directives.

Question 23

Assuming pizza is a normal good, if your income increases, then your demand for pizza will _______ and quantity demanded for pizza will _______.

Answer 23

increase; increase

Question 24

When the price changes, if the percentage change in the quantity demanded is greater than the
percentage change in the price

Answer 24

The demand is elastic