Question 1

Assume the demand function for basketballs is given by QD = 150 −3P + 0.1I,where P = price of a basketball,and I = average income of consumers.Also,assume the supply of basketballs is given by QS = 2P.If the market for basketballs is perfectly competitive,and the average income is equal to $1,500,what is the equilibrium price and quantity? What if a 20 percent income tax is introduced?

Accepted Answer

A)  Before the tax,the equilibrium price was $60,and 120 basketballs were traded.The introduction of an income tax would have no effect on the equilibrium price and quantity.
B)  Before the tax,the equilibrium price was $60,and 120 basketballs were traded.Once the income tax is introduced,the price would decrease by $6,and only 108 basketballs would be traded.
C)  Before the tax,the equilibrium price was $60,and 120 basketballs were traded.Once the income tax is introduced,the price would decrease by $6,which would cause the quantity of basketballs traded to increase.
D)  Before the tax,the equilibrium price was $60,and 108 basketballs were traded.Once the income tax is introduced,the price would decrease by $6,and only 120 basketballs would be traded.E) B) and D)
F) None of the above

Question 2

There is an OPEC cartel that reduces the production of world oil by several million barrels a day.Which of the following correctly captures the effect of this change on the market for gasoline?

Accepted Answer

A)  Both equilibrium quantity and price will increase.
B)  Both equilibrium quantity and price will decrease.
C)  Equilibrium quantity will increase,but equilibrium price will decrease.
D)  Equilibrium quantity will decrease,but equilibrium price will increase.E) All of the above
F) A) and D)

Question 3

Externalities exist when the actions of one agent

Accepted Answer

A)  benefit or hurt another agent who is not part of the exchange relationship.
B)  hurt the agent committing the action.
C)  benefit the agent committing the action.
D)  benefit or hurt another agent who is a part of the exchange relationship.E) All of the above
F) None of the above

Question 4

Assume the market for ceiling fans is perfectly competitive and is currently in equilibrium.If the demand increases while the supply decreases,then we can be certain that

Accepted Answer

A)  the equilibrium price will increase.
B)  the equilibrium quantity will increase.
C)  both price and quantity will increase.
D)  both price and quantity will decrease.E) C) and D)
F) All of the above

Question 5

A business manager has to decide whether to buy supplies from the marketplace or whether to build them inside the company.What do "information" and "contracting" have to do with this decision?

Accepted Answer

Contracting costs and the costs of acquiring specific knowledge or specific information play a large role in the decision of whether transactions occur in the marketplace or within the boundaries of the firm.Firms are more efficient than markets at organizing some transactions when the costs of information gathering and contracting in markets are high.However,when information is available at a lower cost and contracting or transactional costs are low in the marketplace,it is more efficient for transactions to occur in the marketplace.Individuals have a strong incentive to organize transactions efficiently to maximize gains from trade.

Question 6

There is an increase in availability of alternative fuels through research and development.Which of the following correctly captures the effect of this change on the market for gasoline?

Accepted Answer

A)  Both equilibrium quantity and price will increase.
B)  Both equilibrium quantity and price will decrease.
C)  Equilibrium quantity will increase,but equilibrium price will decrease.
D)  Equilibrium quantity will decrease,but equilibrium price will increase.E) B) and C)
F) B) and D) B

Question 7

Markets can give a buyer everything a buyer needs to know about a product even though the buyer does not have the training to understand the specific knowledge needed to build or distribute the product.Explain.

Accepted Answer

The market price of a good tells the buy...

Question 8

Assume the market for pencils is competitive and originally in equilibrium.As a result of an increase in the price of graphite,the supply of pencils decreases.What is true of the new equilibrium?

Accepted Answer

A)  The price is higher while the quantity exchanged decreases.
B)  The price is higher and the quantity exchanged increases.
C)  The price is lower and the quantity exchanged decreases.
D)  The price is lower while the quantity exchanged increases.E) B) and C)
F) None of the above

Question 9

The war in Iraq comes to an end.Iran and Afghanistan lay pipes to generate more oil.The United States and Venezuela enter into an era of friendship.Which of the following correctly captures the effect of this change on the market for gasoline?

Accepted Answer

A)  Both equilibrium quantity and price will increase.
B)  Both equilibrium quantity and price will decrease.
C)  Equilibrium quantity will increase,but equilibrium price will decrease.
D)  Equilibrium quantity will decrease,but equilibrium price will increase.E) A) and C)
F) A) and B)

Question 10

The demand and supply curves in the market for gasoline are illustrated in the graph below. > A) A. B) B + C. C) B + E. D) C." class="answers-bank-image d-inline" rel="preload" > Starting at the equilibrium point,if the government imposes a price ceiling of $10,producer surplus will fall by an amount given by the area ????_____ >

Accepted Answer

A)  A.
B)  B + C.
C)  B + E.
D)  C.E) A) and D)
F) A) and C)

Question 11

There is an increase in incomes due to a tech boom.Which of the following correctly captures the effect of this change on the market for gasoline?

Accepted Answer

A)  Both equilibrium quantity and price will increase.
B)  Both equilibrium quantity and price will decrease.
C)  Equilibrium quantity will increase,but equilibrium price will decrease.
D)  Equilibrium quantity will decrease,but equilibrium price will increase.E) B) and C)
F) A) and B)

Question 12

Tom and Jerry have been roommates for the past two years.During this period,they bought 11 CDs together.Now that each is taking his own apartment,they are deciding how to split their possessions.Tom suggests they take five CDs each and give the extra one to Arnold,their neighbor.Jerry,on the other hand,suggests they flip a coin to decide who gets the 11th CD.Assuming they neither like nor dislike being altruistic,which of the two suggestions is Pareto efficient?

Accepted Answer

A)  Tom's suggestion is Pareto efficient.
B)  Jerry's suggestion is Pareto efficient.
C)  Both suggestions are Pareto efficient.
D)  None of the suggestions is Pareto efficient.E) B) and D)
F) C) and D)

Question 13

The demand and supply curves in the market for gasoline are illustrated in the graph below.  Starting at the equilibrium point,if the government imposes a price ceiling of $10,the deadweight loss will be the area ______.

Accepted Answer

A)  D + E
B)  F + G
C)  D
D)  EE) B) and D)
F) None of the above

Question 14

The following diagram shows a market in equilibrium.If there was a $3.50 price floor, >60units. C) there would be a shortage of 60 units. D) there would be a surplus of 60 units." class="answers-bank-image d-inline" rel="preload" >

Accepted Answer

A)  the quantity demanded would be 65 units.
B)  the quantity demanded would be >60units.
C)  there would be a shortage of 60 units.
D)  there would be a surplus of 60 units.E) None of the above
F) C) and D)

Question 15

Draw supply and demand curves.Show the impact of an increase in demand on the price and quantity exchanged in the market.Show the impact of a decrease in demand on the price and quantity exchanged in the market.

Accepted Answer

When there is an increase in demand,the ...

Question 16

If the price of movie tickets doubles,then

Accepted Answer

A)  the demand for DVDs is likely to increase.
B)  the price of DVDs is likely to decrease.
C)  the quantity of movie tickets sold is likely to increase.
D)  the quantity of popcorn sold at the movies is likely to increase.E) A) and C)
F) A) and B)

Question 17

A price ceiling on a good will usually

Accepted Answer

A)  shift both the demand and supply curves to the right.
B)  shift both the demand and supply curves to the left.
C)  shift the demand curve to the left and the supply curve to the right.
D)  shift neither the demand curve nor the supply curve.E) A) and B)
F) None of the above

Question 18

Let Qd = 10 - 2P and Qs = 3P be the demand and supply curves for Beer.The equilibrium combination (P* and Q*) in the market is ______.

Accepted Answer

A)  P* = 2; Q* = 5
B)  P* = 5; Q* = 0
C)  P* = 2; Q* = 6
D)  P* = 6; Q* = 2E) A) and D)
F) A) and C)

Question 19

A working knowledge of both markets and firms is important for managers to be effective because it

Accepted Answer

A)  helps them make appropriate strategic and operational decisions.
B)  helps them to exploit other executives.
C)  helps them train their subordinates better.
D)  helps them earn high bonuses.E) A) and D)
F) A) and C)

Question 20

Many products come with a warning about how to use the product without harming other people.Why?

Accepted Answer

The information about how to use a particular product without harming other people is a specific knowledge.The warning is a low-cost method of transferring this information from the producer of the product to the user of the product.

Exam 3: Exchange and Markets

Correct Answer
verified

There is an OPEC cartel that reduces the production of world oil by several million barrels a day.Which of the following correctly captures the effect of this change on the market for gasoline?

Correct Answer
verified

Externalities exist when the actions of one agent

Correct Answer
verified

Assume the market for ceiling fans is perfectly competitive and is currently in equilibrium.If the demand increases while the supply decreases,then we can be certain that

Correct Answer
verified

A business manager has to decide whether to buy supplies from the marketplace or whether to build them inside the company.What do "information" and "contracting" have to do with this decision?

There is an increase in availability of alternative fuels through research and development.Which of the following correctly captures the effect of this change on the market for gasoline?

Correct Answer
verified
B

Markets can give a buyer everything a buyer needs to know about a product even though the buyer does not have the training to understand the specific knowledge needed to build or distribute the product.Explain.

Correct Answer
verified
The market price of a good tells the buy...
View Answer

Assume the market for pencils is competitive and originally in equilibrium.As a result of an increase in the price of graphite,the supply of pencils decreases.What is true of the new equilibrium?

Correct Answer
verified

The war in Iraq comes to an end.Iran and Afghanistan lay pipes to generate more oil.The United States and Venezuela enter into an era of friendship.Which of the following correctly captures the effect of this change on the market for gasoline?

Correct Answer
verified

The demand and supply curves in the market for gasoline are illustrated in the graph below. Starting at the equilibrium point,if the government imposes a price ceiling of $10,producer surplus will fall by an amount given by the area ????_____ <>

Correct Answer
verified

There is an increase in incomes due to a tech boom.Which of the following correctly captures the effect of this change on the market for gasoline?

Correct Answer
verified

Correct Answer
verified

The demand and supply curves in the market for gasoline are illustrated in the graph below. Starting at the equilibrium point,if the government imposes a price ceiling of $10,the deadweight loss will be the area ______.

Correct Answer
verified

The following diagram shows a market in equilibrium.If there was a $3.50 price floor,

Correct Answer
verified

Draw supply and demand curves.Show the impact of an increase in demand on the price and quantity exchanged in the market.Show the impact of a decrease in demand on the price and quantity exchanged in the market.

Correct Answer
verified
When there is an increase in demand,the ...
View Answer

If the price of movie tickets doubles,then

Correct Answer
verified

A price ceiling on a good will usually

Correct Answer
verified

Let Q_d = 10 - 2P and Q_s = 3P be the demand and supply curves for Beer.The equilibrium combination (P* and Q*) in the market is ______.

Correct Answer
verified

A working knowledge of both markets and firms is important for managers to be effective because it

Correct Answer
verified

Many products come with a warning about how to use the product without harming other people.Why?

Correct Answer
verified
The information about how to use a particular product without harming other people is a specific knowledge.The warning is a low-cost method of transferring this information from the producer of the product to the user of the product.

Exam 3: Exchange and Markets

Correct AnswerverifiedShow Answer

There is an OPEC cartel that reduces the production of world oil by several million barrels a day.Which of the following correctly captures the effect of this change on the market for gasoline?

Correct AnswerverifiedShow Answer

Externalities exist when the actions of one agent

Correct AnswerverifiedShow Answer

Assume the market for ceiling fans is perfectly competitive and is currently in equilibrium.If the demand increases while the supply decreases,then we can be certain that

Correct AnswerverifiedShow Answer

A business manager has to decide whether to buy supplies from the marketplace or whether to build them inside the company.What do "information" and "contracting" have to do with this decision?

There is an increase in availability of alternative fuels through research and development.Which of the following correctly captures the effect of this change on the market for gasoline?

Correct AnswerverifiedB

Markets can give a buyer everything a buyer needs to know about a product even though the buyer does not have the training to understand the specific knowledge needed to build or distribute the product.Explain.

Correct AnswerverifiedThe market price of a good tells the buy...View AnswerShow Answer

Assume the market for pencils is competitive and originally in equilibrium.As a result of an increase in the price of graphite,the supply of pencils decreases.What is true of the new equilibrium?

Correct AnswerverifiedShow Answer

The war in Iraq comes to an end.Iran and Afghanistan lay pipes to generate more oil.The United States and Venezuela enter into an era of friendship.Which of the following correctly captures the effect of this change on the market for gasoline?

Correct AnswerverifiedShow Answer

The demand and supply curves in the market for gasoline are illustrated in the graph below. Starting at the equilibrium point,if the government imposes a price ceiling of $10,producer surplus will fall by an amount given by the area ????_____ <>

Correct AnswerverifiedShow Answer

There is an increase in incomes due to a tech boom.Which of the following correctly captures the effect of this change on the market for gasoline?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The demand and supply curves in the market for gasoline are illustrated in the graph below. Starting at the equilibrium point,if the government imposes a price ceiling of $10,the deadweight loss will be the area ______.

Correct AnswerverifiedShow Answer

The following diagram shows a market in equilibrium.If there was a $3.50 price floor,

Correct AnswerverifiedShow Answer

Draw supply and demand curves.Show the impact of an increase in demand on the price and quantity exchanged in the market.Show the impact of a decrease in demand on the price and quantity exchanged in the market.

Correct AnswerverifiedWhen there is an increase in demand,the ...View AnswerShow Answer

If the price of movie tickets doubles,then

Correct AnswerverifiedShow Answer

A price ceiling on a good will usually

Correct AnswerverifiedShow Answer

Let Qd = 10 - 2P and Qs = 3P be the demand and supply curves for Beer.The equilibrium combination (P* and Q*) in the market is ______.

Correct AnswerverifiedShow Answer

A working knowledge of both markets and firms is important for managers to be effective because it

Correct AnswerverifiedShow Answer

Many products come with a warning about how to use the product without harming other people.Why?

Correct AnswerverifiedThe information about how to use a particular product without harming other people is a specific knowledge.The warning is a low-cost method of transferring this information from the producer of the product to the user of the product.

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B

Correct Answer
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The market price of a good tells the buy...
View Answer

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When there is an increase in demand,the ...
View Answer

Correct Answer
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Let Q_d = 10 - 2P and Q_s = 3P be the demand and supply curves for Beer.The equilibrium combination (P* and Q*) in the market is ______.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The information about how to use a particular product without harming other people is a specific knowledge.The warning is a low-cost method of transferring this information from the producer of the product to the user of the product.