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Principles of Microeconomics
Principles of Microeconomics, 1st Canadian Edition
Robert H. Frank, Cornell University
Ben S. Bernanke, Princeton University
Lars Osberg, Dalhousie University
Melvin Cross, Dalhousie University
Brian MacLean, Laurentian University

Supply and Demand: An Introduction



In order to understand how the price of a good is determined in the free market, one must account for
A)the desires of demanders exclusively.
B)the desires of suppliers exclusively.
C)the desires of governmental agencies exclusively.
D)the desires of lobbyists exclusively.
E)the desires of demanders and suppliers.

As the price of cookies increases, firms that produce cookies will
A)increase the supply of cookies.
B)increase the quantity of cookies supplied.
C)decrease the supply of cookies.
D)decrease the quantity of cookies supplied.
E)leave their production unchanged.

"Holding all other relevant factors constant, consumers will purchase more of a good as its price falls." This statement reflects the behaviour underlying
A)the demand curve.
B)an increase in demand.
C)the supply curve.
D)a decrease in the demand curve.
E)the production possibilities curve.

Suppose that both the equilibrium price and quantity of mustard rise. The most consistent explanation for these observations is
A)a decrease in demand for mustard with no change in supply.
B)a decrease in the supply of mustard with no change in demand.
C)a decrease in demand for mustard and a decrease in the supply of mustard.
D)an increase in demand for mustard with no change in supply.
E)an increase in the supply of mustard with no change in demand.

Which of the following would not shift the supply curve for Pentium III processors?
A)A decrease in the price of silicon wafers.
B)An increase in the demand for Pentium III processors.
C)An improvement in the technology used to make processors.
D)An increase in the wage rate paid to "clean room" workers.
E)An earthquake centered in Silicon Valley.

A market is comprised of
A)just demanders.
B)just suppliers.
C)both suppliers and demanders.

If the full marginal costs of producing a certain good are greater than the seller's marginal costs, then
A)the market will produce the socially optimal outcome.
B)the equilibrium price will reflect the true cost of production.
C)too little of the good will be produced.
D)too much of the good will be produced.
E)the total economic surplus will be maximized.

When the demand for a good increases, firms respond by
A)increasing their supply.
B)decreasing their costs.
C)increasing their price.
D)increasing their quantity supplied.
E)decreasing their supply.

A market in equilibrium would feature
A)excess supply.
B)unexploited opportunities.
C)excess demand.
D)wild variation in price.
E)no tendency to change.

Suppose we know two facts: first, the market for hair restoring tonics experiences chronic shortages and second, government sets the price of hair restoring tonics. We can conclude
A)government has set the price too high.
B)government has set the price above the equilibrium price.
C)government has set the price too low.
D)government has set the price below the equilibrium price.
E)firms are passing up opportunities to increase their profits.