Question

1. CarMax is a national chain that sells used cars. The likely impact of its arrival in the market would be to _____. Everything else held constant, this would likely _____ the price of used cars.

   	a.	increase the quantity supplied of used cars; lower
   	b.	shift the supply of used cars to the left; raise
   	c.	shift the supply of used cars to the right; lower
   	d.	shift the supply of used cars to the right; raise

2 points

Question 2

1. A market demand curve

   	a.	is of no use to economists, who are concerned only with individual preferences.
   	b.	is the horizontal summation of individual demands.
   	c.	reflects a positive relationship between price and quantity.
   	d.	reflects society's changing tastes and preferences.

2 points

Question 3

1. An increase in production subsidies causes an increase in supply.

   	a.	True
   	b.	False

2 points

Question 4

1. What signals information between buyers and sellers in a market?

   	a.	stock exchanges
   	b.	the Internet
   	c.	prices
   	d.	the government

2 points

Question 5

1. Which factor will NOT cause a change in demand?

   	a.	an increase in the number of consumers
   	b.	a decrease in income
   	c.	an increase in the price of a complementary good
   	d.	a decrease in the price of a good

2 points

Question 6

1. Willingness-to-pay differs from person to person but is the same under varying circumstances.

   	a.	False
   	b.	True

2 points

Question 7

1. The law of supply states that if prices fall, consumers will purchase fewer products in the market.

   	a.	False
   	b.	True

2 points

Question 8

1. From the seller's perspective, a relatively low price is a good price.

   	a.	False
   	b.	True

2 points

Question 9

1. Graphically, a change in demand is represented by a shift of the demand curve.

   	a.	True
   	b.	False

2 points

Question 10

1. A manufacturer of plastic canoes and fiberglass kayaks is experiencing an increase in the price of kayaks in the marketplace, while the price of oil used to make plastic is rising. These two events are MOST likely to lead to a(n)

   	a.	increase in the quantity supplied of canoes and a decrease in the supply of kayaks.
   	b.	increase in the supply of both kayaks and canoes.
   	c.	increase in the quantity supplied of kayaks and a decrease in the supply of canoes.
   	d.	decrease in the supply of both kayaks and canoes.

Answer 1

1 - Option C

Shift the supply of used cars in the market , lower

The supply curve will be shifted to right , due to this the equlibrium price will fall.

The quantity supplied will happen in case of movement. The price goes up in case of decrease and not increase. Thus option C is correct.

2 - Option B

Is the horizontal summation of individual demands

Market demand is calculated by adding the demand of more than 1 consumers.

The other options do not give the correct definition of market demand.

3 - True

The increase in production subsidy will provide more incentives by decreasing the cost of production. Thus the supply will increase.

4 - Option C

Prices

The prices signal information between buyer and seller. Prices tell whether the product is abundant or scarce.

Government does not intervene in a free market , stock market is a market only for financial assets. Thus option C is correct.

5 - Option D

Decrease in the price of the good

This will not bring about the change in demand . It will cause the change in quantity demanded.

The other factors change the demand as they are other than price factors. Hence option D will be correct.