IAAO 601 MODULE 2 QUESTIONS AND ACCURATE
ANSWERS
Which of the following would decrease the current demand for beef? Check all that
apply.
Higher pork prices
An increase in the price of beef
Widespread outbreak of mad cow or hoof-and-mouth disease
Higher prices of feed grains used to feed cattle
Lower consumer income, assuming that beef is a normal good - Answers - Widespread
outbreak of mad cor or hoof-and-mouth disease
Lower consumer income, assuming that beef is a normal good
Which of the following would increase the current demand for beef? Check all that
apply.
An increase in the price of beef
Widespread outbreak of mad cow or hoof-and-mouth disease
Higher consumer income, assuming that beef is a normal good
Higher prices of feed grains used to feed cattle
Higher pork prices - Answers - Higher consumer income, assuming that beef is a
normal good
Higher pork prices
True or False: When a demand curve for a specific product (ice cream or cell phones,
for example) is constructed, changes in the number of consumers in the market are held
constant. - Answers - True
True or False: The law of supply is a direct positive relationship between the price of a
good or service and the quantity of it that producers are willing to supply. The height of
the supply curve at any quantity shows the minimum price necessary to induce
suppliers to produce that unit. - Answers - True
Are prices an accurate measure of a good's total value?
Yes, prices are an accurate measure of a good's total value.
No, prices are the total benefit consumers derive from all units consumed.
No, prices depend on the elasticity of supply and demand.
No, prices reflect marginal value, not total value. - Answers - No, prices reflect marginal
value, not total value.
Which of the following accurately explains why professional wrestlers earn more than
nurses?
, The supply of nurses is large relative to professional wrestlers, and price is determined
by marginal value (not total value).
The supply of nurses is large relative to professional wrestlers, and price is determined
by total value (not marginal value). - Answers - The supply of nurses is large relative to
professional wrestlers, and price is determined by marginal value (not total value).
What is being held constant when the supply curve is constructed for a specific good
such as pizza or automobiles?
Level of technology
Consumers' tastes
Consumers' income
None of the above - Answers - Level of technology
Which of the following best defines producer surplus?
The difference between the maximum price consumers are willing to pay and the price
they actually pay.
The difference between the price that suppliers actually receive and the maximum price
they would be willing to accept.
A situation in which all of the potential gains from trade have been realized.
The difference between the price that suppliers actually receive and the minimum price
they would be willing to accept. - Answers - The difference between the price that
suppliers actually receive and the minimum price they would be willing to accept.
How does economic efficiency relate to the gains of consumers and producers?
In a market economy, when the demand for a good increases, its price will be efficient,
which will motivate consumers to search for substitutes and cut back on additional
purchases of the good.
The equilibrium reached by a market satisfies economic efficiency, and the total gains
from trade represented by the combined area of consumer and producer surplus are
maximized.
The equilibrium reached by a market satisfies economic efficiency and the difference
between consumer and producer surplus is minimized.
In a market economy, when the demand for a good increases, its price will rise, which
will motivate producers to supply more of the good. - Answers - he equilibrium reached
by a market satisfies economic efficiency, and the total gains from trade represented by
the combined area of consumer and producer surplus are maximized.
Which of the following best defines consumer surplus?
The difference between the price that suppliers actually receive and the minimum price
they would be willing to accept.
ANSWERS
Which of the following would decrease the current demand for beef? Check all that
apply.
Higher pork prices
An increase in the price of beef
Widespread outbreak of mad cow or hoof-and-mouth disease
Higher prices of feed grains used to feed cattle
Lower consumer income, assuming that beef is a normal good - Answers - Widespread
outbreak of mad cor or hoof-and-mouth disease
Lower consumer income, assuming that beef is a normal good
Which of the following would increase the current demand for beef? Check all that
apply.
An increase in the price of beef
Widespread outbreak of mad cow or hoof-and-mouth disease
Higher consumer income, assuming that beef is a normal good
Higher prices of feed grains used to feed cattle
Higher pork prices - Answers - Higher consumer income, assuming that beef is a
normal good
Higher pork prices
True or False: When a demand curve for a specific product (ice cream or cell phones,
for example) is constructed, changes in the number of consumers in the market are held
constant. - Answers - True
True or False: The law of supply is a direct positive relationship between the price of a
good or service and the quantity of it that producers are willing to supply. The height of
the supply curve at any quantity shows the minimum price necessary to induce
suppliers to produce that unit. - Answers - True
Are prices an accurate measure of a good's total value?
Yes, prices are an accurate measure of a good's total value.
No, prices are the total benefit consumers derive from all units consumed.
No, prices depend on the elasticity of supply and demand.
No, prices reflect marginal value, not total value. - Answers - No, prices reflect marginal
value, not total value.
Which of the following accurately explains why professional wrestlers earn more than
nurses?
, The supply of nurses is large relative to professional wrestlers, and price is determined
by marginal value (not total value).
The supply of nurses is large relative to professional wrestlers, and price is determined
by total value (not marginal value). - Answers - The supply of nurses is large relative to
professional wrestlers, and price is determined by marginal value (not total value).
What is being held constant when the supply curve is constructed for a specific good
such as pizza or automobiles?
Level of technology
Consumers' tastes
Consumers' income
None of the above - Answers - Level of technology
Which of the following best defines producer surplus?
The difference between the maximum price consumers are willing to pay and the price
they actually pay.
The difference between the price that suppliers actually receive and the maximum price
they would be willing to accept.
A situation in which all of the potential gains from trade have been realized.
The difference between the price that suppliers actually receive and the minimum price
they would be willing to accept. - Answers - The difference between the price that
suppliers actually receive and the minimum price they would be willing to accept.
How does economic efficiency relate to the gains of consumers and producers?
In a market economy, when the demand for a good increases, its price will be efficient,
which will motivate consumers to search for substitutes and cut back on additional
purchases of the good.
The equilibrium reached by a market satisfies economic efficiency, and the total gains
from trade represented by the combined area of consumer and producer surplus are
maximized.
The equilibrium reached by a market satisfies economic efficiency and the difference
between consumer and producer surplus is minimized.
In a market economy, when the demand for a good increases, its price will rise, which
will motivate producers to supply more of the good. - Answers - he equilibrium reached
by a market satisfies economic efficiency, and the total gains from trade represented by
the combined area of consumer and producer surplus are maximized.
Which of the following best defines consumer surplus?
The difference between the price that suppliers actually receive and the minimum price
they would be willing to accept.
