Solution Manual for Computer Accounting with Sage 50 Complete Accounting 2013, 17th Edition

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1Managerial Economics and Strategy(Perloff/Brander)Chapter 1Introduction1.1Managerial Decision Making1) Microeconomics studies the allocation ofA) decision makers.B) scarce resources.C) models.D) unlimited resources.Answer: BDifficulty: AnalyticalAACSB: Analytic SkillsStatus: Old2) Society faces trade-offs because ofA) government regulations.B) profit motive.C) price setting by firms.D) scarcity.Answer: DDifficulty: AnalyticalAACSB: Analytic SkillsStatus: New3) Managerial economicsA) describes how pay for managers is set.B) ensures managers always make good decisions.C) helps managers make decisions in the face of scarcity.D) explains which products consumers will buy.Answer: CDifficulty: AnalyticalAACSB: Analytic SkillsStatus: New4) CEOs should focus onA) beating their competitors.B) maximizing firm profits.C) getting the best pay package for the senior management team.D) minimizing costs.Answer: BDifficulty: AnalyticalAACSB: Analytic SkillsStatus: New

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25) Profit isA) maximized when the marketing department coordinates with the production department.B) maximized when revenue is maximized.C) used to beat a company's rivals.D) the difference between a firm's revenues and its costs.Answer: DDifficulty: AnalyticalAACSB: Analytic SkillsStatus: New6) Firms face tradeoffs becauseA) managers don't know which inputs to use.B) inputs are scarce.C) markets set prices of goods they sell.D) marginal reasoning leads to uncertainty.Answer: BDifficulty: AnalyticalAACSB: Analytic SkillsStatus: New7) A firm's managers are constrained byA) consumers.B) workers.C) government.D) All of the above.Answer: DDifficulty: ConceptualAACSB: Analytic SkillsStatus: New8) A marketA) always involves the personal exchange of goods for money.B) allows interactions between consumers and firms.C) always takes place at a physical location.D) has no influence on prices.Answer: BDifficulty: AnalyticalAACSB: Analytic SkillsStatus: Old

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39) In a marketA) the primary participants are consumers and firms.B) government policies play a very small part.C) decision makers always maximize.D) the goods sold are always closely related.Answer: ADifficulty: DefinitionAACSB: Analytic SkillsStatus: New10) Which of the following would NOT be considered part of a firm's strategy?A) production levelsB) which inputs to useC) sales strategyD) None of the above-all are part of a firm's strategy.Answer: DDifficulty: AnalyticalAACSB: Analytic SkillsStatus: New11) What is the purpose of having a strategy?Answer: A strategy defines for a manager the actions to be taken to maximize the firm's profits.Difficulty: ConceptualAACSB: CommunicationStatus: New12) Explain what the statement "We can't have everything we want" means.Answer: Because resources are scarce, we face tradeoffs. For example, a baker cannot use apiece of dough she has for both pizza and a croissant, so she has to decide which to make.Difficulty: ConceptualAACSB: Reflective ThinkingStatus: New13) What is profit?Answer: Profit is the difference between a firm's revenue or income and its costs or expenses.Difficulty: DefinitionAACSB: CommunicationStatus: New14) Give an example of a tradeoff a pizza restaurant might face.Answer: Whether to make pepperoni or combination pizzas.Difficulty: DefinitionAACSB: Analytic SkillsStatus: New

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415) Why might raising the price of a good by a dollar lead to lower profits?Answer: If the extra profit margin made on the units sold does not cover the lost profit fromselling fewer units, then profits will actually decrease if the price is raised.Difficulty: AnalyticalAACSB: Analytic SkillsStatus: New16) Why might raising the price of a good by a dollar lead to higher profits?Answer: If the extra profit margin made on the units sold covers the profit lost from sellingfewer units, then profits will increase if the price is raised.Difficulty: AnalyticalAACSB: Analytic SkillsStatus: New17) Raising the price of a good by one dollarA) increases profits.B) decreases profits.C) leaves profits unchanged.D) leads to an indeterminant change in profits.Answer: DDifficulty: AnalyticalAACSB: Analytic SkillsStatus: New18) All private firms seek toA) maximize revenue.B) maximize profit.C) minimize headcount.D) maximize employee salaries.Answer: BDifficulty: AnalyticalAACSB: Analytic SkillsStatus: New19) Behavioral economicsA) studies why people choose not to maximize.B) studies why people maximize.C) studies why people sometimes don't maximize.D) studies why people behave badly when buying and selling.Answer: CDifficulty: DefinitionAACSB: Analytic SkillsStatus: New

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5For the following, please answer "True" or "False" and explain why.20) Managers have to understand the decision making of others.Answer: True. Other entities such as governments and rivals may undertake actions thatconstrain a firm. Consumers and workers make decisions on how to spend their scarce resources,such as budgets and time. To maximize profits, the manager must understand how these otherentities will behave.Difficulty: ConceptualAACSB: Analytic SkillsStatus: New1.2Economic Models1) The purpose of making assumptions in economic model building is toA) force the model to yield the correct answer.B) minimize the amount of work an economist must do.C) simplify the model while keeping important details.D) express the relationship mathematically.Answer: CDifficulty: AnalyticalAACSB: Analytic SkillsStatus: Old2) Einstein was quoted saying "Everything should be made as simple as possible, but notsimpler." When it comes to economic models this means thatA) models shouldn't be too complex.B) models shouldn't be too simple.C) models should have a level of abstraction appropriate to the topic investigated.D) All of the above.Answer: DDifficulty: AnalyticalAACSB: Analytic SkillsStatus: Old3) If a model's predictions are correct, thenA) its assumptions must have been correct.B) it is proven to be correct.C) Both A and B above.D) None of the above.Answer: DDifficulty: AnalyticalAACSB: Analytic SkillsStatus: Old

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64) Economists tend to judge a model based uponA) the reality of its assumptions.B) the accuracy of its predictions.C) its simplicity.D) its complexity.Answer: BDifficulty: AnalyticalAACSB: Analytic SkillsStatus: Old5) Which of the following is an example of a normative statement?A) A higher price for a good causes people to want to buy less of that good.B) A lower price for a good causes people to want to buy more of that good.C) To make the good available to more people, a lower price should be set.D) If you consume this good, you will be better off.Answer: CDifficulty: AnalyticalAACSB: Analytic SkillsStatus: Old6) Which of the following is an example of a normative statement?A) Since this food is bad for you, you should not consume it.B) This food has negative health effects.C) If you consume this food, you will get sick.D) People usually get sick after consuming this food.Answer: ADifficulty: AnalyticalAACSB: Analytic SkillsStatus: New7) Which of the following is an example of a positive statement?A) Since this food is bad for you, you should not consume it.B) If this food is bad for you, you should not consume it.C) If you consume this food, you will get sick.D) None of the above.Answer: CDifficulty: AnalyticalAACSB: Analytic SkillsStatus: New

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78) If an important assumption is omitted from an economic modelA) the model's predictions will be accurate 50% of the time.B) the model's predictions will be inaccurate.C) the model will not predict anything.D) the model will be rejected by other economists.Answer: BDifficulty: AnalyticalAACSB: Analytic SkillsStatus: Old9) Economic models are most useful inA) explaining outcomes resulting from management decisions.B) predicting the direction of the stock market.C) explaining the future with the past.D) generating untestable hypotheses.Answer: ADifficulty: AnalyticalAACSB: Analytic SkillsStatus: New10) Economic models are most useful inA) predicting changes in one variable due to a change in one or more other variables.B) predicting the direction of the stock market.C) explaining the future with the past.D) generating untestable hypotheses.Answer: ADifficulty: AnalyticalAACSB: Analytic SkillsStatus: Old11) Economic models are most often testedA) using computer simulations.B) using data from the distant past.C) using data from the real world.D) using logic alone.Answer: CDifficulty: AnalyticalAACSB: Analytic SkillsStatus: Old

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812) A microeconomic model CANNOT be used toA) evaluate the impact of a price change on a firm's revenue.B) predict the impact of an increase in the minimum wage on unemployment.C) evaluate the fairness of a proposal to nationalize health insurance.D) evaluate the effect of an increase in stadium size on the price of a sport team's tickets.Answer: CDifficulty: AnalyticalAACSB: Analytic SkillsStatus: Old13) Economic models are only useful in analyzing government policy.A) True, individuals are irrational and therefore economic models are useless.B) False, economic models can be used to predict individual and firm behavior.C) True, economists only model those questions for which they are hired.D) False, economic models are not even useful in analyzing government policy.Answer: BDifficulty: AnalyticalAACSB: Analytic SkillsStatus: Old14) Microeconomic models are used toA) make predictions.B) explain real-life phenomena.C) evaluate production alternatives.D) All of the above.Answer: DDifficulty: AnalyticalAACSB: Analytic SkillsStatus: New15) If a theory's predictions are incorrectA) then economists always reject it.B) then the data used was clearly faulty.C) then economists will likely reduce their confidence in the theory.D) then the model must be too simple.Answer: CDifficulty: AnalyticalAACSB: Analytic SkillsStatus: New

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916) Legislators argue that a minimum wage law is instituted to help poor people. Economists canattack the minimum wage law on two fronts. First, some argue that government should not helpthe poor. Second, some argue that minimum wage laws actually hurt the poor because it createsunemployment. Which argument is normative and which is positive?Answer: An opinion about the role of government is a normative statement. An observationabout the impact of a law is a positive statement.Difficulty: AnalyticalAACSB: Analytic SkillsStatus: Old17) Explain why a model that delivers good enough approximations is a good model.Answer: Models make simplifying assumptions in order to make them less complex andcomplicated and therefore usable. But when we simplify, we do leave out parts of the real worldthat have an impact on the results. If a model gives predictions or approximations that are closeto reality, then the model is useful.Difficulty: AnalyticalAACSB: Analytic SkillsStatus: New18) Explain why economists might disagree on the content of a model.Answer: Economists might have different theories or might make different simplifyingassumptions.Difficulty: ConceptualAACSB: Analytic SkillsStatus: NewFor the following, please answer "True" or "False" and explain why.19) Normative analysis offers decision makers the most valuable information when choosingamong alternatives.Answer: False. Normative analysis states subjective goals but not how those goals can beachieved. To choose among alternatives a decision maker uses positive analysis.Difficulty: AnalyticalAACSB: Analytic SkillsStatus: Old20) If a model fits reality but doesn't generate testable predictions, it is of little value toeconomists.Answer: True. If the model doesn't deliver testable predictions it cannot be tested againstcompeting models.Difficulty: AnalyticalAACSB: Analytic SkillsStatus: Old

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1021) If actual experience supports two competing theories, then both theories are proven to betrue.Answer: False. Neither theory can be rejected but if they are competing, then the test isinconclusive.Difficulty: AnalyticalAACSB: Analytic SkillsStatus: Old

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1Managerial Economics and Strategy(Perloff/Brander)Chapter 2Supply and Demand2.1Demand1) An increase in consumer incomes will lead toA) a rightward shift of the demand curve for plasma TVs.B) a movement upward along the demand curve for plasma TVs.C) a rightward shift of the supply curve for plasma TVs.D) no change of the demand curve for plasma TVs.Answer: ADifficulty: AnalyticalAACSB: Analytic SkillsStatus: Old2) If the price of automobiles were to increase substantially, the demand curve for gasolinewould most likelyA) shift leftward.B) shift rightward.C) remain unchanged.D) become steeper.Answer: ADifficulty: AnalyticalAACSB: Analytic SkillsStatus: Old3) If the price of automobiles were to decrease substantially, the demand curve for publictransportation would most likelyA) shift rightward.B) shift leftward.C) remain unchanged.D) remain unchanged while quantity demanded would change.Answer: BDifficulty: AnalyticalAACSB: Analytic SkillsStatus: Old4) If the price of automobiles were to decrease substantially, the demand curve for pizza wouldmost likelyA) shift rightward.B) shift leftward.C) remain unchanged.D) remain unchanged while quantity demanded would change.Answer: CDifficulty: AnalyticalAACSB: Analytic SkillsStatus: New

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25) Consumers have been buying fewer CDs as downloadable music has become easier topurchase and use. We would represent this asA) a leftward shift of the demand curve for CDs.B) a rightward shift of the demand curve for CDs.C) a change in the price of CDs.D) a leftward shift of the supply curve for downloadable music.Answer: ADifficulty: AnalyticalAACSB: Analytic SkillsStatus: New6) As people have become more health-conscious and decided to eat food that is better for themA) the demand curve for scooters has shifted to the right.B) the demand curve for cupcakes has shifted to the right.C) the demand curve for oranges and apples has shifted to the right.D) None of the above.Answer: CDifficulty: AnalyticalAACSB: Analytic SkillsStatus: New7) If a yet-to-be released video game receives a positive review in a popular gaming magazine,what happens to the demand curve for the video game?A) The demand curve is expected to shift to the right.B) The demand curve is expected to shift to the left.C) The demand curve is not expected to change.D) For those who read the review, demand shifts to the left. For those who don't read the review,demand shifts to the right.Answer: ADifficulty: AnalyticalAACSB: Analytic SkillsStatus: New8) Which of the following cultural events likely increased the demand for the product highlightedin the event?A) the banning of cigarette advertising on televisionB) the inclusion of Reese's Pieces in the movie E.T.C) increased environmental awareness about the impacts of sport utility vehicles (SUVs)D) concerns over "Mad Cow" disease in beefAnswer: BDifficulty: AnalyticalAACSB: Analytic SkillsStatus: New

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39) Recently, many cities have attempted to pass laws taxing the sale of sugary drinks such assoda pop. If one of these laws passes, we would expectA) the supply curve for soda pop to shift to the right.B) the supply curve for soda pop to become more vertical.C) the demand curve for soda pop to shift to the right.D) the demand curve for soda pop to shift to the left.Answer: DDifficulty: AnalyticalAACSB: Analytic SkillsStatus: New10) If a city were to ban the use of automobiles within its city limits, we would expectA) the demand curve for automobiles to shift to the left.B) people to move to another city.C) the demand curve bicycles to shift to the left.D) the demand curve for automobiles to remain the same.Answer: ADifficulty: AnalyticalAACSB: Analytic SkillsStatus: New11) The CB radio was very popular in the 1970s and 1980s for communicating while driving,and people bought them because other drivers had them too and they could therefore talk withmany others on their trips. This illustratesA) that the demand curve for CB radios was inelastic.B) the network effect.C) that CB radios and gasoline are complementary goods.D) the effects of mobile phones on the demand curve for CB radios.Answer: BDifficulty: ConceptualAACSB: Analytic SkillsStatus: New12) The quantity demanded for a goodA) must equal the quantity actually sold.B) can be less than the quantity actually sold.C) can be greater than the quantity actually sold.D) is always greater than the quantity actually sold.Answer: CDifficulty: ConceptualAACSB: Analytic SkillsStatus: New

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413) An individual who is only willing to pay a relatively low amount for a particular goodA) would fall in the upper portion of the demand curve.B) would fall in the middle portion of the demand curve.C) would fall in the lower portion of the demand curve.D) would not be considered part of the demand curve.Answer: CDifficulty: AnalyticalAACSB: Analytic SkillsStatus: Old14) Assume Joe is only willing to pay $5 for a Ferrari sports car.A) Joe is not considered part of the demand for Ferraris.B) Joe won't be sold a Ferrari.C) Joe is not considered rational.D) Joe's willingness to pay is not indicative of how much he values the Ferrari.Answer: BDifficulty: AnalyticalAACSB: Analytic SkillsStatus: Old15) A downward sloping demand curve indicates thatA) individuals all have the same valuation of the same product.B) individuals have different valuations of the same product.C) individuals have no valuations of a particular product.D) certain individuals are uninformed about certain aspects of the product.Answer: BDifficulty: ConceptualAACSB: Analytic SkillsStatus: Old16) If the price is $5 and the quantity demanded is 100 units, then at a price of $10, the quantitydemanded will beA) less than or equal to 100 units.B) greater than or equal to 100 units.C) less than or equal to 1000 units.D) equal to 100 units.Answer: ADifficulty: AnalyticalAACSB: Analytic SkillsStatus: Old

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517) According to the Law of Demand, the demand curve for a good willA) shift leftward when the price of the good increases.B) shift rightward when the price of the good increases.C) slope downward.D) slope upward.Answer: CDifficulty: ConceptualAACSB: Analytic SkillsStatus: Old18) The law of demandA) was passed by the 102nd U.S. Congress.B) is a natural law, much like the law of gravity.C) is considered a "law" in economics because of the overwhelming empirical evidence thatsupports its logic.D) is considered a "law" in economics in order to force economic models to operate fully.Answer: CDifficulty: ConceptualAACSB: Analytic SkillsStatus: Old19) Which of the following would NOT change demand?A) the price of the productB) information about the product's health effectsC) the income of the consumersD) the price of related productsAnswer: AAACSB: Analytic SkillsStatus: Old20) If a demand curve shifts left, it impliesA) as a group, consumers are willing and able to pay less for the product.B) as a group, consumers are willing and able to pay more for the product.C) government has regulated how many people can purchase the product.D) the profit motive of the firms is making the price too high.Answer: ADifficulty: ConceptualAACSB: Analytic SkillsStatus: Old

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621) An increase in the price of pork will lead toA) a movement up along the demand curve.B) a movement down along the demand curve.C) a rightward shift of the demand curve.D) a leftward shift of the demand curve.Answer: ADifficulty: ConceptualAACSB: Analytic SkillsStatus: Old22) Holding all other factors constant, consumers demand more of a good theA) higher its price.B) lower its price.C) steeper the downward slope of the demand curve.D) steeper the upward slope of the demand curve.Answer: BAACSB: Analytic SkillsStatus: Old23) As the price of a good increases, the change in the quantity demanded can be shown byA) shifting the demand curve leftward.B) shifting the demand curve rightward.C) moving down along the same demand curve.D) moving up along the same demand curve.Answer: DAACSB: Analytic SkillsStatus: Old24) A increase in quantity demanded as a result of a change in priceA) is a rightward shift of the demand curve.B) is a leftward shift of the demand curve.C) leaves the demand curve unchanged.D) is not possible.Answer: CDifficulty: ConceptualAACSB: Analytic SkillsStatus: New

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725) If the price of automobiles were to increase substantially, the demand curve for automobileswould most likelyA) shift rightward.B) shift leftward.C) remain unchanged.D) become steeper.Answer: CDifficulty: ConceptualAACSB: Analytic SkillsStatus: New26) If the price of a pizza were to increase to $50, many people would give up eating pizza whileothers would continue to eat it. This would indicateA) those who are buying pizza value it at least $50 per pizza.B) those who are not buying pizza value it more than $50 per pizza.C) only those who are extremely wealthy are buying pizza.D) the price of pizza needs to be regulated by the federal government.Answer: ADifficulty: AnalyticalAACSB: Analytic SkillsStatus: New27) Which of the following is NOT possible according to the law of demand?A) A horizontal demand curveB) A vertical demand curveC) A downward-sloping supply curveD) An upward-sloping demand curveAnswer: DDifficulty: ConceptualAACSB: Analytic SkillsStatus: New28) A change in a relevant factor other than the price of the good itself causes a ________ thedemand curve, and a change in a good's own price causes a ________ the demand curve.A) shift of; shift ofB) shift of; movement alongC) movement along; shift ofD) movement along; movement alongAnswer: BDifficulty: AnalyticalAACSB: Analytic SkillsStatus: New

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829) The above figure shows a graph of the market for pizzas in a large town. No pizzas will bedemanded unless price is less thanA) $0.B) $5.C) $12.D) $14.Answer: DDifficulty: AnalyticalAACSB: Analytic SkillsStatus: Old30) The above figure shows a graph of the market for pizzas in a large town. If the price fallsfrom $10 to $7 per pizza, the quantity of pizzas demanded willA) increase by 20.B) decrease by 30.C) increase by 30.D) decrease by 10.Answer: CDifficulty: AnalyticalAACSB: Analytic SkillsStatus: Old31) Assume the price of a movie is $10. Jenna demands 2 movies per week, Sam demands 3movies per week, and Jordan demands 8 movies per week. From this information we canconclude thatA) the market quantity demanded at a price of $10 is at least 13 movies per week.B) Jordan is obviously more wealthy than either Sam or Jeanna.C) Sam is irrational compared to Jenna or Jordan.D) the movie industry is unprofitable.Answer: AAACSB: Analytic SkillsStatus: Old

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932) To determine the total demand for all consumers, sum the quantity each consumer demandsA) at a given price.B) at all prices and then sum this amount across all consumers.C) Both A and B will generate the same total demand.D) None of the above.Answer: AAACSB: Analytic SkillsStatus: OldFor the following, please answer "True" or "False" and explain why.33) If a good is not produced, then there is no demand for it.Answer: False. The demand for a product is independent of its supply. It is possible that peoplewant to buy some of the product but at prices that are below what sellers would require to beginproduction.Difficulty: ConceptualAACSB: Analytic SkillsStatus: Old34) The quantity of a good that consumers demand depends only on the price of the good.Answer: False. The quantity of a good demanded depends on many factors including: its ownprice, consumers' incomes, and the price of related goods.Difficulty: ConceptualAACSB: Analytic SkillsStatus: Old35) Suppose the demand for a particular product can be expressed as Q = 100/p. Calculate thetotal amount spent on this good when p = 10, 20, and 50. Can you make a generalization aboutthe mathematical form of this demand curve and consumer behavior in this market?Answer: In all cases, total expenditure equals 100 (since p * Q = 100). In general, a nonlineardemand curve of the form Q = A/p means that consumers wish to spend a total of A on this goodregardless of its price.Difficulty: AnalyticalAACSB: Analytic SkillsStatus: Old

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102.2Supply1) Technological innovation in the production of computers has led toA) a decrease in the quantity demanded for computers.B) a rightward shift of the supply curve for computers.C) a decrease in the quantity supplied of computers.D) None of the above.Answer: BDifficulty: ConceptualAACSB: Analytic SkillsStatus: Old2) The supply curve is influenced byA) the income of consumers.B) the number of customers in the market.C) the prices of the inputs required to produce the product.D) whether the economy is free-market or command.Answer: CAACSB: Analytic SkillsStatus: Old3) The price of crude oil rose to over $100 per barrel in early 2013. What would we expect to seehappen to the supply of plastic, which is produced using crude oil?A) The supply of plastic will increase.B) The supply of plastic will decrease.C) The supply of plastic will stay the same because the government requires plastic producers tomeet statutory minimum production levels.D) The supply of plastic will stay the same because of the profit motives of plastic producers.Answer: BDifficulty: AnalyticalAACSB: Analytic SkillsStatus: New4) Government regulationsA) have no impact on supply.B) only change the quantity supplied, not the supply curve.C) are generally ineffective due to lobbying by suppliers.D) can change both quantity supplied as well as the supply curve.Answer: DDifficulty: ConceptualAACSB: Analytic SkillsStatus: New

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115) The supply curveA) represents the quantity supplied at any given price.B) represents the quantity actually sold at any given price.C) is the opposite of the demand curve.D) always intersects the demand curve.Answer: ADifficulty: ConceptualAACSB: Analytic SkillsStatus: New6) Suppose the demand curve for a good shifts rightward, causing the equilibrium price toincrease. This increase in the price of the good results inA) a rightward shift of the supply curve.B) an increase in quantity supplied.C) a leftward shift of the supply curve.D) a downward movement along the supply curve.Answer: BDifficulty: AnalyticalAACSB: Analytic SkillsStatus: Old7) An increase in the price of oil willA) shift the supply curve of oil to the left.B) shift the supply curve of oil to the right.C) leave the supply curve of oil unchanged.D) Not enough information to answer the question.Answer: CDifficulty: AnalyticalAACSB: Analytic SkillsStatus: Old8) The expression "increase in quantity supplied" is illustrated graphically as aA) leftward shift in the supply curve.B) rightward shift in the supply curve.C) movement up along the supply curve.D) movement down along the supply curve.Answer: CDifficulty: ConceptualAACSB: Analytic SkillsStatus: Old

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129) The Law of Supply statesA) that supply curves slope upward.B) that supply curves can be vertical or horizontal.C) Both A and BD) None of the above.Answer: DDifficulty: ConceptualAACSB: Analytic SkillsStatus: New10) Supply curvesA) slope upward.B) slope downward.C) are horizontal.D) can have many shapes.Answer: DDifficulty: ConceptualAACSB: Analytic SkillsStatus: Old11) If the supply curve of a product changes so that sellers are now willing to sell 2 additionalunits at any given price, the supply curve willA) shift leftward by 2 units.B) shift rightward by 2 units.C) shift vertically up by 2 units.D) shift vertically down by 2 units.Answer: BDifficulty: AnalyticalAACSB: Analytic SkillsStatus: Old

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1312) The above figure shows a graph of the market for pizzas in a large town. No pizzas will besupplied unless the price is aboveA) $0.B) $5.C) $12.D) $14.Answer: BDifficulty: AnalyticalAACSB: Analytic SkillsStatus: Old13) Suppose there are 100 identical firms in the rag industry, and each firm is willing to supply10 rags at any price. The market supply curve will be aA) vertical line where Q = 10.B) vertical line where Q = 100.C) vertical line where Q = 1000.D) horizontal line where Q = 1000.Answer: CDifficulty: ConceptualAACSB: Analytic SkillsStatus: Old14) The market supply curve is found byA) horizontally summing all individual supply curves at a price.B) vertically summing all individual supply curves at a quantity.C) either A or B above since they both give the same answer.D) None of the above.Answer: ADifficulty: AnalyticalAACSB: Analytic SkillsStatus: New

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1415) Suppose the following information is known about a market:1. Sellers will not sell at all below a price of $2.2. At a price of $10, any given seller will sell 10 units.3. There are 100 identical sellers in the market.Assuming a linear supply curve, use this information to derive the market supply curve.Answer: First, Q = 100q since all firms are identical. This gives two points: (p = 2, Q = 0) and (p= 10, Q = 1000). From the first point, it is known that p = 2 + bQ. When Q = 1000, 10 = 2 +b(1000). Solving for b yields b = .008. Rearranging to solve for Q yields: Q =-250 + 125p or P=2 + .008Q.Difficulty: AnalyticalAACSB: Analytic SkillsStatus: Old2.3Market Equilibrium1) Equilibrium is defined as a situation in whichA) neither buyers nor sellers want to change their behavior.B) no government regulations exist.C) demand curves are perfectly horizontal.D) suppliers will supply any amount that buyers wish to buy.Answer: ADifficulty: ConceptualAACSB: Analytic SkillsStatus: Old2) Once an equilibrium is achieved, it can persist indefinitely becauseA) shocks that shift the demand curve or the supply curve cannot occur.B) shocks to the demand curve are always exactly offset by shocks to the supply curve.C) the government never intervenes in markets at equilibrium.D) in the absence of supply/demand shocks no one applies pressure to change the price.Answer: DDifficulty: ConceptualAACSB: Analytic SkillsStatus: Old3) A market equilibrium occursA) only with government regulation.B) only because of the profit motive of firms.C) only because of the complacency of consumers.D) through the interaction of self-interested consumers and producers.Answer: DAACSB: Analytic SkillsStatus: Old

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154) A market is said to "clear" whenA) sellers give up selling their goods because they can't find any buyers.B) buyers and sellers are able to buy and sell as much as they want at the market price.C) the government decides to shut it down.D) sellers run out of goods to sell.Answer: BDifficulty: ConceptualAACSB: Analytic SkillsStatus: New5) At equilibrium, quantity sold equals the quantity bought. This implies thatA) to sell more, producers require more in payment than consumers are willing to pay.B) government regulation is necessary.C) to sell less would require a lower price but would yield greater profit.D) those who don't buy have been treated unfairly.Answer: ADifficulty: ConceptualAACSB: Analytic SkillsStatus: Old6) The above figure shows a graph of the market for pizzas in a large town. At a price of $14,there will beA) no pizzas supplied.B) equilibrium.C) excess supply.D) excess demand.Answer: CAACSB: Analytic SkillsStatus: Old

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167) The above figure shows a graph of the market for pizzas in a large town. At a price of $5,there will beA) excess demand.B) excess supply.C) equilibrium.D) zero demand.Answer: AAACSB: Analytic SkillsStatus: Old8) The above figure shows a graph of the market for pizzas in a large town. What are theequilibrium price and quantity?A) p = 8, Q = 60B) p = 7, Q = 40C) p = 7, Q = 70D) p = 10, Q = 40Answer: AAACSB: Analytic SkillsStatus: Old9) The figure above shows a graph of the market for pizzas in a large town. What characterizesthe equilibrium in this market?A) There is excess supply at the equilibrium price of $7.B) The government has selected the appropriate price for pizzas.C) The quantity supplied equals the quantity demanded.D) Supply equals demand.Answer: CAACSB: Analytic SkillsStatus: Old10) The above figure shows a graph of a market for pizzas in a large town. At a price of $7, whatis the amount of excess demand?A) 0; there is excess supply at $7.B) 20 unitsC) 30 unitsD) 10 unitsAnswer: CAACSB: Analytic SkillsStatus: Old

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1711) The above figure shows a graph of a market for pizzas in a large town. At a price of $10, themarketA) is not in equilibrium.B) has excess supply.C) does not have excess demand.D) All of the above.Answer: DAACSB: Analytic SkillsStatus: Old12) If Qs =-20 + 10p, and Qd = 400-20p, what is the equilibrium price?A) 14B) 42C) 12.67D) 38Answer: ADifficulty: AnalyticalAACSB: Analytic SkillsStatus: New13) If Qs =-20 + 10p, and Qd = 400-20p, what is the equilibrium quantity?A) 440B) 146.6C) 360D) 120Answer: ADifficulty: AnalyticalAACSB: Analytic SkillsStatus: New14) After tickets for a major sporting event are purchased at the official box office price, amarket often develops whereby these tickets sell at prices well above the official box officeprice. Which of the following scenarios would NOT be able to explain this result?A) The official price was below equilibrium from the moment the tickets were available.B) Increased publicity causes the demand curve for the event to shift rightward.C) The event was not a sellout.D) Not everyone who wanted a ticket was able to buy one at the box office.Answer: CDifficulty: AnalyticalAACSB: Analytic SkillsStatus: Old

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1815) At equilibrium, quantity sold equals the quantity bought. This implies thatA) to sell more, producers require more in payment than consumers are willing to pay.B) government regulation is necessary.C) to sell less would require a lower price but would yield greater profit.D) those who don't buy have been treated unfairly.Answer: ADifficulty: ConceptualAACSB: Analytic SkillsStatus: Old16) According to Adam Smith'sinvisiblehandA) markets need the government to intervene.B) forces are constantly pushing markets out of equilibriumC) people coordinate their activities, resulting in equilibrium in the market.D) there is aninvisible glovethat restricts what markets can do.Answer: CDifficulty: ConceptualAACSB: Analytic SkillsStatus: New17) A competitive equilibrium is described byA) a price only.B) a quantity only.C) the excess supply minus the excess demand.D) a price and a quantity.Answer: DDifficulty: ConceptualAACSB: Analytic SkillsStatus: Old18) If price is initially above the equilibrium levelA) the supply curve will shift rightward.B) the supply curve will shift leftward.C) excess supply exists.D) all firms can sell as much as they want.Answer: CDifficulty: AnalyticalAACSB: Analytic SkillsStatus: Old

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1919) If the price of a good is initially below the equilibrium levelA) the supply curve will shift leftward.B) the supply curve will shift rightward.C) firms supply none of the good.D) excess demand exists.Answer: DDifficulty: AnalyticalAACSB: Analytic SkillsStatus: New20) In some markets, ________ act to adjust the price to bring the market into equilibrium.A) bullsB) regulatorsC) market makersD) web sitesAnswer: CDifficulty: ConceptualAACSB: Analytic SkillsStatus: NewFor the following, please answer "True" or "False" and explain why.21) When a market is in disequilibrium consumers and producers change their behavior. As aresult the market reaches equilibrium.Answer: True. For example, when a shortage exists at a given price consumers bid up the priceand firms increase production until the equilibrium is reached.Difficulty: ConceptualAACSB: Analytic SkillsStatus: Old22) Explain why the equilibrium price is called the market clearing price.Answer: At the equilibrium price, sellers want to sell the exact amount consumers want to buy.There is no excess demand or excess supply. The market is exactly cleared of all goods.Difficulty: ConceptualAACSB: Analytic SkillsStatus: Old

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202.4Shocks to the Equilibrium1) From the 1970s through the 1990s, the relative price of a college education has increasedgreatly. During the same time period, college enrollment has also increased. This evidencesuggests that during this time periodA) the demand curve for a college education has shifted leftward.B) the demand curve for a college education has shifted rightward.C) the supply curve for a college education has shifted leftward.D) the supply curve for a college education has shifted rightward.Answer: BDifficulty: AnalyticalAACSB: Analytic SkillsStatus: Old2) Suppose a market were currently at equilibrium. A rightward shift of the demand curve wouldcauseA) an increase in price but a decrease in quantity.B) a decrease in price but an increase in quantity.C) an increase in both price and quantity.D) a decrease in both price and quantity.Answer: CDifficulty: ConceptualAACSB: Analytic SkillsStatus: Old3) A rightward shift of the demand curve will lead to a(n)A) increase in equilibrium price.B) excess demand at the old equilibrium price.C) increase in quantity supplied.D) All of the above.Answer: DDifficulty: ConceptualAACSB: Analytic SkillsStatus: Old4) A leftward shift of the demand curve will lead to a(n)A) decrease in equilibrium price.B) excess supply at the old equilibrium price.C) decreased in quantity supplied.D) All of the above.Answer: DDifficulty: ConceptualAACSB: Analytic SkillsStatus: New

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