Ch3 Test Bank Docx The Supply And Demand Model - Principles of Macroeconomics -Complete Test Bank by Taylor. DOCX document preview.
Chapter 3
The Supply and Demand Model
Multiple Choice
- Which of the following statements is ?
a. | The supply and demand model serves to illustrate market behavior. |
b. | Supply and demand must be combined for either to be useful in explaining and predicting market behavior. |
c. | Supply illustrates the behavior of firms in a market. |
d. | Demand illustrates the behavior of consumers in a market. |
e. | Market equilibrium is not an important element of the supply and demand model. |
OBJ: factual
SEC: 0. The Supply and Demand Model
TOP: Supply and Demand
MSC: Bloom's: Knowledge
2. Each supply and demand model consists of all the following three elements:
a. | math, geometry, and equations. |
b. | supply, demand, and production possibilities. |
c. | inputs, outputs, and production. |
d. | technology, profit maximization, and government regulation. |
e. | price, quantity, and equilibrium. |
OBJ: factual
SEC: 0. The Supply and Demand Model
TOP: Supply and Demand
MSC: Bloom's: Knowledge
3. Which of the following is not an element of the supply and demand model?
a. | Price |
b. | Inputs |
c. | Market |
d. | Equilibrium |
e. | Quantity |
OBJ: factual
SEC: 0. The Supply and Demand Model
TOP: Supply and Demand
MSC: Bloom's: Knowledge
4. The law of demand states that
a. | as price decreases, demand increases. |
b. | as price increases, quantity demanded increases. |
c. | there is a direct relationship between price and quantity supplied. |
d. | there is an inverse relationship between price and quantity demanded. |
e. | there is an inverse relationship between price and quantity supplied. |
OBJ: factual
SEC: 1. Demand
TOP: Law of Demand
MSC: Bloom's: Knowledge
5. The law of demand states that, as the price of a product increases, consumers
a. | buy more of that product. |
b. | buy less of that product. |
c. | buy more of other related products. |
d. | buy less of other related products. |
e. | may buy more or less of that product. |
OBJ: factual
SEC: 1. Demand
TOP: Law of Demand
MSC: Bloom's: Knowledge
6. The term quantity demanded refers to
a. | that point where the supply and demand curves cross. |
b. | the amount of a good consumers are willing to buy at a given price. |
c. | a particular demand schedule. |
d. | the entire demand curve. |
e. | the amount of a good people must forcibly demand from a producer in order to survive. |
OBJ: factual
SEC: 1. Demand
TOP: Quantity Demanded
MSC: Bloom's: Knowledge
7. According to the law of demand, if the price of compact disks decreased, ceteris paribus, the
a. | demand for compact disks would decrease. |
b. | quantity demanded of compact disks would decrease. |
c. | demand for compact disks would increase. |
d. | quantity demanded of compact disks would not change. |
e. | quantity demanded of compact disks would increase. |
OBJ: conceptual
SEC: 1. Demand
TOP: Law of Demand
MSC: Bloom's: Knowledge
8. The principle that consumers tend to buy less of a good or service when its price increases, all else held equal, is called the law of
a. | preferences. |
b. | increasing cost. |
c. | demand. |
d. | supply. |
e. | maximum satisfaction. |
OBJ: factual
SEC: 1. Demand
TOP: Law of Demand
MSC: Bloom's: Knowledge
9. A demand schedule is a table of prices and
a. | minimum quantities people have purchased at each price. |
b. | quantities people are able to purchase at each price. |
c. | quantities people are willing to buy at each price. |
d. | quantities people have purchased at each price. |
e. | quantities people are willing to produce at each price. |
OBJ: factual
SEC: 1. Demand
TOP: Demand Schedule
MSC: Bloom's: Knowledge
10. The relationship between price and quantity demanded, other things being equal, is
a. | negative in some markets but positive in other markets. |
b. | negative in markets without government intervention but positive in markets with government intervention. |
c. | always negative in any market. |
d. | positive in markets without government intervention but negative in markets with government intervention. |
e. | always positive in any market. |
OBJ: conceptual
SEC: 1. Demand
TOP: Law of Demand
MSC: Bloom's: Knowledge
11. The law of demand is represented by
a. | the positive slope of the demand curve. |
b. | the negative slope of the demand curve. |
c. | a shift of the demand curve to the right when price increases. |
d. | a shift of the demand curve to the left when price decreases. |
e. | a shift of the demand curve when income changes. |
OBJ: conceptual
SEC: 1. Demand
TOP: Law of Demand
MSC: Bloom's: Knowledge
12. Suppose you observe that fares per trip for the Uber share-riding service increased when more commuters called the Uber service. Which of the following is the best possible explanation?
a. | The law of demand was violated. |
b. | The law of supply was violated. |
c. | The price of gasoline went up. |
d. | People were irrational. |
e. | Commuters did not have any choice. |
OBJ: conceptual
SEC: 1. Demand
TOP: Law of Demand
MSC: Bloom's: Analysis | AACSB: Analytic
13. According to the law of demand, one way to reduce the amount of tobacco consumption is to
a. | lower the price of tobacco. |
b. | raise the price of tobacco. |
c. | subsidize users of tobacco. |
d. | subsidize treatments of diseases related to tobacco consumption. |
e. | make tobacco consumption illegal. |
OBJ: conceptual
SEC: 1. Demand
TOP: Law of Demand
MSC: Bloom's: Analysis | AACSB: Analytic
/
- According to the law of demand, when the price of a Gucci handbag increases, the quantity demanded for these goods will also increase because the goods have become more prestigious.
Challenging
OBJ: conceptual
SEC: 1. Demand
TOP: Law of Demand
MSC: Bloom's: Application | AACSB: Analytic
- The law of demand is violated when the demand for a product is high at a high price.
Challenging
OBJ: conceptual
SEC: 1. Demand
TOP: Law of Demand
MSC: Bloom's: Analysis | AACSB: Analytic
- According to the law of demand, the price of a product increases when the quantity demanded increases.
Moderate
OBJ: conceptual
SEC: 1. Demand
TOP: Law of Demand
MSC: Bloom's: Knowledge
- The demand schedule is a table or list of the prices and corresponding quantities demanded of a particular good or service.
Basic
OBJ: factual
SEC: 1. Demand
TOP: Demand Schedule
MSC: Bloom's: Knowledge
Multiple Choice
- Which of the following is not held constant when constructing a demand curve for good A?
a. | Price of good A |
b. | Consumer tastes |
c. | Prices of other goods |
d. | Consumer expectations |
e. | Consumer income |
OBJ: conceptual
SEC: 1. Demand
TOP: Demand Curve
MSC: Bloom's: Analysis | AACSB: Analytic
- The typical slope of a demand curve
a. | is positive. |
b. | is negative. |
c. | is zero. |
d. | is infinity. |
e. | depends on factors such as income and consumer expectations. |
OBJ: factuals
SEC: 1. Demand
TOP: Demand Curve
MSC: Bloom's: Knowledge
- The demand curve for apples is downward-sloping because
a. | when fewer apples are produced, the money in people's apple budgets does not have to stretch as far. |
b. | there must have been an apple blight, so there must be fewer apples to buy. |
c. | when apple prices rise, the price of other goods must also be rising, so people cannot afford to buy as much. |
d. | at higher apple prices, people will seek other, relatively cheaper alternatives, like pears, oranges, or plums. |
e. | at higher prices, apples are more expensive to produce, so fewer are grown. |
OBJ: conceptual
SEC: 1. Demand
TOP: Demand Curve
MSC: Bloom's: Knowledge
- The demand curve of good A is drawn by assuming that all of the following are equal except
a. | the price of good A. |
b. | consumer income. |
c. | consumer preferences. |
d. | the price of good B. |
e. | the number of consumers. |
OBJ: conceptual
SEC: 1. Demand
TOP: Demand Curve
MSC: Bloom's: Application | AACSB: Analytic
- Which of the following statements is ?
a. | A demand curve is a visual representation of a demand schedule. |
b. | A demand curve is typically drawn with quantity demanded on the horizontal axis. |
c. | A demand curve is derived from different quantities produced. |
d. | A demand curve is typically drawn with price on the vertical axis. |
e. | A demand curve is always downward sloping. |
OBJ: conceptual
SEC: 1. Demand
TOP: Demand Curve
MSC: Bloom's: Knowledge | AACSB: Analytic
/
- The demand curve is a relationship between the price of a good and the quantity consumers are willing to buy at that price.
Basic
OBJ: conceptual
SEC: 1. Demand
TOP: Demand Curve
MSC: Bloom's: Knowledge
- A demand curve represents the relationship between consumer income and the quantity demanded.
Basic
OBJ: factual
SEC: 1. Demand
TOP: Demand Curve
MSC: Bloom's: Knowledge
- The slope of a demand curve can be positive, negative, or zero.
Moderate
OBJ: conceptual
SEC: 1. Demand
TOP: Demand Curve
MSC: Bloom's: Knowledge
- A demand curve is always flat.
Moderate
OBJ: conceptual
SEC: 1. Demand
TOP: Demand Curve
MSC: Bloom's: Knowledge | AACSB: Analytic
Multiple Choice
- When economists say that the demand for a product has decreased, they mean that
a. | consumers are going to purchase less at any given price. |
b. | the price has increased and consumers will purchase less of the product. |
c. | the demand curve has shifted to the right. |
d. | the product has become more abundant and consumers therefore want it less. |
e. | consumers would be willing to pay less to receive the same quantity. |
OBJ: conceptual
SEC: 1. Demand
TOP: Demand Shift
MSC: Bloom's: Knowledge | AACSB: Analytic
28. Which of the following will not increase the demand for a good?
a. | An expectation of a decline in the product price in the future |
b. | The product price falls, ceteris paribus. |
c. | An increase in the price of a substitute |
d. | A decrease in the price of a complement |
e. | A foreign country opens its markets to imports from others. |
OBJ: conceptual
SEC: 1. Demand
TOP: Demand Shift
MSC: Bloom's: Analysis | AACSB: Analytic
29. Which of the following will increase the demand for a normal good?
a. | A decrease in the number of consumers |
b. | A decrease in the price of a substitute |
c. | An increase in consumer income |
d. | An increase in the price of a complement |
e. | An increase in the demand for a substitute |
OBJ: conceptual
SEC: 1. Demand
TOP: Normal and Inferior Goods
MSC: Bloom's: Knowledge | AACSB: Analytic
30. Which of the following leads to a leftward shift of the demand curve?
a. | An expectation of a decline in the product price in the future |
b. | A decrease in the good's own price |
c. | An increase in the price of a substitute |
d. | A decrease in the price of a complement |
e. | An increase in the number of consumers |
OBJ: conceptual
SEC: 1. Demand
TOP: Demand Shift
MSC: Bloom's: Analysis | AACSB: Analytic
31. Consider the market for pop music played with an iPod. If there is a decrease in the number of pop music programs broadcast on radio, we can expect
a. | the profits of the pop music industry to decrease. |
b. | the demand for pop music to decrease. |
c. | the demand for iPods to increase. |
d. | less pop music to be listened to on iPods. |
e. | the price of iPods to decline. |
OBJ: conceptual
SEC: 1. Demand
TOP: Preferences
MSC: Bloom's: Application | AACSB: Analytic
32. When incomes are rising, new SUV sales increase while used SUV sales decrease. This indicates that
a. | used SUVs and new SUVs are both normal goods. |
b. | used SUVs are inferior goods and new SUVs are normal goods. |
c. | used SUVs and new SUVs are complements. |
d. | used SUVs and new SUVs are substitutes. |
e. | used SUVs are normal goods and new SUVs are inferior goods. |
OBJ: conceptual
SEC: 1. Demand
TOP: Inferior / Normal Goods
MSC: Bloom's: Application | AACSB: Analytic
33. Suppose that hotdogs are inferior goods. Which of the following is given an increase in consumer income?
a. | An upward movement along the demand curve of hotdogs |
b. | A downward movement along the demand curve of hotdogs |
c. | A leftward shift in the demand curve of hotdogs |
d. | A rightward shift in the demand curve of hotdogs |
e. | No change in the demand curve of hotdogs |
OBJ: conceptual
SEC: 1. Demand
TOP: Inferior / Normal Goods
MSC: Bloom's: Application | AACSB: Analytic
34. The demand for goods sold in discount stores increases when consumer incomes fall in a recession. We can conclude that goods sold in discount stores
a. | are normal goods. |
b. | are luxury goods. |
c. | are inferior goods. |
d. | are complements of goods sold in department stores. |
e. | have no substitutes. |
OBJ: conceptual
SEC: 1. Demand
TOP: Inferior / Normal Goods
MSC: Bloom's: Application | AACSB: Analytic
35. When consumers expect the price of a good to go down in the future, demand will
a. | decrease in the future. |
b. | decrease today. |
c. | increase in the future. |
d. | not change. |
e. | increase today. |
OBJ: conceptual
SEC: 1. Demand
TOP: Consumers' Expectations
MSC: Bloom's: Knowledge
36. Coffee and tea are substitutes so that if the price of tea increases, the
a. | quantity demanded for coffee increases. |
b. | quantity demanded for coffee decreases. |
c. | demand for coffee increases. |
d. | demand for coffee decreases. |
e. | demand for coffee remains the same. |
OBJ: conceptual
SEC: 1. Demand
TOP: Substitutes
MSC: Bloom's: Application | AACSB: Analytic
37. Peanut butter and jelly are complements so that if the price of peanut butter increases, the
a. | quantity demanded for jelly increases. |
b. | quantity demanded for jelly decreases. |
c. | demand for jelly increases. |
d. | demand for jelly decreases. |
e. | demand for jelly remains the same. |
OBJ: conceptual
SEC: 1. Demand
TOP: Substitutes
MSC: Bloom's: Application | AACSB: Analytic
38. If the price of product A falls and this causes the demand for product B to shift to the right, then we can conclude A and B are
a. | normal. |
b. | inferior. |
c. | complements. |
d. | substitutes. |
e. | not related. |
OBJ: conceptual
SEC: 1. Demand
TOP: Complements
MSC: Bloom's: Analysis | AACSB: Analytic
39. If an increase in the price of product A causes an increase in the demand for product B, we can conclude that
a. | they are inferior goods. |
b. | the price of B will decrease. |
c. | they are complements. |
d. | they are substitutes. |
e. | the quantity supplied for B will decrease. |
OBJ: conceptual
SEC: 1. Demand
TOP: Substitutes
MSC: Bloom's: Analysis | AACSB: Analytic
/
- The demand for apples shifts rightward when consumers react to a lower apple price by buying more.
Moderate
OBJ: conceptual
SEC: 1. Demand
TOP: Demand Shift
MSC: Bloom's: Application | AACSB: Analytic
- When economists say that the demand for a product has increased, they mean that consumers are willing to buy more of the product at any given price.
Moderate
OBJ: conceptual
SEC: 1. Demand
TOP: Demand Shift
MSC: Bloom's: Knowledge
- If the demand curve for product X shifts to the left as the price of product Y increases, then X and Y are complementary goods.
Challenging
OBJ: conceptual
SEC: 1. Demand
TOP: Demand Shift: Complements
MSC: Bloom's: Application | AACSB: Analytic
- If goods X and Y are substitutes, then the demand for good X increases when the price of good Y decreases.
Challenging
OBJ: conceptual
SEC: 1. Demand
TOP: Demand Shift: Substitutes
MSC: Bloom's: Application | AACSB: Analytic
Multiple Choice
44. If the price of ice cream decreases, then the
a. | quantity demanded for ice cream will increase. |
b. | demand for ice cream will decrease. |
c. | demand for ice cream will increase. |
d. | quantity demanded for ice cream will decrease. |
e. | supply of ice cream will decrease. |
OBJ: conceptual
SEC: 1. Demand
TOP: Change in Quantity Demanded
MSC: Bloom's: Application | AACSB: Analytic
45. An increase in demand is graphically illustrated by
a. | a shift of the demand curve to the right. |
b. | a shift of the demand curve to the left. |
c. | an upward movement along the demand curve. |
d. | a downward movement along the demand curve. |
e. | both a shift and an upward movement along the demand curve. |
OBJ: conceptual
SEC: 1. Demand
TOP: Change in Demand
MSC: Bloom's: Knowledge
46. Which of the following causes a movement along the demand curve for bananas?
a. | Consumers expect an increase in the price of bananas. |
b. | Consumer income decreases. |
c. | The price of bananas increases. |
d. | The price of oranges decreases. |
e. | The supply of bananas increases. |
OBJ: conceptual
SEC: 1. Demand
TOP: Change in Quantity Demanded
MSC: Bloom's: Application | AACSB: Analytic
47. Which of the following will not cause the demand for ice cream to change?
a. | A change in population size |
b. | A change in the price of ice cream |
c. | A change in consumer incomes |
d. | A change in the price of yogurt |
e. | A change in seasons |
OBJ: conceptual
SEC: 1. Demand
TOP: Change in Demand
MSC: Bloom's: Application | AACSB: Analytic
48. Which of the following statements is ?
a. | An increase in quantity demanded means a movement along a given demand curve. |
b. | An increase in demand means a movement along a given demand curve. |
c. | An increase in demand means that consumers will purchase less of a product at each possible price. |
d. | Price and quantity demanded are positively related. |
e. | An increase in demand always means the same as an increase in quantity demanded. |
OBJ: factual
SEC: 1. Demand
TOP: Change in Quantity Demanded
MSC: Bloom's: Comprehension | AACSB: Analytic
/
- The demand curve for a particular good shifts when any factor other than the price of that good changes.
Moderate
OBJ: conceptual
SEC: 1. Demand
TOP: Change in Demand
MSC: Bloom's: Knowledge | AACSB: Analytic
- If the price of a product decreases, then the demand curve shifts to the right.
Moderate
OBJ: conceptual
SEC: 1. Demand
TOP: Quantity Demanded
MSC: Bloom's: Knowledge | AACSB: Analytic
- A higher price leads to a leftward shift of the demand curve.
Moderate
OBJ: conceptual
SEC: 1. Demand
TOP: Change in Demand
MSC: Bloom's: Knowledge | AACSB: Analytic
- An increase in consumer income causes a movement up along the demand curve.
Moderate
OBJ: conceptual
SEC: 1. Demand
TOP: Quantity Demanded
MSC: Bloom's: Comprehension | AACSB: Analytic
Short Answer
- Why does the law of demand hold?
OBJ: conceptual
SEC: 1. Demand
TOP: Law of Demand
MSC: Bloom's: Comprehension | AACSB: Analytic
- What is the principle that explains the relationship between price and quantity demanded?
OBJ: conceptual
SEC: 1. Demand
TOP: Law of Demand
MSC: Bloom's: Knowledge
- Does the following condition violate the law of demand? Explain your answer.
“The number of iPhones sold last year was more the than the number of Nokia smartphones sold in the same period, even though the price of iPhones was more than twice of the price of Nokia smartphones.”
OBJ: conceptual
SEC: 1. Demand
TOP: Law of Demand
MSC: Bloom's: Analysis | AACSB: Analytic
- List four factors that affect willingness to buy and that shift the demand curve.
OBJ: factual
SEC: 1. Demand
TOP: Demand Shifters
MSC: Bloom's: Knowledge
- What is the difference between a decrease in demand and a decrease in quantity demanded?
OBJ: conceptual
SEC: 1. Demand
TOP: Demand vs. Quantity Demanded
MSC: Bloom's: Analysis | AACSB: Analytic
Multiple Choice
- Economists use the term supply to refer to
a. | the upward-sloping line that relates consumer expenditures to different output levels. |
b. | the downward-sloping line that relates consumer expenditures to different output levels. |
c. | a set of price and quantity supplied combinations, everything else held equal. |
d. | the amount producers are willing but not able to produce at each price. |
e. | a particular quantity supplied at a specific price. |
OBJ: factual
SEC: 2. Supply
TOP: Supply
MSC: Bloom's: Knowledge
59. The law of supply states that
a. | price and quantity supplied are inversely related. |
b. | price and supply are positively related. |
c. | the higher the price, the smaller the quantity that will be sold. |
d. | price and quantity supplied are positively related. |
e. | price and quantity demanded are inversely related. |
OBJ: factual
SEC: 2. Supply
TOP: Law of Supply
MSC: Bloom's: Knowledge
60. According to the law of supply, if the price of personal computers increased, ceteris paribus,
a. | the quantity supplied of personal computers would not change. |
b. | the quantity supplied of personal computers would decrease. |
c. | the supply of personal computers would decrease. |
d. | the quantity supplied of personal computers would increase. |
e. | the supply of personal computers would increase. |
OBJ: conceptual
SEC: 2. Supply
TOP: Law of Supply
MSC: Bloom's: Application | AACSB: Analytic
61. The term quantity supplied refers to
a. | the minimum quantity producers must sell in order to stay in business. |
b. | the quantity where the supply and demand curves cross. |
c. | a supply schedule. |
d. | the entire supply curve. |
e. | the amount of a good producers are willing to sell at a given price. |
OBJ: factual
SEC: 2. Supply TOP: Quantity Supplied
MSC: Bloom's: Knowledge
62. The principle that producers sell more of a good or service when the price increases, all else held equal, is called the law of
a. | increasing profit. |
b. | supply. |
c. | demand. |
d. | opportunity cost. |
e. | reduced real income. |
OBJ: factual
SEC: 2. Supply TOP: Law of Supply
MSC: Bloom's: Comprehension | AACSB: Analytic
63. A supply schedule is
a. | table of prices and quantities people are willing to sell at each price. |
b. | graph of prices and quantities supplied. |
c. | graph of costs and associated quantities supplied. |
d. | table of prices and quantities people are willing to buy at each price. |
e. | graph of prices and revenues. |
OBJ: factual
SEC: 2. Supply TOP: Supply Schedule
MSC: Bloom's: Knowledge
64. The positive relationship between price and quantity supplied, other things being equal, is considered to be
a. | universally true for all markets. |
b. | never true in heavily regulated markets. |
c. | sometimes true in all markets. |
d. | true only in market-based economies. |
e. | true only when consumers act irrationally. |
OBJ: conceptual
SEC: 2. Supply TOP: Law of Supply
MSC: Bloom's: Analysis | AACSB: Analytic
/
- The law of supply states that the quantity supplied of a good is positively related to the price of that good.
Basic
OBJ: conceptual
SEC: 2. Supply
TOP: Law of Supply
MSC: Bloom's: Knowledge
- According to the law of supply, if the price of calculators decreased, the supply of calculators would decrease, everything else held equal.
Moderate
OBJ: conceptual
SEC: 2. Supply
TOP: Law of Supply
MSC: Bloom's: Application | AACSB: Analytic
- All else held equal, if the price of sirloin steak increases from $4.25 to $8.60 per pound, a greater quantity of sirloin steak will be supplied.
Basic
OBJ: conceptual
SEC: 2. Supply
TOP: Law of Supply
MSC: Bloom's: Application | AACSB: Analytic
- Other things being equal, the quantity supplied decreases as price increases.
Basic
OBJ: conceptual
SEC: 2. Supply
TOP: Law of Supply
MSC: Bloom's: Knowledge
Multiple Choice
- Which of the following is not held constant when constructing a supply curve for good X?
a. | Number of firms producing good X |
b. | Price of inputs |
c. | Price of good X |
d. | Producer expectations |
e. | Production technology |
OBJ: conceptual
SEC: 2. Demand
TOP: Supply Curve
MSC: Bloom's: Analysis | AACSB: Analytic
- The supply curve for iPhones is upward-sloping because
a. | when the price of an iPhone rises, it must be due to increased costs in producing iPhones, so producers must charge more. |
b. | a higher iPhone price gives shoe producers incentive to produce more iPhones. |
c. | iPhones are produced by only a few producers. |
d. | iPhone producers always want to satisfy the demand for iPhones by consumers. |
e. | as the price of an iPhone rises, per-unit costs of production fall. |
OBJ: conceptual
SEC: 2. Supply
TOP: Supply Curve
MSC: Bloom's: Application | AACSB: Analytic
- The supply curve
a. | has quantity produced on the vertical axis. |
b. | is a graph of a supply schedule. |
c. | represents production quotas. |
d. | sometimes slopes downward. |
e. | is always a straight line. |
OBJ: conceptual
SEC: 2. Supply
TOP: Supply Curve
MSC: Bloom's: Knowledge
/
- The supply curve represents the relationship between the quantities of a good that sellers are willing and able to supply and different prices of that good.
Basic
OBJ: conceptual
SEC: 2. Supply
TOP: Supply Curve
MSC: Bloom's: Knowledge
- The supply curve slopes downward because sellers attempt to sell more when price drops.
Moderate
OBJ: conceptual
SEC: 2. Supply
TOP: Supply Curve
MSC: Bloom's: Analysis | AACSB: Analytic
Multiple Choice
- Which of the following would not affect the supply of automobiles?
a. | A decrease in the number of automobile producers |
b. | An increase in the price of steel |
c. | An increase in the productivity of workers |
d. | An increase in the price of motor oil |
e. | An improvement in the technology of automobile manufacturing |
OBJ: conceptual
SEC: 2. Supply
TOP: Supply Shifts
MSC: Bloom's: Application | AACSB: Analytic
75. Suppose all workers in the fast-food industry receive a substantial pay increase because of an increase in the minimum wage. What will happen in the fast-food industry that employs these workers?
a. | Supply will decrease. |
b. | Supply will increase. |
c. | Output will rise. |
d. | Demand will decrease. |
e. | Prices will fall. |
OBJ: conceptual
SEC: 2. Supply
TOP: Supply Shift: Input Price
MSC: Bloom's: Application | AACSB: Analytic
76. If a drought in Florida reduces the amount of oranges grown, then
a. | the demand curve of Florida oranges shifts to the left. |
b. | the demand curve of Florida oranges shifts to the right. |
c. | the supply curve of Florida oranges shifts to the left. |
d. | the supply curve of Florida oranges shifts to the right. |
e. | both the supply and demand curve of Florida oranges shift to the right. |
OBJ: conceptual
SEC: 2. Supply
TOP: Supply Shifts
MSC: Bloom's: Application | AACSB: Analytic
77. If the government decides to pay producers of houses $5,000 for every house they build,
a. | the opportunity cost of producing a house will fall. |
b. | demand for housing will increase. |
c. | housing will no longer be scarce. |
d. | consumers will buy more houses, even if the price does not fall. |
e. | producers will be willing to build more houses, even if the price does not rise. |
OBJ: conceptual
SEC: 2. Supply
TOP: Supply Shift: Subsidy
MSC: Bloom's: Application | AACSB: Analytic
78. Which of the following will not cause the supply of internet service to increase?
a. | A reduction in the number of internet service companies |
b. | A reduction in space shuttle fees to launch telecommunications satellites |
c. | A decrease in the price of computer electronics used to access the internet |
d. | A decrease in the number of government regulations on internet services |
e. | A reduction in the price of fiber-optic cables over which the internet is accessed |
OBJ: conceptual
SEC: 2. Supply
TOP: Supply Shifts
MSC: Bloom's: Application | AACSB: Analytic
79. A change in supply will not be caused by a(n)
a. | change in the price producers believe will prevail in the future. |
b. | change in the price of inputs. |
c. | change in the number of producers. |
d. | increase in the number of consumers. |
e. | improvement in technology. |
OBJ: conceptual
SEC: 2. Supply
TOP: Supply Shifts
MSC: Bloom's: Analysis | AACSB: Analytic
80. Which of the following causes a leftward shift of the supply curve?
a. | An increase in the number of producers |
b. | An increase in the cost of production |
c. | A government subsidy on production |
d. | An increase in the price of the good being sold |
e. | An improvement in production technology |
OBJ: conceptual
SEC: 2. Supply
TOP: Supply Shifts
MSC: Bloom's: Analysis | AACSB: Analytic
/
- An increase in production due to better technology is represented by a movement along the supply curve.
Basic
OBJ: conceptual
SEC: 2. Supply
TOP: Supply Shifts
MSC: Bloom's: Analysis | AACSB: Analytic
- An increase in production costs shifts the supply curve leftward.
Basic
OBJ: conceptual
SEC: 2. Supply
TOP: Supply Shifts
MSC: Bloom's: Analysis | AACSB: Analytic
Multiple Choice
- When economists say that the demand for a product has decreased, they mean that
a. | a greater quantity will be produced at any price. |
b. | the price is too high for equilibrium. |
c. | a smaller quantity will be produced at any price. |
d. | demand was too high for producers to make a profit. |
e. | the price is too low for equilibrium. |
OBJ: conceptual
SEC: 2. Supply
TOP: Change in Supply
MSC: Bloom's: Comprehension | AACSB: Analytic
- Which of the following causes a movement along the supply curve for a product?
a. | An increase in the production cost |
b. | An increase in the number of sellers |
c. | An expectation of a higher future price |
d. | An increase in the tax on production |
e. | An increase in the price of that product |
OBJ: conceptual
SEC: 2. Supply
TOP: Change in Supply
MSC: Bloom's: Analysis | AACSB: Analytic
85. In which of the following statements are the terms demand, supply, quantity demanded, and/or quantity supplied used correctly?
a. | When the quantity demanded exceeds supply, the equilibrium price will rise. |
b. | Changes in demand and supply cause changes in the equilibrium price. |
c. | If the demand rises, supply rises. |
d. | Oranges are cheaper in Florida; therefore, the demand is greater in Florida. |
e. | Decreases in quantity demanded and quantity supplied often occur simultaneously. |
OBJ: conceptual
SEC: 2. Supply
TOP: Shifts in Demand and Supply
MSC: Bloom's: Analysis | AACSB: Analytic
86. When there is an increase in quantity supplied,
a. | producers are forced to supply more by government mandate. |
b. | producers are displaying a decreased willingness to produce because price has risen. |
c. | technology must have improved. |
d. | there must have been an increase in output price, ceteris paribus. |
e. | consumers are unlikely to buy the additional product. |
OBJ: conceptual
SEC: 2. Supply
TOP: Supply Supplied
MSC: Bloom's: Analysis | AACSB: Analytic
/
- A rightward shift of a supply curve represents an increase in supply.
Basic
OBJ: conceptual
SEC: 2. Supply
TOP: Supply Shifts
MSC: Bloom's: Knowledge
- An increase in the minimum wage will not affect the supply of hamburgers sold by McDonald's, which hires workers mostly at the minimum wage rate.
Moderate
OBJ: conceptual
SEC: 2. Supply
TOP: Supply Shifts
MSC: Bloom's: Application | AACSB: Analytic
- A change in the quantity supplied is reflected by a shift of the supply curve.
Moderate
OBJ: factual
SEC: 2. Supply
TOP: Quantity Supplied
MSC: Bloom's: Knowledge
- All else being equal, if there is a change in the price of a good, then the supply of that good will change.
Moderate
OBJ: conceptual
SEC: 2. Supply
TOP: Supply Shifts
MSC: Bloom's: Knowledge
Short Answer
- Why does supply slope upward?
OBJ: conceptual
SEC: 2. Supply
TOP: Law of Supply
MSC: Bloom's: Knowledge | AACSB: Analytic
- What is the underlying cause of the law of supply?
OBJ: conceptual
SEC: 2. Supply
TOP: Law of Supply
MSC: Bloom's: Comprehension | AACSB: Analytic
- List four factors that affect willingness to sell and that shift the supply curve.
OBJ: factual
SEC: 2. Supply
TOP: Supply Shifters
MSC: Bloom's: Knowledge | AACSB: Analytic
- What is the difference between an increase in supply and an increase in quantity supplied?
OBJ: conceptual
SEC: 2. Supply
TOP: Supply vs. Quantity Supplied
MSC: Bloom's: Analysis | AACSB: Analytic
Multiple Choice
- Market equilibrium occurs when the
a. | quantity supplied equals quantity demanded. |
b. | quantity supplied is greater than quantity demanded. |
c. | quantity supplied is less than quantity demanded. |
d. | quantity supplied is fixed by the government. |
e. | quantity demanded equals zero. |
OBJ: factual
SEC: 3. Market Equilibrium: Combining Supply and Demand
TOP: Equilibrium
MSC: Bloom's: Knowledge
- Market equilibrium is determined by
a. | the producers in the market. |
b. | the largest consumers in the market. |
c. | all producers and consumers together. |
d. | the consumers in the market. |
e. | the largest firms in the market. |
OBJ: factual
SEC: 3. Market Equilibrium: Combining Supply and Demand
TOP: Equilibrium
MSC: Bloom's: Knowledge | AACSB: Analytic
- Equilibrium prices are determined by
a. | supply alone. |
b. | demand alone. |
c. | both supply and demand. |
d. | the government. |
e. | nothing at all. |
OBJ: factual
SEC: 3. Market Equilibrium: Combining Supply and Demand
TOP: Equilibrium
MSC: Bloom's: Knowledge
- A price at which quantity demanded equals quantity supplied
a. | will cause a shortage or surplus. |
b. | is an equilibrium price. |
c. | is affordable by all consumers in the economy. |
d. | is below the equilibrium price. |
e. | is above the equilibrium price. |
OBJ: factual
SEC: 3. Market Equilibrium: Combining Supply and Demand
TOP: Equilibrium
MSC: Bloom's: Knowledge
- If quantity supplied is less than quantity demanded, then
a. | there is a shortage in the market. |
b. | prices will fall. |
c. | equilibrium has been achieved. |
d. | consumer incomes will increase. |
e. | there is a surplus in the market. |
OBJ: factual
SEC: 3. Market Equilibrium: Combining Supply and Demand
TOP: Shortage
MSC: Bloom's: Knowledge
- In the case of a surplus,
a. | there is no market adjustment because buyers can purchase what they want. |
b. | the quantity supplied exceeds the quantity demanded at the current price level. |
c. | producer incomes will fall and production will rise in order to make up for the shortfall. |
d. | market price will rise. |
e. | the quantity demanded exceeds the quantity supplied at the current price level. |
OBJ: factual
SEC: 3. Market Equilibrium: Combining Supply and Demand
TOP: Surplus
MSC: Bloom's: Comprehension | AACSB: Analytic
- When a market equilibrium is achieved,
a. | those who are willing to pay the most for the good obtain it. |
b. | government regulation will have succeeded. |
c. | anyone who has the skills to produce the good sells some. |
d. | shortages and surpluses become minor. |
e. | anyone who is willing to pay anything for the good obtains it. |
OBJ: conceptual
SEC: 3. Market Equilibrium: Combining Supply and Demand
TOP: Equilibrium
MSC: Bloom's: Comprehension | AACSB: Analytic
- If there is a surplus of a product, we can conclude that
a. | the product's price is above equilibrium. |
b. | the product's price is too low for equilibrium. |
c. | quantity demanded exceeds quantity supplied. |
d. | the product's price will rise. |
e. | consumers want to buy more than is being made available by producers. |
OBJ: factual
SEC: 3. Market Equilibrium: Combining Supply and Demand
TOP: Surplus
MSC: Bloom's: Evaluation | AACSB: Analytic
Exhibit 3-1
- Consider the market represented by the schedule in Exhibit 3-1. At a price of $2 per unit,
a. | the quantity purchased is 1,000 units. |
b. | there will be a tendency for the price to decrease. |
c. | there is a surplus of 300 units. |
d. | the quantity sold is 350 units. |
e. | the quantity purchased equals the quantity sold. |
OBJ: conceptual
SEC: 3. Market Equilibrium: Combining Supply and Demand
TOP: Equilibrium
MSC: Bloom's: Application | AACSB: Application of Knowledge
- Consider the market represented by the schedule in Exhibit 3-1. At equilibrium,
a. | there is a surplus of 500 units. |
b. | there is a shortage of 500 units. |
c. | the market price is $4 per unit. |
d. | the market price is $1 per unit and the quantity traded is 100 units. |
e. | 500 units are traded at a price of $3 per unit. |
OBJ: conceptual
SEC: 3. Market Equilibrium: Combining Supply and Demand
TOP: Equilibrium
MSC: Bloom's: Application | AACSB: Application of Knowledge
- Consider the market described by the schedule in Exhibit 3-1. Which of the following is ?
a. | The law of supply is violated. |
b. | There is no equilibrium. |
c. | At $5 per unit, people will purchase 100 units. |
d. | At $2 per unit, people will purchase 700 units. |
e. | The law of demand is violated. |
OBJ: conceptual
SEC: 3. Market Equilibrium: Combining Supply and Demand
TOP: Equilibrium
MSC: Bloom's: Application | AACSB: Application of Knowledge
- Consider the market described by the schedule in Exhibit 3-1. At a price of $5 per unit,
a. | the quantity traded is 1,000 units. |
b. | there is a shortage. |
c. | the quantity sold is 1,800 units. |
d. | there is a surplus of 1,100 units. |
e. | the quantity purchased is 1,000 units. |
OBJ: conceptual
SEC: 3. Market Equilibrium: Combining Supply and Demand
TOP: Equilibrium
MSC: Bloom's: Application | AACSB: Application of Knowledge
Exhibit 3-2
- In the market represented in Exhibit 3-2, if price is $.50,
a. | producers are not able to sell all they are willing to sell. |
b. | a surplus of 30 units results. |
c. | producers are willing to produce more than is being purchased. |
d. | consumers are willing to buy more than is being produced. |
e. | consumers are willing to buy the same amount as that being produced. |
OBJ: conceptual
SEC: 3. Market Equilibrium: Combining Supply and Demand
TOP: Equilibrium
MSC: Bloom's: Application | AACSB: Application of Knowledge
- In the market represented in Exhibit 3-2, if price rises from $.70 to $.80 as a result of government mandate, then
a. | a surplus of 30 units will occur. |
b. | producers will not be able to sell all they are willing to produce. |
c. | consumers would like to buy more than will be produced. |
d. | a shortage of 15 units will occur. |
e. | a new market equilibrium quantity of 25 units will result. |
OBJ: conceptual
SEC: 3. Market Equilibrium: Combining Supply and Demand
TOP: Equilibrium
MSC: Bloom's: Application | AACSB: Application of Knowledge
- If price is below equilibrium,
a. | demand is too low for equilibrium. |
b. | the income and substitution effects will cause the price to rise. |
c. | quantity supplied exceeds quantity demanded, and a shortage exists. |
d. | quantity demanded exceeds quantity supplied, and a shortage exists. |
e. | demand will increase. |
OBJ: conceptual
SEC: 3. Market Equilibrium: Combining Supply and Demand
TOP: Shortage
MSC: Bloom's: Analysis | AACSB: Analytic
- Market equilibrium predicts all the following except the
a. | price for which quantity is supplied. |
b. | price for which quantity is demanded. |
c. | quantity bought. |
d. | quantity sold. |
e. | amount of consumer income. |
/
- At the equilibrium price, there is no pressure on price to rise or fall.
Moderate
OBJ: conceptual
SEC: 3. Market Equilibrium: Combining Supply and Demand
TOP: Equilibrium MSC: Bloom's: Knowledge | AACSB: Analytic
- When a shortage exists in a market, the actual price is greater than the equilibrium price.
Moderate
OBJ: conceptual
SEC: 3. Market Equilibrium: Combining Supply and Demand
TOP: Shortage
MSC: Bloom's: Analysis | AACSB: Analytic
- A market equilibrium predicts both the price and quantity bought and sold in a market.
Basic
OBJ: conceptual
SEC: 3. Market Equilibrium: Combining Supply and Demand
TOP: Equilibrium
MSC: Bloom's: Analysis | AACSB: Analytic
- A shortage occurs when quantity demanded exceeds quantity supplied.
Basic
OBJ: conceptual
SEC: 3. Market Equilibrium: Combining Supply and Demand
TOP: Shortage
MSC: Bloom's: Knowledge
- When a surplus exists in a market, the actual price will begin to decrease.
Moderate
OBJ: conceptual
SEC: 3. Market Equilibrium: Combining Supply and Demand
TOP: Surplus
MSC: Bloom's: Analysis | AACSB: Analytic
- A surplus occurs when there is excess supply.
Basic
OBJ: conceptual
SEC: 3. Market Equilibrium: Combining Supply and Demand
TOP: Surplus
MSC: Bloom's: Comprehension | AACSB: Analytic
Multiple Choice
- A market is in equilibrium
a. | when the government imposes price controls. |
b. | when the price is low. |
c. | where the demand and supply curves intersect. |
d. | when the price is high. |
e. | when equilibrium price equals equilibrium quantity. |
OBJ: factual
SEC: 3. Market Equilibrium: Combining Supply and Demand
TOP: Equilibrium
MSC: Bloom's: Knowledge
Exhibit 3-3
- Refer to Exhibit 3-3. If the price in this market is $9,
a. | equilibrium is achieved because producers are able to sell all that they make available in the market. |
b. | price will rise because consumers want to buy more than producers are willing to sell. |
c. | quantity supplied exceeds the quantity demanded. |
d. | price will fall because consumers will not buy as much as producers are willing to sell. |
e. | producers are unable to sell all that they are willing to sell. |
OBJ: conceptual
SEC: 3. Market Equilibrium: Combining Supply and Demand
TOP: Equilibrium
MSC: Bloom's: Application | AACSB: Analytic
- Refer to Exhibit 3-3. A shortage of ____ units will result in a price of ____.
a. | 42; $9 |
b. | 32; $18 |
c. | 25; $27 |
d. | 30; $27 |
e. | 30; $9 |
OBJ: conceptual
SEC: 3. Market Equilibrium: Combining Supply and Demand
TOP: Equilibrium
MSC: Bloom's: Application | AACSB: Analytic
- Refer to Exhibit 3-3. The equilibrium price and quantity in the market are
a. | $27 and 25 units, respectively. |
b. | $9 and 25 units, respectively. |
c. | $18 and 32 units, respectively. |
d. | $9 and 10 units, respectively. |
e. | $27 and 55 units, respectively. |
OBJ: conceptual
SEC: 3. Market Equilibrium: Combining Supply and Demand
TOP: Equilibrium
MSC: Bloom's: Application | AACSB: Analytic
- Refer to Exhibit 3-3. If the price is $27,
a. | producers are willing to produce a maximum of 32 units. |
b. | there is an equilibrium. |
c. | there is a tendency for price to rise. |
d. | consumers are willing to buy as much as 25 units. |
e. | there is a shortage of 30 units. |
OBJ: conceptual
SEC: 3. Market Equilibrium: Combining Supply and Demand
TOP: Equilibrium
MSC: Bloom's: Application | AACSB: Analytic
/
- A market is in equilibrium when a price is low enough for all consumers to afford.
Moderate
OBJ: conceptual
SEC: 3. Market Equilibrium: Combining Supply and Demand
TOP: Equilibrium
MSC: Bloom's: Comprehension | AACSB: Analytic
Multiple Choice
- The U.S. surgeon general warns that animal fat in the diet poses a health risk. With the discovery that longhorn beef cattle have little body fat, you would expect
a. | ranchers to be more willing to produce longhorn cattle as the price rises. |
b. | the number of longhorn cattle to dwindle as they are slaughtered. |
c. | the price of longhorn beef to fall as it becomes more popular. |
d. | it will become increasingly difficult to obtain longhorn beef. |
e. | little in the beef market to change. |
OBJ: conceptual
SEC: 3. Market Equilibrium: Combining Supply and Demand
TOP: Equilibrium Change: Demand Shift
MSC: Bloom's: Application | AACSB: Analytic
- More iPhones are being sold today than one year ago, and the selling price of iPhones has increased. This could have been caused by a(n)
a. | increase in demand. |
b. | decrease in supply. |
c. | decrease in demand. |
d. | increase in supply. |
e. | exception to the law of demand. |
OBJ: conceptual
SEC: 3. Market Equilibrium: Combining Supply and Demand
TOP: Equilibrium Change: Demand Shift
MSC: Bloom's: Application | AACSB: Analytic
- If it is discovered that using a smartphone regularly causes brain cancer, then in the market for smartphones,
a. | equilibrium price will fall and equilibrium quantity will rise. |
b. | equilibrium price and equilibrium quantity will fall. |
c. | there will be no change in equilibrium price or quantity. |
d. | equilibrium price will rise as demand for computers decreases. |
e. | equilibrium price will rise as supply decreases. |
OBJ: conceptual
SEC: 3. Market Equilibrium: Combining Supply and Demand
TOP: Equilibrium Change: Demand Shift
MSC: Bloom's: Application | AACSB: Analytic
- Suppose it becomes a common belief among consumers that the current cotton crop falls because of a drought, the price of cotton clothing will rise greatly next year. Then in the current market for cotton clothing, the
a. | equilibrium price will fall and the equilibrium quantity will rise. |
b. | equilibrium price and equilibrium quantity will increase as demand increases. |
c. | equilibrium price and equilibrium quantity will decrease as demand increases. |
d. | demand for cotton clothing will decrease as consumers search for alternatives. |
e. | equilibrium price will rise and the equilibrium quantity will fall. |
OBJ: conceptual
SEC: 3. Market Equilibrium: Combining Supply and Demand
TOP: Equilibrium Change: Demand Shift
MSC: Bloom's: Application | AACSB: Analytic
- If incomes increase, then the ____ in the market for luxury cars as normal goods ____.
a. | supply; decreases |
b. | supply; increases |
c. | demand; increases |
d. | demand; decreases |
e. | both supply and demand; increase |
OBJ: conceptual
SEC: 3. Market Equilibrium: Combining Supply and Demand
TOP: Equilibrium Change: Demand Shift
MSC: Bloom's: Application | AACSB: Analytic
- Which of the following is the most likely reason for the increase in the price of roses on Valentine's Day?
a. | An increase in the supply of roses |
b. | An increase in the demand for roses |
c. | The expectation of an increase in the price of roses after Valentine's Day |
d. | A decrease in consumer income |
e. | An increase in the prices of other flowers |
OBJ: conceptual
SEC: 3. Market Equilibrium: Combining Supply and Demand
TOP: Equilibrium Change: Demand Shift
MSC: Bloom's: Application | AACSB: Analytic
- If a technological improvement took place in the computer industry, we would expect to see the equilibrium price of computers to
a. | increase and the quantity of computers sold to decrease. |
b. | decrease and the quantity of computers sold to increase. |
c. | decrease and the quantity of computers sold to decrease. |
d. | increase and the quantity of computers sold to increase. |
e. | increase and the quantity of computers sold to stay the same. |
OBJ: conceptual
SEC: 3. Market Equilibrium: Combining Supply and Demand
TOP: Equilibrium Change: Supply Shift
MSC: Bloom's: Application | AACSB: Analytic
- Suppose it is observed in a market that price has fallen but more product is being produced and sold. This could be caused by a(n)
a. | decrease in supply and demand. |
b. | decrease in demand. |
c. | decrease in supply. |
d. | increase in supply. |
e. | increase in demand. |
OBJ: conceptual
SEC: 3. Market Equilibrium: Combining Supply and Demand
TOP: Equilibrium Change: Supply Shift
MSC: Bloom's: Knowledge | AACSB: Analytic
- Suppose mobile app engineers have been making earning a high wage rate and the number of individuals becoming mobile app engineers doubles. Then, in the market for mobile app engineers,
a. | the equilibrium wage rate for mobile app engineers fall and the number of mobile app engineers hired falls. |
b. | demand increases because there are so many more mobile app engineers available. |
c. | because demand is not changing, no more mobile app engineers are hired. |
d. | the number of mobile app engineers employed falls as the market becomes saturated. |
e. | the equilibrium wage rate for mobile app engineers falls. |
OBJ: conceptual
SEC: 3. Market Equilibrium: Combining Supply and Demand
TOP: Equilibrium Change: Supply Shift
MSC: Bloom's: Application | AACSB: Analytic
- When there is a decrease in supply, all else held equal,
a. | equilibrium price falls, demand increases, and equilibrium quantity increases. |
b. | equilibrium price falls, demand does not change, and equilibrium quantity increases. |
c. | equilibrium price rises, quantity demanded decreases, and equilibrium quantity decreases. |
d. | equilibrium price falls, quantity demanded decreases, and equilibrium quantity decreases. |
e. | equilibrium price rises, demand does not change, and equilibrium quantity increases. |
OBJ: conceptual
SEC: 3. Market Equilibrium: Combining Supply and Demand
TOP: Equilibrium Change: Supply Shift
MSC: Bloom's: Knowledge | AACSB: Analytic
Exhibit 3-4
- In Exhibit 3-4, which of the following is the most likely reason for the shift of the demand curve from D1 to D2?
a. | An increase in the price of the good |
b. | A decrease in the price of the good |
c. | An increase in the number of consumers |
d. | An increase in the supply of the good |
e. | A decrease in the supply of the good |
OBJ: conceptual
SEC: 3. Market Equilibrium: Combining Supply and Demand
TOP: Demand Shift
MSC: Bloom's: Application | AACSB: Application of Knowledge
- In Exhibit 3-4, if D1 and S1 are the original supply and demand curves and D2 and S2 are the new curves, respectively, then
a. | demand has decreased. |
b. | the original equilibrium quantity was Q1. |
c. | supply has increased. |
d. | the new equilibrium quantity is Q4. |
e. | supply has decreased. |
OBJ: conceptual
SEC: 3. Market Equilibrium: Combining Supply and Demand
TOP: Equilibrium
MSC: Bloom's: Application | AACSB: Application of Knowledge
- Refer to Exhibit 3-4. If S1 and D1 are the original supply and demand curves and, ceteris paribus, demand shifts to D2,
a. | the quantity supplied increases from Q3 to Q4. |
b. | the quantity supplied increases from Q2 to Q3. |
c. | supply decreases from Q3 to Q2. |
d. | the quantity supplied increases from Q2 to Q4. |
e. | the quantity demanded increases from Q3 to Q2. |
OBJ: conceptual
SEC: 3. Market Equilibrium: Combining Supply and Demand
TOP: Demand Increase
MSC: Bloom's: Application | AACSB: Application of Knowledge
- Refer to Exhibit 3-4. If S2 and D2 are the original supply and demand curves and, ceteris paribus, supply shifts to S1,
a. | the quantity demanded decreases from Q4 to Q2. |
b. | supply decreases. |
c. | the quantity demanded increases from Q2 to Q4. |
d. | the quantity supplied increases from Q3 to Q4. |
e. | the equilibrium price falls from P2 to P1. |
OBJ: conceptual
SEC: 3. Market Equilibrium: Combining Supply and Demand
TOP: Supply Decrease
MSC: Bloom's: Application | AACSB: Application of Knowledge
- Refer to Exhibit 3-4. If S1 and D1 are the original supply and demand curves and they shift to S2 and D2, respectively, then the new equilibrium price and quantity will be
a. | P2 and Q4. |
b. | P4 and Q2. |
c. | P1 and Q3. |
d. | P3 and Q1. |
e. | P4 and Q1. |
OBJ: conceptual
SEC: 3. Market Equilibrium: Combining Supply and Demand
TOP: Demand and Supply Change
MSC: Bloom's: Application | AACSB: Application of Knowledge
- When both supply and demand shift right at the same time,
a. | the change in equilibrium price cannot be predicted, but the change in equilibrium quantity can be predicted. |
b. | the change in both equilibrium price and equilibrium quantity can be predicted. |
c. | the change in equilibrium price can be predicted, but the change in equilibrium quantity cannot be predicted. |
d. | neither the change in equilibrium price nor equilibrium quantity can be predicted. |
e. | either the equilibrium price or equilibrium quantity will change, but not both. |
OBJ: conceptual
SEC: 3. Market Equilibrium: Combining Supply and Demand
TOP: Demand and Supply Change
MSC: Bloom's: Analysis | AACSB: Analytic
- Suppose in a financial crisis, major automakers reduce their production of autos while consumers reduce their demand for autos. We can conclude with certainty that in the market of autos,
a. | both the equilibrium price and equilibrium quantity will increase. |
b. | the equilibrium price will decrease and the equilibrium quantity will increase. |
c. | the equilibrium price will decrease, but the equilibrium quantity will increase, decrease or remain unchanged. |
d. | the equilibrium quantity will decrease, but the equilibrium price will increase, decrease or remain unchanged. |
e. | both the equilibrium price and equilibrium quantity will decrease. |
OBJ: conceptual
SEC: 3. Market Equilibrium: Combining Supply and Demand
TOP: Demand and Supply Change
MSC: Bloom's: Application | AACSB: Analytic
- If the equilibrium quantity decreases while the equilibrium price increases, which of the following is the most likely reason?
a. | Supply increases while demand decreases. |
b. | Supply increases while demand does not change. |
c. | Both supply and demand increase. |
d. | Both supply and demand decrease. |
e. | Neither supply nor demand changes. |
OBJ: conceptual
SEC: 3. Market Equilibrium: Combining Supply and Demand
TOP: Demand and Supply Change
MSC: Bloom's: Analysis | AACSB: Analytic
- Suppose a war in the Middle East destroys many oil fields. This will cause a(n)
a. | redistribution of income from the rich to the poor. |
b. | increase in the quantity of oil traded. |
c. | increase in oil prices. |
d. | decrease in the demand for oil. |
e. | increase in the supply of oil. |
OBJ: factual
SEC: 3. Market Equilibrium: Combining Supply and Demand
TOP: Supply and Demand Change
MSC: Bloom's: Application | AACSB: Analytic
- Which of the following would be a likely cause for the decreases in gasoline prices after 2014?
a. | Increases in gasoline demand |
b. | Increases in U.S. oil production |
c. | Higher production costs for gasoline |
d. | Rapid economic and employment growth in the United States |
e. | Decreases in oil supply from the Middle East |
OBJ: factual
SEC: 3. Market Equilibrium: Combining Supply and Demand
TOP: Supply and Demand Change
MSC: Bloom's: Application | AACSB: Analytic
- The high price of gasoline in the late-2000s was likely the result of
a. | an increase in both the supply of and the demand for gasoline. |
b. | a decrease in both the supply of and the demand for gasoline. |
c. | an increase in the supply of gasoline along with a decrease in the demand for gasoline. |
d. | a decrease in the supply of gasoline along with an increase in the demand for gasoline. |
e. | no change in either the supply of or the demand for gasoline. |
OBJ: conceptual
SEC: 3. Market Equilibrium: Combining Supply and Demand
TOP: Supply and Demand Change
MSC: Bloom's: Application | AACSB: Analytic
- A government energy policy that focuses on new technologies for conservation and new sources of energy would result in
a. | an increase in both the supply of and the demand for gasoline. |
b. | a decrease in both the supply of and the demand for gasoline. |
c. | an increase in the supply of gasoline along with a decrease in the demand for gasoline. |
d. | a decrease in the supply of gasoline along with an increase in the demand for gasoline. |
e. | no change in either the supply of or the demand for gasoline. |
OBJ: conceptual
SEC: 3. Market Equilibrium: Combining Supply and Demand
TOP: Supply and Demand Change
MSC: Bloom's: Application | AACSB: Analytic
/
- As a result of an increase in supply, ceteris paribus, the equilibrium price decreases and the equilibrium quantity increases.
Moderate
OBJ: conceptual
SEC: 3. Market Equilibrium: Combining Supply and Demand
TOP: Equilibrium Change MSC:
Bloom's: Knowledge | AACSB: Analytic
- As a result of an increase in both supply and demand, the equilibrium price decreases while the equilibrium quantity increases.
Challenging
OBJ: conceptual
SEC: 3. Market Equilibrium: Combining Supply and Demand
TOP: Demand and Supply Change
MSC: Bloom's: Analysis | AACSB: Analytic
- When supply shifts right and demand shifts left at the same time, the equilibrium market price drops.
Moderate
OBJ: conceptual
SEC: 3. Market Equilibrium: Combining Supply and Demand
TOP: Demand and Supply Change
MSC: Bloom's: Analysis | AACSB: Analytic
- An increase in supply and demand at the same time will always result in a higher equilibrium market price.
Moderate
OBJ: conceptual
SEC: 3. Market Equilibrium: Combining Supply and Demand
TOP: Demand and Supply Change
MSC: Bloom's: Analysis | AACSB: Analytic
- It is impossible to use a supply and demand model to analyze the effects of a decrease in both market supply and market demand on market price.
Moderate
OBJ: conceptual
SEC: 3. Market Equilibrium: Combining Supply and Demand
TOP: Supply and Demand Change
MSC: Bloom's: Evaluation | AACSB: Analytic
- Shifts in both the supply of and the demand for oil can explain the observation of an increase in gasoline prices.
Moderate
OBJ: conceptual
SEC: 3. Market Equilibrium: Combining Supply and Demand
TOP: Supply and Demand Change
MSC: Bloom's: Application | AACSB: Analytic
Short Answer
- Why is the word equilibrium used to describe the price determined by supply and demand in a market?
DIF: challenging
OBJ: conceptual
SEC: 3. Market Equilibrium: Combining Supply and Demand
TOP: Equilibrium
MSC: Bloom's: Comprehension | AACSB: Analytic
152. Draw a supply and demand diagram. Label the equilibrium price and equilibrium quantity as well as the axes and curves.
DIF: moderate
OBJ: conceptual
SEC: 3. Market Equilibrium: Combining Supply and Demand
TOP: Shortage and Surplus
MSC: Bloom's: Knowledge
153. With a single supply and demand diagram, illustrate a shortage and a surplus. Carefully label the diagram.
DIF: moderate
OBJ: conceptual
SEC: 3. Market Equilibrium: Combining Supply and Demand
TOP: Shortage and Surplus
MSC: Bloom's: Knowledge
154. Suppose consumer incomes increase, and we are looking at a market for a normal good. What will happen to demand, quantity demanded, supply, and quantity supplied as a result of this market change?
DIF: challenging
OBJ: conceptual
SEC: 3. Market Equilibrium: Combining Supply and Demand
TOP: Demand Change
MSC: Bloom's: Analysis | AACSB: Analytic
155. Suppose more firms enter the computer market. What will happen to demand, quantity demanded, supply, and quantity supplied as a result of this market change?
DIF: challenging
OBJ: conceptual
SEC: 3. Market Equilibrium: Combining Supply and Demand
TOP: Supply Change
MSC: Bloom's: Application | AACSB: Analytic
156. Draw a supply and demand diagram with supply and demand both increasing and market equilibrium price increasing as well.
DIF: challenging
OBJ: conceptual
SEC: 3. Market Equilibrium: Combining Supply and Demand
TOP: Supply and Demand Change
MSC: Bloom's: Knowledge | AACSB: Analytic
- For each of the following markets, indicate whether the stated change causes a shift in the supply curve, a shift in the demand curve, a movement along the supply curve, and/or a movement along the demand curve.
(A) | The housing market: consumers' incomes fall. |
(B) | The tea market: there is an increase in the production in India. |
(C) | The coffee market: the price of cream goes up. |
(D) | The fast-food market: the number of consumers in an area decreases. |
(E) | The gasoline market: government regulations raise production costs. |
(A) | Shift in the demand for housing; movement along the supply curve |
(B) | Shift in the supply of tea; movement along the demand curve |
(C) | Shift in the demand for coffee; movement along the supply curve |
(D) | Shift in the demand for fast food; movement along the supply curve |
(E) | Shift in the supply of gasoline; movement along the demand curve |
OBJ: conceptual
SEC: 3. Market Equilibrium: Combining Supply and Demand
TOP: Changes in Supply and Demand
MSC: Bloom's: Analysis | AACSB: Analytic
- For each of the following four sentences, determine whether the terminology of the supply and demand model is used correctly.
(A) | "Pizza prices increased; therefore, the demand for pizza went down." |
(B) | "The demand for pizza increased; therefore, the price went up." |
(C) | "Pizza prices fell, decreasing the supply of pizza." |
(D) | "The supply of pizza increased; therefore, pizza prices declined." |
OBJ: conceptual
SEC: 3. Market Equilibrium: Combining Supply and Demand
TOP: Changes in Supply and Demand
MSC: Bloom's: Analysis | AACSB: Analytic
- Use the supply and demand model to explain what happens to the equilibrium price and the equilibrium quantity for pasta in the following cases:
(A) | There is a large expansion in the number of firms producing pasta. |
(B) | It is widely publicized in the press that pasta isn't as healthful as previously thought. |
(C) | There is a sudden increase in the price of pasta flour, which is used to produce pasta. |
(D) | Pasta suddenly becomes popular because a movie idol promotes it in television commercials. |
(A) | Supply shifts right, increasing the equilibrium quantity and decreasing the equilibrium price. |
(B) | Demand shifts left, decreasing the equilibrium price and quantity. |
(C) | Supply shifts left, increasing the equilibrium price and decreasing the equilibrium quantity. |
(D) | Demand shifts right, increasing the equilibrium price and quantity. |
OBJ: conceptual
SEC: 3. Market Equilibrium: Combining Supply and Demand
TOP: Equilibrium Price and Quantity
MSC: Bloom's: Analysis | AACSB: Analytic
- Suppose a decrease in consumers' incomes causes a decrease in the demand for chicken and an increase in the demand for potatoes. Which good is inferior and which good is normal? How will the equilibrium price and equilibrium quantity change for each good?
OBJ: conceptual
SEC: 3. Market Equilibrium: Combining Supply and Demand
TOP: Normal and Inferior Goods
MSC: Bloom's: Application | AACSB: Analytic
Exhibit 3-5
Price per Barrel | Quantity Demanded | Quantity Supplied |
$50 | 725 | 900 |
$49 | 745 | 885 |
$48 | 775 | 840 |
$47 | 800 | 800 |
$46 | 830 | 750 |
- Refer to Exhibit 3-5 for the demand and supply model of the world oil market (in millions of barrels per day).
(A) | Is there a shortage or surplus of oil at a price of $48.00 per barrel? Why? What is the quantity of shortage or surplus? |
(B) | Is there a shortage or surplus of oil at a price of $46 per barrel? Why? What is the quantity of shortage or surplus? |
(C) | What is the equilibrium price and quantity in this market? |
(A) | There is a surplus of 65 million barrels at a price of $48 because the quantity supplied is greater than the quantity demanded at that price. |
(B) | There is a shortage of 80 million barrels at a price of $46 because the quantity supplied is less than the quantity demanded at that price. |
(C) | The equilibrium price is $47; the equilibrium quantity is 800 million barrels. |
OBJ: conceptual
SEC: 3. Market Equilibrium: Combining Supply and Demand
TOP: Demand and Supply
MSC: Bloom's: Application | AACSB: Application of Knowledge
- Refer to Exhibit 3-5. Suppose that a war in the Middle East causes the quantity supplied of oil to fall by 140 million barrels per day at every price.
(A) | Chart the new supply schedule. |
(B) | What is the new equilibrium price and new equilibrium quantity? |
(C) | Given this shift in supply, is there a shortage or surplus at the old equilibrium price? Explain the mechanism that adjusts the market to the new equilibrium. |
(A) |
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(B) | The new equilibrium price is $49; the new equilibrium quantity is 745 million barrels. | ||||||||||||
(C) | There would be a shortage at the old price. Because quantity supplied is less than quantity demanded, suppliers can increase the price, and they will continue to do so until the new equilibrium is reached. |
OBJ: conceptual
SEC: 3. Market Equilibrium: Combining Supply and Demand
TOP: Change in Quantity Supplied
MSC: Bloom's: Application | AACSB: Application of Knowledge
- Suppose that the price of bananas has been rising while the amount sold has been falling. Which of the following is the best explanation?
(A) | Consumer preferences have shifted in favor of bananas because they are healthful. |
(B) | Consumer incomes have risen faster than inflation. |
(C) | Bad weather has reduced some banana crops. |
OBJ: conceptual
SEC: 3. Market Equilibrium: Combining Supply and Demand
TOP: Supply and Demand Analysis
MSC: Bloom's: Application | AACSB: Analytic
- Suppose the price of beer fall in your city while police officers more strictly enforce the no drink-and-drive policy. Which of the following is the best explanation?
(A) | Less beer is being supplied locally. |
(B) | Police arrests are reducing beer consumption. |
(C) | Police arrests are closing more stores that sell beer. |
OBJ: conceptual
SEC: 3. Market Equilibrium: Combining Supply and Demand
TOP: Supply and Demand Analysis
MSC: Bloom's: Application | AACSB: Analytic
- Plastic bags are made from petroleum. Why does an increase in gasoline consumption, which is another product made from petroleum, raise the price of plastic bags? Use the supply and demand model to explain your answer.
OBJ: conceptual
SEC: 3. Market Equilibrium: Combining Supply and Demand
TOP: Supply and Demand Analysis
MSC: Bloom's: Application | AACSB: Analytic
- Using the supply and demand diagrams (one for each market), show what short-run changes in price and quantity would be expected in the following markets if worries about weight gain from fat consumption cause consumers to reduce the demand for ice cream. Each graph should contain the original and new demand and supply curves, and the original and new equilibrium prices and quantities. For each market, write one sentence explaining why each curve shifts or does not shift.
(A) | Market for ice cream |
(B) | Market for nonfat, low-calorie frozen yogurt |
(C) | Market for ice cream toppings |
(A) | The demand curve shifts to the left and the supply curve does not shift due to a change only in ice cream demand. |
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(B) | The demand curve shifts to the right and the supply curve does not shift due to an increase in the demand for frozen yogurt as a substitute for ice cream. |
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(C) | The demand curve shifts to the left and the supply curve does not shift due to a decrease in the demand for ice cream toppings as complements to ice cream. |
OBJ: conceptual
SEC: 3. Market Equilibrium: Combining Supply and Demand
TOP: Changes in Supply and Demand
MSC: Bloom's: Application | AACSB: Application of Knowledge