Verified Test Bank Ch3 Demand And Supply - Macroeconomics v3.0 Complete Test Bank by LibRittenberg. DOCX document preview.
Chapter 3: Demand and Supply
Multiple Choice
1. When economists study the behavior of buyers, they are studying:
A) supply.
B) the role of government.
C) demand.
D) psychology.
Difficulty: Easy
2. Demand is defined as:
A) an amount that is purchased at a specific price, given supply.
B) a schedule that establishes the price of a good.
C) a schedule that shows how much will be purchased at various prices during a particular period, all other things unchanged.
D) the amount that will be bought at a specific price.
Difficulty: Easy
3. Demand is best defined as the:
A) amount of a commodity that buyers would be willing and able to purchase at a specific price.
B) price that buyers would be willing and able to pay for a specific quantity of a good.
C) relationship between the price of a good and the quantity people are able to purchase, all other things unchanged.
D) relationship between the price of a good and the quantity people are willing and able to purchase, all other things unchanged.
Difficulty: Medium
4. The relationship between the price of a good and the quantity people are willing and able to purchase is:
A) supply.
B) demand.
C) equilibrium.
D) disequilibrium.
Difficulty: Easy
5. A decrease in the price of eggs, all other things unchanged, will result in a(n):
A) increase in the demand for eggs.
B) increase in the supply of eggs.
C) greater quantity of eggs supplied.
D) greater quantity of eggs demanded.
Difficulty: Medium
Use the following to answer questions 6-11.
Exhibit: The Demand for Chocolate-Covered Peanuts
Quantity Demanded
(bags per month)
Price (per bag) | George | Barbara | Dan |
90¢ | 10 | 0 | 60 |
80¢ | 15 | 10 | 80 |
70¢ | 20 | 20 | 100 |
60¢ | 25 | 30 | 120 |
50¢ | 30 | 40 | 140 |
40¢ | 35 | 50 | 160 |
30¢ | 40 | 60 | 180 |
6. (Exhibit: The Demand for Chocolate-Covered Peanuts) If the price of chocolate-covered peanuts is 60 cents, the quantity demanded by George is ________ bags per month.
A) 10
B) 15
C) 20
D) 25
Difficulty: Easy
7. (Exhibit: The Demand for Chocolate-Covered Peanuts) If Barbara is only able to purchase 20 bags of chocolate-covered peanuts, the maximum price she is willing and able to pay for each bag is ________ cents.
A) 90
B) 80
C) 70
D) 60
Difficulty: Easy
8. (Exhibit: The Demand for Chocolate-Covered Peanuts) If George is only able to purchase 30 bags of chocolate-covered peanuts, the maximum price he is willing and able to pay for each bag is ________ cents.
A) 80
B) 70
C) 60
D) 50
Difficulty: Easy
9. (Exhibit: The Demand for Chocolate-Covered Peanuts) If the price of chocolate-covered peanuts increases from 40 cents to 50 cents, Dan will reduce his quantity demanded from 160 bags to 140 bags due to:
A) the law of demand.
B) the law of supply.
C) a decline in his income.
D) a change in his tastes and preferences.
Difficulty: Medium
10. (Exhibit: The Demand for Chocolate-Covered Peanuts) If George, Barbara, and Dan are the only three buyers in the market, and the price of a bag of chocolate-covered peanuts is 80 cents, the total market demand is ________ bags per month.
A) 70
B) 80
C) 105
D) 280
Difficulty: Hard
11. (Exhibit: The Demand for Chocolate-Covered Peanuts) If George, Barbara, and Dan are the only three buyers in the market, and the price of a bag of chocolate-covered peanuts is 50 cents, the total market demand is ________ bags per month.
A) 80
B) 105
C) 210
D) 280
Difficulty: Hard
12. A negative relationship between the quantity demanded and price is called the law of ______.
A) demand
B) diminishing marginal returns
C) market clearing
D) supply
Difficulty: Easy
13. The principle stating that, for virtually all goods and services, there is a negative relationship between price and quantity demanded, all other things unchanged, is the law of:
A) supply.
B) demand.
C) scarcity.
D) increasing opportunity costs.
Difficulty: Easy
14. The law of demand is illustrated when:
A) an increase in tuition encourages more students to enroll in college because the quality of education has risen.
B) an increase in the purchases of personal computers results from lower prices.
C) higher oil prices cause oil companies to drill for new sources of oil.
D) higher fees for the use of public golf courses force golfers to purchase fewer golf balls.
Difficulty: Medium
15. The law of demand is illustrated by a demand curve that is:
A) horizontal.
B) downward-sloping.
C) vertical.
D) upward-sloping.
Difficulty: Medium
16. A decrease in the price of a good will, all other things unchanged, result in:
A) an increase in demand.
B) an increase in supply.
C) an increase in the quantity demanded.
D) more being supplied.
Difficulty: Easy
17. The demand curve for on-demand videos has shifted to the right. What could have caused it?
A) A fall in the price of on-demand videos.
B) An increase in the price of on-demand videos.
C) An increase in the supply of on-demand videos.
D) An increase in the income of buyers.
Difficulty: Medium
18. The law of demand implies that:
A) consumers are not responsive to price changes.
B) consumers will, all other things unchanged, buy more at lower prices.
C) sellers will, all other things unchanged, offer more on the market at higher prices.
D) sellers will, all other things unchanged, offer less on the market at lower prices.
Difficulty: Easy
Difficulty: Medium
19. Which of the following most correctly states the law of demand?
A) As the price falls all other things unchanged, demand will go up.
B) As the price goes up, all other things unchanged, demand will go down.
C) As the price falls, all other things unchanged, the quantity demanded will go down.
D) As the price falls, all other things unchanged, the quantity demanded will increase.
Difficulty: Medium
20. If the price of a commodity increases, all other things unchanged, you would expect the:
A) demand to decrease.
B) quantity demanded to increase.
C) quantity demanded to decrease.
D) demand curve to shift to the left.
Difficulty: Medium
21. The primary difference between a change in demand and a change in the quantity demanded is:
A) a change in demand is a movement along the demand curve, and a change in quantity demanded is a shift in the demand curve.
B) a change in quantity demanded is a movement along the demand curve, and a change in demand is a shift in the demand curve.
C) both a change in quantity demanded and a change in demand are shifts in the demand curve, only in different directions.
D) both a change in quantity demanded and a change in demand are movements along the demand curve, only in different directions.
Difficulty: Hard
Use the following to answer questions 22-24.
Exhibit: The Demand for Music Downloads
22. (Exhibit: The Demand for music downloads) A decrease in the fee charged for music downloads would result in a change illustrated by:
A) the move from f to g in Figure (a).
B) the move from h to i in Figure (b).
C) the move from j to k in Figure (c).
D) the move from l to m in Figure (d).
Difficulty: Hard
23. (Exhibit: The Demand for music downloads) A decrease in the price of iPods and other similar devices would result in a change illustrated by:
A) the move from f to g in Figure (a).
B) the move from h to i in Figure (b).
C) the move from j to k in Figure (c).
D) the move from l to m in Figure (d).
Difficulty: Hard
24. (Exhibit: The Demand for music downloads) A decrease in the price of CDs (a substitute) would result in a change illustrated by:
A) the move from f to g in Figure (a).
B) the move from h to i in Figure (b).
C) the move from j to k in Figure (c).
D) the move from l to m in Figure (d).
Difficulty: Hard
25. Which of the following would result in a movement along the demand curve?
A) a change in preferences
B) an increase in the number of buyers
C) an increase in the number of suppliers
D) a decrease in income
Difficulty: Medium
Difficulty: Medium
26. An announcement that smoking will harm your ability to think clearly will most likely result in:
A) an increase in the quantity of cigarettes demanded.
B) a decrease in the demand for cigarettes.
C) no change in smoking habits.
D) an increase in the equilibrium price of cigarettes.
Difficulty: Medium
27. Plastic and steel are substitutes in the production of automobiles. If steel prices go up, all other things unchanged:
A) the equilibrium price of plastic will fall.
B) the demand curve for plastic will shift to the left.
C) the demand curve for plastic will shift to the right.
D) the equilibrium quantity of plastic demanded will increase and the equilibrium price will fall.
Difficulty: Hard
28. Which of the following will not cause the demand for milk (a normal good) to increase in the current time period?
A) a fall in the price of milk
B) an increase in income
C) an expected increase in milk prices
D) a decrease in the price of cookies (a complement)
Difficulty: Hard
29. Demand and supply curves are drawn assuming ceteris paribus. This means that:
A) economists ignore all assumptions.
B) economists don't watch for the fallacy of false cause.
C) changes will be proportional.
D) all other things besides price and quantity are assumed unchanged.
Difficulty: Medium
30. Which of the following would not change the demand for automobiles?
A) a change in the price of gasoline
B) a change in the cost of steel
C) a change in the price of motorcycles
D) a change in tastes
Difficulty: Medium
31. For most consumers, blu-ray players and blu-ray discs are likely to be:
A) substitute goods.
B) complementary goods.
C) inferior goods.
D) independent goods.
Difficulty: Medium
32. The slope and location of the demand curve depend on:
A) the number of buyers.
B) production costs.
C) the number of producers.
D) all of the above.
Difficulty: Easy
33. If steak and potatoes are complements, when the price of steak goes up, the demand curve for potatoes:
A) shifts to the right.
B) shifts to the left.
C) stays the same.
D) shifts to the right and then moves back.
Difficulty: Medium
34. Two goods are substitutes if:
A) an increase in the price of one leads to a shift to the left in the demand curve for the other.
B) an increase in the price of one leads to an increase in demand for the other.
C) an increase in the price of one will increase the supply of the other.
D) a fall in the price of one leads to a reduction in supply for the other.
Difficulty: Hard
35. A decrease in the demand for eggs caused by concerns over cholesterol is most likely attributable to which demand shifter?
A) income
B) prices
C) consumer preferences
D) prices of other goods
Difficulty: Medium
36. Given that meat and potatoes are complementary goods, if the price of meat decreases substantially, there would be:
A) an increase in the demand for potatoes.
B) an increase in the quantity of potatoes demanded.
C) a decrease in the demand for potatoes.
D) no change in the demand for potatoes.
Difficulty: Medium
37. Given that chicken and beef are substitute goods, if the price of chicken decreases substantially, there would be:
A) an increase in the demand for beef.
B) a decrease in the demand for beef.
C) a decrease in the quantity of beef demanded.
D) no change in the demand for beef.
Difficulty: Medium
38. Every day for the past two years you've had ham and cheese on a whole wheat bagel for lunch at Bungalow Bob's Bagel Boutique. However, the price of whole wheat bagels has risen by 10 cents so today you decide to have ham and cheese on a rye bagel. In this case, whole wheat and rye bagels are best considered:
A) superior goods.
B) normal goods.
C) substitute goods.
D) complementary goods.
Difficulty: Hard
39. Which statement best illustrates complementary goods?
A) The price of tennis rackets declines so your economics instructor decides to take tennis lessons and purchases several cans of new tennis balls.
B) The price of Apple Macintosh computers declines so your economics instructor sells his or her IBM personal computer and buys a Macintosh.
C) After receiving a promotion and a hefty year-end bonus from the college, your economics instructor decides to stop buying denim jeans and switches to clothing befitting his or her loftier position on the faculty.
D) Fearing that the price of pipe tobacco will rise next year, your economics professor goes to his local tobacconist and purchases an ample supply to last for several years.
Difficulty: Hard
40. An increase in the price of football tickets will cause the ________ for (of) basketball tickets (a substitute) to ________ .
A) demand; increase
B) demand; decrease
C) supply; decrease
D) supply; increase
Difficulty: Medium
41. For most goods, purchases tend to rise with increases in buyers' incomes and to fall with decreases in buyers' incomes. Such goods are known as:
A) inferior goods.
B) direct goods.
C) normal goods.
D) luxury goods.
Difficulty: Easy
42. Economists know that a particular good can be classified as an inferior good if a(n) ________ in buyers' income causes a(n) ________ .
A) increase; increase in demand
B) increase; increase in quantity demanded
C) increase; decrease in demand
D) decrease; decrease in demand
Difficulty: Medium
43. Assuming that pizza is a normal good, if students' income at your college increases substantially, there would be:
A) a reduction in the demand for pizza.
B) an increase in the quantity of pizza demanded.
C) no change in the demand for pizza.
D) an increase in the demand for pizza.
Difficulty: Medium
44. After graduation from college you will receive a substantial increase in your income from a new job. If you decide that you will purchase more T-bone steak and less hamburger, then for you hamburger would be considered a(n):
A) normal good.
B) substitute good.
C) complementary good.
D) inferior good.
Difficulty: Medium
45. An increase in the demand for medical services caused by an increase in the number of people over 65 is most likely attributable to which demand shifter?
A) income
B) consumer preferences
C) prices of other goods
D) demographic characteristics
Difficulty: Medium
46. An increase in the demand for gasoline today caused by concerns that gasoline prices will be higher tomorrow is most likely attributable to which demand shifter?
A) income
B) consumer expectations
C) consumer preferences
D) prices of other goods
Difficulty: Medium
47. Which of the following would shift the demand curve for new textbooks to the right?
A) A decrease in the price of paper.
B) A fall in the price of used textbooks.
C) An increase in college enrollments.
D) A fall in the price of new textbooks.
Difficulty: Medium
48. The Case in Point on campus parking suggested that giving students lower fares for taking public transportation was what kind of factor in the demand for parking spaces?
A) supply shifter
B) demand shifter
C) false prophet
D) spoiler
Difficulty: Hard
49. In the Case in Point on campus parking, the implication was that existing prices for parking spaces on university campuses are generally:
A) too high.
B) too low.
C) about right.
D) unconscionable.
Difficulty: Hard
50. A supply curve that is upward sloping means that:
A) demand is being ignored.
B) consumers will buy less at lower prices.
C) suppliers will want to sell more at higher prices.
D) suppliers will want to sell less at higher prices.
Difficulty: Easy
51. When economists study the behavior of sellers, they are studying:
A) supply.
B) the role of government.
C) demand.
D) accounting.
Difficulty: Easy
52. Supply is best defined as the:
A) relationship between the quantity of a good or service buyers are able to purchase, all other things unchanged.
B) relationship between the quantity of a good or service buyers are willing to purchase, all other things unchanged.
C) relationship between the quantity of a good or service sellers are willing to offer for sale and various prices, all other things unchanged.
D) quantity of a good or service sellers are willing to offer for sale at a specific price, all other things unchanged.
Difficulty: Easy
53. The relationship between the quantity of a good or service sellers are willing to offer for sale at different prices is:
A) supply.
B) demand.
C) equilibrium.
D) disequilibrium.
Difficulty: Easy
54. A curve that shows the relationship between the price and quantity supplied during a particular period, all other things unchanged, is the:
A) price curve.
B) supply curve.
C) quantity function.
D) production possibilities curve.
Difficulty: Easy
55. How a supply curve is sloped and located is affected by:
A) consumer preferences.
B) resource prices.
C) the number of consumers.
D) all of the above.
Difficulty: Easy
A) a shift to the left of the entire supply curve.
B) moving downward (to the left) along the supply curve with lower prices.
C) less will be demanded at every price.
D) more will be supplied at every price.
Difficulty: Medium
57. A decrease in the price of milk (and ingredient of ice cream) will result in a(n):
A) shift of the supply curve of ice cream to the left.
B) shift of the supply curve of ice cream to the right.
C) lower price of ice cream, and thus an increase in the demand for ice cream.
D) increase in the demand for ice cream and a decrease in the supply of milk.
Difficulty: Hard
58. In the textbook, the prices of the factors of production, returns from alternative activities, technology, seller expectations regarding future prices, and the number of sellers are called:
A) demand shifters.
B) supply prices.
C) market realities.
D) supply shifters.
Difficulty: Easy
59. Factor prices, returns from alternative activities, technology, number of firms, producer expectations, and natural events are often termed:
A) demand determinants.
B) demand quantities.
C) supply prices.
D) supply shifters.
Difficulty: Medium
60. An increase in supply of a good is caused by:
A) resource prices rising.
B) a fall in the price of the good.
C) an increase in the number of sellers.
D) expectations of future price increases.
Difficulty: Medium
61. All other things unchanged, a tax on a product that leads to an increase in the cost of production would:
A) lead to an increase in supply.
B) lead to a decrease in demand.
C) result in an increased price.
D) lead to a decrease in supply.
Difficulty: Hard
62. The primary difference between a change in supply and a change in the quantity supplied is:
A) a change in quantity supplied is a shift in the supply curve, and a change in supply is a movement along the supply curve.
B) both a change in quantity supplied and a change in supply are movements along the supply curve, only in different directions.
C) a change in quantity supplied is a movement along the supply curve, and a change in supply is a shift of the supply curve.
D) a change in supply is a movement to the left along the supply curve and a change in quantity supplied is a movement to the right along the supply curve.
Difficulty: Medium
63. If the price of a commodity increases as the result of increased demand, you would expect the:
A) supply to increase.
B) quantity supplied to increase.
C) quantity supplied to decrease.
D) supply curve to shift to the right.
Difficulty: Medium
Use the following to answer questions 64-66.
Exhibit: The Supply of Music Downloads
64. (Exhibit: The Supply of Music Downloads) A decrease in the fee charged for music downloads would result in a change illustrated by the move from:
A) n to o in Figure (a).
B) p to q in Figure (b).
C) s to t in Figure (c).
D) u to v in Figure (d).
Difficulty: Medium
65. (Exhibit: The Supply of Music Downloads) A decrease in the price of music licenses sold by music companies to online sites would result in a change illustrated by:
A) the move from n to o in Figure (a).
B) the move from p to q in Figure (b).
C) the move from s to t in Figure (c).
D) the move from u to v in Figure (d).
Difficulty: Medium
66. (Exhibit: The Supply of Music downloads) A decrease in the number of websites supplying music downloads would result in a change illustrated by:
A) the move from n to o in Figure (a).
B) the move from p to q in Figure (b).
C) the move from s to t in Figure (c).
D) the move from u to v in Figure (d).
Difficulty: Medium
67. An increase in supply is caused by:
A) an increase in resource prices.
B) suppliers' expectations of higher prices in the future.
C) an increase in the price of a good using the same resources.
D) a decrease in the price of a good using the same resources.
Difficulty: Hard
68. A decrease in supply is caused by:
A) an increase in returns from other alternative activities.
B) suppliers' expectations of lower prices in the future.
C) an advancement in the technology for producing the good.
D) a decrease in the price of a good using the same resources.
Difficulty: Hard
69. An example of a supply shifter is:
A) demographic characteristics.
B) technology.
C) income.
D) consumer expectations.
Difficulty: Medium
70. If the price of mozzarella cheese (an ingredient in pizzas) declines due to a major technological breakthrough in the dairy industry, there would be:
A) a decrease in the supply of pizza.
B) an increase in the supply of pizza.
C) an increase in the quantity of pizza supplied.
D) no change in the supply of pizza.
Difficulty: Medium
71. An increase in supply is caused by:
A) an increase in resource prices.
B) a decrease in the number of sellers in the market.
C) suppliers' expectations of higher prices in the future.
D) an advancement in the technology for producing the good.
Difficulty: Medium
72. A decrease in supply is caused by:
A) a decrease in resource prices.
B) an increase in the number of sellers in the market.
C) suppliers' expectations of higher prices in the future.
D) an advancement in the technology for producing the good.
Difficulty: Medium
73. A substantial increase in the price of oranges (a normal good) is likely to result from:
A) an increase in the amount of imported oranges.
B) a prolonged freeze in Florida.
C) a decline in buyers' incomes.
D) a decrease in the public's demand for orange juice.
Difficulty: Medium
74. A decrease in supply is caused by:
A) a decrease in resource prices.
B) a decrease in the number of sellers in the market.
C) suppliers' expectations of lower prices in the future.
D) an advancement in the technology for producing the good.
Difficulty: Medium
75. Which would not cause the supply curve to shift?
A) a change in technology
B) a change in factor costs
C) a change in the price of the good
D) a change in the prices of related goods
Difficulty: Medium
76. A shift to the left of a supply curve is caused by:
A) an increase in the number of sellers.
B) a technological improvement.
C) an increase in the returns from other supply possibilities.
D) an increase in the number of buyers.
Difficulty: Hard
77. In the Case in Point on "The Monks of St. Benedict's," the Monks got out of the egg business largely because:
A) there was a large increase in the supply of eggs from other producers.
B) of the increase in the price of chicken feed.
C) the Pope forbade them from working on Sunday.
D) a huge increase in the demand for eggs caused the price of eggs to increase, and their operation was too small to meet the demand.
Difficulty: Medium
78. In the 1990s, the Monks of St. Benedict's the Monks determined that their ________ were ________ in the egg and cookie business, so they ________ .
A) opportunity costs; too low; switched to providing private retreats
B) opportunity costs; too high; switched to providing private retreats
C) profits; too high; went out of business
D) operating costs; too low; opened a new business
Difficulty: Hard
79. A shift of a demand curve to the right, all other things unchanged, will:
A) increase equilibrium price and quantity.
B) decrease equilibrium price and quantity.
C) decrease quantity and increase price.
D) increase quantity and decrease price.
Difficulty: Hard
80. Which of the following will result in an increased price of milk?
A) A shift to the right of the supply curve for milk.
B) A shift to the right of the demand curve for milk.
C) An increase in the number of milk suppliers.
D) A decrease in the number of milk buyers.
Difficulty: Medium
81. Given a supply curve that is positively sloped and a demand curve for a normal good that is negatively sloped, an increase in income will most likely result in:
A) an increase in price and quantity.
B) a decrease in price and an increase in quantity.
C) a decrease in both price and quantity.
D) an increase in price and a decrease in quantity.
Difficulty: Hard
82. An increase in demand, all other things unchanged, will result in a(n) ________ in the equilibrium price and a(n) ________ in the equilibrium quantity.
A) increase; increase
B) decrease; decrease
C) decrease; increase
D) increase; decrease
Difficulty: Hard
83. It is true that the equilibrium quantity will always go up if supply:
A) and demand both increase.
B) increases and demand decreases.
C) and demand both decrease.
D) decreases and demand remains unchanged.
Difficulty: Hard
84. The intersection of the supply and demand curves indicates:
A) the equilibrium solution in the market.
B) a surplus that will cause the price to fall.
C) a shortage that will cause the price to rise.
D) the quantity demanded exceeds the quantity supplied.
Difficulty: Medium
Use the following to answer questions 85-88.
Exhibit: Demand and Supply
85. (Exhibit: Demand and Supply) Given the demand curve, what is the price some buyers are willing and able to pay for 3 units?
A) $2
B) $4
C) $6
D) $8
Difficulty: Medium
86. (Exhibit: Demand and Supply) What is the equilibrium price?
A) $2
B) $4
C) $6
D) $8
Difficulty: Medium
87. (Exhibit: Demand and Supply) What is the equilibrium quantity?
A) 3
B) 6
C) 9
D) 12
Difficulty: Medium
88. (Exhibit: Demand and Supply) If the equilibrium price fell to $2 because of a shift to the left of the demand curve, the quantity supplied would be:
A) 3
B) 4
C) 5
D) 6
Difficulty: Hard
Use the following to answer questions 89-94.
Exhibit: Demand and Supply of Gasoline
89. (Exhibit: Demand and Supply of Gasoline) The initial price and quantity (at intersection of S1 and D) in equilibrium are:
A) $2.00 and 450 gallons.
B) $1.50 and 400 gallons.
C) $2.00 and 200 gallons.
D) $2.50 and 300 gallons.
Difficulty: Medium
90. (Exhibit: Demand and Supply of Gasoline) A factor that may have changed supply from S1 to S2 is:
A) better technology in the production of gasoline.
B) increased demand.
C) lower labor productivity.
D) increased prices of substitutes for gasoline.
Difficulty: Medium
91. (Exhibit: Demand and Supply of Gasoline) Given the equilibrium after a change in supply from S1 to S2:
A) at the old price of $2.50, there will be pressure for the price to fall.
B) the new price will be $2.00.
C) the new quantity will be 400.
D) all of the above are true.
Difficulty: Medium
92. (Exhibit: Demand and Supply of Gasoline) Given the initial equilibrium of S1 and D, any price lower than _____________ will create pressure for the price to ________ .
A) $2.00; fall
B) $2.50; rise
C) $3.00; rise
D) none of the above are true
Difficulty: Medium
93. (Exhibit: Demand and Supply of Gasoline) When the supply curve shifted from the initial equilibrium to the new intersection of supply and demand at a price of ________ and quantity of 400, this could have resulted from ________ .
A) $1.50; an increase in consumers' income
B) $1.50; an improvement in refining technology
C) $2.00; an increase in the number of buyers
D) A and B are true
Difficulty: Hard
94. (Exhibit: Demand and Supply of Gasoline) What might cause the supply curve to shift from S2 back to the initial supply curve S1?
A) The Organization of Petroleum Exporting Countries (OPEC) restricts the production of crude oil.
B) The Organization of Petroleum Exporting Countries (OPEC) increases the production of crude oil.
C) Americans want to buy more gas.
D) Technology in the refinement of gasoline greatly improves.
Difficulty: Hard
Use the following to answer questions 95-98.
Exhibit: Demand and Supply of Wheat
95. (Exhibit: Demand and Supply of Wheat) What are the equilibrium price and quantity in this wheat market?
A) $6 and 6,000 bushels
B) $4 and 2,000 bushels
C) $4 and 10,000 bushels
D) $8 and 12,000 bushels
Difficulty: Medium
96. (Exhibit: Demand and Supply of Wheat) If a price of $10 temporarily exists in this market, a:
A) shortage of 10,000 bushels will result.
B) shortage of 8,000 bushels will result.
C) surplus of 8,000 bushels will result.
D) surplus of 6,000 bushels will result.
Difficulty: Medium
97. (Exhibit: Demand and Supply of Wheat) A temporary price of $2 in this market would result in:
A) a surplus of 8,000 bushels.
B) a shortage of 8,000 bushels.
C) a shortage of 10,000 bushels.
D) a surplus of 10,000 bushels.
Difficulty: Medium
98. (Exhibit: Demand and Supply of Wheat) A price of ________ will result in a ________ , and a price of ________ will result in a ________ .
A) $6; shortage; $8; surplus
B) $8; surplus; $4; shortage
C) $8; shortage; $6; surplus
D) $4; surplus; $8; shortage
Difficulty: Hard
99. If the quantity supplied in a market exceeds the quantity demanded in a market, we would expect price to:
A) stay the same.
B) increase.
C) decrease.
D) rise in order to clear the market.
Difficulty: Medium
100. There is equilibrium in the market when:
A) there is no shortage.
B) there is no surplus.
C) price is established where the supply curve and the demand curve intersect.
D) all of the above are true.
Difficulty: Medium
101. A competitive market with flexible prices and many buyers and sellers will:
A) tend to create surpluses.
B) tend to create shortages.
C) reach an equilibrium where the market clears.
D) reach and equilibrium only if a government agency sets the price.
Difficulty: Medium
102. When the market price is established where demand and supply curves intersect:
A) consumer buying tends to exceed the quantity producers supply.
B) the quantity consumers demand generally fall short of the quantity producers supply.
C) the quantity demanded and the quantity supplied are equal.
D) all of the above will result.
Difficulty: Medium
103. The theory underlying demand and supply curves assumes that, all other things unchanged, the primary variable that assures the equality of the quantities demanded and supplied is:
A) consumer income.
B) the preferences of consumers.
C) the expectations of consumers and producers.
D) price.
Difficulty: Medium
104. The key signals that send messages to buyers and sellers to buy or not to buy or to sell or not to sell are, all other things unchanged:
A) prices.
B) preferences.
C) government mandates.
D) expectations.
Difficulty: Easy
Use the following to answer questions 105-111.
Exhibit: The Market for Chocolate-Covered Peanuts
Price | Quantity Demanded | Quantity Supplied |
(per bag) | (bags per month) | ( bags per month) |
90¢ | 70 | 280 |
80¢ | 105 | 245 |
70¢ | 140 | 210 |
60¢ | 175 | 175 |
50¢ | 210 | 140 |
40¢ | 245 | 105 |
30¢ | 280 | 70 |
105. (Exhibit: The Market for Chocolate-Covered Peanuts) If the price of chocolate-covered peanuts is 60 cents, the price will:
A) remain unchanged.
B) fall to 30 cents.
C) fall to 50 cents.
D) rise to 70 cents.
Difficulty: Medium
106. (Exhibit: The Market for Chocolate-Covered Peanuts) The equilibrium quantity and the equilibrium price are ________ bags and ________ cents.
A) 140; 40
B) 175; 60
C) 175; 80
D) 210; 50
Difficulty: Medium
107. (Exhibit: The Market for Chocolate-Covered Peanuts) If the price of chocolate-covered peanuts is 80 cents, there is:
A) a surplus of 140 bags per month.
B) a shortage of 140 bags per month.
C) a surplus of 70 bags per month.
D) a shortage of 70 bags per month.
Difficulty: Medium
108. (Exhibit: The Market for Chocolate-Covered Peanuts) A surplus of 210 bags of chocolate-covered peanuts exists if the price is ________ cents per bag.
A) 90
B) 80
C) 60
D) 40
Difficulty: Medium
109. (Exhibit: The Market for Chocolate-Covered Peanuts) If the price of chocolate-covered peanuts is 40 cents, the price will:
A) remain unchanged.
B) fall to 30 cents.
C) rise to 50 cents.
D) rise to 60 cents.
Difficulty: Medium
110. (Exhibit: The Market for Chocolate-Covered Peanuts) If the price of chocolate-covered peanuts is 50 cents, there is:
A) a surplus of 140 bags per month.
B) a shortage of 140 bags per month.
C) a surplus of 70 bags per month.
D) a shortage of 70 bags per month.
Difficulty: Medium
111. (Exhibit: The Market for Chocolate-Covered Peanuts.) A shortage of 210 bags of chocolate-covered peanuts exists if the price is ________ cents per bag.
A) 80
B) 60
C) 40
D) 30
Difficulty: Medium
Use the following to answer questions 112-117.
Exhibit: The Determinants of Demand and Supply
112. (Exhibit: The Determinants of Demand and Supply) The exhibit shows how supply and demand might shift in response to specific events. Suppose consumer incomes increase. Which panel best describes how this will affect the market for used furniture, an inferior good?
A) Panel (a)
B) Panel (b)
C) Panel (c)
D) Panel (d)
Difficulty: Medium
113. (Exhibit: The Determinants of Demand and Supply) The exhibit shows how supply and demand might shift in response to specific events. Suppose scientists discover that eating a tomato a day prevents aging. Which panel best describes how this will affect the market for tomatoes?
A) Panel (a)
B) Panel (b)
C) Panel (c)
D) Panel (d)
Difficulty: Medium
114. (Exhibit: The Determinants of Demand and Supply) The exhibit shows how supply and demand might shift in response to specific events. Suppose a fall frost destroys one-third of the nation's orange crop. Which panel best describes how this will affect the market for oranges?
A) Panel (a)
B) Panel (b)
C) Panel (c)
D) Panel (d)
Difficulty: Medium
115. (Exhibit: The Determinants of Demand and Supply) The exhibit shows how supply and demand might shift in response to specific events. Suppose a fall frost destroys one-third of the nation's orange crop. Which panel best describes how this will affect the market for Vitamin C tablets, which are a substitute for oranges?
A) Panel (a)
B) Panel (b)
C) Panel (c)
D) Panel (d)
Difficulty: Medium
116. (Exhibit: The Determinants of Demand and Supply) The exhibit shows how supply and demand might shift in response to specific events. Suppose the population increases. Which panel best describes how this will affect the market for apples?
A) Panel (a)
B) Panel (b)
C) Panel (c)
D) Panel (d)
Difficulty: Medium
117. (Exhibit: The Determinants of Demand and Supply) The exhibit shows how supply and demand might shift in response to specific events. Suppose a new machine is developed that allows restaurants and fast-food outlets to produce French fries at a lower cost. Which panel best describes how this will affect the market for French fries?
A) Panel (a)
B) Panel (b)
C) Panel (c)
D) Panel (d)
Difficulty: Medium
Use the following to answer questions 118-124.
Exhibit: Demand and Supply—Determinants
118. (Exhibit: Demand and Supply-Determinants) The exhibit shows how supply and demand might shift in response to specific events. Suppose consumer incomes decrease. Which panel best describes how this will affect the market for used clothing, an inferior good?
A) Panel (a)
B) Panel (b)
C) Panel (c)
D) Panel (d)
Difficulty: Medium
119. (Exhibit: Demand and Supply-Determinants) The exhibit shows how supply and demand might shift in response to specific events. Suppose scientists discover that eating pomegranates causes premature aging. Which panel best describes how this will affect the market for pomegranates?
A) Panel (a)
B) Panel (b)
C) Panel (c)
D) Panel (d)
Difficulty: Medium
120. (Exhibit: Demand and Supply-Determinants) The exhibit shows how supply and demand might shift in response to specific events. Suppose a drought destroys one-third of the nation's peanut crop. Which panel best describes how this will affect the market for peanuts?
A) Panel (a)
B) Panel (b)
C) Panel (c)
D) Panel (d)
Difficulty: Medium
121. (Exhibit: Demand and Supply-Determinants) The exhibit shows how supply and demand might shift in response to specific events. Suppose a fall frost destroys one-third of the nation's grapefruit crop. Which panel best describes how this will affect the market for Vitamin B-12 tablets, which are a substitute for grapefruit?
A) Panel (a)
B) Panel (b)
C) Panel (c)
D) Panel (d)
Difficulty: Medium
122. (Exhibit: Demand and Supply-Determinants) The exhibit shows how supply and demand might shift in response to specific events. Suppose the birth rate (the number of babies per female in the childbearing age bracket) decreases. Which panel best describes how this will affect the market for diapers?
A) Panel (a)
B) Panel (b)
C) Panel (c)
D) Panel (d)
Difficulty: Medium
123. (Exhibit: Demand and Supply-Determinants) The exhibit shows how supply and demand might shift in response to specific events. Suppose the technology for producing automotive gasoline improves. Which panel best describes how this will affect the market for gasoline additives, a complement of automotive gasoline?
A) Panel (a)
B) Panel (b)
C) Panel (c)
D) Panel (d)
Difficulty: Medium
124. (Exhibit: Demand and Supply-Determinants) The exhibit shows how supply and demand might shift in response to specific events. Suppose the technology for producing automotive gasoline improves. Which panel best describes how this will affect the market for automotive gasoline?
A) Panel (a)
B) Panel (b)
C) Panel (c)
D) Panel (d)
Difficulty: Medium
Use the following to answer questions 125-132.
Exhibit: Demand Shifters and Supply Shifters
125. (Exhibit: Demand Shifters and Supply Shifters) The exhibit shows how supply and demand might shift in response to specific events. Suppose consumer incomes increase. Which panel best describes how this will affect the market for tuxedoes, a normal good?
A) Panel (a)
B) Panel (b)
C) Panel (c)
D) Panel (d)
Difficulty: Medium
126. (Exhibit: Demand Shifters and Supply Shifters) The exhibit shows how supply and demand might shift in response to specific events. Suppose scientists discover that eating asparagus slows down the aging process. Which panel best describes how this will affect the market for asparagus?
A) Panel (a)
B) Panel (b)
C) Panel (c)
D) Panel (d)
Difficulty: Medium
127. (Exhibit: Demand Shifters and Supply Shifters) The exhibit shows how supply and demand might shift in response to specific events. Suppose a wet and sunny year increases the nation's corn crop by 20 percent. Which panel best describes how this will affect the market for corn?
A) Panel (a)
B) Panel (b)
C) Panel (c)
D) Panel (d)
Difficulty: Medium
128. (Exhibit: Demand Shifters and Supply Shifters) The exhibit shows how supply and demand might shift in response to specific events. Suppose a spring frost destroys one-third of the nation's artichoke crop. Which panel best describes how this will affect the market for mayonnaise, which is a complement to artichokes?
A) Panel (a)
B) Panel (b)
C) Panel (c)
D) Panel (d)
Difficulty: Medium
129. (Exhibit: Demand Shifters and Supply Shifters) The exhibit shows how supply and demand might shift in response to specific events. Suppose the birth rate (the number of babies per female in the childbearing age bracket) increases. Which panel best describes how this will affect the market for diapers?
A) Panel (a)
B) Panel (b)
C) Panel (c)
D) Panel (d)
Difficulty: Medium
130. (Exhibit: Demand Shifters and Supply Shifters) The exhibit shows how supply and demand might shift in response to specific events. Suppose the technology for producing snowboards improves. Which panel best describes how this will affect the market for winter parkas, a complement of snowboards?
A) Panel (a)
B) Panel (b)
C) Panel (c)
D) Panel (d)
Difficulty: Medium
131. (Exhibit: Demand Shifters and Supply Shifters) The exhibit shows how supply and demand might shift in response to specific events. Suppose the technology for producing automotive gasoline improves. Which panel best describes how this will affect the market for automotive gasoline?
A) Panel (a)
B) Panel (b)
C) Panel (c)
D) Panel (d)
Difficulty: Medium
132. (Exhibit: Demand Shifters and Supply Shifters) The exhibit shows how supply and demand might shift in response to specific events. Suppose a wet and sunny year increases the nation's sweet corn crop by 20 percent. Which panel best describes how this will affect the market for frozen peas, a substitute for sweet corn?
A) Panel (a)
B) Panel (b)
C) Panel (c)
D) Panel (d)
Difficulty: Medium
Use the following to answer questions 133-140.
Exhibit: Demand and Supply Shifters
133. (Exhibit: Demand and Supply Shifters) The exhibit shows how supply and demand might shift in response to specific events. Suppose consumer incomes increase. Which panel best describes how this will affect the market for dress ties, a normal good?
A) Panel (a)
B) Panel (b)
C) Panel (c)
D) Panel (d)
Difficulty: Medium
134. (Exhibit: Demand and Supply Shifters) The exhibit shows how supply and demand might shift in response to specific events. Suppose the Surgeon General announces that eating chocolate prevents heart disease. Which panel best describes how this will affect the market for chocolate?
A) Panel (a)
B) Panel (b)
C) Panel (c)
D) Panel (d)
Difficulty: Medium
135. (Exhibit: Demand and Supply Shifters) The exhibit shows how supply and demand might shift in response to specific events. Suppose the price of lumber falls dramatically. Which panel best describes how this will affect the market for houses?
A) Panel (a)
B) Panel (b)
C) Panel (c)
D) Panel (d)
Difficulty: Medium
136. (Exhibit: Demand and Supply Shifters) The exhibit shows how supply and demand might shift in response to specific events. Suppose oil becomes more expensive. Which panel best describes how this will affect the market for gasoline, which is made from oil?
A) Panel (a)
B) Panel (b)
C) Panel (c)
D) Panel (d)
Difficulty: Medium
137. (Exhibit: Demand and Supply Shifters) The exhibit shows how supply and demand might shift in response to specific events. Suppose half the people in San Diego move to Colorado Springs. Which panel best describes how this will affect the market for houses in Colorado Springs?
A) Panel (a)
B) Panel (b)
C) Panel (c)
D) Panel (d)
Difficulty: Medium
138. (Exhibit: Demand and Supply Shifters) The exhibit shows how supply and demand might shift in response to specific events. Suppose half the people in San Diego pack up and move to Colorado Springs. Which panel best describes how this will affect the supply of houses in San Diego?
A) Panel (a)
B) Panel (b)
C) Panel (c)
D) Panel (d)
Difficulty: Medium
139. (Exhibit: Demand and Supply Shifters) The exhibit shows how supply and demand might shift in response to specific events. Suppose the technology for producing handheld calculators improves. Which panel best describes how this will affect the market for handheld calculators?
A) Panel (a)
B) Panel (b)
C) Panel (c)
D) Panel (d)
Difficulty: Medium
140. (Exhibit: Demand and Supply Shifters) The exhibit shows how supply and demand might shift in response to specific events. Suppose a wet and sunny year increases the nation's sweet pea crop by 20 percent. Which panel best describes how this will affect the market for frozen sweet corn, a substitute for sweet peas?
A) Panel (a)
B) Panel (b)
C) Panel (c)
D) Panel (d)
Difficulty: Medium
141. There is an increase in incomes. What happens in the market for steak?
A) The equilibrium price falls, and the equilibrium quantity rises.
B) The equilibrium price rises, and the equilibrium price falls.
C) The equilibrium price and quantity rise.
D) The equilibrium price and quantity fall.
Difficulty: Medium
142. The price of apples falls. What happens in the market for apple pies?
A) The equilibrium price falls, and the equilibrium quantity rises.
B) The equilibrium price rises, and the equilibrium quantity falls.
C) The equilibrium price and quantity rise.
D) The equilibrium price and quantity fall.
Difficulty: Medium
143. The price of cotton rises. What happens in the market for cotton shirts?
A) The equilibrium price falls and the equilibrium quantity rises.
B) The equilibrium price rises and the equilibrium quantity falls.
C) The equilibrium price and quantity rise.
D) The equilibrium price and quantity fall.
Difficulty: Medium
144. The price of oranges rises. What happens in the market for apples, which are a substitute for oranges?
A) The equilibrium price falls, and the equilibrium quantity rises.
B) The equilibrium price rises, and the equilibrium quantity falls.
C) The equilibrium price and quantity rise.
D) The equilibrium price and quantity fall.
Difficulty: Medium
145. Researchers demonstrate conclusively that drinking 4-6 ounces of ginger ale each day increases life expectancy by 3 years. What happens in the market for ginger ale?
A) The equilibrium price falls, and the equilibrium quantity rises.
B) The equilibrium price rises, and the equilibrium quantity falls.
C) The equilibrium price and quantity rise.
D) The equilibrium price and quantity fall.
Difficulty: Medium
146. The price of oranges falls. What happens in the market for apples, which are a substitute for oranges?
A) The equilibrium price falls and the equilibrium quantity rises.
B) The equilibrium price rises and the equilibrium quantity falls.
C) The equilibrium price and quantity rise.
D) The equilibrium price and quantity fall.
Difficulty: Medium
147. Consumer preferences, prices of related goods, income, and demographic characteristics are often termed:
A) market technologies.
B) demand prices.
C) demand shifters.
D) supply determinants.
Difficulty: Medium
148. An example of a demand shifter is:
A) factor prices.
B) technology.
C) consumer preferences.
D) producer expectations.
Difficulty: Medium
149. If people demand more of product A when the price of B falls, then A and B are:
A) not related.
B) substitutes.
C) complements.
D) inferior.
Difficulty: Medium
150. When the price of gas goes up and the demand for tires goes down, this means tires and gas are:
A) substitutes.
B) complements.
C) both expensive.
D) both inexpensive.
Difficulty: Medium
151. If the price of hamburger increases, it would probably result in ________ in the demand for hamburger buns.
A) a decrease
B) an increase
C) no change
D) random fluctuations
Difficulty: Medium
152. The price of eggs might go up because:
A) of an increase in the price of bacon.
B) the price of chicken feed increased.
C) the supply of eggs increased.
D) the demand for eggs fell.
Difficulty: Medium
153. Which of the following is true?
A) If demand decreases, equilibrium price increases.
B) If demand increases, equilibrium price decreases.
C) If demand decreases, the demand curve shifts to the left.
D) If demand decreases, the demand curve shifts to the right.
Difficulty: Medium
154. If a demand curve shifts to the left, then:
A) the equilibrium price would go up and the equilibrium quantity would go down.
B) the equilibrium price would go down and the equilibrium quantity would go up.
C) a lower equilibrium price and quantity would result.
D) a higher equilibrium price and quantity would result.
Difficulty: Easy
155. A shift in the demand curve to the left, all other things unchanged:
A) will cause the supply curve to shift to the left, too.
B) will cause a movement upward along the supply curve and a higher equilibrium price.
C) will cause a movement downward along the supply curve and a lower equilibrium quantity.
D) will result in a lower equilibrium price and greater equilibrium quantity.
Difficulty: Medium
Use the following to answer questions 156-161.
Exhibit: Demand and Supply Curves
156. (Exhibit: Demand and Supply Curves) The highest price per unit that buyers would be willing to pay for 250 units is:
A) $0.
B) $5.
C) $10.
D) $15.
Difficulty: Medium
157. (Exhibit: Demand and Supply Curves) The lowest price per unit that sellers would be willing to accept for 50 units is:
A) $25.
B) $15.
C) $10.
D) $5.
Difficulty: Medium
158. (Exhibit: Demand and Supply Curves) If there are no restrictions on the actions of buyers and sellers, the market price and quantity will tend toward ________ and ________ units, respectively.
A) $25; 50
B) $25; 250
C) $15; 150
D) $10; 50
Difficulty: Medium
159. (Exhibit: Demand and Supply Curves) A surplus of 200 units will occur at a price of ________ and a shortage of 200 units will occur at a price of ________.
A) $15; $10
B) $15; $15
C) $15; $25
D) $25; $10
Difficulty: Medium
160. (Exhibit: Demand and Supply Curves) A price of $25 per unit will result in:
A) a surplus of 50 units.
B) a surplus of 200 units.
C) a surplus of 250 units.
D) quantity demanded exceeding quantity supplied.
Difficulty: Medium
161. (Exhibit: Demand and Supply Curves) A price of $10 per unit will result in:
A) a shortage of 50 units.
B) a shortage of 200 units.
C) a shortage of 250 units.
D) quantity supplied exceeding quantity demanded.
Difficulty: Medium
162. In a competitive market, if there should be a surplus of a product at a given price:
A) sellers will drive the price down.
B) sellers will drive the price up.
C) buyers will drive the price up.
D) the price will tend to remain constant.
Difficulty: Medium
163. If the price in the market for a commodity is above the market equilibrium price, the:
A) price will remain unchanged.
B) price will rise to clear the market.
C) quantity supplied exceeds the quantity demanded.
D) quantity demanded exceeds the quantity supplied.
Difficulty: Medium
164. A market surplus occurs if the quantity:
A) demanded is greater than the quantity supplied.
B) demanded is less than the quantity supplied.
C) demanded is equal to the quantity supplied.
D) supplied is less than the quantity demanded.
Difficulty: Medium
165. A market surplus occurs if the:
A) price is below the equilibrium price.
B) price is equal to the equilibrium price.
C) equilibrium price is above the actual price.
D) equilibrium price is below the actual price.
Difficulty: Medium
166. If the quantity of housing supplied in a community is greater than the quantity of houses demanded, the existing price:
A) is above the market equilibrium price.
B) will rise to clear the market.
C) will either rise or remain unchanged.
D) is below the market equilibrium price.
Difficulty: Medium
167. If economists say, "the price is too high," they mean that:
A) quantity demanded is greater than quantity supplied.
B) quantity supplied is greater than quantity demanded.
C) the equilibrium price exceeds the current price.
D) the price of a good will tend to increase.
Difficulty: Medium
168. In a competitive market, when price is below the equilibrium price, there will be pressure for the price to:
A) fall.
B) stay the same.
C) rise.
D) change only if demand and/or supply change.
Difficulty: Medium
169. A market shortage occurs if the quantity:
A) demanded is greater than the quantity supplied.
B) demanded is less than the quantity supplied.
C) demanded is equal to the quantity supplied.
D) supplied is greater than the quantity demanded.
Difficulty: Medium
170. If the price in the market for a commodity is below the equilibrium price, the:
A) price will remain unchanged.
B) price will decline to clear the market.
C) quantity supplied exceeds the quantity demanded.
D) quantity demanded exceeds the quantity supplied.
Difficulty: Medium
171. If the quantity of housing supplied in a community is less than the quantity of houses demanded, the existing price:
A) will remain unchanged.
B) will fall to clear the market.
C) will either fall or remain unchanged.
D) is below the market equilibrium price.
Difficulty: Medium
172. A market shortage occurs if the:
A) price is above the equilibrium price.
B) price is equal to the equilibrium price.
C) equilibrium price is above the current price.
D) equilibrium price is below the current price.
Difficulty: Medium
173. A price above the equilibrium price will:
A) result in quantity supplied being less than quantity demanded.
B) result in a shortage.
C) create pressure for price to fall.
D) tend to rise over time.
Difficulty: Medium
174. A price below the equilibrium price will:
A) result in pressure for price to rise.
B) result in a surplus.
C) never be the case.
D) result in pressure for price to fall.
Difficulty: Medium
175. If a market reflects a shortage and prices are allowed to move:
A) supply will increase.
B) demand will decrease.
C) price will decrease.
D) price will increase.
Difficulty: Medium
176. If the current price is above the equilibrium price, we would expect:
A) quantity demanded to exceed quantity supplied.
B) upward pressure on price.
C) quantity supplied to exceed quantity demanded.
D) no change in the market price.
Difficulty: Medium
177. If the current price is less than the market clearing or equilibrium price, we would expect:
A) a surplus.
B) downward pressure on price.
C) upward pressure on price.
D) no change in the market price.
Difficulty: Medium
178. What is the difference between a shortage and scarcity?
A) Scarcity will always exist because choices must be made, but a shortage will only exist if the price is kept below the equilibrium level.
B) Scarcity is a result of two or more alternative uses and will always exist, and quantities of supply and demand adjusting to flexible prices will create shortages.
C) A surplus will exist when a good is scarce; a shortage merely implies that there isn't as much of something as people would like, which is nearly always the case.
D) There is no distinction between the two. They are the same thing.
Difficulty: Hard
179. Assume a market initially exhibits a shortage. Assuming that both prices and quantities are flexible, which of the following will be true after the market adjusts to equilibrium?
A) Price is lower.
B) Quantity demanded is greater.
C) Quantity supplied is more.
D) Quantity supplied will be reduced.
Difficulty: Hard
180. Which of the following always results in an increase in equilibrium price and quantity?
A) an increase in supply and a decrease in demand
B) an increase in demand with no change in supply
C) an increase in supply with no change in demand
D) all of the above
Difficulty: Medium
Use the following to answer questions 181-183.
Exhibit: Demand and Supply Schedules for a Good
Price | Quantity Demanded | Quantity Supplied |
(per unit) | (units) | ( units) |
$2.00 | 260 | 200 |
2.50 | 245 | 220 |
3.00 | 240 | 240 |
3.50 | 200 | 250 |
4.00 | 160 | 260 |
4.50 | 130 | 280 |
5.00 | 100 | 300 |
181. (Exhibit: Demand and Supply Schedules for a Good) The equilibrium price is ________ and the equilibrium quantity is ________.
A) $2.00; 230 units
B) $3.00; 240 units
C) $4.00; 210 units
D) impossible to determine; impossible to determine
Difficulty: Medium
182. (Exhibit: Demand and Supply Schedules for a Good.) If there were an increase in demand by 50 units at each price, the equilibrium price and quantity would be ________ and ________ units, respectively.
A) $2.00; 310
B) $2.50; 295
C) $3.00; 290
D) $3.50; 250
Difficulty: Hard
183. (Exhibit: Supply and Demand Schedules for a Good) If there were a decrease in supply by 100 units at each price, the equilibrium price and quantity would be ________ and ________ units, respectively.
A) $2.00; 100
B) $3.00; 140
C) $3.50; 175
D) $4.00; 160
Difficulty: Hard
184. An increase in demand, with no change in supply, will lead to ________ in equilibrium quantity and ________ in equilibrium price.
A) an increase; an increase
B) an increase; a decrease
C) a decrease; an increase
D) a decrease; a decrease
Difficulty: Medium
185. An increase in supply, with no change in demand, will lead to ______ _ in equilibrium quantity and ________ in equilibrium price.
A) an increase; an increase
B) an increase; a decrease
C) a decrease; an increase
D) a decrease; a decrease
Difficulty: Medium
186. A decrease in demand, with no change in supply, will lead to ________ in equilibrium quantity and ________ in equilibrium price.
A) an increase; an increase
B) an increase; a decrease
C) a decrease; an increase
D) a decrease; a decrease
Difficulty: Medium
187. A decrease in supply, with no change in demand, will lead to ________ in equilibrium quantity and ________ in equilibrium price.
A) an increase; an increase
B) an increase; a decrease
C) a decrease; an increase
D) a decrease; a decrease
Difficulty: Medium
188. A decrease in demand and a decrease in supply, will lead to a(n) ________ in equilibrium quantity and a(n) ________ in equilibrium price.
A) decrease; indeterminate change
B) indeterminate change; increase
C) indeterminate change; decrease
D) increase; indeterminate change
Difficulty: Hard
189. An increase in demand and a decrease in supply, will lead to a(n) ________ in equilibrium quantity and a(n) ________ in equilibrium price.
A) decrease; decrease
B) indeterminate change; increase
C) indeterminate change; decrease
D) increase; indeterminate change
Difficulty: Hard
190. If both the demand for a product and the supply of it increase, then the equilibrium quantity will ________ and the equilibrium price will ________.
A) decrease; increase
B) decrease; decrease
C) decrease; remain constant
D) increase; either increase, decrease, or remain constant
Difficulty: Hard
191. If both the demand for a product and the supply of it decrease, then the equilibrium quantity will ________ and the equilibrium price will ________.
A) increase; either increase, decrease, or remain constant
B) decrease; either increase, decrease, or remain constant
C) increase; increase
D) increase; decrease
Difficulty: Hard
192. Given that milk and cookies are complements, suppose the price of flour (an ingredient in cookies) rises. What happens in the market for cookies?
A) The equilibrium price and quantity rise.
B) The equilibrium price rises, and the equilibrium quantity falls.
C) The equilibrium price and quantity fall.
D) The equilibrium price falls, and the equilibrium quantity rises.
Difficulty: Medium
193. Given that milk and cookies are complements, suppose the price of flour (an ingredient in cookies) rises. What happens in the market for milk?
A) The equilibrium price and quantity rise.
B) The equilibrium price rises and the equilibrium quantity falls.
C) The equilibrium price and quantity fall.
D) The equilibrium price falls and the equilibrium quantity rises.
Difficulty: Medium
Use the following to answer questions 194-196.
Exhibit: Shifts in Demand and Supply
M
N
PM
O
194. (Exhibit: Shifts in Demand and Supply) Which graph best illustrates what happened in the desktop calculators market when handheld calculators were invented and came on the market?
A) the movement from M to N in Panel (a).
B) the movement from O to P in Panel (b).
C) the movement from N to M in Panel (a).
D) the movement from P to O in Panel (b).
Difficulty: Medium
195. (Exhibit: Shifts in Demand and Supply) Which diagram best illustrates what would happen in the handheld calculator industry if elementary schools encouraged their use?
A) the movement from M to N in panel (a)
B) the movement from P to O in panel (b)
C) the movement from O to P in panel (b)
D) the movement from N to M in panel (a)
Difficulty: Medium
196. (Exhibit: Shifts in Demand and Supply) Assume that the market in Panel (a) is in equilibrium at point M. Compared to the initial equilibrium at point N, what changes could explain what happened in this market?
A) supply decreased
B) demand decreased
C) both demand and supply decreased
D) both demand and supply increased
Difficulty: Medium
Use the following to answer questions 197-201.
Exhibit: Simultaneous Shifts in Demand and Supply
197. (Exhibit: Simultaneous Shifts in Demand and Supply) D1 and S1 are original supply and demand curves, and S2 and D2 are new curves. In this market for a normal good:
A) supply has increased and price has increased.
B) demand has increased and price has increased.
C) demand has decreased and price has fallen.
D) demand has increased and price has fallen.
Difficulty: Medium
198. (Exhibit: Simultaneous Shifts in Demand and Supply) D1 and S1 are original supply and demand curves, and S2 and D2 are new curves. In this market for a normal good, the shift in the demand curve may have been a result of:
A) a decrease in the price of a substitute good.
B) a decrease in the number of buyers.
C) falling incomes.
D) consumers' expecting the price to go up.
Difficulty: Medium
199. (Exhibit: Simultaneous Shifts in Demand and Supply) D1 and S1 are original supply and demand curves, and S2 and D2 are new curves. In this market, the original equilibrium changed from point ________ to point ________ .
A) J; L
B) L; J
C) J; M
D) J; K
Difficulty: Medium
200. (Exhibit: Simultaneous Shifts in Demand and Supply) D1 and S1 are original supply and demand curves, and S2 and D2 are new curves. In this market, following the adjustment shown:
A) both demand and supply increased.
B) price fell and quantity increased.
C) quantity had to increase, given the changes in supply and demand.
D) all of the above are true.
Difficulty: Hard
201. (Exhibit: Simultaneous Shifts in Demand and Supply) D1 and S1 are original supply and demand curves, and S2 and D2 are new curves. In this market, the change in supply may have resulted from:
A) wage increases for the workers.
B) an improvement in technology.
C) a decrease in the number of sellers.
D) all of the above.
Difficulty: Medium
Use the following to answer questions 202-204.
Exhibit: The Market for Music Downloads
202. (Exhibit: The Market for Music Downloads) An increase in buyers' income, assuming music downloads are a normal good, would result in a change illustrated by the move from:
A) f to g in Figure (a).
B) g to f in Figure (a).
C) i to h in Figure (b).
D) j to m in Figure (c).
Difficulty: Hard
203. (Exhibit: The Market for Music Downloads) An increase in the wage rate paid to web site technical support employees would result in a change illustrated by the move from:
A) f to g in Figure (a).
B) g to f in Figure (a).
C) i to h in Figure (b).
D) h to i in Figure (b).
Difficulty: Hard
204. (Exhibit: The Market for Music Downloads) A decrease in buyers' income, assuming music downloads are a normal good, combined with a decrease in the wage rate paid to web site technical support employees would result in a change illustrated by the move from:
A) j to m in Figure (c).
B) g to f in Figure (a).
C) i to h in Figure (b).
D) h to i in Figure (b).
Difficulty: Hard
205. Which of the following is false?
A) If demand increases and supply decreases, equilibrium price will go up.
B) If demand remains constant and supply increases, equilibrium price will go down.
C) If demand decreases and supply increases, equilibrium price will rise.
D) If supply is unchanged and demand decreases, equilibrium price will fall.
Difficulty: Hard
206. It's certain that the equilibrium price will fall when:
A) the supply curve and the demand curve both shift to the right.
B) the supply curve shifts to the right and the demand curve shifts to the left.
C) supply and demand both increase.
D) supply decreases and demand stays the same.
Difficulty: Medium
207. If demand and supply both decrease:
A) both price and quantity will be less.
B) both price and quantity will go up.
C) price will fall but quantity will go up.
D) quantity will go down but the effect on price is indeterminate.
Difficulty: Medium
208. If the demand for housing increases and the supply of housing decreases:
A) price will go up and quantity will go down.
B) price and quantity will both go up.
C) price will increase, but the quantity change is indeterminate.
D) the quantity will be higher, but the change in price is indeterminate.
Difficulty: Medium
209. If demand and supply both shift to the right, then:
A) both price and quantity will go up.
B) price will go down and quantity will go up.
C) quantity will go down and price will go up.
D) quantity will go up, but price could go up, down, or stay the same
Difficulty: Hard
210. The Case in Point on obesity suggests that food prices are lower because of:
A) an increase in the in the demand for food only.
B) an increase in the supply of food only.
C) an increase in the demand for food was less than the increase in the supply of food.
D) an increase in the supply of food that was less than the increase in demand for food.
Difficulty: Hard
211. The Case in Point on obesity argues that agricultural innovation led to:
A) the increase in the demand for food.
B) the increase in the supply of food.
C) higher food prices.
D) B and C occurred.
Difficulty: Medium
212. A market is a set of arrangements where:
A) buyers and sellers can get together and buy and sell.
B) buyers compete with sellers.
C) sellers compete with buyers.
D) A and C are true, but B is not true.
Difficulty: Hard
True/False
1. The demand for a product is the quantity of it that people buy.
2. The law of demand implies that the quantity demanded of a commodity is inversely related to income, assuming other things that may affect demand remain the same.
3. Consumer preferences are a demand shifter.
4. Price changes for complements and substitutes have the same effect on demand.
5. The same factors that lead to a change in quantity demanded also cause a change in demand.
6. Technology is a demand shifter.
7. At any price below the equilibrium price, the quantity demanded exceeds the quantity supplied, and the price tends to rise.
8. There can be no shortages or surpluses at the equilibrium price.
9. A shortage occurs at any price above the equilibrium price.
10. A surplus will cause pressure on the price to fall.
11. A shortage will exert pressures for the price to decrease.
12. A decrease in price will lead to an increase in the quantity demanded.
13. A decrease in price will lead to an increase in demand.
14. An increase in price will result in a decrease in the quantity supplied.
15. An increase in price will result in an increase in supply.
16. According to the textbook, demand and supply determine prices, and prices allocate scarce resources in the economy.
17. Demand and supply are terms that refer to the behavior of people and firms as they interact in markets.
18. An increase in income will lead to an increase in demand for inferior goods.
19. A surplus is a result of equilibrium price being below the current price.
20. A shortage results from a current price being below the equilibrium price.
Difficulty: TK
21. A decrease in the price of a factor of production will lead to an increase in the supply of goods that use the factor in production.
22. A decrease in the price of a good will result in a decrease in supply.
23. An increase in the price of a good will lead to an increase in the quantity supplied.
24. An increase in both supply and demand must increase both equilibrium price and quantity.
25. A decrease in both supply and demand will lead to a decrease in equilibrium quantity.
26. A shortage or a surplus can exist when the current price is equal to the equilibrium price.
27. An improvement in technology will lead to a change in demand.
28. An increase in consumer income will lead to an increase in supply.
29. If two goods are substitutes, a decrease in the price of one will result in an increase in demand for the other.
30. If two goods are complements, a fall in the price of one will lead to an increase in demand for the other.
31. A current price below the equilibrium price will result in a surplus.
Short Answer
1. Define demand, supply, and equilibrium price.
2. Differentiate between a change in demand and a change in quantity demanded.
3. Differentiate between a change in supply and a change in quantity supplied.
4. List and explain the demand shifters.
5. List and explain the supply shifters.
6. Describe what would happen in a market if the current price were above the equilibrium price (assume no government interference). Using the same assumptions, describe what would happen if the current price were below the equilibrium price. Use a graph to explain your answer.
7. Given the events listed below that take place in the corn market, decide if demand or quantity demanded changes and determine the direction of change.
a. The economy prospers and incomes rise dramatically.
b. The price of corn falls.
c. The price of pork increases, and corn is a significant input in the pork market.
d. The price of oats, a substitute for corn, falls.
e. The price of corn increases.
f.A new fertilizer comes on the market that leads to tremendous increases in corn productivity.
8. Given the events listed below that take place in the bread market, decide if demand changes or quantity demanded changes and determine the direction of change.
a. The economy prospers and incomes increase dramatically.
b. The price of bread falls.
c. The price of flour, an ingredient of bread, falls.
d. The price of bread increases.
e. A severe weather problem occurs and most grain crops are destroyed.
f. The price of potatoes, a substitute for bread, rises.