Deck 3: Supply and Demand: an Introduction

Question 1

An economic model used to analyze the market for wheat will also be useful to analyze the market for

A) electricity.
B) gasoline.
C) automobiles.
D) corn.
E) education.

Answer 1

corn.

Question 2

If the price of an item falls,then one would expect to see a(n)

A) increase in demand.
B) increase in the quantity demanded.
C) decrease in supply.
D) increase in the quantity supplied.
E) decrease in the number of consumers.

Answer 2

increase in the quantity demanded.

Question 3

A graph with price on the vertical axis and quantity on the horizontal axis depicting a positive relationship between price and quantity is a

A) demand curve.
B) production possibilities curve.
C) supply curve.
D) equilibrium curve.
E) shortage curve.

Answer 3

supply curve.

Question 4

"Holding all other relevant factors constant,consumers will purchase more of a good as its price falls." This statement reflects the behaviour underlying

A) the demand curve.
B) an increase in demand.
C) the supply curve.
D) a decrease in demand.
E) the production possibilities curve.

Question 5

The most important determinant of the supply of good X is

A) the price of good X.
B) the price of labour used in the production of good X.
C) the amount of technology used in the production of good X.
D) the cost of the equipment used in the production of good X.
E) the price of fuel used in the production of good X.

Question 6

In order to understand how the price of a good is determined in the market,one must account for the desires of

A) consumers exclusively.
B) firms exclusively.
C) governmental agencies exclusively.
D) lobbyists exclusively.
E) both consumers and firms.

Question 7

The most important determinant of the demand for dental floss is

A) the price of toothpaste.
B) the price of toothbrushes.
C) consumer income.
D) the price of dental floss.
E) consumer preferences for healthy gums.

Question 8

When we move down along a given demand curve,we know that the

A) price has fallen because the quantity demanded has increased.
B) price has increased because the quantity demanded has decreased.
C) quantity demanded has increased because the price has fallen.
D) quantity demanded has decreased because the price has increased.
E) demand has increased because the price has fallen.

Question 9

The demand curve illustrates that consumers purchase

A) more of a good as its price rises.
B) name brand products more frequently than generic products.
C) more of a good as its price falls.
D) more of a good as their incomes fall.
E) more of a good as their incomes rise.

Question 10

The market price of a hamburger is determined by the

A) the cost of production
B) value to the consumer.
C) cost of production and the value to the consumer.
D) government
E) financial markets

Question 11

Potential buyers and sellers of a particular good comprise the

A) market for the good.
B) demand for the good.
C) supply for the good.
D) production possibilities curve for the good.
E) economic model for all goods in a mixed economy

Question 12

Which of the following is NOT true of a demand curve?

A) It has a negative slope.
B) It shows the amount consumers are willing and able to purchase at various prices,holding other factors constant.
C) It relates the price of an item to the quantity demanded of that item.
D) It relates the price of an item to the supply for that item.
E) It shows that consumers tend to purchase less of a good as its price rises.

Question 13

The supply curve illustrates that firms

A) increase the supply of a good when its price rises.
B) increase the quantity supplied of a good when its price rises.
C) decrease the quantity supplied of a good when input prices fall.
D) increase the quantity supplied of a good when input prices rise.
E) decrease the quantity supplied to earn higher profits.

Question 14

At the point where the market price is $6 and the quantity demanded is 4 units,which of the following statements is true?

A) The maximum price that consumers are willing to pay for any of the 4 units of pizza demanded is $6.
B) The minimum price that consumers are willing to pay for any of the 4 units of pizza demanded is $6.
C) No one currently buying pizza thinks that a unit of pizza is worth more than $6.
D) If producers produced more than 4 units of pizza at the market price of $6,more pizza will be demanded.
E) At the market price of $6,4 units of pizza will be demanded.

Question 15

The demand curve for any good is a downward-sloping function of

A) buyers' incomes.
B) sellers' profit margins.
C) its price.
D) its price and its cost of production.
E) its price as well as buyers' incomes and tastes.

Question 16

Which of the following statements is true?

A) If the quantity demanded increases from 4 units to 6 units,the market price will fall.
B) If the quantity demanded increases from 4 units to 6 units,the supply will increase.
C) If the quantity demanded increases from 4 units to 6 units,the market price will fall and the supply will increase.
D) Six units of pizza will be demanded if the market price of pizza is $4 instead of $6.
E) Only 4 units of pizza will be demanded even if the price of pizza is $4.

Question 17

Which of the following is NOT true of a supply curve?

A) It relates the price of an item to the quantity supplied of that item.
B) It shows the amount producers are willing and able to produce at various prices,holding other factors constant.
C) It has a positive slope.
D) It shows that producers tend to produce more of a good as its price rises.
E) It relates the price of an item to the demand for that item.

Question 18

When we move down along a given supply curve,we know that the

A) price has fallen because the quantity supplied has increased.
B) price has fallen because the quantity supplied has decreased.
C) quantity supplied has increased because the price has fallen.
D) quantity supplied has decreased because the price has increased.
E) quantity supplied has decreased because the price has fallen.

Question 19

When we move up along a given demand curve,we know that the

A) price has fallen because the quantity demanded has increased.
B) price has increased because the quantity demanded has decreased.
C) quantity demanded has increased because the price has fallen.
D) quantity demanded has decreased because the price has increased.
E) demand has increased because the price has fallen.

Question 20

The supply curve for any good is an upward-sloping function of

A) buyers' incomes.
B) sellers' profit margins.
C) its own price.
D) its price and its cost of production.
E) its price as well as buyers' incomes and tastes.

Question 21

At a price of $10,quantity demanded is

A) 0 units.
B) 2 units.
C) 4 units.
D) 6 units.
E) 8 units.

Question 22

Assume that D1 and S1 are the initial demand and supply curves.The equilibrium occurs at a price of _______ and ________ units exchanged.

A) $90;50
B) $60;20
C) $60;40
D) $30;30
E) $30;70

Question 23

As the price decreases,the behaviour of the data in Column 2 is most consistent with

A) a supply curve.
B) excess demand.
C) excess supply.
D) a demand curve.
E) an equilibrium.

Question 24

At a price of $9,the market will experience ______________ in the amount of __________ units.

A) excess demand;1
B) excess supply;6
C) equilibrium;0
D) excess demand;5
E) excess supply;5

Question 25

As the price decreases,the behaviour of the data in Column 1 is most consistent with

A) a supply curve.
B) excess demand.
C) excess supply.
D) a demand curve.
E) an equilibrium.

Question 26

If column 1 represents the demand curve for a product and column 2 represents the supply curve,then at a price of $10,the market experiences ______________ equal to _________ units.

A) excess demand;40
B) excess demand;20
C) excess supply;0
D) excess supply;20
E) excess supply;60

Question 27

At a price of $3,the market will experience ______________ in the amount of _________ units.

A) excess demand;7
B) excess supply;2
C) equilibrium;0
D) excess demand;5
E) excess supply;5

Question 28

Which of the following could NEVER be a feature of an unregulated market in a state of disequilibrium?

A) Excess supply.
B) A stable price.
C) Excess demand.
D) Changes in the equilibrium quantity.
E) A rising price.

Question 29

If column 1 represents the demand curve for a product and column 2 represents the supply curve,then at a price of $2.50,the market experiences _________________ equal to __________ units.

A) excess demand;70
B) excess demand;40
C) excess supply;0
D) excess supply;40
E) excess supply;30

Question 30

Assume supply and demand both shift to the right so that D2 and S2 are now the relevant curves.The new equilibrium occurs at a price of _______ and ______ units exchanged.

A) $90;50
B) $60;20
C) $60;40
D) $30;30
E) $30;70

Question 31

Which of the following is NOT a characteristic of a market in equilibrium?

A) Quantity demanded equals quantity supplied.
B) Excess supply is zero.
C) All consumers are able to purchase as much as they wish.
D) Excess demand is zero.
E) The equilibrium price is stable,i.e. ,there is no pressure for it to change.

Question 32

If column 1 represents the demand curve for a product and column 2 represents the supply curve,then at a price of $7.50,the market experiences ________________.

A) a shortage.
B) excess supply.
C) a surplus.
D) excess demand.
E) an equilibrium.

Question 33

If the market for coffee has excess supply,then one can say that

A) supply is greater than demand.
B) quantity supplied is greater than quantity demanded.
C) demand is greater than supply.
D) supply is greater than quantity demanded.
E) quantity demanded is greater than quantity supplied.

Question 34

If column 1 represents the demand curve for a product and column 2 represents the supply curve,then the market reaches an equilibrium at a price of

A) $12.50.
B) $10.
C) $7.50.
D) $5.
E) $2.50.

Question 35

The market equilibrium process depends on the competition among

A) a few sellers and many buyers.
B) many small buyers and many small sellers.
C) a few buyers and many sellers.
D) a few big buyers and a few big sellers.
E) many buyers and a single seller.

Question 36

At a price of $3,quantity supplied is

A) 0 units.
B) 2 units.
C) 4 units.
D) 6 units.
E) 8 units.

Question 37

If the price of a good is below the equilibrium price,then

A) the government needs to set a higher price.
B) firms,dissatisfied with growing inventories,will raise the price.
C) consumers,wanting to ensure they acquire the good,will bid the price higher.
D) the government needs to set a lower price.
E) firms,dissatisfied with growing inventories,will lower the price.

Question 38

The equilibrium price and quantity for this market are

A) $10 and 0 units.
B) $8 and 6 units.
C) $6 and 4 units.
D) $4 and 6 units.
E) $2 and 8 units.

Question 39

The equilibrium price and quantity of any good or service are established by

A) only consumers.
B) only firms.
C) government regulations.
D) both consumers and firms.
E) custom and tradition.

Question 40

For the quantity demanded to be greater than 10 units,an extrapolation of the demand curve would suggest that

A) the market price would be zero.
B) the market price would rise gently.
C) the market price is expected to rise.
D) the market price must be positive.
E) the market price would have to be negative.

Question 41

Market Equilibrium
Assume that column A and column C are the initial demand and supply curves.At a price of $50,the market would experience

A) an equilibrium.
B) excess demand of 25 units.
C) excess supply of 55 units.
D) excess demand of 80 units.
E) excess supply of 25 units.

Question 42

Suppose that the demand curve for a good is given by Q_D = 80 - P_D,while the supply curve for the good is given by Q_S = 3P_S.If the price in this market is currently equal to 10,then the quantity demanded is ______ and the quantity supplied is _____.

A) 30;70
B) 30;80
C) 80;30
D) 80;3
E) 70;30

Question 43

A market comprised of a downward-sloping demand curve and an upward-sloping supply curve is said to be stable because

A) price will never change.
B) quantity will never change.
C) demand will never change.
D) supply will never change.
E) at any price other than equilibrium,forces in the market move the price towards the equilibrium.

Question 44

If price is above the equilibrium value,then

A) producers hope that buyers will want more in the future.
B) buyers are unhappy because they are unable to find the good for sale.
C) producers find their inventories growing and will start to cut price.
D) neither buyers nor sellers have an incentive to alter their behaviour.
E) the government must enforce price controls.

Question 45

Suppose that the demand curve for a good is given by Q_D = 100 - 2P_D,while the supply curve for the good is given by Q_S = 60 + 2P_S.If the price in this market is currently equal to 20,then there is currently ______ in the amount of _____ units.

A) excess demand;20
B) excess demand;40
C) excess supply;20
D) excess supply;40
E) excess supply;100

Question 46

Suppose that the demand curve for a good is given by Q_D = 100 - 2P_D,while the supply curve for the good is given by Q_S = 60 + 2P_S.The equilibrium quantity is ______ and the equilibrium price is _____.

A) 10;80
B) 80;10
C) 100;60
D) 60;100
E) 120;100

Question 47

If the price of a good is above the equilibrium price,then

A) the government needs to set a higher price.
B) firms,dissatisfied with growing inventories,will raise the price.
C) consumers,wanting to ensure they acquire the good,will bid the price lower.
D) the government needs to set a lower price.
E) firms,dissatisfied with growing inventories,will lower the price.

Question 48

If price is below the equilibrium value,then

A) producers cannot sell all they make.
B) neither buyers nor sellers wish to alter their behaviour.
C) the government must enforce price controls.
D) buyers will start to bid the price up.
E) a surplus develops.

Question 49

When the price of a good is above its equilibrium value,

A) consumers will bid the price up.
B) excess demand will occur.
C) it will tend to stay above the equilibrium value.
D) suppliers will notice their inventories are shrinking.
E) suppliers will lower the price.

Question 50

A market in disequilibrium would feature

A) a stable price.
B) consumers able to purchase all they wish at the market price.
C) a stable quantity.
D) either excess supply or excess demand.
E) firms able to sell all they wish at the market price.

Question 51

When the price of a good is below its equilibrium value,

A) consumers will bid the price up.
B) excess supply will occur.
C) it will tend to stay below the equilibrium value.
D) suppliers will notice their inventories are growing.
E) suppliers will lower the price.

Question 52

A shortage occurs when

A) demand is greater than supply.
B) the equilibrium price is too high.
C) quantity demanded exceeds quantity supplied.
D) quantity supplied exceeds quantity demanded.
E) price is above the equilibrium price.

Question 53

When a market is not in equilibrium,

A) government intervention is required to achieve equilibrium.
B) consumers will organize into special interest groups to promote their agenda.
C) firms will increase contributions to political action committees.
D) the economic motives of sellers and buyers will move the market to its equilibrium.
E) it will simply stay in a state of disequilibrium.

Question 54

Market Equilibrium
Assume that column B and column D are the initial demand and supply curves.At a price of $30,the market would experience

A) an equilibrium.
B) excess demand of 95 units.
C) excess supply of 45 units.
D) excess demand of 45 units.
E) excess supply of 50 units.

Question 55

Suppose that the demand curve for a good is given by Q_D = 100 - 2P_D,while the supply curve for the good is given by Q_S = 60 + 2P_S.If the price in this market is currently equal to 20,then the quantity demanded is ______ and the quantity supplied is _____.

A) 80;80
B) 100;60
C) 20;140
D) 60;100
E) 140;20

Question 56

Suppose that the demand curve for a good is given by Q_D = 80 - P_D,while the supply curve for the good is given by Q_S = 3P_S.If the price in this market is currently equal to 10,then there is currently ______ in the amount of _____ units.

A) excess demand;20
B) excess demand;40
C) excess supply;20
D) excess supply;40
E) excess supply;60

Question 57

Market Equilibrium
Assume that column A and column C are the initial demand and supply curves.The market would achieve an equilibrium at a quantity of

A) 100 units.
B) 90 units.
C) 85 units.
D) 80 units.
E) 70 units.

Question 58

Market Equilibrium
Assume that column A and column C are the initial demand and supply curves.The market would achieve an equilibrium at a price of

A) $20.
B) $30.
C) $40.
D) $50.
E) $60.

Question 59

Suppose that the demand curve for a good is given by Q_D = 80 - P_D,while the supply curve for the good is given by Q_S = 3P_S.The equilibrium quantity is ______ and the equilibrium price is _____.

A) 60;20
B) 20;60
C) 20;20
D) 60;60
E) 30;80

Question 60

A surplus exists when

A) quantity supplied exceeds quantity demanded.
B) the equilibrium price is too low.
C) supply is greater than demand.
D) price is below the equilibrium value.
E) demand is weak.

Question 61

Suppose that the demand curve for a good is given by Q_D = 60 - 0.5P_D,while the supply curve for the good is given by Q_S = 20 + 0.5P_S.The equilibrium quantity is ______ and the equilibrium price is _____.

A) 20;60
B) 60;20
C) 60;60
D) 40;40
E) 45;30

Question 62

Suppose that the demand curve for a good is given by Q_D = 60 - 0.5P_D,while the supply curve for the good is given by Q_S = 20 + 0.5P_S.If the price in this market is currently equal to 30,then there is currently ______ in the amount of _____ units.

A) excess demand;10
B) excess demand;20
C) excess supply;10
D) excess supply;20
E) excess supply;40

Question 63

The statement that a market in equilibrium leaves no unexploited opportunities for individuals is the

A) Cost-Benefit Principle.
B) Scarcity Problem.
C) Efficiency Principle.
D) Equilibrium Principle.
E) Principle of Comparative Advantage.

Question 64

Suppose that the demand curve for a good is given by Q_D = 60 - 0.5P_D,while the supply curve for the good is given by Q_S = 20 + 0.5P_S.If the price in this market is currently equal to 30,then the quantity demanded is ______ and the quantity supplied is _____.

A) 60;20
B) 35;45
C) 45;35
D) 20;60
E) 40;40

Question 65

The equilibrium principle asserts that

A) in equilibrium,many unexploited opportunities exist.
B) in equilibrium,a few unexploited opportunities exist.
C) in disequilibrium,all opportunities have been exploited.
D) in disequilibrium,no opportunities exist.
E) in equilibrium,all opportunities have been exploited.

Question 66

If the price in a market is below the equilibrium price,then a supplier can produce an additional unit at a cost that is lower than the price buyers are willing to pay.This is referred to as

A) leaving "cash on the table."
B) market equilibrium.
C) exploiting all opportunities.
D) maximizing economic surplus.
E) achieving economic efficiency.

Question 67

If,in a particular market,all unexploited opportunities have been realized,one can conclude that

A) government regulation has proven successful.
B) the market is in equilibrium.
C) demanders are unable to find adequate amounts of the good.
D) excess demand is present.
E) excess supply is present.

Question 68

When a market is not in equilibrium,then

A) it is always possible to identify unexploited opportunities.
B) consumers are satisfied with the market.
C) firms are satisfied with the market.
D) government intervention is necessary.
E) it will have a tendency to remain in disequilibrium.

Question 69

As the price of cookies increases,firms that produce cookies will

A) increase the supply of cookies.
B) increase the quantity of cookies supplied.
C) decrease the supply of cookies.
D) decrease the quantity of cookies supplied.
E) leave their production unchanged.

Question 70

The equilibrium principle states that

A) a market out of equilibrium leaves no unexploited opportunities for individuals.
B) a market out of equilibrium provides the maximum economic surplus.
C) a market in equilibrium leaves no unexploited opportunities for individuals.
D) a market in equilibrium always leaves unexploited opportunities for individuals.
E) no markets are ever in equilibrium.

Question 71

As more houses are needed in Calgary due to the oil boom,the demand curve for an average house in Calgary is expected to

A) shift to the right.
B) shift to the left.
C) move down along the old existing demand curve.
D) move up along the old existing demand curve.
E) move in the opposite direction as the supply curve.

Question 72

Which of the following changes could cause the demand curve to shift from D1 to D2?

A) A decrease in the price of a substitute good.
B) An increase in the price of a complementary good.
C) An increase in consumers' incomes.
D) A decrease in the size of the population.
E) An expectation that the price will be lower in the future.

Question 73

Given that demand shifts from D1 to D2,the equilibrium price will

A) rise to $10.
B) fall to $9.
C) rise to $9.
D) fall to $6.
E) remain unchanged.

Question 74

Which of the following statements is an example of the equilibrium principle?

A) If the price in a market is higher than the equilibrium price,excess supply will put pressure on the price to rise.
B) If the price in a market is lower than the equilibrium price,excess demand will put pressure on the price to fall.
C) If the price in a market is higher than the equilibrium price,suppliers have an incentive to reduce the price in order to increase their sales.
D) If the price in a market is lower than the equilibrium price,consumers have an incentive to reduce the price in order to obtain the good.
E) If the price in a market is equal to the equilibrium price,suppliers have an incentive to reduce the price in order to increase their sales.

Question 75

A market in equilibrium would feature

A) excess supply.
B) unexploited opportunities.
C) excess demand.
D) wild variation in price.
E) no tendency to change.

Question 76

Assume that Joe is willing to produce another hamburger that costs $1 to make.Mary is hungry and is willing to buy a hamburger for $3.According to the equilibrium principle,Joe and Mary

A) will make a trade.
B) will only make a trade if Joe can get Mary to spend more than $3 for the hamburger.
C) will only make a trade if Mary can get Joe to charge less than $1 for the hamburger.
D) may or may not make a trade.
E) will never trade;they will look for better deals.

Question 77

Given that demand shifts from D1 to D2,the equilibrium quantity will

A) rise to 6 units.
B) fall to 6 units.
C) rise to 9 units.
D) fall to 5 units.
E) remain unchanged.

Question 78

Some economics students cite the following three factors that may cause the demand curve for houses in Calgary to shift to the right when the price of oil rises: (1)the population in Calgary increase during oil booms;
(2)the income of individuals increase during oil booms;
(3)the price of the average house rises substantially during oil booms,but is not expected to rise further.
Which of the above factors were cited correctly?

A) Factor 1 only.
B) Factor 2 only.
C) Factor 3 only.
D) Factors 1 and 2.
E) Factors 1,2,and 3.

Question 79

Which of following is NOT true of an equilibrium price?

A) Consumers who are willing to pay the equilibrium price can acquire the good.
B) It measures the value of the last unit sold to consumers.
C) It is always a fair price.
D) Firms who are willing to accept the equilibrium price can sell what they produce.
E) It measures the cost of resources required to produce the last unit.

Question 80

An increase in the demand for apples with no concurrent change in the supply of apples will result in a ________ equilibrium price and a(n)________ equilibrium quantity.

A) higher;lower
B) lower;lower
C) higher;unchanged
D) higher;higher
E) lower;higher