Deck 1: Supply,demand,and Equilibrium

Question 1

If the demand for a good is high,then there will be a shortage of that good.

Answer 1

False

Question 2

If one wants to apply the theoretical side of economics by examining data,they use a family of statistical techniques called econometrics.

Answer 2

True

Question 3

When the quantity demanded by consumers goes up,we can be sure that there has been a rise in demand.

Answer 3

False

Question 4

If the price of a good changes,the demand for the good changes.

Question 5

An increase in the price of wheat will cause a rise in the supply of wheat.

Question 6

A rise in supply is illustrated by a rightward shift in the supply curve.

Question 7

Suppliers of a commodity are better off whenever the legal incidence of a tax is shifted away from the suppliers to the demanders.

Question 8

If safer cars reduce a driver's chance of dying in an accident,then there will be fewer driver fatalities.

Question 9

If the demand curve for a good is relatively flat,a small change in price results in a relatively large change in quantity demanded.

Question 10

When suppliers are not satisfied,they lower their prices to attract more demanders.

Question 11

An increase in the price of gasoline would shift the demand curve for gasoline to the left.

Question 12

An increase in the price of compact discs would shift the demand curve for DVD players to the left.

Question 13

When the law of supply holds,an increase in the price of a product will cause producers to increase the quantity they wish to sell.

Question 14

As defined by economists,the supply of corn refers to the number of bushels of corn that farmers bring to the market.

Question 15

A demand curve is drawn downward sloping to show that price and quantity demanded will move in opposite directions as long as other relevant factors remain unchanged.

Question 16

When the actual market price is below its equilibrium level,suppliers are satisfied but demanders are not.

Question 17

A sales tax causes the demand curve to shift upwards by the amount of the tax.

Question 18

When a sales tax of 50¢ per carton is imposed on cigarettes,the equilibrium price drops by precisely 50¢ per carton.

Question 19

The supply curve for a commodity will shift downward when an excise tax is imposed.

Question 20

The equilibrium price of a good will rise in response to either a rise in demand or a fall in supply.

Question 21

If the demand curve for gasoline is relatively steep,then

A) higher gasoline prices would cause a large number of people to stop driving.
B) the law of demand does not hold for gasoline.
C) shifts in the supply curve for gasoline will have relatively little effect on the price of gasoline.
D) the price of gasoline has relatively little effect on drivers' decision to buy gasoline.

Question 22

Surveys show that a small increase in the price of organic potatoes will cause most people to switch to other alternatives such as packaged mashed potatoes.This finding suggests that the demand curve for organic potatoes is

A) relatively steep.
B) relatively flat.
C) upward sloping.
D) vertical.

Question 23

Which of the following would shift the supply curve for coffee to the right?

A) An innovation in agricultural techniques that allows growers to produce coffee less expensively.
B) A late frost in Brazil that destroys 75% of its coffee bean crop.
C) An increase in the wages paid to coffee bean pickers.
D) A rise in the popularity of espresso,cappuccino,and other exotic coffee drinks.

Question 24

If the legal incidence of a tax is entirely on suppliers,then the tax will have no economic effect on demanders.

Question 25

When a sales tax of 20¢ per soda is imposed on soda consumption,the supply curve for soda shifts down by precisely 20¢ per soda.

Question 26

According to the law of demand,if other relevant factors remain unchanged,then a rise in the price of a commodity will cause

A) a reduction in the equilibrium quantity.
B) excess supply.
C) suppliers to reduce their production in reaction to the lower demand.
D) a fall in the quantity demanded.

Question 27

If a rise in supply and a rise in demand occur at the same time,then we know that the price must also rise.

Question 28

Suppose the price of a DVD is $15 per unit.At that price,consumers wish to purchase 6,000 units weekly and producers wish to sell 4,000 units weekly.In this situation,

A) unsatisfied consumers will bid up the market price.
B) the market price will fall because producers are unsatisfied.
C) the price will rise and the demand will fall to bring the market to equilibrium.
D) supply will increase by 2,000 units in order to satisfy consumers.

Question 29

If a fall in supply and a rise in demand occur at the same time,then we know that the price must also rise.

Question 30

The observation that consumer purchases of walnuts decline as the price rises reflects:

A) a decrease in demand.
B) the law of demand.
C) an increase in demand.
D) the law of supply.

Question 31

If the supply of hotel rooms falls and all other relevant factors remain unchanged,then,

A) the demand for hotel rooms will fall.
B) the quantity demanded of hotel rooms will fall.
C) the demand for hotel rooms will rise.
D) the quantity demanded of hotel rooms will rise.

Question 32

The term demand refers to

A) a collection of numbers,listing the quantities demanded at a variety of hypothetical prices.
B) the information on tastes,incomes,and prices needed to determine people's desired purchases of a commodity.
C) the amount of a commodity that is being purchased under current market conditions.
D) the quantity purchased at each and every possible level of income.

Question 33

At the equilibrium point of a market,

A) supply equals demand.
B) neither demanders nor suppliers are satisfied.
C) the quantities supplied and demanded are equal.
D) suppliers will refuse any price increases offered by demanders.

Question 34

Techniques for estimating demand curves using direct observations from the marketplace are part of a family of statistical techniques referred to as:

A) legal studies.
B) Econometrics.
C) policy analysis.
D) Economic expansion.

Question 35

When the price of a barrel of crude oil rises,what will be the immediate effect on the market for home heating fuel produced from crude oil?

A) The demand for the fuel will fall.
B) The quantity demanded of fuel will rise.
C) The supply of fuel will fall.
D) The quantity supplied of fuel will fall.

Question 36

A fall in supply is illustrated by

A) a downward shift in the supply curve.
B) moving the equilibrium point down and to the left along the supply curve.
C) drawing the supply curve flatter.
D) shifting the supply curve to the left.

Question 37

Which of the following would cause the demand curve for rice to shift to the left?

A) A rise in the price of rice.
B) A blight that destroyed 75% of the rice harvest.
C) A report claiming that the starch in rice causes heart disease.
D) A tariff that doubles the price of imported spaghetti.

Question 38

In a supply-demand diagram,the law of supply is illustrated by

A) shifting the supply curve to the right as suppliers expand production and to the left as they contract production.
B) drawing the supply curve so that it slopes upward.
C) showing how the equilibrium point changes as the supply curve shifts.
D) drawing a vertical line at the quantity that producers choose to supply.

Question 39

Consider a demand curve for reckless driving,for which the "price of reckless driving" is interpreted as the probability of having a fatal accident.When could safer cars lead to an increase in total number of driver fatalities?

A) Always.
B) Never.
C) When the demand curve is relatively flat.
D) When the demand curve is relatively steep.

Question 40

An excise tax of 20 cents on gasoline shifts demand down by exactly 20 cents.

Question 41

Suppose we observe that the price of gasoline has been rising,even though the quantity of gasoline sold has been falling.We can conclude that

A) the law of supply does not hold for gasoline.
B) the law of demand does not hold for gasoline.
C) the demand for gasoline must have fallen.
D) the supply of gasoline must have fallen.

Question 42

The accompanying supply-demand diagram shows the market for calculators.The initial price of calculators is P₀,and the initial quantity exchanged is Q₀. Which of the following situations could be correctly illustrated by the diagram?

A) Graphing capabilities and other new features lead people to buy more calculators.
B) The cost of memory chips used in calculators falls,lowering the price of calculators.
C) Personal computerized notepads with substantial computing power are introduced,reducing people's need for calculators.
D) A heavy tariff is placed on calculators imported from overseas.

Question 43

To make child daycare more affordable,government advisors are debating two possible options.Plan A is to give daycare centers a $100 subsidy per month per child.Plan B is to give the parents $100 reduction in taxes per month per child in daycare.Which plan benefits parents more?

A) Plan A because it will increase the supply of childcare and decrease the price.
B) Plan B because the $100 goes directly to the parents.
C) The plans are equivalent in terms of their impact on the price minus subsidy paid by parents.
D) Plan A because the price will fall,while under Plan B the price will rise.

Question 44

Which of the following is the most likely to cause the price of air travel to rise?

A) Lower prices and improved service in Amtrak (the nation's passenger railroad).
B) Improved productive efficiency resulting from airline mergers.
C) Higher airplane fuel costs.
D) Reports that air travel safety is deteriorating.

Question 45

Assume that the demand curve for oranges is downward-sloping and the supply curve for oranges is upward-sloping.If the government imposes an excise tax of 10¢ per orange,then the total price (including the tax)that demanders must pay for an orange

A) remains unchanged.
B) rises by less than 10¢ per orange.
C) rises by exactly 10¢ per orange.
D) rises by more than 10¢ per orange.

Question 46

If the wages of loggers went up,the supply of logs would:

A) fall,thereby shifting to the right.
B) fall,thereby shifting to the left.
C) rise,thereby shifting to the right.
D) rise,thereby shifting to the left.

Question 47

The imposition of a sales tax on eggs will:

A) Cause a parallel shift downward in demand for eggs.
B) Cause a parallel shift upward in demand for eggs.
C) Lead to an increase in the slope of the demand curve for eggs.
D) Have no effect in demand or sales of eggs since they are a small part of any family's budget.

Question 48

Consider the market for high-end wine.Statistics show that wealthier families spend a greater proportion of their income on high-end wine than do poorer families.If households' incomes rise substantially during an economic recovery,then we can expect

A) an increased demand for high-end wine.
B) an increased supply of high-end wine.
C) a lower price for high-end wine.
D) the demand curve for high-end wine to shift to the left.

Question 49

The simultaneous imposition of a 3 cent sales tax and a 5 cent excise tax on the sale of a cup of coffee would have the same effect on coffee sales as:

A) a 2 cent subsidy.
B) a 2 cent excise tax .
C) a 3 cent excise tax .
D) an 8 cent excise tax.

Question 50

Which of the following would cause a fall in the price of video tape rentals?

A) A new nationwide video rental chain opens.
B) Movie theaters raise their prices.
C) The royalties paid to movie actors increase.
D) The price of video cassette recorders (VCRs)falls.

Question 51

Suppose a sales tax of $1 is imposed on DVDs.Suppose the tax causes the price received by suppliers of the DVDs to fall by 60 cents.In this situation,the economic incidence of the sales tax

A) falls more heavily on the demanders of DVDs.
B) falls more heavily on the suppliers of DVDs.
C) is evenly split between the demanders and suppliers of the DVDs.
D) is the same as the legal incidence of the tax.

Question 52

A simultaneous increase in both the demand for computers and the supply of computers must increase

A) the number of computers bought and sold.
B) the price of computers.
C) both the equilibrium price and quantity of computers.
D) the shortage of computers in the market.

Question 53

A fear that consumption of ice cream may be related to a life threatening disease spreads rapidly through France.The market result will be:

A) the demand falls,price decreases and therefore French consumers buy more ice cream.
B) the demand falls,price decreases and the quantity supplied therefore falls.
C) a fall in demand followed by a fall in supply.
D) the equilibrium quantity falls,but the price does not change.

Question 54

Consider a $4 excise tax that has been levied on suppliers of automobile tires.Legislators,in the interest of fairness,change the law so that the tax is evenly split between suppliers and demanders,with each group legally required to pay $2 per tire.In this situation,we can predict that

A) suppliers will be made better off and demanders will be made worse off.
B) the change will have no economic effect on suppliers and demanders.
C) demanders will "pass back" their share of the tax to the suppliers,so that suppliers continue to pay $4 per tire.
D) the economic incidence of the tax will be evenly split between suppliers and demanders.

Question 55

Which of the following would lead to a rise in demand for recordable DVDs by students?

A) An increase in the number of DVD manufacturers.
B) A decrease in the price of DVD recording devices.
C) A decrease in the price of the DVD making machinery.
D) A cut in the number of student workers hired by the university,lowering student incomes.

Question 56

When are demanders satisfied and suppliers unsatisfied?

A) Never-neither suppliers nor demanders are ever completely happy with the market price.
B) Whenever the market price is above its equilibrium level.
C) When the market price is relatively low,because then demanders can buy all they want but suppliers cannot make a profit.
D) When rises in supply cause a fall in the equilibrium price of the good.

Question 57

Which of the following could decrease the equilibrium price but increase the equilibrium quantity of apples?

A) Higher wages are paid to the agricultural workers who harvest the apples.
B) A rise in the cost of treating pests destroying apples.
C) Many new apple orchards are planted.
D) An increase in the market supply of grapefruit.

Question 58

New safety regulations increase manufacturers' costs of producing insulation.What happens in the market for insulation?

A) The demand falls as buyers refuse to bear the higher production costs.
B) The supply falls,resulting in a higher equilibrium price and lower equilibrium quantity.
C) Both supply and demand fall,resulting in less insulation being bought and sold.
D) The supply rises as manufacturers attempt to use higher sales to offset their lower profit margins.

Question 59

A movement up along a supply curve indicates:

A) a rise in supply.
B) an increase in the quantity supplied.
C) an increase in the sales tax on a good.
D) a reaction by suppliers to a decrease in demand.

Question 60

The division of the burden of a sales or excise tax on demanders and suppliers:

A) Is always equal.
B) Is always higher for demanders.
C) Is always higher for suppliers.
D) Depends on the shapes of the demand and supply curves.

Question 61

Suppose the demand curve for a good is given by the equation Q = 100 - P and the supply curve is given by the equation Q = 0.25P,where P represents the price of the good (measured in dollars per unit)and Q represents the quantity of the good (measured in units per week).

Question 62

Define the terms legal incidence and economic incidence.When the legal incidence of a tax is changed,how does this affect the economic incidence of the tax? Why does this result occur?

Question 63

What can be said about the market price when a good is in surplus (i.e.,when the quantity supplied exceeds the quantity demanded)? How will demanders and suppliers respond to a surplus,and what will happen to the market price?

Question 64

What is the difference between the quantity supplied of corn and the supply of corn? What could cause a rise in the quantity supplied of corn,and what could cause a rise in the supply of corn? How would these changes be shown graphically using a supply curve?

Question 65

Demand for a product is given by Q = 200 - P and supply is given by Q = 0.5P - 10.If the quantity demanded rises by 10 units at every possible price,then the equilibrium quantity will be

A) 40 units
B) 50 units
C) 60 units
D) 100 units

Question 66

Which statement is true regarding a market in equilibrium

A) There is a shortage of the good.
B) There is a surplus of the good.
C) Neither demanders or suppliers are satisfied.
D) Both demanders and suppliers are satisfied.

Question 67

The following was heard on a primetime news cast.
"The government has just increased the sales tax.This is unfair to consumers,particularly the poor,because budgets are already stretched far enough.It would have been much more fair for the government to have levied an excise tax on firms as a way of making big business give back to the community."
Explain why the person's argument is more than likely incorrect.Be sure to discuss whether the person has over or understated the effect of the tax on consumers and producers.

Question 68

If demand rises and supply falls,which of the following must be true?

A) The equilibrium price will rise.
B) The equilibrium price will fall.
C) The equilibrium price will not change.
D) The change in the equilibrium price is indeterminate.

Question 69

If both demand and supply rise,which of the following must be true?

A) The equilibrium quantity will rise.
B) The equilibrium quantity will fall.
C) The equilibrium quantity will not change.
D) The change in the equilibrium quantity is indeterminate.

Question 70

Which of the following would cause a positive change in quantity demanded?

A) A rise in supply.
B) A fall in supply.
C) A rise in demand.
D) A fall in demand.

Question 71

If both demand and supply rise,which of the following must be true?

A) The equilibrium price will increase.
B) The equilibrium price will decrease.
C) The equilibrium price will not change.
D) The change in the equilibrium price is indeterminate.

Question 72

A person argues that if the prison sentences for all crimes were doubled,this would worsen the problem of overcrowded prisons,all other things being equal.Use the concept of demand to explain why this argument is incorrect.

Question 73

Demand for a product is given by Q = 100 - P and supply is given by Q = P - 10.If the quantity demanded rises by 10 units at every possible price,then the equilibrium price will

A) increase by $5
B) increase by $10
C) decrease by $5
D) increase by $7.50

Question 74

Suppose the demand curve for a good is given by the equation P = 200 - 1/2 Q and the supply curve is given by the equation P = 50 + 1/4 Q,where P represents the price of the good (measured in dollars per unit)and Q represents the quantity of the good (measured in units per week).

Question 75

Suppose that a city law requires taxi drivers to wear tuxedos.The drivers must pay $10 per week for the tuxedos.Taxicab companies pay their drivers $210 per week.After paying for the tuxedos,taxi drivers earn $200 per week.

Question 76

If demand rises and supply falls,which of the following must be true?

A) The equilibrium quantity will rise.
B) The equilibrium quantity will fall.
C) The equilibrium quantity will not change.
D) The change in the equilibrium quantity is indeterminate.

Question 77

If the demand for baseballs falls and all other relevant factors remain unchanged,then,

A) the supply for baseballs will fall.
B) the quantity supplied of baseballs will fall.
C) the supply for baseballs will rise.
D) the quantity supplied of baseballs will rise.