Deck 3: Demand and Supply

Question 1

Which market is an example of a market for factors of production?

A)furniture market
B)foreign exchange market
C)automobile market
D)computer programmer market
E)apple market

Answer 1

computer programmer market

Question 2

A market where no single buyer or seller can influence the price is

A)a seller's market.
B)a competitive market.
C)a government- controlled market.
D)a factor market.
E)a buyer's market.

Answer 2

a competitive market.

Question 3

The opportunity cost of a hot dog in terms of hamburgers is

A)the ratio of the money price of a hot dog to the money price of a hamburger.
B)the ratio of the slope of the demand curve for hot dogs to the slope of the demand curve for hamburgers.
C)smaller in the winter than in the summer.
D)the money price of a hot dog minus the money price of a hamburger.
E)the ratio of the slope of the supply curve of hot dogs to the slope of the supply curve of hamburgers.

Answer 3

the ratio of the money price of a hot dog to the money price of a hamburger.

Question 4

The demand curve slopes downward to the right because

A)an increase in income leads to increased consumption.
B)as income rises, the quantity demanded increases.
C)when expected future prices rise, the quantity demanded increases.
D)of the substitution effect and the income effect.
E)of comparative advantage.

Question 5

William Gregg owned a mill in South Carolina.In December 1862, he placed a notice in the Edgehill Advertiser announcing his willingness to exchange cloth for food and other items.Here is an extract:
1 yard of cloth for 1 pound of bacon 2 yards of cloth for 1 pound of butter 4 yards of cloth for 1 pound of wool 8 yards of cloth for 1 bushel of salt
If the money price of bacon was 20¢ a pound and the money price of salt was $2.00 a bushel, people would

A)not buy bacon and trade it for cloth because they would have to buy 8 yards of cloth for $1.60 and then give Mr.Gregg an extra $0.40 to buy a bushel of salt.
B)buy bacon and trade it for cloth because they could buy 8 yards of cloth for only $1.60, and use that cloth to obtain a bushel of salt.
C)not buy bacon and trade it for cloth because the relative price of 1 bushel of salt is only 1/8 yard of cloth.
D)buy bacon and trade it for cloth because cloth is more expensive than bacon.
E)buy bacon and trade it for cloth and then trade the cloth for salt because salt is more important for life than either cloth or bacon.

Question 6

Suppose the price of a football is $40.00 and the price of a basketball is $20.00.The _______ of a football is _______

A)relative price; 2 basketballs per football
B)relative price; $10
C)opportunity cost; $20.00
D)opportunity cost; $2.00
E)relative price; 1/2 basketball per football

Question 7

Use the table below to answer the following questions.
Table 3.1.1
Refer to Table 3.1.1.Between 2015 and 2016, the price of coffee relative to the price of tea _______ while the price of coffee relative to the price of cola _______

A)rose; did not change
B)fell; rose
C)fell; did not change
D)fell; fell
E)rose; fell

Question 8

Which one of the following events shifts the demand curve for grape jelly to the right?

A)an increase in income if grape jelly is a normal good
B)a decrease in the price of strawberry preserves, a substitute for grape jelly
C)a decrease in the population
D)an increase in the price of peanut butter, a complement of grape jelly
E)a decrease in the price of grape jelly

Question 9

How many sides does a market have?

A)two sides - buyers and sellers
B)one side - buyers
C)one side - sellers
D)two sides - domestic and foreign
E)three sides - buyers, sellers, and the government

Question 10

Use the table below to answer the following questions.
Table 3.1.1
Refer to Table 3.1.1.In 2017, the relative price of cola in terms of tea is

A)2.00.
B)1.00.
C)0.91.
D)2.20.
E)1.10.

Question 11

Use the table below to answer the following questions.
Table 3.1.1
Refer to Table 3.1.1.In 2016, the relative price of coffee in terms of cola is

A)2.50.
B)2.00.
C)1.00.
D)1.25.
E)0.80.

Question 12

The law of demand states that, other things remaining the same,

A)the higher the price of a good, the greater is the quantity demanded.
B)as income increases, willingness to pay for the last unit purchased increases.
C)price and quantity supplied are positively related.
D)the higher the price of a good, the smaller is the quantity supplied.
E)the higher the price of a good, the smaller is the quantity demanded.

Question 13

The relative price of a good is

A)the ratio of the price of a good to the income of the purchaser.
B)the ratio of one price to another and an opportunity cost.
C)the cost of its factors of production.
D)the same as the money price of a good.
E)a household's income divided by the number of goods purchased.

Question 14

The demand and supply model determines

A)supply prices but not demand prices.
B)demand prices but not supply prices.
C)absolute prices.
D)relative prices.
E)money prices.

Question 15

The opportunity cost of good A in terms of good B is equal to the

A)money price of good B minus the money price of good A.
B)ratio of the money price of good A to the money price of good B.
C)ratio of the money price of good B to the money price of good A.
D)money price of good A plus the money price of good B.
E)money price of good A minus the money price of good B.

Question 16

Use the table below to answer the following questions.
Table 3.1.1
Refer to Table 3.1.1.In 2015, the relative price of coffee in terms of tea is

A)1.00.
B)2.10.
C)1.07.
D)2.25.
E)0.93.

Question 17

Which market is an example of a market for services?

A)orange market
B)tennis lessons market
C)factor market
D)stock market
E)foreign exchange market

Question 18

Which market is an example of a market for goods?

A)energy market
B)factor market
C)haircut market
D)labour market
E)apple market

Question 19

Use the table below to answer the following questions.
Table 3.1.1
Refer to Table 3.1.1.Between 2016 and 2017, the price of coffee relative to the price of tea _______ while the price of coffee relative to the price of cola _______

A)rose; rose
B)fell; did not change
C)rose; fell
D)fell; rose
E)fell; fell

Question 20

The money price of a litre of milk is $3.33 and the money price of a litre of gasoline is $1.11.The relative price of a litre of gasoline in terms of milk is

A)$2.22.
B)$1.11.
C)3 litres of milk.
D)1/3 litre of milk.
E)$3.33.

Question 21

An increase in the price of ground beef

A)increases the quantity demanded of ground beef.
B)increases the demand for chicken, a substitute for ground beef.
C)increases the demand for ground beef.
D)decreases the demand for ground beef.
E)increases the demand for hamburger buns, a complement of ground beef.

Question 22

Good A is a normal good if

A)good A satisfies the law of demand.
B)a rise in the price of a substitute causes the demand for A to increase.
C)income and the demand for A are negatively related.
D)the demand for A increases when income rises.
E)a rise in the price of a complement causes the demand for A to decrease.

Question 23

Use the figure below to answer the following questions.
Figure 3.2.2
Refer to Figure 3.2.2.If consumers' income increases,

A)the demand curve for pizzas shifts from D₁ to D₂ if a pizza is a normal good.
B)a movement from point A to point B on D₁ occurs.
C)the quantity of pizzas demanded increases.
D)the quantity of pizzas supplied decreases.
E)the supply of pizzas increases.

Question 24

The price of good X falls and the demand for good Y decreases.We can conclude that

A)X is an inferior good.
B)X and Y are substitutes in production.
C)X and Y are complements.
D)X and Y are substitutes.
E)X is a normal good.

Question 25

Which one of the following would lead to an increase in the demand for hamburgers?

A)a rise in the price of French fries, a complement of hamburgers
B)a decrease in population
C)a news report that hamburgers can cause skin diseases
D)a new fad hamburger diet
E)a decrease in consumer income if hamburgers are a normal good

Question 26

A decrease in quantity demanded is represented by a

A)movement upward and to the left along the demand curve.
B)rightward shift of the supply curve.
C)leftward shift of the demand curve.
D)rightward shift of the demand curve.
E)movement downward and to the right along the demand curve.

Question 27

Some sales managers are talking shop.Which one of the following quotations does not refer to a rightward shift of the demand curve?

A)"Since our competitors raised their prices, our sales have doubled."
B)"It has been an unusually harsh winter; our sales of wool scarves are up from last year."
C)"People are expecting a harsh winter next year, so the sales of our winter coats have increased."
D)"The Green movement has sparked an increase in our sales of biodegradable products."
E)"We decided to cut our prices, and the increase in our sales has been remarkable."

Question 28

A turnip is an inferior good if

A)an increase in income increases the demand for turnips.
B)an increase in income decreases the demand for turnips.
C)turnips violate the law of demand.
D)an increase in the price of a turnip decreases the quantity of turnips that consumers want to buy.
E)turnips are a low quality good.

Question 29

Figure 3.2.1
Which one of the following would result in a movement from point A to point B in Figure 3.2.1?

A)an increase in population
B)a rise in the price of bananas
C)public concern about chemicals sprayed on apples
D)a rise in the price of oranges
E)a fall in the price of apples

Question 30

Use the figure below to answer the following questions.
Figure 3.2.1
Given Figure 3.2.1, under what condition are consumers willing to buy more than 9,000 apples per week?

A)if the price is below $0.50
B)if the price is between $1 and $1.50
C)if the price is $0.75
D)if the price is between $1 and $0.50
E)if the price is above $1

Question 31

If a turnip is an inferior good, then, ceteris paribus, an increase in the price of a turnip will

A)decrease the quantity of turnips supplied.
B)decrease the demand for turnips.
C)increase the demand for turnips.
D)decrease the quantity of turnips demanded.
E)increase the supply of turnips.

Question 32

Which of the following "other things" are not held constant along a demand curve?

A)preferences
B)prices of related goods
C)income
D)the price of the good itself
E)expected future income and credit

Question 33

The price of good A rises, and the demand curve for good B shifts leftward.We can conclude that

A)A and B are complements.
B)A and B are complements in production.
C)B is a normal good.
D)A and B are substitutes.
E)B is an inferior good.

Question 34

Use the figure below to answer the following questions.
Figure 3.2.1
Which one of the following statements best characterizes point B in Figure 3.2.1?

A)At point B, the market is in equilibrium.
B)At a price of $0.50, there will be an apple shortage.
C)Producers would be unwilling to sell the 9,000th apple for less than $0.50.
D)The most that consumers would be willing to pay for the 9,000th apple is $0.50.
E)At a price of $0.50, consumers will be unwilling to buy any apples.

Question 35

Some sales managers are talking shop.Which of the following quotations refers to a movement along the demand curve?

A)"Since our competitors raised their prices, our sales have doubled."
B)"The Green movement has sparked an increase in our sales of biodegradable products."
C)"It has been an unusually mild winter; our sales of wool scarves are down from last year."
D)"More firms are producing biodegradable products."
E)"We decided to cut our prices, and the increase in our sales has been remarkable."

Question 36

Use the figure below to answer the following questions.
Figure 3.2.2
Refer to Figure 3.2.2.Which one of the following represents a decrease in quantity demanded?

A)a movement from A to B
B)a shift from D₂ to D₁
C)a movement from the origin to any point on D₁
D)a shift from D₁ to D₂
E)a movement from B to A

Question 37

Use the figure below to answer the following questions.
Figure 3.2.1
Point A in Figure 3.2.1 indicates that

A)consumers will only pay $1 for any apple.
B)$1 is the least that consumers are willing to pay for the 4,000th apple.
C)if the price is $1, consumers will plan to buy 4,000 apples.
D)consumers will not be in equilibrium if the price of an apple is $1.
E)if the price is more than $1, consumers will buy 9,000 apples.

Question 38

Use the figure below to answer the following questions.
Figure 3.2.2
Which one of the following would result in the demand curve shifting from D₁ to D₂ in Figure 3.2.2?

A)an increase in the supply of pizza
B)a rise in the price of pizza
C)a rise in the price of spaghetti, a substitute for pizza
D)a fall in the price of pizza
E)a rise in the price of Coke, a complement of pizza

Question 39

An increase in income

A)decreases the demand for turnips if turnips have a very low price.
B)increases the demand for turnips if a turnip is an inferior good.
C)increases the supply of turnips.
D)decreases the supply of turnips.
E)increases the demand for turnips if a turnip is a normal good.

Question 40

Some sales managers are talking shop.Which one of the following quotations refers to a leftward shift of the demand curve?

A)"It has been an unusually mild winter; our sales of wool scarves are down from last year."
B)"Since our competitors raised their prices, our sales have doubled."
C)"We decided to cut our prices, and the increase in our sales has been remarkable."
D)"More firms are producing biodegradable products."
E)"The Green movement has sparked an increase in our sales of biodegradable products."

Question 41

If a factor of production can be used to produce either good A or good B, then A and B are

A)normal goods.
B)substitutes.
C)complements.
D)complements in production.
E)substitutes in production.

Question 42

A rise in the price of a good

A)decreases the supply of the good.
B)creates a movement down along the demand curve.
C)increases the supply of the good.
D)creates a movement up along the supply curve.
E)decreases demand for the good.

Question 43

If a producer can use its factors of production to produce either good A or good B, then a rise in the price of A

A)increases the supply of A.
B)decreases the supply of B.
C)increases the demand for A.
D)decreases the supply of A.
E)increases the supply of B.

Question 44

If goods X and Y are substitutes in production, then a rise in the price of good X

A)increases the supply of good Y.
B)increases the demand for good Y.
C)decreases the demand for good Y.
D)decreases the supply of good Y.
E)might change the supply of Y; it depends on whether X and Y are also substitutes.

Question 45

The fact that a fall in the price of a good results in a decrease in the quantity of the good supplied illustrates

A)the law of supply.
B)the nature of an inferior good.
C)the law of demand.
D)a change in supply.
E)technological improvement.

Question 46

The income effect influences food purchases because when the price of a certain food rises, other things remaining the same, _______ Consumers _______

A)demand for that food increases; believe that the price may rise even further so they buy more now
B)its relative price rises; purchase less of all foods because food is an inferior good
C)demand for that food decreases; buy less of the food that has experienced the price rise and more of other foods
D)the price rises relative to income; cannot afford to buy all the things they previously bought, so they normally buy less of the food that has experienced the price rise
E)demand for that food increases; buy more food because food is a normal good

Question 47

A decrease in the quantity supplied is shown by a

A)rightward shift of the demand curve.
B)rightward shift of the supply curve.
C)movement up along the supply curve.
D)movement down along the supply curve.
E)leftward shift of the supply curve.

Question 48

People buy more of good 1 when the price of good 2 rises.Good 1 and good 2 are

A)substitutes in production
B)inferior goods.
C)normal goods.
D)substitutes.
E)complements.

Question 49

The supply curve of a good slopes upward to the right because of

A)the law of demand.
B)the existence of substitutes in production.
C)the fact that prices tend to rise over time.
D)increasing marginal cost as production increases.
E)technological improvements over time.

Question 50

The law of supply tells us that other things remaining the same, as the

A)price of gasoline rises, the quantity of gasoline supplied decreases.
B)cost of producing gasoline increases, the price of gasoline rises.
C)price of gasoline falls, the quantity of gasoline supplied decreases.
D)supply of gasoline increases, the price of gasoline falls.
E)cost of producing gasoline falls, the supply of gasoline will increase.

Question 51

If Hamburger Helper is an inferior good, then, ceteris paribus, a decrease in income will lead to

A)a movement up along the demand curve for Hamburger Helper.
B)a leftward shift of the demand curve for Hamburger Helper.
C)a movement down along the demand curve for Hamburger Helper.
D)a rightward shift of the demand curve for Hamburger Helper.
E)a rightward shift of the supply curve of Hamburger Helper.

Question 52

An increase in supply is shown by

A)a leftward shift of the supply curve.
B)a movement down along the supply curve.
C)a movement up along the supply curve.
D)a rightward shift of the supply curve.
E)a movement from the supply curve toward the origin.

Question 53

Which one of the following would not shift the supply curve of good X to the right?

A)a rise in the price of X
B)an increase in the price of Y, a complement in production of X
C)a fall in the price of the factors of production used in producing X
D)a technological change that increases production of X
E)a fall in the price of Y, a substitute in production of X

Question 54

The substitution effect influences food purchases because when the price of a certain food rises, other things remaining the same, _______ Consumers _______

A)its relative price does not change because most likely the prices of all other foods will also rise; continue to purchase all foods, but in smaller quantities
B)its relative price rises; purchase more of a different food that is less expensive
C)the relative price of all food rises; continue to purchase all foods, but in smaller quantities
D)its relative price rises; purchase less of all foods
E)the relative price of all food rises; purchase less of the food that has experienced the price increase and more of all other foods

Question 55

The law of demand applies to food because when the price of food rises, there is

A)a substitution effect and a complement effect.
B)an income effect but no substitution effect.
C)a substitution effect that offsets the income effect.
D)a substitution effect but no income effect.
E)both a substitution effect and an income effect.

Question 56

Which of the following will shift the supply curve of good X rightward?

A)the price of Y, a substitute in production for good X, rises
B)a decrease in the number of suppliers of good X
C)an increase in the price of energy
D)a decrease in the wages of workers employed to produce good X
E)an increase in the cost of capital used to produce good X

Question 57

Networks increase the price they charge cable television firms for programming.As a result, the price of cable television rises.Choose the correct statement.

A)The demand curve for cable television shifts leftward.
B)A movement occurs up along the demand curve for cable television and the quantity demanded increases.
C)The price of cable television does not change because subscribers are already paying a high enough price.
D)A movement occurs up along the demand curve for cable television and the quantity demanded decreases.
E)The demand curve for cable television shifts rightward.

Question 58

Oatmeal is a normal good and cold cereal is a substitute for oatmeal.Raisins are a complement of oatmeal.Which of the following increases the demand for oatmeal?

A)a decrease in population
B)an increase in the supply of oatmeal
C)an increase in the price of raisins
D)a decrease in income
E)an increase in the price of cold cereal

Question 59

Consider the market for smartphones.Suppose the price of a smartphone falls.Explain the effect of this event on the quantity of smartphones demanded and on the demand for smartphones.

A)The quantity of smartphones demanded is unchanged and the demand for smartphones increases.
B)The quantity of smartphones demanded is unchanged and the demand for smartphones decreases.
C)The quantity of smartphones demanded increases and the demand for smartphones also increases.
D)The quantity of smartphones demanded decreases and the demand for smartphones is unchanged.
E)The quantity of smartphones demanded increases and the demand for smartphones is unchanged.

Question 60

Which one of the following will shift the supply curve of good X leftward?

A)a situation where the quantity of X demanded exceeds the quantity of X supplied
B)a decrease in the cost of capital used to produce X
C)a decrease in the wages of workers employed to produce X
D)an increase in the cost of machinery used to produce X
E)a technological change that increases production of X

Question 61

A shift of the supply curve for rutabagas occurs if there is

A)a change in income.
B)a change in the price of a related good that is a substitute for rutabagas.
C)a change in preferences for rutabagas.
D)a change in the price of rutabagas.
E)a flood that destroys rutabaga farms.

Question 62

Bottled water and health club memberships are

A)complements in production.
B)inferior goods.
C)complements.
D)substitutes.
E)substitutes in production.

Question 63

Use the table below to answer the following questions.
Price dollars per unit)
Table 3.4.1
Quantity Demanded
Quantity Supplied units)
Refer to Table 3.4.1.A shortage occurs if

A)the price is $4 a unit.
B)the price is $7 a unit.
C)the price is $5 a unit.
D)the price is below $4 a unit.
E)the price is $6 a unit.

Question 64

Use the table below to answer the following questions.
Price dollars per unit)
Table 3.4.1
Quantity Demanded
Quantity Supplied units)
Refer to Table 3.4.1.If the price is $3, then the shortage is

A)160 units.
B)600 units.
C)zero units.
D)1,050 units.
E)180 units.

Question 65

If the number of suppliers of good Y increases, then

A)a movement down along the supply curve of good Y will occur.
B)a movement up along the supply curve of good Y will occur.
C)the supply curve of good Y shifts leftward.
D)the supply curve of good Y becomes steeper.
E)the supply curve of good Y shifts rightward.

Question 66

Some producers are chatting.Which one of the following quotations refers to a leftward shift of the supply curve?

A)"Wage increases have forced us to raise our prices."
B)"Our new, sophisticated equipment will enable us to undercut our competitors."
C)"Raw material prices have sky- rocketed; we will have to pass the cost on to our customers."
D)"We anticipate a big increase in demand.Our product price should rise, so we are planning for an increase in output."
E)Both A and C

Question 67

Use the table below to answer the following questions.
Price dollars per unit)
Table 3.4.1
Quantity Demanded
Quantity Supplied units)
In Table 3.4.1, the equilibrium price is

A)$7 a unit.
B)$4 a unit.
C)$3 a unit.
D)$5 a unit.
E)$1 a unit.

Question 68

Use the figure below to answer the following questions.
Figure 3.4.1
At price P₃ in Figure 3.4.1,

A)this market is in equilibrium.
B)there is a tendency for the price to rise.
C)equilibrium quantity is Q₅.
D)there is a shortage in the amount of Q₅ - Q₁.
E)there is a surplus in the amount of Q₅ - Q₁.

Question 69

Use the table below to answer the following questions.
Price dollars per unit)
Table 3.4.1
Quantity Demanded
Quantity Supplied units)
Refer to Table 3.4.1.A surplus occurs if

A)the price is $4 a unit.
B)the price is above $4 a unit.
C)the price is $1 a unit.
D)the price is $2 a unit.
E)the price is $3 a unit.

Question 70

Use the table below to answer the following questions.
Price dollars per unit)
Table 3.4.1
Quantity Demanded
Quantity Supplied units)
Refer to Table 3.4.1.At a price of $3 a unit

A)the market is in equilibrium.
B)there is a 180- unit shortage and a tendency for the price to fall.
C)there is a 180- unit shortage and a tendency for the price to rise.
D)there is a 180- unit surplus and a tendency for the price to fall.
E)there is a 420- unit shortage and a tendency for the price to rise.

Question 71

Which of the following decreases the supply of popcorn?

A)a technological advance in the production of popcorn
B)a decrease in the demand for popcorn
C)an increase in the price of popcorn
D)a decrease in the price of popcorn
E)a decrease in the number of popcorn producers

Question 72

French fries and baked potatoes are

A)complements for consumers and substitutes in production for producers.
B)substitutes for consumers and substitutes in production for producers.
C)normal goods for consumers and complements for producers.
D)complements for consumers and complements in production for producers.
E)substitutes in production for consumers and inferior goods for producers.

Question 73

New Maple Sap Method
With the new way to tap maple trees, farmers could produce 10 times as much maple syrup per acre.Source: cbc.ca, February 5, 2014
The new method of tapping maple trees _______ the supply of maple syrup and the _______ quantity supplied of maple syrup.

A)increases; does not change
B)increases; increases
C)does not change; does not change
D)does not change; increases
E)does not change; decreases

Question 74

Use the table below to answer the following questions.
Price dollars per unit)
Table 3.4.1
Quantity Demanded
Quantity Supplied units)
Refer to Table 3.4.1.If the price is $7, then the surplus is

A)160 units.
B)zero units.
C)400 units.
D)290 units.
E)360 units.

Question 75

Use the figure below to answer the following questions.
Figure 3.4.1
At price P₂ in Figure 3.4.1, which one of the following is not true?

A)The quantity demanded is equal to the quantity supplied.
B)There is no surplus.
C)The quantity demanded is Q₁.
D)This market is in equilibrium.
E)The quantity supplied is Q₃.

Question 76

Use the table below to answer the following questions.
Price dollars per unit)
Table 3.4.1
Quantity Demanded
Quantity Supplied units)
In Table 3.4.1, the equilibrium quantity is

A)420 units.
B)1,100 units.
C)500 units.
D)200 units.
E)320 units.

Question 77

Which of the following shifts the supply curve for good X leftward?

A)a technological advance in the production of X
B)a decrease in the wages of workers employed to produce X
C)a situation in which the quantity supplied of X exceeds the quantity demanded of X
D)an increase in the cost of the machinery used to produce X
E)a situation in which the quantity demanded of X exceeds the quantity supplied of X

Question 78

Some producers are chatting.Which one of the following quotations refers to a rightward shift of the supply curve?

A)"Competitors are leaving the industry."
B)"Our new, sophisticated equipment will enable us to undercut our competitors."
C)"Raw material prices have sky- rocketed; we will have to pass the cost on to our customers."
D)"Wage increases have forced us to raise our prices."
E)"We anticipate a big increase in demand.Our product price should rise, so we are planning for an increase in output."

Question 79

A decrease in the quantity supplied of a good is shown by

A)a movement up along the supply curve.
B)a leftward shift of the supply curve.
C)a rightward shift of the supply curve.
D)a movement down along the supply curve.
E)a movement from the supply curve to the origin.

Question 80

Some producers are chatting.Which one of the following quotations refers to a movement along the supply curve?

A)"Wage increases have forced us to raise our prices."
B)"We anticipate a big increase in demand.Our product price should rise, so we are planning for an increase in output."
C)"New competitors in the industry are causing prices to fall."
D)"Raw material prices have sky- rocketed; we will have to pass the cost on to our customers."
E)"Our new, sophisticated equipment will enable us to undercut our competitors."