Deck 3: Supply and Demand

Question 1

One of the most important ingredients in bubble tea is the tapioca pearls that are added to the tea. If the price of tapioca flour increases, what will happen to the supply of bubble tea, all else being equal?

A) The supply of bubble tea will increase dramatically.
B) The supply of bubble tea will increase modestly.
C) The supply of bubble tea will decrease.
D) The supply of bubble tea will not change.

Answer 1

C

Question 2

In the market for online tutoring, there is an increase in the supply of online tutors during finals week, but there is an even larger increase in the demand for online tutors. These events will cause the equilibrium price of online tutoring to _____ and the equilibrium quantity to _____.

A) fall; rise
B) rise; rise
C) rise; fall
D) fall; fall

Answer 2

B

Question 3

Suppose that a major drought causes a 30 percent reduction in the peanut harvest. If there is no change in demand, this event would cause a _____ at the original equilibrium price, and the equilibrium price will therefore _____ and the equilibrium quantity will _____.

A) shortage; rise; fall
B) shortage; rise; rise
C) surplus; fall; fall
D) surplus; fall; rise

Answer 3

A

Question 4

An institution that enables buyers and sellers to interact and transact with one another is known as a(n):

A) bank.
B) economy.
C) stock exchange.
D) market.

Question 5

Another way of referring to a market economy is as a:

A) demand economy.
B) command economy.
C) ceteris paribus.
D) price system.

Question 6

If the price of used plug-in electric cars is expected to rise in six months, the reaction in the supply of those cars in the market today would likely be a(n):

A) upward movement along the supply curve.
B) downward movement along the supply curve.
C) shift of the supply curve to the right.
D) shift of the supply curve to the left.

Question 7

In the market for Chinese take-out, suppose that the price of Sushi take-out, a substitute, decreases in price. What will happen to the demand for Chinese take-out?

A) Demand for Chinese take-out will be eliminated.
B) Demand for Chinese take-out will not change.
C) Demand for Chinese take-out will increase.
D) Demand for Chinese take-out will decrease.

Question 8

When a large factory closed in the town of Greenville, income fell for many residents. As a result, demand for normal goods would _____ and demand for inferior goods would _____.

A) decrease; increase
B) increase; increase
C) decrease; decrease
D) increase; decrease

Question 9

A market exists when:

A) an absolute advantage is achieved by one country.
B) people exchange money for goods and services.
C) the cost of production is equated to the price by a government agency.
D) a physical location is created to facilitate the exchange of personal information about consumer choices.

Question 10

The graph represents the market for water park admissions. If the price of admission is set at $50, this would result in a _____ of _____ units.

A) shortage; 400
B) shortage; 200
C) surplus; 400
D) surplus; 200

Question 11

For any given product, _____ is determined by what the market will bear.

A) quantity
B) price
C) quality
D) None of the answers is correct.

Question 12

Suppose there are three massage therapists, with a supply schedule that indicates their willingness to supply massages at various prices. What is the market quantity of massages supplied at $60, and does this supply schedule follow the law of supply? $$\begin{array} { | c | c | c | c | } \hline \text { Price } & \text { Tracey } & \text { Kira } & \text { Peter } \\\hline \$ 40 & 5 & 10 & 3 \\\hline \$ 60 & 8 & 15 & 6 \\\hline \$ 80 & 13 & 20 & 9 \\\hline\end{array}$$

A) 47; no .
B) 29; yes
C) 47; no
D) 29; yes

Question 13

Which factor would NOT cause the demand curve for green tea to shift to the right?

A) a decrease in the price of lemons, a complement to green tea
B) a decrease in the price of green tea
C) new research showing that drinking green tea reduces the risk of illnesses
D) All of these will shift the demand for green tea to the right.

Question 14

The development of solar panels for home installation has improved due to technological advances and subsidies. These factors shift the supply curve to the _____ and result in the equilibrium price of solar panel installations to _____.

A) left; fall
B) left; rise
C) right; fall
D) right; rise

Question 15

Which statement is a CORRECT description of the law of demand?

A) As prices of a good rise, the quantity supplied of that good rises.
B) As prices of a good fall, the quantity demanded of that good rises.
C) As prices of a good rise, the demand curve shifts to the left.
D) There is a positive relationship between the price of a good and the quantity demanded.

Question 16

Which statement is NOT true when a market is in equilibrium?

A) Every consumer willing and able to pay for a good is able to do so.
B) There is no surplus or shortage.
C) The market has cleared.
D) Sellers have enough inventory to satisfy all buyers and some left over for future demand.

Question 17

In the graph, an increase in quantity demanded would be represented by a change from point a to point _____, while a decrease in demand would be represented by a change from point d to point _____.

A) b; b
B) b; c
C) c; b
D) c; c

Question 18

Which item is NOT an example of a market?

A) eBay
B) a neighborhood yard sale
C) the Internal Revenue Service
D) New York Stock Exchange

Question 19

The supply curve represents the _____ price at which a firm is willing to _____.

A) minimum; sell various quantities of a good
B) maximum; sell various quantities of a good
C) minimum; pay for inputs
D) maximum; pay for inputs

Question 20

Which factor would shift the supply of skateboards to the right?

A) a new rule banning all skateboards on college campuses
B) an increase in incomes among skateboard enthusiasts
C) a decrease in the price of skateboards
D) a large reduction in the price of wheels used to produce skateboards

Question 21

Sales of luxury consumer products for cats and dogs, such as pet spas and hotels, have experienced _____ over the past decade.

A) a large decline
B) a modest decline
C) little change
D) a large increase

Question 22

Luz sells cupcakes. According to market economics, which is the BEST signal that consumers value her product highly?

A) that they readily pay the full price per cupcake
B) the glowing Yelp reviews they often write
C) the line out the door every Sunday morning
D) the many competing companies that imitate her business

Question 23

Prices do NOT help consumers decide:

A) how much of a product to purchase.
B) how much of a product to produce.
C) how much of a product to substitute for another.
D) whether to buy a certain product.

Question 24

Institutions that bring buyers and sellers together so they can interact and transact with each other are called:

A) networking sites.
B) interactive modes.
C) markets.
D) arenas.

Question 25

Which enterprise is NOT an example of a market?

A) a neighborhood lemonade stand
B) painting one's house
C) ticket scalping
D) the New York Stock Exchange

Question 26

During the recent recession, consumer spending on dogs and cats:

A) fell because national income declined.
B) fell, even though national income increased.
C) rose because national income increased.
D) rose, even though national income declined.

Question 27

Prices typically contain useful information:

A) both for buyers and for sellers.
B) more for buyers than for sellers.
C) more for sellers than for buyers.
D) for neither buyers nor sellers.

Question 28

Markets differ in:

A) geographical location.
B) products offered.
C) size.
D) location, products, and size.

Question 29

Which statement is TRUE about markets?

A) They only contain legal activity conducted by incorporated businesses.
B) They can contain legal or illegal activity conducted by incorporated businesses.
C) They only contain legal activity conducted by any individual or business.
D) They can contain legal or illegal activity conducted by any individual or business.

Question 30

Uvaldo is deciding which brand of energy drink to buy. According to market economics, he would benefit MOST from basing his decision on which brand has the most:

A) value relative to its price.
B) attractive packaging.
C) innovative marketing campaign.
D) availability in his local market.

Question 31

Which statement about markets is CORRECT? I) All markets require a physical location.
II) All markets involve a transaction of some type.
III) Markets operate independently of laws and regulations.

A) I and II
B) II only
C) III only
D) I, II, and III

Question 32

The market economy is often called the price system because:

A) prices are often not known until after the transaction is completed.
B) prices provide information for both buyers and sellers.
C) all prices must be publicized, by law.
D) prices become less important over time.

Question 33

Which statement is NOT correct about markets?

A) They enable buyers and sellers to conduct transactions with one another.
B) They require a physical location for transactions to take place.
C) They use prices to communicate between buyers and sellers.
D) They can exist for single goods as well as for multiple products.

Question 34

Another name for a market economy is:

A) the law of demand.
B) the law of supply.
C) comparative advantage.
D) the price system.

Question 35

In a market-based economy, scarce resources are allocated by:

A) political power.
B) first come, first served.
C) the price system.
D) cooperative efforts to determine relative need.

Question 36

Suppose that an artist has priced his painting at $150, but it remains unsold. We can conclude that the price of $150 is too:

A) high for this painting and it should be lowered.
B) high for this painting but it should not be lowered.
C) low for this painting and it should be raised.
D) low for this painting but it should not be raised.

Question 37

In the market economy, the primary channel through which buyers and sellers communicate with each other is:

A) advertising.
B) price.
C) involuntary signaling.
D) subliminal signaling.

Question 38

Prices:

A) allow sellers to determine what goods to sell.
B) help buyers find possible substitute goods.
C) contain information useful for all people involved in a transaction.
D) allow sellers to determine what goods to sell, help buyers find possible substitute goods, and contain information useful for all people involved in a transaction.

Question 39

Which type of payment would NOT be a market transaction?

A) payment for purchase of shares at a stock exchange
B) payment for a used book purchased on eBay
C) payment for a soft drink at a vending machine
D) payment made to a disaster victim

Question 40

The main role of a market is to:

A) make everyone happy.
B) allocate resources.
C) guarantee equity.
D) keep prices low.

Question 41

According to the law of demand, people buy more of a good when:

A) their income rises.
B) the price rises.
C) the relative price rises.
D) the price falls.

Question 42

_____ refers to the goods and services people are willing and able to buy during a certain period of time, at various prices, ceteris paribus.

A) Supply
B) Demand
C) Price
D) Quantity demanded

Question 43

(Table) According to the table, in a two-person market that includes person A and person B, the willingness to pay for the third doughnut is: $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\text {Willingness to Pay for One,}$
$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\text { Two, Three, or Four }$
$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\text {Doughnuts}$
$\begin{array} { l c c } & \text { Person A } & \text { Person B } \\ \text { First Doughnut } & \$ 5 & \$ 8 \\ \text { Second Doughnut } & \$ 3 & \$ 6 \\ \text { Third Doughnut } & \$ 2 & \$ 4 \\ \text { Fourth Doughnut } & \$ 1 & \$ 0 \end{array}$

A) $2.
B) $4.
C) $5.
D) $6.

Question 44

A demand schedule is:

A) a shopping list.
B) a list of prices and the quantities demanded at those prices.
C) the quantity a person actually purchases.
D) a list of prices and incomes.

Question 45

In economic markets, what signals information between buyers and sellers?

A) the Internet
B) prices
C) transactions
D) stock exchanges

Question 46

The law of demand states that:

A) the lower a product's price, the less of that product consumers will purchase during a given period.
B) the lower a product's price, the more of that product consumers will purchase during a given period.
C) higher prices will lead producers to offer less of their products for sale during a given period.
D) higher prices will lead producers to offer more of their products for sale during a given period.

Question 47

Which statement about the pet goods market is CORRECT? I) The market for pet goods has been on the rise in recent years due to the lower costs of producing pet goods.
II) One reason for the growth of the pet goods market has been the increase in the number and availability of goods and services for pets.
III) Like other markets, the pet goods market typically declines when there are downturns in the economy.

A) I and II
B) II only
C) III only
D) I, II, and III

Question 48

People's willingness to pay for umbrellas is MOST likely _____ on a _____ day.

A) higher; rainy
B) higher; sunny
C) lower; cloudy
D) lower; rainy

Question 49

On a demand curve:

A) price is on the vertical axis and the number of buyers is on the horizontal axis.
B) price is on the horizontal axis and quantity demanded is on the vertical axis.
C) determinants of demand are on the horizontal axis and price is on the vertical axis.
D) price is on the vertical axis and quantity demanded is on the horizontal axis.

Question 50

There is a(n) _____ relationship between price and quantity demanded.

A) indeterminate
B) positive
C) negative
D) indeterminate, positive, and negative

Question 51

Willingness to pay is the:

A) price a consumer pays for a good or service.
B) price that all the consumers in a market pay for a good or service.
C) highest value that a consumer believes a good or service is worth.
D) highest value that a producer believes consumers will pay for his product.

Question 52

Demand refers to:

A) consumers wanting a product so much that they insist on the product being produced.
B) the goods and services buyers are willing and able to purchase at various prices in a given period of time.
C) the amount consumers wish they could consume.
D) the relationship between price and quantity that sellers bring to the market.

Question 53

An individual's valuation of a good or service is:

A) generally the same from person to person.
B) known as willingness to pay.
C) impossible for individuals to express.
D) lower than the maximum value the individual will pay.

Question 54

The reason that the law of demand exists is that:

A) specialization leads to an increase in a person's standard of living.
B) people substitute cheaper products for more expensive products.
C) people always follow the law of the land.
D) a higher price never reduces demand enough to lower producer's profits.

Question 55

(Table) The table shows that: $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\text {Willingness to Pay for One,}$
$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\text { Two, Three, or Four }$
$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\text {Doughnuts}$
$\begin{array} { l c c } & \text { Person A } & \text { Person B } \\ \text { First Doughnut } & \$ 5 & \$ 8 \\ \text { Second Doughnut } & \$ 3 & \$ 6 \\ \text { Third Doughnut } & \$ 2 & \$ 4 \\ \text { Fourth Doughnut } & \$ 1 & \$ 0 \end{array}$

A) person A has a higher willingness to pay for the fourth doughnut as well as for the first doughnut.
B) person A has a higher willingness to pay for the fourth doughnut but not for the first doughnut.
C) person B has a higher willingness to pay for the fourth doughnut as well as for the first doughnut.
D) person B has a higher willingness to pay for the fourth doughnut but not for the first doughnut.

Question 56

An individual's valuation of a good or service:

A) can be expressed in the marketplace.
B) is generally the same for most people.
C) is known as the market price.
D) is lower than the maximum value the individual will pay.

Question 57

Willingness to pay _____ from person to person and _____ under varying circumstances.

A) is the same; is the same
B) is the same; differs
C) differs; is the same
D) differs; differs

Question 58

Which statement illustrates the law of demand?

A) Lindsay offers to buy more sticks of chewing gum at $2 than at $1.
B) Lindsay offers to buy more sticks of chewing gum at $1 than at $2.
C) Marcus offers to sell more sticks of chewing gum at $2 than at $1.
D) Marcus offers to sell more sticks of chewing gum at $1 than at $2.

Question 59

A market demand curve:

A) reflects a positive relationship between price and quantity.
B) is the horizontal summation of individual demands.
C) reflects society's changing tastes and preferences.
D) is of no use to economists, who are concerned only with individual preferences.

Question 60

(Table) According to the table, in a two-person market that includes person A and person B, the willingness to pay for the second doughnut is: $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\text {Willingness to Pay for One,}$
$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\text { Two, Three, or Four }$
$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\text {Doughnuts}$
$\begin{array} { l c c } & \text { Person A } & \text { Person B } \\ \text { First Doughnut } & \$ 5 & \$ 8 \\ \text { Second Doughnut } & \$ 3 & \$ 6 \\ \text { Third Doughnut } & \$ 2 & \$ 4 \\ \text { Fourth Doughnut } & \$ 1 & \$ 0 \end{array}$

A) $3.
B) $5.
C) $6.
D) $8.

Question 61

(Table) The table shows the demand of three individuals in a market. Assuming they are the only buyers, what is total market demand if the price is $20? $$\begin{array} { c c c c } \text { Price } & \begin{array} { c } \text { Angel's } \\\text { Quantity } \\\text { Demanded }\end{array} & \begin{array} { c } \text { Sally's } \\\text { Quantity } \\\text { Demanded }\end{array} & \begin{array} { c } \text { Nadia's } \\\text { Quantity } \\\text { Demanded }\end{array} \\\text { \$5 } & 9 & 7 & 10 \\\text { \$10 } & 6 & 6 & 6 \\\text { \$15 } & 4 & 4 & 3 \\\text { \$20 } & 1 & 3 & 1 \\\text { \$25 } & 1 & 2 & 0\end{array}$$

A) 5 units
B) 1 unit
C) 20 units
D) 7 units

Question 62

(Figure: Demand for Shoes) A shift to the right of the demand curve could be caused by a(n):

A) decrease in tastes or preferences.
B) increase in income if the good is a normal good.
C) increase in the price of a complement.
D) decrease in the price of a substitute.

Question 63

If the demand for iPhones rises as incomes increase, then the iPhone is a(n) _____ good.

A) inferior
B) abnormal
C) supply
D) normal

Question 64

Which factor would shift the demand curve for gasoline to the right?

A) an increase in national income
B) a decrease in the price of alternative forms of energy
C) an increase in the price of gasoline
D) a decrease in the number of consumers

Question 65

If a consumer buys a set of headphones at the same time as she buys an MP3 player, these two products are MOST likely _____ goods.

A) complementary
B) inferior
C) luxury
D) substitute

Question 66

The equation for the demand curve for bags of Doritos is P = 6 + (-1) × Q. Which graph shows the CORRECT demand curve?

A)

B)

C)

Question 67

In general terms, which item is an example of an inferior good?

A) gasoline
B) a T-bone steak
C) a city bus
D) clothing

Question 68

(Figure: Market for Shoes) If the price of shoes is $60 per pair, the _____ will be 10 pairs of shoes.

A) quantity demanded
B) quantity supplied
C) market demand
D) market supply

Question 69

(Figure: Demand for Shoes) A shift to the right of the demand curve would NOT be caused by a(n):

A) decrease in the population.
B) increase in income given that shoes are a normal good.
C) decrease in the price of a complement.
D) increase in the price of a substitute.

Question 70

(Figure: Market for Shoes) The graph represents:

A) an individual's willingness to pay.
B) the price system.
C) the law of supply.
D) the law of demand.

Question 71

A shift in the demand curve is caused by a change in:

A) the price of the item.
B) the behavior of suppliers.
C) costs of production.
D) one of the determinants of demand.

Question 72

Whenever you construct a demand curve, which statement is TRUE?

A) The price of all other goods must be held constant.
B) Income must be allowed to change.
C) The price of the good itself must be held constant.
D) Tastes and preferences are variable.

Question 73

When economists refer to a market demand curve, they mean that it represents:

A) the horizontal summation of individual demand curves.
B) the vertical summation of individual demand curves.
C) the quantity demanded by any individual consumer, multiplied by the number of consumers.
D) None of the answers is correct.

Question 74

(Figure: Market for Shoes) If the price of shoes is $40 per pair, the quantity demanded will be _____ pairs of shoes.

A) 5
B) 10
C) 15
D) 20

Question 75

(Table) The table shows the demand schedules for three individuals. Which table would be the CORRECT market demand schedule? $$\begin{array} { | r | r | r | r | } \hline \text { Price } & \text { Person 1 } & \text { Person 2 } & \text { Person 3 } \\\hline \mathbf { \$ 0 . 0 0 } & 9 & 15 & 10 \\\hline \mathbf { \$ 1 0 . 0 0 } & 6 & 11 & 8 \\\hline \mathbf { \$ 2 0 . 0 0 } & 5 & 10 & 6 \\\hline \mathbf { \$ 3 0 . 0 0 } & 3 & 9 & 4 \\\hline \mathbf { \$ 4 0 . 0 0 } & 0 & 6 & 2 \\\hline \mathbf { \$ 5 0 . 0 0 } & 0 & 4 & 0 \\\hline \mathbf { \$ 6 0 . 0 0 } & 0 & 2 & 0 \\\hline\end{array}$$

A)
$$\begin{array} { | r | r | } \hline \text { Price } & \text { Quantity } \\\hline \$ 0.00 & 15 \\\hline \$ 10.00 & 11 \\\hline \$ 20.00 & 10 \\\hline \$ 30.00 & 9 \\\hline \$ 40.00 & 6 \\\hline \$ 50.00 & 4 \\\hline \$ 60.00 & 2 \\\hline\end{array}$$
B)
$$\begin{array} { | r | r | } \hline \text { Price } & \text { Quantity } \\\hline \$ 0.00 & 9 \\\hline \$ 10.00 & 6 \\\hline \$ 20.00 & 5 \\\hline \$ 30.00 & 3 \\\hline \$ 40.00 & 0 \\\hline \$ 50.00 & 0 \\\hline \$ 60.00 & 0 \\\hline\end{array}$$
C)
$$\begin{array} { | r | r | } \hline \text { Price } & \text { Quantity } \\\hline \$ 0.00 & 34 \\\hline \$ 10.00 & 25 \\\hline \$ 20.00 & 21 \\\hline \$ 30.00 & 16 \\\hline \$ 40.00 & 8 \\\hline \$ 50.00 & 4 \\\hline \$ 60.00 & 2 \\\hline\end{array}$$
D)
$$\begin{array} { | r | r | } \hline \text { Price } & \text { Quantity } \\\hline \$ 0.00 & 10 \\\hline \$ 10.00 & 8 \\\hline \$ 20.00 & 6 \\\hline \$ 30.00 & 4 \\\hline \$ 40.00 & 2 \\\hline \$ 50.00 & 0 \\\hline \$ 60.00 & 0 \\\hline\end{array}$$

Question 76

The demand for gasoline is rising. Which statement describes a possible cause?

A) Consumers expect prices to rise in the near future.
B) Commuters are switching from driving to public transportation.
C) Drivers are purchasing more fuel-efficient cars.
D) Incomes are falling.

Question 77

(Table) If Jake and Sue are the only buyers of the local pizzeria's pizza, what is the market demand for pizzas at each of the prices listed, starting at the market price of $5? Q_J is the quantity demanded at each price by Jake, and Q_S is the quantity demanded at each price by Sue. $$\begin{array} { c c c } \text { Price } & Q _ { J } & Q _ { S } \\5 & 4 & 2 \\10 & 3 & 1 \\15 & 2 & 0 \\20 & 1 & 0\end{array}$$

A) 11, 14, 17, 21, respectively
B) 4, 3, 2, 1, respectively
C) 6, 4, 2, 1, respectively
D) 6, 4, 0, 0, respectively

Question 78

(Figure: Interpreting Demand Curves) In the demand curve shown, an increase in price from $1 to $2 will:

A) cause quantity demanded to rise from 20 units to 30 units.
B) cause quantity demanded to fall from 30 units to 20 units.
C) have no impact on sales.
D) make buyers angry.

Question 79

Suppose there is unseasonable summer weather in a resort town. We can expect demand to shift _____ and the equilibrium price for hotels to _____.

A) left; fall
B) left; rise
C) right; fall
D) right; rise

Question 80

A market demand curve:

A) is easy to create.
B) shows the minimum amount of goods that a person is willing to buy.
C) can be estimated with statistical techniques.
D) is of no use to economists, who are concerned only with individual preferences.