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Deck 3: Demand, Supply, and the Market Process
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Figure 3-6 
In Figure 3-6, suppose D1 and S1 indicate initial conditions in the market for ice cream. Which of the following changes would tend to cause a shift from S1 to S2 in the market for ice cream?
A)an increase in the price of sugar, an ingredient used to produce ice cream
B)a decrease in the price of frozen yogurt, a substitute for ice cream
C)abnormally hot weather that temporarily increases consumer desire for ice cream
D)a decrease in the price of milk, an ingredient used to produce ice cream
In Figure 3-6, suppose D1 and S1 indicate initial conditions in the market for ice cream. Which of the following changes would tend to cause a shift from S1 to S2 in the market for ice cream?
A)an increase in the price of sugar, an ingredient used to produce ice cream
B)a decrease in the price of frozen yogurt, a substitute for ice cream
C)abnormally hot weather that temporarily increases consumer desire for ice cream
D)a decrease in the price of milk, an ingredient used to produce ice cream
Question
Use the figure below to answer the following question(s).
Figure 3-8
In Figure 3-8, if the initial demand and supply for soybeans were D1 and S1, how would a decrease in the cost of producing soybeans affect the market for soybeans?
A)Demand would increase to D2, price would increase to P2, and the quantity would increase to S.
B)Supply would increase to S2, price would decrease to P0, and the quantity would increase to S.
C)Both demand and supply would increase so the price would remain at P1, but the quantity would increase to T.
D)None of the above would occur.
Figure 3-8
In Figure 3-8, if the initial demand and supply for soybeans were D1 and S1, how would a decrease in the cost of producing soybeans affect the market for soybeans?
A)Demand would increase to D2, price would increase to P2, and the quantity would increase to S.
B)Supply would increase to S2, price would decrease to P0, and the quantity would increase to S.
C)Both demand and supply would increase so the price would remain at P1, but the quantity would increase to T.
D)None of the above would occur.
Question
Use the figure below to answer the following question(s).
Figure 3-3
In Figure 3-3, if the initial demand for margarine were D1, the impact of a decrease in the price of butter, a substitute good for margarine, would be illustrated as
A)a shift in the demand curve to D2.
B)a shift in the demand curve to D3.
C)a movement downward to the right along the original demand curve D1.
D)none of the above.
Figure 3-3
In Figure 3-3, if the initial demand for margarine were D1, the impact of a decrease in the price of butter, a substitute good for margarine, would be illustrated as
A)a shift in the demand curve to D2.
B)a shift in the demand curve to D3.
C)a movement downward to the right along the original demand curve D1.
D)none of the above.
Question
Use the figure below to answer the following question(s).
Figure 3-9
Given the demand (D) and supply (S) for gasoline in Figure 3-9, if the price of gasoline were $3 per gallon,
A)consumers would wish to purchase more than was being supplied.
B)producers would be supplying more than consumers wished to purchase.
C)the quantity consumers wished to purchase would equal the quantity that producers wished to supply.
D)there would be a tendency for the price of gasoline to rise.
Figure 3-9
Given the demand (D) and supply (S) for gasoline in Figure 3-9, if the price of gasoline were $3 per gallon,
A)consumers would wish to purchase more than was being supplied.
B)producers would be supplying more than consumers wished to purchase.
C)the quantity consumers wished to purchase would equal the quantity that producers wished to supply.
D)there would be a tendency for the price of gasoline to rise.
Question
Use the figure below to answer the following question(s).
Figure 3-13
Refer to Figure 3-13. The market for margarine was initially in equilibrium at point
A)r.
B)s.
C)t.
D)u.
E)Other things constant, a decrease in the price of butter, a close substitute for margarine, would likely move the equilibrium in this market toward point
Figure 3-13
Refer to Figure 3-13. The market for margarine was initially in equilibrium at point
A)r.
B)s.
C)t.
D)u.
E)Other things constant, a decrease in the price of butter, a close substitute for margarine, would likely move the equilibrium in this market toward point
Question
Figure 3-5 
In Figure 3-5, if the initial demand for margarine were D1, an increase in the price of butter, which is a substitute for margarine, would tend to cause which of the following changes in the market for margarine?
A)a shift in the demand curve from D1 to D2
B)a shift in the demand curve from D2 to D1
C)a movement along demand curve D1 from a to b
D)a movement along demand curve D1 from b to a
In Figure 3-5, if the initial demand for margarine were D1, an increase in the price of butter, which is a substitute for margarine, would tend to cause which of the following changes in the market for margarine?
A)a shift in the demand curve from D1 to D2
B)a shift in the demand curve from D2 to D1
C)a movement along demand curve D1 from a to b
D)a movement along demand curve D1 from b to a
Question
Figure 3-7 
In Figure 3-7, suppose D1 and S1 indicate the initial conditions in the market for ice cream. Which of the following changes would tend to cause the shift from D1 to D2 in the market for ice cream?
A)a decrease in the price of sugar, an ingredient used to produce ice cream
B)an increase in the price of frozen yogurt, a substitute for ice cream
C)abnormally cold weather that decreased consumer desire for ice cream
D)an increase in the price of milk, an ingredient used to produce ice cream
In Figure 3-7, suppose D1 and S1 indicate the initial conditions in the market for ice cream. Which of the following changes would tend to cause the shift from D1 to D2 in the market for ice cream?
A)a decrease in the price of sugar, an ingredient used to produce ice cream
B)an increase in the price of frozen yogurt, a substitute for ice cream
C)abnormally cold weather that decreased consumer desire for ice cream
D)an increase in the price of milk, an ingredient used to produce ice cream
Question
Use the figure below to answer the following question(s).
Figure 3-3
In Figure 3-3, if the initial demand for margarine were D1, the impact of an increase in the price of margarine from $0.35 to $0.40 per pound on consumer purchases would be illustrated as
A)a shift in the demand curve to D2.
B)a shift in the demand curve to D3.
C)a movement upward to the left along the original demand curve D1.
D)none of the above.
Figure 3-3
In Figure 3-3, if the initial demand for margarine were D1, the impact of an increase in the price of margarine from $0.35 to $0.40 per pound on consumer purchases would be illustrated as
A)a shift in the demand curve to D2.
B)a shift in the demand curve to D3.
C)a movement upward to the left along the original demand curve D1.
D)none of the above.
Question
Use the figure below to answer the following question(s).
Figure 3-9
Given the demand (D) and supply (S) for gasoline in Figure 3-9, if the price of gasoline were $1 per gallon,
A)consumers would wish to purchase more than was being supplied.
B)producers would be supplying more than consumers wished to purchase.
C)the quantity consumers wished to purchase would equal the quantity that producers wished to supply.
D)there would be a tendency for the price of gasoline to fall.
Figure 3-9
Given the demand (D) and supply (S) for gasoline in Figure 3-9, if the price of gasoline were $1 per gallon,
A)consumers would wish to purchase more than was being supplied.
B)producers would be supplying more than consumers wished to purchase.
C)the quantity consumers wished to purchase would equal the quantity that producers wished to supply.
D)there would be a tendency for the price of gasoline to fall.
Question
Figure 3-2 
Given the supply and demand conditions illustrated in Figure 3-2, the equilibrium price of steak is
A)$2 per pound.
B)$4 per pound.
C)$6 per pound.
D)$8 per pound.
Given the supply and demand conditions illustrated in Figure 3-2, the equilibrium price of steak is
A)$2 per pound.
B)$4 per pound.
C)$6 per pound.
D)$8 per pound.
Question
Use the figure below to answer the following question(s).
Figure 3-13
Refer to Figure 3-13. The market for margarine was initially in equilibrium at point
A)r.
B)s.
C)t.
D)u.
E)Other things constant, an increase in the price of soybean oil, an important ingredient used to produce margarine, would likely move the equilibrium in this market toward point
Figure 3-13
Refer to Figure 3-13. The market for margarine was initially in equilibrium at point
A)r.
B)s.
C)t.
D)u.
E)Other things constant, an increase in the price of soybean oil, an important ingredient used to produce margarine, would likely move the equilibrium in this market toward point
Question
Figure 3-10 
Figure 3-10 illustrates the conditions of demand and supply in the market for compact discs. Indicate the equilibrium price and quantity.
A)price, $20; quantity, 2,000
B)price, $15; quantity, 3,000
C)price, $10; quantity, 2,000
D)price, $10; quantity, 4,000
Figure 3-10 illustrates the conditions of demand and supply in the market for compact discs. Indicate the equilibrium price and quantity.
A)price, $20; quantity, 2,000
B)price, $15; quantity, 3,000
C)price, $10; quantity, 2,000
D)price, $10; quantity, 4,000
Question
Use the figure below to answer the following question(s).
Figure 3-14
Refer to Figure 3-14. The gasoline market was initially in equilibrium at point
A)r.
B)s.
C)t.
D)u.
E)Other things constant, an increase in the popularity and use of Sport Utility Vehicles (SUVs) that consume more gasoline per mile driven than most other types of cars would likely move the equilibrium in this market toward point
Figure 3-14
Refer to Figure 3-14. The gasoline market was initially in equilibrium at point
A)r.
B)s.
C)t.
D)u.
E)Other things constant, an increase in the popularity and use of Sport Utility Vehicles (SUVs) that consume more gasoline per mile driven than most other types of cars would likely move the equilibrium in this market toward point
Question
Figure 3-4 
Figure 3-4 shows conditions in the market for beef. A reduction in the price of the grain used to feed cattle results in
A)the supply curve for beef shifting to the left resulting in higher beef prices and a lower quantity sold.
B)the supply curve for beef shifting to the right resulting in lower beef prices and a higher quantity sold.
C)the demand curve for beef shifting to the left resulting in lower beef prices and a lower quantity sold.
D)the demand curve for beef shifting to the right resulting in higher beef prices and a higher quantity sold.
Figure 3-4 shows conditions in the market for beef. A reduction in the price of the grain used to feed cattle results in
A)the supply curve for beef shifting to the left resulting in higher beef prices and a lower quantity sold.
B)the supply curve for beef shifting to the right resulting in lower beef prices and a higher quantity sold.
C)the demand curve for beef shifting to the left resulting in lower beef prices and a lower quantity sold.
D)the demand curve for beef shifting to the right resulting in higher beef prices and a higher quantity sold.
Question
Use the figure below to answer the following question(s).
Figure 3-9
In Figure 3-9, if D and S represent the demand and supply for gasoline, what is the equilibrium price and quantity?
A)price, $1; quantity, 20
B)price, $2; quantity, 30
C)price, $3; quantity, 40
D)price, $4; quantity, 50
Figure 3-9
In Figure 3-9, if D and S represent the demand and supply for gasoline, what is the equilibrium price and quantity?
A)price, $1; quantity, 20
B)price, $2; quantity, 30
C)price, $3; quantity, 40
D)price, $4; quantity, 50
Question
Figure 3-12 
In Figure 3-12, suppose D1 and S1 indicate initial conditions in the market for ice cream. Which of the following changes would tend to shift this market from D1 to D2?
A)an increase in the price of milk, an ingredient used to produce ice cream
B)an increase in the price of frozen yogurt, a substitute for ice cream
C)a decrease in the price of sugar, an ingredient used to produce ice cream
D)a decrease in consumer income
In Figure 3-12, suppose D1 and S1 indicate initial conditions in the market for ice cream. Which of the following changes would tend to shift this market from D1 to D2?
A)an increase in the price of milk, an ingredient used to produce ice cream
B)an increase in the price of frozen yogurt, a substitute for ice cream
C)a decrease in the price of sugar, an ingredient used to produce ice cream
D)a decrease in consumer income
Question
Figure 3-11 
In Figure 3-11, suppose D1 and S1 indicate initial conditions in the market for kitchen cabinets. Which of the following would tend to cause the supply curve to shift from S1 to S2?
A)the invention of "folding" plates and cups that take up substantially less storage space in the kitchen
B)a decrease in consumer income
C)a decrease in the price of wood, a resource used to produce kitchen cabinets
D)an increase in the price of steel hinges, a resource used to produce kitchen cabinets
In Figure 3-11, suppose D1 and S1 indicate initial conditions in the market for kitchen cabinets. Which of the following would tend to cause the supply curve to shift from S1 to S2?
A)the invention of "folding" plates and cups that take up substantially less storage space in the kitchen
B)a decrease in consumer income
C)a decrease in the price of wood, a resource used to produce kitchen cabinets
D)an increase in the price of steel hinges, a resource used to produce kitchen cabinets
Question
Figure 3-15 
Refer to Figure 3-15. Which area represents producer surplus when the price is P1?
A)BCE
B)ACF
C)ABED
D)DEF
Refer to Figure 3-15. Which area represents producer surplus when the price is P1?
A)BCE
B)ACF
C)ABED
D)DEF
Question
Figure 3-1 
Which of the following is true regarding the market for steak shown in Figure 3-1?
A)If the price of steak were $2 per pound, producers would want to supply less steak than consumers would want to buy.
B)If the price of steak were $4 per pound, producers would want to supply more steak than consumers would want to buy.
C)If the price of steak were $3 per pound, producers would want to supply the same amount of steak that consumers would want to buy.
D)All of the above are true regarding the market for steak shown in the figure.
Which of the following is true regarding the market for steak shown in Figure 3-1?
A)If the price of steak were $2 per pound, producers would want to supply less steak than consumers would want to buy.
B)If the price of steak were $4 per pound, producers would want to supply more steak than consumers would want to buy.
C)If the price of steak were $3 per pound, producers would want to supply the same amount of steak that consumers would want to buy.
D)All of the above are true regarding the market for steak shown in the figure.
Question
Use the figure below to answer the following question(s).
Figure 3-14
Refer to Figure 3-14. The gasoline market was initially in equilibrium at point
A)r.
B)s.
C)t.
D)u.
E)Other things constant, a decrease in the price of crude oil, an important ingredient used to produce gasoline, would likely move the equilibrium in this market toward point
Figure 3-14
Refer to Figure 3-14. The gasoline market was initially in equilibrium at point
A)r.
B)s.
C)t.
D)u.
E)Other things constant, a decrease in the price of crude oil, an important ingredient used to produce gasoline, would likely move the equilibrium in this market toward point
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Deck 3: Demand, Supply, and the Market Process
1
A recent study suggested that moderate wine drinking may actually benefit one's health. If this information leads to an increased demand for wine, we would expect
A)both the price and quantity of wine sold to increase.
B)both the price and quantity of wine sold to decrease.
C)the price to decrease and the quantity of wine sold to increase.
D)the price to increase and the quantity of wine sold to decrease.
A)both the price and quantity of wine sold to increase.
B)both the price and quantity of wine sold to decrease.
C)the price to decrease and the quantity of wine sold to increase.
D)the price to increase and the quantity of wine sold to decrease.
both the price and quantity of wine sold to increase.
2
If we observe a decrease in the price of a good and an increase in the amount of the good bought and sold, this could be explained by
A)an increase in the supply of the good.
B)an increase in the demand for the good.
C)a decrease in the demand for the good.
D)a decrease in the supply of the good.
A)an increase in the supply of the good.
B)an increase in the demand for the good.
C)a decrease in the demand for the good.
D)a decrease in the supply of the good.
an increase in the supply of the good.
3
If the supply of a good decreased, what would be the effect on the equilibrium price and quantity?
A)Price would increase, and quantity would decrease.
B)Price would decrease, and quantity would decrease.
C)Price would increase, and quantity would increase.
D)Price would decrease, and quantity would increase.
A)Price would increase, and quantity would decrease.
B)Price would decrease, and quantity would decrease.
C)Price would increase, and quantity would increase.
D)Price would decrease, and quantity would increase.
Price would increase, and quantity would decrease.
4
If there is a decrease in demand for picture frames, we would expect
A)both the price and quantity sold to increase.
B)both the price and quantity sold to decrease.
C)the price to decrease and the quantity sold to increase.
D)the price to increase and the quantity sold to decrease.
A)both the price and quantity sold to increase.
B)both the price and quantity sold to decrease.
C)the price to decrease and the quantity sold to increase.
D)the price to increase and the quantity sold to decrease.
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5
After a hurricane in Florida knocked out the regional water supply for several days, the demand for bottled water increased sharply. In a market economy, how will this increase in demand affect the equilibrium price and quantity of bottled water?
A)Price will increase, and quantity will decrease.
B)Price will decrease, and quantity will decrease.
C)Price will decrease, and quantity will increase.
D)Price will increase, and quantity will increase.
A)Price will increase, and quantity will decrease.
B)Price will decrease, and quantity will decrease.
C)Price will decrease, and quantity will increase.
D)Price will increase, and quantity will increase.
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6
If we observe an increase in the price of a good and a decrease in the amount of the good bought and sold, this could be explained by
A)an increase in the supply of the good.
B)an increase in the demand for the good.
C)a decrease in the demand for the good.
D)a decrease in the supply of the good.
A)an increase in the supply of the good.
B)an increase in the demand for the good.
C)a decrease in the demand for the good.
D)a decrease in the supply of the good.
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7
How would a decrease in consumer income affect the market for lawn mowers?
A)Demand would decrease, leading to an increase in price and a reduction in quantity sold.
B)Demand would decrease, leading to a reduction in price and a reduction in quantity sold.
C)Demand would increase, leading to an increase in price and an increase in quantity sold.
D)Demand would increase, leading to a reduction in price and an increase in quantity sold.
A)Demand would decrease, leading to an increase in price and a reduction in quantity sold.
B)Demand would decrease, leading to a reduction in price and a reduction in quantity sold.
C)Demand would increase, leading to an increase in price and an increase in quantity sold.
D)Demand would increase, leading to a reduction in price and an increase in quantity sold.
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8
Which of the following will most likely result from a destruction of half of the Florida orange crop due to a hard freeze?
A)a decrease in the demand for oranges
B)an increase in the supply of oranges
C)an increase in the quantity of oranges bought and sold
D)an increase in the price of oranges
A)a decrease in the demand for oranges
B)an increase in the supply of oranges
C)an increase in the quantity of oranges bought and sold
D)an increase in the price of oranges
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9
If Georgia experiences a late frost that damages the peach crop, we should expect the
A)supply curve for peaches to shift to the right and the price of peaches to fall.
B)supply curve for peaches to shift to the left and the price of peaches to rise.
C)demand curve for peaches to shift to the left and the price of peaches to fall.
D)demand curve for peaches to shift to the right and the price of peaches to rise.
A)supply curve for peaches to shift to the right and the price of peaches to fall.
B)supply curve for peaches to shift to the left and the price of peaches to rise.
C)demand curve for peaches to shift to the left and the price of peaches to fall.
D)demand curve for peaches to shift to the right and the price of peaches to rise.
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10
Which of the following is the most likely effect of higher chicken prices on the price and quantity purchased of beef, a substitute product?
A)The price of beef will increase, and the quantity purchased will fall.
B)The price of beef will fall, and the quantity purchased will increase.
C)The price of beef will increase, and the quantity purchased will increase.
D)The price of beef will fall, and the quantity purchased will fall.
A)The price of beef will increase, and the quantity purchased will fall.
B)The price of beef will fall, and the quantity purchased will increase.
C)The price of beef will increase, and the quantity purchased will increase.
D)The price of beef will fall, and the quantity purchased will fall.
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11
Suppose prices for new homes have risen and sales of new homes have also risen. We can conclude that
A)the demand for new homes has risen.
B)the law of demand has been violated.
C)new firms have entered the construction industry.
D)construction firms must be facing higher costs.
A)the demand for new homes has risen.
B)the law of demand has been violated.
C)new firms have entered the construction industry.
D)construction firms must be facing higher costs.
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12
If the demand for a good increased, what would be the effect on the equilibrium price and quantity?
A)Price would increase, and quantity would decrease.
B)Price would decrease, and quantity would decrease.
C)Price would increase, and quantity would increase.
D)Price would decrease, and quantity would increase.
A)Price would increase, and quantity would decrease.
B)Price would decrease, and quantity would decrease.
C)Price would increase, and quantity would increase.
D)Price would decrease, and quantity would increase.
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13
Between 1994 and 2004, the monthly charge for cellular phone service decreased from $120 per month to $30 per month. At the same time, the number of subscribers increased from less than 10 million to more than 75 million. Which of the following provides the best explanation for these changes?
A)an increase in consumer income between 1994 and 2004
B)a reduction in the price of residential phone service, a substitute for cellular phone service
C)an increase in the wages of workers in the cellular phone industry
D)technological improvements that reduced the cost of supplying cellular phone service
A)an increase in consumer income between 1994 and 2004
B)a reduction in the price of residential phone service, a substitute for cellular phone service
C)an increase in the wages of workers in the cellular phone industry
D)technological improvements that reduced the cost of supplying cellular phone service
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14
If the demand for a good decreased, what would be the effect on the equilibrium price and quantity?
A)Price would increase, and quantity would decrease.
B)Price would decrease, and quantity would decrease.
C)Price would increase, and quantity would increase.
D)Price would decrease, and quantity would increase.
A)Price would increase, and quantity would decrease.
B)Price would decrease, and quantity would decrease.
C)Price would increase, and quantity would increase.
D)Price would decrease, and quantity would increase.
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15
If we observe an increase in the price of a good and an increase in the amount of the good bought and sold, this could be explained by
A)an increase in the supply of the good.
B)an increase in the demand for the good.
C)a decrease in the demand for the good.
D)a decrease in the supply of the good.
A)an increase in the supply of the good.
B)an increase in the demand for the good.
C)a decrease in the demand for the good.
D)a decrease in the supply of the good.
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16
Suppose a new law requires all piercing studios to pass tougher licensing tests and to begin using more costly sterilization methods. Other things constant, this law would cause
A)an increase in the supply of piercings and a lower price for piercings.
B)an increase in the supply of piercings and a higher price for piercings.
C)a decrease in the supply of piercings and a higher price for piercings.
D)a decrease in the supply of piercings and a lower price for piercings.
A)an increase in the supply of piercings and a lower price for piercings.
B)an increase in the supply of piercings and a higher price for piercings.
C)a decrease in the supply of piercings and a higher price for piercings.
D)a decrease in the supply of piercings and a lower price for piercings.
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17
How will an increase in the price of coffee affect the market for cocoa, a substitute good?
A)The supply of cocoa will increase, leading to a reduction in the price of cocoa.
B)The supply of cocoa will decrease, leading to an increase in the price of cocoa.
C)The demand for cocoa will increase, leading to an increase in the price of cocoa.
D)The demand for cocoa will decrease, leading to a reduction in the price of cocoa.
A)The supply of cocoa will increase, leading to a reduction in the price of cocoa.
B)The supply of cocoa will decrease, leading to an increase in the price of cocoa.
C)The demand for cocoa will increase, leading to an increase in the price of cocoa.
D)The demand for cocoa will decrease, leading to a reduction in the price of cocoa.
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18
Which of the following would most likely cause both a decrease in the price of plasma screen TVs and a decrease in the number sold?
A)an increase in the supply of plasma screen TVs
B)an increase in the demand for plasma screen TVs
C)a decrease in the supply of plasma screen TVs
D)a decrease in the demand for plasma screen TVs
A)an increase in the supply of plasma screen TVs
B)an increase in the demand for plasma screen TVs
C)a decrease in the supply of plasma screen TVs
D)a decrease in the demand for plasma screen TVs
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19
Which of the following is the most likely effect of lower apple juice prices on the price and quantity purchased of orange juice, a substitute product?
A)The price of orange juice will increase, and the quantity purchased will fall.
B)The price of orange juice will fall, and the quantity purchased will increase.
C)The price of orange juice will increase, and the quantity purchased will increase.
D)The price of orange juice will fall, and the quantity purchased will fall.
A)The price of orange juice will increase, and the quantity purchased will fall.
B)The price of orange juice will fall, and the quantity purchased will increase.
C)The price of orange juice will increase, and the quantity purchased will increase.
D)The price of orange juice will fall, and the quantity purchased will fall.
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20
If we observe a decrease in the price of a good and a decrease in the amount of the good bought and sold, this could be explained by
A)an increase in the supply of the good.
B)an increase in the demand for the good.
C)a decrease in the demand for the good.
D)a decrease in the supply of the good.
A)an increase in the supply of the good.
B)an increase in the demand for the good.
C)a decrease in the demand for the good.
D)a decrease in the supply of the good.
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21
Assume that supply decreases slightly and demand decreases greatly. Which of the following will happen?
A)Equilibrium price will fall and equilibrium quantity will rise.
B)Equilibrium price will rise and equilibrium quantity will fall.
C)Equilibrium price will rise and equilibrium quantity will rise.
D)Equilibrium price will fall and equilibrium quantity will fall.
E)Neither equilibrium price nor equilibrium quantity will change.
A)Equilibrium price will fall and equilibrium quantity will rise.
B)Equilibrium price will rise and equilibrium quantity will fall.
C)Equilibrium price will rise and equilibrium quantity will rise.
D)Equilibrium price will fall and equilibrium quantity will fall.
E)Neither equilibrium price nor equilibrium quantity will change.
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22
Assume that supply increases greatly and demand increases slightly. Which of the following will happen?
A)Equilibrium price will fall and equilibrium quantity will rise.
B)Equilibrium price will rise and equilibrium quantity will fall.
C)Equilibrium price will rise and equilibrium quantity will rise.
D)Equilibrium price will fall and equilibrium quantity will fall.
E)Neither equilibrium price nor equilibrium quantity will change.
A)Equilibrium price will fall and equilibrium quantity will rise.
B)Equilibrium price will rise and equilibrium quantity will fall.
C)Equilibrium price will rise and equilibrium quantity will rise.
D)Equilibrium price will fall and equilibrium quantity will fall.
E)Neither equilibrium price nor equilibrium quantity will change.
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23
Suppose demand decreases and supply decreases. Which of the following will happen?
A)Equilibrium price will rise, fall, or stay the same while equilibrium quantity will decrease.
B)Equilibrium price will rise, fall, or stay the same while equilibrium quantity will increase
C)Equilibrium quantity will rise, fall, or stay the same and equilibrium price will increase.
D)Equilibrium quantity will rise, fall, or stay the same while equilibrium price will decrease.
E)The change in equilibrium price and quantity cannot be determined.
A)Equilibrium price will rise, fall, or stay the same while equilibrium quantity will decrease.
B)Equilibrium price will rise, fall, or stay the same while equilibrium quantity will increase
C)Equilibrium quantity will rise, fall, or stay the same and equilibrium price will increase.
D)Equilibrium quantity will rise, fall, or stay the same while equilibrium price will decrease.
E)The change in equilibrium price and quantity cannot be determined.
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24
During a major war between two oil producing nations, there would likely be
A)an increase in the price of oil because the supply of oil would decrease.
B)an increase in the price of oil because the supply of oil would increase.
C)a decrease in the price of oil because the supply of oil would decrease.
D)a decrease in the price of oil because the supply of oil would increase.
A)an increase in the price of oil because the supply of oil would decrease.
B)an increase in the price of oil because the supply of oil would increase.
C)a decrease in the price of oil because the supply of oil would decrease.
D)a decrease in the price of oil because the supply of oil would increase.
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25
Suppose demand decreases and supply increases. Which of the following will happen?
A)Equilibrium price will rise, fall, or stay the same while equilibrium quantity will decrease.
B)Equilibrium price will rise, fall, or stay the same while equilibrium quantity will increase.
C)Equilibrium quantity will rise, fall, or stay the same and equilibrium price will increase.
D)Equilibrium quantity will rise, fall, or stay the same while equilibrium price will decrease.
E)The change in equilibrium price and quantity cannot be determined.
A)Equilibrium price will rise, fall, or stay the same while equilibrium quantity will decrease.
B)Equilibrium price will rise, fall, or stay the same while equilibrium quantity will increase.
C)Equilibrium quantity will rise, fall, or stay the same and equilibrium price will increase.
D)Equilibrium quantity will rise, fall, or stay the same while equilibrium price will decrease.
E)The change in equilibrium price and quantity cannot be determined.
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26
Suppose demand increases and supply increases. Which of the following will happen?
A)Equilibrium price will rise, fall, or stay the same while equilibrium quantity will decrease.
B)Equilibrium price will rise, fall, or stay the same while equilibrium quantity will increase.
C)Equilibrium quantity will rise, fall, or stay the same and equilibrium price will increase.
D)Equilibrium quantity will rise, fall, or stay the same while equilibrium price will decrease.
E)The change in equilibrium price and quantity cannot be determined.
A)Equilibrium price will rise, fall, or stay the same while equilibrium quantity will decrease.
B)Equilibrium price will rise, fall, or stay the same while equilibrium quantity will increase.
C)Equilibrium quantity will rise, fall, or stay the same and equilibrium price will increase.
D)Equilibrium quantity will rise, fall, or stay the same while equilibrium price will decrease.
E)The change in equilibrium price and quantity cannot be determined.
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27
Which of the following would most likely increase the price of automobiles?
A)a decrease in the price of steel used to produce automobiles
B)an increase in the price of gasoline
C)a decrease in consumer income
D)the United Auto Workers union obtaining a substantial wage increase for auto workers
A)a decrease in the price of steel used to produce automobiles
B)an increase in the price of gasoline
C)a decrease in consumer income
D)the United Auto Workers union obtaining a substantial wage increase for auto workers
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28
If there is an increase in both the supply and demand for a good, which of the following will definitely occur?
A)The price of the good will increase.
B)The price of the good will decrease.
C)The equilibrium quantity will increase.
D)The equilibrium quantity will decrease.
A)The price of the good will increase.
B)The price of the good will decrease.
C)The equilibrium quantity will increase.
D)The equilibrium quantity will decrease.
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29
Suppose both the equilibrium price and quantity fall for a particular product. Which of the following best explains this situation?
A)Supply and demand simultaneously increased and the shift in supply was greater than the shift in demand.
B)Supply and demand simultaneously increased and the shift in supply was less than the shift in demand.
C)Supply and demand simultaneously decreased and the shift in supply was greater than the shift in demand.
D)Supply and demand simultaneously decreased and the shift in supply was less than the shift in demand.
A)Supply and demand simultaneously increased and the shift in supply was greater than the shift in demand.
B)Supply and demand simultaneously increased and the shift in supply was less than the shift in demand.
C)Supply and demand simultaneously decreased and the shift in supply was greater than the shift in demand.
D)Supply and demand simultaneously decreased and the shift in supply was less than the shift in demand.
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30
Assume that supply increases slightly and demand increases greatly. Which of the following will happen?
A)Equilibrium price will fall and equilibrium quantity will rise.
B)Equilibrium price will rise and equilibrium quantity will fall.
C)Equilibrium price will rise and equilibrium quantity will rise.
D)Equilibrium price will fall and equilibrium quantity will fall.
E)Neither equilibrium price nor equilibrium quantity will change.
A)Equilibrium price will fall and equilibrium quantity will rise.
B)Equilibrium price will rise and equilibrium quantity will fall.
C)Equilibrium price will rise and equilibrium quantity will rise.
D)Equilibrium price will fall and equilibrium quantity will fall.
E)Neither equilibrium price nor equilibrium quantity will change.
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31
Which of the following would increase the price of fitness equipment?
A)a reduction in consumer income
B)a major study indicating that a 30-minute workout each day improved health more than was previously thought to be the case
C)a decrease in the price of steel used to produce the equipment
D)all of the above
A)a reduction in consumer income
B)a major study indicating that a 30-minute workout each day improved health more than was previously thought to be the case
C)a decrease in the price of steel used to produce the equipment
D)all of the above
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32
Assume that supply decreases greatly and demand decreases slightly. Which of the following will happen?
A)Equilibrium price will fall and equilibrium quantity will rise.
B)Equilibrium price will rise and equilibrium quantity will fall.
C)Equilibrium price will rise and equilibrium quantity will rise.
D)Equilibrium price will fall and equilibrium quantity will fall.
E)Neither equilibrium price nor equilibrium quantity will change.
A)Equilibrium price will fall and equilibrium quantity will rise.
B)Equilibrium price will rise and equilibrium quantity will fall.
C)Equilibrium price will rise and equilibrium quantity will rise.
D)Equilibrium price will fall and equilibrium quantity will fall.
E)Neither equilibrium price nor equilibrium quantity will change.
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33
Suppose both the equilibrium price and quantity rise for a particular product. Which of the following best explains this situation?
A)Supply and demand simultaneously increased and the shift in supply was greater than the shift in demand.
B)Supply and demand simultaneously increased and the shift in supply was less than the shift in demand.
C)Supply and demand simultaneously decreased and the shift in supply was greater than the shift in demand.
D)Supply and demand simultaneously decreased and the shift in supply was less than the shift in demand.
A)Supply and demand simultaneously increased and the shift in supply was greater than the shift in demand.
B)Supply and demand simultaneously increased and the shift in supply was less than the shift in demand.
C)Supply and demand simultaneously decreased and the shift in supply was greater than the shift in demand.
D)Supply and demand simultaneously decreased and the shift in supply was less than the shift in demand.
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34
Which of the following is most likely to lead to an increase in the rental price of apartments near your campus?
A)lower property taxes on apartment buildings
B)an unexpected increase in enrollment at your college
C)lower prices for the bricks used in the construction of apartments
D)the building of a new large dormitory on the college campus
A)lower property taxes on apartment buildings
B)an unexpected increase in enrollment at your college
C)lower prices for the bricks used in the construction of apartments
D)the building of a new large dormitory on the college campus
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35
If there is a decrease in both the supply and demand for a good, which of the following will definitely occur?
A)The price of the good will increase.
B)The price of the good will decrease.
C)The equilibrium quantity will increase.
D)The equilibrium quantity will decrease.
A)The price of the good will increase.
B)The price of the good will decrease.
C)The equilibrium quantity will increase.
D)The equilibrium quantity will decrease.
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36
How would a decrease in the price of the feed grains used to feed cattle affect the market for beef?
A)The demand for beef would increase, increasing beef prices.
B)The demand for beef would decrease, decreasing beef prices.
C)The supply of beef would increase, decreasing beef prices.
D)The supply of beef would decrease, increasing beef prices.
A)The demand for beef would increase, increasing beef prices.
B)The demand for beef would decrease, decreasing beef prices.
C)The supply of beef would increase, decreasing beef prices.
D)The supply of beef would decrease, increasing beef prices.
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37
Which of the following would most likely cause the price of wheat to decline?
A)an increase in the production costs of corn, a substitute for wheat
B)a decrease in the price of soybeans, a substitute for wheat
C)an increase in the price of fertilizer, a resource used to produce wheat
D)a sandwich craze among Americans, causing increased demand for whole-wheat bread
A)an increase in the production costs of corn, a substitute for wheat
B)a decrease in the price of soybeans, a substitute for wheat
C)an increase in the price of fertilizer, a resource used to produce wheat
D)a sandwich craze among Americans, causing increased demand for whole-wheat bread
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38
How would a decrease in the cost of production affect the market for video games?
A)Supply would decrease, leading to an increase in price and a reduction in quantity sold.
B)Supply would decrease, leading to a reduction in price and a reduction in quantity sold.
C)Supply would increase, leading to an increase in price and an increase in quantity sold.
D)Supply would increase, leading to a reduction in price and an increase in quantity sold.
A)Supply would decrease, leading to an increase in price and a reduction in quantity sold.
B)Supply would decrease, leading to a reduction in price and a reduction in quantity sold.
C)Supply would increase, leading to an increase in price and an increase in quantity sold.
D)Supply would increase, leading to a reduction in price and an increase in quantity sold.
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39
Which of the following would reduce the price of basketballs and increase the quantity sold?
A)An increase in the demand for basketballs.
B)A decrease in the demand for basketballs.
C)A decrease in the supply of basketballs.
D)An increase in the supply of basketballs.
A)An increase in the demand for basketballs.
B)A decrease in the demand for basketballs.
C)A decrease in the supply of basketballs.
D)An increase in the supply of basketballs.
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40
Suppose demand increases and supply decreases. Which of the following will happen?
A)Equilibrium price will rise, fall, or stay the same while equilibrium quantity will decrease.
B)Equilibrium price will rise, fall, or stay the same while equilibrium quantity will increase.
C)Equilibrium quantity will rise, fall, or stay the same and equilibrium price will increase.
D)Equilibrium quantity will rise, fall, or stay the same while equilibrium price will decrease.
E)The change in equilibrium price and quantity cannot be determined.
A)Equilibrium price will rise, fall, or stay the same while equilibrium quantity will decrease.
B)Equilibrium price will rise, fall, or stay the same while equilibrium quantity will increase.
C)Equilibrium quantity will rise, fall, or stay the same and equilibrium price will increase.
D)Equilibrium quantity will rise, fall, or stay the same while equilibrium price will decrease.
E)The change in equilibrium price and quantity cannot be determined.
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41
When a conflict arises in a major oil-exporting area of the world, such as the Middle East, the price of gasoline already in the storage tanks at local gas stations usually increases. Which of the following best explains this occurrence?
A)Gas station owners anticipate consumers will buy more gasoline as gasoline prices increase.
B)Gas station owners are attempting to repeal the laws of supply and demand.
C)Gas station owners anticipate higher replacement costs for their supply of gasoline and, therefore, raise their prices in response to this higher expected cost.
D)A decline in consumer demand generally causes gas station owners to raise their prices.
A)Gas station owners anticipate consumers will buy more gasoline as gasoline prices increase.
B)Gas station owners are attempting to repeal the laws of supply and demand.
C)Gas station owners anticipate higher replacement costs for their supply of gasoline and, therefore, raise their prices in response to this higher expected cost.
D)A decline in consumer demand generally causes gas station owners to raise their prices.
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42
When oil prices increased to record levels in the 1970s, salaries dramatically increased for petroleum geologists skilled in finding oil. Those geologists who moved from other areas to the higher paying jobs were
A)seeking to profit from society's needs rather than following the guidance of the invisible hand, which would have led them to seek jobs serving society rather than jobs with higher pay.
B)following the guidance of the invisible hand and probably serving society's best interests as well as their own.
C)causing oil prices to rise even more by moving to jobs with higher salaries.
D)helping themselves but hurting the economy.
A)seeking to profit from society's needs rather than following the guidance of the invisible hand, which would have led them to seek jobs serving society rather than jobs with higher pay.
B)following the guidance of the invisible hand and probably serving society's best interests as well as their own.
C)causing oil prices to rise even more by moving to jobs with higher salaries.
D)helping themselves but hurting the economy.
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43
Under competitive conditions, market prices
A)generally convey little information about the value and cost of goods.
B)do not usually have much of an effect on the decisions of individuals.
C)are incapable of coordinating the actions of buyers and sellers.
D)generally bring the self-interest of individuals into harmony with the general welfare.
A)generally convey little information about the value and cost of goods.
B)do not usually have much of an effect on the decisions of individuals.
C)are incapable of coordinating the actions of buyers and sellers.
D)generally bring the self-interest of individuals into harmony with the general welfare.
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44
Market prices are
A)conveyors of information.
B)determined by the interactions of supply and demand in voluntary exchange.
C)indicators of the relative scarcity of resources and products.
D)all of the above.
A)conveyors of information.
B)determined by the interactions of supply and demand in voluntary exchange.
C)indicators of the relative scarcity of resources and products.
D)all of the above.
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45
Which of the following is necessary for the invisible hand of market prices to work properly?
A)buyers and sellers who generally tend to disregard their own self-interest
B)democratic political procedures and highly regulated markets
C)price controls that restrict the movement of market prices
D)competition and property rights that are well-defined and enforced
A)buyers and sellers who generally tend to disregard their own self-interest
B)democratic political procedures and highly regulated markets
C)price controls that restrict the movement of market prices
D)competition and property rights that are well-defined and enforced
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46
Which of the following observations was made famous by Adam Smith in his book The Wealth of Nations?
A)There is no such thing as a free lunch.
B)People buy more when prices are low than when prices are high.
C)No matter how much people earn, they tend to spend more than they earn.
D)Households and firms interacting in markets are guided by an "invisible hand" that leads them to desirable market outcomes.
A)There is no such thing as a free lunch.
B)People buy more when prices are low than when prices are high.
C)No matter how much people earn, they tend to spend more than they earn.
D)Households and firms interacting in markets are guided by an "invisible hand" that leads them to desirable market outcomes.
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47
"He [the producer] intends only his gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention." What famous economist made this statement?
A)Alfred Marshall
B)Friedrich Hayek
C)Adam Smith
D)David Ricardo
A)Alfred Marshall
B)Friedrich Hayek
C)Adam Smith
D)David Ricardo
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48
According to Adam Smith, what is the primary source of a nation's wealth?
A)The amount of gold and silver in the government's possession.
B)A spirit of cooperation in which people share according to their means.
C)Strong central planning authorities.
D)The people's ability to produce products and trade in free markets.
A)The amount of gold and silver in the government's possession.
B)A spirit of cooperation in which people share according to their means.
C)Strong central planning authorities.
D)The people's ability to produce products and trade in free markets.
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49
Market prices provide information to consumers, helping them coordinate their activities so long as
A)competition is present and buyers and sellers are free to choose mutually agreeable prices.
B)prices are not allowed to rise too high, causing a shortage.
C)prices are legally kept equal in all markets, preventing unfair price increases in markets with shortages and unfair price decreases when a market surplus is present.
D)the government carefully screens producers and effectively keeps inefficient producers out of the market.
A)competition is present and buyers and sellers are free to choose mutually agreeable prices.
B)prices are not allowed to rise too high, causing a shortage.
C)prices are legally kept equal in all markets, preventing unfair price increases in markets with shortages and unfair price decreases when a market surplus is present.
D)the government carefully screens producers and effectively keeps inefficient producers out of the market.
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50
According to the invisible hand principle, competitive markets generally
A)bring the self-interest of individuals into harmony with the efficient allocation of resources, even though centralized planning of economic activities is absent.
B)bring the self-interest of individuals into harmony with the efficient allocation of resources when the behavior of individuals is directed by democratic centralized planning.
C)require central direction; otherwise, the actions of self-interested individuals will conflict with the general interests of society.
D)promote the economic welfare of self-interested producers at the expense of unorganized groups such as consumers and taxpayers.
A)bring the self-interest of individuals into harmony with the efficient allocation of resources, even though centralized planning of economic activities is absent.
B)bring the self-interest of individuals into harmony with the efficient allocation of resources when the behavior of individuals is directed by democratic centralized planning.
C)require central direction; otherwise, the actions of self-interested individuals will conflict with the general interests of society.
D)promote the economic welfare of self-interested producers at the expense of unorganized groups such as consumers and taxpayers.
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51
Which of the following is a major implication of the invisible hand concept?
A)When directed by competitive market prices, the actions of self-interested individuals will tend to promote overall economic prosperity.
B)Prosperity cannot be achieved unless the selfish nature of people can be changed.
C)Competition is harmful to the health of an economy because it results in wasteful duplication.
D)Government-operated firms tend to have higher efficiency and lower costs than private sector firms.
A)When directed by competitive market prices, the actions of self-interested individuals will tend to promote overall economic prosperity.
B)Prosperity cannot be achieved unless the selfish nature of people can be changed.
C)Competition is harmful to the health of an economy because it results in wasteful duplication.
D)Government-operated firms tend to have higher efficiency and lower costs than private sector firms.
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52
Which of the following is not a function of prices in a market system?
A)Prices have the crucial job of balancing supply and demand.
B)Prices send signals to buyers and sellers to help them make rational economic decisions.
C)Prices coordinate economic activity.
D)Prices ensure an equitable distribution of goods and services among consumers.
A)Prices have the crucial job of balancing supply and demand.
B)Prices send signals to buyers and sellers to help them make rational economic decisions.
C)Prices coordinate economic activity.
D)Prices ensure an equitable distribution of goods and services among consumers.
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53
Adam Smith's invisible hand principle stresses
A)that benevolence is a powerful motivator that encourages individuals to engage in productive economic activity.
B)the tendency of the competitive market process to direct self-interested individuals into activities that enhance the economic welfare of society.
C)the potential of government regulation as a means of bringing the self interest of individuals into harmony with the economic welfare of society.
D)the tendency of self-interested individuals to pursue activities that benefit themselves but harm the overall economic welfare of society.
A)that benevolence is a powerful motivator that encourages individuals to engage in productive economic activity.
B)the tendency of the competitive market process to direct self-interested individuals into activities that enhance the economic welfare of society.
C)the potential of government regulation as a means of bringing the self interest of individuals into harmony with the economic welfare of society.
D)the tendency of self-interested individuals to pursue activities that benefit themselves but harm the overall economic welfare of society.
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54
"He [the producer] intends only his gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention." What is the "invisible hand" referred to in this statement?
A)the elasticity of the market demand curve
B)the power of government when decisions are made democratically
C)the guidelines and regulations set for his industry by the government
D)the incentive structure accompanying market prices
A)the elasticity of the market demand curve
B)the power of government when decisions are made democratically
C)the guidelines and regulations set for his industry by the government
D)the incentive structure accompanying market prices
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55
Prices direct economic activity in a market economy by
A)influencing the actions of buyers and sellers.
B)reducing scarcity of the goods and services produced.
C)eliminating the need for government intervention.
D)allocating goods and services in the most equitable way.
A)influencing the actions of buyers and sellers.
B)reducing scarcity of the goods and services produced.
C)eliminating the need for government intervention.
D)allocating goods and services in the most equitable way.
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56
Price is important in a market economy because it
A)eliminates imbalances between supply and demand.
B)serves as the rationing mechanism for the limited supplies of goods and services.
C)coordinates the choices of consumers and producers and brings them into harmony.
D)is all of the above.
A)eliminates imbalances between supply and demand.
B)serves as the rationing mechanism for the limited supplies of goods and services.
C)coordinates the choices of consumers and producers and brings them into harmony.
D)is all of the above.
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57
Which of the following is a function performed by market prices?
A)Market prices communicate information to buyers and sellers.
B)Market prices coordinate the decisions of buyers and sellers.
C)Market prices motivate entrepreneurs to produce those products that are currently most desired relative to their costs of production.
D)All of the above are functions performed by market prices.
A)Market prices communicate information to buyers and sellers.
B)Market prices coordinate the decisions of buyers and sellers.
C)Market prices motivate entrepreneurs to produce those products that are currently most desired relative to their costs of production.
D)All of the above are functions performed by market prices.
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58
Market prices generally promote social cooperation because they
A)clarify the options available to people and encourage individuals to help others in exchange for income.
B)encourage government officials to levy taxes to provide people with the necessities of life.
C)eliminate scarcity by allowing prices to rise.
D)reward only altruistic actions, whereby, people seek to help others without the expectation of personal gain.
A)clarify the options available to people and encourage individuals to help others in exchange for income.
B)encourage government officials to levy taxes to provide people with the necessities of life.
C)eliminate scarcity by allowing prices to rise.
D)reward only altruistic actions, whereby, people seek to help others without the expectation of personal gain.
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59
According to Adam Smith's invisible hand principle, productive actions that promote the general welfare of society will be undertaken when
A)political representatives are elected democratically.
B)competitive markets direct the actions of self-interested individuals.
C)the selfish instincts of individuals are controlled.
D)workers are able to organize and develop strong unions.
A)political representatives are elected democratically.
B)competitive markets direct the actions of self-interested individuals.
C)the selfish instincts of individuals are controlled.
D)workers are able to organize and develop strong unions.
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60
Which of the following most accurately describes the invisible hand concept?
A)Wise central planning by government is necessary for the efficient use of resources.
B)In a democratic setting, majority rule will result in the efficient use of resources.
C)In a market setting, when individuals pursue their own interests, they simultaneously tend to promote the public interest.
D)In a market setting, when individuals pursue their own interests, they tend to engage in activities that lower the overall economic welfare of society.
A)Wise central planning by government is necessary for the efficient use of resources.
B)In a democratic setting, majority rule will result in the efficient use of resources.
C)In a market setting, when individuals pursue their own interests, they simultaneously tend to promote the public interest.
D)In a market setting, when individuals pursue their own interests, they tend to engage in activities that lower the overall economic welfare of society.
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61
Figure 3-6
In Figure 3-6, suppose D1 and S1 indicate initial conditions in the market for ice cream. Which of the following changes would tend to cause a shift from S1 to S2 in the market for ice cream?
A)an increase in the price of sugar, an ingredient used to produce ice cream
B)a decrease in the price of frozen yogurt, a substitute for ice cream
C)abnormally hot weather that temporarily increases consumer desire for ice cream
D)a decrease in the price of milk, an ingredient used to produce ice cream
In Figure 3-6, suppose D1 and S1 indicate initial conditions in the market for ice cream. Which of the following changes would tend to cause a shift from S1 to S2 in the market for ice cream?
A)an increase in the price of sugar, an ingredient used to produce ice cream
B)a decrease in the price of frozen yogurt, a substitute for ice cream
C)abnormally hot weather that temporarily increases consumer desire for ice cream
D)a decrease in the price of milk, an ingredient used to produce ice cream
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62
Use the figure below to answer the following question(s).
Figure 3-8
In Figure 3-8, if the initial demand and supply for soybeans were D1 and S1, how would a decrease in the cost of producing soybeans affect the market for soybeans?
A)Demand would increase to D2, price would increase to P2, and the quantity would increase to S.
B)Supply would increase to S2, price would decrease to P0, and the quantity would increase to S.
C)Both demand and supply would increase so the price would remain at P1, but the quantity would increase to T.
D)None of the above would occur.
Figure 3-8
In Figure 3-8, if the initial demand and supply for soybeans were D1 and S1, how would a decrease in the cost of producing soybeans affect the market for soybeans?
A)Demand would increase to D2, price would increase to P2, and the quantity would increase to S.
B)Supply would increase to S2, price would decrease to P0, and the quantity would increase to S.
C)Both demand and supply would increase so the price would remain at P1, but the quantity would increase to T.
D)None of the above would occur.
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63
Use the figure below to answer the following question(s).
Figure 3-3
In Figure 3-3, if the initial demand for margarine were D1, the impact of a decrease in the price of butter, a substitute good for margarine, would be illustrated as
A)a shift in the demand curve to D2.
B)a shift in the demand curve to D3.
C)a movement downward to the right along the original demand curve D1.
D)none of the above.
Figure 3-3
In Figure 3-3, if the initial demand for margarine were D1, the impact of a decrease in the price of butter, a substitute good for margarine, would be illustrated as
A)a shift in the demand curve to D2.
B)a shift in the demand curve to D3.
C)a movement downward to the right along the original demand curve D1.
D)none of the above.
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64
Use the figure below to answer the following question(s).
Figure 3-9
Given the demand (D) and supply (S) for gasoline in Figure 3-9, if the price of gasoline were $3 per gallon,
A)consumers would wish to purchase more than was being supplied.
B)producers would be supplying more than consumers wished to purchase.
C)the quantity consumers wished to purchase would equal the quantity that producers wished to supply.
D)there would be a tendency for the price of gasoline to rise.
Figure 3-9
Given the demand (D) and supply (S) for gasoline in Figure 3-9, if the price of gasoline were $3 per gallon,
A)consumers would wish to purchase more than was being supplied.
B)producers would be supplying more than consumers wished to purchase.
C)the quantity consumers wished to purchase would equal the quantity that producers wished to supply.
D)there would be a tendency for the price of gasoline to rise.
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65
Use the figure below to answer the following question(s).
Figure 3-13
Refer to Figure 3-13. The market for margarine was initially in equilibrium at point
A)r.
B)s.
C)t.
D)u.
E)Other things constant, a decrease in the price of butter, a close substitute for margarine, would likely move the equilibrium in this market toward point
Figure 3-13
Refer to Figure 3-13. The market for margarine was initially in equilibrium at point
A)r.
B)s.
C)t.
D)u.
E)Other things constant, a decrease in the price of butter, a close substitute for margarine, would likely move the equilibrium in this market toward point
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66
Figure 3-5
In Figure 3-5, if the initial demand for margarine were D1, an increase in the price of butter, which is a substitute for margarine, would tend to cause which of the following changes in the market for margarine?
A)a shift in the demand curve from D1 to D2
B)a shift in the demand curve from D2 to D1
C)a movement along demand curve D1 from a to b
D)a movement along demand curve D1 from b to a
In Figure 3-5, if the initial demand for margarine were D1, an increase in the price of butter, which is a substitute for margarine, would tend to cause which of the following changes in the market for margarine?
A)a shift in the demand curve from D1 to D2
B)a shift in the demand curve from D2 to D1
C)a movement along demand curve D1 from a to b
D)a movement along demand curve D1 from b to a
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67
Figure 3-7
In Figure 3-7, suppose D1 and S1 indicate the initial conditions in the market for ice cream. Which of the following changes would tend to cause the shift from D1 to D2 in the market for ice cream?
A)a decrease in the price of sugar, an ingredient used to produce ice cream
B)an increase in the price of frozen yogurt, a substitute for ice cream
C)abnormally cold weather that decreased consumer desire for ice cream
D)an increase in the price of milk, an ingredient used to produce ice cream
In Figure 3-7, suppose D1 and S1 indicate the initial conditions in the market for ice cream. Which of the following changes would tend to cause the shift from D1 to D2 in the market for ice cream?
A)a decrease in the price of sugar, an ingredient used to produce ice cream
B)an increase in the price of frozen yogurt, a substitute for ice cream
C)abnormally cold weather that decreased consumer desire for ice cream
D)an increase in the price of milk, an ingredient used to produce ice cream
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68
Use the figure below to answer the following question(s).
Figure 3-3
In Figure 3-3, if the initial demand for margarine were D1, the impact of an increase in the price of margarine from $0.35 to $0.40 per pound on consumer purchases would be illustrated as
A)a shift in the demand curve to D2.
B)a shift in the demand curve to D3.
C)a movement upward to the left along the original demand curve D1.
D)none of the above.
Figure 3-3
In Figure 3-3, if the initial demand for margarine were D1, the impact of an increase in the price of margarine from $0.35 to $0.40 per pound on consumer purchases would be illustrated as
A)a shift in the demand curve to D2.
B)a shift in the demand curve to D3.
C)a movement upward to the left along the original demand curve D1.
D)none of the above.
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69
Use the figure below to answer the following question(s).
Figure 3-9
Given the demand (D) and supply (S) for gasoline in Figure 3-9, if the price of gasoline were $1 per gallon,
A)consumers would wish to purchase more than was being supplied.
B)producers would be supplying more than consumers wished to purchase.
C)the quantity consumers wished to purchase would equal the quantity that producers wished to supply.
D)there would be a tendency for the price of gasoline to fall.
Figure 3-9
Given the demand (D) and supply (S) for gasoline in Figure 3-9, if the price of gasoline were $1 per gallon,
A)consumers would wish to purchase more than was being supplied.
B)producers would be supplying more than consumers wished to purchase.
C)the quantity consumers wished to purchase would equal the quantity that producers wished to supply.
D)there would be a tendency for the price of gasoline to fall.
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70
Figure 3-2
Given the supply and demand conditions illustrated in Figure 3-2, the equilibrium price of steak is
A)$2 per pound.
B)$4 per pound.
C)$6 per pound.
D)$8 per pound.
Given the supply and demand conditions illustrated in Figure 3-2, the equilibrium price of steak is
A)$2 per pound.
B)$4 per pound.
C)$6 per pound.
D)$8 per pound.
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71
Use the figure below to answer the following question(s).
Figure 3-13
Refer to Figure 3-13. The market for margarine was initially in equilibrium at point
A)r.
B)s.
C)t.
D)u.
E)Other things constant, an increase in the price of soybean oil, an important ingredient used to produce margarine, would likely move the equilibrium in this market toward point
Figure 3-13
Refer to Figure 3-13. The market for margarine was initially in equilibrium at point
A)r.
B)s.
C)t.
D)u.
E)Other things constant, an increase in the price of soybean oil, an important ingredient used to produce margarine, would likely move the equilibrium in this market toward point
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72
Figure 3-10
Figure 3-10 illustrates the conditions of demand and supply in the market for compact discs. Indicate the equilibrium price and quantity.
A)price, $20; quantity, 2,000
B)price, $15; quantity, 3,000
C)price, $10; quantity, 2,000
D)price, $10; quantity, 4,000
Figure 3-10 illustrates the conditions of demand and supply in the market for compact discs. Indicate the equilibrium price and quantity.
A)price, $20; quantity, 2,000
B)price, $15; quantity, 3,000
C)price, $10; quantity, 2,000
D)price, $10; quantity, 4,000
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73
Use the figure below to answer the following question(s).
Figure 3-14
Refer to Figure 3-14. The gasoline market was initially in equilibrium at point
A)r.
B)s.
C)t.
D)u.
E)Other things constant, an increase in the popularity and use of Sport Utility Vehicles (SUVs) that consume more gasoline per mile driven than most other types of cars would likely move the equilibrium in this market toward point
Figure 3-14
Refer to Figure 3-14. The gasoline market was initially in equilibrium at point
A)r.
B)s.
C)t.
D)u.
E)Other things constant, an increase in the popularity and use of Sport Utility Vehicles (SUVs) that consume more gasoline per mile driven than most other types of cars would likely move the equilibrium in this market toward point
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74
Figure 3-4
Figure 3-4 shows conditions in the market for beef. A reduction in the price of the grain used to feed cattle results in
A)the supply curve for beef shifting to the left resulting in higher beef prices and a lower quantity sold.
B)the supply curve for beef shifting to the right resulting in lower beef prices and a higher quantity sold.
C)the demand curve for beef shifting to the left resulting in lower beef prices and a lower quantity sold.
D)the demand curve for beef shifting to the right resulting in higher beef prices and a higher quantity sold.
Figure 3-4 shows conditions in the market for beef. A reduction in the price of the grain used to feed cattle results in
A)the supply curve for beef shifting to the left resulting in higher beef prices and a lower quantity sold.
B)the supply curve for beef shifting to the right resulting in lower beef prices and a higher quantity sold.
C)the demand curve for beef shifting to the left resulting in lower beef prices and a lower quantity sold.
D)the demand curve for beef shifting to the right resulting in higher beef prices and a higher quantity sold.
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75
Use the figure below to answer the following question(s).
Figure 3-9
In Figure 3-9, if D and S represent the demand and supply for gasoline, what is the equilibrium price and quantity?
A)price, $1; quantity, 20
B)price, $2; quantity, 30
C)price, $3; quantity, 40
D)price, $4; quantity, 50
Figure 3-9
In Figure 3-9, if D and S represent the demand and supply for gasoline, what is the equilibrium price and quantity?
A)price, $1; quantity, 20
B)price, $2; quantity, 30
C)price, $3; quantity, 40
D)price, $4; quantity, 50
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76
Figure 3-12
In Figure 3-12, suppose D1 and S1 indicate initial conditions in the market for ice cream. Which of the following changes would tend to shift this market from D1 to D2?
A)an increase in the price of milk, an ingredient used to produce ice cream
B)an increase in the price of frozen yogurt, a substitute for ice cream
C)a decrease in the price of sugar, an ingredient used to produce ice cream
D)a decrease in consumer income
In Figure 3-12, suppose D1 and S1 indicate initial conditions in the market for ice cream. Which of the following changes would tend to shift this market from D1 to D2?
A)an increase in the price of milk, an ingredient used to produce ice cream
B)an increase in the price of frozen yogurt, a substitute for ice cream
C)a decrease in the price of sugar, an ingredient used to produce ice cream
D)a decrease in consumer income
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77
Figure 3-11
In Figure 3-11, suppose D1 and S1 indicate initial conditions in the market for kitchen cabinets. Which of the following would tend to cause the supply curve to shift from S1 to S2?
A)the invention of "folding" plates and cups that take up substantially less storage space in the kitchen
B)a decrease in consumer income
C)a decrease in the price of wood, a resource used to produce kitchen cabinets
D)an increase in the price of steel hinges, a resource used to produce kitchen cabinets
In Figure 3-11, suppose D1 and S1 indicate initial conditions in the market for kitchen cabinets. Which of the following would tend to cause the supply curve to shift from S1 to S2?
A)the invention of "folding" plates and cups that take up substantially less storage space in the kitchen
B)a decrease in consumer income
C)a decrease in the price of wood, a resource used to produce kitchen cabinets
D)an increase in the price of steel hinges, a resource used to produce kitchen cabinets
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78
Figure 3-15
Refer to Figure 3-15. Which area represents producer surplus when the price is P1?
A)BCE
B)ACF
C)ABED
D)DEF
Refer to Figure 3-15. Which area represents producer surplus when the price is P1?
A)BCE
B)ACF
C)ABED
D)DEF
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79
Figure 3-1
Which of the following is true regarding the market for steak shown in Figure 3-1?
A)If the price of steak were $2 per pound, producers would want to supply less steak than consumers would want to buy.
B)If the price of steak were $4 per pound, producers would want to supply more steak than consumers would want to buy.
C)If the price of steak were $3 per pound, producers would want to supply the same amount of steak that consumers would want to buy.
D)All of the above are true regarding the market for steak shown in the figure.
Which of the following is true regarding the market for steak shown in Figure 3-1?
A)If the price of steak were $2 per pound, producers would want to supply less steak than consumers would want to buy.
B)If the price of steak were $4 per pound, producers would want to supply more steak than consumers would want to buy.
C)If the price of steak were $3 per pound, producers would want to supply the same amount of steak that consumers would want to buy.
D)All of the above are true regarding the market for steak shown in the figure.
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80
Use the figure below to answer the following question(s).
Figure 3-14
Refer to Figure 3-14. The gasoline market was initially in equilibrium at point
A)r.
B)s.
C)t.
D)u.
E)Other things constant, a decrease in the price of crude oil, an important ingredient used to produce gasoline, would likely move the equilibrium in this market toward point
Figure 3-14
Refer to Figure 3-14. The gasoline market was initially in equilibrium at point
A)r.
B)s.
C)t.
D)u.
E)Other things constant, a decrease in the price of crude oil, an important ingredient used to produce gasoline, would likely move the equilibrium in this market toward point
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