Deck 3: Supply and Demand

Question 1

Recall the discussion about the demand for oil in your textbook. Which of the following correctly explains why the demand curve for oil is negatively sloped? As the price of oil rises:

A) consumers use oil for more and varied purposes.
B) consumers increasingly use oil only for those purposes without good substitutes.
C) consumers have an incentive to use oil more freely.
D) more producers are more willing and able to produce oil.

Answer 1

consumers increasingly use oil only for those purposes without good substitutes.

Question 2

The demand curve:

A) shows how much buyers are willing and able to buy at different prices.
B) is the amount that buyers are willing and able to buy at a particular price.
C) shows how much sellers are willing and able to sell at different prices.
D) is the amount that sellers are willing and able to sell at a particular price.

Answer 2

shows how much buyers are willing and able to buy at different prices.

Question 3

The law of demand states that:

A) the lower the price, the greater the quantity demanded.
B) the higher the price, the higher the quantity demanded.
C) the demand curve is upward sloping.
D) an increase in income increases the quantity demanded.

Answer 3

the lower the price, the greater the quantity demanded.

Question 4

The quantity demanded is the quantity that buyers are:

A) willing to buy but they cannot afford to pay.
B) able to buy at a given income level but not willing to pay.
C) willing to buy at a given income level.
D) willing and able to buy at a given price.

Question 5

Figure: Religion This graph illustrates the work of psychologists Harvey Whitehouse and Quentin Atkinson, as published in the April 23-29, 2011 issue of The Economist. The "unpleasantness" of religious rituals (0 is low, 5 is high) is along the x-axis. How often the religion requires the ritual to be performed is along the y-axis. What economic concept does this diagram represent?

A) opportunity cost
B) consumer surplus
C) a demand curve
D) an inferior good

Question 6

Use the following to answer questions: Figure: Good X
(Figure: Good X) From the figure, the maximum price that consumers are willing to pay for _____ units of Good X is _____ per unit.

A) 36; $4
B) 11; $4
C) 36; $12
D) 26; $4

Question 7

Figure: Demand Curve Refer to the figure. What is the maximum amount that buyers are willing and able to pay at a price of $45 per book?

A) 300 books
B) 450 books
C) 100 books
D) 0 books

Question 8

Figure: Demand Curve Which statement is TRUE regarding the figure?

A) At a price of $6 per unit, consumers are willing and able to buy 10 units.
B) The maximum price demanders are willing to pay for 15 units is $6 per unit.
C) The higher the price, the greater the quantity demanded.
D) At a price of $3.75 per unit, consumers are indifferent between buying 10 and 15 units.

Question 9

Figure: Demand Curve Refer to the figure. What is the maximum price per book that buyers are willing to pay for 2,500 books?

A) $60
B) $45
C) $30
D) $15

Question 10

Quantity demanded:

A) shows how much buyers are willing and able to buy at different prices.
B) is the amount that buyers are willing and able to buy at a particular price.
C) shows how much sellers are willing and able to sell at different prices.
D) is the amount that sellers are willing and able to sell at a particular price.

Question 11

Which statement correctly completes the definition of a demand curve? A demand curve is a function that shows the relationship between:

A) price and the quantity sold.
B) price and the quantity supplied.
C) price and the quantity demanded.
D) quantity demanded and quantity supplied.

Question 12

What does the law of demand state?

A) As incomes increase, people consume more of all goods.
B) The demand for a good increases with the number of consumers in the market.
C) As the price of a good increases, consumers purchase less of that good.
D) The supply of a good increases in proportion to the demand for it.

Question 13

Use the following to answer questions: Figure: Good X
(Figure: Good X) From the figure, which statement is TRUE?

A) At a price of $12 per unit, consumers are willing and able to purchase between 11 and 26 units of Good X.
B) 36 units of Good X can be purchased by spending a total of $4.
C) At a price of $6 per unit, consumers are willing and able to purchase 26 units of Good X.
D) At a price of $4 per unit, consumers are willing and able to purchase 11 units of Good X.

Question 14

The quantity demanded of a good or service is the amount that:

A) consumers are willing and able to buy at a given price.
B) firms are willing to sell during a given time period at a given price.
C) a consumer would like to buy but might not be able to afford.
D) a consumer needs to consume during a given time period.

Question 15

The most important concepts in economics, according to the textbook, are supply, demand, and the:

A) idea of equilibrium.
B) opportunity to barter.
C) quantity of sales.
D) the level of prices.

Question 16

A supply and/or demand graph typically shows:

A) the price of the good on the horizontal axis and the quantity of the good on the vertical axis.
B) the quantity of the good on the horizontal axis and the price of the good on the vertical axis.
C) supply or demand of the good on the horizontal axis and price of the good on the vertical axis.
D) price of the good on the horizontal axis and supply or demand of the good on the vertical axis.

Question 17

The demand curve shows the relationship between:

A) demand and supply.
B) quantity demanded and quantity supplied.
C) price and quantity supplied.
D) price and quantity demanded.

Question 18

The demand curve for oil shows:

A) the quantity demanded of oil at different income levels.
B) the quantity demanded of oil at different oil prices.
C) the demand for oil at different prices of other goods.
D) the demand for oil when there is a surplus or shortage.

Question 19

Which statement expresses the law of demand?

A) There is a positive relationship between price and consumer surplus.
B) There is a positive relationship between price and quantity that buyers are willing and able to purchase.
C) There is an inverse relationship between the willingness to pay and the ability to pay.
D) There is a negative relationship between price and quantity demanded.

Question 20

Which of the following is TRUE about demand curves?

A) Demand curves are negatively sloped.
B) Demand curves are U-shaped.
C) Demand curves are positively sloped.
D) Demand curves are vertical.

Question 21

If Maria is willing to pay $50 for a sweatshirt, how much consumer surplus does she earn if the market price for sweatshirts is $27.50 each?

A) $27.50
B) $50.00
C) $77.50
D) $22.50

Question 22

The demand curve for oil slopes downward because:

A) oil will only be used in its higher-valued uses when the price of oil is lower.
B) oil will only be used in its higher-valued uses when the price of oil is higher.
C) oil has many substitutes so that no buyer is willing to pay when the price of oil rises.
D) oil has no substitutes so that buyers do not react to any change in the price of oil.

Question 23

Use the following to answer questions: Figure: Potatoes
(Figure: Potatoes) Refer to the figure. If the price of potatoes is $8 a pound, what is the consumer surplus received?

A) $30,000
B) $60,000
C) $240,000
D) $360,000

Question 24

Which of the following statements is TRUE?

A) When the price of oil is high, consumers will use oil for both valuable and less valuable uses.
B) When the price of oil is low, consumers will use oil only for its most valuable uses.
C) When the price of oil rises, consumers tend to use oil for uses in which there are few substitutes for it.
D) When the price of oil falls, consumers start to conserve oil and only use it when there are no other options.

Question 25

When the price of wood is high:

A) consumers will be more likely to use wood in its least valuable uses.
B) consumers will be more likely to use wood in its most valuable uses.
C) the quantity demanded of wood will also rise.
D) the quantity demanded of wood will be unaffected.

Question 26

Figure: Consumer Surplus Refer to the figure. Calculate the dollar amount of consumer surplus being earned in this market when the price is $30 and there are 300 units consumed.

A) $4,500
B) $9,000
C) $18,000
D) $450

Question 27

Which of the following explains why the demand for oil has a negative slope?

A) Oil is equally valuable in all of its uses.
B) Oil is not equally valuable in all of its uses.
C) Oil has many uses.
D) Oil has few substitutes.

Question 28

If the price of oil were sufficiently high, it would be used only in:

A) making plastics.
B) generating heat.
C) powering cars and jets.
D) making kerosene.

Question 29

Demand slopes down because:

A) supply slopes up, and supply and demand must intersect.
B) consumers focus too much on the price of goods when they choose the quantity to demand.
C) goods usually only have a single use.
D) consumers will choose to use goods only in their most valuable uses when prices are high.

Question 30

Table: Maximum Willingness to Pay $$\begin{array} { l c } \hline \text { Name } & \begin{array} { c } \text { Willingness to pay } \\\text { for 1 lb of bananas }\end{array} \\\hline \text { Jill } & \$ 2.00 \\\text { Joe } & 1.25 \\\text { Jane } & 0.75 \\\text { James } & 0.25 \\\hline\end{array}$$ The table shows four individuals' maximum willingness to pay for one pound of bananas. If the market price of bananas is $0.50/lb, what is the total consumer surplus in the market?

A) $4.00
B) $2.50
C) $2.75
D) $4.25

Question 31

A demand curve indicates that:

A) the quantity demanded of a good is higher when its price is higher.
B) the quantity demanded of a good is higher when its price is lower.
C) the demand for a good is higher when its price is lower.
D) the demand for a good is higher when its price is higher.

Question 32

The law of demand suggests a _____ relationship between price and _____.

A) positive; quantity demanded
B) positive; quantity supplied
C) negative; quantity demanded
D) negative;, quantity supplied

Question 33

The demand curve for oil has a _____ slope because a _____ price of oil signals consumers to use oil in _____ valuable uses.

A) negative; higher; less
B) negative; lower; more
C) positive; higher; more
D) negative; lower; less

Question 34

Which of the following statements is TRUE?

A) Consumer surplus is the difference between the maximum price a consumer is willing to pay for a good or service and its market price.
B) Bill is willing to pay $10 for a pound of clay. If he buys a pound of clay at a market price per pound of $5, his consumer surplus is $2.
C) Total consumer surplus is represented graphically by the area beneath the demand curve.
D) Total consumer surplus is represented graphically by the area above the demand curve.

Question 35

Which statement about consumer surplus is correct?

A) Consumer surplus is the gross benefit to consumers from the exchange that occurs in a market.
B) Consumer surplus is the gains from trade on the part of the consumer that result from a market transaction.
C) Total consumer surplus is equal to the price the consumers paid multiplied by the quantity they purchased.
D) Consumer surplus is the difference between the minimum price the consumer is willing to pay and the market price.

Question 36

Use the following to answer questions: Table: Sweetbrand Cheesecakes $$\begin{array} { l c } \hline \text { Consumer } & \begin{array} { c } \text { Maximum willingness to pay } \\\text { for Sweetbrand cheesecakes }\end{array} \\\hline \text { Frodo } & \$ 11.65 \\\text { Sam } & 17.99 \\\text { Mary } & 12.99 \\\text { Pippin } & 16.75 \\\hline\end{array}$$

-(Table: Sweetbrand Cheesecakes) The table shows the maximum consumer willingness to pay for Sweetbrand cheesecakes. Which of the four consumers receives the most consumer surplus, if the market price of the cheesecakes is $12.50 each?

A) Frodo
B) Sam
C) Mary
D) Pippin

Question 37

Use the following to answer questions: Figure: Potatoes
(Figure: Potatoes) Refer to the figure. According to the demand curve, if the price of potatoes is $8 a pound, how many pounds are demanded?

A) 5
B) 50
C) 60,000
D) 80,000

Question 38

Use the following to answer questions: Table: Sweetbrand Cheesecakes $$\begin{array} { l c } \hline \text { Consumer } & \begin{array} { c } \text { Maximum willingness to pay } \\\text { for Sweetbrand cheesecakes }\end{array} \\\hline \text { Frodo } & \$ 11.65 \\\text { Sam } & 17.99 \\\text { Mary } & 12.99 \\\text { Pippin } & 16.75 \\\hline\end{array}$$

-(Table: Sweetbrand Cheesecakes) The table shows the maximum consumer willingness to pay for Sweetbrand cheesecakes. Which of the four consumers receives the smallest consumer surplus, if the market price of the cheesecakes is $12.50 each?

A) Frodo
B) Sam
C) Mary
D) Pippin

Question 39

Figure: Earned Consumer Surplus Refer to the figure. The market price of the product is $20 per unit. Calculate the dollar amount of consumer surplus being earned in this market.

A) $120,000
B) $60,000
C) $100,000
D) $80,000

Question 40

Use the following to answer the question :
Table: Excel Company Survey $$\begin{array} { l c } \hline \text { Consumer } & \begin{array} { c } \text { Maximum willingness to pay } \\\text { for Excel personal computers (\$) }\end{array} \\\hline \text { Adam } & 1,459 \\\text { Sheera } & 1,320 \\\text { Orko } & 1,201 \\\text { Juliet } & 1,165 \\\hline\end{array}$$

-(Table: Excel Company Survey) The table shows the results of Excel Company's market survey. If the market price of Excel computers is $1,200 each, how much total consumer surplus (in $) are the four consumers earning?

A) $380
B) $415
C) $345
D) $5,145

Question 41

If you are willing to pay $8 for a $6 burrito, what is your consumer surplus if you buy it?

A) $8
B) $2
C) $0
D) $6

Question 42

The market price of a good is $5 and 40 units of the good sell at this price. Its demand curve intersects the vertical axis at a price of $10 and has a constant slope. What is the approximate value of consumer surplus in this market?

A) $100
B) $50
C) $200
D) $75

Question 43

Which variable is NOT a demand shifter?

A) price of complements
B) price of substitutes
C) price of raw materials
D) tastes and preferences

Question 44

If, for any given amount of a good or service, willingness to pay increases, then:

A) supply has increased.
B) supply has decreased.
C) demand has increased.
D) demand has decreased.

Question 45

On a graph of a demand curve, total consumer surplus equals:

A) the demand curve.
B) the area above the demand curve and beneath the market price.
C) the area beneath the demand curve and above the market price.
D) the market price.

Question 46

Use the following to answer questions: Figure: Quantity of Good X
(Figure: Quantity of Good X) Refer to the figure. As the price falls from $200 to $100, consumer surplus changes by:

A) $5,000.
B) $10,000.
C) $12,500.
D) -$25,000.

Question 47

Use the following to answer questions: Figure: Quantity of Good X
(Figure: Quantity of Good X) Refer to the figure. At a price of $200, consumer surplus is:

A) $20,000.
B) $40,000.
C) $10,000.
D) $200.

Question 48

The market price of a good is $10 and 40 units of the good sell at this price. Its demand curve intersects the vertical axis at a price of $12 and has a constant slope. What is the approximate value of consumer surplus in this market?

A) $20
B) $30
C) $40
D) $50

Question 49

In the week before Hurricane Katrina, the price of flashlights rose in New Orleans because of:

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

Question 50

The difference between the maximum price a consumer is willing to pay for a given quantity of a good and its market price is:

A) producer shortage.
B) consumer shortage.
C) producer surplus.
D) consumer surplus.

Question 51

An increase in demand shifts the demand curve:

A) up and to the right.
B) down and to the right.
C) up and to the left.
D) down and to the left.

Question 52

Consumer surplus is the amount that consumers:

A) are willing to pay for a good minus what they actually pay for it.
B) are willing to pay for a good.
C) actually pay for a good.
D) are willing to pay for a good plus the amount that they actually pay for it.

Question 53

There are 100 consumers, each of whom values a concert ticket at a unique whole number dollar amount between $1 and $100. One customer is willing to pay $1, a second is willing to pay $2, a third is willing to pay $3, and so on. An unlimited number of concert tickets are on sale for $15 each. What is the total consumer surplus in this market?

A) $3,612.50
B) $4,250.00
C) $4,887.50
D) $5,000.00

Question 54

When you are willing to pay $5 for a hamburger but you pay $4 for it, your consumer surplus for the hamburger is:

A) -$1.
B) $1.
C) -$9.
D) $9.

Question 55

A decrease in demand refers to:

A) a rightward shift of the demand curve.
B) a leftward shift of the demand curve.
C) an upward movement along the demand curve.
D) a downward movement along the demand curve.

Question 56

If the university president valued a parking space close to the administration building at $500 and paid $30 for a parking permit, he would receive consumer surplus equal to:

A) $30.
B) $470.
C) $500.
D) $530.

Question 57

Figure: Demand In the diagram, for a market price of $4 total consumer surplus equals:

A) $30.
B) $60.
C) $100.
D) $75.

Question 58

Alex and Tyler enjoy the food at a restaurant named China Star. Alex values a meal there at $15 and Tyler values it at $26. If the restaurant charges only $10 a meal, what is Alex and Tyler's joint consumer surplus from a meal at China Star?

A) $41
B) $31
C) $21
D) $16

Question 59

If, for a given amount of a good or service, willingness to pay decreases, then:

A) supply has increased.
B) supply has decreased.
C) demand has increased.
D) demand has decreased.

Question 60

To economists, the term consumer surplus means:

A) the excess money consumers have left over, after purchasing goods.
B) the difference between the price a consumer is willing to pay, and the price that suppliers are willing to accept.
C) the consumer's gain from trading.
D) the difference between the price a consumer is able to pay and willing to pay.

Question 61

Michael graduates from college and his income increases by $40,000 a year. Other things held constant, he decreases the quantity of pizza he buys. For Michael, pizza is:

A) an inferior good.
B) a complement.
C) a substitute.
D) a normal good.

Question 62

For an inferior good, higher income results in:

A) an increase in demand.
B) a decrease in demand.
C) a movement up along the demand curve.
D) a movement down along the demand curve.

Question 63

Imagine that millions of refugees move out of country A and into country X. This would cause the demand for housing in country A to _____ and the demand for housing in country X to _____.

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

Question 64

A decrease in income causes demand for a normal good to ________, and an increase in income causes demand for an inferior good to ________.

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

Question 65

Figure: Shifting Demand In the diagram, which of the following factors would cause the demand curve to shift from D₁ to D₂?

A) an increase in the price of a substitute good
B) a decrease in the price of a complement good
C) an increase in the population
D) an increase in income if this is an inferior good

Question 66

The quantity of DVDs that people plan to buy this month will increase when:

A) movie theater ticket prices increase.
B) the price of movies for download decreases.
C) the price of DVD players increases.
D) cable television prices decrease.

Question 67

The current demand for parking in a city's downtown district is such that all the parking garages are full. If there is an increase in the city's population, there will be:

A) an increase in the willingness to pay for parking.
B) a decrease in the quantity of parking spaces demanded across all prices.
C) a decrease in demand for parking.
D) no increase in demand since the parking garages are already at capacity.

Question 68

Which variable does NOT shift the demand curve?

A) population
B) price of complement goods
C) income
D) price of the good itself

Question 69

Assume that spaghetti is an inferior good for most people. As their incomes increase, all other things held constant, the demand for spaghetti will:

A) decrease, shifting the demand curve to the left.
B) decrease, shifting the demand curve to the right.
C) increase, shifting the demand curve to the left.
D) increase, shifting the demand curve to the right.

Question 70

Which one of the following choices would cause the demand curve for an inferior good to shift to the left?

A) a fall in incomes
B) a fall in the price of the inferior good
C) a rise in incomes
D) a rise in the price of the inferior good

Question 71

As the population of elderly in the United States increases, which service will likely see the biggest increase in demand?

A) skateboard repair
B) home medical care
C) career training
D) child day care

Question 72

What are factors that shift the demand curve?

A) costs of production, price of the product, and subsidies
B) income, population, tastes, and input prices
C) expectations, opportunity costs, price of the product
D) price of substitutes, tastes, price of complements

Question 73

Zoey receives a big raise at work and decides to buy additional porcelain figurines. Which of the following statements is TRUE?

A) Zoey considers porcelain figurines to be a normal good.
B) Zoey considers porcelain figurines to be an inferior good.
C) Zoey's demand for porcelain figurines decreased.
D) Zoey's willingness to pay for porcelain figures has decreased.

Question 74

The average age in the United States is _____, causing the demand for prescription drugs to _____.

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

Question 75

A good is considered normal if demand for it ______ when income ______.

A) increases; increases
B) decreases; increases
C) stays the same; decreases
D) increases; decreases

Question 76

Mario buys eight units of good X when his income is $2,000 a month. When his income increases to $2,700 per month, he buys only six units of good X. For Mario, good X is:

A) a normal good.
B) a good with few substitutes.
C) an inferior good.
D) a good of high value.

Question 77

For a normal good, higher income results in:

A) an increase in demand.
B) a decrease in demand.
C) a movement up along the demand curve.
D) a movement down along the demand curve.

Question 78

Figure: Demand Shift Which of the following could explain the figure?

A) Consumer income increases in the market for a normal good.
B) Consumer income falls in the market for a normal good.
C) Consumer income rises in the market for an inferior good.
D) Consumer income remains the same and the price of the good falls.

Question 79

Coke and Pepsi are substitute soft drinks. Which of the following would cause the demand curve for Pepsi to shift to the left?

A) a new Pepsi ad campaign that increases the popularity of Pepsi
B) the price of Coke decreases
C) the price of Pepsi decreases
D) the cost of making Pepsi rises

Question 80

An inferior good is one that:

A) is of low quality or not very durable.
B) gets poor reviews from objective, independent evaluators.
C) no consumers are willing to buy.
D) experiences decreased demand when income increases.