Deck 3: Supply and Demand

Question 1

Other factors held constant, as the price of an iPad rises, the

A) demand for iPads falls.
B) quantity demanded of iPads falls.
C) demand for iPads rises.
D) quantity demanded of iPads rises.

Answer 1

quantity demanded of iPads falls.

Question 2

Another name for a market economy is

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

Answer 2

the price system.

Question 3

(Table) According to the data in the table, what happens if quantity supplied rises by 4 units at each and every price?

A) The equilibrium price drops to $30, and the equilibrium quantity rises to 14 units.
B) The equilibrium price drops to $30, and the equilibrium quantity falls to 10 units.
C) The equilibrium price rises to $60, and the equilibrium quantity rises to 16 units.
D) The equilibrium price drops to $6, and the equilibrium quantity falls to 10 units.

Answer 3

The equilibrium price drops to $30, and the equilibrium quantity rises to 14 units.

Question 4

A change in the quantity of laundry detergent supplied occurs when more sellers enter the laundry detergent market.

Question 5

Ceteris paribus, a decrease in the number of businesses selling pizza will cause a(n)

A) increase in the equilibrium price of pizza.
B) decrease in the equilibrium price of pizza.
C) increase in pizza demand.
D) increase in the quantity of pizza demanded.

Question 6

Which graph concerning electric vehicles indicates an increase in the quantity demanded of electric vehicles?

A)

B)

C)

D)

Question 7

The supply curve slopes up and to the right because

A) due to constant opportunity costs, producers feel that people will buy more if they charge a higher price.
B) due to efficiencies, producers feel that people will buy more if they charge a higher price.
C) due to increasing opportunity costs, producers must charge more to produce additional units in order to cover their costs.
D) The supply curve actually slopes down and to the right.

Question 8

Economists often call our market economy the price system.

Question 9

(Figure: Interpreting a Market Graph) The graph represents

A) willingness-to-pay.
B) the price system.
C) the law of supply.
D) the law of demand.

Question 10

The demand curve slopes downward and to the right.

Question 11

Long-term shortages and surpluses are almost always the result of automatic market adjustments.

Question 12

Suppose that a person discovers that, ceteris paribus, when the price of tomatoes increases, the demand for blue cheese decreases. From this he concludes that

A) tomatoes and blue cheese are substitutes.
B) tomatoes are inferior goods and blue cheese is a normal good.
C) tomatoes and blue cheese are complements.
D) the demand curve for tomatoes has shifted to the left.

Question 13

(Figure: Individual and Market Demand Curves) According to the graph, the market quantity demanded at $10 is

A) 15 units.
B) 7 units.
C) 11 units.
D) 5 units.

Question 14

Willingness-to-pay is always equal to the price actually paid for an item.

Question 15

Which item is most likely an inferior good?

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

Question 16

(Table) Using the data in the table for the market for lattes, at a price of $2, there is a _____ and the price will _____.

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

Question 17

Supply is defined as the _____ over a particular time period at various prices, holding all other relevant factors constant.

A) maximum amount of a product that buyers are willing and able to purchase
B) maximum amount of a product that sellers are willing and able to provide for sale
C) minimum amount of a product that buyers are willing and able to purchase
D) minimum amount of a product that sellers are willing and able to provide for sale

Question 18

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

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

Question 19

(Figure: Interpreting Market Shifts) The graph shows how supply and demand changed between the years 2011 and 2012. The market experienced

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

Question 20

If both the supply of and the demand for a good increase simultaneously, and if demand grows relatively less than supply, then price will

A) rise and quantity will fall.
B) fall and quantity will rise.
C) be indeterminate and quantity will fall.
D) be indeterminate and quantity will rise.

Question 21

If a market is NOT at equilibrium

A) supply will shift until the market reaches equilibrium.
B) demand will shift until the market reaches equilibrium.
C) both supply and demand will shift until the market reaches equilibrium.
D) the price will change and, in response, market participants will move along the existing supply and demand curves until the market reaches equilibrium.

Question 22

Which type of payment would NOT be considered a market transaction?

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

Question 23

(Figure: Interpreting Market Equilibrium) If the price is $20, then there is a _____ units and the price will _____.

A) shortage of 4,000; fall
B) shortage of 2,000; rise
C) surplus of 4,000; fall
D) surplus of 2,000; fall

Question 24

(Figure: Predicting Market Shifts) Why is there a tendency for this market to adjust from a price of P₁ to P₂?

A) The presence of excess inventories forces firms to cut prices.
B) The presence of an economic shortage induces firms to offer lower prices.
C) The government wants to regulate the market.
D) Insufficient production causes some consumers to offer to pay more for the product.

Question 25

In the market for cable television, fewer people are subscribing to cable while the cost of providing cable television has increased. If the magnitude of the corresponding demand and supply shifts are the same for both events, we can expect

A) an increase in the equilibrium price and quantity of cable television.
B) an unknown change in the equilibrium price but a decrease in the equilibrium quantity of cable television.
C) a decrease in the equilibrium price and quantity of cable television.
D) no change in the equilibrium price but a decrease in the equilibrium quantity of cable television.

Question 26

Demand refers to the goods and services people are willing to sell during a set time period.

Question 27

Two-Buck Chuck wine is an example of the results of a(n)

A) excess demand for California wines, which caused the price to drop.
B) decrease in the demand for imported wines, which caused the price of California wines to increase.
C) excess supply of California grapes, which caused the price to drop.
D) decrease in the supply of imported wines, which caused the price of California wines to increase.

Question 28

If television sellers expect the prices of televisions to fall in the future, then today, we are likely to see the

A) supply of televisions increase.
B) supply of televisions decrease.
C) demand for televisions increase.
D) demand for televisions decrease.

Question 29

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

A)

B)

C)

Question 30

Electricity is essential in the production of aluminum. If electricity prices increase

A) the supply curve for aluminum shifts leftward.
B) the supply curve for aluminum shifts rightward.
C) aluminum becomes cheaper because it is a substitute good for electricity.
D) aluminum becomes an inferior good.

Question 31

A _____ occurs when price is above market equilibrium.

A) price rise
B) sell-off
C) surplus
D) shortage

Question 32

The law of demand states that as the price of a good increases, the quantity demanded decreases.

Question 33

Suppose the Terrific Taffy Company ran a very successful advertising campaign. Economic analysis would suggest that the campaign would cause the equilibrium price to _____ and the equilibrium quantity to _____.

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

Question 34

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

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

Question 35

The reason that the law of demand exists is that

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

Question 36

If both the supply of and the demand for a good increase simultaneously, the equilibrium price will

A) increase.
B) decrease.
C) be indeterminate.
D) remain unchanged.

Question 37

In the free market, the main signal to the market that pushes prices toward equilibrium comes from

A) government regulators.
B) a surplus or shortage of goods available for sale.
C) stock market analysts.
D) research economists.

Question 38

Which is NOT a determinant of supply?

A) the cost of resources
B) national income
C) prices of other commodities
D) taxes and subsidies

Question 39

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

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

Question 40

One of the implications of the supply and demand model is that

A) a rise in the price of a good always means that demand for it has increased.
B) supply shifts to the left whenever demand falls.
C) a market price below the equilibrium price will lead to a surplus.
D) government action is not necessary for a market to achieve equilibrium.

Question 41

Wheat is the main input in the production of flour. If the price of wheat increases, all else equal, we would expect the

A) supply of flour to be unaffected.
B) supply of flour to decrease.
C) supply of flour to increase.
D) demand for flour to decrease.

Question 42

A market is a physical location that enables buyers and sellers to interact and transact with one another.

Question 43

(Figure: Supply and Demand for Shoes) If the price of shoes is $40, then the market

A) is in equilibrium.
B) experiences a shortage of shoes.
C) experiences a surplus of shoes.
D) There is not enough information to answer this question.

Question 44

In the market for cable television, fewer people are subscribing to cable while the cost of providing cable television has increased. As a result, we can expect a(n)

A) increase in the equilibrium price and quantity of cable television.
B) unknown change in the equilibrium price but a decrease in the equilibrium quantity of cable television.
C) decrease in the equilibrium price and quantity of cable television.
D) unknown change in the equilibrium quantity but a decrease in the equilibrium price of cable television.

Question 45

In the market for gasoline, more consumers will begin driving at the onset of nicer weather, while the price of public transportation, a substitute, rises. The demand for gasoline should

A) decrease.
B) increase.
C) stay the same because the effects will cancel each other out.
D) stay the same because demand is not affected by price changes.

Question 46

A market demand curve

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

Question 47

From the seller's perspective, a relatively low price is a good price.

Question 48

An increase in production subsidies causes an increase in supply.

Question 49

Suppose that at the current price, the quantity supplied of a product is 5 units and the quantity demanded is 8 units. In this market, there is a _____ of this product and the price should _____.

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

Question 50

Which event would shift the supply curve for corn to the right?

A) an increase in property taxes
B) a decrease in property taxes
C) an increase in the market price of corn
D) a decrease in the market price of corn

Question 51

Consider the demand for olive oil. What would happen to the demand for olive oil if a study supporting its beneficial health effects is published at the same time that an investigative report finds that much of the olive oil imported into the country is actually sunflower oil that has been dyed?

A) We would expect demand to shift to the right.
B) We would expect demand to shift to the left.
C) We would expect demand not to change.
D) We would expect demand to shift in each direction, but the final position will depend on which event has the bigger impact on demand.

Question 52

The law of supply states that if prices _____ the market.

A) fall, consumers will purchase fewer products in
B) fall, producers will offer fewer products to
C) rise, consumers will purchase more products in
D) rise, producers will offer fewer products to

Question 53

Prices provide no information other than a monetary value.

Question 54

Which circumstance will cause a movement down along a demand curve?

A) an increase in the product price
B) an increase in the price of a complementary good
C) an increase in the price of a substitute good
D) a decrease in the product price

Question 55

Economists use the term "price system" to refer to an economic system in which the government sets prices.

Question 56

If both the supply of and the demand for a good decrease simultaneously, and if demand shrinks relatively less than supply, then price will

A) rise and quantity will fall.
B) fall and quantity will rise.
C) be indeterminate and quantity will fall.
D) stay the same and quantity will fall.

Question 57

If supply of a good increases and at the same time demand for that good decreases, equilibrium price

A) decreases and equilibrium quantity is indeterminate.
B) increases and equilibrium quantity decreases.
C) is indeterminate and equilibrium quantity increases.
D) is indeterminate and equilibrium quantity decreases.

Question 58

(Table) Using the data in the table for the market for lattes, at a price of $10

A) there is a surplus of lattes.
B) there is a shortage of lattes.
C) the price of lattes will rise.
D) the price of lattes is stable.

Question 59

A decrease in the supply of a good causes a(n)

A) increase in the equilibrium price and a decrease in equilibrium quantity.
B) increase in equilibrium quantity and a decrease in the equilibrium price.
C) increase in the equilibrium price and quantity.
D) decrease in the equilibrium price and quantity.

Question 60

(Figure: Predicting Demand Shifts) Which factor would change demand from D₀ to D₂?

A) the expectation of a decrease in the future price of the good
B) a change in consumer tastes so that consumers want more of the good
C) an increase in the price of a substitute good
D) a decrease in the price of a complementary good

Question 61

Markets gravitate toward equilibrium levels only when government intervenes.

Question 62

An item whose demand rises as people's incomes fall is known as a(n) _____ good.

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

Question 63

If the price of the cotton used in making trousers increases, then the supply curve for trousers will shift to the left.

Question 64

If the supply of a good increases while the demand for that good decreases, the equilibrium price will

A) increase.
B) decrease.
C) be indeterminate.
D) remain unchanged.

Question 65

In the short run, once a market has reached equilibrium

A) price and quantity will be stable.
B) quantity will drift upward.
C) forces are set in motion that will shift supply and demand.
D) price and quantity will gravitate toward a new equilibrium.

Question 66

(Figure: Interpreting a Market Graph) If the price of shoes is $60 per pair, the _____ will be 30 pairs of shoes.

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

Question 67

Markets require a physical location for transactions to take place.

Question 68

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

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

Question 69

If bagels and doughnuts are substitute goods, then which scenario is likely to occur if the price of bagels is reduced?

A) The demand curve for bagels will shift to the left.
B) There will be a leftward movement along the bagel demand curve.
C) The demand curve for doughnuts will shift to the right.
D) The demand curve for doughnuts will shift to the left.

Question 70

If the producers of cotton shirts face higher cotton prices, which scenario is likely to occur?

A) The supply of cotton shirts decreases, the equilibrium price of cotton shirts rises, and the equilibrium quantity falls.
B) The supply of cotton shirts decreases, the equilibrium price of cotton shirts rises, and the equilibrium quantity rises.
C) The supply of cotton shirts increases, the equilibrium price of cotton shirts rises, and the equilibrium quantity falls.
D) The supply of cotton shirts increases, the equilibrium price of cotton shirts falls, and the equilibrium quantity rises.

Question 71

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

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

Question 72

If the supply of a good increases while the demand for that good decreases, the equilibrium quantity will

A) increase.
B) decrease.
C) be indeterminate.
D) remain unchanged.

Question 73

As the price of a bag of Doritos increases, the quantity demanded for this product will decrease.

Question 74

(Figure: Interpreting Market Equilibrium) If the price is $10, then there is a _____ units and the price will _____.

A) shortage of 4,000; fall
B) shortage of 2,000; rise
C) surplus of 4,000; fall
D) surplus of 2,000; fall

Question 75

The price of apples has recently fallen in the marketplace. From this information, we can safely infer that

A) a surplus of apples must have existed at the previous price.
B) a shortage of apples must have existed at the previous price.
C) the demand for apples recently increased.
D) the supply of apples recently decreased.

Question 76

(Figure: Interpreting Supply Shifts 3) When the supply shifts from S₀ to S₁, the equilibrium price changes from

A) $60 to $40.
B) $40 to $60.
C) 20 units to 15 units.
D) 15 units to 20 units.

Question 77

(Table) The table shows the demand of three individuals in a market. Assuming they are the only buyers, what is total market quantity demanded if the price is $20?

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

Question 78

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

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

Question 79

A market demand curve

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

Question 80

(Figure: Interpreting Supply Shifts) The shift of the supply curve from A to B is an example of a

A) price-induced shift.
B) change in quantity supplied.
C) change in supply.
D) demand-induced shift.