Deck 4: Demand, Supply, and Market Equilibrium

Question 1

The Law of Demand can be explained as

A) a lot of people wanting the same thing.
B) the higher the price, the smaller the quantity demanded, ceteris paribus.
C) people are willing to make limited sacrifices to acquire products.
D) legal reasons people make purchases in the marketplace.

Answer 1

the higher the price, the smaller the quantity demanded, ceteris paribus.

Question 2

The market demand curve

A) shows the relationship between the price of a good and the quantity that all consumers together are willing to buy.
B) is drawn assuming that variables such as income and tastes are variable.
C) is drawn assuming that the number of consumers is variable.
D) is drawn assuming that the selling price is fixed.

Answer 2

shows the relationship between the price of a good and the quantity that all consumers together are willing to buy.

Question 3

Suppose that there are only three consumers of a product. At a price of $6 per unit, the first consumer would buy 12 units of the product, the second consumer would buy 8 units, and the third consumer would buy 3 units of the product. If you drew a market demand curve for this product, the quantity demanded at a price of $6 would be

A) 23 units.
B) 20 units.
C) 12 units.
D) 11 units.

Answer 3

23 units.

Question 4

Recall the Application about the decrease in taxes on cigarettes in several Canadian provinces in 1994 to answer the following question(s).
According to this Application, after the government deceased cigarette taxes in several Canadian provinces, demand for cigarettes ________ in these provinces, shifting the demand curve to the ________.

A) increased; right
B) increased; left
C) decreased; right
D) decreased; left

Question 5

Recall the Application about the decrease in taxes on cigarettes in several Canadian provinces in 1994 to answer the following question(s).
According to this Application, after the government deceased cigarette taxes in several Canadian provinces in 1994, the price of cigarettes in these provinces decreased by roughly ________ percent.

A) 8
B) 17
C) 50
D) 88

Question 6

In considering the relationships between price and quantity demanded, ceteris paribus directs the economist to assume that

A) price increases affect quantity.
B) quantity increases affect prices.
C) either price nor quantity affect demand.
D) all other variables remain unchanged.

Question 7

When there is a change in the quantity demanded it means that

A) the hours the customer can buy products each day have increased.
B) the number of products in inventory have increased.
C) the quantity a consumer is willing to buy changes when the price changes.
D) the selling price of the products has not changed.

Question 8

Refer to Figure 4.1, which shows Molly's and Ryan's individual demand curves for compact discs per month. Assuming Molly and Ryan are the only consumers in the market, what is the market quantity demanded at a price of $9?

A) 2
B) 4
C) 6
D) 10

Question 9

Refer to Figure 4.1, which shows Molly's and Ryan's individual demand curves for compact discs per month. Assuming Molly and Ryan are the only consumers in the market, if the market quantity demanded is 15, the price must be

A) $0.
B) $6.
C) $9.
D) $15.

Question 10

As the price of a product falls, the demand for the product increases, ceteris paribus.

Question 11

If a competitive market operates perfectly, it relies on

A) the number of people buying goods.
B) the laws of supply and demand.
C) how many products can be produced for sale.
D) how much people are willing to pay for the products.

Question 12

A demand curve is defined as the relationship between

A) the price of a good and the quantity of that good that consumers are willing to buy.
B) the price of a good and the quantity of that good that producers are willing to sell.
C) the income of consumers and the quantity of a good that consumers are willing to buy.
D) the income of consumers and the quantity of a good that producers are willing to sell.

Question 13

On the "demand side" of a market, consumers indicate what they are willing to buy, in what quantity and at what price.

Question 14

The quantity demanded of a product increases as

A) consumer income rises.
B) the prices of other products fall.
C) the price of the product rises.
D) the price of the product falls.

Question 15

A change in the quantity demanded of a product is the result of a change in

A) the price of the product.
B) the price of related goods.
C) consumer income.
D) the cost of producing the product.

Question 16

Refer to Figure 4.1, which shows Molly's and Ryan's individual demand curves for compact discs per month. Assuming Molly and Ryan are the only consumers in the market, if the market quantity demanded is 5, the price must be

A) $3.
B) $6.
C) $9.
D) $12.

Question 17

Recall the Application about the decrease in taxes on cigarettes in several Canadian provinces in 1994 to answer the following question(s).
Recall the Application. The change in demand for cigarettes resulting from the decrease in taxes would normally create, ceteris paribus,

A) an increase in their supply.
B) a decrease in their supply.
C) an increase in their quantity supplied.
D) a decrease in their quantity supplied.

Question 18

The law of demand states that there is a negative relationship between price and quantity demanded, ceteris paribus.

Question 19

Refer to Figure 4.1, which shows Molly's and Ryan's individual demand curves for compact discs per month. Assuming Molly and Ryan are the only consumers in the market, what is the market quantity demanded at a price of $3?

A) 6
B) 9
C) 15
D) 20

Question 20

Recall the Application about the decrease in taxes on cigarettes in several Canadian provinces in 1994 to answer the following question(s).
According to this Application, after the government deceased cigarette taxes in several Canadian provinces in 1994, the decrease in the price of cigarettes in these provinces

A) more than doubled the smoking rate.
B) created no noticeable change in the smoking rate.
C) increased the smoking rate by roughly 17 percent
D) was accompanied by a slight decrease in the rate of smoking.

Question 21

Figure 4.6

David's Supply Schedule Celeste's Supply Schedule
Refer to Figure 4.6, which shows David's and Celeste's individual supply curves for flower arrangements per week. Assuming David and Celeste are the only producers in the market, if the market quantity supplied is 50, the price must be

A) $0.
B) $10.
C) between $10 and $20.
D) $30.

Question 22

4.3 Market Equilibrium: Bringing Demand and Supply Together

Figure 4.2 illustrates the supply and demand for t-shirts. If the actual price of t-shirts is $7, there is an

A) excess demand of 8 t-shirts.
B) excess supply of 8 t-shirts.
C) excess demand of 10 t-shirts.
D) excess supply of 10 t-shirts.

Question 23

Table 4.1
Quantity of Frozen Latte-On-A-Stick Supplied

Refer to Table 4.1, which shows Flo's and Rita's individual supply schedules for frozen latte-on-a-stick. Assuming Flo and Rita are the only suppliers in the market, what is the market quantity supplied at a price of $5?

A) 3
B) 12
C) 15
D) 27

Question 24

A change in quantity supplied of a product is the result of a change in

A) consumer income.
B) the state of production technology.
C) the cost of producing the product.
D) the price of the product.

Question 25

Figure 4.6

David's Supply Schedule Celeste's Supply Schedule
Refer to Figure 4.6, which shows David's and Celeste's individual supply curves for flower arrangements per week. Assuming David and Celeste are the only producers in the market, what is the market quantity supplied at a price of $30?

A) 200
B) 250
C) 300
D) 350

Question 26

The Law of Supply states that

A) producers should only produce what they can sell.
B) producers should only sell the items when the price is right.
C) there is a positive relationship between price and quantity supplied, ceteris paribus.
D) producers are legally required to make necessary items available in the marketplace.

Question 27

Recall the Application about the decrease in the price of wool in the 1990s to answer the following question(s). In the 1990s, the world price of wool decreased by about 30 percent and prices have remained relatively low since then. In 2012, an organization in New Zealand proposed that sheep shearing be added to the Commonwealth Games and the Olympics as a spectator sport in an effort to increase the awareness and the demand for wool.
Recall the Application. If the organization in New Zealand was successful in getting the Olympics to include sheep shearing as a spectator sport, and this helped to raise the world price of wool, the quantity of wool supplied would ________ because the market supply curve for wool is ________ sloped.

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

Question 28

The law of supply states that there is a positive relationship between price and quantity supplied, ceteris paribus.

Question 29

Table 4.1
Quantity of Frozen Latte-On-A-Stick Supplied

Refer to Table 4.1, which shows Flo's and Rita's individual supply schedules for frozen latte-on-a-stick. Assuming Flo and Rita are the only suppliers in the market, what is the market quantity supplied at a price of $2?

A) 0
B) 2
C) 3
D) 5

Question 30

Recall the Application about the decrease in the price of wool in the 1990s to answer the following question(s). In the 1990s, the world price of wool decreased by about 30 percent and prices have remained relatively low since then. In 2012, an organization in New Zealand proposed that sheep shearing be added to the Commonwealth Games and the Olympics as a spectator sport in an effort to increase the awareness and the demand for wool.
Recall the Application. The decrease in the price of wool would be reflected by a movement ________ on the market supply curve for wool.

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

Question 31

The market demand curve shows the relationship between the price and the quantity demanded by all consumers, everything else being equal.

Question 32

A supply curve is defined as the relationship between

A) the price of a good and the quantity that consumers are willing to buy.
B) the price of a good and the quantity that producers are willing to sell.
C) the income of consumers and the quantity of a product that consumers are willing to buy.
D) the income of consumers and the quantity of a product that producers are willing to sell.

Question 33

Figure 4.6

David's Supply Schedule Celeste's Supply Schedule
Refer to Figure 4.6, which shows David's and Celeste's individual supply curves for flower arrangements per week. Assuming David and Celeste are the only producers in the market, if the market quantity supplied is 350, the price must be

A) $10.
B) $20.
C) $30.
D) $40.

Question 34

Figure 4.6

David's Supply Schedule Celeste's Supply Schedule
Refer to Figure 4.6, which shows David's and Celeste's individual supply curves for flower arrangements per week. Assuming David and Celeste are the only producers in the market, what is the market quantity supplied at a price of $20?

A) 0
B) 100
C) 150
D) 200

Question 35

Table 4.1
Quantity of Frozen Latte-On-A-Stick Supplied

Refer to Table 4.1, which shows Flo's and Rita's individual supply schedules for frozen latte-on-a-stick. Assuming Flo and Rita are the only suppliers in the market, if the market quantity supplied is 3, the price must be

A) $0.
B) $2.
C) $4.
D) $5.

Question 36

Recall the Application about the decrease in the price of wool in the 1990s to answer the following question(s). In the 1990s, the world price of wool decreased by about 30 percent and prices have remained relatively low since then. In 2012, an organization in New Zealand proposed that sheep shearing be added to the Commonwealth Games and the Olympics as a spectator sport in an effort to increase the awareness and the demand for wool.
Recall the Application. As the world price of wool decreased, the quantity of wool supplied by individual ranchers would ________, and the quantity supplied in the whole market would ________.

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

Question 37

Table 4.1
Quantity of Frozen Latte-On-A-Stick Supplied

Refer to Table 4.1, which shows Flo's and Rita's individual supply schedules for frozen latte-on-a-stick. Assuming Flo and Rita are the only suppliers in the market, if the market quantity supplied is 18, the price must be

A) $2.
B) $3.
C) $4.
D) $5.

Question 38

Table 4.1
Quantity of Frozen Latte-On-A-Stick Supplied

Refer to Table 4.1, which shows Flo's and Rita's individual supply schedules for frozen latte-on-a-stick. Assuming Flo and Rita are the only suppliers in the market, what is the market quantity supplied at a price of $1?

A) 0
B) 1
C) 3
D) 5

Question 39

As the price of a product rises, the quantity supplied decreases.

Question 40

On the "supply side" of a market, producers indicate to consumers what they are willing to sell, in what quantity and at what price.

Question 41

Excess demand in an unregulated market will cause the price of a product to fall.

Question 42

Governments sometime create an excess demand for a product by setting a maximum price that is less than the equilibrium price, resulting in a permanent excess demand for the product. This is known as a price floor.

Question 43

Recall the Application about the policies used by the European Union to support the agricultural sectors of is member countries to answer the following question(s).
According to this Application, the policies used by the European Union to support the agricultural sectors of its member countries created excess supply. Excess supply can be generated if a government establishes a

A) price ceiling below the market equilibrium price.
B) price ceiling above the market equilibrium price.
C) price floor below the market equilibrium price.
D) price floor above the market equilibrium price.

Question 44

Suppose that the quantity of cars supplied exceeds the quantity of cars demanded. We would expect that

A) the price of cars will increase.
B) the price of cars will decrease.
C) the supply will increase (supply will shift to the right) to meet the demand.
D) the demand will decrease (demand will shift to the left) to meet the supply.

Question 45

4.3 Market Equilibrium: Bringing Demand and Supply Together

Figure 4.2 illustrates the supply and demand for t-shirts. If the actual price of t-shirts is $7, we would expect that

A) demand will decrease until quantity demanded equals quantity supplied.
B) supply will increase until quantity demanded equals quantity supplied.
C) price will increase until quantity demanded equals quantity supplied.
D) there will be no change in the price since the market is in equilibrium.

Question 46

Suppose that the quantity of cars demanded exceeds the quantity of cars supplied. We would expect that

A) the price of cars will increase.
B) the price of cars will decrease.
C) the supply will increase (supply will shift to the right) to meet the demand.
D) the demand will decrease (demand will shift to the left) to meet the supply.

Question 47

Excess supply in an unregulated market will cause the price of a product to fall.

Question 48

A government sometimes creates an excess supply of a product by setting a minimum price at which the product may be sold to consumers. This is sometimes called a

A) price ceiling.
B) price floor.
C) tax.
D) subsidy.

Question 49

4.3 Market Equilibrium: Bringing Demand and Supply Together

Figure 4.2 illustrates the supply and demand for t-shirts. If the actual price of t-shirts is $10, we would expect that

A) demand will decrease until quantity demanded equals quantity supplied.
B) supply will increase until quantity demanded equals quantity supplied.
C) price will increase until quantity demanded equals quantity supplied.
D) there will be no change in the price since the market is in equilibrium.

Question 50

Recall the Application about the policies used by the European Union to support the agricultural sectors of is member countries to answer the following question(s).
According to this Application, in recent years the European Union has reformed its agriculture policies by reducing or eliminating minimum prices. Ceteris paribus, these policy reforms would ________ excess supply by ________ prices.

A) reduce; raising
B) reduce; lowering
C) increase; raising
D) increase; lowering

Question 51

4.3 Market Equilibrium: Bringing Demand and Supply Together

Figure 4.2 illustrates the supply and demand for t-shirts. If the actual price of t-shirts is $15, there is an

A) excess demand of 8 t-shirts.
B) excess supply of 8 t-shirts.
C) excess demand of 10 t-shirts.
D) excess supply of 10 t-shirts.

Question 52

When consumers are willing to buy more than producers are willing to sell

A) there is excess supply of the product in the market.
B) there is excess demand for the product in the market.
C) the market is in equilibrium.
D) the demand curve will shift until the quantity supplied equals the quantity demanded.

Question 53

The government sometimes creates an excess demand for a product by setting a maximum price at which the product may be sold to consumers. This is sometimes called a

A) price ceiling.
B) price floor.
C) tax.
D) subsidy.

Question 54

In the event of excess supply in the coffee market

A) the price of coffee will increase.
B) the price of coffee will decrease.
C) the supply of coffee will decrease (supply will shift to the left) to meet the demand.
D) the demand for coffee will increase (demand will shift to the right) to meet the supply.

Question 55

4.3 Market Equilibrium: Bringing Demand and Supply Together

Figure 4.2 illustrates the supply and demand for t-shirts. If the actual price of t-shirts is $15, we would expect that

A) demand will decrease until quantity demanded equals quantity supplied.
B) supply will increase until quantity demanded equals quantity supplied.
C) price will decrease until quantity demanded equals quantity supplied.
D) there will be no change in the price since the market is in equilibrium.

Question 56

What happens if the price of a product is below the equilibrium price?

A) The buyers will stop purchasing a "cheap" product.
B) The producer will lower the price to sell more product.
C) There will be an excess demand for the product.
D) There will be a surplus of the product.

Question 57

Suppose that a market for a product is in equilibrium at a price of $5 per unit. At any price above $5 per unit

A) there will be an excess demand for the product.
B) there will be an excess supply of the product.
C) the quantity supplied of the product will be less than the quantity demanded of that product.
D) there will be a shortage of that product.

Question 58

Recall the Application about the policies used by the European Union to support the agricultural sectors of is member countries to answer the following question(s).
According to this Application, the policies used by the European Union to support the agricultural sectors of its member countries created excess supply. This would occur if these policies set a ________ price which was ________ the market equilibrium price.

A) maximum; above
B) maximum; below
C) minimum; above
D) minimum; below

Question 59

If the quantity of a product demanded is greater than the quantity of a product supplied, there is pressure in the market to push the price downward.

Question 60

Suppose that a market for a product is in equilibrium at a price of $3 per unit. At any price below $3 per unit

A) there will be an excess demand for the product.
B) there will be an excess supply of the product.
C) the quantity demanded of the product will be less than the quantity supplied of that product.
D) there will be a surplus of that product.

Question 61

4.4 Market Effects of Changes in Demand

Figure 4.3 illustrates the demand for tacos. Assume tacos are an inferior good. An increase in income would bring about a movement from

A) point a to point b.
B) point c to point b.
C) D2 to D1.
D) D0 to D1.

Question 62

Governments sometime create an excess supply of a product by setting a minimum price that is greater than the equilibrium price, resulting in a permanent excess supply of the product. This is known as a price ceiling.

Question 63

4.4 Market Effects of Changes in Demand

Figure 4.3 illustrates the demand for tacos. A successful advertising campaign to sell tacos would bring about a movement from

A) point a to point b.
B) point c to point b.
C) D2 to D1.
D) D0 to D1.

Question 64

4.4 Market Effects of Changes in Demand

Figure 4.3 illustrates the demand for tacos. Assume that tacos and beer are complements. An increase in the price of beer would bring about a movement from

A) point a to point b.
B) point c to point b.
C) D2 to D1.
D) D0 to D2.

Question 65

4.4 Market Effects of Changes in Demand

Figure 4.3 illustrates the demand for tacos. An increase in the demand for tacos is represented by the movement from

A) point a to point b.
B) point c to point b.
C) D2 to D1.
D) D0 to D1.

Question 66

Suppose that consumers expect that the price of a product will increase in the future. The result is that

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

Question 67

4.4 Market Effects of Changes in Demand

Figure 4.3 illustrates the demand for tacos. A decrease in the demand for tacos is represented by the movement from

A) point a to point b.
B) point c to point b.
C) D2 to D1.
D) D0 to D1.

Question 68

4.4 Market Effects of Changes in Demand

Figure 4.3 illustrates the demand for tacos. A decrease in price of tacos would bring about a movement from

A) point a to point c.
B) point c to point a.
C) D2 to D0.
D) D0 to D2.

Question 69

Assume that tortilla chips and salsa are complements. When the price of tortilla chips decreases

A) the demand for salsa increases.
B) the demand for salsa decreases.
C) the supply of salsa decreases.
D) the demand for tortilla chips decreases.

Question 70

4.4 Market Effects of Changes in Demand

Figure 4.3 illustrates the demand for tacos. An increase in price of tacos would bring about a movement from

A) point a to point c.
B) point c to point a.
C) D2 to D0.
D) D0 to D1.

Question 71

When the price of almonds falls

A) the demand for almonds decreases, ceteris paribus.
B) the demand for almonds increases, ceteris paribus.
C) the quantity of almonds demanded decreases, ceteris paribus.
D) the quantity of almonds demanded increases, ceteris paribus.

Question 72

Assume that coffee and tea are substitutes. When the price of coffee increases

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

Question 73

4.4 Market Effects of Changes in Demand

Figure 4.3 illustrates the demand for tacos. Assume that tacos and burritos are substitutes. A decrease in the price of burritos would bring about a movement from

A) point a to point c.
B) point c to point b.
C) D2 to D0.
D) D1 to D2.

Question 74

Landon demands more sushi as his income increases. From this we can conclude that, for Landon,

A) sushi is a normal good.
B) sushi is an inferior good.
C) sushi is a complementary good.
D) sushi is a substitute good.

Question 75

4.4 Market Effects of Changes in Demand

Figure 4.3 illustrates the demand for tacos. An increase in the number of consumers in the market would bring about a movement from

A) point a to point b.
B) point c to point a.
C) D2 to D1.
D) D0 to D2.

Question 76

Suppose that a product benefits from a successful advertising campaign. The result is that

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

Question 77

4.4 Market Effects of Changes in Demand

Figure 4.3 illustrates the demand for tacos. Assume tacos are a normal good. An increase in income would bring about a movement from

A) point a to point b.
B) point c to point b.
C) D2 to D1.
D) D0 to D1.

Question 78

When the price of apples goes up

A) the demand for apples will decrease, ceteris paribus.
B) the demand for apples will increase, ceteris paribus.
C) the quantity of apples demanded will decrease, ceteris paribus.
D) the quantity of apples demanded will increase, ceteris paribus.

Question 79

4.4 Market Effects of Changes in Demand

Figure 4.3 illustrates the demand for tacos. If people expect the price of tacos to decrease in the near future, this would most likely bring about a movement from

A) point a to point b.
B) point c to point a.
C) D2 to D0.
D) D0 to D1.

Question 80

4.4 Market Effects of Changes in Demand

Figure 4.3 illustrates the demand for tacos. Assume that tacos and beer are complements. A decrease in the price of beer would bring about a movement from

A) point a to point c.
B) point c to point a.
C) D2 to D0.
D) D0 to D2.