Deck 2: The Operation of a Market

Question 1

When drawing a demand curve for cars, we keep which of the following constant?

A) price expectations, incomes, and the price of cars
B) incomes, tastes, and the price of products that are substitutes for cars
C) incomes, the price of cars, and the price of products complementary to cars
D) incomes, tastes, and the price of cars

Answer 1

incomes, tastes, and the price of products that are substitutes for cars

Question 2

If beef and pork are substitutes for each other, an increase in the price of beef will:

A) decrease the demand for pork.
B) decrease the quantity of beef demanded.
C) decrease the demand for beef.
D) decrease the quantity of pork
Demanded.

Answer 2

decrease the quantity of beef demanded.

Question 3

The law of downward-sloping demand states that:

A) as prices decrease people buy less of a product.
B) as incomes decrease people buy less of a product.
C) the demand curve shows a positive relationship between price and quantity demanded.
D) the demand curve shows an inverse relationship between price and quantity demanded.

Answer 3

the demand curve shows an inverse relationship between price and quantity demanded.

Question 4

Which of the following will increase a typical student's demand in the quantity of pizza slices Purchased?

A) an increase in income
B) a decrease in the price of cheese
C) a decrease in the price per slice of pizza
D) a decrease in the prize of hamburgers

Question 5

Which of the following will increase a typical student's demand for pizza?

A) a decrease in the price of cheese
B) an increase in income
C) a decrease in the price per slice of pizza
D) a decrease in the prize of hamburgers

Question 6

If potatoes and rice are substitutes for each other, then a decrease in the price of potatoes will:

A) decrease the quantity demanded of rice.
B) increase the demand for rice.
C) decrease the demand for potatoes.
D) decrease the demand for rice.

Question 7

If Jones' Manufacturing sold 500 belts at $15 each last month and 450 belts at the same price this month, it can be said that the company has had:

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

Question 8

A shift to the right in the demand curve for product X could be caused by:

A) a decrease in the price of a substitute for X.
B) a decrease in the price of X.
C) a decrease in the price of a product complementary to X.
D) a decrease in consumer incomes.

Question 9

A shift to the left in the demand curve for product Y could be caused by:

A) an increase in consumer incomes.
B) a decrease in the price of a product complementary to Y.
C) a decrease in the price of a substitute product for Y.
D) an increase in the price of Y.

Question 10

The difference between an increase in demand and an increase in quantity demanded is:

A) an increase in quantity demanded is the result of a decrease in price only.
B) an increase in demand can result from a change in price or a change in a constant factor,
Whereas an increase in quantity demanded results only from a change in price.
C) an increase in demand can result from a change in price or a change in a constant factor, whereas an increase in quantity demanded results only from a change in one of the constant factors.
D) an increase in demand is the result of a price change only.

Question 11

The demand curve for houses will not change if there is a change in:

A) consumer incomes.
B) mortgage interest rates.
C) the price of houses.
D) consumer expectations of future prices.

Question 12

When we say that there has been a decrease in the demand for beef we mean that:

A) the demand curve for beef has shifted to the right.
B) the demand curve for beef has shifted to the left.
C) the price of beef has increased.
D) the price of beef has decreased.

Question 13

The demand schedule shows how much of a particular product will be purchased:

A) depending on consumer incomes.
B) depending on the supply of the product.
C) depending on the price of the product.
D) none of the above

Question 14

All of the following factors influence the demand for a product except:

A) production costs.
B) expectations of future prices.
C) consumer incomes.
D) population.

Question 15

If consumers expect gold prices to increase in the future:

A) they will reduce their gold purchases, causing the demand curve for gold to shift to the left.
B) they will reduce their gold purchases; however, the demand curve for gold will remain the same.
C) they will be willing to buy more gold now; however, the demand curve for gold will remain the same.
D) they will be willing to buy more gold now, causing the demand curve to shift to the right.

Question 16

Which of the following, by itself, might shift the demand curve for gasoline to the left?

A) an increase in the price of gasoline
B) an increase in the price of riding the
Train
C) an increase in the price of cars
D) an abundance of gasoline on the market

Question 17

If products A and B are substitutes for each other, and the price of A increases:

A) the demand curve for A will shift to the right.
B) the demand curve for A will shift to the left while the demand curve for B will remain unchanged.
C) the demand for B will decrease.
D) the demand for B will increase.

Question 18

If products M and N are complementary, when the price of M increases:

A) the demand curve for N will shift to the left.
B) the demand curve for M will shift to the left.
C) the demand curves for both products will shift to the left.
D) the demand curve for M will shift to the left and the demand curve for N will shift to the right.

Question 19

Which of the following would not cause a decrease in the supply of automobiles?

A) an increase in the price of automobiles
B) an increase in steel prices
C) an increase in wages for automobile workers
D) an excise tax placed on automobile manufacturers

Question 20

Which of the following would not cause a shift in the supply curve?

A) a change in technology
B) a change in government taxes on suppliers
C) a change in the price
D) a change in resource costs

Question 21

In drawing the supply curve for cars, which of the following do we keep constant?

A) wages, the price of cars, and consumer expectations
B) the price of cars, technology, and wages
C) wages, taxes, and consumer expectations
D) technology, wages, and expected profit

Question 22

The quantity supplied of any product:

A) increases with consumer demand.
B) decreases with the price of the product.
C) increases with the price of the product.
D) is solely dependent upon the price of the product.

Question 23

If construction workers achieve a wage increase from their employers, then:

A) the supply curve for houses will decrease by moving down to the right.
B) the supply curve for houses will shift upward and to the left.
C) the quantity of houses supplied will decrease.
D) the demand curve for houses will shift to the left because of higher prices.

Question 24

Which of the following will not cause the supply curve for tomatoes to shift to the left?

A) an increase in the price of tomatoes
B) an increase in wages paid to workers to harvest tomatoes
C) poor weather that destroys part of the tomato crop
D) an increase in the cost of fertilizer

Question 25

When we refer to an increase in supply we mean:

A) supplier's reaction to lower prices for the product.
B) supplier's reaction to an increase in the cost of resources necessary to make the product.
C) supplier's reaction to higher prices for the product.
D) a shift of the supply curve to the right.

Question 26

Which of the following will increase the quantity of new construction supplied in the market?

A) an increase in the price of new houses
B) a decrease in the price of new houses
C) a decrease in the price of lumber
D) an increase in the use of machinery

Question 27

Which of the following will increase the supply of new construction?

A) an increase in the use of machinery
B) a decrease in the price of new houses
C) an increase in the price of new houses
D) a decrease in the price of lumber

Question 28

If potatoes and rice are substitutes for each other, an increase in the price of potatoes will:

A) shift the demand curve for potatoes to the left and lower the price.
B) increase the quantity of rice demanded by moving down the demand curve for rice.
C) increase the price of rice but decrease the quantity sold.
D) increase the demand for rice and increase the price of rice.

Question 29

An increase in the price of gasoline will:

A) increase both the price of tires and the quantity sold.
B) decrease the price of tires and decrease the quantity sold.
C) decrease the price of tires and increase the quantity sold.
D) increase the price of tires but reduce the quantity purchased.

Question 30

If the market price for houses is in equilibrium and the price of lumber increases:

A) the demand curve for houses will shift to the left, reducing the price of houses.
B) the demand curve for houses will shift to the right, increasing the price of houses.
C) the supply curve for houses will shift to the right, increasing the price of houses.
D) the supply curve for houses will shift to the left, increasing the price of houses.

Question 31

The introduction of labour-saving machinery in the production of automobiles will:

A) decrease the price of automobiles and increase the quantity sold.
B) decrease the price of automobiles and decrease the quantity sold.
C) increase the price of automobiles but reduce the quantity sold.
D) increase the price of automobiles and quantity sold.

Question 32

If the market price for a product is above the equilibrium price:

A) the demand will decrease and the supply will increase.
B) the quantity demanded will increase and the quantity supplied will decrease.
C) the demand will increase and the supply will decrease.
D) the quantity demanded will decrease and the quantity supplied will increase.

Question 33

If the market price for a product is below the equilibrium price:

A) the demand will decrease and the supply will increase.
B) the demand will increase and the supply will decrease.
C) the quantity demanded will decrease and the quantity supplied will increase.
D) the quantity demanded will increase and the quantity supplied will decrease.

Question 34

If the demand for a product and the supply of a product both increase:

A) the quantity exchanged will increase but the price could either increase or decrease.
B) both the price and the quantity exchanged will increase.
C) the price will increase and the quantity exchanged will decrease.
D) the price will decrease and the quantity exchanged will increase.

Question 35

If the market for automobiles is in equilibrium and the price of steel increases:

A) the price of automobiles will increase and the quantity exchanged will increase.
B) the price of automobiles will decrease and the quantity exchanged will decrease.
C) the price of automobiles will decrease and the quantity exchanged will increase.
D) the price of automobiles will increase and the quantity exchanged will decrease.

Question 36

Demand and supply concepts can be used to explain prices:

A) only in product markets, such as cars and houses.
B) only in government-regulated industries.
C) in all markets.
D) in labour and product markets, but not in money markets.

Question 37

The term equilibrium in market analysis means:

A) the quantity that suppliers will supply to the market at a specific price.
B) the quantity buyers are willing to purchase.
C) a situation in which there is no tendency for the price or quantity to change.
D) the government-established price for a product.

Question 38

If the market for hamburgers is in equilibrium and the price of pizza falls:

A) the price of hamburgers will decrease and the quantity exchanged will decrease.
B) the price of hamburgers will increase and the quantity exchanged will increase.
C) the price of hamburgers will decrease and the quantity exchanged will increase.
D) the price of hamburgers will increase and the quantity exchanged will decrease.

Question 39

If the market for jelly beans is in equilibrium and the demand for jelly beans increases:

A) the price of jelly beans will decrease and the quantity exchanged will increase.
B) the price of jelly beans will decrease and the quantity exchanged will decrease.
C) the price of jelly beans will increase and the quantity exchanged will increase.
D) the price of jelly beans will increase and the quantity exchanged will decrease.

Question 40

Assuming that the market for fossil fuels is in equilibrium, the introduction of a smart car would:

A) decrease the price of gas powered vehicles.
B) increase the demand for fossil fuels.
C) not affect this market.
D) decrease the demand for fossil fuels.

Question 41

Assuming that the market for fossil fuels is in equilibrium, the introduction of a smart car would:

A) not affect this market.
B) increase the price of fossil fuels.
C) decrease the price of fossil fuels.
D) decrease the supply of fossil fuels.

Question 42

If the demand for a product is inelastic, the coefficient of elasticity is:

A) zero.
B) greater than one.
C) less than one.
D) equal to one.

Question 43

If the price of a product increases by 6 percent and the quantity demanded falls by 10 percent, the demand for this product is:

A) perfectly inelastic.
B) unitary elastic.
C) inelastic.
D) elastic.

Question 44

A perfectly inelastic demand curve is:

A) upward sloping to the right.
B) horizontal.
C) vertical.
D) downward sloping to the right.

Question 45

If the demand for a product is inelastic and the price of the product increases, the total amount of money brought in from the sale of the product:

A) increases.
B) decreases.
C) is impossible to tell without further information.
D) stays the same.

Question 46

If an increase in the price of a product leads to a decrease in total revenue, the demand for this product is:

A) unitary elastic.
B) elastic.
C) inelastic.
D) perfectly elastic.

Question 47

On a graph, a perfectly elastic supply curve is:

A) upward sloping to the right.
B) vertical.
C) horizontal.
D) downward sloping to the right.

Question 48

If a 20 percent increase in the price led to a 15 percent increase in quantity supplied, the elasticity of supply is:

A) inelastic.
B) perfectly elastic.
C) elastic.
D) unitary elastic.

Question 49

If the quantity supplied of a product remains the same regardless of the price, the supply is:

A) perfectly inelastic.
B) perfectly elastic.
C) relatively elastic.
D) relatively inelastic.

Question 50

If consumers are willing to purchase a fixed quantity of a product regardless of the price, the
Demand is:

A) inelastic.
B) perfectly inelastic.
C) elastic.
D) perfectly elastic.

Question 51

Which of the following products is likely to have the most inelastic demand?

A) magazines
B) medical care
C) chocolate bars
D) blue jeans

Question 52

Which of the following products is likely to have the most elastic demand?

A) cigarettes
B) textbooks
C) chocolate bars
D) medical care

Question 53

The coefficient of price elasticity of demand is calculated by:

A) dividing the change in quantity demanded by the change in price.
B) dividing the percentage change in price by the percentage change in quantity demanded.
C) dividing the percentage change in quantity demanded by the percentage change in price.
D) dividing the change in price by the change in quantity demanded.

Question 54

Which of the following characteristics does not lead to an elastic demand?

A) quantity demanded decreases when price increases
B) composes a large percentage of one's budget
C) many substitutes
D) luxury product

Question 55

Which of the following does not help determine the elasticity of supply?

A) ability to substitute during production
B) ability to store the product
C) time under consideration
D) number of substitute products available

Question 56

The demand for a product will be more elastic:

A) the shorter the time period under consideration.
B) the smaller the percentage of one's budget spent on it.
C) if it is a necessity.
D) the greater the number of substitutes for it.

Question 57

If consumers spend a fixed amount of money on a product regardless of the price, the demand Can be said to be:

A) perfectly elastic.
B) inelastic.
C) elastic.
D) unitary elastic.

Question 58

When we say that the demand for a product is elastic we mean:

A) that an increase in price will increase total revenue.
B) that the demand curve slopes to the right.
C) that the coefficient of price elasticity of demand is less than one.
D) that the percentage change in quantity demanded is greater than the percentage change in price.

Question 59

The demand for a product tends to be less elastic:

A) the greater the percentage of our income allocated to it.
B) the lower the price.
C) the closer the product is to being a necessity.
D) the more substitutes there are available for it.

Question 60

If the price of a product increased from $28 to $32 and quantity demanded decreased from 102 to 98 units, the demand is said to be:

A) elastic.
B) perfectly elastic.
C) inelastic.
D) unitary elastic.

Question 61

If the price of a product decreased from $11 to $9 and the quantity supplied decreased from 61 to 59 units, the supply is said to be:

A) inelastic.
B) unitary elastic.
C) perfectly elastic.
D) elastic.

Question 62

One can expect the elasticity of demand for a hockey game to be ________________ because it is____________ good.

A) elastic, necessity
B) elastic, luxury
C) inelastic, necessity
D) inelastic, luxury

Question 63

One can expect the elasticity of supply of blood to be:

A) elastic.
B) perfectly elastic.
C) inelastic.
D) perfectly inelastic.