Deck 3: Demand and Supply

Question 1

The market demand for a good is derived by summing all the individual demands.

Answer 1

True

Question 2

The short run is depicted by a vertical supply curve.

Answer 2

False

Question 3

If the quantity demanded of flashlights is 140,000 and the quantity supplied of flashlights is 80,000, then there is an excess supply of 60,000 flashlights.

Answer 3

False

Question 4

A short-run decision for a muffin shop would be to lay off some workers.

Question 5

If people buy less of a good at every price when their incomes fall, then that good is a normal good.

Question 6

If the price of Chinese food decreases, then the demand for chop sticks decreases because they are complementary goods.

Question 7

A change in flour prices shifts the supply curve for bread.

Question 8

An increase in consumers' incomes raises the equilibrium price and quantity of fine clothing.

Question 9

A decrease in demand, accompanied by a simultaneous decrease in supply, will always cause the equilibrium price and quantity of the good to fall.

Question 10

The supply schedule shows the relationship between price and quantity supplied.

Question 11

Price doesn't change in a market-day supply curve.

Question 12

An excess supply will cause price to fall.

Question 13

A long-run supply curve is more price sensitive than a short-run supply curve.

Question 14

If two goods are substitutes, an increase in the price of one will cause the demand for the other to decrease.

Question 15

A change in demand for milk is caused by a change in the price of milk.

Question 16

An increase in market supply will increase price.

Question 17

The quantity supplied of a good for the market day increases with increases in price.

Question 18

Excess demand or excess supply will always drive price back to equilibrium in a freemarket.

Question 19

When a market is in equilibrium, excess demand and excess supply are zero.

Question 20

The long run refers to the time interval in which suppliers are able to change the quantityof some, but not all, of the resources in the production of a good.

Question 21

The demand for fish today decreases if there are expectations that the price of fish may increase in the future.

Question 22

For complementary goods, an increase in the price of one results in a decrease in demand for the others.

Question 23

A simultaneous increase in demand and supply leads to an increase in price.

Question 24

A demand curve is upward sloping because as the price decreases the quantity demanded decreases.

Question 25

The short-run supply curve for a good is upward sloping because it is possible for producers to completely adjust the resources used in production in response to price changes.

Question 26

The quantity purchased and sold could either increase or decrease when both demand and supply decrease in a market.

Question 27

If the quantity demanded of a good is 100 units and the quantity supplied is 50 units, then the equilibrium quantity will be larger than 100 units.

Question 28

An increase in the price of fish will shift the demand curve for chicken to the right (assuming fish and chicken are substitutes).

Question 29

For complementary goods, an increase in the price of one shifts the demand curve for the other to the right.

Question 30

If the price of pizzas falls, the demand for submarine sandwiches (a substitute good)increases.

Question 31

If people expect the price of automobiles to increase drastically next year, it is likely that the demand curve for this year's automobiles will shift to the right.

Question 32

Expectations of future prices affect demand but not supply.

Question 33

If an earthquake destroys most of a country's steel mills, then the country's supply curve of steel will shift to the left.

Question 34

The quantity demanded is always equal to the quantity supplied.

Question 35

If imports of Japanese automobiles are restricted, prices of U.S.-made automobiles in the United States will be higher than they would otherwise be.

Question 36

Population growth will most likely lead to increased bottled water demand, short-term

A) shortages, and a resultant price increase .
B) surpluses, and a resultant price increase
C) shortages, and a resultant price decrease.
D) surpluses, and a resultant price decrease
E) surpluses, and a resultant price decrease.

Question 37

When Smartville's personal computer assembly plant closed, 30% of the community's labor force was laid off. Following this event Joe's New Car Dealership (NCD, Inc.) complained because the __________ new cars __________.

A) quantity supplied of; fell
B) supply of; increased
C) quantity demanded of; fell
D) demand for; fell
E) demand for; was unchanged

Question 38

-In Exhibit C-1 on the previous page, which panel best depicts the law of demand as aneconomist would represent it?

A) Panel 1
B) Panel 2
C) Panel 3
D) Panel 4
E) Panel 5

Question 39

-In Exhibit C-1, which panel best depicts the long-run supply curve?

A) Panel 1
B) Panel 2
C) Panel 3
D) Panel 4
E) Panel 5

Question 40

Hooterville's Chamber of Commerce has been successful in its campaign to attractmanufacturing firms ("Locate here, we give a hoot!") and the community has experienced an increased average wage rate. Why?

A) The new firms like residents of Hooterville.
B) Labor costs more in other communities.
C) Hooterville has a nice train station.
D) The supply of labor has changed.
E) The demand for labor has changed.

Question 41

Hooterville has seen its population grow by 200% over the past decade (10 years). Urban sprawl has occurred as city services have been extended to formerly rural areas. Mark'sManhole Cover Company, Inc. has seen sales to the City of Hooterville triple during this period. This is most likely due to

A) increased manhole cover prices
B) increased quantity supplied of manhole covers
C) altered consumer expectations
D) increased demand for manhole covers
E) increased supply for manhole covers

Question 42

-Which of the following would result in the changes shown in Exhibit C-2 on the previous page (where S and D represent the initial supply and demand for Smids)?

A) Tastes for smids declined and incomes decreased.
B) The cost of producing smids increased and consumer tastes for smids declined.
C) Consumer incomes increased and production technology for smids improved.
D) The population increased and the input costs for smids increased.
E) Production technology improved and the price of Quids, a substitute good, declined.

Question 43

The equilibrium quantity of Smids would be found by

A) choosing a quantity that generated the highest market price
B) setting price equal to the revenue target desired by firms
C) solving for the price that generates the maximum revenue for sellers
D) choosing the quantity desired by consumers and working backward to solve for the price associated with that quantity
E) determining the price and quantity where the demand and supply curves intersect

Question 44

The law of demand says that the lower the price, the

A) greater is the quantity demanded
B) greater is the demand for the good
C) smaller is the demand for the good
D) smaller is the quantity demanded
E) larger is the supply of the good

Question 45

When price falls, quantity demanded increases. This illustrates the

A) law of supply
B) law of quantity supply
C) law of demand
D) law of quantity demanded
E) linkage between demand and supply

Question 46

A demand curve shows

A) that when price increases, quantity demanded increases
B) the negative relationship between price and quantity demanded; that is when price increases, quantity demanded falls
C) what happens to demand when supply changes
D) what happens to supply when demand changes
E) that price and quantity demanded cannot change at the same time

Question 47

The horizontal summing of individual demand curves creates

A) a horizontal supply curve
B) a vertical supply curve
C) a market demand curve
D) the quantity supplied for each individual demand
E) the quantity demanded for each individual supply

Question 48

A market demand curve is

A) the sum of the demand curves of individuals in a market
B) the sum of individuals who make demands
C) horizontal at the market price
D) vertical at the market price
E) upward sloping

Question 49

Which of the following will not shift the demand curve for grapefruit?

A) an announcement that eating a grapefruit before every meal will induce weight loss
B) a new technology that cuts the labor time needed to harvest grapefruit
C) an announcement that eating grapefruit causes skin problems
D) a fall in the price of oranges
E) an announcement that the price of grapefruit will increase next week

Question 50

An increase in the demand for a good refers to a shift in the

A) demand curve to the left
B) demand curve to the right
C) quantity demanded to the right
D) quantity demanded to the left
E) price of the good

Question 51

Suppose you like shoes and your income doubles. If shoes are a normal good, then the increase in your income will cause

A) the market demand for shoes to shift to the left
B) the market demand for shoes to shift to the right
C) your quantity demanded of shoes to decrease
D) the market's quantity demanded of shoes to decrease
E) market demand for shoes to shift to the left and your own quantity demanded of shoes to shift to the right

Question 52

Which of the following would cause a decrease in the demand for film?

A) a decrease in the price of film processing
B) an increase in the price of film
C) an increase in income of camera users
D) an increase in the price of cameras
E) an increase in supply of cameras

Question 53

Substitute goods are goods that are

A) jointly consumed, like bread and jam
B) good replacements for each other, like Coke and Pepsi
C) used in sequence, like meals and desserts
D) inferior, like black-and-white television
E) not dependent on price, like water and air

Question 54

Consider the case of complementary goods. An increase in the demand for peanut butter can be caused by a(n)

A) decrease in consumer income
B) increase in the price of jams, jellies, and preserves
C) decrease in the price of bread
D) drought in Georgia that destroyed 30 percent of the peanut crop
E) decrease in the price of bologna

Question 55

Consider two goods: gold jewelry and round-trip bus tickets to Urbana, Illinois. Which statement is most likely correct?

A) They are inferior goods.
B) Their demand curves are quite similar.
C) They are complementary goods.
D) They are substitute goods.
E) They are neither inferior, similar, substitutes, nor complements.

Question 56

A short-run supply curve is

A) horizontal, summing individual supply curves
B) temporary, and disappears when price rises
C) downward sloping reaching the horizontal axis
D) upward sloping
E) vertical

Question 57

A market-day supply curve is

A) horizontal, summing individual supply curves
B) vertical
C) downward sloping
D) upward sloping
E) dependent on the market-day demand

Question 58

A decline in the supply of coffee will result in a(n)

A) increase in its demand
B) rise in price and a fall in quantity
C) rise in price and a rise in quantity
D) fall in price and a fall in quantity
E) fall in price and a rise in quantity

Question 59

A decrease in supply means that

A) demand will increase by the same amount
B) the quantity supplied increases
C) the quantity supplied decreases
D) at every price level, the quantity supplied decreases
E) the supply curve shifts to the right

Question 60

Which of the following is true of the relationship between price and quantity supplied?

A) Whatever the price level, quantity supplied is equal to quantity demanded.
B) More is supplied at lower prices.
C) As the price rises, consumers are willing to purchase more of the good supplied.
D) Except for market-day supply, an increase in price generates an increase in quantity supplied.
E) An increase in price leads to a decrease in quantity supplied.

Question 61

Which of the following events would increase the supply of tomatoes?

A) an increase in the demand for tomatoes
B) an increase in the wages of people harvesting tomatoes
C) a decrease in the cost of fertilizers for tomato plants
D) an increase in the price of tomatoes
E) a decrease in the price of tomatoes

Question 62

When quantity supplied equals quantity demanded

A) the demand curve is identical to the supply curve
B) both the demand curve and supply curve are vertical
C) the market is in equilibrium and price is the market-clearing price
D) price is zero
E) excess demand and excess supply are equal to price

Question 63

When the market generates an equilibrium price, we know that

A) the quantity demanded is higher than the quantity demanded associated with a market that is not in equilibrium
B) excess demand and excess supply are zero
C) increases in quantity demanded are matched by increases in quantity supplied
D) it is the most profitable price for suppliers
E) all demanders who want the good will get it

Question 64

The effect of a rise in peoples' incomes on equilibrium price and quantity of Florida orange juice is to

A) increase equilibrium price and quantity
B) decrease equilibrium price and quantity
C) increase equilibrium price and decrease equilibrium quantity
D) increase equilibrium quantity and decrease equilibrium price
E) decrease equilibrium price and increase equilibrium

Question 65

Tickets to the Indiana-Purdue basketball game are usually sold out far in advance of game day and many people are disappointed because they cannot see the game. This suggests

A) the price of the tickets must be higher than the equilibrium price because people consider them valuable
B) the price is set below the equilibrium level
C) the price is set above the equilibrium level
D) there is no excess demand or supply
E) the people deciding on what price to charge considered only the fixed capacity of the stadium

Question 66

Which of the following can bring about a change in the quantity demanded?

A) decrease in quantity supplied
B) increase in quantity supplied
C) change in income
D) change in price
E) change in taste

Question 67

At a price of $5, Sam buys 10 units of a product. When the price increases to $6, Sambuys 8 units. Martha says Sam's demand has decreased. Is Martha correct?

A) Yes, Martha is correct. Sam's demand decreased from 10 to 8 units.
B) No, Martha is incorrect. Sam's demand increased because price increased from $5 to $6.
C) No, Martha is incorrect. The quantity demanded decreased from 10 to 8 units but his demand remains unchanged.
D) No, Martha is incorrect. The quantity supplied to Sam has decreased from 8 units to 10 units but his demand remains unchanged.
E) No, Martha is incorrect. Sam's demand has increased, and his quantity demanded has decreased from 10 units to 8 units.

Question 68

-In Exhibit C-3, which of the graphs shown displays a market-day supply?

A) I
B) II
C) III
D) IV
E) V

Question 69

Matt Taylor is one of the fishermen who returns to the dock at the end of a fishing day with 720 fish in his boat. He and 40 other fishermen crowd the dock with their fish supplies while hundreds of people, eager to buy fish, make their demands felt on themarket. Matt knows that for the current fishing day

A) price cannot change
B) the market-day supply curve is vertical
C) the market-day demand curve is vertical
D) quantity demanded is fixed
E) his short-run supply curve is upward sloping

Question 70

-In Exhibit C-5 (on the following page), if price is $75, a(n) ____ would result, causinga(n) ___ in price.

A) excess demand; increase
B) excess demand; decrease
C) excess supply; increase
D) excess supply; decrease
E) market clearing; change

Question 71

-In Exhibit C-5, if price is $25, a(n) ___ would result, causing a(n)___ in price.

A) excess demand; increase
B) excess demand; decrease
C) excess supply; increase
D) excess supply; decrease
E) scarcity; stabilization

Question 72

A shortage of a good means

A) an excess supply of the good
B) an excess demand of the good
C) quantity demanded is less than the quantity supplied
D) the quantity supplied exceeds the quantity demanded
E) price is higher than its equilibrium level in the market

Question 73

If a shortage of a good exists in the market,

A) the price is higher than its equilibrium level
B) the quantity demanded is less than the quantity supplied
C) the quantity demanded exceeds the quantity supplied
D) there is an excess supply of the good
E) the price will fall

Question 74

A surplus of a good means

A) there is an excess demand for this good
B) the price is lower than its equilibrium level
C) the quantity demanded exceeds the quantity supplied
D) the quantity supplied is less than the quantity demanded
E) there is an excess supply of the good

Question 75

If there is an excess supply of a good on the market, then

A) the price is lower than the equilibrium price
B) the quantity demanded exceeds the quantity supplied
C) the price will fall
D) there is a shortage of the good
E) the price will rise

Question 76

-In Exhibit C-6, the equilibrium price is

A) $65
B) $60
C) $55
D) $50
E) $45

Question 77

-In Exhibit C-6, if there is a shortage of 200 radios, price must be

A) $60
B) $55
C) $50
D) $45
E) $40

Question 78

-In Exhibit C-6, if there is a surplus of 200 radios, price must be

A) $60
B) $55
C) $50
D) $45
E) $40

Question 79

In economics, the short run refers to a period of time in which

A) demanders can change their minds about what to buy at what prices
B) demanders and suppliers can negotiate prices
C) price is fixed
D) suppliers can change some, but not all, of their inputs
E) output is fixed

Question 80

In the long run,

A) output, once determined, cannot be changed
B) price, once determined, cannot be changed
C) land and capital cannot be changed
D) all inputs are variable, that is, the quantities of all inputs can be changed
E) labor can be changed, but all other inputs are fixed