Deck 4: The Market Forces of Supply and Demand (PART 2)

Question 1

What is the side of the market that deals with the willingness and ability to produce and sell?

A)demand
B)competition
C)supply
D)a monopoly

Answer 1

supply

Question 2

How is a market supply curve constructed?

A)by vertically summing individual supply curves
B)by horizontally summing individual supply curves
C)by finding the average quantity supplied of the market's individual supply curves
D)by summing a consumer's demands for all goods

Answer 2

by horizontally summing individual supply curves

Question 3

What might cause a movement along the supply curve?

A)a change in technology
B)a change in input prices
C)a change in expectations about future prices
D)a change in the price of the good or service

Answer 3

a change in the price of the good or service

Question 4

What is one reason that government taxes on cigarettes reduce smoking?

A)Cigarette companies are successful in passing much of the tax on to consumers.
B)Cigarette companies do not pass much of the tax on to consumers.
C)There are many good substitutes for cigarettes.
D)Higher prices suggest less harmful cigarettes.

Question 5

Suppose you make jewellery.If the price of gold increases,what would we expect you to do?

A)be willing and able to produce less jewellery than before at each possible price
B)be willing and able to produce more jewellery than before at each possible price
C)face a greater demand for your jewellery
D)face a weaker demand for your jewellery

Question 6

What relationship is shown by the supply schedule?

A)between price and quantity supplied
B)between price and quantity demanded
C)between supply and quantity
D)between profit and price

Question 7

Other things equal,what happens when the price of a good rises?

A)The quantity demanded of the good increases.
B)The supply increases.
C)The quantity supplied of the good rises.
D)The demand curve shifts to the left.

Question 8

Which of the following determines a market supply curve but not an individual supply curve?

A)number of sellers
B)expectations
C)input prices
D)technology

Question 9

What does the market supply curve show?

A)the total quantity supplied at any price
B)the average quantity supplied at any price
C)a ratio between price and quantity supplied for the market
D)the price sellers will receive from consumers at given quantities

Question 10

Suppose you make jewellery.If the price of gold falls,what would we expect you to do?

A)be willing and able to produce less jewellery than before at each possible price
B)be willing and able to produce more jewellery than before at each possible price
C)face a greater demand for your jewellery
D)face a weaker demand for your jewellery

Question 11

If cigarettes and marijuana had been found to be substitutes,what would a tax placed on cigarettes do?

A)decrease the demand for marijuana
B)increase the demand for marijuana
C)decrease the quantity demanded of marijuana
D)increase the quantity demanded of marijuana

Question 12

What is the relationship between price and quantity supplied?

A)negative, or inverse
B)positive, or direct
C)nonexistent
D)the same as the relationship between price and quantity demanded

Question 13

For teens,what does a 10 percent increase in the price of cigarettes lead to?

A)a 6 percent drop in teenage smoking
B)a 12 percent drop in teenage smoking
C)a 18 percent drop in teenage smoking
D)a 24 percent drop in teenage smoking

Question 14

Figure 4-9

Refer to the Figure 4-9.Which graph could be used to show the result of 5 percent of the country's smokers deciding to stop smoking?

A)graph a
B)graph b
C)graph c
D)both a and c could be used to show the result

Question 15

What does fewer sellers in the market cause?

A)the supply curve to shift to the left
B)the supply curve to shift to the right
C)a movement up a stationary supply curve
D)a movement down a stationary supply curve

Question 16

What will happen if the price of a good is low?

A)Firms would increase profit by increasing output.
B)Quantity supplied could be zero.
C)The supply curve for the good will shift to the left.
D)Firms should raise the price of the product.

Question 17

Lead is an important input in the production of crystal.If the price of lead decreases,all else being equal,what would we expect?

A)the supply of crystal to be unaffected
B)the supply of crystal to decrease
C)the supply of crystal to increase
D)the supply of lead to increase

Question 18

Which of the following cause and effect events are in order for a seller?

A)an input price falls, profit falls, the supply curve shifts left
B)an input price falls, profit rises, the supply curve shifts right
C)an input price rises, profit falls, the supply curve shifts right
D)an input price rises, profit rises, the supply curve shifts left

Question 19

For a seller,which of the following is NOT positively related?

A)the price of the good and the seller's profit
B)the price of the good and quantity supplied
C)the seller's profit and product cost
D)the seller's profit and quantity supplied

Question 20

What does a 10 percent increase in the price of cigarettes lead to?

A)18 percent drop in smoking
B)12 percent drop in smoking
C)6 percent drop in smoking
D)4 percent drop in smoking

Question 21

Holding the other determinants of supply constant,what would a change in price do?

A)result in a change in supply
B)have no effect on the quantity supplied
C)result in a shift of demand
D)result in a movement along a stable supply curve

Question 22

Figure 4-10

Refer to the Figure 4-10.What is the movement from point B to point A on the graph called?

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

Question 23

In a perfectly competitive market,buyers and sellers are price setters.

Question 24

Baseballs and baseball bats are substitute goods.

Question 25

The market demand is the average of all of the individual demands for a particular good or service.

Question 26

Figure 4-10

Refer to the Figure 4-10.What would cause the movement from point A to point B on the graph?

A)a decrease in the price of the good
B)an increase in the price of the good
C)an increase in technology
D)a decrease in input prices

Question 27

A market is a group of buyers and sellers of a particular product.

Question 28

Whenever a determinant of demand other than price changes,the demand curve shifts.

Question 29

A reduction in the price of a product and an increase in the number of buyers in the market affect the demand curve in the same general way.

Question 30

The quantity supplied of a good or service is the amount that sellers are willing and able to sell at a particular price.

Question 31

Figure 4-10

Refer to the Figure 4-10.What is the movement from point A to point B on the graph called?

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

Question 32

The law of demand states that the quantity demanded of a product is positively related to price.

Question 33

The quantity demanded of a product is the amount that buyers are willing and able to purchase at a particular price.

Question 34

When an increase in the price of one good lowers the demand for another good,the two goods are called complements.

Question 35

An increase in the price of pizza will shift the demand curve for pizza to the left.

Question 36

If the demand for a good falls when income falls,the good is called an inferior good.

Question 37

Figure 4-10

Refer to the Figure 4-10.What would cause the movement from point B to point A on the graph?

A)a decrease in the price of the good
B)an increase in the price of the good
C)an increase in technology
D)a decrease in input prices

Question 38

What will a technological advancement do?

A)shift the supply curve to the right
B)shift the demand curve to the left
C)shift the demand curve to the right
D)shift the supply curve to the left

Question 39

A local cable TV company might be a monopolist.

Question 40

A dress manufacturer is expecting higher prices for dresses in the near future.What would we expect?

A)the dress manufacturer to supply more dresses now
B)the dress manufacturer to supply fewer dresses now
C)the demand for this manufacturer's dresses to fall
D)no change in the dress manufacturer's current supply

Question 41

Price,which is determined by all buyers and sellers as they interact in the marketplace,allocates the economy's scarce resources.

Question 42

This question deals with demand and supply and refers you to the table below.
a.Given the table, graph the demand and supply curves for flashlights. Make certain to label equilibrium price and equilibrium quantity.

b.What is the equilibrium price and equilibrium quantity?
c.Suppose the price is currently at $5. What problem would exist in the economy? What would you expect to happen to price? Show this on your graph.
d.Suppose the price is currently $2. What problem exists in the economy? What would you expect to happen to price? Show this on your graph.

Question 43

Assume the following demand and supply equations: Qd=900-20P,and Qs=150+10P.
a)Graph the two curves.
b)Calculate the slopes of the two curves.
c)Calculate the equilibrium price and quantity.
d)If the price was $30,how much would the quantity demanded be? (Show it on the graph)
e)If the price was $30,how much would the quantity supplied be? (Show it on the graph)

Question 44

The law of supply states that,other things equal,when the price of a good rises,the quantity supplied of the good falls.

Question 45

Anyone willing to pay the market price for a resource may have it.

Question 46

A.What is the difference between a "change in demand" and a "change in quantity demanded"? Graph your answer.
B.For each of the following changes, determine whether there will be a movement along the demand curve or a shift in the demand curve.
a.a change in the price of a related good
b.a change in tastes
c.a change in the number of buyers
d.a change in price
e.a change in expectations
f.a change in income

Question 47

Refer to the following:
A.
What is the difference between a "change in supply" and a "change in quantity supplied"? Graph your answer.
B.
For each of the following changes,determine whether there will be a change in quantity supplied or a change in supply.
a.a change in the resource cost
b.a change in producer expectations
c.a change in price
d.a change in technology
e.a change in the number of sellers

Question 48

A supply curve slopes upward because,all else equal,a higher price means a greater quantity supplied.

Question 49

It is not possible for demand and supply to shift at the same time.

Question 50

Fill in the accompanying table,showing whether equilibrium price and equilibrium quantity go up,down,or stay the same.

Question 51

A movement along a supply curve is called a change in supply while a shift of the curve is called a change in quantity supplied.

Question 52

A reduction in an input price will cause a change in quantity supplied,but not a change in supply.

Question 53

A shortage will occur at any price below equilibrium price and a surplus will occur at any price above equilibrium price.

Question 54

If a company making frozen orange juice expects the price of their product to be higher next month,they will supply more to the market this month.

Question 55

Suppose we are analyzing the market for hot chocolate.Graphically illustrate the impact each of the following would have on demand or supply.Also show how equilibrium price and quantity have changed.
a.Winter starts and the weather turns sharply colder.
b.The price of tea, a substitute for hot chocolate, falls.
c.The price of cocoa beans decreases.
d.The price of whipped cream falls.
e.A better method of harvesting cocoa beans is introduced.
f. The Canadian Medical Association announces that hot chocolate cures acne.
g. Protesting farmers dump millions of gallons of milk, causing the price of milk to rise.
h. Consumer income falls because of a recession and hot chocolate is considered a normal good.
i. Producers expect the price of hot chocolate to increase next month.
j. Currently, the price of hot chocolate is $0.50 per cup above equilibrium.

Question 56

If there is an improvement in the technology of producing a product,the supply curve for that product will shift to the left.

Question 57

The behaviour of buyers and sellers drives markets toward equilibrium.

Question 58

Quantity demanded is equal to quantity supplied,at the equilibrium price.

Question 59

In a market,the price of any good adjusts until quantity demanded equals quantity supplied.

Question 60

Surpluses drive price up while shortages drive price down.

Question 61

In the aftermath of hurricane Sandy,parts of New Jersey have been isolated so that the transportation of gasoline to consumers has become very difficult.Local authorities in various locations have tried various ways to address the situation.
a)Using a supply and demand model,analyze the effect of the hurricane on the market for gasoline.
b)In some places,local authorities have decided to distribute a certain amount of gasoline for free,so that every consumer had the right to a fixed allowance.Show and discuss the effects of this decision on the market.
c)In other places,local authorities have imposed a price cap on gas.Show this in a supply and demand diagram and explain the consequences.

Question 62

Suppose the market for standard one-family houses in a Canadian city is described by the equations Qd=(165+IM)-2.5P,and Qs=-60+10P,where Q represents the number of houses demanded or supplied per year (in 10s),P represents the price in 10 000s,and IM is the number of families immigrating into the city during the year,in 10s.
a)What is the equilibrium number of houses and the equilibrium price if there were no immigration (IM=0)? Show this situation in a graph.
Now,suppose 350 families have immigrated within the year (IM=35).
b)Show this new situation on your graph.
c)What are the new equilibrium price and number of houses?
d)How many of the "old" families (non-immigrant)have lost their ability to buy a house?
e)By how much does the number of houses supplied increase?
f)How many of the newcomers buy a house? How could you change the demand equation if you knew that only about 10 percent of the immigrating families buy a house in the year of their arrival?

Question 63

Suppose the equation Qd=(10-0.4D)-0.6P describes an individual's demand for iTunes content,with D being the price of the device needed to access iTunes content,in $100s.
a)Draw the individual demand curve and show a person's quantity demanded when the price P is $8 and the price of the device is $600 (D=6).
b)If the market price P increased by $1 (so that the new price is P=$9),what should be the change in the price of the device (D)that would keep the quantity demanded the same as before? Show these changes in a graph.
c)For the above question (b),identify which change(s)have determined a movement along the demand curve,and which have determined a shift in the demand curve.

Question 64

Ad Venture is a company that produces advertising video clips.Their supply curve is Qs=-2W+6P,where W (in 10s)is the hourly wage that the company pays their workers and P (in 1000s)is the ongoing market price for a 1-minute commercial.
a)If the current wage in the video industry is $35 (W=3.5),what is the minimum price that allows Ad Venture to remain in the industry (i.e.,to supply a positive number of videos)? Draw the supply curve.
b)If the wage is $35,how much should the market price be so that Ad Venture produces 8 videos?
c)At the price you have determined at point
b.,how does the number of videos supplied change if the wage decreases to $30? Show this situation in your graph.