Deck 4: The Market Forces of Supply and Demand

Question 1

What is another term for equilibrium price?

A) balancing price
B) market-clearing price
C) cooperative price
D) reservation price

Answer 1

B

Question 2

Wheat is the main input in the production of flour. All else equal, if the price of wheat increases, what would we expect?

A) the supply of flour to increase
B) the supply of flour to decrease
C) the demand for flour to increase
D) the demand for flour to decrease

Answer 2

B

Question 3

If suppliers expect the price of their product to fall in the future, what will they do?

A) decrease supply now
B) increase supply now
C) increase supply in the future, but not now
D) increase supply now and decrease it in the future

Answer 3

B

Question 4

Figure 4-2

Refer to the Figure 4-2. What would happen at a price of $35?

A) There would be a shortage of 400 units.
B) There would be a shortage of 200 units.
C) There would be a surplus of 200 units.
D) There would be a surplus of 400 units.

Question 5

Recent pine beetle infestations that are destroying trees in the western provinces are expected to cause the price of lumber to rise in the next six months. As a result, what can we expect to happen to the supply of lumber?

A) It will fall in six months, but not now.
B) It will increase in six months when the price goes up.
C) It will fall now.
D) It will increase now to meet as much demand as possible.

Question 6

Funsters Inc. sells its most popular doll for $35. It has just learned that its leading competitor is mass producing an excellent copy and plans to flood the market with their $10 doll in six weeks. What should Funsters do?

A) increase the supply of their doll now before the other doll hits the market
B) fight fire with fire and decrease supply for six weeks, then increase the supply of its doll too
C) continue business as usual, since consumers will not buy the cheaper imitation
D) discontinue their doll

Question 7

Figure 4-1

Refer to the Figure 4-1. What is the movement from S1 to S called?

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

Question 8

What happens at the equilibrium price?

A) Buyers have an incentive to buy more.
B) It is possible for there to be a shortage.
C) Firms have an incentive to increase production.
D) Everyone in the market has been satisfied.

Question 9

Workers at a bicycle assembly plant currently make minimum wage. If the provincial government increases the minimum wage by $1.00 an hour, what will likely happen?

A) Demand for bicycle assembly workers will increase.
B) Supply of bicycles will shift to the right.
C) Supply of bicycles will shift to the left.
D) The firm must increase output to maintain profit levels.

Question 10

Figure 4-1

Refer to the Figure 4-1. What could cause the movement from S to S1?

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

Question 11

Figure 4-1

Refer to the Figure 4-1. What is the movement from S to S1 called?

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

Question 12

What is the unique point at which the supply and demand curves intersect?

A) market unity
B) an agreement
C) cohesion
D) equilibrium

Question 13

If a car manufacturer purchases new labour-saving technology for its assembly line, what would we NOT expect?

A) less labour to be used
B) the supply of cars produced to increase
C) costs to the firm to fall
D) the price of cars to be increased by the firm

Question 14

Figure 4-2

Refer to the Figure 4-2. What are the equilibrium price and quantity?

A) $35 and 200
B) $15 and 600
C) $25 and 400
D) $15 and 200

Question 15

What is the price where quantity supplied equals quantity demanded?

A) coordinating price
B) cooperative price
C) equilibrium price
D) balancing price

Question 16

Figure 4-1

Refer to the Figure 4-1. What could cause the movement from S1 to S?

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

Question 17

What happens if there is a shortage of a good at the current price?

A) Sellers are producing more than buyers wish to buy.
B) The market must be in equilibrium.
C) The price is below the equilibrium price.
D) Quantity demanded equals quantity supplied.

Question 18

When evaluating differences or similarities between an increase in supply and an increase in quantity supplied, what do we know?

A) The former is a shift of the curve and the latter is a movement along the curve.
B) The former is a movement along the curve and the latter is a shift of the curve.
C) Both are shifts of the supply curve.
D) Both are movements along the curve.

Question 19

Figure 4-2

Refer to the Figure 4-2. What would happen at a price of $15?

A) There would be a shortage of 400 units.
B) There would be a surplus of 400 units.
C) There would be a shortage of 200 units.
D) There would be a surplus of 200 units.

Question 20

Wheat is the main input in the production of flour. All else equal, if the price of wheat decreases, what would we expect?

A) the supply of flour to decrease
B) the demand for flour to decrease
C) the supply of flour to increase
D) the demand for flour to increase

Question 21

Figure 4-3

Refer to the Figure 4-3. If the price in this market is currently $14, what would happen?

A) There would be a shortage of 20 units so producers would increase production.
B) There would be a surplus of 20 units and the price would tend to fall.
C) There would be a shortage of 40 units so producers would increase production.
D) There would be a surplus of 40 units and the price would tend to fall.

Question 22

Figure 4-4

Refer to the Figure 4-4. If the price is $25, what would happen?

A) There would be a surplus of 300 and the price would fall.
B) There would be a surplus of 200 and the price would fall.
C) There would be a shortage of 200 and the price would rise.
D) There would be a shortage of 300 and the price would rise.

Question 23

Figure 4-4

Refer to the Figure 4-4. If the price is $15, what would the quantity supplied be?

A) 400
B) 600
C) 700
D) 800

Question 24

Suppose donuts are currently selling for $14 per dozen. The equilibrium price of donuts is $12 per dozen. What would we expect?

A) a shortage to exist and the market price of donuts to increase
B) a shortage to exist and the market price of donuts to decrease
C) a surplus to exist and the market price of donuts to increase
D) a surplus to exist and the market price of donuts to decrease

Question 25

What happens when there is a surplus in a market?

A) There is upward pressure on price.
B) There is downward pressure on price.
C) The market is operating below the equilibrium level.
D) There are too many buyers chasing too few goods.

Question 26

Refer to the Table 4-1. If the price were $3, what would happen?

A) A shortage of 100 units would exist and the price would tend to fall.
B) A surplus of 50 units would exist and the price would tend to rise.
C) A surplus of 25 units would exist and the price would tend to fall.
D) A shortage of 100 units would exist and the price would tend to rise.

Question 27

Figure 4-3

Refer to the Figure 4-3. If price in this market is currently $8, what would happen?

A) Quantity supplied would be 40 and quantity demanded would be 60.
B) Quantity supplied would be 60 and quantity demanded would be 40.
C) Quantity supplied would be 50 and quantity demanded would be 50.
D) Quantity supplied would be 70 and quantity demanded would be 30.

Question 28

Why do markets move toward equilibrium of supply and demand?

A) because of the actions of buyers and sellers
B) because of government regulations placed on market participants
C) because of increased competition among sellers
D) because of buyers' ability to affect market decisions

Question 29

Figure 4-4

Refer to the Figure 4-4. If the price is $25, what would the quantity demanded be?

A) 400
B) 500
C) 600
D) 800

Question 30

Figure 4-4

Refer to the Figure 4-4. In this market, what would the equilibrium price and quantity be?

A) $15 and 700
B) $20 and 600
C) $25 and 500
D) $25 and 800

Question 31

If a surplus exists in a market, what do we know?

A) The actual price is above equilibrium price, and quantity supplied is greater than quantity demanded.
B) The actual price is above equilibrium price, and quantity demanded is greater than quantity supplied.
C) The actual price is below equilibrium price, and quantity demanded is greater than quantity supplied.
D) The actual price is below equilibrium price, and quantity supplied is greater than quantity demanded.

Question 32

Figure 4-3

Refer to the Figure 4-3. In this market, what are the equilibrium price and quantity?

A) $14 and 30
B) $12 and 60
C) $10 and 50
D) $8 and 50

Question 33

What happens when there is a shortage in a market?

A) There is downward pressure on price.
B) There is upward pressure on price.
C) The market is operating above the equilibrium level.
D) The price must be above equilibrium.

Question 34

Figure 4-2

Refer to the Figure 4-2. What would happen at the equilibrium price?

A) At the equilibrium price, 200 units would be supplied and demanded.
B) At the equilibrium price, 400 units would be supplied and demanded.
C) At the equilibrium price, 600 units would be supplied and demanded.
D) At the equilibrium price, 600 units would be supplied, but only 200 would be demanded.

Question 35

Refer to the Table 4-1. What would the equilibrium price and quantity be?

A) $6 and 30
B) $9 and 60
C) $12 and 40
D) $15 and 20

Question 36

Figure 4-4

Refer to the Figure 4-4. At a price of $20, which of the following would happen?

A) The price would decrease and the quantity would decrease.
B) Both price and quantity would remain unchanged.
C) The price would decrease and the quantity would increase.
D) The price would increase and the quantity would decrease.

Question 37

Figure 4-4

Refer to the Figure 4-4. If the price is $10, what would happen?

A) There would be a shortage of 200 and the price would rise.
B) There would be a surplus of 200 and the price would fall.
C) There would be a shortage of 600 and the price would rise.
D) There would be a surplus of 600 and the price would fall.

Question 38

Figure 4-2

Refer to the Figure 4-2. What would happen at a price of $35?

A) A shortage would exist and the price would tend to fall.
B) A shortage would exist and the price would tend to rise.
C) A surplus would exist and the price would tend to rise.
D) A surplus would exist and the price would tend to fall.

Question 39

Refer to the Table 4-1. If the price were $12, what would happen?

A) A surplus of 50 units would exist and the price would tend to fall.
B) A surplus of 10 units would exist and the price would tend to fall.
C) A surplus of 25 units would exist and the price would tend to fall.
D) A shortage of 25 units would exist and the price would tend to rise.

Question 40

Suppose donuts are currently selling for $10 per dozen. The equilibrium price of donuts is $12 per dozen. What would we expect?

A) a shortage to exist and the market price of donuts to increase
B) a shortage to exist and the market price of donuts to decrease
C) a surplus to exist and the market price of donuts to increase
D) a surplus to exist and the market price of donuts to decrease

Question 41

What is step one in the three-step program for analyzing changes in equilibrium?

A) Decide in which direction the curve shifts.
B) Decide whether the event shifts the supply or demand curve.
C) Use the supply-and-demand diagram to see how the shift changes the original equilibrium.
D) Analyze how equilibrium price and quantity have changed.

Question 42

Which chain of events is listed in the correct order?

A) quantity supplied increases, price increases, demand increases
B) price increases, demand increases, quantity supplied increases
C) demand increases, price increases, quantity supplied increases
D) demand increases, quantity supplied increases, price increases

Question 43

What will result from an increase in resource costs to firms in a market?

A) a decrease in equilibrium price and an increase in equilibrium quantity
B) a decrease in equilibrium price and a decrease in equilibrium quantity
C) an increase in equilibrium price and no change in equilibrium quantity
D) an increase in equilibrium price and an decrease in equilibrium quantity

Question 44

If the demand for a product increases, what would we expect?

A) equilibrium price to increase and equilibrium quantity to decrease
B) equilibrium price to decrease and equilibrium quantity to increase
C) equilibrium price and equilibrium quantity to both increase
D) equilibrium price and equilibrium quantity to both decrease

Question 45

Figure 4-5

Refer to the Figure 4-5. Which of the four graphs represents the market for cars after new technology was installed on assembly lines?

A) graph A
B) graph B
C) graph C
D) graph D

Question 46

Figure 4-5

Refer to the Figure 4-5. Which of the four graphs shown illustrates a decrease in quantity supplied?

A) graph A
B) graph B
C) graph C
D) graph D

Question 47

Which of the following would definitely result in a higher price in the market for smart phones?

A) demand increases and supply decreases
B) demand and supply both decrease
C) demand decreases and supply increases
D) demand and supply both increase

Question 48

Suppose you wish to analyze the change in the equilibrium price of lumber as a result of pine beetle infestations that are destroying trees in the West. What would your first step be?

A) to identify the new equilibrium point
B) to decide whether the fires affect the quantity demanded
C) to decide whether the fires affect the price
D) to decide whether the fires shift demand or supply

Question 49

Which of the following will definitely cause equilibrium quantity to fall?

A) demand increases and supply decreases
B) demand and supply both decrease
C) demand decreases and supply increases
D) demand and supply both increase

Question 50

Figure 4-5

Refer to the Figure 4-5. Which of the four graphs shown illustrates a decrease in quantity demanded?

A) graph A
B) graph B
C) graph C
D) graph D

Question 51

What would an early frost in the vineyards of the Okanagan Valley cause?

A) an increase in the demand for wine, increasing price
B) an increase in the supply of wine, decreasing price
C) a decrease in the demand for wine, decreasing price
D) a decrease in the supply of wine, increasing price

Question 52

Figure 4-5

Refer to the Figure 4-5. Which of the following is shown in Graph C?

A) a decrease in demand
B) a decrease in the number of sellers
C) an increase in supply
D) an increase in input prices

Question 53

What does supply-and-demand analysis involve?

A) comparisons of products in different markets
B) evaluation of buyers' reluctance to pay the market price
C) comparing the old equilibrium and the new equilibrium
D) evaluating the friction that develops between buyers and sellers

Question 54

Which of the following is NOT one of the steps in analyzing how an event affects a market?

A) Determine the number of market participants.
B) Decide whether the curve shifts to the right or to the left.
C) Determine whether the event shifts the supply, the demand, or both curves.
D) Use a supply-demand diagram to examine how the shift(s) affect the equilibrium.

Question 55

Suppose there is an earthquake that destroys several seaside resorts. Which of the following would NOT occur as a direct result of this event?

A) Sellers would not be willing to produce and sell as much as before at each relevant price.
B) The supply would decrease.
C) Buyers would not be willing to buy as much as before at each relevant price.
D) The equilibrium price would rise.

Question 56

Figure 4-5

Refer to the Figure 4-5. Which of the four graphs represents the market for school supplies in September?

A) graph A
B) graph B
C) graph C
D) graph D

Question 57

Figure 4-5

Refer to the Figure 4-5. Which of the four graphs represents the market for toboggans in August?

A) graph A
B) graph B
C) graph C
D) graph D

Question 58

Figure 4-5

Refer to the Figure 4-5. Which of the four graphs represents the market for oranges after disease impacts much of the Florida orange harvest?

A) graph A
B) graph B
C) graph C
D) graph D

Question 59

Figure 4-5

Refer to the Figure 4-5. Which of the following is shown in Graph A?

A) an increase in demand
B) an increase in quantity demanded
C) a decrease in the number of buyers
D) a decrease in consumer income

Question 60

If a shortage exists in a market, what do we know?

A) The actual price is below equilibrium price, and quantity demanded is greater than quantity supplied.
B) The actual price is above equilibrium price, and quantity demanded is greater than quantity supplied.
C) The actual price is above equilibrium price, and quantity supplied is greater than quantity demanded.
D) The actual price is below equilibrium price, and quantity supplied is greater than quantity demanded.

Question 61

Suppose that the number of buyers in a market increases and a technological advancement occurs. What would we expect to happen in the market?

A) The equilibrium price would increase, but the impact on the amount sold in the market would be ambiguous.
B) The equilibrium price would decrease, but the impact on the amount sold in the market would be ambiguous.
C) Equilibrium quantity would increase, but the impact on equilibrium price would be ambiguous.
D) Equilibrium quantity would decrease, but the impact on equilibrium price would be ambiguous.

Question 62

Suppose that the incomes of buyers in a particular market for a normal good increase and there is also an increase in input prices. What would we expect to occur in this market?

A) The equilibrium price would increase, but the impact on the amount sold in the market would be ambiguous.
B) The equilibrium price would decrease, but the impact on the amount sold in the market would be ambiguous.
C) Equilibrium quantity would increase, but the impact on equilibrium price would be ambiguous.
D) Equilibrium quantity would decrease, but the impact on equilibrium price would be ambiguous.

Question 63

Which of the following would unambiguously cause a decrease in the equilibrium price of cotton shirts?

A) an increase in the price of wool shirts and a decrease in the price of raw cotton
B) a decrease in the price of wool shirts and a decrease in the price of raw cotton
C) an increase in the price of wool shirts and an increase in the price of raw cotton
D) a decrease in the price of wool shirts and an increase in the price of raw cotton

Question 64

Suppose that the incomes of buyers in a particular market for a normal good decrease and there is also an increase in input prices. What would we expect to occur in this market?

A) The equilibrium price would increase, but the impact on the amount sold in the market would be ambiguous.
B) The equilibrium price would decrease, but the impact on the amount sold in the market would be ambiguous.
C) Equilibrium quantity would increase, but the impact on equilibrium price would be ambiguous.
D) Equilibrium quantity would decrease, but the impact on equilibrium price would be ambiguous.

Question 65

Table 4-2

Refer to the Table 4-2. What is the space that would represent an increase in equilibrium quantity and an indeterminate change in equilibrium price?

A) space A
B) space B
C) space C
D) space D

Question 66

Suppose that the number of buyers in a market decreases and a technological advancement occurs. What would we expect to happen in the market?

A) The equilibrium price would increase, but the impact on the amount sold in the market would be ambiguous.
B) The equilibrium price would decrease, but the impact on the amount sold in the market would be ambiguous.
C) Equilibrium quantity would increase, but the impact on equilibrium price would be ambiguous.
D) Equilibrium quantity would decrease, but the impact on equilibrium price would be ambiguous.

Question 67

Suppose that the incomes of buyers in a particular market for a normal good decrease and there is also a reduction in input prices. What would we expect to occur in this market?

A) The equilibrium price would increase, but the impact on the amount sold in the market would be ambiguous.
B) The equilibrium price would decrease, but the impact on the amount sold in the market would be ambiguous.
C) Equilibrium quantity would decrease, but the impact on equilibrium price would be ambiguous.
D) Equilibrium quantity would increase, but the impact on equilibrium price would be ambiguous.

Question 68

If the supply of a product increases, what would we expect?

A) equilibrium price to increase and equilibrium quantity to decrease
B) equilibrium price to decrease and equilibrium quantity to increase
C) equilibrium price and equilibrium quantity to both increase
D) equilibrium price and equilibrium quantity to both decrease

Question 69

If the supply of a product decreases, what would we expect?

A) equilibrium price to increase and equilibrium quantity to decrease
B) equilibrium price to decrease and equilibrium quantity to increase
C) equilibrium price and equilibrium quantity to both increase
D) equilibrium price and equilibrium quantity to both decrease

Question 70

What would happen to the equilibrium price and quantity of coffee if the wages of coffee-bean pickers fell and the price of tea fell?

A) price will fall and the effect on quantity is ambiguous
B) price will rise and the effect on quantity is ambiguous
C) quantity will fall and the effect on price is ambiguous
D) quantity will rise and the effect on price is ambiguous

Question 71

Which of the following would cause both the equilibrium price and equilibrium quantity of day-old bread (an inferior good) to increase?

A) an increase in consumer income
B) a decrease in consumer income
C) greater government restrictions on agricultural chemicals
D) fewer government restrictions on agricultural chemicals

Question 72

Suppose that demand increases and supply decreases. What would we expect to happen in the market?

A) Equilibrium price would decrease, but the impact on quantity would be ambiguous.
B) Equilibrium price would increase, but the impact on quantity would be ambiguous.
C) Both equilibrium price and quantity would increase.
D) Both equilibrium price and quantity would decrease.

Question 73

Table 4-2

Refer to the Table 4-2. What is the space that would represent a decrease in equilibrium quantity and an indeterminate change in equilibrium price?

A) space A
B) space B
C) space C
D) space D

Question 74

Table 4-2

Refer to the Table 4-2. What is the space that would represent a decrease in equilibrium price and an indeterminate change in equilibrium quantity?

A) space A
B) space B
C) space C
D) space D

Question 75

Suppose both demand and supply decrease. How do the equilibrium price and quantity change?

A) Equilibrium price would increase, but the impact on equilibrium quantity would be ambiguous.
B) Equilibrium price would decrease, but the impact on equilibrium quantity would be ambiguous.
C) Equilibrium quantity would decrease, but the impact on equilibrium price would be ambiguous.
D) Equilibrium quantity would increase, but the impact on equilibrium price would be ambiguous.

Question 76

Table 4-2

Refer to the Table 4-2. What is the space that would represent an increase in equilibrium price and an indeterminate change in equilibrium quantity?

A) space A
B) space B
C) space C
D) space D

Question 77

Which of the following would result in an increase in equilibrium price and an ambiguous change in equilibrium quantity?

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

Question 78

Suppose that the incomes of buyers in a particular market for a normal good increase and there is also a reduction in input prices. What would we expect to occur in this market?

A) The equilibrium price would increase, but the impact on the amount sold in the market would be ambiguous.
B) The equilibrium price would decrease, but the impact on the amount sold in the market would be ambiguous.
C) Equilibrium quantity would decrease, but the impact on equilibrium price would be ambiguous.
D) Equilibrium quantity would increase, but the impact on equilibrium price would be ambiguous.

Question 79

If the demand for a product decreases, what would we expect?

A) equilibrium price to increase and equilibrium quantity to decrease
B) equilibrium price to decrease and equilibrium quantity to increase
C) equilibrium price and equilibrium quantity to both increase
D) equilibrium price and equilibrium quantity to both decrease

Question 80

What would happen if both supply and demand increase?

A) Equilibrium price would definitely increase.
B) Equilibrium price would definitely decrease.
C) Equilibrium quantity would definitely decrease.
D) Equilibrium quantity would definitely increase.