Deck 4: The Market Forces of Supply and Demand

Question 1

The term market always refers to

A)an arrangement in which buyers and sellers meet at a specific time and place.
B)an arrangement in which an auctioneer plays at least a limited role in setting prices.
C)a group of buyers and sellers of a particular good or service.
D)All of the above are correct.

Answer 1

C

Question 2

A competitive market is one in which

A)there is only one seller, but there are many buyers.
B)there are many sellers and each seller has the ability to set the price of his product.
C)there are many sellers and they compete with one another in such a way that some sellers are always being forced out of the market.
D)there are so many buyers and so many sellers that each has a negligible impact on the price of the product.

Answer 2

D

Question 3

A group of buyers and sellers of a particular good or service is called a

A)coalition.
B)partnership.
C)market.
D)union.

Answer 3

C

Question 4

A market is always characterized by

A)a high degree of organization.
B)an individual or small group of individuals who set the price of the product for all buyers and sellers.
C)the presence of buyers and sellers.
D)All of the above are correct.

Question 5

In a competitive market,each seller has limited control over the price of his product because

A)other sellers are offering similar products.
B)buyers exert more control over the price than do sellers.
C)these markets are highly regulated by government.
D)sellers usually agree to set a common price that will allow each seller to earn a comfortable profit.

Question 6

Which of the following statements is correct?

A)Buyers determine supply and sellers determine demand.
B)Buyers determine demand and sellers determine supply.
C)Buyers and sellers as one group determine supply, but only buyers determine demand.
D)Buyers and sellers as one group determine demand, but only sellers determine supply.

Question 7

The forces that make market economies work are

A)work and leisure.
B)demand and supply.
C)regulation and restraint.
D)taxes and government spending.

Question 8

Most markets in the economy are

A)markets in which sellers, rather than buyers, control the price of the product.
B)markets in which buyers, rather than sellers, control the price of the product.
C)markets in which each seller of the product is aware that there are few, if any, similar products offered by other sellers.
D)highly competitive.

Question 9

For each good produced in a market economy,the interaction of demand and supply determines

A)the price of the good, but not the quantity.
B)the quantity of the good, but not the price.
C)both the price of the good and the quantity of the good.
D)neither price nor quantity, because prices and quantities are determined by the sellers of the goods alone.

Question 10

A market is a

A)group of buyers and sellers of a particular good or service.
B)group of people with common economic characteristics.
C)place where buyers and sellers come together to engage in trade.
D)place where an auctioneer helps set prices and arrange sales.

Question 11

For a competitive market,which of the following statements is correct?

A)A seller can always increase her profit by raising the price of her product.
B)If a seller charges more than the going price, buyers will go elsewhere to make their purchases.
C)A seller often charges less than the going price to increase sales and profit.
D)A single buyer can influence the price of the product, but only when purchasing from several sellers in a short period of time.

Question 12

A competitive market is a market in which

A)an auctioneer helps set prices and arrange sales.
B)there are only a few sellers.
C)the forces of supply and demand do not apply.
D)no individual buyer or seller has any significant impact on the market price.

Question 13

In a market economy,supply and demand are important because they

A)play a critical role in the allocation of the economy's scarce resources.
B)determine how much of each good gets produced.
C)can be used to predict the impact on the economy of various events and policies.
D)All of the above are correct.

Question 14

In a market economy,

A)supply determines demand and, in turn, demand determines prices.
B)demand determines supply and, in turn, supply determines prices.
C)the allocation of scarce resources determines prices and, in turn, prices determine supply and demand.
D)supply and demand determine prices and, in turn, prices allocate scarce resources.

Question 15

For a market for a good or service to exist,

A)there must be a group of buyers and sellers.
B)there must be a specific time and place at which the good or service is traded.
C)the price of the good must be determined by the sellers.
D)All of the above are correct.

Question 16

The highest form of competition is called

A)absolute competition.
B)cutthroat competition.
C)perfect competition.
D)market competition.

Question 17

Which of the following are the words most commonly used by economists?

A)surplus and shortage
B)resources and allocation
C)supply and demand
D)theory and practice

Question 18

Assume Teresa buys computers in a competitive market.Then

A)Teresa has a limited number of sellers to turn to when she buys a computer.
B)Teresa will find herself negotiating with sellers whenever she buys a computer.
C)if Teresa buys a large number of computers, the price of computers will rise noticeably.
D)None of the above is correct.

Question 19

In a competitive market,

A)only a few sellers sell the same product.
B)each seller has a limited degree of control over the price of his product.
C)if one buyer chooses to purchase a large quantity of the product, the price will rise.
D)if one seller withholds his product from the market, prices will rise.

Question 20

The demand for a good or service is determined by

A)those who buy the good or service.
B)the government.
C)the producers who create the good or service.
D)those who supply the raw materials used in the production of the good or service.

Question 21

Price takers have no influence over prices in markets that feature

A)only a few buyers and a few sellers.
B)numerous sellers but only a few buyers.
C)numerous buyers but only a few sellers.
D)numerous buyers and numerous sellers.

Question 22

Which of the following is not a characteristic of a perfectly competitive market?

A)Sellers possess market power.
B)There are many sellers.
C)Buyers must accept the price the market determines.
D)All of the above are characteristics of a perfectly competitive market.

Question 23

An example of a perfectly competitive market would be the

A)cable TV market.
B)soybean market.
C)new car market.
D)blue jean market.

Question 24

Buyers and sellers who have no influence on market price are referred to as

A)market pawns.
B)marginalists.
C)price takers.
D)price makers.

Question 25

Which of the following would not be a determinant of the demand for a particular good?

A)prices of related goods
B)income
C)tastes
D)the prices of the inputs used to produce the good

Question 26

If a good is normal,then an increase in income will result in

A)an increase in the demand for the good.
B)a decrease in the demand for the good.
C)a movement down and to the right along the demand curve for the good.
D)a movement up and to the left along the demand curve for the good.

Question 27

If Francis experiences a decrease in his income,we would expect that,as a result,Francis's demand for

A)each good he purchases will remain unchanged.
B)normal goods will decrease.
C)luxury goods will increase.
D)inferior goods will decrease.

Question 28

If buyers and sellers in a certain market are price takers,then individually

A)they have no influence on market price.
B)they have some influence on market price, but that influence is limited.
C)buyers will be able to find prices lower than those determined in the market.
D)sellers will find it difficult to sell all they want to sell at the market price.

Question 29

The amount of the good buyers are willing and able to purchase is called the

A)demand.
B)quantity demanded.
C)supply.
D)quantity supplied.

Question 30

Quantity demanded falls as the price rises and rises as the price falls,so we say that

A)quantity demanded is determined by quantity supplied.
B)price is determined by quantity demanded.
C)quantity demanded is a function of demand.
D)quantity demanded is negatively related to the price.

Question 31

Despite the fact that not all markets are perfectly competitive,the study of perfect competition is worthwhile,in part because

A)buyers and sellers are price takers in all markets, not just in perfectly competitive markets.
B)buyers find it difficult to buy all they want to buy, and sellers find it difficult to sell all they want to sell, in all markets, not just in perfectly competitive markets.
C)some degree of competition is present in most markets, not just in perfectly competitive markets.
D)perfectly competitive markets are the most difficult markets to analyze, and this makes the study of other types of markets easy in comparison.

Question 32

The negative relationship between price and quantity demanded

A)applies to most goods in the economy.
B)is represented by a downward-sloping demand curve.
C)is referred to as the law of demand.
D)All of the above are correct.

Question 33

To say that the quantity demanded of a good is negatively related to the price of the good is to say that

A)an increase in the quantity demanded of the good leads to a decrease in the price of the good.
B)an increase in the price of the good leads to a decrease in the quantity demanded of the good.
C)there is a weak relationship between the quantity demanded of a good and the price of the good.
D)there is no relationship between the quantity demanded of a good and the price of the good.

Question 34

A monopoly is a market

A)with one seller, and that seller is a price taker.
B)with one seller, and that seller sets the price.
C)with one buyer.
D)in which competition has reached its highest form.

Question 35

Which of the following would most likely serve as an example of a monopoly?

A)a bakery in a large city
B)a bank in a large city
C)a local cable television company
D)a small group of corn farmers

Question 36

Each of the following is a determinant of demand except

A)tastes.
B)technology.
C)expectations.
D)the prices of related goods.

Question 37

Which of the following is not a characteristic of a perfectly competitive market?

A)Different sellers sell identical products.
B)There are many sellers.
C)Sellers must accept the price the market determines.
D)All of the above are characteristics of a perfectly competitive market.

Question 38

The market for ice cream is

A)a monopolistic market.
B)a competitive market.
C)a highly organized market.
D)a market in which there is no connection whatsoever between buyers and sellers.

Question 39

The term price takers refers to buyers and sellers in

A)perfectly competitive markets.
B)monopolies.
C)markets that are regulated by government.
D)markets in which buyers cannot buy all they want and/or sellers cannot sell all they want.

Question 40

If a seller in a competitive market chooses to charge more than the market price,then

A)the sellers' profits definitely would increase.
B)the owners of the raw materials used in production would raise the prices for the raw materials.
C)other sellers would also raise their prices.
D)buyers will tend to make purchases from other sellers.

Question 41

The law of demand says that

A)an increase in price causes quantity demanded to increase.
B)an increase in price causes quantity demanded to decrease.
C)an increase in quantity demanded causes price to increase.
D)an increase in quantity demanded causes price to decrease.

Question 42

Alyssa rents 5 movies per month when the price is $3.00 per rental and 7 movies per month when the price is $2.50 per rental.Alyssa's demand demonstrates the law of

A)price.
B)supply.
C)demand.
D)expectations.

Question 43

According to the law of demand,

A)quantity supplied and quantity demanded are positively related.
B)quantity supplied and quantity demanded are negatively related.
C)price and quantity demanded are positively related.
D)price and quantity demanded are negatively related.

Question 44

Economists in general

A)do not try to explain people's tastes, but they do try to explain what happens when tastes change.
B)believe that they must be able to explain people's tastes in order to explain what happens when tastes change.
C)do not believe that people's tastes determine demand and therefore they ignore the subject of tastes.
D)incorporate tastes into economic models only to the extent that tastes determine whether pairs of goods are substitutes or complements.

Question 45

A higher price for batteries would result in a(n)

A)increase in the demand for flashlights.
B)decrease in the demand for flashlights.
C)increase in the demand for batteries.
D)decrease in the demand for batteries.

Question 46

A likely example of complementary goods for most people would be

A)hamburgers and hot dogs.
B)lawnmowers and automobiles.
C)hamburgers and French fries.
D)Dr.Pepper and Pepsi.

Question 47

When it comes to people's tastes,economists generally believe that

A)tastes are based on forces that are well within the realm of economics.
B)tastes are based on historical and psychological forces.
C)tastes can only be studied through well-constructed, real-life models.
D)since tastes do not directly affect demand, there is little need to explain people's tastes.

Question 48

Suppose you like to make,from scratch,pies filled with banana cream and vanilla pudding.You notice that the price of bananas has increased.How would this price increase affect your demand for vanilla pudding?

A)It would decrease.
B)It would increase.
C)It would be unaffected.
D)There is insufficient information given to answer the question.

Question 49

Which of the following demonstrates the law of demand?

A)Relative to last month, Jon buys more pretzels at $1.50 per pretzel since he got a raise at work this month.
B)Melissa buys fewer muffins at $0.75 per muffin than at $1 per muffin, other things equal.
C)Dave buys more donuts at $0.25 per donut than at $0.50 per donut, other things equal.
D)Kendra buys fewer Snickers at $0.60 per Snickers since the price of Milky Ways fell to $0.50 per Milky Way.

Question 50

Two goods are complements if a decrease in the price of one good

A)decreases the quantity demanded of the other good.
B)decreases the demand for the other good.
C)increases the quantity demanded of the other good.
D)increases the demand for the other good.

Question 51

Currently you purchase 6 packages of hot dogs a month.You will graduate from college in December and you will start a new job in January.You have no plans to purchase hot dogs in January.For you,hot dogs are

A)a substitute good.
B)a normal good.
C)an inferior good.
D)a law-of-demand good.

Question 52

You love peanut butter.You hear on the news that 50 percent of the peanut crop in the South has been wiped out by drought,and that this will cause the price of peanuts to double by the end of the year.As a result,

A)your demand for peanut butter will increase, but not until the end of the year.
B)your demand for peanut butter increases today.
C)your demand for peanut butter decreases as you look for a substitute good.
D)you will wait for the price of jelly to change before altering your demand for peanut butter.

Question 53

Two goods are substitutes if a decrease in the price of one good

A)decreases the demand for the other good.
B)decreases the quantity demanded of the other good.
C)increases the demand for the other good.
D)increases the quantity demanded of the other good.

Question 54

You lose your job and as a result you buy fewer romance novels.This shows that you consider romance novels to be a(n)

A)luxury good.
B)inferior good.
C)normal good.
D)complementary good.

Question 55

Which of the following statements about people's tastes is correct?

A)Generally, economists are interested in explaining people's tastes.
B)Generally, economists are interested in how changes in people's tastes affect markets.
C)Tastes never change enough over time to cause noticeable shifts in demand curves.
D)All of the above are correct.

Question 56

The negative relationship between price and quantity demanded

A)applies to most goods in the economy.
B)is represented by a downward-sloping demand curve.
C)is referred to as the law of demand.
D)All of the above are correct.

Question 57

Ford Motor Company announces that it will offer $3,000 rebates on new Mustangs starting next month.As a result of this information,today's demand curve for Mustangs

A)shifts to the right.
B)shifts to the left.
C)shifts either to the right or to the left, but we cannot determine the direction of the shift from the given information.
D)will not shift; rather, the demand curve for Mustangs will shift to the right next month.

Question 58

A downward-sloping demand curve reflects

A)the idea that the demand for the good in question is decreasing as time goes by.
B)the idea that there are fewer suppliers of the good as time goes by.
C)the idea that there exists a substitute for the good in question and the price of that substitute is decreasing.
D)the law of demand.

Question 59

Suppose today people change their expectations about the future.This change in expectations

A)results in a movement along a demand curve.
B)can affect future demand, but not today's demand.
C)can affect today's demand.
D)cannot affect either today's demand or future demand.

Question 60

A likely example of substitute goods for most people would be

A)peanut butter and jelly.
B)tennis balls and tennis rackets.
C)televisions and subscriptions to cable television services.
D)pencils and pens.

Question 61

What will happen in the rice market if buyers are expecting higher rice prices in the near future?

A)The demand for rice will increase.
B)The demand for rice will decrease.
C)The demand for rice will be unaffected.
D)The supply of rice will increase.

Question 62

The line that relates the price of a good to the quantity demanded of that good is called the

A)demand schedule, and it slopes upward only if the good for which the line is drawn fails to conform to the law of demand.
B)demand schedule, and it slopes upward only if the demand for the good in question, relative to the demand for other goods, is increasing over time.
C)demand curve, and it slopes upward only if there is a positive relationship between income and quantity demanded.
D)demand curve, and it slopes downward as long as the good in question conforms to the law of demand.

Question 63

The line that relates the price of a good to the quantity demanded of that good is called the

A)demand schedule, and it usually slopes upward.
B)demand schedule, and it usually slopes downward.
C)demand curve, and it usually slopes upward.
D)demand curve, and it usually slopes downward.

Question 64

If a decrease in income increases the demand for a good,then the good is

A)a substitute good.
B)a complement good.
C)a normal good.
D)an inferior good.

Question 65

With respect to the variables price and quantity demanded,

A)price and quantity demanded are independent of each other.
B)price is the dependent variable and quantity demanded is the independent variable.
C)price is the independent variable and quantity demanded is the dependent variable.
D)price and quantity demanded are both dependent variables, since both depend on the actions of buyers and sellers.

Question 66

When constructing a demand curve,

A)demand is on the vertical axis and quantity is on the horizontal axis.
B)price is on the horizontal axis and quantity is on the vertical axis.
C)price is on the vertical axis and demand is on the horizontal axis.
D)price is on the vertical axis and quantity demanded is on the horizontal axis.

Question 67

Figure 4-1

Refer to Figure 4-1.The movement from point A to point B on the graph would be caused by

A)an increase in price.
B)a decrease in price.
C)a decrease in the price of a substitute good.
D)an increase in income.

Question 68

Figure 4-1

Refer to Figure 4-1.The movement from point A to point B on the graph shows

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

Question 69

Which of the following would not affect an individual's demand curve?

A)expectations
B)income
C)prices of related goods
D)the number of buyers

Question 70

Figure 4-1

Refer to Figure 4-1.It is apparent from the figure that

A)the good is inferior.
B)the demand for the good decreases as income increases.
C)the demand for the good conforms to the law of demand.
D)All of the above are correct.

Question 71

Which of the following changes would not shift the demand curve for a good or service?

A)a change in income
B)a change in the price of the good or service
C)a change in expectations about the future price of the good or service
D)a change in the price of a related good or service

Question 72

A table that shows the relationship between the price of a good and the quantity demanded of that good is called a(n)

A)price-quantity table.
B)complementary table.
C)demand schedule.
D)equilibrium schedule.

Question 73

When we move along a given demand curve,

A)only price is held constant.
B)income and the price of the good are held constant.
C)all nonprice determinants of demand are held constant.
D)all determinants of quantity demanded are held constant.

Question 74

If the number of buyers in the market decreases,the

A)market demand will increase.
B)market demand will decrease.
C)market supply will increase.
D)market supply will decrease.

Question 75

When the number of buyers in a market increases,

A)the market demand curve shifts to the right.
B)the demand curves of the individual demanders in the market are unaffected.
C)the market demand for the good in question increases.
D)Al of the above are correct.

Question 76

A demand schedule is a table showing the relationship between

A)quantity demanded and quantity supplied, and those quantities are usually positively related.
B)quantity demanded and quantity supplied, and those quantities are usually negatively related.
C)price and quantity demanded, and those quantities are usually positively related.
D)price and quantity demanded, and those quantities are usually negatively related.

Question 77

A demand schedule is a table showing the relationship between

A)quantity demanded and quantity supplied.
B)income and quantity demanded.
C)price and quantity demanded.
D)price and expected price.

Question 78

Which of the following is not a determinant of demand?

A)the price of a resource that is used to produce the good
B)the price of a complementary good
C)the price of the good next month
D)the price of a substitute good

Question 79

The demand curve for a good is

A)a line that relates the price to quantity demanded.
B)a line that relates income to quantity demanded.
C)a line that will shift only if the price of a related good changes.
D)the same thing as a production possibilities frontier, except the axes are labeled differently.

Question 80

A downward-sloping demand curve illustrates the

A)relationship between consumers' income and their willingness to purchase the good in question, provided the good is inferior.
B)negative relationship between quantity demanded and quantity supplied.
C)idea that the more of one good that a consumer buys, the less income she has to spend on other goods.
D)law of demand.