Deck 3: Asupply,demand,and the Market Process

Question 1

The demand schedule for a good

A)indicates the relationship between the price of the good and the price of other goods.
B)indicates the quantities of the good that people will buy at various prices.
C)illustrates the quantity producers will provide at alternative prices.
D)is determined primarily by the cost of producing the good.

Answer 1

B

Question 2

A cold spell in Florida extensively reduced the orange crop,and as a result,California oranges commanded a higher price.Which of the following statements best explains the situation?

A)The supply of Florida oranges fell,causing the supply of California oranges to increase as well as their price.
B)The supply of Florida oranges fell,causing the supply of California oranges to decrease and their price to increase.
C)The supply of Florida oranges fell,causing their price to increase and the demand for California oranges to increase.
D)The demand for Florida oranges was reduced by the freeze,causing an increase in the price of California oranges and a greater demand for them.

Answer 2

C

Question 3

Assume that corn and soybeans are alternatives that could be grown by most farmers.An increase in the price of corn will

A)increase the supply of corn.
B)increase the supply of soybeans.
C)decrease the supply of soybeans.
D)decrease the supply of corn.
E)have no effect on the supplies of corn and soybeans.

Answer 3

C

Question 4

Each point on the demand curve indicates

A)the demand for the product.
B)the quantity demanded at that price.
C)the amount that people need.
D)the amount people want to buy at different income levels.

Question 5

Which of the following does the law of demand specifically imply?

A)If the product price increases,quantity demanded will decrease.
B)If consumer income increases,quantity demanded will increase.
C)If the product price increases,quantity demanded will increase.
D)If consumer income increases,quantity demanded will decrease.
E)If supply increases,demand will increase.

Question 6

Producers are willing to offer greater quantities for sale at higher prices because

A)they have the incentive to pay the increasing opportunity cost of resources necessary to attract them from alternative uses
B)they will decrease their profits by expanding production at higher prices
C)the government orders them to do so
D)lower prices attract new firms,which have higher costs of production
E)they hire superior quality,higher-priced resources as production expands

Question 7

The curve that shows the relationship between the price of a good and the quantity that consumers are willing to purchase at each price is the

A)supply curve.
B)demand curve.
C)production possibilities curve.
D)consumption curve.

Question 8

Assume the demand curve for cookies is downward sloping.If the price of cookies falls from $1.50 to $1.25 per dozen,

A)the demand for cookies will fall.
B)the demand for cookies will rise.
C)a larger quantity of cookies will be demanded.
D)a smaller quantity of cookies will be demanded.

Question 9

The number of people willing to buy tickets to the Super Bowl is invariably greater than the number of tickets (and seats)available.This is evidence that the price of the tickets is

A)higher than the equilibrium price.
B)equal to the equilibrium price since the number of tickets bought equals the number sold.
C)lower than the equilibrium price.
D)higher than the equilibrium price when the demand is inelastic but lower when the demand is elastic.

Question 10

A demand curve for concert tickets would show the

A)number of tickets the box office is willing to sell at various prices.
B)number of people who need tickets.
C)quantity of people who want to buy these concert tickets.
D)number of tickets that will be purchased at various prices.

Question 11

If cable TV service and satellite TV service are substitutes,

A)a decrease in the price of cable will decrease the demand for satellite TV.
B)an increase in the price of cable will decrease the demand for satellite TV.
C)an increase in the price of cable will generally have no effect on the demand for satellite TV.
D)an increase in the price of cable will shift the demand curve for satellite TV to the left.

Question 12

The invisible hand principle indicates that competitive markets can help promote the efficient use of resources

A)only if buyers and sellers really care,personally,about economic efficiency.
B)even when each market participant cares only about their own self interest rather than about the overall efficiency of resource use.
C)even if business firms fail to produce goods efficiently.
D)if,and only if,businesses recognize their social obligation to keep costs low and use resources wisely.

Question 13

When the market for a good is in equilibrium,

A)consumer surplus will equal producer surplus.
B)the total value created for consumers will equal the total cost of production for business firms.
C)all units valued more highly than the opportunity cost of production will be supplied.
D)all units that have value will be produced,regardless of their cost of production.

Question 14

At a price of $5,Sam buys 10 units of a product;when the price increases to $6,Sam buys 8 units.Which of the following is correct about Sam's behavior?

A)Sam's demand has decreased.
B)Sam's demand has increased.
C)Sam's quantity demanded has decreased,and his demand has not changed.
D)Sam's quantity demanded has increased,and his demand has increased.
E)Sam's demand has increased,and his quantity demanded has decreased.

Question 15

"A reduction in gasoline prices caused the demand for gasoline to increase.The lower gas prices also led to an increase in demand for large cars,causing their prices to rise." These statements

A)are essentially correct.
B)contain one error;the lower gasoline prices would cause an increase in the quantity demanded of gasoline,not an increase in demand.
C)contain one error;the lower gasoline prices would increase the quantity demanded of large cars,not the demand.
D)contain two errors;the lower gasoline prices would cause the quantity of gasoline demanded (rather than the demand)to increase,and the lower gasoline price would cause an increase in quantity demanded (rather than the demand)for large cars.

Question 16

Which of the following would most likely increase the demand for peanut butter?

A)a decrease in the price of jelly,a good that is often used with peanut butter
B)the discovery that excessive consumption of peanut butter is harmful to one's health
C)crop failures that raise the price of peanuts
D)the invention of a new product that consumers think is a good substitute for peanut butter

Question 17

An important assumption that is made when constructing a demand schedule is that

A)only price and quantity matter in determining demand.
B)people always want a certain amount of a product.
C)demand is too important to be left to the economists.
D)all other determinants of demand are held constant.
E)demand has a positive slope.

Question 18

Willingness to pay

A)measures the value that a buyer places on a good.
B)is the amount a seller actually receives for a good minus the minimum amount the seller is willing to accept.
C)is the maximum amount a buyer is willing to pay minus the minimum amount a seller is willing to accept.
D)is the amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it.

Question 19

If Harry only pays $25,000 to purchase a new car even though he would have been willing to pay as much as $35,000 for the car,this indicates that

A)Harry is an irrational consumer.
B)The seller earned a $10,000 profit on the sale of the car.
C)Harry reaped $10,000 of consumer surplus from the transaction.
D)The seller received $10,000 worth of producer surplus on the transaction.

Question 20

The law of demand refers to the

A)decrease in price that can be expected as more units of a product are demanded.
B)increase in price that results from an increase in demand for a good of limited supply.
C)inverse relationship between the price of a good and the quantity demanded.
D)increase in the quantity of a good available when its price increases.

Question 21

Which of the following is true?

A)The height of the demand curve for a product at a given quantity represents the marginal value derived by the consumption of that unit.
B)The height of the demand curve for a product at a given quantity reflects the total value consumers derive from all units of the good consumed.
C)The total area above the demand curve for a product is equal to consumer surplus.
D)At every quantity,the height of the demand curve for a product represents the cost of producing that unit.

Question 22

Jeff buys a new shirt for $50.If his willingness to pay is ____,he receives consumer surplus of $15 on his purchase

A)$15.
B)$35.
C)$50.
D)$65.

Question 23

Andrew decides that he would pay as much as $3,000 for a new laptop computer.He buys the computer and realizes consumer surplus of $700.How much did Andrew pay for his computer?

A)$700
B)$2,300
C)$3,000
D)$3,700

Question 24

The maximum price that consumers are willing to pay for the hundredth unit of a good can be found as

A)the height of the supply curve at a quantity of 100.
B)the height of the demand curve at a quantity of 100.
C)the difference between the height of the supply and demand curves at a quantity of 100.
D)none of the above.

Question 25

Noah drinks Dr.Pepper.He can buy as many cans of Dr.Pepper as he wishes at a price of $0.50 per can.On a particular day,he is willing to pay $0.95 for the first can,$0.80 for the second can,$0.60 for the third can,and $0.40 for the fourth can.Assume Noah is rational in deciding how many cans to buy.His consumer surplus is

A)$0.50.
B)$0.85.
C)$1.05.
D)$1.20.

Question 26

The law of demand indicates that

A)every physical good has a use.
B)when people want a good badly enough,they will find a way to pay for it.
C)the desire for a good is unrelated to its price.
D)the quantity of a good that people will buy is inversely related to the price of the good.

Question 27

Patrice buys a new cell phone for $80.She receives consumer surplus of $35 on her purchase if her willingness to pay is

A)$35.
B)$45.
C)$80.
D)$115.

Question 28

Suppose Katie,Kendra,and Kristen each purchase a particular type of cell phone at a price of $80.Katie's willingness to pay was $100,Kendra's willingness to pay was $95,and Kristen's willingness to pay was $80.Consumer surplus for the three individuals is

A)$15.
B)$20.
C)$35.
D)$80.

Question 29

Consumers buy less of a good as its price increases because

A)production costs have risen.
B)substitute goods are now relatively cheaper.
C)the income of consumers has effectively risen.
D)the higher price will make the good more valuable to each consumer.

Question 30

Table 3-1

Refer to Table 3-1.If the table represents the willingness to pay of four buyers and the price of the product is $18,then their total consumer surplus is

A)$38.
B)$42.
C)$46.
D)$72.

Question 31

The law of demand refers to the

A)inverse relationship between the price of a good and the willingness of consumers to buy it.
B)price increase that results from an increase in demand for a good of limited supply.
C)inverse relationship between the price of a good and the quantity offered for sale.
D)increase in the quantity of a good available when its price increases.

Question 32

Table 3-1

Refer to Table 3-1.If the table represents the willingness to pay of four buyers and the price of the product is $30,then their total consumer surplus is

A)$-10.
B)$-6.
C)$20.
D)$30.

Question 33

Consumer surplus

A)is the difference between total willingness to pay and the total amount actually paid.
B)guarantees that the market value of a good in money is equal to the total economic value of the good.
C)is always negative because of diminishing marginal utility.
D)is the total area under a consumer's demand curve.

Question 34

The height of the demand curve for a product indicates the

A)minimum price consumers are willing to pay for an additional unit of it.
B)minimum quantity consumers are willing to purchase at the current price.
C)maximum price consumers are willing to pay for an additional unit of it.
D)minimum price required to induce suppliers to produce an additional unit of it.

Question 35

How will consumers generally react to an increase in the price of butter?

A)They will purchase a larger quantity of butter.
B)They will substitute other goods like margarine for the more expensive butter.
C)They will reduce their purchases of substitute goods like margarine.
D)They will continue purchasing the same quantity of butter at the higher price.

Question 36

Because the height of the demand curve measures the marginal value of the good to consumers,the fact that a demand curve slopes downward to the right illustrates that

A)as more of a product is consumed,consumers will value additional units less.
B)as more of a product is consumed,consumers will value additional units more.
C)the value of additional units of the good is unrelated to the amount consumed.
D)the cost of production for a good generally rises as more of it is produced.

Question 37

In economics,the demand for a good refers to the amount of the good people

A)would like to have if the good were free.
B)are willing to buy at various prices.
C)need to achieve a minimum standard of living.
D)will buy at alternative income levels.

Question 38

Shannon buys a new CD player for her car for $135.She receives consumer surplus of $25 on her purchase if her willingness to pay is

A)$25.
B)$110.
C)$135.
D)$160.

Question 39

Table 3-1

Refer to Table 3-1.If the table represents the willingness to pay of four buyers and the price of the product is $15,then who would be willing to purchase the product?

A)Mike
B)Mike and Sandy
C)Mike,Sandy,and Jonathan
D)Mike,Sandy,Jonathan,and Haley

Question 40

The difference between the amount consumers would be willing to pay and the amount they actually pay for a good is called

A)price elasticity of demand.
B)consumer surplus.
C)the substitution effect.
D)income elasticity of demand.

Question 41

If price rises,what happens to the quantity demanded for a product?

A)It increases.
B)It decreases.
C)It does not change.
D)Uncertain--economic theory has no answer to this question.

Question 42

The price elasticity of demand for a commodity is determined primarily by the

A)size of the consumer surplus.
B)availability of good substitutes for the good.
C)incomes of consumers.
D)availability of complementary goods.

Question 43

If price falls,what happens to the quantity demanded for a product?

A)It increases.
B)It decreases.
C)It does not change.
D)Uncertain--economic theory has no answer to this question.

Question 44

Dallas buys strawberries,and he would be willing to pay more than he now pays.Suppose that Dallas has a change in his tastes such that he values strawberries more than before.If the market price is the same as before,then

A)Dallas's consumer surplus would be unaffected.
B)Dallas's consumer surplus would increase.
C)Dallas's consumer surplus would decrease.
D)Dallas would be wise to buy fewer strawberries than before.

Question 45

If the demand for a good is relatively elastic,this means that consumer purchases of the good are

A)not very sensitive to the price of the good.
B)highly sensitive to the price of the good.
C)unrelated to the price of the good.
D)unaffected by changes in the income level of consumers.

Question 46

Which of the following would be the best example of consumer surplus?

A)Jane pays $30 a month for phone service even though it is worth $70 to her.
B)Sam refuses to pay $10 for a hair cut because it is only worth $8 to him.
C)Fred buys a car for $4,000,the maximum amount that he would be willing to pay for it.
D)When Sue purchases a candy bar for $.50,she uses a $20 bill to pay for it.

Question 47

Graphically,the area that represents the difference between the maximum price consumers were willing to pay for a good and the market price is called

A)consumer surplus.
B)producer surplus.
C)marginal cost.
D)triangular arbitrage.

Question 48

If the demand for a good is relatively inelastic,this means that consumer purchases of the good are

A)not very sensitive to the price of the good.
B)highly sensitive to the price of the good.
C)unrelated to the price of the good.
D)unaffected by changes in the income level of consumers.

Question 49

If consumer purchases of a good are highly sensitive to the price of the good,this is illustrated by a

A)demand curve that is relatively flat (more horizontal).
B)demand curve that is relatively steep (more vertical).
C)supply curve that is relatively flat (more horizontal).
D)supply curve that is relatively steep (more vertical).

Question 50

If consumer purchases of a good are not very sensitive to the price of the good,economists say the demand for the good is relatively

A)inelastic.
B)elastic.
C)robust.
D)inverse.

Question 51

If price rises,what happens to the demand for a product?

A)It increases.
B)It decreases.
C)It does not change.
D)Uncertain--economic theory has no answer to this question.

Question 52

If a large percentage increase in the price of a good results in a small percentage reduction in the quantity demanded of the good,demand is said to be

A)horizontal.
B)relatively inelastic.
C)relatively elastic.
D)income proof.

Question 53

A decrease in the price of a good would

A)increase the demand for the good.
B)increase the quantity demanded for the good.
C)decrease the demand for the good.
D)decrease the quantity supplied of the good.

Question 54

If consumer purchases of a good are not very sensitive to the price of the good,this is illustrated by a

A)demand curve that is relatively flat (more horizontal).
B)demand curve that is relatively steep (more vertical).
C)supply curve that is relatively flat (more horizontal).
D)supply curve that is relatively steep (more vertical).

Question 55

If Susan receives $3,000 of value from a computer that she was able to purchase from Joe's Computer Shop for $1,800,this indicates that

A)Susan's opportunity cost of purchasing the computer was $3,000.
B)Joe earned a $1,200 profit on the sale of the computer.
C)Susan reaped a consumer surplus of $1,200 from the purchase of the computer.
D)Joe incurred a loss a $1,200 on the sale of the computer.

Question 56

If consumer purchases of a good are highly sensitive to the price of the good,economists say the demand for the good is relatively

A)inelastic.
B)elastic.
C)robust.
D)inverse.

Question 57

Which of the following best explains the source of consumer surplus for good A?

A)Many consumers pay prices that are greater than the equilibrium price of good A.
B)Many consumers would be willing to pay more than the market price for good A.
C)Many consumers think the market price of good A is greater than its cost.
D)Many consumers think the demand for good A is elastic.

Question 58

If price falls,what happens to the demand for a product?

A)It increases.
B)It decreases.
C)It does not change.
D)Uncertain--economic theory has no answer to this question.

Question 59

Kristen decides that she would pay as much as $400 for a new camera.She buys the camera and realizes consumer surplus of $75.How much did Kristen pay for her camera?

A)$75
B)$325
C)$400
D)$475

Question 60

If a small percentage increase in the price of a good results in a rather large percentage reduction in the quantity demanded of the good,demand is said to be

A)vertical.
B)relatively inelastic.
C)relatively elastic.
D)robust.

Question 61

When economists say the demand for a product has increased,they mean the

A)demand curve has shifted to the right.
B)price of the product has fallen,and consequently,consumers are buying more of it.
C)cost of producing the product has risen.
D)amount of the product that consumers are willing to purchase at various prices has decreased.

Question 62

For a typical product,a decrease in consumer income will cause the market demand for the product to

A)decrease,which is a shift to the left of the demand curve.
B)decrease,which is a shift to the right of the demand curve.
C)increase,which is a shift to the left of the demand curve.
D)increase,which is a shift to the right of the demand curve.

Question 63

Other things being equal,the effect of an increase in the price of orange juice would be illustrated by

A)an upward movement along the demand curve for orange juice.
B)a leftward shift in the demand curve for orange juice.
C)a downward movement along the demand curve for orange juice.
D)a rightward shift in the demand curve for orange juice.

Question 64

When economists say the quantity demanded of a product has increased,they mean the

A)demand curve has shifted to the left.
B)demand curve has shifted to the right.
C)price of the product has fallen,and consequently,consumers are buying more of it.
D)price of the product has risen,and consequently,consumers are buying less of it.

Question 65

In which statement(s)is "demand" used correctly?
(I)"An increase in the price of hot dogs will reduce the demand for hot dogs."
(II)"An increase in the price of hot dogs will reduce the demand for hot dog buns."

A)in both statements I and II
B)in statement I only
C)in statement II only
D)in neither statements I nor II

Question 66

When economists say the quantity demanded of a product has decreased,they mean the

A)demand curve has shifted to the left.
B)demand curve has shifted to the right.
C)price of the product has fallen,and consequently,consumers are buying more of it.
D)price of the product has risen,and consequently,consumers are buying less of it.

Question 67

If people expect the price of coffee to rise next month,the demand for coffee will

A)decrease now.
B)increase now.
C)stay the same now and increase next month.
D)stay the same now and decrease next month.
E)stay the same now and next month.

Question 68

In which statement(s)are "demand" and "quantity demanded" used correctly?
(I)"An increase in the price of coffee will reduce the quantity demanded of coffee."
(II)"An increase in the price of coffee will reduce the demand for cream used in coffee."

A)in both statements I and II
B)in statement I only
C)in statement II only
D)in neither statements I nor II

Question 69

Which of the following best represents the effects of a decrease in the price of tomato juice,other things being equal?

A)An upward movement along the demand curve for tomato juice.
B)A downward movement along the demand curve for tomato juice.
C)A rightward shift in the demand curve for tomato juice.
D)A leftward shift in the demand curve for tomato juice.

Question 70

An increase in the price of a good would

A)decrease the demand for the good.
B)decrease the quantity demanded for the good.
C)increase the demand for the good.
D)decrease the quantity supplied of the good.

Question 71

Other things constant,a decrease in consumer income will

A)decrease the demand for large-screen television sets.
B)increase the demand for large-screen television sets.
C)cause a movement along the demand curve for large-screen television sets,but it will not shift the demand curve.
D)have no impact on the quantity demanded or the demand curve for large-screen television sets.

Question 72

Other things being equal,the effect of a decrease in the price of orange juice would be illustrated by

A)a rightward shift in the demand curve for orange juice.
B)an increase in the quantity demanded for orange juice.
C)a leftward shift in the demand curve for orange juice.
D)a decrease in the quantity demanded orange juice.

Question 73

For a typical product,an increase in consumer income will cause the market demand for the product to

A)decrease,which is a shift to the left of the demand curve.
B)decrease,which is a shift to the right of the demand curve.
C)increase,which is a shift to the left of the demand curve.
D)increase,which is a shift to the right of the demand curve.

Question 74

If consumer tastes are changing more in favor of the consumption of a particular good the

A)market demand curve will shift to the left.
B)consumer will move up a given demand curve,decreasing the quantity demanded.
C)consumer would move down a given demand curve,decreasing the quantity demanded.
D)consumer would move down a given demand curve,increasing the quantity demanded.
E)market demand curve would shift to the right.

Question 75

Other things constant,an increase in consumer income will

A)shift the demand curve for automobiles to the left.
B)shift the demand curve for automobiles to the right.
C)cause a movement along the demand curve for automobiles,but it will not shift the demand curve.
D)lead to a reduction in the supply of automobiles.

Question 76

When economists say the demand for a product has decreased,they mean

A)the demand curve has shifted to the left.
B)the product price has increased,and as a consequence,consumers are buying less of the product.
C)consumers are now willing and able to buy more of this product at each possible price.
D)the demand curve has shifted to the right.

Question 77

An increase in the demand for a good means that

A)the demand curve has shifted to the left.
B)the good's price has fallen and,as a result,consumers are buying more of the good.
C)the good has become scarce.
D)consumers are willing to purchase more of the good at each possible price.

Question 78

Which of the following would lead to an increase in the demand for computer software?

A)a decrease in the price of computer software
B)a decrease in the price of personal computers
C)an decrease in the cost of producing computer software
D)an decrease in personal income

Question 79

Which of the following is least likely to increase the demand for new tires?

A)a decrease in the price of tires
B)a decrease in the price of cars
C)an increase in consumer income
D)an increase in the number of miles people drive per year

Question 80

Which of the following would lead to an increase in the demand for designer blue jeans?

A)a decrease in the price of designer blue jeans
B)a reduction in the price of the cotton used to produce the jeans
C)an increase in the income of youthful Americans
D)an increase in the price of the cotton used to produce the jeans