Deck 3: Demand and Supply

Question 1

Which market is an example of a market for goods?

A)labour market
B)haircut market
C)manufactured input market
D)apple market
E)energy market

Answer 1

D

Question 2

A relative price is all of the following except

A)the ratio of one price to another.
B)an opportunity cost.
C)a quantity of a "basket" of goods and services forgone.
D)determined by demand and supply.
E)the lowest possible price available.

Answer 2

E

Question 3

The opportunity cost of good A in terms of good B is equal to the

A)money price of good A minus the money price of good B.
B)money price of good B minus the money price of good A.
C)ratio of the money price of good A to the money price of good B.
D)ratio of the money price of good B to the money price of good A.
E)money price of good A plus the money price of good B.

Answer 3

C

Question 4

Which one of the following events shifts the demand curve for grape jelly to the right?

A)an increase in income if grape jelly is a normal good
B)a decrease in the price of strawberry preserves, a substitute for grape jelly
C)a decrease in the price of grape jelly
D)an increase in the price of peanut butter, a complement of grape jelly
E)a decrease in the population

Question 5

A market where no single buyer or seller can influence the price is

A)a buyer's market.
B)a seller's market.
C)a competitive market.
D)an output market.
E)an input market.

Question 6

In April 2014, the money price of a litre of milk was $2.01 and the money price of a litre of gasoline was $1.30.The real price of a litre of gasoline in terms of milk was

A)$0.65.
B)0.65 litres of milk.
C)2.61 litres of milk.
D)1.54 litres of milk.
E)$0.71.

Question 7

William Gregg owned a mill in South Carolina.In December 1862, he placed a notice in the Edgehill Advertiser announcing his willingness to exchange cloth for food and other items.Here is an extract: 1 yard of cloth for 1 pound of bacon
2 yards of cloth for 1 pound of butter
4 yards of cloth for 1 pound of wool
8 yards of cloth for 1 bushel of salt
If the money price of bacon was 20¢ a pound and the money price of salt was $2.00 a bushel, people would

A)buy bacon and trade it for cloth because they could buy 8 yards of cloth for only $1.60, and use that cloth to obtain a bushel of salt.
B)not buy bacon and trade it for cloth because they would have to buy 8 yards of cloth for $1.60 and then give Mr. Gregg an extra $0.40 to buy a bushel of salt.
C)buy bacon and trade it for cloth and then trade the cloth for salt because salt is more important for life than either cloth or bacon.
D)not buy bacon and trade it for cloth because the relative price of 1 bushel of salt is only 1/8 yard of cloth.
E)buy bacon and trade it for cloth because cloth is more expensive than bacon.

Question 8

The law of demand states that, other things remaining the same,

A)the higher the price of a good, the smaller is the quantity demanded.
B)the higher the price of a good, the smaller is the quantity supplied.
C)price and quantity supplied are positively related.
D)as income increases, willingness to pay for the last unit increases.
E)the higher the price of a good, the greater is the quantity demanded.

Question 9

Use the table below to answer the following questions.
Table 3.1.1

Refer to Table 3.1.1.In 2014, the relative price of coffee in terms of cola is

A)1.25.
B)1.00.
C)0.67.
D)1.56.
E)unknown without more information.

Question 10

Which market is an example of a market for factors of production?

A)furniture market
B)apple market
C)automobile market
D)haircut market
E)labour market

Question 11

The demand and supply model determines

A)relative prices.
B)money prices.
C)supply prices.
D)demand prices.
E)absolute prices.

Question 12

Use the table below to answer the following questions.
Table 3.1.1

Refer to Table 3.1.1.In 2014, the relative price of cola in terms of tea is

A)1.00.
B)1.20.
C)0.83.
D)1.25.
E)unknown without more information.

Question 13

Use the table below to answer the following questions.
Table 3.1.1

Refer to Table 3.1.1.Between 2012 and 2013, the price of coffee relative to the price of tea ________ while the price of coffee relative to the price of cola ________.

A)rose; rose
B)rose; fell
C)fell; rose
D)fell; fell
E)fell; stayed constant

Question 14

Use the table below to answer the following questions.
Table 3.1.1

Refer to Table 3.1.1.In 2012, the relative price of coffee in terms of tea is

A)1.25.
B)1.10.
C)1.00.
D)0.88.
E)1.14.

Question 15

The opportunity cost of a hot dog in terms of hamburgers is

A)the ratio of the slope of the supply curve of hot dogs to the slope of the supply curve of hamburgers.
B)the ratio of the money price of a hot dog to the money price of a hamburger.
C)the ratio of the slope of the demand curve for hot dogs to the slope of the demand curve for hamburgers.
D)the money price of a hot dog minus the money price of a hamburger.
E)smaller in the winter than in the summer.

Question 16

Use the table below to answer the following questions.
Table 3.1.1

Refer to Table 3.1.1.Between 2013 and 2014, the price of coffee relative to the price of tea ________, while the price of coffee relative to the price of cola ________.

A)rose; rose
B)rose; fell
C)fell; rose
D)fell; fell
E)fell; stayed constant

Question 17

How many sides does a market have?

A)one side - buyers
B)one side - sellers
C)two sides - buyers and sellers
D)three sides - buyers, sellers, and the government
E)two sides - domestic and foreign

Question 18

The relative price of a good is all of the following except

A)the ratio of one price to another.
B)an opportunity cost.
C)the money price of the good divided by a price index.
D)the same as the money price of a good.
E)determined in a market.

Question 19

Suppose the price of a football is $20.00 and the price of a basketball is $10.00.The ________ of a football is ________.

A)relative price; 2 basketballs per football
B)relative price; 1/2 basketball per football
C)opportunity cost; $15.00
D)opportunity cost; $10.00
E)relative price; $10

Question 20

Which market is an example of a market for services?

A)orange market
B)tennis lessons market
C)manufactured input market
D)energy market
E)labour market

Question 21

Which of the following "other things" are not held constant along a demand curve?

A)income
B)prices of related goods
C)the price of the good itself
D)preferences
E)expected future income and credit

Question 22

A turnip is an inferior good if

A)an increase in the price of a turnip decreases the quantity of turnips that consumers want to buy.
B)an increase in income decreases the demand for turnips.
C)an increase in income increases the demand for turnips.
D)turnips violate the law of demand.
E)turnips are a low quality good.

Question 23

Which one of the following would lead to an increase in the demand for hamburgers?

A)a new fad hamburger diet
B)a decrease in population size
C)a rise in the price of French fries, a complement of hamburgers
D)a decrease in consumer income if hamburgers are a normal good
E)a news report that hamburgers can cause skin diseases

Question 24

Use the figure below to answer the following questions.

Figure 3.2.1
Point A in Figure 3.2.1 indicates that

A)$1 is the least that consumers are willing to pay for the 4,000th apple.
B)consumers will not be in equilibrium if the price of an apple is $1.
C)consumers will only pay $1 for any apple.
D)if the price is $1, consumers will plan to buy 4,000 apples.
E)if the price is more than $1, consumers will buy 9,000 apples.

Question 25

Suppose income increases.Choose the correct statement.

A)The equilibrium price of turnips falls if a turnip is an inferior good.
B)The equilibrium price of turnips rises if a turnip is an inferior good.
C)The equilibrium quantity of turnips decreases if a turnip is an inferior good.
D)The supply of turnips decreases whether or not a turnip is an inferior good.
E)Both A and C

Question 26

Use the figure below to answer the following questions.

Figure 3.2.1
Which one of the following would result in a movement from point A to point B in Figure 3.2.1?

A)a fall in the price of apples
B)a rise in the price of oranges
C)an increase in population size
D)public concern about chemicals sprayed on apples
E)a rise in the price of bananas

Question 27

An increase in the price of ground beef

A)increases the demand for chicken, a substitute for ground beef.
B)increases the demand for hamburger buns, a complement of ground beef.
C)increases the quantity demanded of ground beef.
D)decreases the quantity demanded of ground beef.
E)both A and D

Question 28

Use the figure below to answer the following questions.

Figure 3.2.2
Refer to Figure 3.2.2.If consumers' income increases,

A)the quantity of pizzas demanded increases.
B)the demand curve for pizzas shifts from D₁ to D₂ if a pizza is a normal good.
C)the supply of pizzas increases.
D)the quantity of pizzas supplied decreases.
E)a movement from point A to point B on D₁ occurs.

Question 29

Use the figure below to answer the following questions.

Figure 3.2.2
Refer to Figure 3.2.2.Which one of the following represents a decrease in quantity demanded?

A)a shift from D₁ to D₂
B)a shift from D₂ to D₁
C)a movement from A to B
D)a movement from B to A
E)none of the above

Question 30

If a turnip is an inferior good, then, ceteris paribus, an increase in the price of a turnip will

A)decrease the demand for turnips.
B)increase the demand for turnips.
C)decrease the supply of turnips.
D)increase the supply of turnips.
E)decrease the quantity of turnips demanded.

Question 31

The price of good X falls and the demand for good Y decreases.We can conclude that

A)X and Y are complements.
B)X and Y are independent of each other.
C)X is an inferior good.
D)X is a normal good.
E)X and Y are substitutes.

Question 32

A decrease in quantity demanded is represented by a

A)rightward shift of the supply curve.
B)rightward shift of the demand curve.
C)leftward shift of the demand curve.
D)movement upward and to the left along the demand curve.
E)movement downward and to the right along the demand curve.

Question 33

An increase in income

A)increases the demand for turnips if a turnip is an inferior good.
B)increases the demand for turnips if a turnip is a normal good.
C)increases the supply of turnips.
D)decreases the demand for turnips if turnips have a very low price.
E)decreases the supply of turnips.

Question 34

Use the figure below to answer the following questions.

Figure 3.2.2
Which one of the following would result in the demand curve shifting from D₁ to D₂ in Figure 3.2.2?

A)an increase in the supply of pizza
B)a rise in the price of hamburgers, a substitute for pizza
C)a rise in the price of pizza
D)a fall in the price of pizza
E)a rise in the price of Coke, a complement of pizza

Question 35

Some sales managers are talking shop.Which of the following quotations refers to a movement along the demand curve?

A)"Since our competitors raised their prices, our sales have doubled."
B)"It has been an unusually mild winter; our sales of wool scarves are down from last year."
C)"We decided to cut our prices, and the increase in our sales has been remarkable."
D)"The Green movement has sparked an increase in our sales of biodegradable products."
E)"More firms are producing biodegradable products."

Question 36

Use the figure below to answer the following questions.

Figure 3.2.1
Given Figure 3.2.1, under what condition are consumers willing to buy more than 9,000 apples per week?

A)if the price is above $1
B)if the price is between $1 and $0.50
C)if the price is below $0.50
D)if the price is between $1 and $1.50
E)if the price is $0.75

Question 37

The price of good A rises, and the demand curve for good B shifts leftward.We can conclude that

A)A and B are substitutes.
B)A and B are complements.
C)A and B are complements in production.
D)B is an inferior good.
E)B is a normal good.

Question 38

The demand curve slopes downward to the right because

A)an increase in income leads to increased consumption.
B)of the law of supply.
C)of the law of demand.
D)of comparative advantage.
E)as income rises, the quantity demanded increases.

Question 39

Use the figure below to answer the following questions.

Figure 3.2.1
Which one of the following statements best characterizes point B in Figure 3.2.1?

A)Producers would be unwilling to sell the 9,000th apple for less than $0.50.
B)The most that consumers would be willing to pay for the 9,000th apple is $0.50.
C)At a price of $0.50, consumers will be unwilling to buy any apples.
D)At a price of $0.50, there will be an apple shortage.
E)At point B, the market is in equilibrium.

Question 40

Good A is a normal good if

A)a rise in the price of a complement causes the demand for A to decrease.
B)income and the demand for A are negatively related.
C)a rise in the price of a substitute causes the demand for A to increase.
D)the demand for A increases when income rises.
E)good A satisfies the law of demand.

Question 41

Consider the market for cell phones.Suppose the price of a cell phone falls.Explain the effect of this event on the quantity of cell phones demanded and on the demand for cell phones.

A)The quantity of cell phones demanded is unchanged and the demand for cell phones increases.
B)The quantity of cell phones demanded decreases and the demand for cell phones is unchanged.
C)The quantity of cell phones demanded increases and the demand for cell phones is unchanged.
D)The quantity of cell phones demanded increases and the demand for cell phones also increases.
E)The quantity of cell phones demanded is unchanged and the demand for cell phones decreases.

Question 42

The fact that a fall in the price of a good results in a decrease in the quantity of the good supplied illustrates

A)the law of supply.
B)the law of demand.
C)a change in supply.
D)the nature of an inferior good.
E)technological improvement.

Question 43

Some sales managers are talking shop.Which one of the following quotations refers to a leftward shift of the demand curve?

A)"Since our competitors raised their prices, our sales have doubled."
B)"It has been an unusually mild winter; our sales of wool scarves are down from last year."
C)"We decided to cut our prices, and the increase in our sales has been remarkable."
D)"The Green movement has sparked an increase in our sales of biodegradable products."
E)"More firms are producing biodegradable products."

Question 44

Some sales managers are talking shop.Which one of the following quotations does not refer to a rightward shift of the demand curve?

A)"Since our competitors raised their prices, our sales have doubled."
B)"It has been an unusually harsh winter; our sales of wool scarves are up from last year."
C)"We decided to cut our prices, and the increase in our sales has been remarkable."
D)"The Green movement has sparked an increase in our sales of biodegradable products."
E)"People are expecting a harsh winter next year, so the sales of our winter coats have increased."

Question 45

Which one of the following will shift the supply curve of good X leftward?

A)a decrease in the wages of workers employed to produce X
B)an increase in the cost of machinery used to produce X
C)a technological improvement in the production of X
D)a situation where quantity demanded exceeds quantity supplied
E)a decrease in the cost of capital used to produce X

Question 46

Oatmeal is a normal good and cold cereal is a substitute for oatmeal.Raisins are a complement of oatmeal.Which of the following increases the demand for oatmeal?

A)an increase in the price of raisins
B)a decrease in income
C)a decrease in population
D)an increase in the price of cold cereal
E)an increase in the supply of oatmeal

Question 47

The law of supply tells us that other things remaining the same, as the

A)price of gasoline falls, the quantity of gasoline supplied decreases.
B)price of gasoline rises, the quantity of gasoline supplied decreases.
C)supply of gasoline increases, the price of gasoline falls.
D)cost of producing gasoline falls, the supply of gasoline will increase.
E)cost of producing gasoline increases, the price of gasoline rises.

Question 48

The substitution effect influences food purchases because when the price of a certain food rises, other things remaining the same, ________.Consumers ________.

A)the relative price of all food rises; purchase less of the food that has experienced the price increase and more of all other foods
B)its relative price does not change because most likely the prices of all other foods will also rise; continue to purchase all foods, but in smaller quantities
C)its relative price rises; purchase more of a different food that is less expensive
D)the relative price of all food rises; continue to purchase all foods, but in smaller quantities
E)its relative price rises; purchase less of all foods

Question 49

The law of demand applies to food because when the price of food rises, there is

A)a substitution effect that offsets the income effect.
B)an income effect but no substitution effect.
C)both a substitution effect and an income effect.
D)a substitution effect but no income effect.
E)a substitution effect and a complement effect.

Question 50

An increase in supply is shown by

A)a movement down along the supply curve.
B)a movement up along the supply curve.
C)a rightward shift of the supply curve.
D)a leftward shift of the supply curve.
E)an initial movement up and then down along the same supply curve.

Question 51

A decrease in the quantity supplied is shown by a

A)movement down along the supply curve.
B)movement up along the supply curve.
C)rightward shift of the supply curve.
D)leftward shift of the supply curve.
E)rightward shift of the demand curve.

Question 52

People buy more of good 1 when the price of good 2 rises.Good 1 and good 2 are

A)complements.
B)substitutes.
C)normal goods.
D)inferior goods.
E)substitutes in production

Question 53

The income effect influences food purchases because when the price of a certain food rises, other things remaining the same, ________.Consumers ________.

A)demand for that food increases; believe that the price may rise even further so they buy more now
B)demand for that food decreases; buy less of the food that has experienced the price rise and more of other foods
C)the price rises relative to income; cannot afford to buy all the things they previously bought, so they normally buy less of the food that has experienced the price rise
D)demand for that food increases; buy more food because food is a normal good
E)its relative price rises; purchase less of all foods because food is an inferior good

Question 54

Networks increase the price they charge cable television firms for programming.As a result, the price of cable television rises.Choose the correct statement.

A)A movement occurs up along the demand curve for cable television and the quantity demanded increases.
B)The demand curve for cable television shifts rightward.
C)The demand curve for cable television shifts leftward.
D)A movement occurs up along the demand curve for cable television and the quantity demanded decreases.
E)The price of cable television does not change because subscribers are already paying a high enough price.

Question 55

The supply curve of a good slopes upward to the right because of

A)technological improvements over time.
B)the law of supply.
C)the law of demand.
D)the existence of substitutes in production.
E)the fact that prices tend to rise over time.

Question 56

The Government of Canada promises to produce more defence goods without any decrease in the production of other goods.This promise is valid

A)if Canada is producing at a point outside its PPF.
B)if Canada is producing at a point on its PPF.
C)if Canada is producing at a point inside its PPF.
D)only if the PPF shifts rightward.
E)only if technology advances or capital increases.

Question 57

If a producer can use its factors of production to produce either good A or good B, then a rise in the price of A

A)increases the supply of B.
B)decreases the supply of A.
C)increases the supply of A.
D)decreases the supply of B.
E)increases the demand for A.

Question 58

If goods X and Y are substitutes in production, then a rise in the price of good X

A)increases the demand for good Y.
B)decreases the demand for good Y.
C)increases the supply of good Y.
D)decreases the supply of good Y.
E)might change the supply of Y; it depends on whether X and Y are also substitutes.

Question 59

If Hamburger Helper is an inferior good, then, ceteris paribus, a decrease in income will lead to

A)a leftward shift of the demand curve for Hamburger Helper.
B)a rightward shift of the demand curve for Hamburger Helper.
C)a movement up along the demand curve for Hamburger Helper.
D)a movement down along the demand curve for Hamburger Helper.
E)an initial movement up and then down along the demand curve for Hamburger Helper.

Question 60

Which one of the following would not shift the supply curve of good X to the right?

A)a fall in the price of the factors of production used in producing X
B)an improvement in technology used in the production of X
C)a rise in the price of X
D)an increase in the price of Y, a complement in production of X
E)a fall in the price of Y, a substitute in production of X

Question 61

A rise in the price of a good

A)decreases demand for the good.
B)creates a movement up along the supply curve.
C)creates a movement down along the demand curve.
D)increases the supply of the good.
E)increases preferences for the good.

Question 62

Use the table below to answer the following questions.
Table 3.4.1

Refer to Table 3.4.1.At a price of $3 a unit

A)the market is in equilibrium.
B)there is a 180-unit surplus.
C)there is a 180-unit shortage.
D)there is a tendency for the price to rise.
E)C and D

Question 63

A shift of the supply curve for rutabagas occurs if there is

A)a change in preferences for rutabagas.
B)a change in the price of a related good that is a substitute for rutabagas.
C)a change in income.
D)a change in the price of rutabagas.
E)none of the above

Question 64

Use the table below to answer the following questions.
Table 3.4.1

Refer to Table 3.4.1.A surplus occurs if

A)the price is $2 a unit.
B)the price is $3 a unit.
C)the price is above $4 a unit.
D)the price is $1 a unit.
E)the price is $4 a unit.

Question 65

A decrease in the quantity supplied of a good is shown by

A)a movement down along the supply curve.
B)a leftward shift of the supply curve.
C)a movement up along the supply curve.
D)a rightward shift of the supply curve.
E)an initial rightward shift and then leftward shift of the supply curve.

Question 66

Some producers are chatting over a beer.Which one of the following quotations refers to a movement along the supply curve?

A)"Wage increases have forced us to raise our prices."
B)"Our new, sophisticated equipment will enable us to undercut our competitors."
C)"Raw material prices have sky-rocketed; we will have to pass the cost on to our customers."
D)"We anticipate a big increase in demand. Our product price should rise, so we are planning for an increase in output."
E)"New competitors in the industry are causing prices to fall."

Question 67

Which of the following decreases the supply of popcorn?

A)a decrease in the price of popcorn
B)an increase in the price of popcorn
C)a technological advance in the production of popcorn
D)a decrease in the demand for popcorn
E)a decrease in the number of popcorn producers

Question 68

If a factor of production can be used to produce either good A or good B, then A and B are

A)substitutes in production.
B)complements in production.
C)substitutes.
D)complements.
E)normal goods.

Question 69

Which of the following shifts the supply curve for good X leftward?

A)a situation in which the quantity demanded of X exceeds the quantity supplied of X
B)an increase in the cost of the machinery used to produce X
C)a technological advance in the production of X
D)a decrease in the wages of workers employed to produce X
E)a situation in which the quantity supplied of X exceeds the quantity demanded of X

Question 70

Which of the following will shift the supply curve of good X rightward?

A)a decrease in the wages of workers employed to produce good X
B)an increase in the cost of capital used to produce good X
C)an increase in the price of energy
D)a decrease in the number of suppliers of good X
E)the price of Y, a substitute in production for good X, rises

Question 71

New Maple Sap Method
With the new way to tap maple trees, farmers could produce 10 times as much maple syrup per acre.
Source: cbc.ca, February 5, 2014
The new method of tapping maple trees ________ the supply of maple syrup and ________ the quantity supplied of maple syrup.

A)increases; does not change
B)increases; increases
C)does not change; increases
D)does not change; does not change
E)does not change; decreases

Question 72

Use the table below to answer the following questions.
Table 3.4.1

In Table 3.4.1, the equilibrium price is

A)$7 a unit.
B)$5 a unit.
C)$4 a unit.
D)$3 a unit.
E)$1 a unit.

Question 73

French fries and baked potatoes are

A)complements for consumers and complements in production for producers.
B)substitutes for consumers and substitutes in production for producers.
C)complements for consumers and substitutes in production for producers.
D)substitutes in production for consumers and inferior goods for producers.
E)normal goods for consumers and complements for producers.

Question 74

Some producers are chatting over a beer.Which one of the following quotations refers to a leftward shift of the supply curve?

A)"Wage increases have forced us to raise our prices."
B)"Our new, sophisticated equipment will enable us to undercut our competitors."
C)"Raw material prices have sky-rocketed; we will have to pass the cost on to our customers."
D)"We anticipate a big increase in demand. Our product price should rise, so we are planning for an increase in output."
E)Both A and C

Question 75

Some producers are chatting over a beer.Which one of the following quotations refers to a rightward shift of the supply curve?

A)"Wage increases have forced us to raise our prices."
B)"Our new, sophisticated equipment will enable us to undercut our competitors."
C)"Raw material prices have sky-rocketed; we will have to pass the cost on to our customers."
D)"We anticipate a big increase in demand. Our product price should rise, so we are planning for an increase in output."
E)"Competitors are leaving the industry."

Question 76

Use the table below to answer the following questions.
Table 3.4.1

In Table 3.4.1, the equilibrium quantity is

A)200 units.
B)320 units.
C)420 units.
D)500 units.
E)none of the above; there is no equilibrium.

Question 77

Use the table below to answer the following questions.
Table 3.4.1

Refer to Table 3.4.1.The equilibrium quantity is 420 units if

A)the price is fixed at $3 a unit.
B)the price is fixed at $4 a unit.
C)the price is fixed at $5 a unit.
D)Both A and C are correct.
E)none of the above

Question 78

Use the table below to answer the following questions.
Table 3.4.1

Refer to Table 3.4.1.A shortage occurs if

A)the price is $7 a unit.
B)the price is $4 a unit.
C)the price is $5 a unit.
D)the price is below $4 a unit.
E)the price is $6 a unit.

Question 79

Bottled water and health club memberships are

A)substitutes.
B)complements.
C)substitutes in production.
D)complements in production.
E)inferior goods.

Question 80

If the number of suppliers of good Y increases, then

A)a movement up along the supply curve of good Y will occur.
B)a movement down along the supply curve of good Y will occur.
C)the supply curve of good Y shifts rightward.
D)the supply curve of good Y shifts leftward.
E)the supply curve of good Y will remain unchanged.