Deck 2: Supply and Demand

Question 1

According to the Law of Demand,the demand curve for a good will

A) shift leftward when the price of the good increases.
B) shift rightward when the price of the good increases.
C) slope downward.
D) slope upward.

Answer 1

C

Question 2

If on Tuesday the perceived price of studying for an exam is $4 per hour but on Saturday the perceived price of studying for an exam is $10,the law of demand predicts

A) more studying on Saturday and less on Tuesday.
B) more studying on Tuesday and less on Saturday.
C) the same amount of studying on Tuesday and Saturday.
D) no studying on Tuesday or Saturday.

Answer 2

B

Question 3

As the price of a good increases,the change in the quantity demanded can be shown by

A) shifting the demand curve leftward.
B) shifting the demand curve rightward.
C) moving down along the same demand curve.
D) moving up along the same demand curve.

Answer 3

D

Question 4

Consider the demand function Qd = 150 - 2P.The effects of other determinants of Qd is reflected in

A) the intercept of the function.
B) the slope of the function.
C) neither the slope nor the intercept of the function.
D) in both the slope and the intercept of the function.

Question 5

Assuming plasma TVs are a normal good,an increase in consumer incomes will lead to

A) a rightward shift of the demand curve for plasma TVs.
B) a movement upward along the demand curve for plasma TVs.
C) a rightward shift of the supply curve for plasma TVs.
D) no change of the demand curve for plasma TVs.

Question 6

If the price of automobiles were to increase substantially,the demand curve for gasoline would most likely

A) shift leftward.
B) shift rightward.
C) remain unchanged.
D) become steeper.

Question 7

If a yet-to-be released video game receives a positive review in a popular gaming magazine,

A) the demand curve is expected to shift to the right.
B) the demand curve is expected to shift to the left.
C) the demand curve is not expected to change.
D) for those who read the review, demand shifts to the left. For those who don't read the review, demand shifts to the right.

Question 8

To determine the total demand for all consumers,sum the quantity each consumer demands

A) at a given price.
B) at all prices and then sum this amount across all consumers.
C) Both A and B will generate the same total demand.
D) None of the above.

Question 9

The law of demand

A) was passed by the 102nd U.S. Congress.
B) is a natural law, much like the law of gravity.
C) is considered a "law" in economics because of the overwhelming empirical evidence that supports its logic.
D) is considered a "law" in economics in order to force economic models to operate fully.

Question 10

If the demand for oranges is written as Q = 100 - 5p,then the inverse demand function is

A) Q = 5p - 100.
B) Q = 20 - .2p.
C) p = 20 - 5Q.
D) p = 20 - .2Q.

Question 11

An increase in the demand curve for orange juice would be illustrated as a

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

Question 12

Holding all other factors constant,consumers demand more of a good the

A) higher its price.
B) lower its price.
C) steeper the downward slope of the demand curve.
D) steeper the upward slope of the demand curve.

Question 13

Which of the following would not change demand?

A) the price of the product
B) information about the product's health effects
C) the income of the consumers
D) the price of related products

Question 14

The term "inverse demand curve" refers to

A) a demand curve that slopes upward.
B) expressing the demand curve in terms of price as a function of quantity.
C) the demand for "inverses."
D) the difference between quantity demanded and supplied at each price.

Question 15

Consider the demand functions:: A)Qd = 250 - 2P B)Qd = 300 - 3P. Which of the demand functions reflects a higher level of consumer incomes?

A)A
B)B
C)A and B reflect the same consumer incomes.
D)More information is needed.

Question 16

Which of the following cultural events likely increased the demand for the associated product?

A) the banning of cigarette advertising on television
B) the inclusion of Reese's Pieces in the movie E.T.
C) increased environmental awareness about the impacts of sport utility vehicles (SUVs)
D) concerns over "Mad Cow" disease in beef

Question 17

The above figure shows a graph of the market for pizzas in a large town.No pizzas will be demanded unless price is less than

A) $0.
B) $5.
C) $12.
D) $14.

Question 18

If the price of automobiles were to decrease substantially,the demand curve for automobiles would most likely

A) shift rightward.
B) shift leftward.
C) remain unchanged.
D) become steeper.

Question 19

If the price of automobiles were to decrease substantially,the demand curve for public transportation would most likely

A) shift right.
B) shift left.
C) remain unchanged.
D) remain unchanged while quantity demanded would change.

Question 20

The above figure shows a graph of the market for pizzas in a large town.If the price falls from $10 to $7 per pizza,the quantity of pizzas demanded will

A) increase by 20.
B) decrease by 30.
C) increase by 30.
D) decrease by 10.

Question 21

Suppose the demand curve for a good shifts rightward,causing the equilibrium price to increase.This increase in the price of the good results in

A) a rightward shift of the supply curve.
B) an increase in quantity supplied.
C) a leftward shift of the supply curve.
D) a downward movement along the supply curve.

Question 22

Assume Joe is only willing to pay $5 for a Ferrari sports car.

A) Joe is not considered part of the demand for Ferraris.
B) Joe most likely will not be sold a Ferrari.
C) Joe is not considered rational.
D) Joe's willingness to pay is not indicative of how much he values the Ferrari.

Question 23

The above figure shows a graph of the market for pizzas in a large town.No pizzas will be supplied unless the price is above

A) $0.
B) $5.
C) $12.
D) $14.

Question 24

Suppose there are 100 identical firms in the rag industry,and each firm is willing to supply 10 rags at any price.The market supply curve will be a

A) vertical line where Q = 10.
B) vertical line where Q = 100.
C) vertical line where Q = 1000.
D) horizontal line where Q = 1000.

Question 25

Suppose the demand for a particular product can be expressed as Q = 100/p.Calculate the total amount spent on this good when p = 10,20,and 50.Can you make a generalization about the mathematical form of this demand curve and consumer behavior in this market?

Question 26

If a good is not produced,then there is no demand for it.

Question 27

An increase in the price of oil will

A) shift the supply curve of oil to the left.
B) shift the supply curve of oil to the right.
C) leave the supply curve of oil unchanged.
D) not enough information to answer the question.

Question 28

Supply curves

A) slope upward.
B) slope downward.
C) are horizontal.
D) can have many shapes.

Question 29

Because people prefer name-brand pain-relieving drugs over store-brand pain-relieving drugs,demand curves do not slope downward for pain-relieving drugs.

Question 30

If a demand curve shifts left,it implies

A) as a group, consumers are willing and able to pay less for the product.
B) as a group, consumers are willing and able to pay more for the product.
C) government has regulated how many people can purchase the product.
D) the profit motive of the firms is making the price too high.

Question 31

The demand function for tickets to Ireland is expressed as Qd = 1600 - 0.005P + 2 P_England + 3rain + 2Y,where P is the price for tickets to Ireland,P_England is the price of tickets to England,rain is the inches of rain Ireland receives annually,and Y is annual household income.Assuming P_England is $1000,rain is 30 inches per year,and income is 40,000,how much would the price of tickets to Ireland have to fall for consumers to be willing to buy one more trip per year?

A) $15
B) $20
C) $50
D) $200

Question 32

Assume the price of a movie is $10.Jenna demands 2 movies per week,Sam demands 3 movies per week,and Jordan demands 8 movies per week.From this information we can conclude that

A) the market quantity demanded at a price of $10 is at least 13 movies per week.
B) Jordan is obviously more wealthy than either Sam or Jeanna.
C) Sam is irrational compared to Jenna or Jordan.
D) the movie industry is unprofitable.

Question 33

If the price is $5 and the quantity demanded is 100 units,then at a price of $10,the quantity demanded will be

A) less than or equal to 100 units.
B) greater than or equal to 100 units.
C) less than or equal to 1000 units.
D) equal to 100 units.

Question 34

The quantity of a good that consumers demand depends only on the price of the good.

Question 35

Suppose the market demand curve for pizza can be expressed as Q^D = 100 - 2P + 3Pb,where Q^D is the quantity of pizza demanded,P is the price of a pizza,and Pb is the price of a burrito.What is the slope of this demand function,and what information does the slope provide?

Question 36

A downward sloping demand curve indicates that

A) individuals all have the same valuation of the same product.
B) individuals have different valuations of the same product.
C) individuals have no valuations of a particular product.
D) certain individuals are uninformed about certain aspects of the product.

Question 37

If the price of gasoline were $5,many people would stop buying gasoline while others would continue to do so.This would indicate

A) those who are buying gasoline value it at least $5 per gallon.
B) those who are not buying gasoline value it more than $5 per gallon.
C) only those who are extremely wealthy are buying gasoline.
D) the price of gasoline needs to be regulated by the Federal Government.

Question 38

Suppose the market demand curve for pizza can be expressed as Q^D = 100 - 2P + 3Pb,where Q^D is the quantity of pizza demanded,P is the price of pizza,and Pb is the price of a burrito.What is the relationship between burritos and pizza,from the point of view of consumers?

A) They are independent.
B) They are complements.
C) They are substitutes.
D) Not enough information to answer the question.

Question 39

During the winter of 1997-1998,the northeastern United States experienced warmer than usual conditions.The price of home heating oil was less than it was during the previous winter,but people bought less home heating oil.This contradicts the Law of Demand.

Question 40

Suppose an individual inverse demand curve is given as P = 2 - 1/2 qⁱ,where qⁱ is the quantity demanded by individual i.There are 50 individual consumers with this identical,individual inverse demand curve.Solve for the market demand curve.

Question 41

If the supply curve of a product changes so that sellers are now willing to sell 2 additional units at any given price,the supply curve will

A) shift leftward by 2 units.
B) shift rightward by 2 units.
C) shift vertically up by 2 units.
D) shift vertically down by 2 units.

Question 42

Technological innovation in the production of computers has led to

A) a decrease in the quantity demanded for computers.
B) a rightward shift of the supply curve for computers.
C) a decrease in the quantity supplied of computers.
D) None of the above.

Question 43

A competitive equilibrium is described by

A) a price only.
B) a quantity only.
C) the excess supply minus the excess demand.
D) a constant price and a quantity.

Question 44

The price of crude oil increased to $100 per barrel in early 2008.What would we expect to see happen to the supply of gasoline,which is produced using crude oil?

A) The supply of gasoline will increase.
B) The supply of gasoline will decrease.
C) The supply of gasoline will stay the same because the government requires gasoline producers to meet statutory minimum production levels.
D) The supply of gasoline will stay the same because of the profit motives of gasoline producers.

Question 45

What is the total market supply,Qs,for luxury sports cars in the United States if the only three suppliers inverse supply functions are P = -10 + 5Qs₁,P = 20 + 5Qs₂,P = 5Qs₃?

A) P = 10 + 21Qs
B) Qs = -2 +
C) Qs = 6 +
D) Qs = -2 +

Question 46

Once an equilibrium is achieved,it can persist indefinitely because

A) shocks that shift the demand curve or the supply curve cannot occur.
B) shocks to the demand curve are always exactly offset by shocks to the supply curve.
C) the government never intervenes in markets at equilibrium.
D) in the absence of supply/demand shocks no one applies pressure to change the price.

Question 47

Suppose the following information is known about a market:
1.Sellers will not sell at all below a price of $2.
2.At a price of $10,any given seller will sell 10 units.
3.There are 100 identical sellers in the market.
Assuming a linear supply curve,use this information to derive the market supply curve.

Question 48

Equilibrium is defined as a situation in which

A) neither buyers nor sellers want to change their behavior.
B) no government regulations exist.
C) demand curves are perfectly horizontal.
D) suppliers will supply any amount that buyers wish to buy.

Question 49

Horizontally summing different supply curves assumes

A) that individual firms cannot influence the good's price.
B) that all firms operate in collusion.
C) that only firms who volunteer are included in the summation.
D) all firms produce the same amount of output.

Question 50

The market supply curve is found by

A) horizontally summing all individual supply curves.
B) vertically summing all individual supply curves.
C) Either A or B above since they both give the same answer.
D) None of the above.

Question 51

If two firms produce the same product but have different supply curves,

A) this would indicate that some other variable differs across the two firms.
B) this would indicate that all variables are the same across the two firms.
C) this would indicate that one or both of the firm's managers are misinformed.
D) this would indicate a need for government regulation.

Question 52

The expression "increase in quantity supplied" is illustrated graphically as a

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

Question 53

The Law of Supply ensures that supply curves slope upward.

Question 54

If ethanol production is expected to increase the price of corn,U.S.farmers will likely

A) shift the supply of corn to the left.
B) shift the supply of corn to the right.
C) reduce the production of corn by sliding down the corn supply curve, all else equal.
D) increase the production of corn by sliding up the corn supply curve, all else equal.

Question 55

If price is initially above the equilibrium level,

A) the supply curve will shift rightward.
B) the supply curve will shift leftward.
C) excess supply exists.
D) all firms can sell as much as they want.

Question 56

The inverse supply curve of coffee beans equals P = -5 - 2rain + Qs,where rain equals the number of inches of rain per year.How much does quantity supplied change when rain increases from 30 inches to 40 inches per year?

A) Qs decreases by 40.
B) Qs increases by 40.
C) Qs increases by 30.
D) Qs decreases by 30.

Question 57

The above figure shows a graph of the market for pizzas in a large town.At a price of $14,there will be

A) no pizzas supplied.
B) equilibrium.
C) excess supply.
D) excess demand.

Question 58

Suppose society wants to increase the number of teachers in society but doesn't want to pay teachers any more in salary and benefits.This could only occur by

A) making it more expensive to become a teacher, perhaps by raising college tuition rates.
B) making it less expensive to become a teacher, perhaps by offering subsidies to college tuition.
C) making computers more powerful.
D) increasing the income of student parents.

Question 59

The above figure shows a graph of the market for pizzas in a large town.At a price of $5,there will be

A) excess demand.
B) excess supply.
C) equilibrium.
D) zero demand.

Question 60

The supply curve is influenced by

A) the income of consumers.
B) the number of customers in the market.
C) the prices of the inputs required to produce the product.
D) the expectations of future profit.

Question 61

The above figure shows four different markets with changes in either the supply curve or the demand curve.Assuming coffee and tea are substitutes,which graph best illustrates the market for tea after severe weather destroys a large portion of the coffee crop?

A) Graph A
B) Graph B
C) Graph C
D) Graph D

Question 62

The above figure shows a graph of a market for pizzas in a large town.At a price of $10,the market

A) is not in equilibrium.
B) has excess supply.
C) does not have excess demand.
D) All of the above.

Question 63

The figure above shows a graph of the market for pizzas in a large town.What characterizes the equilibrium in this market?

A) There is excess supply at the equilibrium price of $7.
B) The government has selected the appropriate price for pizzas.
C) The quantity supplied equals the quantity demanded.
D) Supply equals demand.

Question 64

Explain why the equilibrium price is called the market clearing price.

Question 65

Use supply-and-demand graphs to explain why parking is free at the suburban shopping mall but one typically must pay to park when shopping downtown.

Question 66

When a market is in disequilibrium consumers and producers change their behavior.As a result the market reaches equilibrium.

Question 67

From the 1970s through the 1990s,the relative price of a college education has increased greatly.During the same time period,college enrollment has also increased.This evidence suggests that during this time period

A) the demand curve for a college education has shifted leftward.
B) the demand curve for a college education has shifted rightward.
C) the supply curve for a college education has shifted leftward.
D) the supply curve for a college education has shifted rightward.

Question 68

The above figure shows a graph of the market for pizzas in a large town.What are the equilibrium price and quantity?

A) p = 8, Q = 60
B) p = 7, Q = 40
C) p = 7, Q = 70
D) p = 10, Q = 40

Question 69

The supply and demand model assumes

A) no buyer or seller can unilaterally influence the price of the product.
B) each unit sold is sold at the same price.
C) suppliers and demanders know the price of the product.
D) All of the above.

Question 70

After tickets for a major sporting event are purchased at the official box office price,a market often develops whereby these tickets sell at prices well above the official box office price.Which of the following scenarios would NOT be able to explain this result?

A) The official price was below equilibrium from the moment the tickets were available.
B) Increased publicity causes the demand curve for the event to shift rightward.
C) The event was not a sellout.
D) Not everyone who wanted a ticket was able to buy one at the box office.

Question 71

Suppose the market for potatoes can be expressed as follows:
Supply: Q^S = -20 + 10p
Demand: Q^D = 400 - 20p
Solve for the equilibrium price and quantity.

Question 72

The above figure shows three different supply-and-demand graphs.Which graph best represents the market for the air we are currently breathing?

A) Graph A
B) Graph B
C) Graph C
D) None of the above.

Question 73

A market equilibrium occurs

A) only with government regulation.
B) only because of the profit motive of firms.
C) only because of the complacency of consumers.
D) through the interaction of self-interested consumers and producers.

Question 74

The above figure shows a graph of a market for pizzas in a large town.At a price of $7,what is the amount of excess demand?

A) 0; there is excess supply at $7.
B) 20 units
C) 30 units
D) 10 units

Question 75

The above figure shows three different supply-and-demand graphs.Which graph best represents the market for vacations on Mars?

A) Graph A
B) Graph B
C) Graph C
D) None of the above.

Question 76

Lionfish is an aquatic invasive species in the southeastern U.S.and the Caribbean.Current removal policies focus on harvesting the lionfish for human consumption.However,a fishing license is required to fish in most southern states.Assume the supply of fishing licenses is Qs = 50 + 0.05L + 40P,where L = lionfish population and P = price of a fishing license,and the demand for fishing licenses is
Qd = 1400 - 60P.What is the equilibrium price and quantity of fishing licenses when L = 1,000?

A) P = $8.5, Q = 890
B) P = $13, Q = 620
C) P = $13.5, Q = 590
D) P = $13.5, Q = 591

Question 77

Lionfish is an aquatic invasive species in the southeastern U.S.and the Caribbean.Current removal policies focus on harvesting the lionfish for human consumption.However,a fishing license is required to fish in most southern states.Assume that the supply of fishing licenses is Qs = 50 + 0.05L + 40P,where and P = price of a fishing license,and the demand for fishing licenses is .What is the equilibrium price and quantity of fishing licenses when L = 10,000?

A) P = $8.5, Q = 890
B) P = $13, Q = 620
C) P = $13.5, Q = 590
D) P = $13.5, Q = 591

Question 78

The above figure shows three different supply-and-demand graphs.Which graph best represents the market for workers at your nearest fast-food restaurant?

A) Graph A
B) Graph B
C) Graph C
D) None of the above.

Question 79

The above figure shows four different markets with changes in either the supply curve or the demand curve.Which graph best illustrates the market for coffee after severe weather destroys a large portion of the coffee crop?

A) Graph A
B) Graph B
C) Graph C
D) Graph D

Question 80

At equilibrium,quantity sold equals the quantity bought.This implies that

A) to sell more, producers require more in payment than consumers are willing to pay.
B) government regulation is necessary.
C) to sell less would require a lower price but would yield greater profit.
D) those who don't buy have been treated unfairly.