Deck 2: Supply and Demand

Question 1

Suppose the demand for Digital Video Recorders (DVRs)is given by Q = 250 - .25p + 4p_c,where Q is the quantity of DVRs demanded (in 1000s),p is the price of a DVR,and p_c is the price of cable television.How much of a change in p must occur for Q to increase by one?

A)fall by 25¢
B)fall by $4
C)increase by 25¢
D)fall by $4.25

Answer 1

fall by $4

Question 2

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

A)shift leftward.
B)shift rightward.
C)become flatter.
D)become steeper.

Answer 2

shift leftward.

Question 3

An increase in the price of pork will lead to

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

Answer 3

a movement up along the demand curve of pork.

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

Suppose the demand for Digital Video Recorders (DVRs)is given by Q = 250 - .25p + 4p_c,where Q is the quantity of DVRs demanded (in 1000s),p is the price of a DVR,and p_c is the price of cable television.How much does Q change if the price of cable changes slightly (i.e.the partial derivative of demand with respect to p_c)?

A)125
B)4.25
C)4
D).25

Question 6

The above figure shows a graph of the market for pizzas in a large town.If the price price rises from 7 to 8,what is the change in quantity demanded for pizzas?

A)-10
B)-30
C)-20
D)20

Question 7

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.

Question 8

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

A)shift rightward.
B)shift leftward.
C)remain unchanged.
D)remain unchanged while quantity demanded would change.

Question 9

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 10

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.

Question 11

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 12

The demand curve for Widgets is given by Q_D = 6000 - 2y - 200p + 30p_G,where Q_D is the quantity of widgets demanded,y is the per capita income and p_G is the price of Gizmos.An increase in per capita income will cause

A)demand shifts left.
B)demand shifts right.
C)demand increases.
D)movement along the demand curve.

Question 13

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 14

Suppose the demand for Digital Video Recorders (DVRs)is given by Q = 250 - .25p + 4p_c,where Q is the quantity of DVRs demanded (in 1000s),p is the price of a DVR,and p_c is the price of cable television.How much does the quantity demanded for DVRs change if the p rises by $40?

A)drops by 10,000 DVRs
B)increases by 16,000 DVRs
C)drops by 2,500 DVRs
D)increases by 4,000 DVRs

Question 15

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 16

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 17

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 18

The demand for pizzas in a large town is written as: Q_d = 120 - 10P + 5P_b - 0.5P_s - 10Y,where Q_d is the quantity demanded,P is the price,P_b is the price of burritos,P_s is the price of soft drinks sold in the pizza restaurants,and Y is personal income per month (in thousand dollars).If there is a $1,000 increase in personal income,how will the Q_d change?

A)increase by 10
B)decrease by 10
C)unchanged
D)not enough information provided

Question 19

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 20

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 21

Supply curves

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

Question 22

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 23

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 24

The demand for pizzas in a large town is written as: Q_d = 120 - 10P + 5P_b - 0.5P_s - 10Y,where Q_d is the quantity demanded,P is the price,P_b is the price of burritos,P_s is the price of soft drinks sold in the pizza restaurants,and Y is personal income per month (in thousand dollars).What is ∆Q/∆Ps?

A)5
B)-5
C)0.5
D)-0.5

Question 25

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

Question 26

The demand curve for Widgets is given by Q_D = 6000 - 2y - 200p + 30p_G,where Q_D is the quantity of widgets demanded,y is the per capita income and p_G is the price of Gizmos.Compute the partial derivatives with respect to y and p_G.

Question 27

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

Question 28

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 29

The demand for pizzas in a large town is written as: Q_d = 120 - 10P + 5P_b - 0.5P_s - 10Y,where Q_d is the quantity demanded,P is the price,P_b is the price of burritos,P_s is the price of soft drinks sold in the pizza restaurants,and Y is personal income per month (in thousand dollars).We can conclude that burritos and pizzas are

A)substitutes.
B)normal goods.
C)complements.
D)unrelated.

Question 30

Suppose the demand for widgets is given by Q_D = 100 - 5p - p_d + 2I,where I is average consumer income,p is the price of lemons,and p_d is the price of doodads.According to this equation,doodads are a(n)________ for widgets.

A)substitute
B)complement
C)input
D)None of the above

Question 31

Show that the slope of the market demand curve is the summation of the slopes of individuals' demand curves.

Question 32

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(n)

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 33

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 34

When the price of beef rises,consumers switch consumption to substitutes such as chicken and fish,thereby decreasing the demand for beef.

Question 35

Suppose an individual inverse demand curve is given as P = 2 - 1/2
,where
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 36

Suppose N consumers each have an identical demand curve for a good is given by Q = a - bp,where Q is the quantity demanded,p is the price,and a and b are positive constants.What is the market demand curve? Is the slope (in price)of the market demand greater or less than the slope of each individual demand curve?

Question 37

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 38

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

Question 39

A rise in the oil price will

A)shift the supply curve of gas to the left.
B)shift the supply curve of gas to the right.
C)leave the supply curve of gas unchanged.
D)Not enough information is provided.

Question 40

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 41

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

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

Question 42

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 = 60,Q = 8
C)p = 14,Q = 140
D)p = 5,Q = 60

Question 43

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 44

The U.S.is planning on imposing quotas on tires imported from china.Domestic retailers predict this will result in an increase in consumer prices on tires by about $10.Use a supply and demand graph with brief explanation to show the effects of an import quota.Assume the quota is binding.

Question 45

Restricting imports tends to

A)shift the demand curve for the product to the left.
B)shift the demand curve for the product to the right.
C)change the shape of the supply curve.
D)increase the quantity supplied of a product.

Question 46

The above figure shows a graph of the market for pizzas in a large town.At a price of $7,there will be

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

Question 47

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 48

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 49

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

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

Question 50

Assume the supply function of ice cream is written as: Qs = 100 + 20P - 10Pm,where Qs is the quantity supplied,P is price of ice cream,and Pm is the price of milk ($/gallon).If milk price increases by $2/gallon due to the policy change,how will the Qs change?

A)decreases by 20
B)increases by 20
C)decreases by 10
D)increases by 10

Question 51

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 52

The U.S.government imposes a number of import quotas on dairy products,including Swiss cheese.The domestic supply of Swiss cheese is given by:
Q^{Dom =} 250p - 1000
The supply of Swiss cheese from foreign producers to the U.S.(mostly from Switzerland,of course),is given by:
Q^{For =} 1125p - 4500
In both equations above,Q is the quantity of cheese (100's of lbs/month),and p is the price per pound.
a.Using the equations above,derive the total supply of cheese equation to the U.S.in the absence of any quota.
Suppose that fears of neutral countries (like Switzerland)spark the U.S.to restrict imports of Swiss cheese to Q = 9000.
b.On a graph,draw (i)the domestic, (ii)foreign and (iii)total supply with the quota.

Question 53

The Law of Supply insures that supply curves slope upward.

Question 54

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 55

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 56

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 57

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 58

Assume the supply function of ice cream is written as: Qs = 100 + 20P - 10Pm,where Qs is the quantity supplied,P is price of ice cream,and Pm is the price of milk ($/gallon).If milk price is held fixed at $4/gallon,what is the slope of supply function for ice cream?

A)-10
B)10
C)-20
D)20

Question 59

A competitive equilibrium is described by

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

Question 60

Suppose a market is supplied by domestic producers and and an international supply.The domestic (inverse)supply curve is given by the p = 5 + 2Q,and the foreign supply curve is given by p = 15.Draw the total supply curve.On a second graph,draw the total supply curve if the government imposes a quota of 10 on foreign supply.

Question 61

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 62

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 computers after technological advances in making computers occur?

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

Question 63

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

Question 64

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 typewriters after technological advances in computerized word-processing software occur?

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

Question 65

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 66

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 67

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 68

Suppose a market were currently at equilibrium.A rightward shift of the supply curve would cause a(n)

A)increase in price but a decrease in quantity.
B)decrease in price but an increase in quantity.
C)increase in both price and quantity.
D)decrease in both price and quantity.

Question 69

A rightward shift of the supply curve will lead to a(n)

A)decrease in equilibrium price.
B)excess supply at the old equilibrium price.
C)increase in quantity demanded.
D)All of the above.

Question 70

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 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 71

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

Question 72

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 73

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

Question 74

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 computer manuals after technological advances in making computers occur?

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

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

Suppose a market were currently at equilibrium.A rightward shift of the demand curve would cause

A)an increase in price but a decrease in quantity.
B)a decrease in price but an increase in quantity.
C)an increase in both price and quantity.
D)a decrease in both price and quantity.

Question 77

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 78

If the demand curve is vertical a rightward shift of the supply curve will lead to

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

Question 79

A rightward shift of the demand curve will lead to an

A)increase in equilibrium price.
B)excess demand at the old equilibrium price.
C)increase in quantity supplied.
D)All of the above.

Question 80

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 non-dairy coffee creamer after severe weather destroys a large portion of the coffee crop?

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