Deck 3: Supply and Demand

Question 1

According to the law of demand,during a given period of time,the quantity of a good demanded

A)Increases as its price rises,ceteris paribus.
B)Increases as its price falls,ceteris paribus.
C)Decreases as its price falls,ceteris paribus.
D)Does not change when price changes.

Answer 1

B

Question 2

The goal of the consumer in a market economy is to use his or her limited income to buy

A)The greatest number of goods and services possible.
B)The goods and services that maximize profits for businesses.
C)Those goods and services with the lowest prices.
D)The set of goods and services that maximizes the consumer's total utility.

Answer 2

D

Question 3

Jessie's demand schedule for candy bars indicates

A)Her opportunity cost of buying candy bars.
B)How much she likes candy bars.
C)How many candy bars she will actually buy.
D)Why she likes candy bars.

Answer 3

A

Question 4

Ceteris paribus,if the opportunity cost of purchasing a good rises,then the maximum price a particular consumer is willing to pay for that good

A)Does not change since the demand curve does not change.
B)Decreases.
C)Increases.
D)Decreases as long as supply also falls.

Question 5

A market in which final goods and services are exchanged is a

A)Public goods market.
B)Product market.
C)Factor market.
D)Labor market.

Question 6

Which of the following is a market transaction?

A)A stock increases in value over the 30 years that it is owned.
B)A college student purchases a laptop computer.
C)Weather destroys a farmer's crops,leaving the farmer unable to buy groceries.
D)A radio station changes its programming from classical to rock.

Question 7

A buyer is said to have a demand for a good only when

A)The buyer wants to own the good.
B)The buyer is both willing and able to purchase the good at alternative prices.
C)The price of the good is low enough.
D)An adequate supply of the good is available for purchase.

Question 8

International participants

A)Take no part in American markets.
B)Participate only in American product markets.
C)Participate only in American factor markets.
D)Participate in both American factor markets and American product markets.

Question 9

People benefit by participating in the market because

A)Resources are no longer limited.
B)There are always participants in the market that are more efficient than you are in production.
C)Market participation allows individuals to specialize and,with trade,ultimately consume more.
D)Participants in the market do not have to make choices.

Question 10

Who participates in markets?

A)Business firms.
B)Business firms and consumers.
C)Consumers and government agencies.
D)All of the choices are correct.

Question 11

According to the law of demand,a demand curve

A)Has a negative slope.
B)Is a horizontal or flat line.
C)Has a positive slope.
D)Exceeds the economy's ability to produce.

Question 12

A lower quantity demanded of a good reflects,ceteris paribus,

A)Lower income.
B)A downward shift of the supply curve.
C)A higher price of the good.
D)Fewer units actually purchaseD.Quantity demanded of an item and price of the same item are inversely related.

Question 13

Which of the following is purchased in a product market?

A)Cell phone service.
B)Undeveloped farmland in Texas.
C)Crude oil.
D)The skills of an X-ray technician.

Question 14

Business firms supply goods and services to ____ and purchase factors of production in ____.

A)factor markets; product markets
B)national markets; factor markets
C)product markets; factor markets
D)factor markets; national markets

Question 15

A factor market is any place or process where

A)Finished goods are bought and sold.
B)Land,labor,or capital is bought and sold.
C)Finished services are bought and sold.
D)None of the choices are correct.

Question 16

The term opportunity cost refers to the

A)Value of all the alternatives given up when a good or service is produced.
B)Financial costs of all the factors of production used to produce a good or service.
C)Amount of resources used to produce a good but not a service.
D)Value of the best alternative given up when a good or service is produceD.Opportunity cost refers to the most desired goods or services forgone,not all the goods forgone,because not all choices would have been given up-just the best alternative.

Question 17

The most desired goods or services that are given up when a choice is made are called the

A)Rationing device.
B)Economic profit.
C)Opportunity cost.
D)Utility cost.

Question 18

The goal of the business firms in a market economy is to maximize

A)Total profits.
B)Total sales.
C)Total utility.
D)Total welfare.

Question 19

Which of the following is purchased in a factor market?

A)A bag of jellybeans.
B)National defense.
C)The labor of a state university professor.
D)A motorized scooter used for commuting by a student.

Question 20

Individual consumers supply ____ and purchase ____.

A)factors of production; final goods and services
B)intermediate goods; final goods and services
C)final goods and services; factors of production
D)national goods and services; factors of production

Question 21

Ceteris paribus,which of the following would you expect to have no effect on the demand curve for new automobiles?

A)A rise in the price of gasoline.
B)Consumer expectations that the price of new automobiles will be lower next year.
C)Consumer expectations that a significant recession will develop and last for a year.
D)An increase in the price of new automobiles.

Question 22

Ceteris paribus,if buyers expect the price of airline tickets to fall in the future,then right now there should be

A)An increase in the demand for airline tickets.
B)A decrease in the supply of airline tickets.
C)A decrease in the demand for airline tickets.
D)No change in the supply of or demand for airline tickets because the price is not changing right now.

Question 23

Which of the following is a determinant of market supply?

A)Consumer expectations.
B)Consumers' income.
C)Consumers' desire for the good.
D)Available technology.

Question 24

Which determinant of demand changes in the personal computer market as more individuals become interested in "surfing the Internet"?

A)Cost of factors of production.
B)Income.
C)Expectations.
D)Number of buyers.

Question 25

Which of the following is a determinant of supply?

A)Consumer tastes or preferences.
B)The prices of the factors of production.
C)Income.
D)Number of buyers.

Question 26

If bagels and doughnuts are substitutes,then a decrease in the price of doughnuts will result in

A)An increase in the demand for doughnuts.
B)A decrease in the demand for doughnuts.
C)An increase in the demand for bagels.
D)A decrease in the demand for bagels.

Question 27

If there are only two airlines that fly between Dallas and New Orleans,what will happen in the market for one airline if the other one goes out of business?

A)The demand curve will shift to the right.
B)The demand curve will shift to the left.
C)There will be a movement to the right along the initial demand curve.
D)There will be a movement to the left along the initial demand curve.

Question 28

Which of the following is not held constant along a given demand curve for a good?

A)Price.
B)Consumer's income.
C)The price of substitutes.
D)Consumer tastes.

Question 29

Ceteris paribus,which of the following is most likely to cause an increase in the quantity demanded of perfume?

A)A decrease in the price of perfume.
B)A decrease in tastes for perfume.
C)An increase in income.
D)An increase in the price of electricity.

Question 30

A change in demand means there has been a shift in the demand curve,and a change in quantity demanded

A)Results from a change in price of other goods.
B)Means a shortage or surplus will result from holding prices constant.
C)Also means demand has shifted.
D)Means that price has changed and there is movement along the demand curve.

Question 31

Market demand is determined by all of the following except

A)The number of potential sellers.
B)Income.
C)Tastes.
D)Expectations about future income.

Question 32

Assume a series of forest fires reduces the supply of lumber,which is an input in the production of wooden bats.Baseballs and wooden bats are complements.If the price of wooden bats increases,we can expect the

A)Demand for baseballs to decrease.
B)Supply of baseballs to decrease.
C)Demand for baseballs to increase.
D)Supply of baseballs to increase.

Question 33

Ceteris paribus,which of the following would generally cause an increase in the demand curve for new automobiles?

A)A decrease in the price of new automobiles.
B)An increase in consumers' income.
C)The new models being perceived as ugly compared with old models.
D)Consumer expectations that the price of new automobiles will be lower next year.

Question 34

Ceteris paribus means

A)Holding everything constant except for the variables you are interested in examining.
B)Allowing the free market to decide,not government.
C)Changing prices to see how demand or supply shifts.
D)Holding constant the determinant of demand or supply that you are interested in examining.

Question 35

Peanut butter and jelly are complements.A decrease in the price of one will result in

A)A decrease in the demand for the other.
B)A decrease in the quantity demanded of the other.
C)An increase in the demand for the other.
D)An increase in the quantity demanded of the other.

Question 36

To calculate market demand,we

A)Add the quantities demanded for each individual demand schedule horizontally.
B)Add the quantities demanded for each individual demand schedule vertically.
C)Find the average quantity demanded at each price.
D)Find the difference between the quantity demanded and the quantity supplied at each price.

Question 37

A change in the price of a good

A)Causes a shift in the supply curve.
B)Results in a change in quantity supplied.
C)Results in a change in supply.
D)Is a determinant of supply.

Question 38

Which of the following is not held constant along a given supply curve for a good?

A)The cost of factors of production.
B)Price.
C)Technology.
D)Taxes.

Question 39

Ceteris paribus,if the price of a digital camera rises,then we can expect

A)An increase in the demand for digital cameras.
B)An increase in the quantity demanded of digital cameras.
C)A decrease in the demand for digital cameras.
D)A decrease in the quantity demanded of digital cameras.

Question 40

Assume that pencils and pens are substitutes.If the price of pencils rises,then we will see

A)An increase in the demand for pens.
B)A decrease in the demand for pens.
C)An increase in the supply of pens.
D)A decrease in the supply of pens.

Question 41

Ceteris paribus,which of the following is most likely to shift both the demand and the supply curves?

A)Technology.
B)Expectations.
C)The price of the good itself.
D)Income.

Question 42

In most markets,the equilibrium price is achieved

A)Through detailed databases.
B)Using an equilibrium price formula.
C)Through government mandate.
D)Through trial and error.

Question 43

Assume that steel is used to produce monkey wrenches.Ceteris paribus,if the price of steel rises,then

A)The supply curve for monkey wrenches will shift to the left.
B)The supply curve for monkey wrenches will shift to the right.
C)There will be a leftward movement along the initial supply curve for monkey wrenches.
D)There will be a rightward movement along the initial supply curve for monkey wrenches.

Question 44

Ceteris paribus,if the subsidies given to corn syrup producers decrease,then we can expect

A)A decrease in the demand for corn syrup.
B)A decrease in the supply of corn syrup.
C)An increase in the demand for corn syrup.
D)An increase in the supply of corn syrup.

Question 45

The equilibrium price in a market is found where

A)The market supply curve intersects the market demand curve.
B)The market supply curve intersects the y-axis.
C)The market demand curve intersects the y-axis.
D)The market supply curve intersects the x-axis.

Question 46

Ceteris paribus,which of the following is most likely to cause an increase in the quantity supplied of perfume?

A)An improvement in perfume-making technology.
B)An increase in the salaries paid to perfume makers.
C)An increase in the price of perfume.
D)An increase in the number of sellers of perfume.

Question 47

Ceteris paribus,which of the following is most likely to cause a decrease in the supply of skateboards?

A)An increase in the price of skateboards.
B)An increase in the cost of materials used to produce skateboards.
C)An improvement in skateboard-making technology.
D)All of the choices are correct.

Question 48

Which of the following would not cause the market supply of cell phones to change?

A)Telecommunications are deregulated,and anyone who wants to can produce and sell cell phones.
B)A cheaper technology for producing plastics used in producing cell phones is developed.
C)A reduction in the demand for cell phones causes the price to fall.
D)Taxes levied on cell phone production are reduceD.A change in the price of cell phones will cause a movement along the supply curve or a change in the quantity supplied.

Question 49

Which of the following can change without shifting either demand or supply,ceteris paribus?

A)The price of the good itself.
B)The prices of other goods.
C)Incomes.
D)Expectations.

Question 50

To calculate market supply,we

A)Add the quantities supplied for each individual supply schedule horizontally.
B)Add the quantities supplied for each individual supply schedule vertically.
C)Find the average quantity supplied at each price.
D)Find the difference between the quantity supplied and the quantity demanded at each price.

Question 51

Which of the following events would cause a rightward shift in the market supply curve for automobiles?

A)A technological improvement that reduces the cost of production.
B)An increase in the wages of autoworkers.
C)A higher sales tax on automobiles.
D)A decrease in the number of sellers.

Question 52

A shift in supply is defined as a change in

A)Price.
B)Quantity supplied because of a change in price.
C)Equilibrium quantity.
D)Supply because of a change in a nonprice determinant.

Question 53

The law of supply implies that

A)Supply curves are flat.
B)Supply curves are upward-sloping to the right.
C)Supply curves are downward-sloping to the right.
D)A change in a determinant of demand shifts the supply curve.

Question 54

If corn and wheat are alternative pursuits for a farmer,a change in the supply of corn will take place when,ceteris paribus,

A)The price of corn changes.
B)The price of wheat changes.
C)The demand for corn changes.
D)Consumers want to buy more corn at the same price.

Question 55

If there is a shortage at a given price,then

A)That price is the equilibrium price.
B)That price is greater than the equilibrium price.
C)That price is less than the equilibrium price.
D)There is no equilibrium price in the market.

Question 56

If there is a surplus at a given price,then

A)The market is in equilibrium at that price.
B)That price is greater than the equilibrium price.
C)That price is lower than the equilibrium price.
D)The price is zero.

Question 57

A market is said to be in equilibrium when

A)Demand is fully satisfied at all alternative prices.
B)The buying intentions of all consumers are realized.
C)The supply intentions of all sellers are realized.
D)The quantity demanded equals the quantity supplieD.Equilibrium occurs at the intersection of the supply and demand curves.

Question 58

When a surplus exists for a product,

A)Producers increase supply.
B)Consumers increase demand.
C)Government purchases decrease.
D)Producers reduce the level of output and reduce price.

Question 59

The term market mechanism refers to

A)The use of market prices and sales to determine resource allocation.
B)The establishment of a ceiling price in a market.
C)Supply curves but not demand curves.
D)Government laws and regulations concerning how the market should operate.

Question 60

At the equilibrium price,there are

A)Shortages.
B)Surpluses.
C)Excess inventories.
D)No shortages or surpluses.

Question 61

Tickets to a sporting event go on sale and sell out almost instantly.This implies that

A)There are too many tickets to the event.
B)The price for the tickets is below the equilibrium price.
C)The tickets must be very expensive.
D)There is a surplus of tickets.

Question 62

An increase in the equilibrium price of electricity can be caused by

A)An increase in the supply of electricity.
B)An increase in the demand for electricity.
C)A decrease in the demand for electricity.
D)An increase in the quantity demanded of electricity.

Question 63

As a result of a shortage,

A)Consumers increase demand for the product.
B)Producers reduce supply.
C)Producers increase output and raise price.
D)Government purchases decrease.

Question 64

Assume milk is used to produce ice cream.Ceteris paribus,a decrease in the price of milk will cause the equilibrium price of ice cream to

A)Increase and the equilibrium quantity of ice cream to increase.
B)Increase and the equilibrium quantity of ice cream to decrease.
C)Decrease and the equilibrium quantity of ice cream to increase.
D)Decrease and the equilibrium quantity of ice cream to decrease.

Question 65

A rightward shift of the market demand curve for MP3 players,ceteris paribus,causes equilibrium

A)Price to increase and equilibrium quantity to decrease.
B)Price to decrease and equilibrium quantity to decrease.
C)Price to increase and equilibrium quantity to increase.
D)Price to decrease and equilibrium quantity to increase.

Question 66

Suppose both the demand for and supply of salsa increase (although not necessarily by the same amount).What can we conclude about changes in the price and quantity of salsa?

A)Both the price and quantity increase.
B)The price increases but the change in the quantity cannot be determined.
C)The quantity increases but the change in the price cannot be determined.
D)Both the price and quantity decrease.

Question 67

A market shortage is

A)The amount by which the quantity demanded exceeds the quantity supplied at a given price.
B)The result of a price floor.
C)A situation in which producers cannot sell all the goods and services that they are willing and otherwise able to sell.
D)The amount by which the cost of production exceeds the price of a gooD.A market shortage is the excess of quantity demanded over quantity supplied.

Question 68

A ballet performance had many empty seats.This implies that the

A)Hall where the performance was being held was very large.
B)Price of the tickets must have been very low because of the low demand.
C)Ballet group was not very well known.
D)Price of the tickets must have been above the equilibrium price.

Question 69

A leftward shift of the market demand curve for HDTVs,ceteris paribus,causes equilibrium price to

A)Increase and quantity to decrease.
B)Decrease and quantity to decrease.
C)Increase and quantity to increase.
D)Decrease and quantity to increase.

Question 70

Ceteris paribus,an increase in the number of sellers of running shoes causes equilibrium price to

A)Decrease and equilibrium quantity to increase.
B)Decrease and equilibrium quantity to decrease.
C)Increase and equilibrium quantity to increase.
D)Increase and equilibrium quantity to decrease.

Question 71

If the quantity demanded of a good is greater than the quantity supplied of the good at the current price,then

A)Price will increase until it reaches the equilibrium price.
B)The demand curve will shift to the left to create equilibrium.
C)The supply curve will shift to the right to create equilibrium.
D)There is a surplus of the gooD.If a shortage exists,buyers will compete for goods by offering to pay higher prices.

Question 72

When the demand for coffee increases,ceteris paribus,the equilibrium price will also increase because

A)A shortage exists at the old equilibrium price.
B)There must be a surplus of the good.
C)The market supply and demand curves do not intersect.
D)Market demand must be upward-sloping.

Question 73

An increase in the supply of gasoline,ceteris paribus,will cause equilibrium price

A)To rise and equilibrium quantity to fall.
B)To fall and equilibrium quantity to rise.
C)And equilibrium quantity to rise.
D)And equilibrium quantity to fall.

Question 74

A rightward shift in a demand curve and a rightward shift in a supply curve both result in a

A)Lower equilibrium price.
B)Lower equilibrium quantity.
C)Higher equilibrium price.
D)Higher equilibrium quantity.

Question 75

A decrease in the price of electricity can best be explained by

A)A decrease in the population.
B)Abnormally cold winters and hot summers.
C)The increased use of electronic devices such as computers.
D)A growing economy.

Question 76

Assume peanut butter and jelly are complements.Ceteris paribus,an increase in the price of peanut butter will cause the equilibrium price of jelly to

A)Increase and the equilibrium quantity of jelly to decrease.
B)Increase and the equilibrium quantity of jelly to increase.
C)Decrease and the equilibrium quantity of jelly to decrease.
D)Decrease and the equilibrium quantity of jelly to increase.

Question 77

A rightward shift in a demand curve and a leftward shift in a supply curve both result in a

A)Lower equilibrium price.
B)Lower equilibrium quantity.
C)Higher equilibrium price.
D)Higher equilibrium quantity.

Question 78

In 2007 a company sold 35,000 MP3 players at $150 each.In 2008 the same company sold 40,000 MP3 players at $170 each.This information suggests that

A)The supply of MP3 players increased from 2007 to 2008.
B)The demand for MP3 players increased from 2007 to 2008.
C)The price of MP3 players increased because the costs of production increased from 2007 to 2008.
D)From 2007 to 2008,the demand curve for MP3 players was upward-sloping because of improved technology.

Question 79

Assume two goods are substitutes.Ceteris paribus,a decrease in the price of one good will cause the equilibrium price of the other good to

A)Increase and the equilibrium quantity of the other good to increase.
B)Increase and the equilibrium quantity of the other good to decrease.
C)Decrease and the equilibrium quantity of the other good to increase.
D)Decrease and the equilibrium quantity of the other good to decrease.

Question 80

Suppose there are a series of forest fires that affect the lumber industry while,at the same time,consumers demand more wooden furniture.The wooden furniture market would experience

A)An increase in price and an indeterminate change in quantity.
B)An increase in price and an increase in quantity.
C)An increase in quantity and an indeterminate change in price.
D)A decrease in price and an indeterminate change in quantity.