Deck 3: Demand and Supply: An Elaboration

Question 1

Refer to the above graph to answer this question.What will be the result if the producer prices this product at $80?

A)The producer will sell 20 units.
B)The producer will sell 70 units.
C)There will be a surplus of 70 units.
D)There will be a shortage of 40 units.
E)None of the choices are correct.

Answer 1

The producer will sell 20 units.

Question 2

The following data shows the market for soccer balls:

Refer to the above information to answer this question.Assume that initially the market is in equilibrium,and the demand increases by 10 units while the supply increases by 40 units.What will be the new equilibrium price and quantity?

A)$10 and 110.
B)$30 and 100.
C)$40 and 120.
D)$50 and 50.
E)$60 and 110.

Answer 2

$30 and 100.

Question 3

Under what circumstances can an illegal market exist?

A)When the price of a product is above equilibrium.
B)Whenever supply exceeds demand.
C)When a price ceiling is imposed.
D)When a price floor is imposed.

Answer 3

When a price ceiling is imposed.

Question 4

Refer to the above graph to answer this question.What will be the result in the market if the price is set at $70?

A)There will be a shortage of 20 units.
B)There will be a shortage of 40 units.
C)There will be a surplus of 30 units.
D)There will be a surplus of 40 units.
E)None of the choices are correct.

Question 5

Refer to the above graph to answer this question.If the demand were to decrease by 200 units and the supply were to increase by 100 units,what would be the resulting equilibrium price and quantity?

A)$50 and 600.
B)$55 and 425.
C)$60 and 500.
D)$70 and 400.
E)$70 and 500.

Question 6

Refer to the above graph to answer this question.What will be the result if the producer prices this product at $7,000.

A)She will sell 80 units.
B)She will sell 140 units.
C)There will be a surplus of 80 units.
D)There will be a shortage of 80 units.
E)It would be underpriced.

Question 7

The following data shows the market for soccer balls:

Refer to the above information to answer this question.Assume that initially the market is in equilibrium,and the demand increases by 20 units while the supply decreases by 10 units.What will be the new equilibrium price and quantity?

A)$30 and 70.
B)$30 and 90.
C)$40 and 90.
D)$50 and 90.
E)$60 and 100.

Question 8

Rent control is an example of _____.

A)an illegal market.
B)a price ceiling.
C)rationing.
D)a price floor.

Question 9

Refer to the above graph to answer this question.What is true about the possible surpluses and shortages in this market if the price is set at $40?

A)There will be a shortage of 20 units.
B)There will be a shortage of 40 units.
C)There will be a surplus of 20 units.
D)There will be a surplus of 50 units.
E)None of the choices are correct.

Question 10

In the short term,how does competitive housing real-estate market react during a natural disaster?

A)The price increases,causing the quantity demanded to increase and the quantity supplied to decrease.
B)The price increases,causing the quantity demanded to decrease and the quantity supplied to increase.
C)The price increases,causing the quantity demanded to increase and the quantity supplied to increase.
D)The price decreases,causing the quantity demanded to increase and the quantity supplied to decrease.
E)The price decreases,causing the quantity demanded to decrease and the quantity supplied to increase.

Question 11

What is a price control?

A)The price of a product which is set by the government.
B)A government regulation stipulating the maximum price which can be charged for a product.
C)A government regulation to set either a maximum or minimum price for a product.
D)A government regulation stipulating the minimum price which can be charged for a product.

Question 12

Refer to the above graph to answer this question.If the demand were to increase by 500 units and the supply were to increase by 200 units,what would be the resulting equilibrium price and quantity?

A)$60 and 1,300.
B)$70 and 900.
C)$70 and 1,300.
D)$80 and 900.
E)$70 and 1,000.

Question 13

Refer to the above graph to answer this question.If the demand and supply were both to increase by 200 units,what would be the resulting equilibrium price and quantity?

A)$60 and 700.
B)$60 and 800.
C)$60 and 1,000.
D)$70 and 700.
E)$70 and 800.

Question 14

If an increase in the demand for a product is greater than the increase in the supply,what will be the immediate result?

A)A surplus.
B)A shortage.
C)The price will fall.
D)Cannot be determined.

Question 15

The following data shows the market for soccer balls:

Refer to the above information to answer this question.Assume that initially the market is in equilibrium and the demand and supply both increase by 20 units.What will be the new equilibrium price and quantity?

A)$30 and 50.
B)$40 and 100.
C)$50 and 80.
D)$50 and 100.
E)$60 and 100.

Question 16

Refer to the above graph to answer this question.What is true about the possible surpluses and shortages in this market if the price is $1,000 above equilibrium?

A)There will be a shortage of 20.
B)There will be a shortage of 40.
C)There will be a surplus of 20.
D)There will be a surplus of 40.
E)Cannot be determined.

Question 17

A minimum wage an example of ______.

A)an illegal market.
B)a price ceiling.
C)rationing.
D)a price floor.

Question 18

What is a price ceiling?

A)A government regulation to set either a maximum or minimum price for a product.
B)A method of allocation where producers determine the price of a product.
C)A government regulation stipulating the maximum price which can be charged for a product.
D)An agreement between firms stipulating the maximum price that they will sell a product for.

Question 19

Refer to the above graph to answer this question.What is true about the possible surpluses and shortages in this market if the price is $1,000 below equilibrium?

A)There will be a shortage of 20.
B)There will be a shortage of 40.
C)There will be a surplus of 20.
D)There will be a surplus of 40.
E)Cannot be determined.

Question 20

If the increase in the supply of a product is greater than the increase in the demand,what will be the immediate result?

A)A surplus.
B)A shortage.
C)The price will increase.
D)Cannot be determined.

Question 21

Refer to the graph above to answer this question.If the government imposes an effective price ceiling of $4,what will be the new price and quantity in the market?

A)$5 and 30 units
B)$4 and 30 units
C)$6 and 35 units
D)$6 and 40 units

Question 22

Refer to the graph above to answer this question.What is the effect of a price ceiling of $6?

A)A shortage of 5 units.
B)A shortage of 10 units.
C)A surplus of 5 units.
D)A surplus of 20 units.
E)None of the choices are correct.

Question 23

What is meant by rationing?

A)A method of product allocation in which producers decide which customers obtain a product.
B)A method of product allocation in which customers receive quantities according to the amounts which they are prepared to pay.
C)A method of product allocation in which the government buys all of a product and directly distributes it to the public.
D)A method of product allocation by the issuance of coupons by the government guaranteeing a certain quantity per family.

Question 24

Refer to the graph above to answer this question.What is the effect of a price ceiling of $4?

A)A shortage of 5 units.
B)A shortage of 10 units.
C)A surplus of 5 units.
D)A surplus of 10 units.

Question 25

Price floors are often introduced in agricultural markets for which of the following reasons?

A)In order to decrease the price of the product abroad below the cost of production.
B)To decrease sale price.
C)To stop collusion between firms.
D)To support farmers.

Question 26

What can we conclude if consumers are forced to wait in long line-ups in order to purchase products such as food and fuel?

A)That the price of these items is at equilibrium.
B)That price is operating effectively as a rationing mechanism.
C)That producers are producing more than people want.
D)Producers would be willing to produce more if price were allowed to rise.

Question 27

What is a price floor?

A)A government regulation to set either a maximum or minimum price for a product.
B)A method of allocation where producers determine the price of a product.
C)A government regulation stipulating the maximum price which can be charged for a product.
D)An agreement between firms stipulating the maximum price that they will sell a product for.
E)A government regulation stipulating the minimum price which can be charged for a product.

Question 28

All of the following,except one,describes a minimum wage.Which is the exception?

A)A government regulation stipulating the minimum price must be paid to the factor labour.
B)A government regulation stipulating the lowest rate of pay per hour for workers.
C)A type of price floor.
D)A type of price ceiling.

Question 29

What is the term for a market where products are bought and sold at a price above the price ceiling?

A)Producers' preference.
B)Rationing.
C)Illegal market.
D)Dumping.

Question 30

Refer to the graph above to answer this question.What is the illegal price if a quantity of 25 only is available?

A)$5.
B)$6.
C)$7.
D)$8.
E)$9.

Question 31

All of the following except one are examples of price floors.Which is the exception?

A)Minimum wage legislation.
B)Rent controls.
C)Agricultural price supports.
D)A government decree that a country's currency cannot be sold below a certain value.

Question 32

What is the term for an allocation system where sellers are allowed to determine the method of allocation on the basis of their own preferences?

A)Illegal market.
B)Rationing.
C)Dumping.
D)Producers' preference.

Question 33

What is the term for the sale of a product abroad for a lower price than is being charged in the domestic market?

A)Price control.
B)Producers' preference.
C)Dumping.
D)Subsidy.

Question 34

Refer to the graph above to answer this question.What must be true if the quantity currently being purchased is 25?

A)There is a price ceiling of $3.
B)There is a price floor of $3.
C)Equilibrium price is $3.
D)Consumers would like to buy 10 more units at a price of $3.

Question 35

All of following except one are possible methods of allocation.Which is the exception?

A)The market.
B)First come,first served.
C)Consumers' preferences.
D)Producers' preferences.
E)Rationing.

Question 36

What is meant by an illegal market?

A)An allocation system where sellers are allowed to determine the method of allocation on the basis of their own preferences.
B)A market where products are bought and sold at a price above a government imposed price ceiling.
C)The effect which a price change has on real income and therefore on the quantity demanded of a product.
D)A mechanism to bring buyers and sellers together.

Question 37

Which of the following statements is true about rent controls?

A)It makes more apartments available for people.
B)It can often cause a surplus of apartments.
C)It leads to a more equitable distribution of apartments.
D)It encourages increased investment in apartments.
E)It leads to a shortage of apartments.

Question 38

What is meant by dumping?

A)The destruction of surplus production by the producers.
B)The destruction of surplus production by the government.
C)The sale of a product abroad for a lower price than is being charged in the domestic market.
D)The sale of a product at a price above a price ceiling.

Question 39

What is meant by producers' preference?

A)The effect which a price change has on real income and therefore on the quantity demanded of a product.
B)An allocation system where sellers are allowed to determine the method of allocation on the basis of their own preferences.
C)The preference which a government shows to certain producers through the introduction of price floors.
D)A government regulation stipulating the maximum price which can be charged for a product.

Question 40

What do economists mean when they speak of price as a rationing mechanism?

A)That all goods produced will be sold.
B)Consumers get the products they want at prices they can afford.
C)That shortages of goods in the market price will disappear as a result of price rising which results in the quantity demanded increasing and the quantity supplied decreasing.
D)That shortages of goods in the market price will disappear as a result of price rising which results in the quantity demanded decreasing and the quantity supplied increasing.

Question 41

Refer to the graph above to answer this question.What would be the result if an effective price floor is set which is $2 different from the equilibrium price?

A)The price would be above equilibrium and a surplus of 60 would be produced.
B)The price would be below equilibrium and a shortage of 60 would be produced.
C)The price would be above equilibrium and a shortage of 60 would be produced.
D)The price would be below equilibrium and a surplus of 60 would be produced.

Question 42

The data shows the demand and supply for wheat:
quantity of bushels per year (in million)

Refer to the information above to answer this question.What would happen if the government were to establish a price floor of $16 per bushel of wheat?

A)The price floor would stay at $16 and there would be no surplus in the market.
B)The equilibrium price would rise to $16 and there would be shortage in the market.
C)The quantity demanded would increase to 15 million bushels.
D)There would be a surplus of 10 million bushels of wheat.
E)The wheat buyers would have difficulty finding sufficient wheat in the market.

Question 43

The data shows the demand and supply for wheat:
quantity of bushels per year (in million)

Refer to the information above to answer this question.What would be the cost to the government to support a price floor of $16 per bushel of wheat?

A)The cost would be $160 million to the government since it has to purchase the surplus wheat.
B)The cost would be zero to the government since the farmers are producing the wheat.
C)The cost would be zero to the government since the market will purchase the surplus wheat.
D)The cost would be $240 million to the government since the farmers receive this amount from the sales of the wheat in the market.
E)The cost would be $400 million to the government since it has to purchase all the wheat produced by the farmers.

Question 44

Refer to the graph above to answer this question.What would be the result if an effective price floor is set which is $2 different from the equilibrium price and demand increased by 30?

A)The price would be above equilibrium and a surplus of 30 would be produced.
B)The price would be below equilibrium and a shortage of 30 would be produced.
C)The price would be above equilibrium and a shortage of 30 would be produced.
D)The price would be below equilibrium and a surplus of 30 would be produced.

Question 45

Refer to the graph above to answer this question.What would be the effect of a price floor set $20 below the equilibrium price?

A)A surplus of 100 units
B)A shortage of 100 units
C)200 units would be sold
D)There would be neither a surplus nor a shortage
E)300 units would be sold

Question 46

The data shows the market for daycare workers in a particular city:
(quantity of workers in hundreds)

Refer to the information above to answer this question.What would happen if the government were to establish a minimum wage of $6.50 an hour?

A)The wage would stay at $6 and there would be no unemployment.
B)The equilibrium wage would rise to $6.50 and there would be no unemployment.
C)The number employed would increase by 100.
D)There would be 200 daycare workers unemployed.
E)The daycare centres would have difficulty finding sufficient workers.

Question 47

The data shows the demand and supply for sugar:
quantity of kilograms (in thousand per week)

Refer to the information above to answer this question.What would happen if the government were to establish an effective price floor of $3 per kilogram of sugar?

A)There would be a shortage of 40,000 kilograms of sugar in the market.
B)There would be a surplus of 40,000 kilograms of sugar in the market.
C)The farmers could sell only 40,000 kilograms of sugar in the market.
D)The market would be in equilibrium selling 50,000 kilograms of sugar in the market.
E)The farmers would sell all 70,000 kilograms of sugar in the market.

Question 48

Refer to the graph above to answer this question.What would be the effect of a price ceiling set $20 above the equilibrium price?

A)A surplus of 100 units.
B)A shortage of 100 units.
C)200 units would be sold.
D)300 units would be sold.
E)There would be neither a surplus nor a shortage.

Question 49

Refer to the graph above to answer this question.What would be the effect of a price floor set $20 above the equilibrium price?

A)A surplus of 100 units.
B)A shortage of 100 units.
C)A surplus of 50 units.
D)There would be neither a surplus nor a shortage.
E)The product would be overpriced.

Question 50

Refer to the graph above to answer this question.What would be the effect of a price ceiling set $20 below the equilibrium price?

A)A surplus of 100 units.
B)A shortage of 100 units.
C)300 units would be sold.
D)There would be neither a surplus nor a shortage.
E)The product would be overpriced.

Question 51

The data shows the demand and supply for sugar:
quantity of kilograms (in thousand per week)

Refer to the information above to answer this question.How many kilograms of sugar would be sold in the market if the government's price floor is set at $3 per kilogram?

A)30,000 kilograms.
B)40,000 kilograms.
C)50,000 kilograms.
D)60,000 kilograms.
E)70,000 kilograms.

Question 52

The data shows the demand and supply for wheat:
quantity of bushels per year (in million)

Refer to the information above to answer this question.What are the implications if the wheat market is in equilibrium?

A)The market price would be $10 per bushel and there would be a shortage of 20 bushels of wheat.
B)The market price would be $12 per bushel and there would be a shortage of 10 bushels of wheat.
C)The market price would be $14 per bushel and 20 bushels of wheat would be demanded.
D)The market price would be $16 per bushel and there would be a surplus of 10 bushels of wheat.
E)The market price would be $18 per bushel and there would be a surplus of 20 bushels of wheat.

Question 53

Refer to the graph above to answer this question.Suppose that the government imposes a price ceiling of $80 and subsequently demand decreases by 100.What would be the result?

A)Price would fall to $60.
B)There would be a surplus of 100 units.
C)There would be a shortage of 100 units.
D)There would be neither a surplus nor a shortage.
E)250 units would be sold.

Question 54

Refer to the graph above to answer this question.If the government imposes a price ceiling of $7,what will be the new price and quantity in the market?

A)$6 and 40
B)$6 and 30
C)$4 and 30
D)$5 and 35

Question 55

The data shows the market for daycare workers in a particular city:
(quantity of workers in hundreds)

Refer to the information above to answer this question.Suppose that after the imposition of a minimum wage of $6.50,a number of new daycare centres opened up increasing the demand for workers by 400.In what way would this market be affected?

A)The wage would increase to $7 and there would be no unemployment.
B)The wage would remain at $6.50 but there would now be no unemployment.
C)The wage would remain at $6.50 and there would now be 200 unemployed daycare workers.
D)The wage would remain at $6.50 and there would now be 200 vacancies.
E)The wage would drop to $5 and there would be no unemployment.

Question 56

The data shows the market for daycare workers in a particular city:
(quantity of workers in hundreds)

Refer to the information above to answer this question.What are the implications if this market is in equilibrium?

A)The wage rate would be $5 an hour and there would be 400 unemployed daycare workers.
B)The wage rate would be $5.50 an hour and there would be 200 unemployed daycare workers.
C)The wage rate would be $6 an hour and there would be no unemployed daycare workers.
D)The wage rate would be $6.50 an hour and there would be 200 unemployed daycare workers.
E)The wage rate would be $5 an hour and there would be 1,300 unemployed daycare workers.

Question 57

Refer to the graph above to answer this question.What would be the result if an effective price ceiling is set which is $2 different from the equilibrium price?

A)The price would be above equilibrium and a surplus of 60 would be produced.
B)The price would be below equilibrium and a shortage of 60 would be produced.
C)The price would be above equilibrium and a shortage of 60 would be produced.
D)The price would be below equilibrium and a surplus of 60 would be produced.

Question 58

The data shows the demand and supply for wheat:
quantity of bushels per year (in million)

Refer to the information above to answer this question.What would be the farmers' revenue from the sale of the wheat in the market if the price floor is $16 per bushel of wheat?

A)The farmers' revenue would be $160 million.
B)The farmers' revenue would be $240 million.
C)The farmers' revenue would be $400 million.
D)The farmers' revenue would be $16 million.
E)The farmers' revenue would be $10 million.

Question 59

Refer to the graph above to answer this question.If the government imposes an effective price ceiling of $4,what will be the illegal market price and quantity traded in the market?

A)$5 and 30 units.
B)$6 and 30 units.
C)$6 and 35 units.
D)$6 and 40 units.

Question 60

Refer to the graph above to answer this question.What would be the result if an effective price ceiling is set which is $2 different from the equilibrium price and demand increased by 30?

A)The price would be above equilibrium and a surplus of 90 would be produced.
B)The price would be below equilibrium and a shortage of 90 would be produced.
C)The price would be above equilibrium and a shortage of 90 would be produced.
D)The price would be below equilibrium and a surplus of 90 would be produced.

Question 61

Refer to the graph above to answer this question.What is the result if the government establishes minimum wage of $7 in this market?

A)Firms would employ 22,000 workers.
B)There would be a shortage of 3,000 workers.
C)1,000 of the employed workers would be prepared to work for $1 an hour less.
D)There would be 3,000 unemployed workers.
E)19,000 workers would be willing and able to work.

Question 62

Below is the hypothetical demand for water in a particular country (price per 50 liters):

Refer to the above information to answer this question.Suppose that the present supply of 200 is cut by 80.What effect will this have on the price?

A)The price will fall by $1.
B)The price will fall by $2.
C)The price will increase by $1.
D)The price will increase by $2.
E)Cannot be determined.

Question 63

What will happen if both the demand for and supply of a product increase simultaneously?

A)The effect on the quantity traded is indeterminate.
B)The quantity traded will increase.
C)The quantity traded will decrease.
D)The price will rise.

Question 64

A minimum wage is an example of a:

A)Price floor.
B)Price ceiling.
C)A market in equilibrium.
D)Producers' preference.

Question 65

Refer to the graph above to answer this question.Suppose that the government imposes a price floor of $120 and subsequently demand increases by 200.What would be the result?

A)Price would increase to $140.
B)There would be a surplus of 200 units.
C)There would be a shortage of 100 units.
D)There would be a shortage of 200 units.
E)The product would be underpriced.

Question 66

Refer to the graph above to answer this question.Suppose that the government imposes a price floor of $6.What will be the cost to the government of purchasing any surplus?

A)0.
B)$6.
C)$90.
D)$150.

Question 67

What will happen if both the demand for and the supply of a product decrease simultaneously?

A)The effect on the quantity traded is indeterminate.
B)The quantity traded will increase.
C)The quantity traded will decrease.
D)The price will fall.

Question 68

Below is the hypothetical demand for water in a particular country (price per 50 liters):

Refer to the above information to answer this question.Suppose that the present supply of 120 is cut by 80.What effect will this have on the price?

A)The price will fall by $2.
B)The price will fall by $3.
C)The price will increase by $2.
D)The price will increase by $3.
E)Cannot be determined.

Question 69

Refer to the graph above to answer this question.What would be the price if the government imposes a quota of 250 units in this market?

A)$20.
B)$25.
C)$30.
D)$35.
E)Cannot be determined.

Question 70

What will happen if both the demand for and supply of a product decrease simultaneously?

A)The effect on the price is indeterminate.
B)The price will increase.
C)The price will decrease.
D)The effect on quantity traded is indeterminate.

Question 71

Refer to the graph above to answer this question.What would be the result if the government imposes a quota of 250 units in this market?

A)There would be a shortage of 100 units.
B)There would be a shortage of 150 units.
C)There would be a shortage of 200 units.
D)There would be a shortage of 300 units.
E)There would be no shortage.

Question 72

The following table shows the demand for,and supply of,soya milk in a particular market (the quantities are in thousands of liters per day):

Refer to the above information to answer this question.Suppose that the government introduces an effective price ceiling which is 20 cents different from the equilibrium price.What will be the result?

A)A surplus of 6.
B)A surplus of 12.
C)A surplus of 18.
D)A shortage of 12.
E)140 would be purchased.

Question 73

Rent control is an example of a:

A)Price floor.
B)Price ceiling.
C)A market in equilibrium.
D)Producers' preference.

Question 74

Refer to the graph above to answer this question.What is the result if the government establishes a minimum wage of $5 in this market?

A)There would be 2,000 unemployed workers.
B)There would be 3,000 unemployed workers.
C)Firms would employ 18,000 workers.
D)Firms would employ 21,000 workers.
E)It would have no effect on the market.

Question 75

Refer to the graph above to answer this question.If this market is in equilibrium what is the total sales revenue of producers?

A)$4.
B)$40.
C)$120.
D)Cannot be determined.

Question 76

Refer to the graph above to answer this question.How many workers would be prepared to work for $5 an hour or less?

A)2,500.
B)18,000.
C)20,000.
D)21,000.
E)Cannot be determined.

Question 77

The following table shows the demand for,and supply of,soya milk in a particular market (the quantities are in thousands of liters per day):

Refer to the above information to answer this question.Suppose that the government introduces an effective price ceiling which is 20 cents different from the equilibrium price and as a result an illegal market develops.What will be the illegal market price?

A)$2.10.
B)$2.20.
C)$2.30.
D)$2.40.
E)Cannot be determined.

Question 78

What will happen if both the demand for and supply of a product increase simultaneously?

A)The effect on the price is indeterminate.
B)The price will increase.
C)The price will decrease.
D)The effect on quantity traded is indeterminate.

Question 79

Refer to the graph above to answer this question.Suppose that the government imposes a price floor of $6.What quantity will the government have to buy?

A)0.
B)15.
C)25.
D)40.

Question 80

All of the following,except one,are examples of price ceilings.Which is the exception?

A)Minimum-wage legislation.
B)Rent controls.
C)Wartime price controls on the price of consumer necessities.
D)A freeze on credit card interest rates.