Deck 3: Supply and Demand

Question 1

In the market economy,the primary channel through which buyers and sellers communicate with each other is:

A) advertising.
B) price.
C) involuntary signaling.
D) subliminal signaling.

Answer 1

price.

Question 2

Another name for the "market economy" is:

A) the law of demand.
B) the law of supply
C) comparative advantage.
D) the price system.

Answer 2

the price system.

Question 3

During the recent recession,consumer spending on dogs and cats:

A) fell because national income declined.
B) fell even though national income increased.
C) rose because national income increased.
D) rose even though national income declined.

Answer 3

rose even though national income declined.

Question 4

The market economy is often called the price system because:

A) prices are often not known until after the transaction is completed.
B) prices provide information for both buyers and sellers.
C) by law,all prices much be publicized.
D) prices become less important over time.

Question 5

Sales of luxury consumer products for cats and dogs,such as pet spas and hotels,have experienced:

A) a large decline over the past decade.
B) a modest decline over the past decade.
C) little change over the past decade.
D) a large increase over the past decade.

Question 6

Which of the following would NOT be a market transaction?

A) payment for purchase of shares at a stock exchange
B) payment for a used book purchased on eBay
C) payment for a soft drink at a vending machine
D) payment made to a disaster victim

Question 7

Prices typically contain useful information:

A) both for buyers and for sellers.
B) more for buyers than for sellers.
C) more for sellers than for buyers.
D) neither for buyers nor for sellers.

Question 8

Prices help consumers decide all of the following,EXCEPT:

A) how much of a product to purchase.
B) how much of a product to produce.
C) how much of a product to substitute for another.
D) whether to buy a certain product.

Question 9

An institution that enables buyers and sellers to interact and transact with one another is known as a(n):

A) bank.
B) economy.
C) stock exchange.
D) market.

Question 10

Which of the following is TRUE about markets?

A) They only contain legal activity conducted by incorporated business.
B) They can contain legal or illegal activity conducted by incorporated business.
C) They can contain legal activity conducted by any individual or business.
D) They can contain legal or illegal activity conducted by any individual or business.

Question 11

Suppose that an artist prices his painting at $150,but it remains unsold.We can conclude that the price of $150 is too:

A) high for this painting and it should be lowered.
B) high for this painting but it should not be lowered.
C) low for this painting and it should be raised.
D) low for this painting but it should not be raised.

Question 12

In any given market,_____ is determined by "what the market will bear."

A) quantity
B) price
C) quality
D) None of these are determined by "what the market will bear."

Question 13

Markets differ in:

A) geographical location.
B) products offered.
C) size.
D) Markets differ in all of these.

Question 14

Which of the following is NOT an example of a market?

A) neighborhood lemonade stand
B) painting one's house
C) ticket scalping
D) New York Stock Exchange

Question 15

Which of the following is NOT correct about markets?

A) They enable buyers and sellers to conduct transactions with one another.
B) They require a physical location for transactions to take place.
C) They use prices to communicate between buyers and sellers.
D) They can exist for single goods as well as for multiple products.

Question 16

A market exists when:

A) an absolute advantage is achieved by one country.
B) people exchange money for goods and services.
C) the cost of production is equated to price by a government agency.
D) a physical location is created to facilitate the exchange of personal information about consumer choices.

Question 17

In a market based economy,scarce resources are allocated by:

A) political power.
B) first come,first served.
C) the price system.
D) cooperative efforts to determine relative need.

Question 18

Institutions that bring buyers and sellers together so they can interact and transact with each other are called:

A) networking sites.
B) interactive modes.
C) markets.
D) arenas.

Question 19

Uvaldo is deciding which brand of energy drink to buy.According to market economics,he would benefit MOST from basing his decision on which brand has the:

A) most value relative to its price.
B) most attractive packaging.
C) most innovative marketing campaign.
D) most availability in his local market.

Question 20

Prices:

A) allow sellers to determine what goods to sell.
B) help buyers find possible substitute goods.
C) contain information useful for all people involved in a transaction.
D) allow sellers to determine what goods to sell,help buyers find possible substitute goods,and contain information useful for all people involved in a transaction.

Question 21

According to the law of demand,people buy more of a good when:

A) their income rises.
B) the price rises.
C) the relative price rises.
D) the price falls.

Question 22

A demand schedule is:

A) a shopping list.
B) a list of prices and the quantities demanded at those prices.
C) the quantity a person actually purchases.
D) a list of prices and incomes.

Question 23

An individual's valuation of a good or service is:

A) generally the same from person to person.
B) known as "willingness to pay."
C) impossible for individuals to express.
D) lower than the maximum that the individual will pay.

Question 24

Willingness-to-pay is the:

A) price a consumer pays for a good or service.
B) price that all the consumers in a market pay for a good or service.
C) highest value that a consumer believes a good or service is worth.
D) highest value that a producer believes consumers will pay for his product.

Question 25

Individuals' willingness to pay for umbrellas is MOST likely _____ on a _____ day.

A) higher;rainy
B) higher;sunny
C) lower;cloudy
D) lower;rainy

Question 26

A market demand curve:

A) is easy to create.
B) shows the minimum amount of goods that a person is willing to buy.
C) can be estimated with statistical techniques.
D) is of no use to economists,who are concerned only with individual preferences.

Question 27

Demand refers to:

A) consumers wanting a product so much that they insist on it.
B) the goods and services buyers are willing and able to purchase at various prices in a given period of time.
C) the amount consumers wish they could consume.
D) the relationship between price and quantity that sellers bring to the market.

Question 28

A market demand curve:

A) reflects a positive relationship between price and quantity.
B) is the horizontal summation of individual demands.
C) reflects society's changing tastes and preferences.
D) is of no use to economists,who are concerned only with individual preferences.

Question 29

Whenever you construct a demand curve,which of the following statements is TRUE?

A) The price of all other goods must be held constant.
B) Income must be allowed to change.
C) The price of the good itself must be held constant.
D) Tastes and preferences are variable.

Question 30

The equation for the demand curve for bags of Doritos is P = 6 + (-1)× Q.Which of the following is the correct demand curve?

A)

B)

C)

Question 31

On a demand curve:

A) price is on the vertical axis and the number of buyers is on the horizontal axis.
B) price is on the horizontal axis and quantity demanded is on the vertical axis.
C) determinants of demand are on the horizontal axis and price is on the vertical axis.
D) price is on the vertical axis and quantity demanded is on the horizontal axis.

Question 32

Which of the following illustrates the law of demand?

A) Lindsay offers to buy more sticks of chewing gum at $2 than at $1.
B) Lindsay offers to buy more sticks of chewing gum at $1 than at $2.
C) Marcus offers to sell more sticks of chewing gum at $2 than at $1.
D) Marcus offers to sell more sticks of chewing gum at $1 than at $2.

Question 33

There is a(n)_____ relationship between price and quantity demanded.

A) indeterminate
B) positive
C) negative
D) indeterminate,positive,and negative

Question 34

Willingness to pay:

A) is the same from person to person and is the same under varying circumstances.
B) is the same from person to person and differs under varying circumstances.
C) differs from person to person and is the same under varying circumstances.
D) differs from person to person and differs under varying circumstances.

Question 35

In economic markets,what "signals" information between buyers and sellers?

A) the Internet
B) prices
C) transactions
D) stock exchanges

Question 36

The law of demand states that:

A) the lower a product's price,the less of that product consumers will purchase during a given period.
B) the lower a product's price,the more of that product consumers will purchase during a given period.
C) higher prices will lead producers to offer less of their products for sale during a given period.
D) higher prices will lead producers to offer more of their products for sale during a given period.

Question 37

The reason that the law of demand exists is that:

A) specialization leads to an increase in a person's standard of living.
B) people substitute cheaper products for more expensive products.
C) people always follow the law of the land.
D) a higher price never reduces demand enough to lower producer's profits.

Question 38

_____ refers to the goods and services people are willing and able to buy during a certain period of time,at various prices,ceteris paribus.

A) Supply
B) Demand
C) Price
D) Quantity demanded

Question 39

An individual's valuation of a good or service:

A) can be expressed in the marketplace.
B) is generally the same for most people.
C) is known as the "market price."
D) is lower than the maximum that the individual will pay.

Question 40

Luz sells cupcakes.According to market economics,which is the BEST signal that consumers value her product highly?

A) that they readily pay $6 per cupcake
B) the glowing Yelp reviews they often write
C) the line out the door every Sunday morning
D) the many competing companies that imitate her business.

Question 41

A good is a normal good if:

A) normal people buy it when the price goes up.
B) the demand curve shifts out if income goes up.
C) the demand curve shifts back if income goes up.
D) the demand curve shifts only when the GDP changes.

Question 42

If the price the U.S.Post Office charges to deliver Express Mail rises,the demand facing FedEx will rise because its respective services are:

A) substitute goods.
B) complementary goods.
C) inferior goods.
D) luxury goods.

Question 43

If an increase in income leads to an increase in the demand for opera tickets,then opera concerts are a(n):

A) normal good.
B) inferior good.
C) superior good.
D) substitute good.

Question 44

Bus tickets are often considered _____ goods because _____.

A) inferior;as the price of a related good falls,demand for bus tickets increases
B) inferior;as income rises,demand for bus tickets falls
C) substitute;as the price of a related good falls,demand for bus tickets decreases
D) substitute;as income rises,demand for bus tickets falls

Question 45

The demand for gasoline is rising.Which of the following statements describes a possible cause?

A) Consumers expect prices to rise in the near future.
B) Commuters are switching from driving to public transportation.
C) Drivers are purchasing more fuel-efficient cars.
D) Incomes are falling.

Question 46

Use the following to answer questions
Figure: Market for Shoes
(Figure: Market for Shoes)If the price of shoes is $40 per pair,the quantity demanded will be _____ pairs of shoes.

A) 5
B) 10
C) 15
D) 20

Question 47

If the demand for iPhones rises as incomes increase,then the iPhone is a(n):

A) inferior good.
B) abnormal good.
C) supply good.
D) normal good.

Question 48

Use the following to answer questions
Figure: Demand for Shoes
(Figure: Demand for Shoes)A shift to the right of the demand curve could be caused by a(n):

A) decrease in tastes or preferences.
B) increase in income if the good is normal.
C) increase in the price of a complement.
D) decrease in the price of a substitute.

Question 49

Use the following to answer question
Figure: Interpreting Demand Curves
(Figure: Interpreting Demand Curves)In the demand curve shown,an increase in price from $1 to $2 will:

A) cause quantity demanded to rise from 20 to 30 units.
B) cause quantity demanded to fall from 30 to 20 units.
C) have no impact on sales.
D) make buyers mad.

Question 50

Which of the following is an example of an inferior good?

A) gasoline
B) T-bone steak
C) city bus
D) clothing

Question 51

Use the following to answer questions
Figure: Market for Shoes
(Figure: Market for Shoes)If the price of shoes is $60/pair,the _____ will be 10 pairs of shoes.

A) quantity demanded
B) quantity supplied
C) market demand
D) market supply

Question 52

If consumers believe that an item will not be available in the future,then demand will shift:

A) left and the equilibrium quantity will fall.
B) left and the equilibrium quantity will rise.
C) right and the equilibrium quantity will fall.
D) right and the equilibrium quantity will rise.

Question 53

Which of the following should shift the demand curve for gasoline to the right?

A) an increase in national income
B) a decrease in the price of alternative forms of energy
C) an increase in the price of gasoline
D) a decrease in the number of consumers

Question 54

A shift in the demand curve is caused by a change in:

A) the price of the item.
B) the behavior of suppliers.
C) costs of production.
D) one of the determinants of demand.

Question 55

Use the following to answer questions
Figure: Demand for Shoes
(Figure: Demand for Shoes)A shift to the right of the demand curve would be caused by anything,EXCEPT a(n):

A) decrease in the population.
B) increase in income given that shoes are a normal good.
C) decrease in the price of a complement.
D) increase in the price of a substitute.

Question 56

Suppose that summer in a resort town is very rainy.We can expect demand to shift _____ and the equilibrium price for hotels to _____.

A) left;fall
B) left;rise
C) right;fall
D) right;rise

Question 57

If a consumer buys a set of headphones at the same time as she buys an MP3 player,these two products are MOST likely:

A) complementary goods.
B) inferior goods.
C) luxury goods.
D) substitute goods.

Question 58

Use the following to answer questions
Figure: Market for Shoes
(Figure: Market for Shoes)The graph represents:

A) an individual's willingness-to-pay.
B) the price system.
C) the law of supply.
D) the law of demand.

Question 59

When economists refer to a "market demand" curve,we know that it represents:

A) the horizontal summation of individual demand curves.
B) the vertical summation of individual demand curves.
C) the quantity demanded by any individual consumer,multiplied by the number of consumers.
D) It represents none of these.

Question 60

Which pair are MOST likely substitute goods?

A) hot dogs and mustard
B) ramen noodles and water
C) soft drinks and lemonade
D) pizza and chicken wings

Question 61

If the price of gasoline rises,then:

A) the quantity of gasoline demanded rises.
B) there is an upward movement along the demand curve for gasoline.
C) the demand for gas-powered cars rises.
D) the demand for hybrid cars falls.

Question 62

Assume the demand schedule for smart phones is downward sloping.If the price of smart phones increases from $200 to $600:

A) the demand for smart phones will decrease.
B) the demand for smart phones will increase.
C) an increase in quantity demanded of smart phones will occur.
D) a decrease in quantity demanded of smart phones will occur.

Question 63

When demand increases,the demand curve:

A) shifts to the left.
B) does not change.
C) shifts to the right.
D) shifts counter-clockwise.

Question 64

Which of the following will cause an increase in the quantity demanded for iPhones?

A) an increase in the price of iPhones
B) an increase in the number of buyers in the iPhone market
C) an increase in preferences for iPhones
D) a decrease in the price of iPhones

Question 65

When a consumer's income level is low,it is MORE likely the consumer will purchase ______ goods.

A) complementary
B) substitute
C) normal
D) inferior

Question 66

Which of the following will NOT cause a change in demand?

A) an increase in the price of a complement
B) a decrease in income
C) a decrease in the price of the good
D) an increase in the number of consumers

Question 67

All of the following cause a shift in the demand curve,EXCEPT:

A) income.
B) expectations.
C) prices of related goods.
D) technology.

Question 68

Which of the following would be considered a complementary good for a kayak?

A) canoe
B) Jet Ski
C) life jacket
D) good weather

Question 69

Use the following to answer question
Figure: Predicting Demand Shifts
(Figure: Predicting Demand Shifts)Which of the following would change demand from D₀ to D₁?

A) increase in consumer income if this is an inferior good
B) change in consumer taste so that consumers want less of the good
C) increase in the price of a substitute good
D) increase in the price of a complement

Question 70

Which of the following would increase demand for a given good?

A) high unemployment,if it is a normal good
B) a reduction in price,if it is a normal good
C) the expectation that the price will increase in the near future
D) an increase in the price of a complementary good

Question 71

Which of the following would cause a decrease in the demand for coffee?

A) an increase in the price of tea (a substitute for coffee)
B) a decrease in the price of tea (a substitute for coffee)
C) an increase in the price of coffee
D) a decrease in the price of coffee

Question 72

Which of the following graphs concerning hamburgers indicates an increase in the quantity demanded of hamburgers?

A)

B)

C)

D)

Question 73

Use the following to answer question
Figure: Interpreting Demand Shifts
(Figure: Interpreting Demand Shifts)The shift in demand from A to B is called a(n):

A) increase in quantity demanded.
B) increase in demand.
C) decrease in quantity demanded.
D) decrease in demand.

Question 74

Suppose that you discover that,ceteris paribus,when the price of tomatoes increases,the demand for bleu cheese decreases.From this you conclude that:

A) tomatoes and blue cheese are substitutes.
B) tomatoes are inferior goods and blue cheese is a normal good.
C) tomatoes and blue cheese are complements.
D) the demand curve for tomatoes has shifted to the left.

Question 75

An increase in the price of ice cream causes the demand for sprinkles to decrease.In this case,ice cream and sprinkles are:

A) substitute goods.
B) independent goods.
C) complementary goods.
D) inferior goods.

Question 76

Other factors held constant,as the price of an iPad rises,the:

A) demand for iPads falls.
B) quantity demanded for iPads falls.
C) demand for iPads rises.
D) quantity demanded for iPads rises.

Question 77

If bagels and doughnuts are substitute goods,then which of the following is likely to occur if the price of bagels is reduced?

A) The demand curve for bagels will shift to the left.
B) There will be a leftward movement along the bagel demand curve.
C) The demand curve for doughnuts will shift to the right.
D) The demand curve for doughnuts will shift to the left.

Question 78

Which of the following is NOT a determinant of demand?

A) history of the product
B) tastes and preferences
C) prices of related goods
D) income

Question 79

An item whose demand rises as people's incomes fall is known as a(n)________ good.

A) inferior
B) complementary
C) superior
D) substitute

Question 80

Use the following to answer question
Figure: Predicting Demand Shifts 2
(Figure: Predicting Demand Shifts 2)What would cause a shift from D₁ to D₂?

A) a decrease in the price of honey
B) a new virus that decimates the bee population
C) a new study that shows that honey cures cancer
D) a decrease in population