Deck 3: Supply and Demand: Theory

Question 1

An increase in the number of buyers in a particular market will result in a

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

Answer 1

rightward shift in the demand curve.

Question 2

At a price of $15 each,Marta buys 4 books per month.When the price increases to $20,Marta buys 3 books per month.Luz says that Marta's demand for books has decreased.Is Luz correct?

A) Yes,Luz is correct.
B) No,Luz is incorrect.Marta's demand has increased.
C) No,Luz is incorrect.Marta's quantity demanded has decreased,but her demand has stayed the same.
D) No,Luz is incorrect.Marta's quantity demanded has increased,but her demand has stayed the same.
E) No,Luz is incorrect.Marta's quantity demanded has decreased and her demand has increased.

Answer 2

No,Luz is incorrect.Marta's quantity demanded has decreased,but her demand has stayed the same.

Question 3

If Max's demand for hot dogs falls as his income rises,then for Max hot dogs are

A) a bad good.
B) an inferior good.
C) a preferential good.
D) a normal good.
E) a neutral good.

Answer 3

an inferior good.

Question 4

Which of the following illustrates the law of demand?

A) Jorge buys fewer pencils at $2 per pencil than at $1 per pencil,ceteris paribus.
B) Chen buys more ice cream at $4 per half-gallon than at $3 per half gallon,ceteris paribus.
C) Karissa buys fewer sweaters at $50 each than at $35 each,ceteris paribus.
D) a,b,and c
E) a and c

Question 5

The law of supply states that price and quantity supplied are

A) inversely related,ceteris paribus.
B) directly related,ceteris paribus.
C) not related.
D) fixed.

Question 6

Resource X is necessary to the production of good Y.If the price of resource X rises,

A) the supply curve of Y shifts leftward.
B) the supply curve of Y shifts rightward.
C) the supply curve of Y is unaffected.
D) there is a movement down the supply curve of Y.
E) there is a movement up the supply curve of Y.

Question 7

As the price of good X rises,the demand for good Y falls.Therefore,goods X and Y are

A) substitutes.
B) normal goods.
C) complements.
D) inferior goods.
E) none of the above

Question 8

"As the price of apples goes up,the demand for apples goes down." The author of this statement

A) implies that price and demand are unrelated.
B) uses the word "demand" when he should use the word "supply."
C) uses the word "demand" when he should use the words "quantity demanded."
D) implies that demand and price have a direct relationship.

Question 9

One major reason for the law of demand is that

A) one price changing requires at least one other price to change in the opposite direction.
B) people substitute relatively lower-priced goods for relatively higher-priced goods.
C) a higher price never reduces quantity demanded by enough to lower total revenue.
D) people are willing to produce more units at a higher price.

Question 10

Tobacco production is one of the more heavily subsidized industries in the United States.Suppose that as a result of intense lobbying from health-related concerns,Congress repeals the tobacco firms' subsidies.Which of the following scenarios would likely occur?

A) The tobacco firms' supply curve would shift rightward,as it would now be cheaper to produce each level of output.
B) The tobacco firms' supply curve would shift leftward,since it would now cost more to produce each level of output.
C) The tobacco firms would not experience any shift in their supply curves;subsidies don't affect output.
D) There would be a movement along the supply curve for tobacco,but the supply curve would not shift.

Question 11

If the workers of a firm successfully negotiate an increase in wages,which of the following is most likely to happen?

A) The demand curve for the product the firm produces shifts rightward.
B) The demand curve for the product the firm produces shifts leftward.
C) The supply curve of the product the firm produces shifts rightward.
D) The supply curve of the product the firm produces shifts leftward.

Question 12

An advance in technology causes

A) a rightward shift in the supply curve.
B) a leftward shift in the supply curve.
C) the supply curve to go from upward sloping to vertical.
D) the supply curve to go from vertical to upward sloping.

Question 13

If the demand curve for a good shifts leftward,

A) quantity demanded is less at each price.
B) quantity demanded remains constant at each price.
C) quantity demanded is greater at each price.
D) demand is greater at each price.

Question 14

Which of the following is true about the relationship between price and quantity supplied?

A) There is always a direct relationship.
B) There is always an inverse relationship.
C) There is usually a direct relationship.
D) There is usually an inverse relationship.

Question 15

As the price of good A rises,the demand for good B rises.Therefore,goods A and B are

A) normal goods.
B) inferior goods.
C) substitutes.
D) complements.
E) none of the above

Question 16

The fundamental reason why most supply curves are upward sloping is that

A) consumers substitute lower-priced goods for higher-priced goods.
B) the quantity supplied increases as more firms enter the market.
C) a higher price never reduces quantity supplied by enough to lower total revenue and so higher production is motivated.
D) higher production raises the opportunity costs of production and so price must rise to induce more output.

Question 17

If people begin to favor science fiction novels to a greater degree than previously,the demand curve for science fiction novels

A) shifts rightward.
B) shifts leftward.
C) stays constant.
D) can shift either rightward or leftward.

Question 18

A demand schedule is a numerical tabulation of

A) prices and quantities supplied.
B) costs and quantities demanded.
C) prices and quantities demanded.
D) incomes and quantities demanded.

Question 19

Suppose the government decides that every family should own its own home.To bring this about,the government decides to subsidize the home-construction industry by giving the home-construction companies $10,000 for every house that they build.As a result of this,

A) the supply curve of new houses would shift leftward,since it now costs $10,000 more for builders to produce a house.
B) the demand curve for new houses would shift rightward,since now every family would want to buy a house.
C) the demand curve for new houses would shift leftward.
D) the supply curve of new houses would shift rightward,since builders would be willing to produce and sell more houses at each given price.
E) c and d

Question 20

The law of demand states that price and quantity demanded are

A) directly related,ceteris paribus.
B) inversely related,ceteris paribus.
C) independent.
D) positively related,ceteris paribus.

Question 21

If demand increases by a lesser amount than supply decreases,then equilibrium price __________ and equilibrium quantity __________.

A) rises;falls
B) falls;falls
C) rises;rises
D) falls;rises

Question 22

If the supply curve and the demand curve for lettuce both shift to the left by an equal amount,what can we say about the resulting changes in price and quantity?

A) The price will increase,but the quantity may increase or decrease.
B) The price will increase,and the quantity will increase.
C) The price will decrease,and the quantity will increase.
D) The price will stay the same,but the quantity will increase.
E) The price will stay the same,but the quantity will decrease.

Question 23

Oil producers expect that oil prices next year will be lower than oil prices this year.As a result,oil producers are most likely to

A) place more oil on the market this year,thus shifting the present supply curve of oil rightward.
B) hold some oil off the market this year,thus shifting the present supply curve of oil leftward.
C) place more oil on the market this year,thus increasing the quantity supplied of oil at lower but not higher prices.
D) hold some oil off the market this year,thus decreasing the quantity supplied of oil at lower but not higher prices.

Question 24

On a supply-and-demand diagram,consider a price for which the horizontal distance to the supply curve exceeds the horizontal distance to the demand curve.There is a __________ at that price and the current price must be __________ the equilibrium price.

A) shortage;above
B) shortage;below
C) surplus;above
D) surplus;below

Question 25

Exhibit 3-1
Refer to Exhibit 3-1.Equilibrium price and quantity are

A) $2 and 250 units.
B) $4 and 250 units.
C) $2 and 150 units.
D) $6 and 250 units.
E) none of the above

Question 26

Oil producers expect that oil prices next year will be higher than oil prices this year.As a result,oil producers are most likely to

A) place more oil on the market this year,thus shifting the present supply curve of oil rightward.
B) hold some oil off the market this year,thus shifting the present supply curve of oil leftward.
C) place more oil on the market this year,thus increasing the quantity supplied of oil at lower but not higher prices.
D) hold some oil off the market this year,thus decreasing the quantity supplied of oil at lower but not higher prices.

Question 27

Exhibit 3-2 Good X
Refer to Exhibit 3-2.Which of the following would result in a movement from point B on D₂ to point A on D₁?

A) There was an increase in income (assuming that good X is an inferior good)and technology remained constant.
B) There was an increase in income (assuming that good X is a normal good)and technology remained constant
C) There was an increase in income (assuming that good X is an inferior good)and technology improved.
D) There was an increase in income (assuming that good X is a normal good)and technology declined.

Question 28

On a supply-and-demand diagram,equilibrium is found

A) where the supply curve intercepts the vertical axis.
B) where the demand curve intercepts the horizontal axis.
C) where the demand and supply curves intersect.
D) at every point on either curve

Question 29

If demand decreases by a greater amount than supply increases,then equilibrium price __________ and equilibrium quantity __________.

A) rises;rises
B) rises;falls
C) falls;rises
D) falls;falls

Question 30

Which of the following will not shift a supply curve?

A) a change in the price of relevant resources
B) a change in the good's own price
C) a change in the number of sellers
D) a change in per-unit costs brought about by a change in taxes.

Question 31

At a price above the equilibrium price,there is

A) a shortage.
B) a surplus.
C) excess demand.
D) super-equilibrium.
E) none of the above

Question 32

If demand decreases by a greater amount than supply decreases,then equilibrium price __________ and equilibrium quantity __________.

A) rises;rises
B) rises;falls
C) falls;rises
D) falls;falls

Question 33

If demand increases by a lesser amount than supply increases,then equilibrium price __________ and equilibrium quantity __________.

A) rises;falls
B) falls;falls
C) rises;rises
D) falls;rises

Question 34

At a price for which quantity demanded exceeds quantity supplied,a __________ is experienced,which pushes the price __________ toward its equilibrium value.

A) surplus;downward
B) surplus;upward
C) shortage;downward
D) shortage;upward

Question 35

At a price below the equilibrium price,there is

A) a surplus.
B) a shortage.
C) excess supply.
D) sub-equilibrium.
E) none of the above

Question 36

Exhibit 3-2 Good X
Refer to Exhibit 3-2.Which of the following would result in a movement from point A on D₁ to point B on D₂?

A) There was a decrease in the price of a substitute for good X.
B) There was an increase in the price of a complement to good X.
C) There was a decline in technology in the production of good X.
D) There was an increase in the price of a substitute for good X.

Question 37

Exhibit 3-1
Refer to Exhibit 3-1.At a price of $6 there is a

A) surplus of 100 units.
B) surplus of 150 units.
C) surplus of 200 units.
D) shortage of 150 units.
E) shortage of 200 units.

Question 38

On a supply-and-demand diagram,quantity demanded equals quantity supplied

A) only at the single equilibrium price.
B) at every price at or above the equilibrium price.
C) at every price at or below the equilibrium price.
D) at every price.

Question 39

On a supply-and-demand diagram,consider a price for which the horizontal distance to the supply curve is shorter than the horizontal distance to the demand curve.There is a __________ at that price and the current price must be __________ the equilibrium price.

A) shortage;above
B) shortage;below
C) surplus;above
D) surplus;below

Question 40

Exhibit 3-1
Refer to Exhibit 3-1.At a price of $2 there is a

A) shortage of 100 units.
B) shortage of 200 units.
C) shortage of 150 units.
D) surplus of 200 units..
E) surplus of 150 units.

Question 41

Exhibit 3-4
Refer to Exhibit 3-4.If this is a competitive market,price and quantity will gravitate toward

A) $6 and 10 units,respectively.
B) $6 and 20 units,respectively.
C) $4 and 15 units,respectively.
D) $2 and 15 units,respectively.

Question 42

Exhibit 3-4
Refer to Exhibit 3-4.A price of $2 in the market will result in a

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

Question 43

Exhibit 3-2 Good X
Refer to Exhibit 3-2.Suppose equilibrium is at point C.Something then changes and equilibrium becomes point B.Which of the following is consistent with the change in equilibrium from point C to B (assuming that good X is a normal good)?

A) There was an increase in resource prices and income stayed constant.
B) There was a decrease in resource prices and income stayed constant.
C) There was an increase in resource prices and income decreased.
D) There was a decrease in resource prices and income increased.

Question 44

Exhibit 3-4
Refer to Exhibit 3-4.A price of $4 in the market will result in a

A) shortage of 10 units.
B) surplus of 10 units.
C) surplus of 5 units.
D) shortage of 5 units.
E) none of the above

Question 45

Exhibit 3-2 Good X
Refer to Exhibit 3-2.Suppose equilibrium is at point B.Something then changes and equilibrium becomes point C.Which of the following is consistent with the change in equilibrium from point B to C (assuming that good X is a normal good)?

A) There was an increase in resource prices and income stayed constant.
B) There was a decrease in resource prices and income stayed constant.
C) There was an increase in resource prices and income decreased.
D) There was an increase in resource prices and income increased.

Question 46

An increase in the expected price of corn would likely do the following to the current supply and demand for corn:

A) increase both the demand and the supply.
B) decrease both the demand and the supply.
C) increase the demand,but decrease the supply.
D) increase the supply,but decrease the demand.

Question 47

Exhibit 3-3 Good Y
Refer to Exhibit 3-3.A movement from point Z to point W would have been the result of

A) a reduction in the price of good Y.
B) an increase in taxes paid by the producers of good Y.
C) a decline in technology in the production of good Y.
D) an increase in the number of buyers of good Y.

Question 48

An increase in the price of good B caused an increase in the demand for good C.This indicates that

A) B and C are complements.
B) B and C are substitutes.
C) B and C are neither substitutes nor complements.
D) B and C are normal goods.

Question 49

Exhibit 3-3 Good Y
Refer to Exhibit 3-3.A movement from point W to point Z would have been the result of

A) a reduction in the price of good Y.
B) an increase in the number of buyers in the area where good Y is being sold.
C) a decrease in business taxes paid by the producers of good Y.
D) a decrease in the number of buyers in the area where good Y is being sold.
E) an increase in the price of good Y.

Question 50

Exhibit 3-4
Refer to Exhibit 3-4.At a price of $6 _______________ units will be exchanged.

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

Question 51

A rightward shift in the demand curve for tennis balls could be caused by

A) a fall in the price of tennis balls.
B) a fall in the price of tennis rackets.
C) a rise in the price of tennis lessons.
D) a fall in income,assuming tennis balls are a normal good.

Question 52

Exhibit 3-2 Good X
Refer to Exhibit 3-2.Suppose equilibrium is at point A.Something then changes and equilibrium becomes point C.Which of the following is consistent with the change in equilibrium from point A to C (assuming that good X is a normal good)?

A) There was a decrease in the number of buyers and business taxes increased.
B) There was an increase in the number of buyers and business taxes decreased.
C) There was an increase in the number of buyers and business taxes increased.
D) There was a decrease in the number of buyers and business taxes decreased.

Question 53

A decrease in the expected price of corn would likely do the following to the current supply and demand for corn:

A) increase both the demand and the supply.
B) decrease both the demand and the supply.
C) increase the demand,but decrease the supply.
D) increase the supply,but decrease the demand.

Question 54

Given that frozen yogurt and ice cream are substitutes,a shift in preferences in favor of yogurt would be predicted to do all of the following EXCEPT

A) raise the equilibrium price of frozen yogurt.
B) increase the quantity supplied of frozen yogurt.
C) increase the supply of ice cream.
D) increase the demand for frozen yogurt.

Question 55

Exhibit 3-4
Refer to Exhibit 3-4.A price of $6 in the market will result in a

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

Question 56

Exhibit 3-3 Good Y
Refer to Exhibit 3-3.A shift in demand from D₁ to D₂ can NOT occur from a change in the

A) population.
B) price of a substitute for good Y.
C) average income of good Y buyers.
D) price of good Y.

Question 57

Exhibit 3-4
Refer to Exhibit 3-4.At a price of $2 _______________ units will be exchanged.

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

Question 58

Exhibit 3-2 Good X
Refer to Exhibit 3-2.Suppose equilibrium is at point A.Something then changes and equilibrium becomes point C.Which of the following is consistent with the change in equilibrium from point A to C (assuming that good X is a normal good)?

A) There was an increase in income and production technology advanced.
B) There was a decrease in income and production technology advanced.
C) There was an increase in the price of a substitute and an increase in wages.
D) There was a decrease in the price of a complement and an increase in wages.

Question 59

Exhibit 3-3 Good Y
Refer to Exhibit 3-3.A movement from point V to point W could not have been the result of

A) a increase in the price of good Y.
B) an increase in good Y buyers' income (assuming that good Y is an inferior good).
C) an increase in the price of a complement to good Y.
D) a decrease in the number of buyers of good Y.
E) a decrease in good Y buyers' income (assuming that good Y is a normal good).

Question 60

If the supply of and demand for a product both decrease,then equilibrium

A) quantity and equilibrium price must both decline.
B) quantity must decline,but equilibrium price may either rise,fall,or remain unchanged.
C) price must fall,but equilibrium quantity may either rise,fall,or remain unchanged.
D) quantity must fall and equilibrium price must rise.

Question 61

Exhibit 3-5
Refer to Exhibit 3-5.In the market shown,if equilibrium was originally at point Z and the new equilibrium is now at point V,this change may have been caused by

A) a decrease in consumers' income (assuming that this is an inferior good)and a simultaneous decline in technology in the production of this good.
B) an increase in consumers' income (assuming that this is an inferior good)and a simultaneous improvement in technology in the production of this good.
C) a decrease in consumers' income (assuming that this is an inferior good)and no change in supply.
D) an increase in consumers' income (assuming that this is an inferior good)and no change in supply.

Question 62

In moving along a demand curve,which of the following is NOT held constant?

A) the prices of substitute goods
B) the prices of complementary goods
C) consumer incomes
D) the price of the good for which the demand curve is relevant

Question 63

Exhibit 3-7
Refer to Exhibit 3-7.If S₁ is the relevant supply curve,a decrease in the price of a resource that is necessary for the production of good X causes

A) the supply of good X to shift from S₁ to S₂
B) the supply of good X to shift from S₁ to S₃.
C) a movement along S₁ perhaps from point A to point B.
D) a movement along S₁ perhaps from point A to point C.
E) no change in the supply of good X.

Question 64

Exhibit 3-5
Refer to Exhibit 3-5.In the market shown,if equilibrium was originally at point V and is now at point Z,the new equilibrium price is __________ it was originally and the new equilibrium quantity is ____________ it was originally.

A) greater than;greater than
B) less than;greater than
C) greater than;less than
D) less than;less than

Question 65

A "decrease in the quantity demanded" means that

A) the demand curve has shifted to the right.
B) the supply curve has shifted to the left.
C) price has declined and consumers therefore want to purchase more of the good.
D) price has increased and consumers therefore want to purchase less of the good.

Question 66

Exhibit 3-6
Refer to Exhibit 3-6.If D₁ is the relevant demand curve,a decrease in the price of good X may cause

A) demand to shift from D₁ to D₂.
B) demand to shift from D₁ to D₃.
C) a movement along D₁ from point A to point B.
D) a movement along D₁ from point A to point C.

Question 67

An "increase in the quantity demanded" means that

A) the demand curve has shifted to the right.
B) the supply curve has shifted to the left.
C) price has declined and consumers therefore want to purchase more of the good.
D) given supply,the price of the good can be expected to rise.

Question 68

Exhibit 3-6
Refer to Exhibit 3-6.If an increase in income causes the demand for good X to shift from D₁ to D₃,then good X is

A) a normal good.
B) an inferior good.
C) a substitute good.
D) a complementary good.
E) a neutral good.

Question 69

Exhibit 3-5
Refer to Exhibit 3-5.In the market shown,a rightward shift in demand from D₁ to D₂ could have been caused by

A) an increase in the number of sellers in the market.
B) an improvement in technology in the production of this good.
C) a decrease in buyers' income (assuming the good is an inferior good).
D) a decrease in buyers' income (assuming the good is a normal good).
E) a and b

Question 70

Exhibit 3-6
Refer to Exhibit 3-6.If D₁ is the relevant demand curve,an increase in the price of good X may cause

A) demand to shift from D₁ to D₂.
B) demand to shift from D₁ to D₃.
C) a movement along D₁ from point A to point B.
D) a movement along D₁ from point A to point C.

Question 71

Exhibit 3-7
Refer to Exhibit 3-7.If S₁ is the relevant supply curve,an increase in the price of good X may cause

A) the supply of good X to shift from S₁ to S₂
B) the supply of good X to shift from S₁ to S₃.
C) a movement along S₁ perhaps from point A to point B.
D) a movement along S₁ perhaps from point A to point C.
E) no change in the quantity supplied of good X.

Question 72

Exhibit 3-5
Refer to Exhibit 3-5.In the market shown,if equilibrium was originally at point W and is now at point X,the new equilibrium price is __________ it was originally and the new equilibrium quantity is ____________ it was originally.

A) greater than;greater than
B) less than;greater than
C) greater than;less than
D) less than;less than

Question 73

Exhibit 3-7
Refer to Exhibit 3-7.If S₁ is the relevant supply curve,a decline in technology in the production of good X causes

A) the supply of good X to shift from S₁ to S₂
B) the supply of good X to shift from S₁ to S₃.
C) a movement along S₁ perhaps from point A to point B.
D) a movement along S₁ perhaps from point A to point C.
E) no change in the supply of good X.

Question 74

Exhibit 3-5
Refer to Exhibit 3-5.In the market shown,a rightward shift in supply from S₁ to S₂ could have been caused by

A) a decline in the number of buyers in the market.
B) a decline in the price of a substitute good.
C) a decrease in income (assuming the good is a normal good).
D) the granting of a subsidy to the producer.
E) none of the above

Question 75

An "increase in demand" means that

A) the demand curve has shifted to the left.
B) price has declined and consumers want to purchase more of the good.
C) the demand curve has shifted to the right.
D) the price of the good can be expected to decline,assuming supply stays constant.

Question 76

Exhibit 3-6
Refer to Exhibit 3-6.If an increase in the price of good Y causes the demand for good X to shift from D₁ to D₂,goods X and Y are

A) normal goods.
B) inferior goods.
C) substitutes.
D) complements.
E) neutral goods.

Question 77

Exhibit 3-6
Refer to Exhibit 3-6.If an increase in income causes the demand for good X to shift from D₁ to D₂,then good X is

A) a normal good.
B) an inferior good.
C) a substitute good.
D) a complementary good.
E) a neutral good.

Question 78

A "decrease in demand" means that

A) the demand curve has shifted to the left.
B) price has declined and consumers want to purchase more of the good.
C) the demand curve has shifted to the right.
D) the price of the good can be expected to decline,assuming supply stays constant.

Question 79

Exhibit 3-6
Refer to Exhibit 3-6.If a decrease in income causes the demand for good X to shift from D₁ to D₂,then good X is

A) a normal good.
B) an inferior good.
C) a substitute good.
D) a complementary good.
E) a neutral good.

Question 80

Exhibit 3-8
Refer to Exhibit 3-8.Equilibrium price and quantity are

A) $3 and 25 units.
B) $3 and 15 units.
C) $5 and 15 units.
D) $5 and 25 units.
E) $1 and 25 units.