Deck 4: Equilibrium: How Supply and Demand Determine Prices

Question 1

Use the following to answer questions: Figure: Market Equilibrium
(Figure: Market Equilibrium) Refer to the figure. At a price of $3, quantity supplied is ______ and quantity demanded is ______, leading to a _______.

A) 6; 2; surplus of 4 units
B) 2; 6; shortage of 8 units
C) 2; 4; surplus of 2 units
D) 4; 2; shortage of 2 units

Answer 1

6; 2; surplus of 4 units

Question 2

A market can be described by the equations Q_d = 100 - P and Q_s = P. What are the equilibrium price and quantity in this market?

A) The equilibrium price is $50 and the equilibrium quantity is 50 units.
B) The equilibrium price is $100 and the equilibrium quantity is 100 units.
C) The equilibrium price is $0 and the equilibrium quantity is 0 units.
D) The equilibrium price is $0 and the equilibrium quantity is 100 units.

Answer 2

The equilibrium price is $50 and the equilibrium quantity is 50 units.

Question 3

Use the following to answer questions: Table: Equilibrium Price, Quantity $$\begin{array} { c c c } \hline \boldsymbol { P } & \boldsymbol { Q } _ { \mathbf { d } } & \boldsymbol { Q } _ { \mathbf { s } } \\\hline \$ 10 & 50 & 30 \\12 & 45 & 35 \\14 & 40 & 40 \\16 & 35 & 45 \\18 & 30 & 50 \\\hline\end{array}$$

-(Table: Equilibrium Price, Quantity) Refer to the table. The equilibrium P and Q are:

A) $10 and 50.
B) $12 and 35.
C) $40 and 14.
D) $14 and 40.

Answer 3

$14 and 40.

Question 4

In a market, the equilibrium condition is given by the following:

A) quantity demanded = quantity supplied
B) quantity demanded × quantity supplied
C) quantity demanded / quantity supplied
D) price × quantity demanded = quantity supplied

Question 5

Use the following to answer questions: Figure: Market Equilibrium
(Figure: Market Equilibrium) Refer to the figure. At a price of $1, the market is characterized by a(n):

A) excess supply of 2 units.
B) excess demand of 4 units.
C) surplus of 4 units.
D) shortage of 6 units.

Question 6

Use the following to answer questions: Table: Equilibrium Price, Quantity $$\begin{array} { c c c } \hline \boldsymbol { P } & \boldsymbol { Q } _ { \mathbf { d } } & \boldsymbol { Q } _ { \mathbf { s } } \\\hline \$ 10 & 50 & 30 \\12 & 45 & 35 \\14 & 40 & 40 \\16 & 35 & 45 \\18 & 30 & 50 \\\hline\end{array}$$

-(Table: Equilibrium Price, Quantity) Refer to the table. If the price in the market was $12, there would be a:

A) shortage of 10 units.
B) shortage of 45 units.
C) surplus of 10 units.
D) surplus of 35 units.

Question 7

In free markets, shortages lead to:

A) lower prices.
B) higher prices.
C) surpluses.
D) unexploited gains from trade.

Question 8

(Figure: Market Equilibrium) According to the figure, the equilibrium price and quantity are:

A) $1 and 4 units.
B) $4 and 8 units.
C) $2 and 4 units.
D) $3 and 6 units.

Question 9

Figure: Price Adjustment Refer to the figure. If the price of the product is $14, there is a:

A) shortage of 30 units of the product, and the price will rise to $16.
B) surplus of 20 units of the product, and the price will rise to $16.
C) shortage of 50 units of the product, and the price will rise to $16.
D) surplus of 40 units of the product, and the price will rise to $16.

Question 10

If sellers want to sell more products than buyers are willing to purchase, we know that:

A) the current price is less than the equilibrium price.
B) quantity demanded exceeds quantity supplied.
C) the current price is greater than the equilibrium price.
D) the demand curve will likely increase.

Question 11

A market can be described by the equations Q_d = 50 - 3P and Q_s = 2P. What are the equilibrium price and quantity in this market?

A) The equilibrium price is $20 and the equilibrium quantity is 10 units.
B) The equilibrium price is $50 and the equilibrium quantity is 100 units.
C) The equilibrium price is $30 and the equilibrium quantity is 10 units.
D) The equilibrium price is $10 and the equilibrium quantity is 20 units.

Question 12

Suppose that the equilibrium price in the market is $10. If the current market price is $7.50:

A) the equilibrium price will fall to $7.50.
B) competition among buyers will increase the current price.
C) the current price will fall below $7.50 as sellers compete for market share.
D) There is not enough information provided to answer the question.

Question 13

For each good produced in a free market economy, demand and supply determine:

A) the price of the good, but not the quantity.
B) the quantity of the good, but not the price.
C) both the price and the quantity of the good.
D) neither price nor quantity; sellers determine the price.

Question 14

Use the following to answer questions: Table: Equilibrium Price, Quantity $$\begin{array} { c c c } \hline \boldsymbol { P } & \boldsymbol { Q } _ { \mathbf { d } } & \boldsymbol { Q } _ { \mathbf { s } } \\\hline \$ 10 & 50 & 30 \\12 & 45 & 35 \\14 & 40 & 40 \\16 & 35 & 45 \\18 & 30 & 50 \\\hline\end{array}$$

-(Table: Equilibrium Price, Quantity) Refer to the table. If the price in the market was $16, there would be a:

A) shortage of 10 units.
B) shortage of 35 units.
C) surplus of 10 units.
D) surplus of 45 units.

Question 15

Use the following to answer questions: Table: Equilibrium Price, Quantity $$\begin{array} { c c c } \hline \boldsymbol { P } & \boldsymbol { Q } _ { \mathbf { d } } & \boldsymbol { Q } _ { \mathbf { s } } \\\hline \$ 10 & 50 & 30 \\12 & 45 & 35 \\14 & 40 & 40 \\16 & 35 & 45 \\18 & 30 & 50 \\\hline\end{array}$$

-(Table: Equilibrium Price, Quantity) Refer to the table. If the supply curve for the product shifted to the right such that 10 more units of the good are supplied at every price, what is the new equilibrium price?

A) $12
B) $14
C) $16
D) $18

Question 16

In free markets, surpluses lead to:

A) lower prices.
B) higher prices.
C) stable prices.
D) unexploited gains from trade.

Question 17

Use the following to answer questions: Table: Equilibrium Price, Quantity $$\begin{array} { c c c } \hline \boldsymbol { P } & \boldsymbol { Q } _ { \mathbf { d } } & \boldsymbol { Q } _ { \mathbf { s } } \\\hline \$ 10 & 50 & 30 \\12 & 45 & 35 \\14 & 40 & 40 \\16 & 35 & 45 \\18 & 30 & 50 \\\hline\end{array}$$

-(Table: Equilibrium Price, Quantity) Refer to the table. If the supply curve for the product shifted to the right such that 20 more units of the good are supplied at every price, what is the new equilibrium price?

A) $10
B) $12
C) $14
D) $16

Question 18

The key condition for equilibrium to occur in a market is:

A) the demand curve equals the supply curve.
B) quantity demanded equals quantity supplied.
C) price equals quantity.
D) demand for one good equals demand for all other goods.

Question 19

Suppose that a market is characterized as follows: consumers are willing and able to purchase 100 units and sellers are willing and able to sell 70 units. Which of the following statements are true?

A) There is a shortage of 30 units.
B) The market is in equilibrium.
C) The price in the market will decrease.
D) Quantity demanded will increase.

Question 20

Use the following to answer questions: Table: Equilibrium Price, Quantity $$\begin{array} { c c c } \hline \boldsymbol { P } & \boldsymbol { Q } _ { \mathbf { d } } & \boldsymbol { Q } _ { \mathbf { s } } \\\hline \$ 10 & 50 & 30 \\12 & 45 & 35 \\14 & 40 & 40 \\16 & 35 & 45 \\18 & 30 & 50 \\\hline\end{array}$$

-(Table: Equilibrium Price, Quantity) Refer to the table. If the demand curve for the product shifted to the right such that 10 more units of the good are demanded at every price, what is the new equilibrium price?

A) $12
B) $14
C) $16
D) $18

Question 21

If the market price is above the equilibrium price, which of the following will occur?

A) Quantity demanded will exceed quantity supplied and the market price will eventually fall.
B) Quantity demanded will exceed quantity supplied and the market price will eventually rise.
C) Quantity supplied will exceed quantity demanded and the market price will eventually fall.
D) Quantity supplied will exceed quantity demanded, and the market price will eventually rise.

Question 22

A free market achieves an equilibrium price and quantity due to:

A) the combined actions of buyers and sellers.
B) increased competition among sellers.
C) government regulations placed on market participants.
D) buyers' ability to affect market outcomes.

Question 23

The yearly shortage of Super Bowl tickets implies that the price of Super Bowl tickets is:

A) set at the equilibrium price since they always sell out.
B) above the equilibrium price.
C) below the equilibrium price.
D) not set by supply and demand, but instead set by the NFL.

Question 24

When there is a surplus of a good:

A) sellers will lower the price in order to increase quantity demanded.
B) sellers will raise the price in order to decrease quantity demanded.
C) sellers will compete with buyers.
D) this is an indication the buyers do not value the good.

Question 25

If there is a surplus of a good, sellers will:

A) lower the price in order to increase quantity demanded.
B) raise the price in order to decrease quantity demanded.
C) compete with buyers.
D) know that the buyers overvalue the good.

Question 26

When the quantity supplied of a good exceeds the quantity demanded, there is a(n):

A) shortage.
B) surplus.
C) equilibrium.
D) opportunity cost.

Question 27

If the market price is below the equilibrium price, which of the following will occur?

A) Quantity demanded will exceed quantity supplied and the market price will eventually fall.
B) Quantity demanded will exceed quantity supplied and the market price will eventually rise.
C) Quantity supplied will exceed quantity demanded and the market price will eventually fall.
D) Quantity supplied will exceed quantity demanded and the market price will eventually rise.

Question 28

When there is a shortage of 1,000 units of a particular good:

A) the price of the good will rise.
B) the price of the good will fall.
C) the quantity demanded of the good will equal 1,000 units.
D) there will be no change in the price of the good.

Question 29

Use the following to answer questions: Table: Equilibrium Adjustment $$\begin{array} { c c c } \hline \text { Price } & \text { Quantity Demanded } & \text { Quantity Supplied } \\\hline \$ 10 & 100 & 160 \\8 & 120 & 145 \\6 & 130 & 130 \\4 & 140 & 115 \\2 & 150 & 100 \\\hline\end{array}$$

-(Table: Equilibrium Adjustment) Refer to the table. If the price in the free market is $8, then a:

A) surplus of 25 units would exist, and price would tend to fall.
B) surplus of 25 units would exist, and price would tend to rise.
C) shortage of 25 units would exist, and price would tend to rise.
D) shortage of 25 units would exist, and price would tend to fall.

Question 30

Use the following to answer questions: Figure: Basic Supply and Demand
(Figure: Basic Supply and Demand) In the diagram, the market price is stable only at a price of:

A) $2.
B) $3.
C) $4.
D) $50.

Question 31

Use the following to answer questions: Table: Equilibrium Adjustment $$\begin{array} { c c c } \hline \text { Price } & \text { Quantity Demanded } & \text { Quantity Supplied } \\\hline \$ 10 & 100 & 160 \\8 & 120 & 145 \\6 & 130 & 130 \\4 & 140 & 115 \\2 & 150 & 100 \\\hline\end{array}$$

-(Table: Equilibrium Adjustment) Refer to the table. If the price in the free market is $2, then a:

A) surplus of 50 units would exist, and price would fall.
B) surplus of 50 units would exist, and price would rise.
C) shortage of 50 units would exist, and price would rise.
D) shortage of 50 units would exist, and price would fall.

Question 32

Use the following to answer questions: Figure: Basic Supply and Demand
(Figure: Basic Supply and Demand) In the diagram, if the market price is $2, then there is a:

A) surplus of 60 units.
B) surplus of 20 units.
C) shortage of 20 units.
D) market equilibrium.

Question 33

Use the following to answer questions: Figure: Basic Supply and Demand
(Figure: Basic Supply and Demand) In the diagram, which of the following statements is TRUE?

A) When the price is $3, the quantity demanded exceeds the quantity supplied by 60 units.
B) When the price is $2, the quantity demanded exceeds the quantity supplied by 40 units.
C) When the price is $4, the quantity demanded is less than the quantity supplied by 40 units.
D) When the price is $2, there is a tendency for the price to rise in the future.

Question 34

Use the following to answer questions: Figure: Basic Supply and Demand
(Figure: Basic Supply and Demand) In the diagram, which of the following statements is TRUE?

A) The equilibrium price is $3, and the equilibrium quantity is 60 units.
B) The equilibrium price is $4, and the equilibrium quantity is 60 units.
C) The equilibrium price is $2, and the equilibrium quantity is 40 units.
D) The equilibrium price is $3, and the equilibrium quantity is 50 units.

Question 35

If the price of Nike Air Force 1 sneakers is below the equilibrium price:

A) competition will eventually push the price up.
B) there will be a surplus of sneakers.
C) quantity demanded will increase as the price rises to meet the equilibrium price.
D) quantity supplied will be greater than quantity demanded.

Question 36

When a surplus exists in a market, we know that the actual price is:

A) above equilibrium price, and quantity supplied is greater than quantity demanded.
B) above equilibrium price, and quantity demanded is greater than quantity supplied.
C) below equilibrium price, and quantity demanded is greater than quantity supplied.
D) below equilibrium price, and quantity supplied is greater than quantity demanded.

Question 37

The equilibrium price is:

A) stable because at this price the quantity demanded equals the quantity supplied.
B) unstable because at this price the quantity demanded is less than the quantity supplied.
C) unstable because at this price the quantity demanded exceeds the quantity supplied.
D) stable because at this price all buyers are willing and able to pay.

Question 38

If the market for iPads experiences a surplus, then the:

A) supply of iPads will fall.
B) demand for iPads will rise.
C) price of iPads will rise.
D) price of iPads will fall.

Question 39

Use the following to answer questions: Table: Equilibrium Adjustment $$\begin{array} { c c c } \hline \text { Price } & \text { Quantity Demanded } & \text { Quantity Supplied } \\\hline \$ 10 & 100 & 160 \\8 & 120 & 145 \\6 & 130 & 130 \\4 & 140 & 115 \\2 & 150 & 100 \\\hline\end{array}$$

-(Table: Equilibrium Adjustment) Refer to the table. The equilibrium price is:

A) $2.
B) $4.
C) $6.
D) $8.

Question 40

A shortage of a good occurs when:

A) the quantity supplied equals the quantity demanded.
B) the quantity supplied is greater than the quantity demanded.
C) the quantity supplied is less than the quantity demanded.
D) supply does not exist.

Question 41

Imagine a free market in which at a price of $10, quantity supplied is 50 units and quantity demanded is 50 units. Equilibrium price in this market:

A) is equal to $10.
B) is less than $10.
C) is greater than $10.
D) differs from $10 in an indeterminate direction.

Question 42

Imagine a free market in which at a price of $10, quantity supplied is 40 units and quantity demanded is 50 units. Equilibrium price in this market:

A) is equal to $10.
B) is less than $10.
C) is greater than $10.
D) differs from $10 in an indeterminate direction.

Question 43

Use the following to answer questions: Figure: Price and Quantity 1
(Figure: Price and Quantity 1) In the diagram, at which price is quantity demanded equal to the quantity supplied?

A) $40
B) $50
C) $60
D) $80

Question 44

Imagine a free market in which at a price of $10, quantity supplied is 50 units and quantity demanded is 40 units. Equilibrium price in this market:

A) is equal to $10.
B) is less than $10.
C) is greater than $10.
D) differs from $10 in an indeterminate direction.

Question 45

Use the following to answer questions: Figure: Price and Quantity 1
(Figure: Price and Quantity 1) In the diagram, at a price of $40, the quantity demanded is ______, the quantity supplied is ______, and there is a ______.

A) 40; 60; surplus of 20 units
B) 80; 20; shortage of 60 units
C) 60; 40; shortage of 20 units
D) 20; 60; surplus of 40 units

Question 46

Use the following to answer questions: Figure: Price and Quantity 1
(Figure: Price and Quantity 1) In the diagram, at which price is there a surplus?

A) $80
B) $50
C) $40
D) $0

Question 47

A shortage occurs when:

A) the price of a good is too high.
B) a market is at equilibrium.
C) the quantity supplied is zero.
D) the quantity demanded is greater than the quantity supplied.

Question 48

Use the following to answer questions: Figure: Chocolate
(Figure: Chocolate) If the price in the diagram is $5, what will happen?

A) The price will increase because of a shortage.
B) The price will decrease because of a shortage.
C) The price will increase because of a surplus.
D) The price will decrease because of a surplus.

Question 49

When there is a shortage in the market, competition will:

A) drive the price down to the equilibrium price.
B) drive the price up to the equilibrium price.
C) cause the demand curve to shift right.
D) cause the supply curve to increase.

Question 50

When there is a shortage, sellers have an incentive to ______ their price and buyers have an incentive to offer a ______ price.

A) increase; lower
B) decrease; lower
C) decrease; higher
D) increase; higher

Question 51

The equilibrium price is:

A) the price at which quantity demanded is equal to quantity supplied.
B) never higher than what most consumers are willing to pay.
C) unstable.
D) the highest price at which all consumers can afford a good.

Question 52

When there is a surplus, sellers have an incentive to ______ their price and buyers have an incentive to offer a ______ price.

A) increase; lower
B) decrease; lower
C) increase; higher
D) decrease; higher

Question 53

In a free market equilibrium, prices and quantities are uniquely:

A) stable.
B) unstable.
C) moving in the "right" direction.
D) moving in the "wrong" direction.

Question 54

Use the following to answer questions: Figure: Price and Quantity 1
(Figure: Price and Quantity 1) In the diagram, at a price of $80, the quantity demanded is ______, the quantity supplied is ______, and there is ______.

A) 20; 80; a surplus of 60 units
B) 80; 20, a surplus of 60 units
C) 80; 20, a shortage of 60 units
D) 20; 20; no surplus or shortage

Question 55

When there is an excess supply in the market, competition will:

A) drive the price down to the equilibrium price.
B) drive the price up to the equilibrium price.
C) cause the demand curve to shift right.
D) cause the supply curve to increase.

Question 56

Table: Supply and Demand Schedule $$\begin{array} { c c c } \hline \text { Price per Unit } & \text { Quantity Demanded } & \text { Quantity Supplied } \\\hline \$ 17 & 80 & 97 \\\$ 15 & 88 & 88 \\\$ 13 & 96 & 79 \\\$ 11 & 104 & 71 \\\hline\end{array}$$ In the table, a surplus occurs at a price ________, and a shortage occurs at a price _________.

A) of $17; below $15
B) of $15; above $15
C) above $15; of $15
D) above $11; below $17

Question 57

A surplus occurs when:

A) workers are more productive than expected.
B) the quantity supplied is greater than the quantity demanded.
C) more people want to buy a good than want to sell it.
D) a market is at equilibrium.

Question 58

If a market has a surplus, how will the market respond?

A) The price will fall and the quantity supplied will fall.
B) The price will fall and the quantity supplied will rise.
C) The price will rise and the quantity supplied will fall.
D) The price will rise and the quantity supplied will rise.

Question 59

Use the following to answer questions: Figure: Chocolate
(Figure: Chocolate) What is the equilibrium price per pound in the diagram?

A) $4
B) $6
C) $8
D) $10

Question 60

Imagine a free market in which quantity supplied is 50 units and quantity demanded is 50 units at the current price. The market is experiencing a(n):

A) equilibrium.
B) surplus.
C) shortage.
D) shift.

Question 61

In a free market when there are unexploited gains from trade:

A) the market is slow to adjust to this situation.
B) there are sellers who are unwilling to sell at prices buyers are willing to pay.
C) there are buyers who are willing to pay more for goods than sellers are asking.
D) an equilibrium price and quantity have been reached.

Question 62

Use the following to answer questions: Figure: Gains from Trade
(Figure: Gains from Trade) Refer to the figure. What are the unexploited gains from trade at the free market equilibrium?

A) $1,000
B) $500
C) $0
D) $1,500

Question 63

In a free market in which an equilibrium price and quantity prevails:

A) consumer surplus is less than producer surplus.
B) consumer surplus is greater than producer surplus.
C) consumer surplus is the same as producer surplus.
D) consumer surplus and producer surplus are maximized.

Question 64

In a free market setting where quantity supplied is 40 units and quantity demanded is 50 units, price will:

A) rise.
B) fall.
C) remain the same.
D) move in an indeterminate direction.

Question 65

Imagine a free market in which quantity supplied is 50 units and quantity demanded is 40 units at the current price. The market is experiencing a(n):

A) equilibrium.
B) surplus.
C) shortage.
D) shift.

Question 66

Figure: Basic Supply and Demand
M
In a free market, as illustrated in the diagram, total gains from trade are greatest when:

A) 60 units are sold at a price of $2.
B) 40 units are sold at a price of $3.
C) 60 units are sold at a price of $4.
D) 50 units are sold at a price of $3.

Question 67

Why is consuming a quantity above equilibrium wasteful?

A) because there are willing buyers of the good who do not purchase it
B) because resources are used without making society better off
C) because it creates a shortage, which generates waste
D) because it creates a surplus, which generates waste

Question 68

Use the following to answer questions: Figure: Demand and Supply
(Figure: Demand and Supply) Refer to the figure. At the equilibrium quantity, total surplus is:

A) $960.
B) $480.
C) $320.
D) $240

Question 69

Imagine a free market in which quantity supplied is 40 units and quantity demanded is 50 units at the current price. The market is experiencing a(n):

A) equilibrium.
B) surplus.
C) shortage.
D) shift.

Question 70

How is a class in which students are graded on a curve like a competitive market?

A) In both cases, the quantity supplied equals the quantity demanded.
B) In a competitive market, demanders compete against one another for goods, the same way students compete for grades.
C) In a competitive market, demanders compete against suppliers for goods, the same way students compete for grades.
D) If the price is too high, demanders should blame suppliers, the same way students should blame professors for bad grades.

Question 71

Use the following to answer questions: Figure: Demand and Supply
(Figure: Demand and Supply) Refer to the figure. Which statement is TRUE?

A) The gains from trade are maximized at 20 units of output.
B) At 16 units of output, there are unexploited gains from trade.
C) Buyers are willing to pay $20 for the 16th unit of output and it costs sellers $60 to produce that unit.
D) A free market is likely to produce less than 12 units of output.

Question 72

For suppliers to sell more than the equilibrium quantity, it would mean that:

A) it costs suppliers less to produce the good than its value to buyers.
B) it costs suppliers more to produce the good than its value to buyers.
C) the gains from trade increase.
D) suppliers gain from trade while buyers are unaffected.

Question 73

In a competitive market:

A) buyers compete with other buyers, and sellers compete with other sellers.
B) buyers compete with sellers, and sellers compete with buyers.
C) sellers alone determine the equilibrium price.
D) buyers alone determine the equilibrium price.

Question 74

In a free market setting where quantity supplied is 50 units and quantity demanded is 50 units, price will:

A) rise.
B) fall.
C) remain the same.
D) move in an indeterminate direction.

Question 75

In a free market setting where quantity supplied is 50 units and quantity demanded is 40 units, price will:

A) rise.
B) fall.
C) remain the same.
D) move in an indeterminate direction.

Question 76

Use the following to answer questions: Figure: Demand and Supply
Gains from trade are maximized at the:

A) equilibrium price and quantity.
B) midpoint on the demand curve.
C) point at which output is maximized.
D) vertical intercept on the supply curve.

Question 77

When a market is competitive:

A) buyers compete with sellers to try to get lower prices.
B) buyers compete with other buyers, raising prices; and sellers compete with sellers, lowering prices.
C) everybody competes with everybody else.
D) buyers compete with sellers and sellers compete with one another, but buyers do not compete with one another.

Question 78

Gains from trade are maximized when:

A) the market price is higher than the equilibrium price.
B) the market price is less than the equilibrium price.
C) the market price is equal to the equilibrium price.
D) there are additional potential trades available that have not been completed.

Question 79

Gains from trade are maximized in a competitive market when:

A) quantity supplied equals quantity demanded.
B) quantity supplied exceeds quantity demanded.
C) quantity demanded exceeds quantity supplied.
D) quantity supplied equals zero.

Question 80

Use the following to answer questions: Figure: Gains from Trade
(Figure: Gains from Trade) Refer to the figure. What are the total gains from trade at the free market equilibrium?

A) $1,000
B) $500
C) $0
D) $1,500