Deck 3: Part 2: Market Demand and Supply

Question 1

Assume Qs represents the quantity supplied at a given price and Qd represents quantity demanded at the same given price.Which of the following market conditions produces an upward movement of the price?

A) Qs = 1,000, Qd = 750.
B) Qs = 750, Qd = 750.
C) Qs = 750, Qd = 1,000.
D) Qs = 1,000, Qd = 1,000.

Answer 1

C

Question 2

If the current price of a good is the same as that found at the intersection of the market demand and supply curves,then:

A) excess demand exists.
B) excess supply exists.
C) price will rise.
D) price will fall.
E) the market is in equilibrium.

Answer 2

E

Question 3

The price of a good will rise when:

A) there is a shortage of the good.
B) there is a surplus of the good.
C) demand for the good decreases.
D) the supply of the good increases.

Answer 3

A

Question 4

If quantity demanded is greater than quantity supplied,then according to the market process:

A) an excess supply exists.
B) the market is in equilibrium.
C) the price will rise.
D) the supply curve must be vertical.
E) there will be no tendency for the situation to change.

Question 5

If a shortage of a product currently exists in the market,

A) the market price is too high.
B) the quantity demanded is less than the quantity supplied.
C) the quantity demanded exceeds the quantity supplied at the market price.
D) there is an excess supply of the product.
E) there will be a tendency for the price to fall.

Question 6

When quantity supplied equals quantity demanded,there is:

A) disequilibrium.
B) excess quantity supplied.
C) a market-clearing price (equilibrium price).
D) excess quantity demanded.
E) a shortage.

Question 7

Tickets to the Indiana-Purdue basketball game are usually sold out in advance of game day.This suggests:

A) the price of the tickets must be very high or else people would not consider them valuable.
B) the price is set below the equilibrium level.
C) the Indiana basketball stadium is relatively small.
D) everyone who attends the game will enjoy it.

Question 8

When the price of a good is below its equilibrium level,a:

A) shortage puts upward pressure on the price.
B) surplus puts downward pressure on the price.
C) shortage puts downward pressure on the price.
D) surplus puts upward pressure on the price.

Question 9

When the price of a good is above its equilibrium price,a:

A) surplus puts upward pressure on the price.
B) surplus puts downward pressure on the price.
C) shortage puts upward pressure on the price.
D) shortage puts downward pressure on the price.

Question 10

A shortage of product means a(n):

A) excess supply of the product.
B) excess demand of the product.
C) situation where the quantity demanded is less than the quantity supplied.
D) situation where the quantity supplied exceeds the quantity demanded.
E) situation where the current market price is too high.

Question 11

When there is a shortage of a product in a market the:

A) price will fall.
B) price must be below the equilibrium price.
C) price must be above the equilibrium price.
D) producers will reduce output and sales will fall.

Question 12

If a shortage exists in a market then:

A) the price is below equilibrium.
B) the quantity demanded exceeds the quantity supplied.
C) the price will rise in the near future.
D) all of the above.

Question 13

All of the following apply to the description of a market in equilibrium except:

A) quantity supplied equals quantity demanded.
B) the intersection of the supply and demand curves.
C) no excess supply exists.
D) no excess demand exists.
E) the price of the good is falling.

Question 14

If the price of tea is below its equilibrium level,then:

A) the demand for tea will decrease.
B) the market for tea has cleared.
C) sellers will be stuck with unsold tea.
D) there is a shortage of tea.

Question 15

Which of the following situations results from a ticket price to a concert set below the equilibrium price?

A) A long line of people wanting to purchase tickets to the concert.
B) No line of people wanting to buy tickets to the concert.
C) Tickets available at the box office, but no line of people wanting to buy them.
D) None of the above.

Question 16

If equilibrium is present in a market:

A) there is either a shortage or a surplus.
B) the quantity demanded equals quantity supplied.
C) the quantity demanded exceeds quantity supplied.
D) the quantity supplied exceeds quantity demanded.

Question 17

The most important characteristic of the equilibrium price is that it:

A) guarantees that producers earn profit.
B) clears the market.
C) increases the quantity demanded.
D) decreases the quantity demanded.

Question 18

If the market price is below the equilibrium price,then:

A) a surplus of product will result.
B) the quantity supplied will exceed the quantity demanded.
C) the market supply curve will shift to the right.
D) the quantity demanded will exceed the quantity supplied.
E) the market demand curve will shift to the left.

Question 19

The equilibrium price is best defined as the price at which:

A) demand is smaller than supply.
B) suppliers want to supply more goods.
C) demanders want to buy more goods.
D) quantity demanded is equal to quantity supplied.
E) the quantity demanded increases

Question 20

If the quantity demanded of milk is 55,000 and the quantity supplied of milk is 80,000,then:

A) there is an excess supply of 25,000 units of milk.
B) the price of milk will tend to rise to clear the market.
C) consumers get the milk they want so market equilibrium exists.
D) there is an excess demand of 25,000 units of milk.
E) this is the intersection of market supply and demand curves.

Question 21

When the price of a good in a market is above equilibrium:

A) the quantity supplied exceeds the quantity demanded.
B) a surplus is observed.
C) the price will fall in the near future.
D) all of the above.

Question 22

At any price below the equilibrium price,the:

A) demand is greater than supply.
B) supply is greater than demand.
C) quantity demanded is greater than quantity supplied.
D) quantity supplied is greater than quantity demanded.

Question 23

In a market,competitive forces guarantee that any price other than the equilibrium price is:

A) market-clearing.
B) stable.
C) temporary.
D) unaffordable.

Question 24

Exhibit 3-8 Demand and supply data for radios

In Exhibit 3-8,if there is a shortage of radios of 200 units,the current price of radios must be:

A) $60.
B) $55.
C) $50.
D) $45.
E) $40.

Question 25

Exhibit 3-8 Demand and supply data for radios

Exhibit 3-8 presents supply and demand data for the radio market.If the price of radios was currently $70,there would be an ____ of ____ radios in this market.

A) Excess demand; 450
B) Excess demand; 500
C) Excess supply; 400
D) Excess supply; 850
E) Excess demand; 400

Question 26

Exhibit 3-8 Demand and supply data for radios

In Exhibit 3-9,if the market price is $50,

A) this market will be in equilibrium.
B) a shortage of 27 units would result.
C) the price is below the equilibrium price.
D) a surplus of 26 units would result.
E) a surplus of 27 units would result.

Question 27

Exhibit 3-6 Milk market

In Exhibit 3-6,which of the following are the equilibrium price and equilibrium quantity in the milk market?

A) $0.70 per quart and 200 quarts of milk.
B) $0.60 per quart and 100 quarts of milk.
C) $0.50 per quart and 100 quarts of milk.
D) $0.40 per quart and 60 quarts of milk.
E) $0.30 per quart and 20 quarts of milk.

Question 28

Exhibit 3-8 Demand and supply data for radios

In Exhibit 3-8,at any market price of radios above $50,a(n)____ would result,causing price to ____.

A) excess demand; rise
B) excess supply; rise
C) excess demand; fall
D) excess supply; fall
E) shortage; rise

Question 29

Exhibit 3-6 Milk market

In Exhibit 3-6,which of the following is true about the milk market?

A) At price 0.60 there is an excess demand of milk.
B) At price 0.40 there is an excess supply of milk.
C) At price 0.30 there is an excess supply of milk.
D) At price 0.50 there is an excess demand of milk.
E) At price 0.70 there is an excess supply of milk.

Question 30

Exhibit 3-8 Demand and supply data for radios

In Exhibit 3-8,if there is a surplus of radios of 200 units,the current price of radios must be;

A) $60.
B) $55.
C) $50.
D) $45.
E) $40.

Question 31

Exhibit 3-8 Demand and supply data for radios

In Exhibit 3-8,the equilibrium market price in this radio market would be:

A) $65
B) $60
C) $55
D) $50
E) $45

Question 32

Which of the following best explains the determination of the equilibrium price of a product?

A) Production costs.
B) The supply of a good.
C) The interaction of supply and demand.
D) The decisions of government.

Question 33

Which of the following is true about the market equilibrium?

A) As the price increases, the quantity demanded and the quantity supplied increases.
B) As the price increases, the quantity demanded and the quantity supplied decreases.
C) As the price increases, the quantity demanded increases and the quantity supplied decreases.
D) As the price increases, the quantity demanded decreases and the quantity supplied increases.
E) As the price increases, neither the quantity demanded nor quantity supplied change.

Question 34

Market equilibrium is:

A) defined as the condition in which there is neither a shortage or surplus.
B) defined as the condition under which the separately formulated plans of buyers and sellers exactly mesh when tested in the market.
C) represented graphically by the intersection of the supply and demand curves.
D) all of the above.

Question 35

Exhibit 3-7 Demand and supply curves

In Exhibit 3-7,if price happened to currently be $25 in this market,a ____ would result,causing a(n)____ in price.

A) shortage; increase
B) shortage; decrease
C) surplus; increase
D) surplus; decrease
E) scarcity; stabilization

Question 36

Exhibit 3-7 Demand and supply curves

In Exhibit 3-7,if price happened to currently be $75 in this market,a ____ would result,causing a(n)____ in price.

A) shortage; increase
B) shortage; decrease
C) surplus; increase
D) surplus; decrease
E) market clearing; change

Question 37

Exhibit 3-8 Demand and supply data for radios

In Exhibit 3-9,if the market price is $20,

A) this market will be in equilibrium.
B) a shortage of 27 units will result.
C) the price is above the equilibrium price.
D) a surplus of 26 units will result.
E) a shortage of 26 units will result.

Question 38

The use of a price system eliminates:

A) scarcity.
B) equilibrium.
C) shortages and surpluses.
D) changes in supply and demand.

Question 39

Exhibit 3-8 Demand and supply data for radios

In Exhibit 3-8,at any market price of radios below $50,a(n)____ would result,causing price to ____.

A) excess demand; rise
B) excess supply; rise
C) excess demand; fall
D) excess supply; fall
E) surplus; rise

Question 40

Exhibit 3-8 Demand and supply data for radios

In Exhibit 3-8,if the price of radios was currently $45,there would be an ____ of ____ radios in this market.

A) Excess demand; 700
B) Excess demand; 500
C) Excess supply; 100
D) Excess supply; 600
E) Excess demand; 100

Question 41

Exhibit 3-12 Supply and demand data

In Exhibit 3-12,at a price of $2.00 the market will experience a(n):

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

Question 42

Exhibit 3-14 Supply and demand curves

In Exhibit 3-14,assume that the price of compact discs is $5 each.This price is:

A) an equilibrium price.
B) not an equilibrium price because there is an excess quantity supplied at a price of $5.
C) not an equilibrium price because there is an excess quantity demanded at a price of $5.
D) not an equilibrium price because the quantity supplied of compact discs is greater than the quantity demanded.

Question 43

Exhibit 3-14 Supply and demand curves

In Exhibit 3-14,assume that the market price of compact discs is $15 each.This price is:

A) an equilibrium price.
B) not an equilibrium price because there is an excess quantity demanded at a price of $15.
C) an equilibrium price because suppliers can store inventories in their warehouses.
D) not an equilibrium price because the quantity supplied of compact discs is greater than the quantity demanded.

Question 44

Exhibit 3-13 Supply and demand curves

Which of the graphs in Exhibit 3-13 illustrates a shortage exists at the indicated market price?

A) Diagram A.
B) Diagram B.
C) Diagram C.
D) Diagrams A and B.

Question 45

Exhibit 3-10 Demand and supply curves

In Exhibit 3-10,what do you expect to happen in this market at point C?

A) Competition among demanders will drive the price down.
B) Competition among demanders will drive the price up.
C) Competition among suppliers will drive the price up.
D) Competition among suppliers will drive the price down.
E) The equilibrium price A is not attainable.

Question 46

Exhibit 3-13 Supply and demand curves

Which of the graphs in Exhibit 3-13 illustrates a surplus exists at the indicated market price?

A) Diagram A.
B) Diagram B.
C) Diagram C.
D) Diagrams A and C.

Question 47

Exhibit 3-11 Demand and supply curves

In Exhibit 3-11,in Panel B the movement from A to C describes a(n):

A) increase in demand and a decrease in supply, where the increase in demand is relatively bigger.
B) decrease in both demand and supply, where the decrease in supply is relatively bigger.
C) increase in demand and a decrease in supply, where the decrease in supply is relatively bigger.
D) decrease in demand and increase in supply, where the increase in supply is relatively bigger.
E) increase in both demand and supply, where the increase in supply is relatively bigger.

Question 48

Exhibit 3-16 Supply and demand curves for chairs

In Exhibit 3-16,assume that the market price of chairs is $15 each.This price is:

A) an equilibrium price.
B) not an equilibrium price, since there is an excess demand at a price of $10.
C) an equilibrium price, since suppliers can store inventories in their warehouses.
D) not an equilibrium price, since the rate at which chairs are being supplied is greater than the rate at which they are being demanded.

Question 49

Exhibit 3-14 Supply and demand curves

In Exhibit 3-14,if the market price of compact discs is initially $15,a movement toward equilibrium would require:

A) no change, because an equilibrium already exists.
B) the price to fall below $15 and both the quantity supplied and the quantity demanded to fall.
C) the price to remain the same, but the supply curve to shift to the left.
D) the price to fall below $15, the quantity supplied to fall, and the quantity demanded to rise.

Question 50

Exhibit 3-12 Supply and demand data

In Exhibit 3-12 the equilibrium price and quantity in the market are:

A) $1.00, 200.
B) $1.50, 400.
C) $2.00, 100.
D) $1.50, 200.

Question 51

Exhibit 3-15 Supply and demand curves for good X

In the market shown in Exhibit 3-15,the equilibrium price and quantity of good X are:

A) $0.50, 250.
B) $2.00, 300.
C) $2.00, 100.
D) $1.00, 200.

Question 52

Exhibit 3-15 Supply and demand curves for good X

In Exhibit 3-15,if the market price of good X is initially $1.50,a movement toward equilibrium requires:

A) no change, because an equilibrium already exists.
B) the price to fall below $1.50 and both the quantity supplied and the quantity demanded to fall.
C) the price to remain the same, but the supply curve to shift to the left.
D) the price to fall below $1.50, the quantity supplied to fall, and the quantity demanded to rise.

Question 53

Exhibit 3-15 Supply and demand curves for good X

In Exhibit 3-15,if the market price of good X is initially $.50,a movement toward equilibrium requires:

A) no change, because an equilibrium already exists.
B) the price to fall below $.50 and both the quantity supplied and the quantity demanded to rise.
C) the price to remain the same, but the supply curve to shift to the left.
D) the price to rise above $.50, the quantity supplied to rise, and the quantity demanded to fall.

Question 54

Exhibit 3-10 Demand and supply curves

In Exhibit 3-10,which of the following is true about this graph?

A) When the price is $4, there is an excess supply.
B) When the price is $8, there is an excess demand.
C) When the price is $4, excess supply is greater than excess demand.
D) When the price is $8, excess demand is greater than excess supply.
E) When the price is $6, there is no excess demand or excess supply.

Question 55

Exhibit 3-15 Supply and demand curves for good X

In Exhibit 3-15,at a price of $.50 the market for good X will experience a:

A) shortage of 100 units.
B) surplus of 100 units.
C) shortage of 300 units.
D) surplus of 200 units.

Question 56

Exhibit 3-15 Supply and demand curves for good X

In Exhibit 3-15,if the price moves from $2.00 to $1.00,unsold inventories will:

A) fall, putting upward pressure on price.
B) fall, putting less pressure on price.
C) rise, putting less pressure on price.
D) rise, putting upward pressure on price.

Question 57

Exhibit 3-11 Demand and supply curves

In Exhibit 3-11,in Panel A the movement from A to B describes a(n):

A) increase in demand and an increase in the quantity supplied.
B) increase in the quantity demanded and an increase in supply.
C) decrease in demand and a decrease in the quantity supplied.
D) decrease in the quantity demanded and a decrease in supply.
E) decrease in the quantity demanded and an increase in supply.

Question 58

Exhibit 3-10 Demand and supply curves

In Exhibit 3-10,which of the following points represents an excess quantity supplied?

A) Point E.
B) Point B.
C) Point C.
D) Point F.
E) Point A.

Question 59

Exhibit 3-12 Supply and demand data

In Exhibit 3-12,which of the following occurs at a price of $1.00?

A) A shortage puts a downward pressure on price.
B) Quantity demanded exceeds quantity supplied, putting upward pressure on price.
C) Quantity supplied exceeds quantity demanded, putting upward pressure on price.
D) The surplus would be so small that there would be only slight upward pressure on price.

Question 60

Exhibit 3-11 Demand and supply curves

In Exhibit 3-11,in Panel A the movement from A to C describes a(n):

A) ambiguous change in price and a decrease in quantity.
B) increase in price and an ambiguous change in quantity.
C) increase in both price and quantity.
D) decrease in both price and quantity.
E) change in supply that dominates a change in demand.

Question 61

Suppose A and B are complementary goods.Other things being equal,the demand curve for A will shift to the right when the price of B goes up.

Question 62

Exhibit 3-16 Supply and demand curves for chairs

In Exhibit 3-16,assume that the market price of chairs is $5 each.This price is:

A) an equilibrium price.
B) not an equilibrium price, since there is an excess supply at a price of $5.
C) not an equilibrium price, since there is an excess demand at a price of $5.
D) not an equilibrium price, since the rate at which chairs are being supplied is great than the rate at which they are being demanded.

Question 63

If the price of good X increases and this causes an increase in the demand for good Y,then goods X and Y are substitute goods.

Question 64

If pork and beans is an inferior good,other things being equal,an increase in consumer income will decrease the demand for pork and beans.

Question 65

Demand curves slope downward to the right.

Question 66

Other things being equal,an increase in the price of gasoline will decrease the quantity demanded for gasoline.

Question 67

Suppose A and B are substitute goods.Other things being equal,the demand curve for A will shift to the right when the price of B goes down.

Question 68

The law of demand is the principle that there is an inverse between the price of a good and the quantity that buyers are willing to purchase in a defined time period,ceteris paribus.

Question 69

If X and Y are substitutes,the demand curve for X will shift to the right when the price of Y decreases.

Question 70

If people buy more of a generic brand when consumer income falls,it is an inferior good.

Question 71

Other things being equal,an increase in the price of aspirin will decrease the demand for aspirin.

Question 72

According to the law of demand,if the price of a good increases,other things being equal,the quantity demanded will decrease.

Question 73

If a vacation in Paris is a normal good,other things being equal,an increase in consumer income will increase the demand for travel to Paris.

Question 74

Other things being equal,a fall in the price of Coca-Cola will increase the quantity of Coca-Cola demanded.

Question 75

Suppose A and B are complementary goods.Other things being equal,the demand curve for A will shift to the right when the price of B goes down.

Question 76

Exhibit 3-16 Supply and demand curves for chairs

In Exhibit 3-16,if the market price of chairs is initially $15,a movement toward equilibrium would require:

A) no change, because an equilibrium already exists.
B) the price to fall below $15 and both the quantity supplied and the quantity demanded to fall.
C) the price to remain the same, but the supply curve to shift to the left.
D) the price to fall below $15, the quantity supplied to fall, and the quantity demanded to rise.

Question 77

An increase in demand is reflected as a rightward (outward)shift of the demand curve and is caused by an increase in price.

Question 78

If movies are an inferior good,movie attendance will rise when consumer incomes fall.

Question 79

Higher milk prices reduce the demand for milk.

Question 80

If renting videos is an inferior good,demand for this service will rise when consumer income falls.