Deck 4: Demand, Supply, and Market Equilibrium

Question 1

If there is an advance in the technology used to produce a product, what is the likely effect it may have on the supply?

A) More people would be needed to produce the product.
B) The company would not change its manufacturing.
C) It would decrease the supply.
D) It would increase the supply.

Answer 1

It would increase the supply.

Question 2

Suppose that the quantity demanded for cars exceeds the quantity supplied of cars. We would expect that:

A) the supply will increase to meet the demand.
B) the demand will decrease to meet the supply.
C) the price of cars will decrease.
D) the price of cars will increase.

Answer 2

the price of cars will increase.

Question 3

Figure 4.6
Figure 4.6 illustrates a set of supply and demand curves for a product. Suppose that the market is currently in point A. If the price of the input of the product decreases, the market will move to point:

A) A.
B) B.
C) C.
D) D.

Answer 3

B.

Question 4

Which of the following is the least likely complement for hamburgers?

A) beef
B) soda
C) hamburger buns
D) cheese

Question 5

Assume that tortilla chips and salsa are complements. When the price of tortilla chips decreases:

A) the demand for salsa decreases.
B) the demand for salsa increases.
C) the supply of salsa decreases.
D) the demand for tortilla chips decreases.

Question 6

Figure 4.6
Figure 4.6 illustrates a set of supply and demand curves for a product. If the good were inferior and the consumer's income decreases, then this can be illustrated as moving from point:

A) A to B.
B) C to B.
C) E to B.
D) B to A.

Question 7

Figure 4.4
Figure 4.4 illustrates the demand for guitars. An increase in the demand for guitars is represented by the movement from:

A) D₁ to D₀.
B) point B to point C.
C) D₁ to D₂.
D) point B to point A.

Question 8

Two goods are substitutes if:

A) the demand for one good decreases when the price of the other decreases.
B) the supply of one good decreases when the price of the other decreases.
C) the supply of one good decreases when the price of the other increases.
D) the demand for one good decreases when the price of the other increases.

Question 9

The quantity of a product that consumers are willing and able to buy at a given price is called the

A) quantity demanded.
B) demand schedule.
C) demand for a good.
D) quantity supplied.

Question 10

Suppose that people expect that the price of orange juice will fall next month. We would predict that the equilibrium quantity of orange juice will _______ and the equilibrium price of orange juice will _______ this month.

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

Question 11

A change in the quantity demanded of a product cannot be the result of a change in:

A) the buyer's preference.
B) consumer income.
C) the price of related goods.
D) All of the above are correct.

Question 12

Recall Application 1, "Hurricane Katrina and the Baton Rouge Housing Prices," to answer the following questions:
Hurricane Katrina in 2005 caused housing prices to rise in nearby areas like Baton Rouge due to

A) a decrease in housing supply due to hurricane damage.
B) a decrease in housing demand because people left the area.
C) an increase in housing supply due to a growth in building.
D) an increase in housing demand from refugees from the affected area.

Question 13

If the government imposes a price ceiling that is above the equilibrium price, then the market will experience:

A) an equilibrium.
B) a shortage.
C) an excess supply.
D) no scarcity.

Question 14

Figure 4.6
Figure 4.6 illustrates a set of supply and demand curves for a product. When the economy moves from point A to point B, there has been:

A) an increase in supply and an increase in quantity demanded.
B) an increase in quantity supplied and an increase in demand.
C) an increase in supply and an increase in demand.
D) an increase in quantity supplied and an increase in quantity demanded.

Question 15

Recall Application 5, "Droughts in Australia and the Price of Rice," to answer the following questions:
The drought in Australia has caused a shift in the:

A) supply curve for rice to the right.
B) demand curve for rice to the right.
C) demand curve for rice to the left.
D) supply curve for rice to the left.

Question 16

Suppose you have 2 goods, X and Y. If the price of X decreases and you buy more Y, then X and Y are:

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

Question 17

Suppose that the government requires that farms use only animals instead of machinery when planting and harvesting corn. This will result in a/an:

A) increase in the quantity supplied of corn.
B) decrease in the supply of corn.
C) increase in the supply of corn.
D) decrease in the quantity supplied of corn.

Question 18

A supply curve is defined as the relationship between:

A) the price of a good and the quantity that consumers are willing to buy.
B) the price of a good and the quantity that producers are willing to sell.
C) the income of consumers and the quantity of a product that producers are willing to sell.
D) the income of consumers and the quantity of a product that consumers are willing to buy.

Question 19

When there is a change in the quantity demanded it means that the:

A) quantity a consumer is willing to buy changes when the price changes.
B) hours the customer can buy products each day have increased.
C) number of products in inventory have increased.
D) selling price of the products has not changed.

Question 20

Recall Application 4, "The Bouncing Price of Vanilla Beans," to answer the following questions:
If after a cyclone strikes a vanilla- producing area, farmers in several new countries plant vanilla, we would expect that over time as the damaged vanilla area is replanted to see a(n)

A) increased demand and output and a higher price of vanilla.
B) reduced demand and output and a lower price of vanilla.
C) reduced supply and output and a higher price of vanilla.
D) increased supply and output and a lower price of vanilla.

Question 21

What happens if the price of a product is below the equilibrium price?

A) There will be an excess demand for the product.
B) The buyers will stop purchasing a "cheap" product.
C) The producer will lower the price to make more profit.
D) none of the above

Question 22

Peaches and cream are complements. When the price of peaches falls and the price of raw milk (used to make cream) rises:

A) the equilibrium price of cream rises and the equilibrium quantity of cream might rise or fall.
B) the equilibrium price of cream falls and the equilibrium quantity of cream might rise or fall.
C) the equilibrium price of cream falls and the equilibrium quantity of cream falls.
D) the equilibrium price of cream falls and the equilibrium quantity of cream rises.

Question 23

Figure 4.7
If supply increases in Figure 4.7, then the equilibrium:

A) price and quantity rise.
B) price rises and quantity falls.
C) price falls and quantity rises.
D) price and quantity fall.

Question 24

Figure 4.3
Figure 4.3 illustrates the supply and demand for blue jeans. If the actual price of blue jeans is $30, there is:

A) excess supply of 40 pairs of blue jeans.
B) excess demand of 50 pairs of blue jeans.
C) excess demand of 40 pairs of blue jeans.
D) excess supply of 50 pairs of blue jeans.

Question 25

Bananas and apples are substitutes. When the price of bananas rises and a technological advance in apple production occurs at the same time:

A) the equilibrium price of apples rises and the equilibrium quantity of apples falls.
B) the equilibrium price of apples rises and the equilibrium quantity of apples rises.
C) the equilibrium price of apples rises and the equilibrium quantity of apples might rise or fall.
D) the equilibrium quantity of apples rises and the equilibrium price of apples might rise or fall.

Question 26

Recall Application 3, "The Supply and Demand for Cruise Ship Berths," to answer the following questions:
Based on what we learned from the application, one way to increase the price of cruise ship berths is to:

A) retire some of the cruise ships from service.
B) get the economy out of a recession.
C) invest more on additional new cruise ships.
D) A and B are correct.

Question 27

Judy demands more peanuts as her income increases. From this, we can conclude that, for Judy:

A) peanuts are a normal good.
B) peanuts are a complementary good.
C) peanuts are an inferior good.
D) peanuts are a substitute good.

Question 28

A decrease in demand for coffee can be caused by:

A) a decrease in demand due to changing preferences for healthier products.
B) an increase in income and coffee is an inferior good.
C) an increase in demand for substitute products by younger populations.
D) all of the above.

Question 29

If the government imposes a price floor that is above the equilibrium price, then the market will experience:

A) an equilibrium.
B) a shortage.
C) an excess supply.
D) an increase in demand.

Question 30

Figure 4.3
Figure 4.3 illustrates the supply and demand for blue jeans. If the actual price of blue jeans is $30, we would expect the price of blue jeans to _______, the quantity demanded of blue jeans to _______, and the quantity supplied of blue jeans _______.

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

Question 31

Figure 4.1
Refer to Figure 4.1 that shows Mary and Tom's individual demand curves for meals per week at Fratelli's Italian Restaurant. Assuming Mary and Tom are the only consumers in the market, if the market quantity demanded is 6, the price must be:

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

Question 32

Suppose that in 2006, 12 million cars were purchased at $15,000 each, while in 2007, 10 million cars were purchased at $12,000 each. What might have caused this change?

A) The price of airplane tickets (a substitute for cars) rose.
B) Automobile manufacturing technology decreased.
C) Automobile manufacturing technology increased.
D) The price of airplane tickets (a substitute for cars) fell.

Question 33

Figure 4.6
Figure 4.6 illustrates a set of supply and demand curves for a product. When the economy moves from point B to point C, there has been:

A) a decrease in quantity supplied and a decrease in demand.
B) a decrease in supply and a decrease in quantity demanded.
C) a decrease in quantity supplied and a decrease in quantity demanded.
D) a decrease in supply and a decrease in demand.

Question 34

Figure 4.5
Figure 4.5 illustrates the supply of guitars. A technological advancement that makes guitars cheaper to produce would most likely cause a movement from:

A) S₁ to S₀.
B) S₁ to S₂.
C) point B to point C.
D) point B to point A.

Question 35

Suppose that a market for a product is in equilibrium at a price of $5 per unit. At any price above $5 per unit:

A) there will be an excess demand for the product.
B) there will be an excess supply of the product.
C) the quantity supplied of the product will be greater than the quantity demanded of that product.
D) both B and C.

Question 36

Suppose that a new study is released stating that consumption of orange juice (a substitute for apple juice) reduces the risk of cancer and a major freeze destroys half of the country's apple crop. What happens to the price and quantity of apple juice?

A) The price of apple juice falls and the quantity of apple juice falls.
B) The quantity of apple juice might rise or fall and the price of apple juice rises.
C) The price of apple juice might rise or fall and the quantity of apple juice falls.
D) The price of apple juice might rise or fall and the quantity of apple juice rises.

Question 37

When the price of a substitute product decreases, the demand for a substitute product:

A) increases.
B) changes to balance the price change.
C) decreases.
D) none of the above

Question 38

The market supply curve is:

A) upward sloping and is flatter than an individual's supply curve.
B) upward sloping and is steeper than an individual's supply curve.
C) downward sloping and is steeper than an individual's supply curve.
D) downward sloping and is flatter than an individual's supply curve.

Question 39

The market supply curve is:

A) always horizontal.
B) negatively sloped.
C) always vertical
D) upward sloping.

Question 40

Figure 4.7
If demand decreases and supply increases in Figure 4.7, then the equilibrium:

A) price rises.
B) price falls.
C) quantity rises.
D) quantity falls.

Question 41

Suppose that consumption of oat bran is found to reduce cholesterol and improve health. The result is that:

A) the demand for oat bran increases.
B) the demand for oat bran decreases.
C) the supply of oat bran increases.
D) Both A and C are correct.

Question 42

Recall Application 2, "Honeybees and the Price of Ice Cream," to answer the following questions:
Using supply and demand analysis, if the "colony collapse disorder (CCD)" of honey bees caused a leftward shift of the supply curve for ice cream, then which of the following must be true?

A) The equilibrium price of ice creams increased and the equilibrium quantity increased.
B) The equilibrium price of ice creams increased and the equilibrium quantity decreased.
C) The equilibrium price of ice creams decreased and the equilibrium quantity increased.
D) The equilibrium price of ice creams decreased and the equilibrium quantity decreased.

Question 43

As consumers prefer smaller and more fuel- efficient cars, the

A) quantity demanded for SUVs will rise.
B) demand for SUVs will decrease.
C) demand for SUVs will increase.
D) quantity demanded for SUVs will fall.

Question 44

Which of the following is the most likely complement for hamburgers?

A) hamburger buns
B) cheese
C) soda
D) All of the above are complements.

Question 45

Which of the following can increase the number of pizzas a seller is willing to sell at a given price?

A) The cost of inputs such as pepperoni and cheese goes up.
B) The amount of subsidies that pizza makers receive from the government decreases.
C) The number of workers working in the pizza factory decreases.
D) A new technology is developed that allows producers to make the same sized pizza using less cheese and dough.

Question 46

Recall Application 3, "The Supply and Demand for Cruise Ship Berths," to answer the following questions:
Because the application claims that a recession will decrease the demand for cruise ships, we can infer that cruise ship berths are:

A) inputs to the production of cruise ships.
B) normal goods.
C) complements.
D) inferior goods.

Question 47

Why is the market supply curve positively sloped?

A) At a higher price, more firms enter the market willing to sell the product or service.
B) At a higher price, fewer firms enter the market willing to sell the product or service.
C) At a higher price, the firms already in the market and are willing to sell a larger quantity of the product or service.
D) Both A and C are correct.

Question 48

Two goods are complements if:

A) the demand for one good decreases when the price of the other increases.
B) the supply of one good decreases when the price of the other decreases.
C) the demand for one good decreases when the price of the other decreases.
D) the supply of one good decreases when the price of the other increases.

Question 49

Figure 4.5
Figure 4.5 illustrates the supply of guitars. An increase in the price of rosewood, which is used to make guitars, would most likely cause a movement from:

A) point B to point C.
B) point B to point A.
C) S₁ to S₂.
D) S₁ to S₀.

Question 50

If we observe that the price is rising in the sugar market, it could be due to:

A) a decrease in the demand for sugar.
B) an excess supply of sugar.
C) an increase in the supply of sugar.
D) an excess demand for sugar.

Question 51

Figure 4.4
Figure 4.4 illustrates the demand for guitars. Assume that guitars and banjos are substitutes. A decrease in the price of banjos would bring about a movement from:

A) point B to point C.
B) D₁ to D₂.
C) point B to point A.
D) D₁ to D₀.

Question 52

Suppose that a technological advancement substantially reduces the cost of producing cheese. We would predict that the equilibrium quantity of cheese will _______ and the equilibrium price of cheese will _______.

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

Question 53

At a price of $1000, Dell Computer Co. is willing 20 laptops and Compaq is willing to sell 40 laptops. IBM will only sell laptops if the price is $1300 or higher. From the point of view of IBM, $1300 is the:

A) minimum cost.
B) the equilibrium price.
C) minimum loss price.
D) minimum supply price.

Question 54

Suppose that the price of fertilizer, an input in the production of corn, falls. We would predict that the equilibrium quantity of corn will _______ and the equilibrium price of corn will _______ .

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

Question 55

In considering the relationships between price and quantity demanded, certeris paribus means economists assume that:

A) either price or quantity can affect demand.
B) price increases affect quantity.
C) quantity increases affect prices.
D) all other variables remain unchanged.

Question 56

A decrease in the tuition (i.e., price) that a public university charges would result in:

A) an downward movement along the supply curve for college classes.
B) an upward movement along the supply curve for college classes.
C) a shift in the supply of college classes to the right.
D) a shift in the supply of college classes to the left.

Question 57

If sellers have an expectation of higher future prices:

A) the current demand for that good will decrease.
B) the current supply of that good will decrease.
C) the current supply of that good will increase.
D) the current demand for that good will increase.

Question 58

Figure 4.2
In Figure 4.2, which of the panels depicts a market in which there is an excess supply of a product?

A) Panel A
B) Panel B
C) Panel C
D) None of the panels depicts a market in which there is an excess supply of a product.

Question 59

A decrease in the amount of subsidies that a public university receives would result in:

A) an downward movement along the supply curve for college classes.
B) a shift in the supply of college classes to the left.
C) an upward movement along the supply curve for college classes.
D) a shift in the supply of college classes to the right.

Question 60

If a technological advance makes it possible to produce bananas at a lower cost:

A) the supply of bananas decreases.
B) the supply of bananas increases.
C) the demand for bananas increases.
D) the demand for bananas decreases.

Question 61

Bananas and apples are substitutes. When the price of bananas rises, the equilibrium quantity of apples will _______ and the equilibrium price of apples will _______.

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

Question 62

Suppose that the price for fully electric vehicle made by Toyota increases. The quantity of fully electric cars sold in the market will:

A) increase, because Toyota would be willing to sell more fully electric vehicles.
B) decrease, because Toyota believes that to maintain the higher prices, it must sell a smaller quantity.
C) increase, because other auto manufacturers would want to enter the market and also sell fully electric vehicles.
D) Both A and C are correct.

Question 63

Figure 4.7
If supply decreases in Figure 4.7, then the equilibrium:

A) price and quantity rise.
B) price rises and quantity falls.
C) price falls and quantity rises.
D) price and quantity fall.

Question 64

The market demand curve:

A) is drawn assuming that the number of consumers is fixed.
B) is drawn assuming that variables such as income and tastes are fixed.
C) shows the relationship between the price of a good and the quantity that all consumers together are willing to buy.
D) all of the above

Question 65

Recall Application 3, "The Supply and Demand for Cruise Ship Berths," to answer the following questions:
Based on the application, an increase in the supply of cruise ships (all else equal) would cause the equilibrium price of cruise ship berths to:

A) remain constant.
B) increase or decrease, without certainty.
C) decrease.
D) increase.

Question 66

Suppose that in 2006, 8 million cars were purchased at $15,000 each, while in 2007, 10 million cars were purchased at $12,000 each. What might have caused this change?

A) The price of airplane tickets (a substitute for cars) fell.
B) The price of airplane tickets (a substitute for cars) rose.
C) There were fewer workers in automobile manufacturing.
D) There was an advance in automobile manufacturing technology.

Question 67

A perfectly competitive market is a market that has:

A) many sellers
B) no single buyer or seller who can affect the price.
C) many buyers
D) All of the above are correct.

Question 68

If the government imposes a price ceiling that is below the equilibrium price, then the market will experience:

A) an equilibrium.
B) a shortage.
C) an excess supply.
D) no scarcity.

Question 69

When a supply curve is drawn, which of the following is not held constant?

A) the price of the good
B) the state of production technology
C) prices of inputs
D) taxes and subsidies

Question 70

Figure 4.7
If demand increases and supply decreases in Figure 4.7, then the equilibrium:

A) price rises.
B) price falls.
C) quantity rises.
D) quantity falls.

Question 71

Recall Application 1, "Hurricane Katrina and the Baton Rouge Housing Prices," to answer the following questions:
Hurricane Katrina in 2005 caused housing prices to rise in the affected area due to

A) a decrease in housing supply due to hurricane damage.
B) an increase in housing supply due to a growth in building.
C) a decrease in housing demand because people left the area.
D) an increase in housing demand from refugees from the affected area.

Question 72

Suppose that there are only three consumers of a product. At a price of $3 per unit, the first consumer would buy 6 units of the product, the second consumer would buy 5 units, and the third consumer would buy 7 units of the product. If you drew a market demand curve for this product, the quantity demanded at a price of $3 would be:

A) 13 units.
B) 18 units.
C) 11 units.
D) unable to be determined based on the information provided.

Question 73

If the incomes increase and electricity is a normal good, then:

A) the quantity demanded for electricity decreases.
B) the demand for electricity increases.
C) the quantity demanded for electricity increases.
D) the demand for electricity decreases.

Question 74

Figure 4.4
Figure 4.4 illustrates the demand for guitars. Assume guitars are an inferior good. An increase in income would bring about a movement from:

A) D₁ to D₀.
B) D₁ to D₂.
C) point B to point A.
D) point B to point C.

Question 75

Recall Application 1, "Hurricane Katrina and the Baton Rouge Housing Prices," to answer the following questions:
If the government mandated that the average price of houses in Baton Rouge stay at $136,000 after Hurricane Katrina, we would expect that the housing market in Baton Rouge would experience:

A) a surplus of houses.
B) a shortage of houses.
C) an increase in quantity supplied of houses.
D) an equilibrium.

Question 76

Suppose that the population of a country decreases. Assuming that people in that country enjoy eating steak, we would predict that the equilibrium quantity of steak will _______ and the equilibrium price of steak will _______ in that country.

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

Question 77

Suppose you have 2 goods, X and Y. If the price of X increases and you buy more Y, then X and Y are:

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

Question 78

Figure 4.4
Figure 4.4 illustrates the demand for guitars. Assume that guitars and guitar strings are complements. An increase in the price of guitar strings would bring about a movement from:

A) point B to point A.
B) D₁ to D₀.
C) D₁ to D₂.
D) point B to point C.

Question 79

Figure 4.5
Figure 4.5 illustrates the supply of guitars. A decrease in the supply of guitars is represented by a movement from:

A) S₁ to S₂.
B) point B to point C.
C) point B to point A.
D) S₁ to S₀.

Question 80

Figure 4.1
Refer to Figure 4.1 that shows Mary and Tom's individual demand curves for meals per week at Fratelli's Italian Restaurant. Assuming Mary and Tom are the only consumers in the market, what is the market quantity demanded at a price of $10?

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