Deck 3: Demand, Supply, and Market Equilibrium

Question 1

Economists would classify the Boston Symphony Orchestra as a firm.

Answer 1

True

Question 2

Resources are exchanged in ________ markets.

A) product
B) factor
C) exchange rate
D) stock

Answer 2

factor

Question 3

Michael Dell was the first individual who sold computers by mail order. The company founded by Dell is now one of the largest and most successful computer companies in the United States. Michael Dell would be classified as a(n)

A) entrepreneur.
B) opportunist.
C) monopolist.
D) socialist.

Answer 3

entrepreneur.

Question 4

The consuming units in an economy are known as

A) firms.
B) entrepreneurs.
C) households.
D) factors.

Question 5

Among the factors of production are

A) capital.
B) wages.
C) income.
D) all of the above

Question 6

Most firms exist to make a profit.

Question 7

In an output market

A) consumers purchase products.
B) firms purchase resources.
C) households earn income.
D) land, labor, and capital may be exchanged.

Question 8

An entrepreneur is a person who does all of the following except

A) assumes the risk of a firm.
B) organizes and manages a firm.
C) turns a new idea or product into a business.
D) always makes a profit.

Question 9

All households have ultimately limited incomes.

Question 10

Why do firms engage in the activity of production?

A) to help society advance technologically
B) to participate in the circular flow
C) to acquire profits
D) to develop a supply schedule

Question 11

Firms are the producing units of the economy.

Question 12

In factor, or input, markets

A) consumers purchase products.
B) firms supply goods.
C) firms demand resources.
D) households demand goods.

Question 13

Economists would classify the New York Mets as a firm.

Question 14

A factor market is

A) where goods are exchanged.
B) where resources are exchanged.
C) where goods are made.
D) organized by government.

Question 15

In input, or factor, markets

A) consumers purchase products.
B) firms supply goods.
C) households supply resources.
D) households demand goods.

Question 16

Mary Kay Ash was one of the first individuals who sold cosmetics directly to customers via independent sales representatives. The company founded by Mary Kay is now one of the largest and most successful cosmetics companies in the world. Mary Kay Ash would be classified as a(n)

A) entrepreneur.
B) opportunist.
C) monopolist.
D) socialist.

Question 17

Organizations that transform resources into products are known as

A) firms.
B) entrepreneurs.
C) households.
D) factors.

Question 18

Entrepreneurs are unnecessary in a market economy, and their profit is unearned.

Question 19

An entrepreneur is a person who

A) assumes the risk of a firm.
B) organizes and manages a firm.
C) turns a new idea or product into a business.
D) all of the above

Question 20

Firms are organizations that

A) take advantage of the public.
B) transform resources into products.
C) transform outputs into inputs.
D) demand consumer outputs.

Question 21

Consumers purchase products in ________ markets.

A) output
B) factor
C) resource
D) input

Question 22

Factors of production are traded in the product market.

Question 23

Labor is demanded by firms in an output market.

Question 24

If the demand for coffee decreases as income decreases, coffee is a(n)

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

Question 25

If the demand for sardines increases as income decreases, sardines are a(n)

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

Question 26

As an individual consumes more of a product within a given period of time, it is likely that each additional unit consumed will yield

A) successively less satisfaction.
B) successively more satisfaction.
C) the same amount of satisfaction.
D) less satisfaction for a while and then start to add more satisfaction.

Question 27

Payment in the land market is called rent.

Question 28

Refer to the information provided in Figure 3.1 below to answer the question(s) that follow. Figure 3.1
Refer to Figure 3.1. Which of the following would be most likely to cause the demand for Dr. Pepper to shift from D₀ to D₁?

A) an increase in income, assuming that Dr. Pepper is a normal good
B) a decrease in the price of 7-UP, assuming 7-UP is a substitute for Dr. Pepper
C) an increase in the price of Dr. Pepper
D) an increase in the price of sugar used to make Dr. Pepper

Question 29

Refer to the information provided in Figure 3.1 below to answer the question(s) that follow. Figure 3.1
Refer to Figure 3.1. Which of the following would be most likely to cause the demand for Dr. Pepper to shift from D₀ to D₁?

A) a decrease in income, assuming that Dr. Pepper is a normal good
B) an increase in the price of 7-UP, assuming 7-UP is a substitute for Dr. Pepper
C) a decrease in the price of Dr. Pepper
D) a reduction in the price of sugar used to make Dr. Pepper

Question 30

The "law of demand" implies that

A) as prices fall, demand increases.
B) as prices rise, demand increases.
C) as prices fall, quantity demanded increases.
D) as prices rise, quantity demanded increases.

Question 31

According to the law of demand there is ________ relationship between price and quantity demanded.

A) a positive
B) a negative
C) either a positive or negative
D) a constantly changing

Question 32

Payment in the capital market is called investment.

Question 33

Which of the following will cause a shift in the demand curve for hoverboards?

A) a change in income
B) a change in wealth
C) a change in taste or preference
D) all of the above

Question 34

Refer to the information provided in Figure 3.2 below to answer the question(s) that follow. Figure 3.2
Refer to Figure 3.2. Which of the following would be most likely to cause the demand for macaroni and cheese to shift from D₀ to D₁?

A) a decrease in the price of macaroni and cheese
B) an increase in the price of flour used to make macaroni and cheese
C) a decrease in income, assuming macaroni and cheese is a normal good
D) an increase in the quantity demanded for macaroni and cheese

Question 35

Capital, labor, and land are

A) factors of production.
B) inputs.
C) resources.
D) all of the above

Question 36

Households are paid income for the resources they supply in an input market.

Question 37

Refer to the information provided in Figure 3.2 below to answer the question(s) that follow. Figure 3.2
Refer to Figure 3.2. Which of the following would be most likely to cause the demand for macaroni and cheese to shift from D₁ to D₀?

A) an increase in the price of macaroni and cheese
B) an increase in the price of flour used to make macaroni and cheese
C) an increase in income, assuming macaroni and cheese is a normal good
D) an increase in the quantity demanded for macaroni and cheese

Question 38

Inputs are traded in the factor market.

Question 39

According to the law of demand, as prices rise, ceteris paribus

A) demand increases.
B) demand decreases.
C) quantity demanded decreases.
D) quantity demanded increases.

Question 40

Which of the following is held constant along the demand curve?

A) price of the good
B) quantity
C) income
D) both A and B

Question 41

Refer to the information provided in Figure 3.3 below to answer the question(s) that follow. Figure 3.3
Refer to Figure 3.3. As your income decreased, the demand for X shifted from D₁ to D₂. Good X is

A) an inferior good.
B) a normal good.
C) a luxury good.
D) an income-neutral good.

Question 42

Demand curves are derived while holding constant

A) income, tastes, and the price of the good.
B) only income and tastes.
C) income, tastes, and the prices of other goods.
D) only tastes and the prices of other goods.

Question 43

A decrease in demand for cameras would likely be caused by

A) an increase in the price of a substitute good.
B) an increase in the price of cameras.
C) an increase in the price of a complementary good.
D) a decrease in the price of cameras.

Question 44

Refer to the information provided in Figure 3.6 below to answer the question(s) that follow. Figure 3.6
Refer to Figure 3.6. The number of DVDs Isabel rents per week decreases from 7 to 4. This is caused by

A) a decrease in income if DVDs are a normal good.
B) an increase in the price of popcorn which is a complement to DVDs.
C) an increase in the rental price of DVDs.
D) a decrease in the streaming price of pay-per-view movies.

Question 45

Refer to the information provided in Figure 3.3 below to answer the question(s) that follow. Figure 3.3
Refer to Figure 3.3. As your income increased, the demand for X shifted from D₁ to D₂. Good X is

A) an inferior good.
B) a normal good.
C) a luxury good.
D) an income-neutral good.

Question 46

During an economic downturn when consumer income falls, the demand for tacos increases and the demand for sushi decreases. This implies that tacos

A) and sushi are complements.
B) are a normal good and sushi is an inferior good.
C) are an inferior good and sushi is a normal good.
D) are an economic bad and sushi is an economic good.

Question 47

Suppose the demand for books goes down when the price of video games goes down. We can say that these two goods are

A) complements.
B) substitutes.
C) unrelated goods.
D) perfect substitutes.

Question 48

In college you practically existed on instant noodles, but now you earn $95,000 a year. You never want to see instant noodles again. We can safely conclude that you consider instant noodles to be a(n)

A) normal good.
B) complementary good.
C) luxury.
D) inferior good.

Question 49

Refer to the information provided in Figure 3.5 below to answer the question(s) that follow. Figure 3.5
Refer to Figure 3.5. If consumer income increases, the demand for chili peppers shifts from D₀ to D₁. This implies that chili peppers are a(n)

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

Question 50

Demand for one item goes down when the price of another item goes up. These items must be

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

Question 51

The quantity demanded of Pepsi has decreased. The best explanation for this is that

A) the price of Coca-Cola has increased.
B) Pepsi's advertising is not as effective as in the past.
C) the price of Pepsi has increased.
D) Pepsi consumers had an increase in income.

Question 52

A good whose demand is inversely related to income is a(n)

A) normal good.
B) inferior good.
C) regular good.
D) new good.

Question 53

Refer to the information provided in Figure 3.4 below to answer the question(s) that follow. Figure 3.4
Refer to Figure 3.4. If consumer income falls, the demand for tuna fish sandwiches shifts from D₀ to D₁. This implies that tuna fish sandwiches are a(n)

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

Question 54

When the decrease in the price of one good causes the demand for another good to decrease, the goods are

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

Question 55

Refer to the information provided in Figure 3.4 below to answer the question(s) that follow. Figure 3.4
Refer to Figure 3.4. If consumer income increases, the demand for tuna fish sandwiches shifts from D₀ to D₁. This implies that tuna fish sandwiches are a(n)

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

Question 56

For inferior goods, a decrease in income will cause the

A) quantity demanded to fall.
B) demand to increase.
C) demand to fall.
D) quantity demanded to increase.

Question 57

An increase in the price of a good or service leads to a(n) ________ that leads to a(n) ________.

A) decrease in demand; movement along the demand curve
B) decrease in quantity demanded; movement along the demand curve
C) increase in demand; shift of the demand curve
D) increase in quantity demanded; shift of the demand curve

Question 58

Refer to the information provided in Figure 3.5 below to answer the question(s) that follow. Figure 3.5
Refer to Figure 3.5. If consumer income decreases, the demand for chili peppers shifts from D₀ to D₁. This implies that chili peppers are a(n)

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

Question 59

In response to news reports that taking aspirin daily can reduce an individual's risk of a heart attack, there will most likely be a(n)

A) increase in the supply of aspirin.
B) decrease in the supply of aspirin.
C) increase in the demand for aspirin.
D) increase in the quantity demanded of aspirin.

Question 60

Refer to the information provided in Figure 3.6 below to answer the question(s) that follow. Figure 3.6
Refer to Figure 3.6. The number of DVDs Isabel rents per week increases from 4 to 7. This is caused by

A) an increase in income if DVDs are a normal good.
B) a decrease in the price of popcorn, which is a complement to DVDs.
C) a decrease in the rental price of DVDs.
D) either A or B

Question 61

Refer to the information provided in Figure 3.7 below to answer the following question(s). Figure 3.7
Refer to Figure 3.7. Assume the market is initially at Point B and that pizza is a normal good. An increase in income would cause the market to move from Point B on demand curve D₂ to

A) Point A on demand curve D₂.
B) Point C on demand curve D₂.
C) demand curve D₁.
D) demand curve D₃.

Question 62

Refer to the information provided in Figure 3.8 below to answer the following question(s). Figure 3.8
Refer to Figure 3.8. Assume there are only two people in the market for baseball caps: Alex and Ryan. Along the market demand curve for baseball caps, at a price of ________, quantity demanded would be ________.

A) $10; 6
B) $10; 12
C) $8; 14
D) $8; 25

Question 63

Refer to the information provided in Figure 3.7 below to answer the following question(s). Figure 3.7
Refer to Figure 3.7. Assume the market is initially at Point B and that pizza is a normal good. A decrease in income would cause the market to move from Point B on demand curve D₂ to

A) demand curve D₁.
B) demand curve D₃.
C) Point A on demand curve D₂.
D) Point C on demand curve D₂.

Question 64

Refer to the information provided in Figure 3.7 below to answer the following question(s). Figure 3.7
Refer to Figure 3.7. An increase in demand is represented by the movement

A) from D₂ to D₁.
B) from D₂ to D₃.
C) along D₂ from Point B to Point A.
D) along D₂ from Point B to Point C.

Question 65

Refer to the information provided in Figure 3.7 below to answer the following question(s). Figure 3.7
Refer to Figure 3.7. A decrease in demand is represented by the movement

A) from D₂ to D₁.
B) from D₂ to D₃.
C) along D₂ from Point B to Point A.
D) along D₂ from Point B to Point C.

Question 66

Refer to the information provided in Figure 3.7 below to answer the following question(s). Figure 3.7
Refer to Figure 3.7. If pizza and burritos are substitutes, a decrease in the price of burritos will cause a movement from Point B on demand curve D₂ to

A) demand curve D₁.
B) demand curve D₃.
C) Point A on demand curve D₂.
D) Point C on demand curve D₂.

Question 67

Refer to the information provided in Figure 3.8 below to answer the following question(s). Figure 3.8
Refer to Figure 3.8. Assume there are only two people in the market for baseball caps: Alex and Ryan. Along the ________, at a price of $8, quantity demanded would be 7.

A) demand curve for Alex only
B) demand curve for Ryan only
C) market demand curve
D) demand curves for both Ryan and Alex

Question 68

Refer to the information provided in Figure 3.7 below to answer the following question(s). Figure 3.7
Refer to Figure 3.7. A movement from Point A to Point B on demand curve D₂ would be caused by a(n)

A) decrease in income, assuming pizza is a normal good.
B) decrease in the price of burritos, assuming that pizza and burritos are substitutes.
C) decrease in the price of pizza.
D) increase in the price of pizza.

Question 69

Refer to the information provided in Figure 3.7 below to answer the following question(s). Figure 3.7
Refer to Figure 3.7. If pizza and hamburgers are substitutes, an increase in the price of hamburgers will cause a movement from Point B on demand curve D₂ to

A) demand curve D₁.
B) demand curve D₃.
C) Point A on demand curve D₂.
D) Point C on demand curve D₂.

Question 70

Refer to the information provided in Figure 3.7 below to answer the following question(s). Figure 3.7
Refer to Figure 3.7. A decrease in quantity demanded is represented by the movement

A) from D₂ to D₁.
B) from D₂ to D₃.
C) along D₂ from Point B to Point A.
D) along D₂ from Point B to Point C.

Question 71

Refer to the information provided in Figure 3.9 below to answer the following question(s). Figure 3.9
Refer to Figure 3.9. Assume there are only two people in the market for coconuts: Sasha and Kyle. Along the market demand curve for coconuts, at a price of ________, quantity demanded would be ________.

A) $10; 9
B) $10; 10
C) $14; 9
D) $14; 8

Question 72

Refer to the information provided in Figure 3.9 below to answer the following question(s). Figure 3.9
Refer to Figure 3.9. Assume that there are only two people in the market for coconuts: Sasha and Kyle. Along the ________ for coconuts, at a price of $14, quantity demanded would be 10.

A) demand curve for Sasha
B) demand curve for Kyle
C) market demand curve
D) none of the above

Question 73

Refer to the information provided in Figure 3.7 below to answer the following question(s). Figure 3.7
Refer to Figure 3.7. An increase in quantity demanded is represented by the movement

A) from D₂ to D₁.
B) from D₂ to D₃.
C) along D₂ from Point B to point A.
D) along D₂ from Point B to point C.

Question 74

Refer to the information provided in Figure 3.7 below to answer the following question(s). Figure 3.7
Refer to Figure 3.7. If pizza and beer are complementary goods, a decrease in the price of beer will cause a movement from Point B on demand curve D₂ to

A) demand curve D₁.
B) demand curve D₃.
C) Point A on demand curve D₂.
D) Point C on demand curve D₂.

Question 75

Refer to the information provided in Figure 3.9 below to answer the following question(s). Figure 3.9
Refer to Figure 3.9. Assume that there are only two people in the market for coconuts: Sasha and Kyle. Along the market demand curve for coconuts, at a price of ________, quantity demanded would be ________.

A) $14; 7
B) $14; 9
C) $10; 9
D) $10; 8

Question 76

Refer to the information provided in Figure 3.8 below to answer the following question(s). Figure 3.8
Refer to Figure 3.8. Assume that there are only two people in the market for baseball caps: Alex and Ryan. Along the market demand curve for baseball caps, at a price of ________, quantity demanded would be ________.

A) $10; 7
B) $10; 11
C) $8; 12
D) $8; 13

Question 77

Refer to the information provided in Figure 3.8 below to answer the following question(s). Figure 3.8
Refer to Figure 3.8. Assume that there are only two people in the market for baseball caps: Alex and Ryan. Along the ________ for baseball caps, at a price of $10, quantity demanded would be 5.

A) demand curve for Alex
B) demand curve for Ryan
C) market demand curve
D) none of the above

Question 78

A change in income leads to a ________ that causes a ________.

A) change in demand; movement along the demand curve
B) change in quantity demanded; movement along the demand curve
C) change in demand; shift of the demand curve
D) change in quantity demanded; shift of the demand curve

Question 79

Refer to the information provided in Figure 3.7 below to answer the following question(s). Figure 3.7
Refer to Figure 3.7. If pizza and beer are complementary goods, an increase in the price of beer will cause a movement from Point B on demand curve D₂ to

A) demand curve D₁.
B) demand curve D₃.
C) Point A on demand curve D₂.
D) Point C on demand curve D₂.

Question 80

Refer to the information provided in Figure 3.7 below to answer the following question(s). Figure 3.7
Refer to Figure 3.7. A movement from Point C to Point B on demand curve D₂ would be caused by a(n)

A) decrease in income, assuming pizza is a normal good.
B) decrease in the price of hamburgers, assuming that pizza and hamburgers are substitutes.
C) decrease in the price of pizza.
D) increase in the price of pizza.