Deck 3: Demand and Supply

Question 1

A drought decreases the supply of agricultural products, which means that at any given price a lower quantity will be supplied; conversely, especially good weather would shift the _______.

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

Answer 1

supply curve to the right

Question 2

A severe freeze has once again damaged the Florida orange crop. The impact on the market for orange juice will be a leftward shift of:

A) the supply curve.
B) the demand curve, as consumers try to economize because of the shortage.
C) both the supply and demand curves.
D) the supply curve and a rightward shift of the demand curve, resulting in a higher equilibrium price.

Answer 2

the supply curve.

Question 3

When quantity demanded decreases in response to a change in price:

A) the demand curve shifts to the right.
B) the demand curve shifts to the left.
C) there is a movement down along the demand curve.
D) there is a movement up along the demand curve.

Answer 3

there is a movement up along the demand curve.

Question 4

In economics, the demand for a good refers to the amount of the good that people:

A) would like to have if the good were free.
B) will buy at various prices.
C) need to achieve a minimum standard of living.
D) will buy at alternative income levels.

Question 5

Any given demand or supply curve is based on the ceteris paribus assumption that _______

A) everything is variable.
B) all else is held equal
C) no one knows which variables will change and which will remain constant.
D) what is true for the individual is not necessarily true for the whole.

Question 6

The demand curve for a typical good has an):

A) negative slope because some consumers switch to other goods as the price rises.
B) negative slope because consumer incomes fall as the price of the good rises.
C) negative slope because the good has less "snob appeal" as its price falls.
D) inverse slope because as the price goes up, the good has more profitability.

Question 7

After widespread press reports about the dangers of contracting "mad cow disease" by consuming beef from Canada, the likely economic effect on the U.S. demand curve for beef from Canada is:

A) no change; only the supply curve for beef is likely to be affected.
B) a shift of the demand curve for beef to the left.
C) a movement down along the demand curve for beef to the right.
D) a shift of the demand curve for beef to the right.

Question 8

When _______, a firm will supply a higher quantity at any given price for its output, and the supply curve will shift to the right.

A) prices rise
B) equilibrium is achieved
C) costs of production fall
D) there is a population increase

Question 9

The nature of demand indicates that as the price of a good increases:

A) suppliers wish to sell less of it.
B) more of it is produced.
C) more of it is desired.
D) buyers desire to purchase less of it.

Question 10

The term "ceteris paribus" means that:

A) everything is variable.
B) all variables except those specified are constant.
C) no one knows which variables will change and which will remain constant.
D) what is true for the individual is not necessarily true for the whole.

Question 11

A supply curve is a graphical illustration of the relationship between price, shown on the vertical axis, and , _______ shown on the horizontal axis.

A) demand
B) quantity
C) quantity supplied
D) quantity demanded

Question 12

But nearly all supply curves share a basic similarity: they slope _______.

A) down from left to right
B) up from left to right
C) up from right to left
D) down from right to left

Question 13

The _______ is the only price where quantity demanded is equal to quantity supplied.

A) equilibrium price
B) horizontal axis intercept
C) vertical axis intercept
D) market price

Question 14

If a firm faces _______, while the prices for the output the firm produces remain unchanged, a firm's profits will increase.

A) higher demand
B) lower costs of production
C) equilibrium
D) a shift in demand

Question 15

If new manufacturers enter the computer industry, then ceteris paribus):

A) the supply curve shifts to the left.
B) the supply curve shifts to the right.
C) the demand curve shifts to the left.
D) some established manufacturers must exit the industry.

Question 16

The demand schedule for a good:

A) indicates the quantity that people will buy at the prevailing price.
B) indicates the quantities that suppliers will sell at various market prices.
C) is determined primarily by the cost of producing the good.
D) indicates the quantities that will be purchased at alternative market prices.

Question 17

Economists refer to the relationship that a higher price leads to a lower quantity demanded as the _______.

A) income gap
B) market equilibrium
C) law of demand
D) price model

Question 18

The downward slope of the demand curve again illustrates the pattern that as _______ rises, _______ Decreases.

A) quantity demanded, price
B) quantity supplied, quantity demanded
C) price, quantity demanded
D) price, quantity supplied

Question 19

When economists talk about supply, they are referring to a relationship between price received for each unit sold and the _______.

A) demand schedule
B) market price
C) quantity supplied
D) demand curve

Question 20

A demand curve shows the relationship between price and _______ on a graph.

A) quantity demanded
B) quantity produced
C) economies of scale
D) costs

Question 21

Wheat and oats are both used to make cereal and both are grown on the prairies. What would happen to the supply and demand of oats if the price of wheat were to rise?

Question 22

The _______ is the quantity where quantity demanded and quantity supplied are equal at a certain price.

A) quantity demanded
B) equilibrium quantity
C) demand schedule
D) supply schedule

Question 23

Around the world, many countries have passed laws to keep farm prices higher than they otherwise would be. Why does this widespread practice continue?

Question 24

Define consumer surplus, producer surplus, and social surplus.

Question 25

Interpret the following statement: "An increase in the price of wheat will encourage farmers to increase the quantity of wheat supplied to the market."

A) The statement is correct.
B) The statement would be correct if "quantity of wheat demanded" were substituted for "quantity of wheat supplied."
C) The statement is incorrect because it confuses a change in quantity supplied with a change in supply.
D) The statement would be correct if it read that a "decrease in the price of wheat will encourage farmers to increase the quantity of wheat supplied to the market."

Question 26

With alternative policies like income subsidies and directed construction subsidies readily available, why do governments enact price floors and price ceilings?

Question 27

Which of the following would reduce the supply of microcomputers?

A) a technological improvement that lowers the cost of producing the computers
B) higher wage rates for the workers that assemble the computers
C) a reduction in the price of computer chips used to produce the computers
D) a reduction in the price of computers.

Question 28

Define social surplus and deadweight loss.

Question 29

Andy views beer and pizza as complements to one another. If the price of pizza decreases, economists would expect:

A) Andy's demand for pizza to increase.
B) Andy's demand for pizza to decrease.
C) Andy's quantity of pizza demanded to decrease.
D) Andy's demand for beer to increase.

Question 30

Price floors and price ceilings often lead to unintended consequences, because buyers and sellers have many margins for action. List at least four margins.

Question 31

A change in price of a good or service typically causes _______ for that specific good or service.

A) a new equilibrium price
B) a change along the supply curve
C) the supply curve to shift
D) a decreased demand

Question 32

According to the law of supply:

A) there is a direct relationship between price and the quantity supplied.
B) there is an inverse relationship between price and the quantity supplied.
C) there is a direct relationship between price and quantity demanded.
D) there is an inverse relationship between price and quantity demanded.

Question 33

What are five things that will shift a supply curve to the right?

Question 34

Define consumer surplus and producer surplus.

Question 35

If an increase in the price of Good X causes a decrease in the demand for Good Y, we can conclude that:

A) the price of Good Y will increase.
B) Goods X and Y are normal goods.
C) Goods X and Y are substitute goods.
D) Goods X and Y are complement goods.

Question 36

What is the difference between a change in demand and a change in quantity demanded?

Question 37

If the price is below the equilibrium level, then the quantity demanded will exceed the quantity supplied. This is known as _______

A) excess supply
B) excess demand
C) ceteris paribus
D) a price ceiling

Question 38

Various factors cause a demand curve to shift. List four different factors.