Deck 3: Demand, Supply, and Market Equilibrium

Question 1

Buyers and sellers do not have to deal face-to-face with one another in markets.

Answer 1

True

Question 2

The rationing function of prices refers to the fact that government must distribute any surplus goods that may be left in a competitive market.

Answer 2

False

Question 3

"Price" in the statement of the Law of Demand refers to the same concept as the cost of producing the product.

Answer 3

False

Question 4

An increase in quantity supplied might be caused by an increase in resource costs.

Question 5

A ceiling price in a competitive market will result in persistent surpluses of a product.

Question 6

An increase in demand accompanied by an increase in supply will increase the equilibrium quantity, but the effect on equilibrium price will be indeterminate.

Question 7

A market that is achieving allocative efficiency also is assumed to be achieving productive efficiency.

Question 8

Toothpaste and toothbrushes are substitute goods.

Question 9

A market that achieves productive efficiency is necessarily producing the quantity of goods most desired by society.

Question 10

In a competitive market, every consumer willing to pay the market price can buy a product and every producer willing to sell the product at that price can sell it.

Question 11

If demand increases and supply simultaneously decreases, equilibrium price will rise.

Question 12

A price floor in a competitive market will result in persistent shortages of a product.

Question 13

Consumers buy more of normal goods as their incomes rise.

Question 14

If market demand increases and market supply decreases, the change in equilibrium price is unpredictable without first knowing the exact magnitudes of the demand and supply changes.

Question 15

A decrease in supply of X increases the equilibrium price of X, which reduces the demand for X and automatically returns the price of X to its initial level.

Question 16

A government tax per unit of output reduces supply.

Question 17

A government subsidy per unit of output increases supply.

Question 18

The law of demand states that if price increases, other things being equal, the demand for the product will decrease.

Question 19

Surpluses drive market prices up; shortages drive them down.

Question 20

Producing a good in the least costly way is known as allocative efficiency.

Question 21

An increase in consumer incomes will cause a decrease in the demand for an inferior good.

Question 22

Two goods are considered to be related goods by many buyers: if the price of one increases, buyers buy more of the other. This indicates that the two goods are complements.

Question 23

A decrease in the price of digital cameras will cause the demand for memory cards to shift to the left.

Question 24

If the newspapers report that there is a shortage of strawberries, it must mean that the current price of strawberries is below the equilibrium price.

Question 25

If we observe the price of a good in a competitive market rising, then we can conclude that there had been a shortage in the market.

Question 26

An effective price ceiling will lower the equilibrium price and cause a surplus.

Question 27

If the demand for electronic readers and tablets increases, then their supply will increase as price rises.

Question 28

An increase in both supply and demand will lead to an increase in the equilibrium price and an indeterminate change in the equilibrium quantity.

Question 29

A decrease in the price of multi-touch screens for electronic tablets will increase the supply of electronic tablets.

Question 30

The law of supply states that, ceteris paribus, if the price of loans (known as the "interest rate")rises then the quantity supplied of loans will increase.

Question 31

If there is a surplus in a market, competition among the sellers will drive price down.

Question 32

If we observe that the price of gold is rising and the quantity of gold traded in the market is falling, then this must be the result of an increase in the supply of gold.

Question 33

When the government pushes for expanded use of corn, such as requiring ethanol from corn to be used as an additive to gasoline, the impact in the market is that the supply of corn decreases.

Question 34

If the government subsidizes the car makers in the production of cars, then the supply of steel increases.

Question 35

If two goods are substitutes, a decline in the price of one will cause a decrease in the demand for the other.

Question 36

A price ceiling imposed by the government is intended to benefit the sellers of the product.

Question 37

A surplus indicates that the quantity demanded is greater than the quantity supplied at that price.

Question 38

The development of a new production technique that lowers the cost of producing 3-D movies will shift the supply curve of 3-D movies to the right.

Question 39

If the decrease in supply is less than the decrease in demand, then the equilibrium price will decrease.

Question 40

When a fruit or vegetable (such as strawberries or lentils)is in season, the demand for it will increase as it becomes cheaper.

Question 41

Which of the following statements is correct?

A)If supply decreases and demand increases, equilibrium price will rise.
B)If supply decreases and demand decreases, equilibrium quantity will rise.
C)If supply decreases and demand decreases, equilibrium price will fall.
D)If supply decreases and demand increases, equilibrium quantity will rise.
E)If supply decreases and demand remains constant, equilibrium price is indeterminate.

Question 42

If the organizers of a major sports event set the ticket price above the equilibrium level, then scalping will develop in a secondary market for tickets.

Question 43

In the market for crude oil, if the change in demand due to the falling price of natural gas (a substitute for oil)is greater than the change in supply due to disruptions in oil-well operations in the Middle East, then the equilibrium price of oil will decrease.

Question 44

Markets, viewed from the perspective of the supply and demand model,

A)assume many buyers and many sellers of a standardized product.
B)assume market power so that buyers and sellers bargain with one another.
C)do not exist in the real-world economy.
D)are approximated by markets in which a single seller determines price.

Question 45

In the following question you are asked to determine, other things equal, the effects of a given change in a determinant of demand or supply for product X upon (1)the demand (D)for, or supply (S)of, X; (2)the equilibrium price (P)of X; and (3)the equilibrium quantity (Q)of X.A decrease in the price of a product that is a complement to X will

A)increase D, increase P, and increase Q.
B)increase D, decrease P, and increase Q.
C)increase D, increase P, and decrease Q.
D)decrease S, decrease P, and increase Q.
E)shift D left with no change in P and Q.

Question 46

Refer to the above table. A shortage of 500 units will occur when the price is

A)$20.
B)$10.
C)$25.
D)$5.
E)$15.

Question 47

In cases where sellers have a fixed number of units of a product to sell, the supply curve will be horizontal.

Question 48

Answer the question based on the given supply and demand data for wheat. Equilibrium price in this market is

A)$5.
B)$4.
C)$3.
D)$2.

Question 49

The presence of ticket scalpers in popular events like concerts will hurt consumers who buy from the scalpers.

Question 50

Suppose product X is an input in the production of product Y. Product Y in turn is a substitute for product Z. A decrease in the price of X can be expected to

A)decrease the demand for Z.
B)increase the demand for Z.
C)have no effect on the demand of product Z.
D)decrease the supply of Z.
E)increase the supply of Z.

Question 51

In the following question you are asked to determine, other things equal, the effects of a given change in a determinant of demand or supply for product X upon (1)the demand (D)for, or supply (S)of, X; (2)the equilibrium price (P)of X; and (3)the equilibrium quantity (Q)of X.Removing the subsidy placed on product X years ago will

A)decrease S, increase P, and decrease Q.
B)increase S, increase P, and increase Q.
C)decrease S, increase P, and increase Q.
D)increase D, decrease P, and increase Q.

Question 52

In the market for sushi, an increase in supply and a greater decrease in demand will cause both the equilibrium price and quantity to decrease.

Question 53

In response to the general public's complaints about "price gouging" by sellers, the government could impose a price floor.

Question 54

In the market for sushi, an increase in the price of fish along with an increase in the popularity of sushi among consumers will cause the equilibrium quantity to increase, but the effect on the equilibrium price is indeterminate.

Question 55

A market

A)reflects upsloping demand and downsloping supply curves.
B)entails the exchange of goods, but not services.
C)is an institution that brings together buyers and sellers.
D)always requires face-to-face contact between buyer and seller.

Question 56

In cases where the supply curve is vertical, any change in demand will cause only a change in price but no change in quantity.

Question 57

Today, economists classify market equilibrium as a behavior demonstrated by an entire system that is not found in any of its constituent parts; this is known as an emergent property.

Question 58

Adam Smith's "invisible hand" is now regarded as emergent equilibria as people's uncoordinated interactions are magically guided toward socially beneficial outcomes.

Question 59

Refer to the table. If demand is represented by columns (3)and (1)and supply is represented by columns (3)and (4), equilibrium price and quantity will be

A)$7 and 40 units.
B)$8 and 60 units.
C)$7 and 50 units.
D)$9 and 60 units.
E)$7 and 30 units.

Question 60

In the market for gasoline, if the change in demand due to the start of the summer driving season is greater than the change in supply due to disruptions in the refinery operations in the Gulf, then the equilibrium quantity will increase.

Question 61

The demand curve shows the relationship between

A)money income and quantity demanded.
B)price and production costs.
C)price and quantity demanded.
D)consumer tastes and quantity demanded.

Question 62

If two goods are complements,

A)they are consumed independently.
B)an increase in the price of one will increase the demand for the other.
C)a decrease in the price of one will increase the demand for the other.
D)they are necessarily inferior goods.

Question 63

The law of demand states that, other things equal,

A)price and quantity demanded are inversely related.
B)the larger the number of buyers in a market, the lower will be product price.
C)price and quantity demanded are directly related.
D)consumers will buy more of a product at high prices than at low prices.

Question 64

If the demand for steak (a normal good)shifts to the left, the most likely reason is that

A)consumer incomes have fallen.
B)cattle production has declined.
C)the price of steak has risen.
D)the price of cattle feed has gone up.

Question 65

A decrease in the price of digital cameras will

A)cause the demand curve for memory cards to become vertical.
B)shift the demand curve for memory cards to the right.
C)shift the demand curve for memory cards to the left.
D)not affect the demand for memory cards.

Question 66

If the price of product L increases, the demand curve for close-substitute product J will

A)shift downward toward the horizontal axis.
B)shift to the left.
C)shift to the right.
D)remain unchanged.

Question 67

Economists use the term "demand" to refer to

A)a particular price-quantity combination on a stable demand curve.
B)the total amount spent on a particular commodity over a fixed time period.
C)an upsloping line on a graph that relates consumer purchases and product price.
D)a schedule of various combinations of market prices and quantities demanded.

Question 68

An increase in the price of a product will reduce the amount of it purchased because

A)the higher price will signal to consumers that the good is of low quality.
B)the higher price means that real incomes have risen.
C)consumers will substitute other products for the one whose price has risen.
D)consumers substitute relatively high-priced for relatively low-priced products.

Question 69

A normal good is one

A)whose amount demanded will increase as its price decreases.
B)whose amount demanded will increase as its price increases.
C)whose demand curve will shift leftward as incomes rise.
D)for which its consumption varies directly with income.

Question 70

When the price of a product increases, a consumer is able to buy less of it with a given money income. This describes the

A)cost effect.
B)inflationary effect.
C)income effect.
D)substitution effect.

Question 71

An economist for a bicycle company predicts that, other things equal, a rise in consumer incomes will increase the demand for bicycles. This prediction assumes that

A)there are many goods that are substitutes for bicycles.
B)there are many goods that are complementary to bicycles.
C)there are few goods that are substitutes for bicycles.
D)bicycles are normal goods.

Question 72

Digital cameras and memory cards are

A)substitute goods.
B)complementary goods.
C)independent goods.
D)inferior goods.

Question 73

The relationship between quantity supplied and price is _____, and the relationship between quantity demanded and price is _____.

A)direct; inverse
B)inverse; direct
C)inverse; inverse
D)direct; direct

Question 74

Graphically, the market demand curve is

A)steeper than any individual demand curve that is part of it.
B)greater than the sum of the individual demand curves.
C)the horizontal sum of individual demand curves.
D)the vertical sum of individual demand curves.

Question 75

Assume the demand curve for product X shifts to the right. This might be caused by

A)a decline in income if X is an inferior good.
B)a decline in the price of Z if X and Z are substitute goods.
C)a change in consumer tastes that is unfavorable to X.
D)an increase in the price of Y if X and Y are complementary goods.

Question 76

Which of the following would not shift the demand curve for beef?

A)a widely publicized study that indicates beef consumption increases one's cholesterol
B)a reduction in the price of cattle feed
C)an effective advertising campaign by pork producers
D)a change in the incomes of beef consumers

Question 77

If the demand curve for product B shifts to the right as the price of product A declines, then

A)both A and B are inferior goods.
B)A is a superior good and B is an inferior good.
C)A is an inferior good and B is a superior good.
D)A and B are complementary goods.

Question 78

A demand curve

A)shows the relationship between price and quantity supplied.
B)indicates the quantity demanded at each price in a series of prices.
C)graphs as an upsloping line.
D)shows the relationship between income and spending.

Question 79

In 2018, the price of oil increased, which in turn contributed to a rise in the price of natural gas. This can best be explained by saying that oil and natural gas are

A)complementary goods, and the higher price for oil increased the demand for natural gas.
B)substitute goods, and the higher price for oil increased the demand for natural gas.
C)complementary goods, and the higher price for oil decreased the supply of natural gas.
D)substitute goods, and the higher price for oil decreased the supply of natural gas.

Question 80

Blu-ray players and Blu-ray discs are

A)complementary goods.
B)substitute goods.
C)independent goods.
D)inferior goods.