Deck 4: The Market Forces of Supply and Demand

Question 1

In a market economy, supply and demand are important because they

A) are direct policy tools used by government agencies to regulate the economy.
B) illustrate when an market is in equilibrium, but they are not helpful when a market is out of equilibrium.
C) can be used to predict the impact on the economy of various events and policies.
D) All of the above are correct.

Answer 1

C

Question 2

For a market for a good or service to exist, there must be a

A) group of buyers and sellers.
B) specific time and place at which the good or service is traded.
C) high degree of organization present.
D) All of the above are correct.

Answer 2

A

Question 3

The market for ice cream is a

A) monopolistic market.
B) highly competitive market.
C) highly organized market.
D) Both b and c are correct.

Answer 3

B

Question 4

Which of the following statements is correct?

A) Buyers determine supply, and sellers determine demand.
B) Buyers determine demand, and sellers determine supply.
C) Buyers determine both demand and supply.
D) Sellers determine both demand and supply.

Question 5

Which of the following is an example of a less-than-highly-organized market?

A) the market for U.S. Treasury bonds
B) the market for corn
C) the market for soybeans
D) the market for ice cream

Question 6

A market includes

A) buyers only.
B) sellers only.
C) both buyers and sellers.
D) the place where transactions occur but not the people involved.

Question 7

Most markets in the economy are

A) markets in which sellers, rather than buyers, control the price of the product.
B) markets in which buyers, rather than sellers, control the price of the product.
C) perfectly competitive.
D) highly competitive.

Question 8

In a market economy,

A) supply determines demand and demand, in turn, determines prices.
B) demand determines supply and supply, in turn, determines prices.
C) the allocation of scarce resources determines prices and prices, in turn, determine supply and demand.
D) supply and demand determine prices and prices, in turn, allocate the economy's scarce resources.

Question 9

In a market economy, supply and demand determine

A) both the quantity of each good produced and the price at which it is sold.
B) the quantity of each good produced but not the price at which it is sold.
C) the price at which each good is sold but not the quantity of each good produced.
D) neither the quantity of each good produced nor the price at which it is sold.

Question 10

A group of buyers and sellers of a particular good or service is called a(n)

A) coalition.
B) economy.
C) market.
D) competition.

Question 11

The forces that make market economies work are

A) work and leisure.
B) politics and religion.
C) supply and demand.
D) taxes and government spending.

Question 12

The supply of a good or service is determined by

A) those who buy the good or service.
B) the government.
C) those who sell the good or service.
D) both those who buy and those who sell the good or service.

Question 13

In a market economy, supply and demand are important because they

A) play a critical role in the allocation of the economy's scarce resources.
B) determine how much of each good gets produced.
C) can be used to predict the impact on the economy of various events and policies.
D) All of the above are correct.

Question 14

Which of the following is an example of a highly organized market?

A) the market for textbooks
B) the market for spa services
C) the market for soybeans
D) the market for ice cream

Question 15

The two words most often used by economists are

A) prices and quantities.
B) resources and allocation.
C) supply and demand.
D) efficiency and equity.

Question 16

In a competitive market, the price of a product

A) is determined by buyers, and the quantity of the product produced is determined by sellers.
B) is determined by sellers, and the quantity of the product produced is determined by buyers.
C) and the quantity of the product produced are both determined by sellers.
D) None of the above is correct.

Question 17

Which of the following is an example of a market?

A) a gas station
B) a garage sale
C) a barber shop
D) All of the above are examples of markets.

Question 18

The two words economists use most often are

A) inflation and trade.
B) supply and demand.
C) competition and prices.
D) markets and equilibrium.

Question 19

The demand for a good or service is determined by

A) those who buy the good or service.
B) the government.
C) those who sell the good or service.
D) both those who buy and those who sell the good or service.

Question 20

Which of the following is not an example of a market?

A) A small town has only one seller of electricity.
B) In the United States, a sick person cannot legally purchase a kidney.
C) In Florida, there are many buyers and sellers of key lime pie.
D) The availability of Internet shopping has expanded the clothing choices for buyers who do not live near large cities.

Question 21

A competitive market is a market in which

A) an auctioneer helps set prices and arrange sales.
B) there are only a few sellers.
C) the forces of supply and demand do not apply.
D) no individual buyer or seller has any significant impact on the market price.

Question 22

Which of the following is not a characteristic of a perfectly competitive market?

A) Sellers set the price of the product.
B) There are many sellers.
C) Buyers must accept the price the market determines.
D) All of the above are characteristics of a perfectly competitive market.

Question 23

The highest form of competition is called

A) absolute competition.
B) cutthroat competition.
C) perfect competition.
D) market competition.

Question 24

In competitive markets,

A) firms produce identical products.
B) buyers can influence the market price more easily than sellers.
C) markets are more likely to be in equilibrium.
D) sellers are price setters.

Question 25

Assume Diana buys computers in a competitive market. It follows that

A) Diana has a limited number of sellers to turn to when she buys a computer.
B) Diana will find herself negotiating with sellers whenever she buys a computer.
C) if Diana buys a large number of computers, the price of computers will rise noticeably.
D) None of the above is correct.

Question 26

The highest form of competition is called

A) arbitrage.
B) monopolistic competition.
C) equilibrium.
D) perfect competition.

Question 27

Assume Leo buys coffee beans in a competitive market. It follows that

A) Leo has a limited number of sellers from which to buy coffee beans.
B) Leo will negotiate with sellers whenever he buys coffee beans.
C) Leo cannot influence the price of coffee beans even if he buys a large quantity of them.
D) None of the above is correct.

Question 28

In competitive markets,

A) firms produce identical products.
B) no individual buyer can influence the market price.
C) no individual seller can influence the market price.
D) All of the above are correct.

Question 29

Assume Leo buys coffee beans in a competitive market. It follows that

A) Leo has a limited number of sellers from which to buy coffee beans.
B) Leo will negotiate with sellers whenever he buys coffee beans.
C) Leo can influence the price of coffee beans if he buys a large quantity of them.
D) None of the above is correct.

Question 30

In a competitive market, each seller has limited control over the price of his product because

A) other sellers are offering similar products.
B) buyers exert more control over the price than do sellers.
C) these markets are highly regulated by the government.
D) sellers usually agree to set a common price that will allow each seller to earn a comfortable profit.

Question 31

If a seller in a competitive market chooses to charge more than the going price, then

A) the sellers' profits must increase.
B) the owners of the raw materials used in production would raise the prices for the raw materials.
C) other sellers would also raise their prices.
D) buyers will make purchases from other sellers.

Question 32

A competitive market is one in which there

A) is only one seller, but there are many buyers.
B) are many sellers, and each seller has the ability to set the price of his product.
C) are many sellers, and they compete with one another in such a way that some sellers are always being forced out of the market.
D) are so many buyers and so many sellers that each has a negligible impact on the price of the product.

Question 33

Buyers and sellers who have no influence on market price are referred to as

A) market pawns.
B) monopolists.
C) price takers.
D) price setters.

Question 34

In a competitive market, the quantity of a product produced and the price of the product are determined by

A) buyers.
B) sellers.
C) both buyers and sellers.
D) None of the above is correct.

Question 35

For a competitive market,

A) a seller can always increase her profit by raising the price of her product.
B) if a seller charges more than the going price, buyers will go elsewhere to make their purchases.
C) a seller often charges less than the going price to increase sales and profit.
D) a single buyer can influence the price of the product but only when purchasing from several sellers in a short period of time.

Question 36

In competitive markets, buyers

A) are price takers, but sellers are price setters.
B) are price setters, but sellers are price takers.
C) and sellers are price takers.
D) and sellers are price setters.

Question 37

In competitive markets, which of the following is not correct?

A) Firms produce identical products.
B) No individual buyer can influence the market price.
C) Some sellers can set prices.
D) Buyers are price takers.

Question 38

The term price takers refers to buyers and sellers in

A) perfectly competitive markets.
B) monopolistic markets.
C) markets that are regulated by the government.
D) markets in which buyers cannot buy all they want and/or sellers cannot sell all they want.

Question 39

Which of the following is not a characteristic of a perfectly competitive market?

A) Different sellers sell identical products.
B) There are many sellers.
C) Sellers must accept the price the market determines.
D) All of the above are characteristics of a perfectly competitive market.

Question 40

In a competitive market, the quantity of a product produced and the price of the product are determined by

A) a single buyer.
B) a single seller.
C) one buyer and one seller working together.
D) all buyers and all sellers.

Question 41

An example of a perfectly competitive market would be the market for

A) tennis racquets.
B) pizzb.
C) garbage collection.
D) wheat.

Question 42

A movement upward and to the left along a demand curve is called a(n)

A) increase in demand.
B) decrease in demand.
C) decrease in quantity demanded.
D) increase in quantity demanded.

Question 43

If buyers and sellers in a certain market are price takers, then individually

A) they have no influence on market price.
B) they have some influence on market price but that influence is limited.
C) buyers will be able to find prices lower than those determined in the market.
D) sellers will find it difficult to sell all they want to sell at the market price.

Question 44

Which of the following is the least likely to be a competitive market?

A) ice cream
B) soybeans
C) cable television
D) new houses

Question 45

Which of the following characteristics is required for a perfectly competitive market?

A) The goods offered for sale are exactly the same.
B) There are so many buyers and sellers that no single buyer or seller has any influence over the market price.
C) It is difficult for new sellers to enter the market.
D) Both a and b are correct.

Question 46

The quantity demanded of a good is the amount that buyers are

A) willing to purchase.
B) willing and able to purchase.
C) willing, able, and need to purchase.
D) able to purchase.

Question 47

Which of the following would most likely serve as an example of a monopoly?

A) a restaurant in a large city
B) a dry cleaners in a large city
C) a local gas station
D) a local electrical company

Question 48

An increase in quantity demanded

A) results in a movement downward and to the right along a demand curve.
B) results in a movement upward and to the left along a demand curve.
C) shifts the demand curve to the left.
D) shifts the demand curve to the right.

Question 49

Which of the following would most likely serve as an example of a monopoly?

A) a bakery in a large city
B) a bank in a large city
C) a local cable television company
D) a small group of corn farmers

Question 50

If a firm is a price taker, it operates in a

A) competitive market.
B) monopoly market.
C) oligopoly market.
D) monopolistically competitive market.

Question 51

Assume a market is perfectly competitive. When a new producer enters the market, the

A) price in the market increases.
B) price in the market decreases.
C) price in the market does not change.
D) market is no longer a competitive market.

Question 52

In a perfectly competitive market, at the market price, buyers

A) cannot buy all they want, and sellers cannot sell all they want.
B) cannot buy all they want, but sellers can sell all they want.
C) can buy all they want, but sellers cannot sell all they want.
D) can buy all they want, and sellers can sell all they want.

Question 53

Which of the following is not a reason perfect competition is a useful simplification, despite the diversity of market types we find in the world?

A) Perfectly competitive markets are the easiest to analyze because everyone participating in the market takes the price as given by market conditions.
B) Some degree of competition is present in most markets.
C) There are many buyers and many sellers in all types of markets.
D) Many of the lessons that we learn by studying supply and demand under perfect competition apply in more complicated markets as well.

Question 54

An example of a perfectly competitive market would be the market for

A) electricity.
B) soybeans.
C) coffee shops.
D) restaurants.

Question 55

When all market participants are price takers who have no influence over prices, the markets have

A) only a few buyers and sellers.
B) numerous sellers but only a few buyers.
C) numerous buyers but only a few sellers.
D) numerous buyers and sellers.

Question 56

A monopoly is a market with one

A) seller, and that seller is a price taker.
B) seller, and that seller sets the price.
C) buyer, and that buyer is a price taker.
D) buyer, and that buyer sets the price.

Question 57

An example of a perfectly competitive market would be the

A) cable TV market.
B) soybean market.
C) breakfast cereal market.
D) shampoo market.

Question 58

Assume the market for pork is perfectly competitive. When one pork buyer exits the market,

A) the price of pork increases.
B) the price of pork decreases.
C) the price of pork does not change.
D) there is no longer a market for pork.

Question 59

Assume the market for tennis balls is perfectly competitive. When one tennis ball producer exits the market,

A) the price of tennis balls increases.
B) the price of tennis balls decreases.
C) the price of tennis balls does not change.
D) there is no longer a market for tennis balls.

Question 60

A decrease in quantity demanded

A) results in a movement downward and to the right along a demand curve.
B) results in a movement upward and to the left along a demand curve.
C) shifts the demand curve to the left.
D) shifts the demand curve to the right.

Question 61

A decrease in the price of a good will

A) increase demand.
B) decrease demand.
C) increase quantity demanded.
D) decrease quantity demanded.

Question 62

A decrease in the price of a good would

A) increase the supply of the good.
B) increase the quantity demanded of the good.
C) give producers an incentive to produce more to keep profits from falling.
D) shift the supply curve for the good to the left.

Question 63

The following table contains a monthly demand schedule for large, single-topping, carry-out pizzas. If the law of demand applies to these pizzas, then A could be

A) 0.
B) 15.
C) 25.
D) 30.

Question 64

Kari downloads 7 songs per month when the price is $1.29 per song and 10 songs per month when the price is $0.99 per song. Kari's behavior demonstrates the law of

A) price.
B) supply.
C) demand.
D) income.

Question 65

A downward-sloping demand curve illustrates

A) that demand decreases over time.
B) that prices fall over time.
C) the relationship between income and quantity demanded.
D) the law of demand.

Question 66

When the price of a good or service changes,

A) the supply curve shifts in the opposite direction.
B) the demand curve shifts in the opposite direction.
C) the demand curve shifts in the same direction.
D) there is a movement along a given demand curve.

Question 67

The law of demand states that, other things equal, when the price of a good

A) falls, the demand for the good rises.
B) rises, the quantity demanded of the good rises.
C) rises, the demand for the good falls.
D) falls, the quantity demanded of the good rises.

Question 68

Which of the following demonstrates the law of demand?

A) After Jon got a raise at work, he bought more pretzels at $1.50 per pretzel than he did before his raise.
B) Melissa buys fewer muffins at $0.75 per muffin than at $1 per muffin, other things equal.
C) Dave buys more donuts at $0.25 per donut than at $0.50 per donut, other things equal.
D) Kendra buys fewer Snickers at $0.60 per Snickers after the price of Milky Ways falls to $0.50 per Milky Way.

Question 69

The law of demand states that, other things equal, an increase in

A) price causes quantity demanded to increase.
B) price causes quantity demanded to decrease.
C) quantity demanded causes price to increase.
D) quantity demanded causes price to decrease.

Question 70

Figure 4-1
Refer to Figure 4-1. The movement from point A to point B on the graph shows a(n)

A) decrease in demand.
B) increase in demand.
C) decrease in quantity demanded.
D) increase in quantity demanded.

Question 71

"Other things equal, when the price of a good rises, the quantity demanded of the good falls, and when the price falls, the quantity demanded rises." This relationship between price and quantity demanded is referred to as

A) equilibrium.
B) the law of demand.
C) the relationship between supply and demand.
D) the definition of an inferior good.

Question 72

An increase in the price of a good will

A) increase demand.
B) decrease demand.
C) increase quantity demanded.
D) decrease quantity demanded.

Question 73

"Other things equal, when the price of a good rises, the quantity demanded of the good falls, and when the price falls, the quantity demanded rises." This relationship between price and quantity demanded

A) applies to most goods in the economy.
B) is represented by a downward-sloping demand curve.
C) is referred to as the law of demand.
D) All of the above are correct.

Question 74

A movement downward and to the right along a demand curve is called a(n)

A) increase in demand.
B) decrease in demand.
C) decrease in quantity demanded.
D) increase in quantity demanded.

Question 75

The following table contains a demand schedule for a good. If the law of demand applies to this good, then Q1 could be

A) 0.
B) 100.
C) 200.
D) 400.

Question 76

The following table contains a demand schedule for a good. If the law of demand applies to this good, then A could be

A) 0.
B) 100.
C) 200.
D) 400.

Question 77

The following table contains a monthly demand schedule for large, single-topping, carry-out pizzas. If the law of demand applies to these pizzas, then A could be

A) 35.
B) 40.
C) 30.
D) All of the above could be correct.

Question 78

Which of these statements best represents the law of demand?

A) When buyers' tastes for a good increase, they purchase more of the good.
B) When income levels increase, buyers purchase more of most goods.
C) When the price of a good decreases, buyers purchase more of the good.
D) When buyers' demands for a good increase, the price of the good increases.

Question 79

Figure 4-1
Refer to Figure 4-1. The movement from point A to point B on the graph is caused by a(n)

A) increase in price.
B) decrease in price.
C) decrease in the price of a substitute good.
D) increase in income.

Question 80

Figure 4-1
Refer to Figure 4-1. It is apparent from the figure that the

A) good is inferior.
B) demand for the good decreases as income increases.
C) demand for the good conforms to the law of demand.
D) All of the above are correct.