Deck 3: Supply and Demand

Question 1

The most desired goods or services that are given up when a choice is made are called the

A)Rationing device.
B)Economic profit.
C)Opportunity cost.
D)Utility cost.

Answer 1

Opportunity cost.

Question 2

The goal of the business firms in a market economy is to maximize

A)Total profits.
B)Total sales.
C)Total utility.
D)Total welfare.

Answer 2

Total profits.

Question 3

According to the law of demand,a demand curve

A)Has a negative slope.
B)Is a horizontal or flat line.
C)Has a positive slope.
D)Exceeds the economy's ability to produce.

Answer 3

Has a negative slope.

Question 4

A factor market is any place or process where

A)Finished goods are bought and sold.
B)Land,labor,or capital is bought and sold.
C)Finished services are bought and sold.
D)None of the choices are correct.

Question 5

Which of the following is purchased in a factor market?

A)A bag of jellybeans.
B)National defense.
C)The labor of a state university professor.
D)A motorized scooter used for commuting by a student.

Question 6

Individual consumers supply ____ and purchase ____.

A)factors of production;final goods and services
B)intermediate goods;final goods and services
C)final goods and services;factors of production
D)national goods and services; factors of production

Question 7

Ceteris paribus,which of the following is most likely to cause an increase in the quantity demanded of perfume?

A)A decrease in the price of perfume.
B)A decrease in tastes for perfume.
C)An increase in income.
D)A decrease in the quantity demanded of digital cameras.

Question 8

People benefit by participating in the market because

A)Resources are no longer limited.
B)There are always participants in the market that are more efficient than you are in production.
C)Market participation allows individuals to specialize and,with trade,ultimately consume more.
D)Participants in the market do not have to make choices.

Question 9

According to the law of demand,during a given period of time,the quantity of a good demanded

A)Increases as its price rises,ceteris paribus.
B)Increases as its price falls,ceteris paribus.
C)Decreases as its price falls,ceteris paribus.
D)Does not change when price changes.

Question 10

A lower quantity demanded of a good reflects,ceteris paribus,

A)Lower income.
B)A downward shift of the supply curve.
C)A higher price of the good.
D)Fewer units actually purchased.

Question 11

Which of the following is purchased in a product market?

A)Cell phone service.
B)Undeveloped farmland in Texas.
C)Crude oil.
D)The skills of an X-ray technician.

Question 12

Which of the following is a market transaction?

A)A stock increases in value over the 30 years that it is owned.
B)A college student purchases a laptop computer.
C)Weather destroys a farmer's crops,leaving the farmer unable to buy groceries.
D)A radio station changes its programming from classical to rock.

Question 13

Ceteris paribus,if buyers expect the price of airline tickets to fall in the future,then right now there should be

A)An increase in the demand for airline tickets.
B)A decrease in the supply of airline tickets.
C)A decrease in the demand for airline tickets.
D)No change in the supply of or demand for airline tickets because the price is not changing right now.

Question 14

Ceteris paribus,which of the following would generally cause an increase in the demand curve for new automobiles?

A)A decrease in the price of new automobiles.
B)An increase in consumers' income.
C)The new models being perceived as ugly compared with old models.
D)Consumer expectations that the price of new automobiles will be lower next year.

Question 15

Jessie's demand schedule for candy bars indicates

A)Her opportunity cost of buying candy bars.
B)How much she likes candy bars.
C)How many candy bars she will actually buy.
D)Why she likes candy bars.

Question 16

Which of the following is not held constant along a given demand curve for a good?

A)Price.
B)Consumer's income.
C)The price of substitutes.
D)Consumer tastes.

Question 17

A buyer is said to have a demand for a good only when

A)The buyer wants to own the good.
B)The buyer is both willing and able to purchase the good at alternative prices.
C)The price of the good is low enough.
D)An adequate supply of the good is available for purchase.

Question 18

Business firms supply goods and services to ____ and purchase factors of production in ____.

A)factor markets;product markets
B)national markets;factor markets
C)product markets;factor markets
D)factor markets; national markets

Question 19

Ceteris paribus,if the opportunity cost of purchasing a good rises,then the maximum price a particular consumer is willing to pay for that good

A)Does not change since the demand curve does not change.
B)Decreases.
C)Increases.
D)Decreases as long as supply also falls.

Question 20

A market in which final goods and services are exchanged is a

A)Public goods market.
B)Product market.
C)Factor market.
D)Labor market.

Question 21

Ceteris paribus,which of the following is most likely to cause a decrease in the supply of skateboards?

A)An increase in the price of skateboards.
B)An increase in the cost of materials used to produce skateboards.
C)An improvement in skateboard-making technology.
D)All of the choices are correct.

Question 22

If there are only two airlines that fly between Dallas and New Orleans,what will happen in the market for one airline if the other one goes out of business?

A)The demand curve will shift to the right.
B)The demand curve will shift to the left.
C)There will be a movement to the right along the initial demand curve.
D)There will be a movement to the left along the initial demand curve.

Question 23

To calculate market demand,we

A)Add the quantities demanded for each individual demand schedule horizontally.
B)Add the quantities demanded for each individual demand schedule vertically.
C)Find the average quantity demanded at each price.
D)Find the difference between the quantity demanded and the quantity supplied at each price.

Question 24

Peanut butter and jelly are complements.A decrease in the price of one will result in

A)A decrease in the demand for the other.
B)A decrease in the quantity demanded of the other.
C)An increase in the demand for the other.
D)An increase in the quantity demanded of the other.

Question 25

Ceteris paribus,if the subsidies given to corn syrup producers decrease,then we can expect

A)A decrease in the demand for corn syrup.
B)A decrease in the supply of corn syrup.
C)An increase in the demand for corn syrup.
D)An increase in the supply of corn syrup.

Question 26

Which of the following events would cause a rightward shift in the market supply curve for automobiles?

A)A technological improvement that reduces the cost of production.
B)An increase in the wages of autoworkers.
C)A higher sales tax on automobiles.
D)A decrease in the number of sellers.

Question 27

Ceteris paribus means

A)Holding everything constant except for the variables you are interested in examining.
B)Allowing the free market to decide,not government.
C)Changing prices to see how demand or supply shifts.
D)Holding constant the determinant of demand or supply that you are interested in examining.

Question 28

Assume that steel is used to produce monkey wrenches.Ceteris paribus,if the price of steel rises,then

A)The supply curve for monkey wrenches will shift to the left.
B)The supply curve for monkey wrenches will shift to the right.
C)There will be a leftward movement along the initial supply curve for monkey wrenches.
D)There will be a rightward movement along the initial supply curve for monkey wrenches.

Question 29

Assume a series of forest fires reduces the supply of lumber,which is an input in the production of wooden bats.Baseballs and wooden bats are complements.If the price of wooden bats increases,we can expect the

A)Demand for baseballs to decrease.
B)Supply of baseballs to decrease.
C)Demand for baseballs to increase.
D)Supply of baseballs to increase.

Question 30

Which of the following would not cause the market supply of cell phones to change?

A)Telecommunications are deregulated,and anyone who wants to can produce and sell cell phones.
B)A cheaper technology for producing plastics used in producing cell phones is developed.
C)A reduction in the demand for cell phones causes the price to fall.
D)Taxes levied on cell phone production are reduced.

Question 31

Market demand is determined by all of the following except

A)The number of potential sellers.
B)Income.
C)Tastes.
D)Expectations about future income.

Question 32

Ceteris paribus,which of the following is most likely to cause an increase in the quantity supplied of perfume?

A)An improvement in perfume-making technology.
B)An increase in the salaries paid to perfume makers.
C)An increase in the price of perfume.
D)An increase in the number of sellers of perfume.

Question 33

If corn and wheat are alternative pursuits for a farmer,a change in the supply of corn will take place when,ceteris paribus,

A)The price of corn changes.
B)The price of wheat changes.
C)The demand for corn changes.
D)Consumers want to buy more corn at the same price.

Question 34

To calculate market supply,we

A)Add the quantities supplied for each individual supply schedule horizontally.
B)Add the quantities supplied for each individual supply schedule vertically.
C)Find the average quantity supplied at each price.
D)Find the difference between the quantity supplied and the quantity demanded at each price.

Question 35

Assume that pencils and pens are substitutes.If the price of pencils rises,then we will see

A)An increase in the demand for pens.
B)A decrease in the demand for pens.
C)An increase in the supply of pens.
D)A decrease in the supply of pens.

Question 36

Which of the following is not held constant along a given supply curve for a good?

A)The cost of factors of production.
B)Price.
C)Technology.
D)Taxes.

Question 37

The law of supply implies that

A)Supply curves are flat.
B)Supply curves are upward-sloping to the right.
C)Supply curves are downward-sloping to the right.
D)A change in a determinant of demand shifts the supply curve.

Question 38

Which of the following can change without shifting either demand or supply,ceteris paribus?

A)The price of the good itself.
B)The prices of other goods.
C)Incomes.
D)Expectations

Question 39

A change in the price of a good

A)Causes a shift in the supply curve.
B)Results in a change in quantity supplied.
C)Results in a change in supply.
D)Is a determinant of supply.

Question 40

Which of the following is a determinant of supply?

A)Consumer tastes or preferences.
B)The prices of the factors of production.
C)Income.
D)Number of buyers.

Question 41

The equilibrium price in a market is found where

A)The market supply curve intersects the market demand curve.
B)The market supply curve intersects the y-axis.
C)The market demand curve intersects the y-axis.
D)The market supply curve intersects the x-axis.

Question 42

A rightward shift of the market demand curve for MP3 players,ceteris paribus,causes equilibrium

A)Price to increase and equilibrium quantity to decrease.
B)Price to decrease and equilibrium quantity to decrease.
C)Price to increase and equilibrium quantity to increase.
D)Price to decrease and equilibrium quantity to increase.

Question 43

An increase in the supply of gasoline,ceteris paribus,will cause equilibrium price

A)To rise and equilibrium quantity to fall.
B)To fall and equilibrium quantity to rise.
C)And equilibrium quantity to rise.
D)And equilibrium quantity to fall.

Question 44

Assume two goods are substitutes.Ceteris paribus,a decrease in the price of one good will cause the equilibrium price of the other good to

A)Increase and the equilibrium quantity of the other good to increase.
B)Increase and the equilibrium quantity of the other good to decrease.
C)Decrease and the equilibrium quantity of the other good to increase.
D)Decrease and the equilibrium quantity of the other good to decrease.

Question 45

If there is a surplus at a given price,then

A)The market is in equilibrium at that price.
B)That price is greater than the equilibrium price.
C)That price is lower than the equilibrium price.
D)The price is zero.

Question 46

If the quantity demanded of a good is greater than the quantity supplied of the good at the current price,then

A)Price will increase until it reaches the equilibrium price.
B)The demand curve will shift to the left to create equilibrium.
C)The supply curve will shift to the right to create equilibrium.
D)There is a surplus of the good.

Question 47

Suppose there are a series of forest fires that affect the lumber industry while,at the same time,consumers demand more wooden furniture.The wooden furniture market would experience

A)An increase in price and an indeterminate change in quantity.
B)An increase in price and an increase in quantity.
C)An increase in quantity and an indeterminate change in price.
D)A decrease in price and an indeterminate change in quantity.

Question 48

The term market mechanism refers to

A)The use of market prices and sales to determine resource allocation.
B)The establishment of a ceiling price in a market.
C)Supply curves but not demand curves.
D)Government laws and regulations concerning how the market should operate.

Question 49

A leftward shift of the market demand curve for HDTVs,ceteris paribus,causes equilibrium price to

A)Increase and quantity to decrease.
B)Decrease and quantity to decrease.
C)Increase and quantity to increase.
D)Decrease and quantity to increase.

Question 50

Ceteris paribus,which of the following is most likely to shift both the demand and the supply curves?

A)Technology.
B)Expectations.
C)The price of the good itself.
D)Income

Question 51

As a result of a shortage,

A)Consumers increase demand for the product.
B)Producers reduce supply.
C)Producers increase output and raise price.
D)Government purchases decrease.

Question 52

Tickets to a sporting event go on sale and sell out almost instantly.This implies that

A)There are too many tickets to the event.
B)The price for the tickets is below the equilibrium price.
C)The tickets must be very expensive.
D)There is a surplus of tickets.

Question 53

If there is a shortage at a given price,then

A)That price is the equilibrium price.
B)That price is greater than the equilibrium price.
C)That price is less than the equilibrium price.
D)There is no equilibrium price in the market.

Question 54

A market shortage is

A)The amount by which the quantity demanded exceeds the quantity supplied at a given price.
B)The result of a price floor.
C)A situation in which producers cannot sell all the goods and services that they are willing and otherwise able to sell.
D)The amount by which the cost of production exceeds the price of a good.

Question 55

When the demand for coffee increases,ceteris paribus,the equilibrium price will also increase because

A)A shortage exists at the old equilibrium price.
B)There must be a surplus of the good.
C)The market supply and demand curves do not intersect.
D)Market demand must be upward-sloping.

Question 56

Assume milk is used to produce ice cream.Ceteris paribus,a decrease in the price of milk will cause the equilibrium price of ice cream to

A)Increase and the equilibrium quantity of ice cream to increase.
B)Increase and the equilibrium quantity of ice cream to decrease.
C)Decrease and the equilibrium quantity of ice cream to increase.
D)Decrease and the equilibrium quantity of ice cream to decrease.

Question 57

In 2007 a company sold 35,000 MP3 players at $150 each.In 2008 the same company sold 40,000 MP3 players at $170 each.This information suggests that

A)The supply of MP3 players increased from 2007 to 2008.
B)The demand for MP3 players increased from 2007 to 2008.
C)The price of MP3 players increased because the costs of production increased from 2007 to 2008.
D)From 2007 to 2008, the demand curve for MP3 players was upward-sloping because of improved technology.

Question 58

Ceteris paribus,an increase in the number of sellers of running shoes causes equilibrium price to

A)Decrease and equilibrium quantity to increase.
B)Decrease and equilibrium quantity to decrease.
C)Increase and equilibrium quantity to increase.
D)Increase and equilibrium quantity to decrease.

Question 59

A rightward shift in a demand curve and a leftward shift in a supply curve both result in a

A)Lower equilibrium price.
B)Lower equilibrium quantity.
C)Higher equilibrium price.
D)Higher equilibrium quantity.

Question 60

Assume peanut butter and jelly are complements.Ceteris paribus,an increase in the price of peanut butter will cause the equilibrium price of jelly to

A)Increase and the equilibrium quantity of jelly to decrease.
B)Increase and the equilibrium quantity of jelly to increase.
C)Decrease and the equilibrium quantity of jelly to decrease.
D)Decrease and the equilibrium quantity of jelly to increase.

Question 61

If the government places a binding or effective price ceiling on cancer-treating drugs,then

A)Fewer people will die from cancer.
B)More people will die from cancer.
C)There will be no change in the number of people who die from cancer.
D)The supply of cancer-treating drugs will increase.

Question 62

Table 3.1 Individual Demand and Supply Schedules
Complete Table 3.1.Then answer the indicated question.
In Table 3.1,if the price is $4,the market will

A)Be in equilibrium.
B)Experience a surplus of 30 units.
C)Experience a shortage of 22 units.
D)Experience a surplus of 56 units.

Question 63

Complete Table 3.1.Then answer the indicated question. Table 3.1 Individual Demand and Supply Schedules
In Table 3.1,if government held the price at $3,

A)The government would be setting an effective price floor.
B)The shortage would be the same as the quantity demanded.
C)There would be a shortage.
D)The market would be in equilibrium.

Question 64

An increase in the equilibrium price of electricity can be caused by

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

Question 65

When economists talk about "optimal outcomes" in the marketplace,they mean that

A)The allocation of resources by the market is perfect.
B)All the consumer desires are satisfied and business profits are maximized.
C)The allocation of resources by the market is likely to be the best possible,given scarce resources and income constraints.
D)Everyone who wants a good or service can have it.

Question 66

If a price ceiling is to be binding or effective,it should be set

A)Below the equilibrium price,and it will create a market shortage.
B)Below the equilibrium price,and it will create a market surplus.
C)Above the equilibrium price,and it will create a market shortage.
D)Above the equilibrium price, and it will create a market surplus.

Question 67

The price ceiling that the federal government placed on human organs caused

A)An increase in demand.
B)An increase in supply.
C)A shortage.
D)A surplus.

Question 68

Suppose a hurricane hits Florida,causing widespread damage to houses and businesses.The governor of Florida places price ceilings on all building materials to keep the prices reasonable.Which of the following is the most likely result?

A)A faster recovery from the storm.
B)More people will be able to purchase building materials.
C)Shortages of building materials and a slower recovery from the storm.
D)The supply of building materials to Florida will increase.

Question 69

When the market mechanism is allowed to operate freely,prices will determine

A)Only the mix of output to be produced and the resources to be used in the production process.
B)Only the resources to be used in the production process and for whom the output is produced.
C)The mix of output to be produced,the resources to be used in the production process,and for whom the output is produced.
D)Only for whom the output is produced and the mix of output to be produced.

Question 70

In a market economy,which of the following determines the answer to the WHAT to produce question?

A)Direct negotiations between consumers and government.
B)Prices and profit.
C)Government directives.
D)A democratic vote by all consumers.

Question 71

Complete Table 3.1.Then answer the indicated question. Table 3.1 Individual Demand and Supply Schedules
In Table 3.1,if the price is $2,the market will

A)Be in equilibrium.
B)Experience a surplus of 30 units.
C)Experience a shortage of 22 units.
D)Experience a surplus of 56 units.

Question 72

Which of the following is most likely to occur because of an increase in the price of electricity in California?

A)An increase in electricity imported into California.
B)A decrease in electricity imported into California.
C)An increase in the consumption of electricity in California.
D)A decrease in the supply of electricity in California.

Question 73

Complete Table 3.1.Then answer the indicated question. Table 3.1 Individual Demand and Supply Schedules
In Table 3.1,the equilibrium market price is

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

Question 74

Price ceilings are intended to address the problem of

A)Inefficiency in production.
B)Inequity in the distribution of goods and services.
C)Business bankruptcies.
D)Shortages.

Question 75

In a market economy,which of the following is an incentive for producers to produce efficiently?

A)Government laws and regulations.
B)Profits.
C)The production possibilities curve.
D)The public's welfare.

Question 76

A decrease in the price of electricity can best be explained by

A)A decrease in the population.
B)Abnormally cold winters and hot summers.
C)The increased use of electronic devices such as computers.
D)A growing economy.

Question 77

The federal government placed an upper limit on human organ prices,which is called a

A)Price floor.
B)Price ceiling.
C)Price support.
D)None of the choices are correct.

Question 78

Suppose both the demand for and supply of salsa increase (although not necessarily by the same amount).What can we conclude about changes in the price and quantity of salsa?

A)Both the price and quantity increase.
B)The price increases but the change in the quantity cannot be determined.
C)The quantity increases but the change in the price cannot be determined.
D)Both the price and quantity decrease.

Question 79

In a market economy,the people who receive the goods and services produced are those who

A)Need the goods and services the most.
B)Want the goods and services the most.
C)Have the most political power.
D)Are willing and able to pay the market price.

Question 80

Use the following figure to answer the question: Figure 3.2 Supply and Demand

The equilibrium price and quantity in Figure 3.2 are,respectively :

A)$9 and 30 units.
B)$6 and 20 units.
C)$12 and 20 units.
D)$12 and 40 units.