Deck 4: The Market Forces of Supply and Demand

Question 1

If the market for a good or service is dominated by one seller, then it is called a monopoly.

Answer 1

False

Question 2

Tastes and expectations are not determinants of individual demand.

Answer 2

False

Question 3

The computer software industry is an example of a perfectly competitive industry.

Answer 3

False

Question 4

If the demand for movies falls when income falls, then movies must be an inferior good.

Question 5

Individual demand curves are summed horizontally to obtain the market demand curve.

Question 6

The quantity demanded of a product is positively related to the price.

Question 7

A market with many sellers offering slightly different products is called a monopoly.

Question 8

The law of demand states that, other things being equal, when the price of a good rises, the quantity demanded of the good falls.

Question 9

Supply and demand are the concepts that economists use most often.

Question 10

Demand curves are often upward sloping when prices are very high.

Question 11

Supply and demand determine prices and prices allocate the economy's scarce resources.

Question 12

An increase in the number of buyers in the market will cause a rightward shift in the demand curve if the good is a normal good.

Question 13

When an increase in the price of one good lowers the price of another good, the two goods are called substitutes.

Question 14

If the price of a good changes, its demand curve shifts.

Question 15

If a rise in the price of a visit to the gym causes an increase in the demand for movie tickets, visits to the gym and trips to the movies are complements.

Question 16

Jack usually eats a lot of noodles. He reads an article saying that rice has twice the health benefits of noodles. His demand curve for noodles is likely to shift right.

Question 17

The quantity demanded of a product is the amount that buyers are willing and able to purchase at a particular price.

Question 18

The market demand is the average of all of the individual demands for a particular good or service.

Question 19

In Australia, a public transport operator might be a monopolist.

Question 20

A competitive market is a market in which there are enough buyers and sellers that each has a negligible impact on the market price.

Question 21

The law of supply states that, other things being equal, when the price of a good rises, the quantity supplied of the good falls.

Question 22

A shortage will occur at any price below equilibrium price and a surplus will occur at any price above equilibrium price.

Question 23

The Latin phrase ceteris paribus means 'other things changing'.

Question 24

Equilibrium in a market is found where the supply curve and the demand curve intersect.

Question 25

At the equilibrium price, quantity demanded is equal to quantity supplied.

Question 26

A reduction in the price of a product and an increase in the number of buyers in the market affect the demand curve in the same general way.

Question 27

The supply curve has a negative slope.

Question 28

If demand and supply both increase, quantity demanded will always increase, no matter how big the changes in supply and demand.

Question 29

Improvements in technology is demonstrated by a shift in the supply curve.

Question 30

The price of any good adjusts until quantity demanded equals quantity supplied.

Question 31

Increasing the number of sellers in a market is demonstrated by a movement along the supply curve.

Question 32

The market-clearing price will always be lower than the equilibrium price.

Question 33

In addition to price, the determinants of individual supply include input prices, technology and expectations.

Question 34

A demand schedule shows how much will be demanded of a good in the future.

Question 35

It is not possible for demand and supply to shift at the same time.

Question 36

If the market price is below the equilibrium price, there will be a surplus and the price will rise.

Question 37

If crocodile leather handbags are a normal good, then consumers will buy less of them as their incomes rise.

Question 38

The quantity supplied of a good or service is the amount that sellers are willing and able to sell at a particular price.

Question 39

If a company producing plastic cookware discovers that the price of plastic has risen by 10 per cent, the company will decide to supply more cookware to the market.

Question 40

Surpluses drive price up, whereas shortages drive price down.

Question 41

Price elasticity over any range of a demand curve is measured by the slope of the demand curve over that range.

Question 42

Goods with close substitutes tend to be more price elastic demand than goods without close substitutes.

Question 43

A perfectly vertical demand curve means that demand is perfectly inelastic. The price elasticity of demand will be zero.

Question 44

If the price of forest-products rises, the price elasticity of supply will be more responsive in the long run than in the short run.

Question 45

The demand curve for a market may be different depending on how widely the market is defined.

Question 46

Price elasticity of supply measures how much the quantity supplied responds to changes in demand.

Question 47

Supply is said to be inelastic if the quantity supplied responds substantially to changes in the price and elastic if the quantity supplied responds only slightly to price.

Question 48

The demand for a good is said to be elastic if a small price decrease leads to a substantial increase in the quantity demanded.

Question 49

Over three years the elasticity of demand for oil heaters will be greater than over ten years.

Question 50

The demand for apples is generally more price elastic than the demand for Australian apples.

Question 51

A linear demand curve always has the same elasticity over its entire length.

Question 52

If the measured elasticity is less than one it means that the demand for this good is inelastic.

Question 53

If the price elasticity of demand is elastic, reduced demand for a good will create a greater fall in revenue than the increase in revenue created by the increase in price.

Question 54

Demand is unit elastic if the elasticity is greater than one.

Question 55

If the price elasticity of demand is 1.5, a price decrease will cause total revenue to increase.

Question 56

Price elasticity of supply is defined as the percentage change in quantity supplied divided by the percentage change in price.

Question 57

A good experiences a shift of the demand curve so that it is now flatter than before. Suppose that the market price and quantity demanded does not change. This means that the good has now become inelastic.

Question 58

The concept of the slope is the best way to measure the responsiveness of demand to changes in its determinants.

Question 59

The price of a hamburger increases by 25 per cent and the quantity of hamburgers demanded per week falls by 50 per cent. The price elasticity of demand is two.

Question 60

Necessities tend to be price inelastic, whereas luxuries tend to be price elastic.

Question 61

A market where there is only one seller is called a:

A) monopoly market
B) competitive market
C) monopolistic competition
D) oligopoly

Question 62

Opponents of the minimum wage note that a high minimum wage creates unemployment, causes teenagers to drop out of school and prevents some unskilled workers from getting the on-the-job training that they need.

Question 63

The ultimate source of demand for most products in australia is?

A) advertisers
B) consumers
C) producers
D) the government

Question 64

In a free market, the relationship between price and quantity demanded of a good can be called:

A) supply and demand
B) the law of demand
C) the law of supply
D) market demand

Question 65

Suppose a price floor on alcohol is set above the equilibrium price. This will increase the supply of alcohol, leading to an increase in sales of alcohol.

Question 66

A binding price ceiling allows consumers to buy all the goods they demand at a lower price.

Question 67

Price controls often help those in need.

Question 68

Taxes are employed by policy makers for two reasons. The first is to raise revenue. The second is to adjust market outcomes.

Question 69

The minimum wage creates the most benefits for teenage workers as their wages are typically much lower than adult workers.

Question 70

Generally, the market for water in Australia would be considered:

A) a monopolistic market
B) more organised than an auction
C) a competitive market
D) a monopsonistic market

Question 71

If a price ceiling is non-binding, it will have no effect on the market.

Question 72

The behaviour of firms to different market conditions is known as:

A) supply
B) demand
C) incomes
D) taxation

Question 73

Market prices are an efficient and impersonal way to ration goods.

Question 74

Suppose the market equilibrium price for cigarettes is $20 before the government introduced a $22 price floor. This price floor will not be binding as it is above market price.

Question 75

Suppose a coffee plantation in Colombia increases the quantity of coffee beans it supplies by 5 per cent when it learns that the price of coffees at cafes in Melbourne has risen by 25 per cent. The Colombian producer's price elasticity of supply of coffee beans is 0.2.

Question 76

Suppose that the equilibrium wage rate in an industry is $10 per hour. The government then sets a minimum wage of $12 per hour. The result will be a surplus of labour supply.

Question 77

A government program that reduces land under cultivation hurts farmers but helps consumers.

Question 78

Suppose the State government decides to implement rent controls. The housing shortage in the short run is likely to be less severe than the housing shortage in the long run.

Question 79

Rent control reduces the incentive for landlords to properly maintain their properties.

Question 80

If a supply curve is horizontal, it is said to be perfectly elastic, and the price elasticity of supply approaches infinity.