Deck 3: Supply and Demand

Question 1

Which of the following statements about markets is false?

A) markets are used to allocate resources in market systems
B) markets can vary in geographical size
C) prices are used to allocate goods in markets
D) markets are used to allocate resources in centrally-planned socialist economic systems
E) supply and demand explains how prices are set in competitive markets

Answer 1

markets are used to allocate resources in centrally-planned socialist economic systems

Question 2

In analyzing the market for a particular good,the most appropriate size of the market to consider

A) is the global market
B) is a local market
C) is a national market
D) is a state-wide market
E) depends on the purpose of the analysis

Answer 2

depends on the purpose of the analysis

Question 3

In a market system,prices are determined by

A) corporate executives
B) government bureaucrats
C) supply and demand
D) total market demand
E) production costs

Answer 3

supply and demand

Question 4

When individuals come together to buy and sell goods and services,they form a(n)

A) economy
B) market
C) production possibilities frontier
D) supply curve
E) demand curve

Question 5

The market for General Motors' bonds

A) exists only within the geographical boundaries of the United States
B) is not defined by its geographic location
C) is at the New York Stock Exchange
D) is at the U.S.Treasury
E) is in London,England

Question 6

The term quantity demanded

A) can refer to either an individual or all buyers in a market
B) only refers to all buyers in a specific market
C) only refers to individual buyers in a market
D) refers to how many units of a good a buyer would be willing and able to purchase at a series of prices
E) determines price when it intersects with the supply curve

Question 7

When households and businesses interact in product markets money

A) is not exchanged
B) is flowing toward businesses
C) is flowing toward households
D) is not used at all
E) is flowing to both businesses and households

Question 8

A group of buyers and sellers with the potential to trade with each other is known as a(n)

A) trading bloc
B) cartel
C) market
D) industry
E) sector

Question 9

When households and businesses interact in product markets goods and services are

A) not exchanged
B) flowing toward businesses
C) flowing toward households
D) not used at all
E) flowing to both businesses and households

Question 10

The law of demand says that as the price of a good rises,the quantity demanded of the good tends to fall.

Question 11

The amount of a commodity that buyers in the market would like to purchase at a particular price is

A) equilibrium
B) quantity supplied
C) quantity produced
D) infinite
E) quantity demanded

Question 12

In a perfectly competitive market,

A) there can be few or many buyers and sellers
B) the price is driven upward when suppliers hold back on goods and services
C) each participant is too small to affect the market price
D) government intervention is needed to ensure that prices are fair for consumers
E) resources are allocated by a central authority

Question 13

The amount of a good or service that buyers would be willing and able to purchase at a specific price is known as

A) quantity demanded
B) demand
C) supply
D) quantity supplied
E) opportunity cost

Question 14

In a circular flow diagram of the economy,households and businesses interact

A) in both product markets and resource markets
B) in neither product markets and resource markets
C) in product markets but not resource markets
D) in resource markets but not product markets
E) very rarely

Question 15

Because price and quantity demanded are inversely related,

A) the demand curve is usually upward-sloping
B) buyers purchase more of the good as the price rises
C) the supply curve must be rising
D) price and quantity supplied must be positively related
E) the demand curve is usually downward-sloping

Question 16

When households and businesses interact in resource markets money

A) is not exchanged
B) is flowing toward businesses
C) is flowing toward households
D) is not used at all
E) is flowing to both businesses and households

Question 17

The market for a particular good is more likely to be local

A) the lower the cost of transporting the good and the greater the ease of communication between buyers and sellers
B) the higher the cost of transporting the good and the greater the ease of communication between buyers and sellers
C) the lower the cost of transporting the good and the greater the ease of determining the good's quality
D) the lower the cost of transporting the good and the more difficult the communication between buyers and sellers
E) the higher the cost of transporting the good and the more difficult the communication between buyers and sellers

Question 18

Suppose that a large dairy farmer is able to raise the market price of milk by withholding milk supply from the market.In this instance,

A) the milk market is perfectly competitive
B) buyers will decrease their demand for milk
C) buyers will increase their demand for milk
D) the milk market is imperfectly competitive
E) the milk market will collapse in the long run

Question 19

When households and businesses interact in product markets resources are

A) not exchanged
B) flowing toward businesses
C) flowing toward households
D) not used at all
E) flowing to both businesses and households

Question 20

The demand curve for dolls shows the quantity of dolls demanded

A) by suppliers of those dolls
B) by U.S.consumers
C) at the equilibrium price for dolls
D) at each level of income
E) at each possible price of dolls

Question 21

Suppose that initially the market for DVDs is at point A on demand curve D₂ in Figure 3-3.If the price of cassette tapes decreased,

A) the demand curve will shift to D₃
B) equilibrium will move to point B on demand curve D₁
C) equilibrium will move to point C on demand curve D₁
D) there will be no change from point A
E) the demand curve will shift to D₂

Question 22

The law of demand states that the quantity demanded of a good and

A) the price of a substitute are positively related
B) its price are inversely related
C) its price are positively related if it is an inferior good
D) the wealth of buyers are positively related
E) its price are inversely related if it is a normal good

Question 23

Each point along the market demand curve shows

A) the quantity of the good that firms would be willing and able to supply at a specific price
B) the relationship between the price of the good and total quantity demanded at a series of prices
C) the opportunity cost of supplying a given quantity of goods to the market
D) the quantity of the good that consumers would be willing and able to purchase at a specific price
E) how population changes affect the quantity demanded at a specific price

Question 24

Both the supply and demand curves can shift due to changes in income.

Question 25

Which of the following statements about demand is correct?

A) A change in the price of bicycles will not lead to a shift of the demand curve for bicycles.
B) A change in the price of automobiles will lead to a shift of the demand curve for motorcycles.
C) A change in demand is equivalent to a movement along a given demand curve.
D) When price falls,so does the quantity demanded.
E) When the demand curve shifts to the right,so will the supply curve.

Question 26

In Figure 3-4,the equilibrium price is

A) $5
B) $4
C) $3
D) $1
E) $0

Question 27

If the demand for new automobiles falls when income falls,automobiles are said to be normal goods.

Question 28

A decrease in the price of a particular good,with all other variables constant,causes

A) a shift to a different demand schedule with higher quantities demanded
B) a shift to a different demand schedule with lower quantities demanded
C) a movement along a given demand curve to a lower quantity demanded
D) a movement along a given demand curve to a higher quantity demanded
E) no movement along a given demand curve unless supply also changes

Question 29

An increase in the price of a good results in a(n)

A) decrease in demand
B) increase in demand
C) increase in quantity demanded
D) decrease in quantity demanded
E) increase in supply

Question 30

All of the following,except one,would increase the demand for a particular model of a Ford automobile.Assume that this model is a normal good.Which is the exception?

A) an increase in buyers' incomes
B) increased prices of other Ford models
C) an expected future increase in the price
D) an increase in the U.S.population
E) a decrease in the price of steel

Question 31

$$\begin{array} { | c c } \hline & \text { Fieure 3-1 } \\\hline \text { Price } & \text { Quantity } \\\text { per CD } & \text { Demanded } \\\hline \$ 10 & 5 . [ \text { Millian } \\\$ 11 & 3.5 \text { Millian } \\\$ 12 & 2.8 \text { Millian } \\\$ 13 & 2.3 \text { Millian } \\\$ 14 & \text { 2.[ Millian } \\\hline\end{array}$$

-Figure 3-1 shows the market demand schedule for compact disks.If the price per disk rises from $10 to $12,the

A) demand will decrease by 2.2 million disks
B) quantity demanded will decrease by 2.2 million disks
C) supply will rise by 2.8 million disks
D) quantity demanded will decrease by 3.5 million disks
E) demand curve will shift to the left

Question 32

The law of demand says that

A) the customer is always right
B) quantity supplied equals quantity demanded
C) price and quantity supplied are inversely related
D) price and quantity demanded are inversely related
E) income and quantity demanded are directly related

Question 33

Which of the following could explain a movement from point F to point G in Figure 3-2? Assume that the good represented is an inferior good.

A) all of the following are correct
B) an increase in buyers' incomes
C) a decrease in the expected future price of the good
D) an increase in the price of the good
E) an increase in the price of a complement

Question 34

According to the law of demand,

A) there is a positive relationship between quantity demanded and price
B) as the price rises,demand will shift to the left
C) there is a negative relationship between quantity demanded and price
D) as the price rises,demand will shift to the right
E) as the price rises,consumers will continue to purchase the same quantity of the good

Question 35

If the price of jelly (a complement with peanut butter)decreases,both the demand and supply curves of peanut butter will shift rightward.

Question 36

The quantity demanded of a good

A) is the amount that would be purchased with an unlimited income
B) is the amount that would be demanded even if income were zero
C) is subject to the buyer's income constraints
D) is a fixed amount unaffected by the buyer's circumstances
E) must match the amount actually purchased in the market

Question 37

The demand curve for apples slopes downward

A) because supply and demand are equal in equilibrium
B) since producers supply more when consumers demand more
C) because people are assumed to be basically greedy
D) because the law of demand holds in the market for apples
E) because apples are preferred to all other goods

Question 38

The demand curve for a product will shift rightward when the price of a substitute decreases.

Question 39

If automobiles are like most goods and the price of automobiles rises,then holding all else constant,the

A) demand for automobiles will rise
B) quantity demanded of automobiles will fall
C) demand for automobiles will fall
D) quantity demanded of automobiles will rise
E) supply of automobiles will fall

Question 40

The demand curve for a particular good indicates the various quantities

A) demanded at various prices,other things equal
B) demanded at different income levels,other things equal
C) actually purchased at various prices,other things equal
D) actually purchased at different income levels,other things equal
E) demanded at various prices and income levels,other things equal

Question 41

In Figure 3-5,a movement from point G to point H would represent

A) a change in demand
B) the impact of a decrease in the price of a substitute good
C) higher prices for the inputs used to produce this product
D) a change in demand plus a change in quantity demanded
E) a change in quantity demanded

Question 42

Which of the following could cause the market demand curve for hot dogs to shift to the left?

A) an increase in the price of hot dogs
B) a decrease in the price of hamburgers
C) an increase in the size of the population
D) an increase in the price of hot dog buns or rolls
E) an increase in the price of mustard

Question 43

Which of the following would not cause the demand curve for college football tickets to shift?

A) an increase in the price of professional football tickets
B) a decrease in the price of college basketball tickets
C) an increase in the price of college football tickets
D) a drop in student incomes
E) an increase in student preferences for college football tickets

Question 44

An increase in the population will lead to

A) a rightward shift in every individual's demand curve
B) no shift in the market demand curve
C) a rightward shift in the market demand curve
D) a rightward movement along every individual's demand curve
E) a rightward movement along the market demand curve

Question 45

Which of the following would shift the demand curve for the normal good regular vanilla ice cream to the left?

A) reports of health risks as a result of eating vanilla ice cream
B) an increase in the price of frozen yogurt
C) a decrease in the price of hot fudge sauce
D) an increase in the price of regular vanilla ice cream
E) an increase in buyers' incomes

Question 46

A substitute good is one that

A) appeals to a wide spectrum of consumers
B) is used together with another good
C) is exchanged on the black market
D) is produced by the same firm as another good
E) can be used in place of another good,fulfilling the same basic purpose

Question 47

When there is a change in demand,

A) there is a rightward movement along the demand curve
B) there is a leftward movement along the demand curve
C) there is a shift of the supply curve
D) changes in price lead to different changes in quantity demanded
E) there is a shift of the demand curve

Question 48

The economic model of demand

A) explains the consequences of a change in buyers' tastes,but not the causes
B) explains the causes of a change in buyers' tastes,but not the consequences
C) explains both the causes and consequences of a change in buyers' tastes
D) explains neither the causes nor the consequences of a change in buyers' tastes
E) ignores buyers' tastes because they are too unstable to include in the model

Question 49

Which of the following would increase the amount of an inferior good that buyers would like to purchase?

A) an increase in buyers' incomes
B) an increase in the price of a complement
C) a decrease in the price of a substitute
D) a decrease in buyers' incomes
E) a decrease in its expected future price

Question 50

A good is said to be a normal good when

A) decreases in income lead to an increase in demand for the good
B) decreases in income lead to a decrease in demand for the good
C) increases in income lead to a decrease in demand for the good
D) increases in price lead to a decrease in the quantity demanded of the good
E) increases in price lead to a decrease in demand for the good

Question 51

"As income rises,the demand for most goods also rises." This statement

A) is inconsistent with the law of demand
B) suggests that many goods are inferior goods
C) shows that the quantity demanded is inversely related to price
D) suggests that most goods are normal goods
E) does not apply to goods traded in competitive markets

Question 52

If the price of orange juice rises,the demand for grapefruit juice will

A) increase because the two goods are substitutes
B) increase because it is a complement
C) decrease because the two goods are substitutes
D) decrease because the two goods are complements
E) not change unless the price of grapefruit juice also changes

Question 53

An increase in buyers' incomes

A) increases the quantity demanded of a good
B) decreases the quantity demanded of a good
C) increases the demand for a normal good
D) increases the demand for an inferior good
E) decreases the quantity demanded of a normal good

Question 54

When demand increases,

A) consumers are willing and able to purchase more of the good at every price
B) consumers are willing and able to purchase less of the good at every price
C) there is a movement to the right along the demand curve
D) this is referred to as a change in quantity demanded
E) the price will tend to fall

Question 55

Betsy graduates from college,where she earned $3,000 a year working part-time,and takes a job as a third grade teacher,where she now earns $30,000 per year.About the same time she received her first paycheck,her bicycle was stolen.With her old income she would have purchased a new bike but with her new income she purchased a new car.Therefore,

A) bicycles are a normal good for Betsy
B) automobiles are an inferior good for Betsy
C) automobiles are a normal good for Betsy
D) Betsy's supply curve for automobiles is upward-sloping
E) bicycles and automobiles are complementary goods for Betsy

Question 56

If the price of ground beef falls,the demand for hamburger buns will

A) increase because the two goods are substitutes
B) decrease because the two goods are complements
C) decrease because the two goods are substitutes
D) increase because the two goods are complements
E) not change unless the price of hamburger buns also changes

Question 57

Which of the following would shift the demand curve for new college textbooks to the right?

A) an increase in the price of new college textbooks
B) a decrease in the price of new college textbooks
C) an increase in the price of used college textbooks
D) a decrease in the population of college students
E) a decrease in the wealth of college students

Question 58

Which of the following is assumed constant along the demand curve for gasoline?

A) the price of gasoline and the prices of related goods
B) the price of gasoline,buyers' incomes,and tastes
C) all variables affecting demand other than the price of gasoline
D) all variables affecting demand other than the supply of gasoline
E) buyers' incomes and tastes,but not the prices of related goods

Question 59

Income is to wealth as

A) hours are to minutes
B) inches are to feet
C) periods are to sentences
D) demand is to quantity demanded
E) learning is to knowledge

Question 60

Assuming that baseball and football cards are substitutes.What might explain the shift in demand curve for baseball cards from D₂ to D₁ in Figure 3-6?

A) an increase in the price of baseball cards
B) a decrease in the price of baseball cards
C) an increase in income (assuming that baseball cards are a normal good)
D) an increase in the population
E) a decrease in the price of football cards

Question 61

Of the following,which is most likely to be a normal good?

A) hamburger
B) automobiles
C) used clothing
D) low-rent housing units
E) macaroni and cheese

Question 62

If an increase in a person's income causes that person to buy more apples,then apples are

A) neutral with respect to price
B) complements
C) inferior goods
D) normal goods
E) substitute goods

Question 63

Which of the following would not lead to a shift of the demand curve for apples?

A) an increase in the price of oranges
B) a decrease in incomes for consumers
C) a decrease in the supply of apples
D) an increased preference for apples
E) a decrease in the population

Question 64

If some piece of information causes buyers to expect the price of a good to rise in the future,but sellers take the same information and believe it will have no impact on price,the result is

A) a decrease in supply today
B) an increase in supply today
C) a decrease in quantity demanded today
D) an increase in demand today
E) an increase in quantity demanded today

Question 65

Figure 3-7

Suppose that initially the market for DVDs is at point A on demand curve D₂ in Figure 3-7.If the price of DVD players increases,

A) the demand curve will shift to D₃
B) the market will move to point B on demand curve D₁
C) the market will move to point C on demand curve D₁
D) there will be no change from point A
E) the demand curve will shift to D₂

Question 66

All else constant,if butter and margarine are substitute goods,then as the price of butter rises,

A) the demand for margarine will fall
B) the quantity of butter demanded will fall
C) the demand for butter will fall
D) the demand for butter will rise
E) butter and margarine will become complementary goods,provided that butter is a normal good

Question 67

Which of the following are the best examples of substitute goods?

A) personal computers and computer software programs
B) milk and cookies
C) Packard Bell and IBM personal computers
D) hot dogs and mustard
E) contact lenses and lens cleaning solutions

Question 68

Orange juice and cranberry juice are substitute goods.An increase in the price of orange juice results in a(n)

A) increase in the demand for orange juice
B) increase in the supply of cranberry juice
C) increase in the quantity demanded of orange juice
D) increase in the demand for cranberry juice
E) decrease in the quantity demanded of cranberry juice

Question 69

If buyers' tastes and preferences shift in favor of a good,the result is

A) an increase in quantity demanded
B) an increase in demand
C) an increase in quantity demanded and an increase in supply
D) a decline in supply
E) an increase in supply

Question 70

Of the following,which could cause the demand curve for personal computers to shift to the left?

A) a decrease in the price of personal computers
B) an increase in the price of computer software
C) a decrease in the price of computer software
D) an increase in wealth (assuming personal computers are a normal good)
E) expectations of an increase in the price of personal computers in the future

Question 71

Which of the following could lead to a rightward shift of the demand curve for a good?

A) a decrease in the price of a substitute good
B) an increase in the price of a complementary good
C) a decrease in the price of the good,assuming it is a normal good
D) an increase in the price of the good,assuming it is an inferior good
E) expectations that the price of the good will rise in the future

Question 72

Figure 3-7

Suppose that the market for DVDs is initially at point A on demand curve D₂ in Figure 3-7.If there is a decrease in the price of DVDs,

A) the demand curve will shift to D₂
B) equilibrium will move to point B on demand curve D₁
C) equilibrium will move to point C on demand curve D₁
D) there will be no change from point A
E) the demand curve will shift to D₃

Question 73

Which of the following sets of goods are most likely to be complementary goods?

A) shoes and pizza
B) automobiles and computers
C) baseballs and baseball gloves
D) football tickets and baseball tickets
E) Dell and Gateway computers

Question 74

An increase in the number of buyers in the market causes

A) a decrease in equilibrium quantity
B) a decrease in equilibrium price
C) an increase in demand
D) a decrease in production
E) an increase in supply

Question 75

Complementary goods

A) are usually used in conjunction with each other
B) are usually used in place of one another
C) do not adhere to the law of demand
D) are goods whose demand rises as incomes rise
E) are goods whose demand falls as wealth falls

Question 76

If two goods are often consumed together,they are

A) substitute goods
B) inferior goods
C) complementary goods
D) normal goods
E) unrelated goods

Question 77

If Holly's demand for fast food decreases as her income rises,then

A) fast food is a normal good for her
B) the law of demand must apply
C) fast food is a complementary good
D) fast food is an inferior good for her
E) fast food is a substitute good

Question 78

If a good is a normal good then

A) other things equal,no consumer will buy it
B) a rise in income or wealth will increase the amount of the good that consumers will purchase
C) a decline in income will increase the amount of it that consumers will purchase
D) abnormal goods are never substituted for it
E) normal consumers will always demand it

Question 79

Which of the following items is most likely to be an inferior good?

A) bus tickets
B) airline tickets
C) housing
D) stereo equipment
E) home computers

Question 80

A decrease in demand for a normal good could be caused by a(n)

A) increase in price
B) decrease in price
C) decrease in consumer incomes
D) increase in consumer incomes
E) increase in production costs