Deck 3: Demand, Supply, and Market Equilibrium

Question 1

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

Answer 1

A

Question 2

DVD players and DVDs are:

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

Answer 2

A

Question 3

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

A) A widely publicized study that indicates beef 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

Answer 3

B

Question 4

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 5

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 the quantity demanded.

Question 6

An economist for a bicycle company predicts that,other things equal,a rise in consumer incomes will increase the demand for bicycles.This prediction is based on the assumption 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 7

One reason that the quantity demanded of a good increases when its price falls is that the:

A) price decline shifts the supply curve to the left.
B) lower price shifts the demand curve to the left.
C) lower price shifts the demand curve to the right.
D) lower price increases the real incomes of buyers,enabling them to buy more.

Question 8

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

A) supply curves are upsloping.
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 9

In the past few years the demand for donuts has greatly increased.This increase in demand might best be explained by:

A) an increase in the cost of making donuts.
B) an increase in the price of coffee.
C) consumers expecting donut prices to fall.
D) a change in buyer tastes.

Question 10

The law of demand states that:

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 11

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 12

In presenting the model of a demand curve,economists presume the most important variable in determining the quantity demanded is:

A) the price of the product itself.
B) consumer income.
C) the prices of related goods.
D) consumer tastes.

Question 13

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 14

A market:

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

Question 15

Perfectly competitive markets explained on the basis of supply and demand:

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 16

Drawing demand and supply curves assumes that the primary variable influencing decisions to produce and purchase goods is:

A) price.
B) expectations.
C) preferences.
D) incomes.

Question 17

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 (or "normal")good.
D) A and B are complementary goods.

Question 18

In 2007 the price of oil increased,which in turn caused the price of natural gas to rise.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 19

Which of the following will not cause the demand for product K to change?

A) A change in the price of close-substitute product J
B) An increase in consumer incomes
C) A change in the price of K
D) A change in consumer tastes

Question 20

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 stipulated 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 amounts demanded.

Question 21

If X is a normal good,a rise in money income will shift the:

A) supply curve for X to the left.
B) supply curve for X to the right.
C) demand curve for X to the left.
D) demand curve for X to the right.

Question 22

Which of the following will cause the demand curve for product A to shift to the left?

A) Population growth that causes an expansion in the number of persons consuming A
B) An increase in money income if A is a normal good
C) A decrease in the price of complementary product C
D) An increase in money income if A is an inferior good

Question 23

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 24

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 25

If products A and B are complements and the price of B decreases,the:

A) demand curves for both A and B will shift to the left.
B) amount of B purchased will increase,but the demand curve for A will not shift.
C) demand for A will increase and the amount of B demanded will increase.
D) demand for A will decline and the demand for B will increase.

Question 26

Other things equal,which of the following might shift the demand curve for gasoline to the left?

A) The discovery of vast new tar sands oil reserves in Canada
B) The development of a low-cost electric automobile
C) An increase in the price of train and air transportation
D) A large decline in the price of automobiles

Question 27

Refer to the above diagram,which shows three demand curves for coffee.Which would cause the change in the demand for coffee illustrated by the shift from D₁ to D₂?

A) A decrease in the price of tea
B) An increase in consumer incomes
C) An increase in the price of sugar
D) A technological improvement in the production of coffee

Question 28

In constructing a stable demand curve for product X:

A) consumer preferences are allowed to vary.
B) the prices of other goods are assumed constant.
C) money incomes are allowed to vary.
D) the supply curve of product X is assumed to be fixed.

Question 29

College students living off-campus frequently consume large amounts of boxed macaroni and cheese.When they finish school and start their careers,their consumption of this good frequently declines.This suggests that boxed macaroni and cheese is:

A) an inferior good.
B) a normal good.
C) a complementary good.
D) a substitute good.

Question 30

Refer to the above diagram,which shows three demand curves for coffee.Which would cause the change in the demand for coffee illustrated by the shift from D₁ to D₃?

A) A decrease in the price of tea
B) An increase in consumer incomes
C) A decrease in the price of sugar
D) A technological improvement in the production of coffee

Question 31

Tennis rackets and ballpoint pens are:

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

Question 32

A shift to the right in the demand curve for product A can be most reasonably explained by saying that:

A) consumer incomes have declined and they now want to buy less of A at each possible price.
B) the price of A has increased and,as a result,consumers want to purchase less of it.
C) consumer preferences have changed in favor of A so that they now want to buy more at each possible price.
D) the price of A has decreased and,as a result,consumers want to purchase more of it.

Question 33

A normal good is one:

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

Question 34

The demand for most products varies directly with changes in consumer incomes.Such products are known as:

A) complementary goods.
B) competitive goods.
C) inferior goods.
D) normal goods.

Question 35

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

A) Fur coats
B) Ocean cruises
C) Used clothing
D) Steak

Question 36

If Z is an inferior good,an increase in money income will shift the:

A) supply curve for Z to the left.
B) supply curve for Z to the right.
C) demand curve for Z to the left.
D) demand curve for Z to the right.

Question 37

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 38

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 39

If the price of K declines,the demand curve for the complementary product J will:

A) shift to the left.
B) shift to the right.
C) decrease.
D) remain unchanged.

Question 40

Digital cameras and memory cards are:

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

Question 41

Refer to the above diagram.A decrease in demand is depicted by a:

A) move from point x to point y.
B) shift from D₁ to D₂.
C) shift from D₂ to D₁.
D) move from point y to point x.

Question 42

In which of the following statements are the terms "demand" and "quantity demanded" used correctly?

A) When the price of ice cream rose,the demand for both ice cream and ice cream toppings fell.
B) When the price of ice cream rose,the quantity demanded of ice cream fell and the demand for ice cream toppings fell.
C) When the price of ice cream rose,the demand for ice cream fell and the quantity demanded of ice cream toppings fell.
D) None of these statements uses the terms correctly.

Question 43

Refer to the above diagram.An increase in quantity supplied is depicted by a:

A) move from point y to point x.
B) shift from S₁ to S₂.
C) shift from S₂ to S₁.
D) move from point x to point y.

Question 44

An increase in product price will cause:

A) quantity demanded to decrease.
B) quantity supplied to decrease.
C) quantity demanded to increase.
D) the supply curve to shift to the left.

Question 45

The demand curve for a product might shift as the result of a change in:

A) consumer tastes.
B) consumer incomes.
C) the prices of related goods.
D) all of these.

Question 46

Refer to the above diagram.A decrease in quantity demanded is depicted by a:

A) move from point x to point y.
B) shift from D₁ to D₂.
C) shift from D₂ to D₁.
D) move from point y to point x.

Question 47

If consumers are willing to pay a higher price than previously for each level of output,we can say that the following has occurred:

A) a decrease in demand.
B) an increase in demand.
C) a decrease in supply.
D) an increase in supply.

Question 48

When an economist says that the demand for a product has increased,this means that:

A) consumers are now willing to purchase more of this product at each possible price.
B) the product has become particularly scarce for some reason.
C) product price has fallen and as a consequence consumers are buying a larger quantity of the product.
D) the demand curve has shifted to the left.

Question 49

Refer to the above diagram.A decrease in supply is depicted by a:

A) move from point x to point y.
B) shift from S₁ to S₂.
C) shift from S₂ to S₁.
D) move from point y to point x.

Question 50

An increase in the quantity demanded means that:

A) given supply,the price of the product can be expected to decline.
B) price has declined and consumers therefore want to purchase more of the product.
C) the demand curve has shifted to the right.
D) the demand curve has shifted to the left.

Question 51

Suppose that tacos and pizza are substitutes,and soda and pizza are complements.We would expect an increase in the price of pizza to:

A) reduce the demand for tacos and increase the demand for sodas.
B) reduce the demand for soda and increase the demand for tacos.
C) increase the demand for both soda and tacos.
D) reduce the demand for both soda and tacos.

Question 52

The term "quantity demanded":

A) refers to the entire series of prices and quantities that comprise the demand schedule.
B) refers to a situation in which the income and substitution effects do not apply.
C) refers to the amount of a product that will be purchased at some specific price.
D) means the same thing as demand.

Question 53

In moving along a stable demand curve,which of the following is not held constant?

A) Price of the product for which the demand curve is relevant
B) Price expectations
C) Consumer incomes
D) Prices of complementary goods

Question 54

Suppose an excise tax is imposed on product X.We would expect this tax to:

A) increase the demand for complementary good Y and decrease the demand for substitute product Z.
B) decrease the demand for complementary good Y and increase the demand for substitute product Z.
C) increase the demands for both complementary good Y and substitute product Z.
D) decrease the demands for both complementary good Y and substitute product Z.

Question 55

The quantity demanded of a product increases as its price declines because the:

A) lower price shifts the demand curve rightward.
B) lower price shifts the demand curve leftward.
C) lower price results in an increase in supply.
D) demand curve is downsloping.

Question 56

"In the corn market,demand often exceeds supply and supply sometimes exceeds demand." "The price of corn rises and falls in response to changes in supply and demand." In which of these two statements are the terms demand and supply being used correctly?

A) In neither statement
B) In the second statement
C) In the first statement
D) In both statements

Question 57

The law of supply indicates that:

A) producers will offer more of a product at high prices than they will at low prices.
B) the product supply curve is downsloping.
C) consumers will purchase less of a good at high prices than they will at low prices.
D) producers will offer more of a product at low prices than they will at high prices.

Question 58

An increase in demand means that:

A) given supply,the price of the product will decline.
B) the demand curve has shifted to the right.
C) price has declined and,therefore,consumers want to purchase more of the product.
D) the demand curve has shifted to the left.

Question 59

A decrease in the demand for recreational fishing boats might be caused by an increase in the:

A) income of sports fishers.
B) price of outboard motors.
C) size and number of fish available.
D) price of sailing boats.

Question 60

Assume the demand schedule for product C is downsloping.If the price of C falls from $2.00 to $1.75:

A) a smaller quantity of C will be demanded.
B) a larger quantity of C will be demanded.
C) the demand for C will increase.
D) the demand for C will decrease.

Question 61

A government subsidy to the producers of a product:

A) reduces product supply.
B) increases product supply.
C) reduces product demand.
D) increases product demand.

Question 62

Refer to the above table.If demand is represented by columns (3)and (2)and supply is represented by columns (3)and (5),equilibrium price and quantity will be:

A) $10 and 60 units.
B) $9 and 50 units.
C) $8 and 60 units.
D) $7 and 50 units.

Question 63

Other things equal,if the price of a key resource used to produce product X falls,the:

A) product supply curve of X will shift to the right.
B) product demand curve of X will shift to the right.
C) product supply curve of X will shift to the left.
D) product demand curve of X will shift to the left.

Question 64

Increasing marginal cost of production explains:

A) the law of demand.
B) the income effect.
C) why the supply curve is upsloping.
D) why the demand curve is downsloping.

Question 65

An increase in the excise tax on cigarettes raises the price of cigarettes by shifting the:

A) demand curve for cigarettes rightward.
B) demand curve for cigarettes leftward.
C) supply curve for cigarettes rightward.
D) supply curve for cigarettes leftward.

Question 66

Assume a drought in the Great Plains reduces the supply of wheat.Since wheat is a basic ingredient in the production of bread and potatoes are a consumer substitute for bread,we would expect the price of wheat to:

A) rise,the supply of bread to increase,and the demand for potatoes to increase.
B) rise,the supply of bread to decrease,and the demand for potatoes to increase.
C) rise,the supply of bread to decrease,and the demand for potatoes to decrease.
D) fall,the supply of bread to increase,and the demand for potatoes to increase.

Question 67

An improvement in production technology will:

A) increase equilibrium price.
B) shift the supply curve to the left.
C) shift the supply curve to the right.
D) shift the demand curve to the left.

Question 68

Suppose that at prices of $5,$4,$3,$2,and $1 for product Z,the corresponding quantities supplied are 3,4,5,6,and 7 units,respectively.Which of the following would increase the quantities supplied of Z to,say,6,8,10,12,and 14 units at these prices?

A) improved technology for producing Z
B) an increase in the prices of the resources used to make Z
C) an increase in the excise tax on product Z
D) increases in the incomes of the buyers of Z

Question 69

A leftward shift of a product supply curve might be caused by:

A) an improvement in the relevant technique of production.
B) a decline in the prices of needed inputs.
C) an increase in consumer incomes.
D) some firms leaving an industry.

Question 70

When the price of oil declines significantly,the price of gasoline also declines.The latter occurs because of a(n):

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

Question 71

The supply curve shows the relationship between:

A) price and quantity supplied.
B) production costs and the amount demanded.
C) total business revenues and quantity supplied.
D) physical inputs of resources and the resulting units of output.

Question 72

The upward slope of the supply curve reflects the:

A) principle of specialization in production.
B) law of supply.
C) fact that price and quantity supplied are inversely related.
D) law of diminishing marginal utility.

Question 73

The location of the supply curve of a product depends on:

A) the technology used to produce it.
B) the prices of resources used in its production.
C) the number of sellers in the market.
D) all of these.

Question 74

Because of unseasonably cold weather,the supply of oranges has substantially decreased.This statement indicates that:

A) the demand for oranges will necessarily rise.
B) the equilibrium quantity of oranges will rise.
C) the amount of oranges that will be available at various prices has declined.
D) the price of oranges will fall.

Question 75

Refer to the above table.In relation to column (3),a change from column (5)to column (4)would indicate a(n):

A) increase in demand.
B) decrease in demand.
C) increase in supply.
D) decrease in supply.

Question 76

Refer to the above table.In relation to column (3),a change from column (2)to column (1)would indicate a(n):

A) increase in demand.
B) decrease in demand.
C) increase in supply.
D) decrease in supply.

Question 77

The law of supply:

A) reflects the amounts that producers want to offer at each price in a series of prices.
B) is reflected in a downsloping supply curve.
C) shows that the relationship between producer revenue and quantity supplied is negative.
D) reflects the income and substitution effects of a price change.

Question 78

If the price of a product increases,we would expect:

A) demand to decrease.
B) quantity supplied to increase.
C) supply to decrease.
D) quantity demanded to increase.

Question 79

Suppose that corn prices rise significantly.If farmers expect the price of corn to continue rising relative to other crops,then we would expect:

A) the supply of ethanol,a corn-based product,to increase.
B) consumer demand for wheat to fall.
C) the supply to increase as farmers plant more corn.
D) the supply to fall as farmers plant more of other crops.

Question 80

Refer to the above 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) $10 and 60 units.
B) $9 and 60 units.
C) $8 and 80 units.
D) $7 and 30 units.