Deck 3: Demand, Supply, and Market Equilibrium

Question 1

An increase in the demand for MP3 music indicates that more are:

A) Purchased even if prices of MP3 music stayed the same
B) Demanded because MP3 music prices decreased
C) Demanded because sellers are selling more MP3 music
D) Purchased because sellers are putting MP3 music on sale

Answer 1

Purchased even if prices of MP3 music stayed the same

Question 2

The horizontal axis of a graph that shows a market demand curve indicates the:

A) Different prices at which various levels of output can be sold
B) Number of consumers who are in the market for this product
C) Various quantities of output at which the market will be cleared
D) Quantities which consumers will be willing and able to buy at various prices

Answer 2

Quantities which consumers will be willing and able to buy at various prices

Question 3

A higher price reduces the quantity demanded for a product because:

A) The purchasing power of individuals increases
B) The financial assets of individuals increase
C) Individuals will buy more of the product and less of its substitutes
D) Individuals can afford less of the product and will switch to substitutes

Answer 3

Individuals can afford less of the product and will switch to substitutes

Question 4

Which statement best illustrates the concept of diminishing marginal utility?

A) As one consumes more hamburgers per week, one would be willing to pay a higher price for additional hamburgers
B) Some consumers will receive less satisfaction from consuming hamburgers than from consuming fried chicken
C) A typical consumer will receive less satisfaction from consuming the fourth hamburger than from the third hamburger in a week
D) A decrease in the price of hamburgers will cause consumers to buy more hamburgers because they can afford to buy more

Question 5

The market demand schedule or curve for a product shows the relationship between how much of the product buyers are willing and able to buy and the:

A) Product's price
B) Buyers' incomes
C) Cost of producing the product
D) Time period, say, from one month to the next

Question 6

Other things being equal, the law of demand suggests that as:

A) The demand for iPads increases, this will cause the price to increase
B) Income increases, the quantity of iPads demanded will increase
C) The price of iPads decreases, the quantity demanded will increase
D) The price of iPads decreases, the quantity demanded will decrease

Question 7

All markets involve the following elements, except:

A) Demand or buyers
B) Face-to-face negotiation
C) Prices of goods and services
D) Supply or sellers

Question 8

The following are explanations of the Law of Demand, except:

A) Expectations effect
B) Diminishing marginal utility
C) Income effect
D) Substitution effect

Question 9

When high-school and college graduates apply for jobs in the labor markets,

A) Job applicants are the "buyers" while employers are the "sellers".
B) Job applicants are the "sellers" while employers are the "buyers".
C) Job applicants and employers are both "sellers".
D) Job applicants and employers are both "buyers".

Question 10

A result of a fall in the price of gasoline, consumers can afford to buy more gasoline for more driving trips. This is an illustration of:

A) The income effect
B) The substitution effect
C) Diminishing marginal utility
D) Consumer sovereignty

Question 11

As a result of a decrease in the price of online streaming movies, consumers download more movies online and buy fewer DVDs. This is an illustration of:

A) Consumer sovereignty
B) The income effect
C) The substitution effect
D) Diminishing marginal utility

Question 12

The table below shows the weekly demand for hamburger in a market where there are just three buyers. Refer to the above table. At a price of $6, the weekly market quantity demanded for hamburger is:

A) 17
B) 23
C) 18
D) 24

Question 13

In understanding and analyzing "demand," we focus on how much of a product the buyers are:

A) Willing and wanting to buy
B) Actually buying now and in the recent past
C) Able to buy with their given income
D) Willing and able to buy

Question 14

Which of the following is consistent with the law of demand?

A) A decrease in the price of tacos causes sellers to want to sell less
B) An increase in the people's craving for pizza causes buyers to buy more pizza
C) An increase in the price of hamburgers causes buyers to buy fewer hamburgers
D) A decrease in the price of egg rolls causes a decrease in the quantity of egg rolls demanded

Question 15

The idea of the Law of Demand, as applied to electric cars, assumes which of the following to be constant?

A) Price of electric cars
B) Price of gasoline cars
C) Quantity of electric cars demanded by buyers
D) How much sellers are charging customers for electric cars

Question 16

When economists describe "a market," they mean:

A) A place where stocks and bonds are traded
B) A communication network that allow individuals to keep in touch with each other
C) A hypothetical place where the production of goods and services takes place
D) A system that allows buyers and sellers to interact with one another

Question 17

In order to derive a market demand curve from individuals' demand curves, we add up the:

A) Various individuals' quantities demanded at each price level
B) Various prices that each buyer is willing and able to pay
C) Incomes of all buyers, assuming that their tastes remain constant
D) Total number of buyers in the market at each time period

Question 18

The table below shows the weekly demand for hamburger in a market where there are just three buyers. Refer to the above table. If the price of hamburger falls from $5 to $3, then the weekly market quantity demanded will:

A) Increase from 24 to 52
B) Decrease from 52 to 24
C) Increase from 120 to 156
D) Increase from 29 to 55

Question 19

When economists speak of "demand" in a particular market, they refer to:

A) The whole demand curve or schedule
B) One point on the demand curve
C) One price-quantity combination on the demand schedule
D) How much of an item buyers want to buy at a given price

Question 20

The table below shows the weekly demand for hamburger in a market where there are just three buyers. Refer to the above table. If there were 200 buyers in the market, each with a demand schedule identical to Buyer 2 in the table above, then the weekly quantity of hamburger demanded in the market at a price of $4 would be:

A) 8,000
B) 2,000
C) 7,400
D) 4,000

Question 21

Use the following graph of the demand for coffee: Refer to the above diagram of three demand curves for coffee. Which of the following would cause a shift in coffee demand from D₁ to D₃?

A) A decrease in the cost of producing coffee
B) A scientific report stating that coffee improves memory
C) A decrease in the prices of cream and sugar
D) A decrease in the price of tea

Question 22

Suppose that goods A and B are close substitutes. If the price of good A falls, then we would expect an:

A) Increase in the demand for A and an increase in the quantity of B demanded
B) Increase in the demand for A and a decrease in the quantity of B demanded
C) Increase in the quantity of A demanded and a decrease in the demand for B
D) Increase in the demand for good A as well as for good B

Question 23

Which of the following is not a determinant of demand for laptop computers?

A) Income of buyers of laptop computers
B) The cost of inputs for producing laptop computers
C) The prices of related goods such as software and iPads
D) Expectations about the future price of laptop computers

Question 24

When economists say that the demand for a product has decreased, they mean that:

A) The demand curve has shifted to the right
B) The product has become particularly scarce for some reason
C) The product has become more expensive and thus consumers are buying less of it
D) Consumers are now willing and able to buy less of this product at each possible price

Question 25

Which of the following factors is a "demand shifter" for new houses?

A) The price of lumber
B) Wages for construction workers
C) The price of new houses
D) The interest rates on mortgage loans

Question 26

Which would be a likely cause of an increase in the demand for pizza?

A) A reduced desire for take-out and fast-food dining
B) A decrease in the price of hamburger sandwiches
C) A decrease in the prices of cheese, pepperoni, and mushrooms
D) A health report showing eating pizza reduces stress

Question 27

Use the following graph of the demand for coffee: Refer to the above diagram of three demand curves for coffee. Which of the following would cause a shift in coffee demand from D₁ to D₂?

A) A decrease in the price of tea
B) An increase in consumer incomes
C) An increase in the prices of cream and sugar
D) A decrease in the price of coffee

Question 28

For most products, purchases tend to fall with decreases in buyers' incomes. Such products are known as:

A) Inferior goods
B) Direct goods
C) Average goods
D) Normal goods

Question 29

Refer to the above graph with three demand curves. An increase in price, other factors constant, would cause a change from:

A) Point 4 to point 5
B) Point 3 to point 6
C) Point 1 to point 5
D) Point 2 to point 4

Question 30

Which of the following would best be classified as a complement for new houses/homes?

A) Lumber or steel
B) Construction equipment
C) Mortgage loans
D) Rental apartments

Question 31

Refer to the above graph with three demand curves. A "decrease in demand" would be illustrated as a change from:

A) Point 1 to point 4
B) Point 1 to point 3
C) Line C to B
D) Line A to C

Question 32

Which of the following will not cause a change in the demand for product A?

A) A change in the number of buyers
B) A change in the price of A
C) A decline in consumer incomes
D) A decrease in the price of close-substitute product B

Question 33

Which of the following goods would most probably be an inferior good?

A) French wines
B) Generic beer
C) Theater tickets
D) Steak

Question 34

If product Y is an inferior good, a decrease in consumer incomes will:

A) Make buyers want to buy less of Product Y
B) Not affect the sales of product Y
C) Shift the demand curve for product Y to the left
D) Shift the demand curve for product Y to the right

Question 35

An increase in the price of digital cameras will result in a(n):

A) Shift of the demand curve for digital cameras to the left
B) Decrease in the demand for digital cameras
C) Shift of the demand curve for digital cameras to the right
D) Movement up and to the left along the demand curve for digital cameras

Question 36

Refer to the above graph with three demand curves. An "increase in quantity demanded" would be illustrated by a change from:

A) Point 4 to point 6
B) Point 5 to point 1
C) Point 4 to point 1
D) Point 2 to point 5

Question 37

If the price of gasoline increases significantly, then we'd expect the demand curve for large trucks and SUVs to:

A) Shift to the right
B) Shift to the left
C) Become upward-sloping
D) Not shift, but there will be a movement along that demand curve

Question 38

Which of the following factors will decrease the current demand for a product?

A) An expected increase in the future price of the product
B) A decrease in the current price of a substitute product
C) A decrease in the current price of a complementary product
D) An increase in the current price of a substitute product

Question 39

Which of the following pairs are not considered to be complementary goods?

A) Steel and cars
B) Digital cameras and memory cards
C) Gasoline and motor oil
D) Fertilizer and irrigation systems

Question 40

Use the following graph of the demand for coffee: Refer to the above diagram of three demand curves for coffee. An increase in the price of coffee, other factors constant, would cause a:

A) Shift from D₁ to D₃
B) Shift from D₁ to D₂
C) Movement from point a to point b
D) Movement from point b to point a

Question 41

Refer to the diagram above, which shows three supply curves for corn. A movement from point a to point b is caused by a change in the:

A) Price of resources used to produce corn
B) Number of corn farmers
C) Price of corn in the market
D) Technology of corn farming

Question 42

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

A) Demand to increase
B) Quantity supplied to decrease
C) Supply to decrease
D) Quantity supplied to increase

Question 43

If farmers withhold some of their current corn harvest from the market because they anticipate a higher price of corn in the near future, then this would cause a(n):

A) Rightward shift in the current supply of corn
B) Movement up along the current supply curve of corn
C) Leftward shift in the current supply of corn
D) Movement down along the current supply curve of corn

Question 44

Refer to the figure above, which shows three supply curves for corn. Which of the following would cause the supply of corn to shift from S₁ to S₂?

A) An increase in the price of fertilizer
B) A change in consumer tastes away from cornbread
C) A decrease in consumer incomes, assuming corn is a normal good
D) The development of a more effective insecticide against corn rootworm

Question 45

Which statement is true about supply?

A) There is an inverse relationship between price and quantity supplied
B) Supply refers to the amount of inventory that sellers have in their warehouses
C) As price decreases, producers are willing to put more of the good on the market for sale
D) To entice producers to offer more of a good on the market for sale, price must rise

Question 46

A fall in the price of milk, used in the production of ice cream, will:

A) Decrease the supply of ice cream
B) Increase the supply of ice cream
C) Cause a movement along the supply curve of ice cream
D) Have no effect on the supply of ice cream

Question 47

Refer to the diagram above, which shows three supply curves for corn. Which of the following would cause the supply of corn to shift from S₁ to S₃?

A) A decrease in the cost of equipment used in corn farming
B) An increase in the price of soybeans
C) A decrease in the price of corn
D) An increase in the number of acres of farmland allocated to corn

Question 48

Which of the following would cause a leftward shift in the supply curve for car washes?

A) An increase in the number of cars in the city
B) A decrease in taxes on car washes
C) An increase in the price of car washing equipment
D) A decrease in the price of water

Question 49

A leftward shift of the supply curve for oil in the United States is most likely to result from:

A) A decrease in the fees that oil companies must pay for drilling licenses
B) An increase in the subsidy for oil exploration and drilling
C) A decrease in the world price of oil
D) An increase in the costs of exploration and drilling for oil

Question 50

Which would cause an increase in the supply curve of cell-phone services?

A) A decrease in the wages of phone-company workers
B) An increase in the price of cell-phone services
C) An increase in the taxes paid by cell-phone service providers
D) A decrease in a subsidy given to cell-phone service providers

Question 51

All of the following would affect the position of the supply curve for cranberries, except the:

A) Popularity of cranberry drinks
B) Price of agricultural land for cranberries
C) Cost of fertilizers for cranberry production
D) Development of a new pest control for cranberries

Question 52

Plastics manufacturers can make either toys or plastic containers. If the prices and profitability of plastic toys increase, then the:

A) Demand for plastic containers will decrease
B) Supply of plastic containers will increase
C) Demand for plastic containers will increase
D) Supply of plastic containers will decrease

Question 53

If the price of Pepsi decreases, other factors constant, then we'd expect to see a consequent shift of the demand curve for:

A) Coke to the left
B) Coke to the right
C) Pepsi to the left
D) Pepsi to the right

Question 54

Which of the following will not cause the supply curve to shift?

A) A change in the costs of resources needed to produce the good
B) A technological change in the production of the good
C) A change in the price of the good
D) A change in the prices of other goods that producers could be producing

Question 55

Suppose that a more efficient way to produce a good is discovered, thus lowering production costs for the good. This will cause a(n):

A) Increase in supply
B) Decrease in supply
C) Increase in quantity supplied
D) Decrease in quantity supplied

Question 56

An "increase in the quantity supplied" suggests a:

A) Rightward shift of the supply curve
B) Movement down along the supply curve
C) Movement up along the supply curve
D) Leftward shift of the supply curve

Question 57

Which of the following is a determinant of supply?

A) Tastes and preferences
B) Price of a complementary good
C) Consumer income
D) Product taxes and subsidies

Question 58

"Price" in the statement of the Law of Supply refers to:

A) The amount that buyers are willing and able to pay for each unit of the product
B) The cost of producing each unit of the product
C) The total revenues that sellers receives for selling a given quantity of the product
D) The total amount that buyers pay in order to acquire a given quantity of the product

Question 59

All of the following are assumed to be constant when the supply curve for a product is drawn, except the:

A) Price of the product
B) State of technology
C) Number of producers
D) Price of inputs used to make the product

Question 60

In order to derive the market supply curve from individual supply curves, we add up the:

A) Various prices that individual sellers are charging for the product
B) Various quantities that individual sellers want to sell at specific price levels
C) Total number of sellers in the market at a given time
D) Costs that all individual sellers incur in producing the product

Question 61

Refer to the above diagram for the milk market. In this market, the equilibrium price is ____ and equilibrium quantity is ___.

A) $1.50 per gallon; 28 million gallons
B) $1.50 per gallon; 30 million gallons
C) $28 per gallon; 150 million gallons
D) $1.00 per gallon; 35 million gallons

Question 62

Refer to the above diagram of the market for corn. If the price in this market is at $4 per bushel, then there will be a:

A) Surplus and the price will tend to rise
B) Shortage and the price will tend to rise
C) Surplus and the price will tend to fall
D) Shortage and the price will tend to fall

Question 63

There is a surplus of tomatoes in the market. This implies that:

A) The current price is set above the equilibrium level
B) The price will be rising, as a result
C) Supply of tomatoes is more than the demand
D) Quantity demanded is more than quantity supplied

Question 64

Refer to the above table. At a price of $15 per unit, which of the following would exist?

A) A shortage of 1,600 units
B) A surplus of 1,000 units
C) A shortage of 1,000 units
D) A surplus of 600 units

Question 65

Refer to the above graph. An increase in price, other factors constant, would cause a change from:

A) Point 5 to point 1
B) Point 4 to point 5
C) Point 1 to point 6
D) Point 3 to point 4

Question 66

Refer to the above diagram for the milk market. If the price were $2 per gallon, then there would be a:

A) Shortage of 20 million gallons
B) Shortage of 10 million gallons
C) Surplus of 10 million gallons
D) Surplus of 30 million gallons

Question 67

There is a shortage in a market for a product when:

A) The current price is higher than the equilibrium price
B) Supply is less than demand
C) Quantity demanded is less than quantity supplied
D) Quantity demanded is greater than quantity supplied

Question 68

In competitive markets, a surplus or shortage will:

A) Never exist because the markets are always at equilibrium
B) Cause changes in the quantities demanded and supplied that tend to eliminate the surplus or shortage
C) Cause shifts in the demand and supply curves that tend to eliminate the surplus or shortage
D) Cause changes in the quantities demanded and supplied that tend to intensify the surplus or shortage

Question 69

Refer to the above diagram for the milk market. There would be a shortage of milk whenever the price is:

A) Higher than $1.50 per gallon
B) Higher than $2.00 per gallon
C) Lower than $1.50 per gallon
D) Lower than $2.00 per gallon

Question 70

Picture a competitive market with the usual upsloping supply curve and downsloping demand curve. If the current price is creating a shortage, then market forces will cause the price to adjust and:

A) Quantity supplied will increase
B) Quantity supplied will decrease
C) Quantity demanded will increase
D) Demand will decrease

Question 71

Refer to the above table. In this competitive market, the price and quantity will settle at:

A) $10 and 2,000 units
B) $15 and 1,600 units
C) $20 and 900 units
D) $25 and 1,200 units

Question 72

If there was initially a shortage in the market for a product, then:

A) Sellers will drive the price down
B) Sellers will drive the price up
C) Buyers will drive the price down
D) Buyers will drive the price up

Question 73

If the market price is above the equilibrium price:

A) A shortage will occur and producers will produce more and lower prices
B) A surplus will occur and producers will produce less and lower prices
C) A surplus will result and consumers will bid prices up
D) Producers will make extremely high profits

Question 74

Refer to the above diagram illustrating the market for corn. If the price in this market is fixed at $2 per bushel, then:

A) Sellers will not be able to sell all the corn that they intended to sell
B) Sellers will quickly run out of corn that they bring to market
C) Buyers will find too much corn in the market
D) Buyers will be able to get as much corn as they wish to buy

Question 75

Refer to the above diagram of the market for corn. There will be a surplus of 8 thousand bushels at the price of:

A) $4/bushel
B) $3/bushel
C) $2/bushel
D) $5/bushel

Question 76

Refer to the above graph. A decrease in supply would best be reflected by a change from:

A) Point 2 to point 1
B) Point 5 to point 1
C) Point 5 to point 2
D) Point 3 to point 6

Question 77

Refer to the above table. A surplus of 500 units will occur when the price is:

A) $10 per unit
B) $15 per unit
C) $20 per unit
D) $30 per unit

Question 78

A market for a product reaches equilibrium when:

A) The actual quantity bought by buyers equals actual quantity sold by sellers
B) The price rises further after there is a surplus
C) Buyers intend to buy a quantity equal to the quantity that sellers intend to sell
D) Price falls further after there is a shortage

Question 79

The market system automatically corrects a surplus condition in a competitive market by:

A) Raising the price of the commodity in question while increasing the quantity demanded
B) Raising the price of the commodity in question while decreasing the quantity demanded
C) Reducing the price of the commodity in question while increasing the quantity demanded
D) Reducing the price of the commodity in question while decreasing the quantity demanded

Question 80

Last year the price of corn was $3 a bushel and the quantity of corn demanded was 10 million bushels. This year the price of corn was $4.00 a bushel and the quantity demanded was 9 million bushels. Is this evidence that law of demand does not apply to corn?

A) Yes, because there is a direct relationship between the price of corn and the quantity supplied
B) Yes, because there is an inverse relationship between the price of corn and the quantity demanded
C) No, because the other-things-equal assumption was violated over the two year period
D) No, because the evidence indicates that there is a shortage of corn