Chapter 3

15. The _________ is the only price where quantity demanded is equal to quantity supplied. A. equilibrium price B. horizontal axis intercept C. vertical axis intercept D. market price

A. equilibrium price

7. A demand curve shows the relationship between price and ______________ on a graph. A. quantity demanded B. quantity produced C. economies of scale D. costs

A. quantity demanded

31. ___________________ are enacted when discontented sellers, feeling that prices are too low, appeal to legislators to keep prices from falling. A. Rent controls B. Price ceilings C. Price floors D. Subsidies

C. Price floors

28. According to the law of supply: A. there is a direct relationship between price and the quantity supplied. B. there is an inverse relationship between price and the quantity supplied. C. there is a direct relationship between price and quantity demanded. D. there is an inverse relationship between price and quantity demanded.

A. there is a direct relationship between price and the quantity supplied.

27. A change in price of a good or service typically causes ________________ for that specific good or service. A. a new equilibrium price B. a change along the supply curve C. the supply curve to shift D. a decreased demand

B. a change along the supply curve

9. In economics, the demand for a good refers to the amount of the good that people: A. would like to have if the good were free. B. will want to buy at various prices. C. need to achieve a minimum standard of living. D. will buy at alternative income levels.

B. will want to buy at various prices

1. The downward slope of the demand curve again illustrates the pattern that as _____________ rises, ______________ decreases. A. quantity demanded, price B. quantity supplied, quantity demanded C. price, quantity demanded D. price, quantity supplied

C. price, quantity demanded

11. When economists talk about supply, they are referring to a relationship between price received for each unit sold and the ________________. A. demand schedule B. market price C. quantity supplied D. demand curve

C. quantity supplied

14. When quantity demanded decreases in response to a change in its own price: A. the demand curve shifts to the right. B. the demand curve shifts to the left. C. there is a movement down along the demand curve. D. there is a movement up along the demand curve.

D. there is a movement up along the demand curve.

32. Amy loves to bake and views apples and sugar as complements to one another. If the price of sugar decreases, economists would expect: A. Amy's demand for apples to increase. B. Amy's demand for apples to decrease. C. Amy's quantity demanded of apples to decrease. D. Amy's demand for apples to stay constant.

A. Amy's demand for apples to increase.

30. Interpret the following statement: "An increase in the price of wheat will encourage farmers to increase the quantity of wheat supplied to the market." A. The statement is correct. B. The statement would be correct if "quantity of wheat demanded" were substituted for "quantity of wheat supplied." C. The statement is incorrect because it confuses a change in quantity supplied with a change in supply. D. The statement would be correct if it read that a "decrease in the price of wheat will encourage farmers to increase the quantity of wheat supplied to the market."

A. The statement is correct.

10. The demand curve for a typical good has a(n): A. negative slope. B. positive slope. C. zero slope. D. infinite slope.

A. negative slope.

22. A severe freeze has once again damaged the Florida orange crop. The impact on the market for orange juice will be a leftward shift of: A. the supply curve. B. the demand curve, as consumers try to economize because of the shortage. C. both the supply and demand curves. D. the supply curve and a rightward shift of the demand curve, resulting in a higher equilibrium price.

A. the supply curve.

16. After widespread press reports about the dangers of contracting "mad cow disease" by consuming beef from Canada, the likely economic effect on the U.S. demand curve for beef from Canada is: A. no change; only the supply curve for beef is likely to be affected. B. a shift of the demand curve for beef to the left. C. a movement down along the demand curve for beef to the right. D. a shift of the demand curve for beef to the right.

B. a shift of the demand curve for beef to the left.

3. Any given demand or supply curve is based on the ceteris paribus assumption that _________________________. A. everything is variable. B. all else is held equal C. no one knows which variables will change and which will remain constant. D. what is true for the individual is not necessarily true for the whole.

B. all else is held equal

4. The term "ceteris paribus" means that: A. everything is variable. B. all variables except those specified are constant. C. no one knows which variables will change and which will remain constant. D. what is true for the individual is not necessarily true for the whole.

B. all variables except those specified are constant.

23. Refer to Figure 3-3. A change from Point A to Point E represents a(n): A. increase in supply. B. decrease in supply. C. increase in quantity supplied. D. decrease in quantity supplied.

B. decrease in supply

35. The _______________ is the quantity where quantity demanded and quantity supplied are equal at a certain price. A. quantity demanded B. equilibrium quantity C. demand schedule D. supply schedule

B. equilibrium quantity

34. If the price is below the equilibrium level, then the quantity demanded will exceed the quantity supplied. This is known as ________________. A. excess supply or surplus B. excess demand or shortage C. ceteris paribus D. Equilibrium

B. excess demand or shortage

29. Which of the following would reduce the supply of microcomputers? A. a technological improvement that lowers the cost of producing the computers B. higher wage rates for the workers that assemble the computers C. a reduction in the price of computer chips used to produce the computers D. a reduction in the price of computers.

B. higher wage rates for the workers that assemble the computers

20. If a firm faces _____________________, while the prices for the output the firm produces remain unchanged, its supply curve will shift right, indicating an increase in supply. A. higher demand B. lower costs of production C. equilibrium D. a shift in demand

B. lower costs of production

8. _____________ refers to the total number of units that are demanded at a specific price. A. quantity B. quantity demanded C. demand D. market quantity

B. quantity demanded

19. If new manufacturers enter the computer industry, then (ceteris paribus): A. the supply curve shifts to the left. B. the supply curve shifts to the right. C. the demand curve shifts to the left. D. some established manufacturers must exit the industry.

B. the supply curve shifts to the right.

12. But nearly all supply curves share a basic similarity: they slope ________________. A. down from left to right B. up from left to right C. up from right to left D. down from right to left

B. up from left to right

33. If a decrease in the price of Good X causes a decrease in the demand for Good Y, we can conclude that: A. the price of Good Y will increase. B. Goods X and Y are normal goods. C. Goods X and Y are substitute goods. D. Goods X and Y are complement goods.

C. Goods X and Y are substitute goods.

17. Refer to Figure 3-1. Using the graph above and beginning on D1, a shift to D2 would indicate a(n): A. increase in quantity demanded. B. decrease in quantity demanded. C. increase in demand. D. decrease in demand.

C. Increase in demand

21. When __________________, a firm will supply a higher quantity at any given price for its output, and the supply curve will shift to the right. A. prices rise B. equilibrium is achieved C. costs of production fall D. there is a population increase

C. costs of production fall

18. Refer to Figure 3-2. A change from Point A to Point B represents a(n): A. increase in demand. B. decrease in demand. C. decrease in quantity demanded. D. increase in quantity demanded.

C. decrease in quantity demanded.

24. Refer to Figure 3-3. A change from Point A to Point D represents a(n): A. decrease in quantity supplied. B. increase in quantity supplied. C. decrease in supply. D. increase in supply.

C. decrease in supply.

25. Refer to Figure 3-3. A change from Point A to Point B represents a(n): A. increase in supply. B. decrease in supply. C. increase in quantity supplied. D. decrease in quantity supplied.

C. increase in quantity supplied.

6. Economists refer to the relationship that a higher price leads to a lower quantity demanded as the _____________________. A. income gap B. market equilibrium C. law of demand D. price model

C. law of demand

5. A supply curve is a graphical illustration of the relationship between price, shown on the vertical axis, and _________________, shown on the horizontal axis. A. demand B. supply C. quantity supplied D. quantity demanded

C. quantity supplied

26. A drought decreases the supply of agricultural products, which means that at any given price a lower quantity will be supplied; conversely, especially good weather would shift the _________________________. A. demand curve to the right B. supply curve to the left C. supply curve to the right D. demand curve to the left

C. supply curve to the right

2. The nature of demand indicates that as the price of a good increases: A. suppliers wish to sell less of it. B. more of it is produced. C. more of it is desired. D. buyers desire to purchase less of it.

D. buyers desire to purchase less of it.

13. The demand schedule for a good: A. indicates the quantity that people will buy at the prevailing price. B. indicates the quantities that suppliers will sell at various market prices. C. is determined primarily by the cost of producing the good. D. indicates the quantities that will be purchased at alternative market prices.

D. indicates the quantities that will be purchased at alternative market prices.