Principles of Macroeconomics, Chapter 4: Demand and Supply

Figure A

A construction boom occurs and many of the new buildings need plywood for their framing. Which of the figures above best illustrates this change? Figure A Figure B Figure C Figure D Figure A or Figure C

Figure A only

A scooter uses much less gasoline than does a car. Suppose the price of gasoline rises substantially. Which of the figures above best illustrates how this change affects the demand curve for scooters? Figure A only Figure B only Figure C only Figure D only Both Figure A and Figure D

falls; increases

A technological improvement lowers the cost of producing corn. As a result, the price of a pound of corn ________ and the quantity of corn ________. rises; increases rises; decreases falls; increases falls; decreases falls; does not change

decrease the cost of production.

Advances in productivity increase supply because they might increase the price expected in the future. decrease the number of goods available. decrease the cost of production. raise the prices of resources used to produce the good. increase the number of firms producing the good.

falls; increases

Assume a market is in equilibrium. There is an increase in supply, but no change in demand As a result the equilibrium price ________, and the equilibrium quantity ________. rises; increases rises; decreases rises; does not change falls; decreases falls; increases

surplus is created, which is eliminated by a fall in price.

If a market begins in equilibrium and then the demand curve shifts leftward, a shortage is created, which is eliminated by a fall in price. shortage is created, which is eliminated by a rise in price. surplus is created, which is eliminated by a fall in price. surplus is created, which is eliminated by a rise in price. surplus is created, which is eliminated by the supply curve shifting leftward.

rise; increase

If consumers buy a large number of plug-in electric cars, the equilibrium price of electricity will ________ and the equilibrium quantity of electricity will ________. rise; increase rise; decrease fall; increase fall; decrease not change; increase

the good is a normal good.

If the demand for a good increases when people's incomes increase, the good is an inferior good. the law of demand is violated. the good's demand curve must be slope upward. the good is a normal good. the good is a substitute good for an inferior good.

substitute goods

If the demand for used cars decreases after the price of a new car falls, used cars and new cars are inferior goods. substitute goods. complementary goods. normal goods. The questions errs because it is the quantity of used cars, NOT the demand for used cars, that will change when the price of a new car falls.

i only

If the supply of iPods increases, then i. the supply curve for iPods has shifted rightward. ii. the price of iPods has decreased. iii. there will be a movement upward along the iPod supply curve.

quantity of tacos demanded is less than the quantity of tacos supplied.

If there is a surplus of tacos, then the quantity of tacos demanded equals the quantity of tacos supplied. quantity of tacos demanded is greater than the quantity of tacos supplied. quantity of tacos demanded is less than the quantity of tacos supplied. market is at equilibrium. supply curve of tacos will shift leftward to eliminate the surplus.

decreases; rises

In Great Britain, raising taxes on gasoline has increased the costs of supplying gasoline. As a result, the equilibrium quantity of gasoline ________, and the equilibrium price of gasoline ________. increases; rises increases; falls decreases; rises decreases; falls does not change; rises

Figure C

In an effort to protect endangered species from the effects of logging in America's national forests, the federal government passes a law prohibiting logging in most of the state of Washington. Which of the figures above best illustrates the effect of this new law? Figure A Figure B Figure C Figure D None of these because a prohibition cannot be illustrated using demand and supply figures.

a surplus

In the figure above, a price of $35 per dozen roses results in a shortage. equilibrium. a surplus. upward pressure on the price of roses. an eventual rightward shift of the demand curve and/or leftward shift of the supply curve.

there has been an increase in supply.

In the figure above, if point "a" represents the original equilibrium and point "b" the new equilibrium, then there has been an increase in supply. there has been an increase in demand. there has been a change in the quantity supplied and no change in supply. Both answers there has been an increase in demand and there has been a change in the quantity supplied and no change in supply are correct. Both answers there has been an increase in supply and there has been an increase in demand are correct.

The supply of cheese decreases.

Milk can be used to produce cheese or butter. If the price of a pound of butter rises, what happens to the supply of cheese? The supply of cheese increases. The supply of cheese decreases. The supply of cheese stays the same, and there is no change in the quantity supplied of cheese. The supply of cheese stays the same, and there is a decrease in the quantity supplied of cheese. The supply of cheese could increase, decrease, or stay the same depending on what happens to the supply of butter.

The quantity of pizza demanded decreases and the demand for tacos increases.

Pizza and tacos are substitutes, and the price of a pizza increases. Which of the following correctly indicates what happens? The demand for pizzas decreases and the demand for tacos increases. The demand for both goods decreases. The quantity of tacos demanded increases and the quantity of pizza demanded decreases. The quantity of pizza demanded decreases and the demand for tacos increases. The demand for each decreases because both are normal goods.

Figure B

Scooters and bicycles are substitutes. Suppose that the price of a bicycle falls. Which of the figures above best illustrates how this fall in price affects the demand curve for scooters? Figure A Figure B Figure C Figure D None of these answers is correct because the change in the price of a bicycle will affect the supply curve not the demand curve.

falls; decreases

Suppose that over the next few years the demand for dancing to country and western music decreases. Hence, at country and western dance clubs the equilibrium price of admission ________ and the equilibrium quantity of dancing ________. rises; increases rises; decreases falls; increases falls; decreases does not change; decreases

surplus exists and the price falls to restore equilibrium.

Suppose the equilibrium price of oranges is $2.00 per pound. If the actual price is above the equilibrium price, a shortage exists and the price falls to restore equilibrium. shortage exists and the price rises to restore equilibrium. surplus exists and the price falls to restore equilibrium. surplus exists and the price rises to restore equilibrium. surplus exists but nothing happens until either the demand or the supply changes.

there is a movement up along the demand curve to a smaller quantity demanded.

The "law of demand" refers to the fact that, other things remaining the same, when the price of a good rises, the demand curve shifts rightward. the demand curve shifts leftward. there is a movement down along the demand curve to a larger quantity demanded. there is a movement up along the demand curve to a smaller quantity demanded. the demand curve shifts rightward and there is a movement up along the demand curve to a smaller quantity demanded.

D

The above figure shows the market for pizza. The market is in equilibrium when new pizza firms enter the market. What point represents the most likely new price and quantity? A B C D E

B

The above figure shows the market for pizza. The market is in equilibrium when the wages paid pizza workers increases. What point represents the most likely new price and quantity? A B C D E

a decrease in the price of iPods

The figure above shows the market for iPods. Which of the following creates a movement from point A to point B? a requirement that all students at universities have an iPod a decrease in the price of iPods a decrease in the price of Zunes, a substitute for iPods an increase in the price of iPods an increase in people's incomes

A change in quantity demanded can be shown as a movement from point A to B.

The figure above shows the market for sports drinks. Consider this statement: regarding the figure:"If the price falls from $3 to $1 per bottle, quantity demanded changes from 10 to 25 bottles."Which of the following states the same idea ? A change in quantity demanded can be shown as a movement from point A to B. As demand changes from January to June, demand will increase from 10 to 25 bottles. If the price changes from $1 to $3, 15 more bottles are demanded. A change in demand from June to January decreases the demand for sports drinks. As the price of sports drinks falls, demand decreases.

the quantity demanded of cotton clothing increases.

The price of cotton clothing falls. As a result, the quantity demanded of cotton clothing increases. the demand for cotton clothing increases. the quantity demanded of cotton clothing decreases. the demand for cotton clothing decreases. both the demand for cotton clothing increases and the quantity demand of cotton clothing increases.

60,000 and $50.

Using the data in the table above, the equilibrium quantity and equilibrium price for a cellular telephone is 50,000 and $100. 80,000 and $80. 60,000 and $50. 40,000 and $20. 100,000 and $20.

The demand for bottled water increases

Water bottlers announce that next month the price of bottled water will rise by 25 percent. Which of the following occurs immediately? The quantity of bottled water demanded increases. The quantity of bottled water demanded decreases. The demand for bottled water decreases. The demand for bottled water increases. None of these answers is correct because it is the supply that immediately changes, not the demand.

there were technological advances in the production of personal computers.

When personal computers were first produced, the price was very high. As time passed, the price of personal computers fell because the demand for personal computers decreased. the initial price was too high and nobody bought personal computers. there were technological advances in the production of personal computers. people's incomes increased and personal computers are an inferior good. None of these answers is correct.

falls; decreases

When the demand for a good decreases, its equilibrium price ________ and equilibrium quantity ________. falls; decreases falls; increases rises; decreases rises; increases falls; does not change

i, ii and iii

Which of the following are examples of a market? i. the New York Stock Exchange ii. a used car lot iii. a website selling vacations to Disney World

lower prices for the resources used to produce the product

Which of the following increases the supply of a product? lower prices for the resources used to produce the product some producers going bankrupt and leaving the industry a higher price for the product an increase in the expected future price of the product a decrease in productivity

i only

Which of the following is true regarding demand? i. Demand is the relationship between quantity demanded and the price of a good when all other influences on buying plans remain the same. ii. Demand refers to one quantity at one time. iii. "Demand" and "quantity demanded" are the same thing.

an increase in the price of movie tickets

Which of the following results in a movement upward along the supply curve for movies in theaters? an increase in the price of movie tickets a decrease in the price of movie tickets a decrease in the price of downloaded movies a decrease in movie star salaries an increase in the number of theaters

a decrease in the number of popcorn suppliers

Which of the following shifts the supply curve of popcorn leftward? a decrease in the price of popcorn an increase in the price of popcorn a technological development in the production of popcorn a decrease in the number of popcorn suppliers a decrease in the cost of producing popcorn