Chapter 03: Market Demand and Supply

A decrease in quantity supplied is called a (an) a. downward movement along a supply curve. b. decrease in supply. c. increase in supply. d. upward movement along the supply curve.

a. downward movement along a supply curve.

In Exhibit 1, at any market price of video games below $50 would result in an a. excess demand causing price to rise. b. excess supply causing price to rise. c. excess demand causing price to fall. d. excess supply causing price to fall.

a. excess demand causing price to rise.

True or False: If there is a surplus of a product in the market, then the actual selling price of a product is above its equilibrium price. A popular band is coming to town with only one concert. The price of a ticket is $750, and the concert begins with a lot of empty seats. The equilibrium price is _____________ $750 because ________________________

True lower than there is a surplus of tickets

True or False: If there is a shortage of a product in the market, then the actual selling price of a product is below its equilibrium price. A popular band is coming to town with only one concert. The price of a ticket is $50, and the concert is sold out almost instantly. Still, a great number of people would pay extra to go to the concert. The equilibrium price is________________ $50 because ____________________

True higher than there is a shortage of tickets

5. Study Questions and Problems #5 Every year, an increasing number of people use word processing software on their various devices, which causes_______________ shift of ________________ curve. As a result, the quantity of word processing software exchanged ___________ from one year to the next.

a rightward the demand increases

Which of the following would not cause market demand for a normal good to decline? a. An increase in the price of a substitute. b. An increase in the price of a complement. c. A decline in consumer income. d. Consumer expectations that the good will go on sale in the near future. e. An announcement by the Surgeon General that the product contributes to premature death.

a. An increase in the price of a substitute.

Which of the following is true in ski-towns such as Crested Butte, Colorado and Whistler, British Columbia during the peak winter ski season as compared to the months of May and June? a. Demand for motel rooms is higher. b. Demand for motel rooms is lower. c. There is a surplus of motel rooms. d. The price of motel rooms will be lower.

a. Demand for motel rooms is higher.

Which of the following decreases supply in the market for pizza? a. Pizza shop employees successfully organize a union and negotiate a pay increase. b. The Surgeon General announces that eating pizza reduces the incidence of cancer. c. Cheese prices drop because price supports for dairy farmers are removed. d. Some hot sandwich shops can also make and sell pizzas, and consumer demand for hot sandwiches declines sharply, reducing the profitability of producing hot sandwiches.

a. Pizza shop employees successfully organize a union and negotiate a pay increase.

Which of the following causes the demand for veggie burgers to increase? a. A decline in the price of veggie burgers. b. An increase in the price of tofu burgers, perceived as a substitute by veggie burger consumers. c. An increase in the price of burger buns. d. A technological innovation that lowers the cost of producing veggie burgers.

b. An increase in the price of tofu burgers, perceived as a substitute by veggie burger consumers.

In moving from a shortage toward the market equilibrium, which of the following is true? a. Price falls. b. Price rises. c. Quantity demanded increases. d. Quantity supplied decreases.

b. Price rises.

The law of supply is the principle that the relationship between the price of a good and the quantity sellers are willing to offer for sale in a defined time period, ceteris paribus, is a. inverse. b. direct. c. no relationship. d. independent.

b. direct.

A curve that is derived by summing horizontally individual demand curves is called a. aggregate supply. b. market demand. c. aggregate demand. d. market supply.

b. market demand.

Suppose that each of the seven dwarfs buys 4 mugs of ginger ale per week from Snow White's cafe‚ when the price per mug is $2. If the seven dwarfs are the entire market demand for Snow White's ginger ale, then which of the following is the correct value for market quantity demanded of ginger ale at a price of $2? a. 4. b. 8. c. 28. d. 7.

c. 28.

With an upward-sloping supply curve, which of the following is true? a. An increase in price results in a decrease in quantity supplied. b. An increase in price results in an increase in supply. c. A decrease in price results in a decrease in quantity supplied. d. A decrease in price results in an increase in supply.

c. A decrease in price results in a decrease in quantity supplied.

Exhibit 1 presents supply and demand data for the video game market. If the price of video games was currently $70, there would be an a. excess demand of 450 video games in this market. b. excess demand of 500 video games in this market. c. excess supply of 400 video games in this market. d. excess supply of 850 video games in this market. e. excess demand of 400 video games in this market.

c. excess supply of 400 video games in this market.

A rightward shift in the supply curve is called a (an) a. decrease in quantity supplied. b. decrease in supply. c. increase in supply. d. increase in quantity supplied.

c. increase in supply.

Which of the following causes a shortage to become larger? a. An increase in market price. b. An increase in supply. c. A decrease in demand. d. A decrease in price.

d. A decrease in price. Correct. This will increase a shortage by increasing quantity demanded and decreasing quantity supplied.

Which of the following increases the supply of corn? a. The farm worker's union successfully negotiates a pay increase for corn harvest workers. b. The Surgeon General announces that eating corn contributes to heart disease. c. Congress and the president eliminate subsidies formerly paid to corn farmers. d. Farmers who grow soybeans can also grow corn, and the price of soybeans drops by 75 percent.

d. Farmers who grow soybeans can also grow corn, and the price of soybeans drops by 75 percent.

Low-income families consume proportionately more of which of the following kinds of goods? a. Luxury goods. b. Substitute goods. c. Normal goods. d. Inferior goods.

d. Inferior goods.

Study Questions and Problems #1 Crystal pays $20 for a watch from the local department store. Hilary pays $2,000 for one Rolex watch. This ______ the law of demand.

does not

2. Study Questions and Problems #2 The following graph shows the demand curve for Mickey Mantle baseball cards. For simplicity, assume that all cards are identical and sell for the same price. Initially, the graph shows market demand under the following circumstances: Average household income is $50,000 per year, and the price of a baseball ticket is $30.00. Consider the graph. Suppose that the price of a card increases from $300 to $350. This would cause a_____________ the demand curve. A decrease in average income causes a ____________ of the demand curve. Suppose that the price of baseball tickets changes from $30 to $20. Because baseball tickets __________ Correct for baseball cards, a decrease in the price of baseball tickets shifts the demand curve for Mickey Mantle baseball cards to the_________________

movement along leftward shift are substitutes/left