ECON 2113 Chapter 4 Practice Problems

The demand for a good or service is determined by a. those who buy the good or service. b. the government. c. those who sell the good or service. d. both those who buy and those who sell the good or service.

a

The equilibrium price is the same as the market-clearing price. a. True b. False

a

Two goods are substitutes when a decrease in the price of one good a. decreases the demand for the other good. b. decreases the quantity demanded of the other good. c. increases the demand for the other good. d. increases the quantity demanded of the other good.

a

When quantity demanded decreases at every possible price, the demand curve has a. shifted to the left. b. shifted to the right. c. not shifted; rather, we have moved along the demand curve to a new point on the same curve. d. not shifted; rather, the demand curve has become flatter.

a

A surplus is the same as an excess demand. a. True b. False

b

An example of a perfectly competitive market would be the market for a. electricity. b. soybeans. c. coffee shops. d. restaurants.

b

An increase in demand is represented by a a. movement downward and to the right along a demand curve. b. movement upward and to the left along a demand curve. c. rightward shift of a demand curve. d. leftward shift of a demand curve.

c

An increase in supply is represented by a a. movement downward and to the left along a supply curve. b. movement upward and to the right along a supply curve. c. rightward shift of a supply curve. d. leftward shift of a supply curve.

c

An increase in the price of a good will a. increase supply. b. decrease supply. c. increase quantity supplied. d. decrease quantity supplied.

c

An increase in the price of a good would a. increase the supply of the good. b. increase the amount purchased by buyers. c. give producers an incentive to produce more. d. decrease both the quantity demanded of the good and the quantity supplied of the good.

c

Buyers and sellers who have no influence on market price are referred to as a. market pawns. b. monopolists. c. price takers. d. price setters.

c

If muffins and bagels are substitutes, a higher price for bagels would result in a(n) a. increase in the demand for bagels. b. decrease in the demand for bagels. c. increase in the demand for muffins. d. decrease in the demand for muffins.

c

In a market economy, supply and demand determine a. both the quantity of each good produced and the price at which it is sold. b. the quantity of each good produced but not the price at which it is sold. c. the price at which each good is sold but not the quantity of each good produced. d. neither the quantity of each good produced nor the price at which it is sold.

a

A likely example of complementary goods for most people would be a. canoes and paddles. b. snow mobiles and sofas. c. coffee and tea. d. tennis balls and basketballs.

a

An increase in quantity demanded a. results in a movement downward and to the right along a demand curve. b. results in a movement upward and to the left along a demand curve. c. shifts the demand curve to the left. d. shifts the demand curve to the right.

a

Equilibrium quantity must increase when demand a. increases and supply does not change, when demand does not change and supply increases, and when both demand and supply increase. b. increases and supply does not change, when demand does not change and supply increases, and when both demand and supply decrease. c. decreases and supply does not change, when demand does not change and supply decreases, and when both demand and supply increase. d. decreases and supply does not change, when demand does not change and supply decreases, and when both demand and supply decrease.

a

If the demand for a good falls when income falls, then the good is called a(n) a. normal good. b. regular good. c. luxury good. d. inferior good.

a

If the supply of a product decreases, then we would expect equilibrium price a. to increase and equilibrium quantity to decrease. b. to decrease and equilibrium quantity to increase. c. and equilibrium quantity to both increase. d. and equilibrium quantity to both decrease.

a

In a competitive market, the quantity of each good produced and the price at which it is sold are not determined by any single buyer or seller. a. True b. False

a

A decrease in quantity demanded a. results in a movement downward and to the right along a demand curve. b. results in a movement upward and to the left along a demand curve. c. shifts the demand curve to the left. d. shifts the demand curve to the right.

b

A decrease in the price of baseball bats will decrease the demand for baseballs. a. True b. False

b

At the equilibrium price, the quantity of the good that buyers are willing and able to buy a. is greater than the quantity that sellers are willing and able to sell. b. exactly equals the quantity that sellers are willing and able to sell. c. is less than the quantity that sellers are willing and able to sell. d. Either a) or c) could be correct.

b

Ford Motor Company announces that next month it will offer $3,000 rebates on new Mustangs. As a result of this information, today's demand curve for Mustangs a. shifts to the right. b. shifts to the left. c. shifts either to the right or to the left, but we cannot determine the direction of the shift from the given information. d. will not shift; rather, the demand curve for Mustangs will shift to the right next month.

b

If a good is inferior, then an increase in income will result in a(n) a. increase in the demand for the good. b. decrease in the demand for the good. c. movement down and to the right along the demand curve for the good. d. movement up and to the left along the demand curve for the good.

b

If the number of sellers in a market increases, then the a. demand in that market will increase. b. supply in that market will increase. c. supply in that market will decrease. d. demand in that market will decrease.

b

If the supply of a product increases, then we would expect equilibrium price a. to increase and equilibrium quantity to decrease. b. to decrease and equilibrium quantity to increase. c. and equilibrium quantity to both increase. d. and equilibrium quantity to both decrease.

b

If there is an improvement in the technology used to produce a good, then the supply curve for that good will shift to the left. a. True b. False

b

If toast and butter are complements, then which of the following would increase the demand for toast? a. a decrease in the price of toast b. a decrease in the price of butter c. an increase in the price of butter d. Both a and b are correct.

b

Matthew bakes apple pies that he sells at the local farmer's market. If the price of apples increases, the a. supply curve for Matthew's pies will increase. b. supply curve for Matthew's pies will decrease. c. demand curve for Matthew's pies will increase. d. demand curve for Matthew's pies will decrease.

b

Suppose that when income rises, the demand curve for doctor's visits shifts to the right. In this case, we know doctor's visits are a. inferior goods. b. normal goods. c. perfectly competitive goods. d. durable goods.

b

Surpluses drive price up, while shortages drive price down. a. True b. False

b

The law of supply states that, other things equal, when the price of a good a. falls, the supply of the good rises. b. rises, the quantity supplied of the good rises. c. rises, the supply of the good falls. d. falls, the quantity supplied of the good rises.

b

The quantity demanded of a good is the amount that buyers are a. willing to purchase. b. willing and able to purchase. c. willing, able, and need to purchase. d. able to purchase.

b

The sum of all the individual supply curves for a product is called a. total supply. b. market supply. c. aggregate supply. d. total output.

b

When quantity demanded increases at every possible price, the demand curve has a. shifted to the left. b. shifted to the right. c. not shifted; rather, we have moved along the demand curve to a new point on the same curve. d. not shifted; rather, the demand curve has become steeper.

b

When the market price is above the equilibrium price, the quantity of the good demanded exceeds the quantity supplied. a. True b. False

b

Which of the following events must cause equilibrium quantity to fall? a. demand increases and supply decreases b. demand and supply both decrease c. demand decreases and supply increases d. demand and supply both increase

b

You love peanut butter. You hear on the news that 50 percent of the peanut crop in the South has been wiped out by drought and that this will cause the price of peanuts to double by the end of the year. As a result, your demand for peanut butter a. will increase but not until the end of the year. b. increases today. c. decreases as you look for a substitute good. d. shifts left today.

b

A decrease in the price of a good will a. increase demand. b. decrease demand. c. increase quantity demanded. d. decrease quantity demanded.

c

A group of buyers and sellers of a particular good or service is called a(n) a. coalition. b. economy. c. market. d. competition.

c

A market includes a. buyers only. b. sellers only. c. both buyers and sellers. d. the place where transactions occur but not the people involved.

c

If the demand for a product increases, then we would expect equilibrium price a. to increase and equilibrium quantity to decrease. b. to decrease and equilibrium quantity to increase. c. and equilibrium quantity both to increase. d. and equilibrium quantity both to decrease.

c

In a competitive market, the quantity of a product produced and the price of the product are determined by a. buyers. b. sellers. c. both buyers and sellers. d. None of the above is correct.

c

In competitive markets, which of the following is not correct? a. Firms produce identical products. b. No individual buyer can influence the market price. c. Some sellers can set prices. d. Buyers are price takers.

c

The forces that make market economies work are a. work and leisure. b. politics and religion. c. supply and demand. d. taxes and government spending.

c

The supply of a good or service is determined by a. those who buy the good or service. b. the government. c. those who sell the good or service. d. both those who buy and those who sell the good or service.

c

When we move along a given supply curve, a. only price is held constant. b. technology and price are held constant. c. all nonprice determinants of supply are held constant. d. all determinants of quantity supplied are held constant.

c

Which of the following events must result in a lower price in the market for Snickers? a. Demand for Snickers increases, and supply of Snickers decreases. b. Demand for Snickers and supply of Snickers both decrease. c. Demand for Snickers decreases, and supply of Snickers increases. d. Demand for Snickers and supply of Snickers both increase

c

Which of the following is not held constant in a demand schedule? a. income b. tastes c. price d. expectations

c

Workers at a bicycle assembly plant currently earn the mandatory minimum wage. If the federal government increases the minimum wage by $1.00 per hour, then it is likely that the a. demand for bicycle assembly workers will increase. b. supply of bicycles will shift to the right. c. supply of bicycles will shift to the left. d. firm must increase output to maintain profit levels.

c

"Other things equal, when the price of a good rises, the quantity demanded of the good falls, and when the price falls, the quantity demanded rises." This relationship between price and quantity demanded a. applies to most goods in the economy. b. is represented by a downward-sloping demand curve. c. is referred to as the law of demand. d. All of the above are correct.

d

A competitive market is one in which there a. is only one seller, but there are many buyers. b. are many sellers, and each seller has the ability to set the price of his product. c. are many sellers, and they compete with one another in such a way that some sellers are always being forced out of the market. d. are so many buyers and so many sellers that each has a negligible impact on the price of the product.

d

A decrease in demand is represented by a a. movement downward and to the right along a demand curve. b. movement upward and to the left along a demand curve. c. rightward shift of a demand curve. d. leftward shift of a demand curve.

d

A decrease in supply is represented by a a. movement downward and to the left along a supply curve. b. movement upward and to the right along a supply curve. c. rightward shift of a supply curve. d. leftward shift of a supply curve.

d

A decrease in the price of a good will a. increase supply. b. decrease supply. c. increase quantity supplied. d. decrease quantity supplied.

d

A likely example of substitute goods for most people would be a. peanut butter and jelly. b. tennis balls and tennis rackets. c. televisions and subscriptions to cable television services. d. pencils and pens.

d

An increase in the price of a good will a. increase demand. b. decrease demand. c. increase quantity demanded. d. decrease quantity demanded.

d

If a seller in a competitive market chooses to charge more than the going price, then a. the sellers' profits must increase. b. the owners of the raw materials used in production would raise the prices for the raw materials. c. other sellers would also raise their prices. d. buyers will make purchases from other sellers.

d

If the demand for a product decreases, then we would expect equilibrium price a. to increase and equilibrium quantity to decrease. b. to decrease and equilibrium quantity to increase. c. and equilibrium quantity to both increase. d. and equilibrium quantity to both decrease.

d

In a market economy, a. supply determines demand and demand, in turn, determines prices. b. demand determines supply and supply, in turn, determines prices. c. the allocation of scarce resources determines prices and prices, in turn, determine supply and demand. d. supply and demand determine prices and prices, in turn, allocate the economy's scarce resources.

d

Suppose the number of buyers in a market increases and a technological advancement occurs also. What would we expect to happen in the market? a. Equilibrium price would decrease, but the impact on equilibrium quantity would be ambiguous. b. Equilibrium price would increase, but the impact on equilibrium quantity would be ambiguous. c. Equilibrium quantity would decrease, but the impact on equilibrium price would be ambiguous. d. Equilibrium quantity would increase, but the impact on equilibrium price would be ambiguous.

d

The following table contains a demand schedule for a good. Price Quantity Demanded $30 A $50 300 If the law of demand applies to this good, then A could be a. 0. b. 100. c. 200. d. 400.

d

The following table contains a supply schedule for a good. Price Quantity Supplied $10 100 $20 Q1 If the law of supply applies to this good, then Q1 could be a. 0. b. 50. c. 100. d. 150.

d

The law of demand states that, other things equal, when the price of a good a. falls, the demand for the good rises. b. rises, the quantity demanded of the good rises. c. rises, the demand for the good falls. d. falls, the quantity demanded of the good rises.

d

The quantity supplied of a good is the amount that a. buyers are willing and able to purchase. b. sellers are able to produce. c. buyers and sellers agree will be brought to market. d. sellers are willing and able to sell.

d

The signals that guide the allocation of resources in a market economy are a. surpluses and shortages. b. quantities. c. government policies. d. prices.

d

The sum of all the individual demand curves for a product is called a. income demand. b. equilibrium demand. c. complementary demand. d. market demand.

d

The unique point at which the supply and demand curves intersect is called a. market harmony. b. coincidence. c. equivalence. d. equilibrium.

d

Two goods are complements when a decrease in the price of one good a. decreases the quantity demanded of the other good. b. decreases the demand for the other good. c. increases the quantity demanded of the other good. d. increases the demand for the other good.

d

When all market participants are price takers who have no influence over prices, the markets have a. only a few buyers and sellers. b. numerous sellers but only a few buyers. c. numerous buyers but only a few sellers. d. numerous buyers and sellers.

d

When drawing a demand curve, a. demand is measured along the vertical axis, and price is measured along the horizontal axis. b. quantity demanded is measured along the vertical axis, and price is measured along the horizontal axis. c. price is measured along the vertical axis, and demand is measured along the horizontal axis. d. price is measured along the vertical axis, and quantity demanded is measured along the horizontal axis.

d

When supply and demand both increase, equilibrium a. price will increase. b. price will decrease. c. quantity may increase, decrease, or remain unchanged. d. price may increase, decrease, or remain unchanged.

d

Which of the following is not a determinant of the demand for a particular good? a. the prices of related goods b. income c. tastes d. the prices of the inputs used to produce the good

d

Which of the following would shift the supply of Packers football jerseys to the right? a. The Packers make it to the Super Bowl. b. The price of the jerseys increases by $15. c. The cost to distribute the jerseys increases. d. The cost of the fabric used to make the jerseys decreases.

d

Who gets scarce resources in a market economy? a. the government b. whoever the government decides gets them c. whoever wants them d. whoever is willing and able to pay the price

d