Chapter 03 Demand and supply
DVD players and DVDs are: A) complementary goods. B) substitute goods. C) independent goods. D) inferior goods.
A
Assume the demand schedule for product C is downsloping. If the price of C falls from $2.00 to $1.75: A) a smaller quantity of C will be demanded. B) a larger quantity of C will be demanded. C) the demand for C will increase. D) the demand for C will decrease.
B
Digital cameras and memory cards are: A) substitute goods. B) complementary goods. C) independent goods. D) inferior goods.
B
An effective price ceiling will: A) induce new firms to enter the industry. B) result in a product surplus. C) result in a product shortage. D) clear the market.
C
The demand curve for a product might shift as the result of a change in: A) consumer tastes. B) consumer incomes. C) the prices of related goods. D) all of these.
D
A price floor in a competitive market will result in persistent shortages of a product.
False
A government subsidy per unit of output increases supply.
True
An increase in product price will cause: A) quantity demanded to decrease. B) quantity supplied to decrease. C) quantity demanded to increase. D) the supply curve to shift to the left.
A
An unusually large crop of coffee beans would: A) increase the supply of coffee. B) increase the price of coffee. C) decrease the quantity of coffee consumed. D) increase the price of tea.
A
Assume product A is an input in the production of product B. In turn product B is a complement to product C. We can expect a decrease in the price of A to: A) increase the supply of B and increase the demand for C. B) decrease the supply of B and increase the demand for C. C) decrease the supply of B and decrease the demand for C. D) increase the supply of B and decrease the demand for C.
A
Assume the demand curve for product X shifts to the right. This might be caused by: A) a decline in income if X is an inferior good. B) a decline in the price of Z if X and Z are substitute goods. C) a change in consumer tastes that is unfavorable to X. D) an increase in the price of Y if X and Y are complementary goods.
A
College students living off-campus frequently consume large amounts of boxed macaroni and cheese. When they finish school and start their careers, their consumption of this good frequently declines. This suggests that boxed macaroni and cheese is: A) an inferior good. B) a normal good. C) a complementary good. D) a substitute good.
A
Drawing demand and supply curves assumes that the primary variable influencing decisions to produce and purchase goods is: A) price. B) expectations. C) preferences. D) incomes.
A
Given a downsloping demand curve and an upsloping supply curve for a product, an increase in the price of a substitute good will: A) increase equilibrium price and quantity. B) decrease equilibrium price and quantity. C) increase equilibrium price and decrease equilibrium quantity. D) decrease equilibrium price and increase equilibrium quantity.
A
If the demand for steak (a normal good) shifts to the left, the most likely reason is that: A) consumer incomes have fallen. B) cattle production has declined. C) the price of steak has risen. D) the price of cattle feed has gone up.
A
In a competitive market the equilibrium price and quantity occur where: A) the downsloping demand curve intersects the upsloping supply curve. B) the upsloping demand curve intersects the downsloping supply curve. C) consumers and suppliers bargain to a mutually acceptable price. D) quantity demanded exceeds quantity supplied or vice versa.
A
In moving along a stable demand curve, which of the following is not held constant? A) Price of the product for which the demand curve is relevant B) Price expectations C) Consumer incomes D) Prices of complementary goods
A
In presenting the model of a demand curve, economists presume the most important variable in determining the quantity demanded is: A) the price of the product itself. B) consumer income. C) the prices of related goods. D) consumer tastes.
A
Other things equal, if the price of a key resource used to produce product X falls, the: A) product supply curve of X will shift to the right. B) product demand curve of X will shift to the right. C) product supply curve of X will shift to the left. D) product demand curve of X will shift to the left.
A
Perfectly competitive markets explained on the basis of supply and demand: A) assume many buyers and many sellers of a standardized product. B) assume market power so that buyers and sellers bargain with one another. C) do not exist in the real-world economy. D) are approximated by markets in which a single seller determines price.
A
Suppose that at prices of $5, $4, $3, $2, and $1 for product Z, the corresponding quantities supplied are 3, 4, 5, 6, and 7 units, respectively. Which of the following would increase the quantities supplied of Z to, say, 6, 8, 10, 12, and 14 units at these prices? A) improved technology for producing Z B) an increase in the prices of the resources used to make Z C) an increase in the excise tax on product Z D) increases in the incomes of the buyers of Z
A
The law of demand states that: A) price and quantity demanded are inversely related. B) the larger the number of buyers in a market, the lower the product price will be. C) price and quantity demanded are directly related. D) consumers will buy more of a product at high prices than at low prices.
A
The law of supply indicates that: A) producers will offer more of a product at high prices than they will at low prices. B) the product supply curve is downsloping. C) consumers will purchase less of a good at high prices than they will at low prices. D) producers will offer more of a product at low prices than they will at high prices.
A
The law of supply: A) reflects the amounts that producers want to offer at each price in a series of prices. B) is reflected in a downsloping supply curve. C) shows that the relationship between producer revenue and quantity supplied is negative. D) reflects the income and substitution effects of a price change.
A
The relationship between quantity supplied and price is ________ and the relationship between quantity demanded and price is ________. A) direct, inverse B) inverse, direct C) inverse, inverse D) direct, direct
A
The supply curve shows the relationship between: A) price and quantity supplied. B) production costs and the amount demanded. C) total business revenues and quantity supplied. D) physical inputs of resources and the resulting units of output.
A
When an economist says that the demand for a product has increased, this means that: A) consumers are now willing to purchase more of this product at each possible price. B) the product has become particularly scarce for some reason. C) product price has fallen and as a consequence consumers are buying a larger quantity of the product. D) the demand curve has shifted to the left.
A
Which of the following is a consequence of rent controls established to keep housing affordable for the poor? A) Less rental housing is available than if the rent controls were not in place. B) The quality of rental housing improves as landlords seek to attract the best tenants. C) Landlords are incentivized to produce and offer more rental units to maintain profits. D) All of these are consequences of rent controls.
A
Which of the following will cause a decrease in market equilibrium price and an increase in equilibrium quantity? A) An increase in supply B) An increase in demand C) A decrease in supply D) A decrease in demand
A
With a downsloping demand curve and an upsloping supply curve for a product, an increase in consumer income will: A) increase equilibrium price and quantity if the product is a normal good. B) decrease equilibrium price and quantity if the product is a normal good. C) have no effect on equilibrium price and quantity. D) reduce the quantity demanded but not shift the demand curve.
A
"In the corn market, demand often exceeds supply and supply sometimes exceeds demand." "The price of corn rises and falls in response to changes in supply and demand." In which of these two statements are the terms demand and supply being used correctly? A) In neither statement B) In the second statement C) In the first statement D) In both statements
B
A binding price ceiling means that: A) there is currently a surplus of the relevant product. B) government is imposing a legal price that is typically below the equilibrium price. C) government wants to stop a deflationary spiral. D) government is imposing a legal price that is typically above the equilibrium price.
B
A decrease in the demand for recreational fishing boats might be caused by an increase in the: A) income of sports fishers. B) price of outboard motors. C) size and number of fish available. D) price of sailing boats.
B
A decrease in the price of digital cameras will: A) cause the demand curve for memory cards to become vertical. B) shift the demand curve for memory cards to the right. C) shift the demand curve for memory cards to the left. D) not affect the demand for memory cards.
B
A demand curve: A) shows the relationship between price and quantity supplied. B) indicates the quantity demanded at each price in a series of prices. C) graphs as an upsloping line. D) shows the relationship between income and spending.
B
A government subsidy to the producers of a product: A) reduces product supply. B) increases product supply. C) reduces product demand. D) increases product demand.
B
A surplus of a product will arise when price is: A) above equilibrium, with the result that quantity demanded exceeds quantity supplied. B) above equilibrium, with the result that quantity supplied exceeds quantity demanded. C) below equilibrium, with the result that quantity demanded exceeds quantity supplied. D) below equilibrium, with the result that quantity supplied exceeds quantity demanded.
B
An effective price floor will: A) force some firms in this industry to go out of business. B) result in a product surplus. C) result in a product shortage. D) clear the market.
B
An increase in demand means that: A) given supply, the price of the product will decline. B) the demand curve has shifted to the right. C) price has declined and, therefore, consumers want to purchase more of the product. D) the demand curve has shifted to the left.
B
An increase in the quantity demanded means that: A) given supply, the price of the product can be expected to decline. B) price has declined and consumers therefore want to purchase more of the product. C) the demand curve has shifted to the right. D) the demand curve has shifted to the left.
B
Assume a drought in the Great Plains reduces the supply of wheat. Since wheat is a basic ingredient in the production of bread and potatoes are a consumer substitute for bread, we would expect the price of wheat to: A) rise, the supply of bread to increase, and the demand for potatoes to increase. B) rise, the supply of bread to decrease, and the demand for potatoes to increase. C) rise, the supply of bread to decrease, and the demand for potatoes to decrease. D) fall, the supply of bread to increase, and the demand for potatoes to increase.
B
At the current price there is a shortage of a product. We would expect price to: A) increase, quantity demanded to increase, and quantity supplied to decrease. B) increase, quantity demanded to decrease, and quantity supplied to increase. C) increase, quantity demanded to increase, and quantity supplied to increase. D) decrease, quantity demanded to increase, and quantity supplied to decrease.
B
If a product is in surplus, its price: A) is below the equilibrium level. B) is above the equilibrium level. C) will rise in the near future. D) is in equilibrium.
B
If consumers are willing to pay a higher price than previously for each level of output, we can say that the following has occurred: A) a decrease in demand. B) an increase in demand. C) a decrease in supply. D) an increase in supply.
B
If the price of K declines, the demand curve for the complementary product J will: A) shift to the left. B) shift to the right. C) decrease. D) remain unchanged.
B
If the price of a product increases, we would expect: A) demand to decrease. B) quantity supplied to increase. C) supply to decrease. D) quantity demanded to increase.
B
If there is a shortage of product X: A) fewer resources will be allocated to the production of this good in the future. B) the price of the product will rise. C) the price of the product will decline. D) the supply curve will shift to the left and the demand curve to the right, eliminating the shortage.
B
In 2007 the price of oil increased, which in turn caused the price of natural gas to rise. This can best be explained by saying that oil and natural gas are: A) complementary goods and the higher price for oil increased the demand for natural gas. B) substitute goods and the higher price for oil increased the demand for natural gas. C) complementary goods and the higher price for oil decreased the supply of natural gas. D) substitute goods and the higher price for oil decreased the supply of natural gas.
B
In constructing a stable demand curve for product X: A) consumer preferences are allowed to vary. B) the prices of other goods are assumed constant. C) money incomes are allowed to vary. D) the supply curve of product X is assumed to be fixed.
B
In which of the following statements are the terms "demand" and "quantity demanded" used correctly? A) When the price of ice cream rose, the demand for both ice cream and ice cream toppings fell. B) When the price of ice cream rose, the quantity demanded of ice cream fell and the demand for ice cream toppings fell. C) When the price of ice cream rose, the demand for ice cream fell and the quantity demanded of ice cream toppings fell. D) None of these statements uses the terms correctly.
B
Other things equal, which of the following might shift the demand curve for gasoline to the left? A) The discovery of vast new tar sands oil reserves in Canada B) The development of a low-cost electric automobile C) An increase in the price of train and air transportation D) A large decline in the price of automobiles
B
Suppose an excise tax is imposed on product X. We would expect this tax to: A) increase the demand for complementary good Y and decrease the demand for substitute product Z. B) decrease the demand for complementary good Y and increase the demand for substitute product Z. C) increase the demands for both complementary good Y and substitute product Z. D) decrease the demands for both complementary good Y and substitute product Z.
B
Suppose that tacos and pizza are substitutes, and soda and pizza are complements. We would expect an increase in the price of pizza to: A) reduce the demand for tacos and increase the demand for sodas. B) reduce the demand for soda and increase the demand for tacos. C) increase the demand for both soda and tacos. D) reduce the demand for both soda and tacos.
B
The upward slope of the supply curve reflects the: A) principle of specialization in production. B) law of supply. C) fact that price and quantity supplied are inversely related. D) law of diminishing marginal utility.
B
Which of the following statements is correct? A) If demand increases and supply decreases, equilibrium price will fall. B) If supply increases and demand decreases, equilibrium price will fall. C) If demand decreases and supply increases, equilibrium price will rise. D) If supply decreases and demand remains constant, equilibrium price will fall.
B
Which of the following statements is true about price ceilings? A) Price ceilings cause goods to be rationed by prices. B) Price ceilings cause goods to be rationed by some other means than free market prices. C) Ration coupons are the only way to ration goods when price ceilings are in place. D) All of these statements are correct.
B
Which of the following would not shift the demand curve for beef? A) A widely publicized study that indicates beef increases one's bad cholesterol levels B) A reduction in the price of cattle feed C) An effective advertising campaign by pork producers D) A change in the incomes of beef consumers
B
A market is in equilibrium :A) provided there is no surplus of the product. B) at all prices above that shown by the intersection of the supply and demand curves. C) if the amount producers want to sell is equal to the amount consumers want to buy. D) whenever the demand curve is downsloping and the supply curve is upsloping.
C
A market: A) exhibits upsloping demand and downsloping supply curves. B) entails the exchange of goods but not services. C) is an institution or mechanism that brings together buyers and sellers. D) always requires face-to-face contact between buyer and seller.
C
A shift to the right in the demand curve for product A can be most reasonably explained by saying that: A) consumer incomes have declined and they now want to buy less of A at each possible price. B) the price of A has increased and, as a result, consumers want to purchase less of it. C) consumer preferences have changed in favor of A so that they now want to buy more at each possible price. D) the price of A has decreased and, as a result, consumers want to purchase more of it.
C
An effective price floor on wheat will: A) force otherwise profitable farmers out of business. B) result in a shortage of wheat. C) result in a surplus of wheat. D) clear the market for wheat.
C
An improvement in production technology will: A) increase equilibrium price. B) shift the supply curve to the left. C) shift the supply curve to the right. D) shift the demand curve to the left.
C
An increase in the price of a product will reduce the amount of it purchased because: A) supply curves are upsloping. B) the higher price means that real incomes have risen. C) consumers will substitute other products for the one whose price has risen. D) consumers substitute relatively high-priced for relatively low-priced products.
C
An increase in the price of product A will: A) reduce the demand for resources used in the production of A. B) increase the demand for complementary product C. C) increase the demand for substitute product B. D) reduce the demand for substitute product B.
C
Assume, in a competitive market, price is initially above the equilibrium level. We predict that price will: A) decrease, quantity demanded will decrease, and quantity supplied will increase. B) decrease and quantity demanded and quantity supplied will both decrease. C) decrease, quantity demanded will increase, and quantity supplied will decrease. D) increase, quantity demanded will decrease, and quantity supplied will increase.
C
At the point where the demand and supply curves intersect: A) the buying and selling decisions of consumers and producers are inconsistent with one another. B) the market is in disequilibrium. C) there is neither a surplus nor a shortage of the product. D) quantity demanded exceeds quantity supplied.
C
Because of hurricanes in Florida, the supply of oranges has substantially decreased. This statement indicates that: A) the demand for oranges will necessarily rise. B) the equilibrium quantity of oranges will rise. C) the amount of oranges that will be available at various prices has declined. D) the price of oranges will fall.
C
Data from the registrar's office at Gigantic State University indicate that over the past 20 years tuition and enrollment have both increased. From this information we can conclude that: A) higher education is an exception to the law of demand. B) the supply of education provided by GSU has also increased over the 20-year period. C) school-age population, incomes, and preferences for education have changed over the 20-year period. D) GSU's supply curve of education is downsloping.
C
Effective price ceilings and price floors: A) cause surpluses and shortages, respectively. B) make the rationing function of free markets more efficient. C) interfere with the rationing function of prices. D) shift demand and supply curves and therefore have no effect on the rationing function of prices.
C
Graphically, the market demand curve is: A) steeper than any individual demand curve that is part of it. B) greater than the sum of the individual demand curves. C) the horizontal sum of individual demand curves. D) the vertical sum of individual demand curves.
C
If Z is an inferior good, an increase in money income will shift the: A) supply curve for Z to the left. B) supply curve for Z to the right. C) demand curve for Z to the left. D) demand curve for Z to the right.
C
If products A and B are complements and the price of B decreases, the: A) demand curves for both A and B will shift to the left. B) amount of B purchased will increase, but the demand curve for A will not shift. C) demand for A will increase and the amount of B demanded will increase. D) demand for A will decline and the demand for B will increase.
C
If the demand and supply curves for product X are stable, a government-mandated increase in the price of X will: A) increase the supply of X and decrease the demand for X. B) increase the demand for X and decrease the supply of X. C) increase the quantity supplied of X and decrease the quantity demanded of X. D) decrease the quantity supplied of X and increase the quantity demanded of X.
C
If the price of product L increases, the demand curve for close-substitute product J will: A) shift downward toward the horizontal axis. B) shift to the left. C) shift to the right. D) remain unchanged.
C
If two goods are complements: A) they are consumed independently. B) an increase in the price of one will increase the demand for the other. C) a decrease in the price of one will increase the demand for the other. D) they are necessarily inferior goods.
C
If we say that a price is too high to clear the market, we mean that: A) quantity demanded exceeds quantity supplied. B) the equilibrium price is above the current price. C) quantity supplied exceeds quantity demanded. D) the price of the good is likely to rise.
C
Increasing marginal cost of production explains: A) the law of demand. B) the income effect. C) why the supply curve is upsloping. D) why the demand curve is downsloping.
C
Suppose that corn prices rise significantly. If farmers expect the price of corn to continue rising relative to other crops, then we would expect: A) the supply of ethanol, a corn-based product, to increase. B) consumer demand for wheat to fall. C) the supply to increase as farmers plant more corn. D) the supply to fall as farmers plant more of other crops.
C
Suppose that in 2008, Ford sold 500,000 Mustangs at an average price of $18,800 per car; in 2009, 600,000 Mustangs were sold at an average price of $22,500 per car. These statements: A) suggest that the demand for Mustangs decreased between 2008 and 2009. B) suggest that the supply of Mustangs must have increased between 2008 and 2009. C) suggest that the demand for Mustangs increased between 2008 and 2009. D) constitute an exception to the law of demand in that they suggest an upsloping demand curve.
C
The demand curve shows the relationship between: A) money income and quantity demanded. B) price and production costs. C) price and quantity demanded. D) consumer tastes and the quantity demanded.
C
The rationing function of prices refers to the: A) tendency of supply and demand to shift in opposite directions. B) fact that ration coupons are needed to alleviate wartime shortages of goods. C) capacity of a competitive market to equate the quantity demanded and the quantity supplied. D) ability of the market system to generate an equitable distribution of income.
C
The term "quantity demanded": A) refers to the entire series of prices and quantities that comprise the demand schedule. B) refers to a situation in which the income and substitution effects do not apply. C) refers to the amount of a product that will be purchased at some specific price. D) means the same thing as demand
C
When the price of oil declines significantly, the price of gasoline also declines. The latter occurs because of a(n): A) increase in the demand for gasoline. B) decrease in the demand for gasoline .C) increase in the supply of gasoline. D) decrease in the supply of gasoline.
C
Which of the following is most likely to be an inferior good? A) Luxury automobiles B) Ocean cruises C) Used clothing D) Steak
C
Which of the following will not cause the demand for product K to change? A) A change in the price of close-substitute product J B) An increase in consumer incomes C) A change in the price of K D) A change in consumer tastes
C
With a downsloping demand curve and an upsloping supply curve for a product, a decrease in resource prices will: A) increase equilibrium price and quantity. B) decrease equilibrium price and quantity. C) decrease equilibrium price and increase equilibrium quantity. D) increase equilibrium price and decrease equilibrium quantity.
C
A binding price floor means that: A) inflation is severe in this particular market. B) sellers are artificially restricting supply to raise price. C) government is imposing a maximum legal price that is typically below the equilibrium price. D) government is imposing a minimum legal price that is typically above the equilibrium price.
D
A leftward shift of a product supply curve might be caused by: A) an improvement in the relevant technique of production. B) a decline in the prices of needed inputs. C) an increase in consumer incomes. D) some firms leaving an industry.
D
A normal good is one: A) whose amount demanded will increase as its price decreases. B) whose amount demanded will decrease as its price decreases. C) whose demand curve will shift leftward as incomes rise. D) for which the consumption varies directly with incomes.
D
A product market is in equilibrium: A) when there is no surplus of the product. B) when there is no shortage of the product. C) when consumers want to buy more of the product than producers offer for sale. D) where the demand and supply curves intersect.
D
An economist for a bicycle company predicts that, other things equal, a rise in consumer incomes will increase the demand for bicycles. This prediction is based on the assumption that: A) there are many goods that are substitutes for bicycles. B) there are many goods that are complementary to bicycles. C) there are few goods that are substitutes for bicycles. D) bicycles are normal goods.
D
An increase in the excise tax on cigarettes raises the price of cigarettes by shifting the: A) demand curve for cigarettes rightward. B) demand curve for cigarettes leftward. C) supply curve for cigarettes rightward. D) supply curve for cigarettes leftward.
D
Assume, in a competitive market, price is initially below the equilibrium level. We predict that price will: A) decrease, quantity demanded will decrease, and quantity supplied will increase. B) decrease and quantity demanded and quantity supplied will both decrease. C) increase, quantity demanded will increase, and quantity supplied will decrease. D) increase, quantity demanded will decrease, and quantity supplied will increase.
D
Assuming competitive markets with typical supply and demand curves, which of the following statements is correct? A) An increase in supply with a decrease in demand will result in an increase in price. B) An increase in supply with no change in demand will result in an increase in price. C) An increase in supply with no change in demand will result in a decline in sales. D) An increase in demand with no change in supply will result in an increase in sales.
D
At the point where the demand and supply curves for a product intersect: A) the selling price and the buying price need not be equal. B) the market may, or may not, be in equilibrium. C) either a shortage or a surplus of the product might exist, depending on the degree of competition. D) the quantity that consumers want to purchase and the amount producers choose to sell are the same.
D
Dynamic pricing used by companies such as Uber: A) often results in shortages of desired products. B) has been declared illegal because it harms consumers. C) creates market prices that are consistently lower than those preset by firms or by law. D) allows market prices to adjust in real time to changes in supply and demand.
D
Economists use the term "demand" to refer to: A) a particular price-quantity combination on a stable demand curve. B) the total amount spent on a particular commodity over a stipulated time period. C) an upsloping line on a graph that relates consumer purchases and product price. D) a schedule of various combinations of market prices and amounts demanded.
D
If X is a normal good, a rise in money income will shift the: A) supply curve for X to the left. B) supply curve for X to the right .C) demand curve for X to the left. D) demand curve for X to the right.
D
If a legal price ceiling is set above the equilibrium price: A) a shortage of the product will occur. B) a surplus of the product will occur. C) a black market will evolve. D) neither the equilibrium price nor the equilibrium quantity will be affected.
D
If an effective price ceiling is placed on hamburgers, then: A) the quantity demanded will exceed the quantity supplied. B) a black market for hamburgers may evolve. C) consumers may want government to ration hamburgers. D) All of these are likely outcomes.
D
If the demand curve for product B shifts to the right as the price of product A declines, then: A) both A and B are inferior goods. B) A is a superior good and B is an inferior good. C) A is an inferior good and B is a superior (or "normal") good. D) A and B are complementary goods.
D
If two goods are complements: A) they are consumed independently. B) an increase in the price of one will increase the demand for the other. C) a decrease in the price of one will increase the demand for the other. D) they are necessarily inferior goods.
D
In the past few years the demand for donuts has greatly increased. This increase in demand might best be explained by: A) an increase in the cost of making donuts. B) an increase in the price of coffee. C) consumers expecting donut prices to fall. D) a change in buyer tastes.
D
One reason that the quantity demanded of a good increases when its price falls is that the: A) price decline shifts the supply curve to the left. B) lower price shifts the demand curve to the left. C) lower price shifts the demand curve to the right. D) lower price increases the real incomes of buyers, enabling them to buy more.
D
Over time, the equilibrium price of a gigabyte of computer memory has fallen while the equilibrium quantity purchased has increased. Based on this we can conclude that: A) decreases in the demand for computer memory have exceeded increases in supply. B) decreases in the supply of computer memory have exceeded increases in demand. C) increases in the demand for computer memory have exceeded increases in supply. D) increases in the supply of computer memory have exceeded increases in demand.
D
Price floors and price ceilings: A) both cause shortages. B) both cause surpluses. C) cause the supply and demand curves to shift until equilibrium is established. D) interfere with the rationing function of prices.
D
Tennis rackets and ballpoint pens are: A) substitute goods. B) complementary goods. C) inferior goods. D) independent goods.
D
The demand for most products varies directly with changes in consumer incomes. Such products are known as: A) complementary goods. B) competitive goods. C) inferior goods. D) normal goods.
D
The location of the supply curve of a product depends on: A) the technology used to produce it. B) the prices of resources used in its production. C) the number of sellers in the market. D) all of these.
D
The quantity demanded of a product increases as its price declines because the: A) lower price shifts the demand curve rightward. B) lower price shifts the demand curve leftward. C) lower price results in an increase in supply. D) demand curve is downsloping.
D
The ride-sharing service Uber uses "surge pricing": A) to undercut the prices charged by taxi companies. B) because equilibrium prices do not exist in the ride-sharing market. C) to discourage customers from wanting rides during off-peak hours. D) to attract more drivers when demand for rides suddenly increases.
D
There will be a surplus of a product when: A) price is below the equilibrium level. B) the supply curve is downward sloping and the demand curve is upward sloping. C) the demand and supply curves fail to intersect. D) consumers want to buy less than producers offer for sale.
D
Which of the following is a consequence of rent controls established to keep housing affordable for the poor? A) Less rental housing is available as prospective landlords find it unprofitable to rent at restricted prices. B) The quality of rental housing declines as landlords lack the funds and incentive to maintain properties. C) Apartment buildings are torn down in favor of office buildings, shopping malls, and other buildings where rents are not controlled. D) All of these are consequences of rent controls.
D
Which of the following will cause the demand curve for product A to shift to the left? A) Population growth that causes an expansion in the number of persons consuming A B) An increase in money income if A is a normal good C) A decrease in the price of complementary product C D) An increase in money income if A is an inferior good
D
A decrease in supply of X increases the equilibrium price of X, which reduces the demand for X and automatically returns the price of X to its initial level.
False
A price ceiling in a competitive market will result in persistent surpluses of a product.
False
A price ceiling set by government will increase the equilibrium price and quantity in a market.
False
An increase in quantity supplied might be caused by an increase in production costs.
False
If effective, a government-set price ceiling will lower equilibrium price and quantity in a market.
False
If market demand increases and market supply decreases, the change in equilibrium price is unpredictable without first knowing the exact magnitudes of the demand and supply changes.
False
If the legal price floor is set below the equilibrium price in a market, then a surplus will develop in the market.
False
Supply refers to the amount of a product that a producer will offer in the market at some particular price.
False
Surpluses drive market prices up; shortages drive them down.
False
The rationing function of prices refers to the fact that government must distribute any surplus goods that may be left in a competitive market.
False
Toothpaste and toothbrushes are substitute goods.
False
f the government sets a price floor above what would be the competitive market price of a product, a shortage of the product will develop.
False
A government tax per unit of output reduces supply.
True
An increase in demand accompanied by an increase in supply will increase the equilibrium quantity, but the effect on equilibrium price will be indeterminate.
True
Consumers buy more normal goods as their incomes rise.
True
If the government presets a price that turns out to be above the actual equilibrium price, a surplus will develop in the market.
True
In a competitive market, every consumer willing to pay the market price can buy a product and every producer willing to sell the product at that price can sell it.
True
f demand increases and supply simultaneously decreases, equilibrium price will rise.
True
