Chapter 3: Supply and Demand
A decrease in the price of a good will result in: 1.) more being supplied 2.) an increase in demand 3.) an increase in supply 4.) an increase in the quantity demanded
4.) an increase in the quantity demanded
The market price of airline flights increased recently. Some economists suggest that the price increased because of an increase in the number of business travelers. They believe that in the market for flights: 1.) supply decreased 2.) supply increased 3.) demand decreased 4.) demand increased
4.) demand increased
An inferior good is one for which a(n) _________ in buyers' income causes a(n) __________. 1.) increase; increase in quantity demanded 2.) increase; increase in demand 3.) decrease; decrease in demand 4.) increase; decrease in demand
4.) increase; decrease in demand
Over the past few years, the technology associated with producing flat panel televisions has improved. This has led to a(n) _________ in the _________ flat-panel televisions. 1.) decrease; demand for 2.) decrease; supply of 3.) decrease; quantity supplied of 4.) increase; supply of
4.) increase; supply of
The primary difference between a change in supply and a change in the quantity supplied is that: 1. ) a change in quantity supplied is a movement along the supply curve, while a change in supply is a shift in the supply curve 2.) a change in supply is related to the supply curve, while a change in quantity supplied is related to shifts in the demand curve that elicit a change in supply 3.) both a change in quantity supplied and a change in supply are movement along the supply curve, only in different directions. 4.) a change in supply is a movement along the supply curve, while a change in quantity supplied is a shift in the supply curve.
1. ) a change in quantity supplied is a movement along the supply curve, while a change in supply is a shift in the supply curve
Which of the following is NOT a determinant of supply? 1.) expectations regarding future prices 2.) consumer tastes 3.) the cost of production 4.) the technology of production
2.) consumer tastes
Look at the table The Market for Chocolate-Covered Peanuts. A surplus of 210 bags of chocolate-covered peanuts exists if the price is _________ per bag. 1.) $0.90 2.) $0.80 3.) $0.40 4.) $0.60
1.) $0.90
Look at the figure The Demand and Supply of Wheat. If there is a decrease in supply of 2,000 bushels at each price, the equilibrium price and quantity will be _______ and _________ bushels, respectively. 1.) $7; 5,000 2.) $6; 4,000 3.) $8; 6,000 4.) $5; 5,000
1.) $7; 5,000
Look at the figure the demand and supply of wheat. If there is an increase in demand of 2000 bushels at each price, the equilibrium price and quantity will be ________ and _________ bushels, respectively 1.) $7; 7,000 2.) $8; 8,000 3.) $5; 5,000 4.) $6; 7,000
1.) $7; 7,000
Look at the figure Supply of Coconuts. If the price of coconuts decreased, it would be represented in the figure as a movement from: 1.) A to B 2.) E to B 3.) B to A 4.) C to A
1.) A to B
Look at the figure Demand for Coconuts. If fish is a substitute good for coconuts and price of fish increases, it will be represented in the figure as a movement from: 1.) A to C 2.) B to A 3.) B to E 4.) C to A
1.) A to C
When the economy turns down and the incomes of many people decrease, vacationers are more likely to take car trips than to fly. Which of the following providers one possible explanation for this phenomenon? 1.) Air travel is a normal good and travel by car is an inferior good. 2.) Air travel and travel by car are complementary goods. 3.) Air travel and travel by car are both normal goods. 4.) Air travel is an inferior good and travel by car is a normal good.
1.) Air travel is a normal good and travel by car is an inferior good.
Which of the following would shift the demand curve for new textbooks to the right? 1.) An increase in college enrollment 2.) A fall in the price of used textbooks 3.) A fall in the price of new textbooks 4.) A decrease in the price of paper
1.) An increase in college enrollment
Look at the figure Supply of Coconuts. If the prices of inputs (e.g., labor, fertilizer, and fuel) used to produce and transport coconuts decreased, it will be represented in the figure as a movement from: 1.) E to B 2.) B to A 3.) C to A 4.) A to B
1.) E to B
Which of the following is TRUE of a normal good? 1.) When income increases, the demand for the good increases 2.) When income increase the demand for the good decreases 3.) Income and the demand are unrelated 4.) When income increases the demand for the good remains unchanged.
1.) When income increases, the demand for the good increases
For consumers, pizza and hamburgers are substitutes. A rise in the price of a pizza causes _______ in the equilibrium price of a hamburger and _________ in the equilibrium quantity of hamburgers. 1.) a rise; an increase 2.) a fall; a decrease 3.) a fall; an increase 4.) a rise; a decrease
1.) a rise; an increase
An increase in the price and an ambiguous change in quantity is most likely caused by: 1.) a shift in the left in supply and shift to the right in demand 2.) a shift to the right in supply and a shift to the left in demand 3.) a shift to the left in demand and no shift in supply 4.) a shift to the left in supply and no shift in demand
1.) a shift in the left in supply and shift to the right in demand
Look at the table The Market for Chocolate-Covered Peanuts. If the price of chocolate-covered peanuts is $0.50, there is: 1.) a shortage of 70 bags per month 2.) a surplus of 70 bags per month 3.) a shortage of 35 bags per month 4.) a surplus of 35 bags per month
1.) a shortage of 70 bags per month
If the price of hamburger decreased, it would probably result in _____________ in the demand for hamburger buns 1.) an increase 2.) a decrease 3.) random fluctuations 4.) no change
1.) an increase
The demand curve for running shoes has shifted to the right. What could have caused it? 1.) an increase in the income of buyers of running shoes 2.) an increase in the supply of running shoes 3.) an increase in the price of running shoes 4.) a fall in the price of running shoes
1.) an increase in the income of buyers of running shoes
In the market for tacos, you observe that the equilibrium price and quantity have increased. This can be caused only by: 1.) an increase in the incomes of people who eat tacos 2.) an increase in the wages of taco shop workers 3.) an increase in the price of beef 4.) fewer taco shops
1.) an increase in the incomes of people who eat tacos
Look at the figure Demand and Supply of Gasoline. A factor that may have changed supply from S1 to S2 is: 1.) better technology in the production of gasoline 2.) lower labor productivity in gasoline production 3.) increased prices of substitutes in production for gasoline 4.) increased demand
1.) better technology in the production of gasoline
An increase in the demand for gasoline today caused by concerns that gasoline prices will be higher tomorrow is most likely attributable to a change in 1.) consumer expectations 2.) income 3.) prices of other goods 4.) consumer preferences
1.) consumer expectations
Suppose the local real estate market is in equilibrium. A recession causes local household incomes to decline. At the same time, construction of a large subdivision of new homes has just been completed. Given these two changes and assuming that real estate is a normal good, we can predict that the price of real estate will ________ and the quantity of real estate bought and sold will ________. 1.) fall; rise or fall 2.) fall; fall 3.) rise; fall or rise 4.) fall; rise
1.) fall; rise or fall
The market for corn is in equilibrium. Which of the following is most likely to INCREASE the equilibrium price of corn? 1.) increasing production of corn-based ethanol 2.) decreasing household incomes, with corn being a normal good 3.) a decrease in the price of wheat, a substitute in consumption 4.) a bountiful harvest
1.) increasing production of corn-based ethanol
It is certain that the equilibrium price will rise when the supply curve shifts to the ________ and the demand curve shifts to the _______. 1.) left; right 2.) right; left 3.) left; left 4.) right; right
1.) left; right
The cost of sensors used in making digital cameras falls, while a successful ad campaign makes digital cameras more fashionable. As a result, the equilibrium price of digital cameras _________ and the equilibrium quantity _________. 1.) may increase, decrease, or stay the same; increases 2.) increases; may increase, decrease, or stay the same 3.) increases; increases 4.) decreases; increases
1.) may increase, decrease, or stay the same; increases
The typical supply curve illustrates that: 1.) other things equal, the quantity supplied for a good is positively related to the price of a good 2.) price and quantity supplied are unrelated 3.) other things equal, the supply of the good creates its own demand for the good 4.) other things equal, the quantity supplied for a good is inversely related to the price of a good.
1.) other things equal, the quantity supplied for a good is positively related to the price of a good
Suppose the market for gasoline is in equilibrium. You have heard that the price of crude oil is falling because of new oil discoveries. You are also aware that the number of car and truck drivers is steadily rising. Knowing this, you predict that the price of gasoline will _______ and the quantity of gasoline bought and sold will ________. 1.) rise or fall; rise 2.) rise or fall; fall 3.) rise; rise 4.) rise; fall
1.) rise or fall; rise
The market price of airline flights increased recently. Some economists suggest that the price increased because jet fuel is much more expensive than before. As a result, they believe that in the market for flights: 1.) supply decreased 2.) demand increased 3.) supply increased 4.) demand decreased
1.) supply decreased
Look at the figure Demand and Supply of Gasoline. Given the initial equilibrium of S1 and D, any price lower than ________ will exert pressure for the price to _________. 1.) $3.00; rise 2.) $2.50; rise 3.) $2.50; fall 4.) $2.00; fall
2.) $2.50; rise
Look at the figure Demand for Coconuts. If coconuts are a normal good and the price of coconuts increases, it will be represented in the figure as a movement from: 1.) C to A 2.) B to A 3.) A to B 4.) E to B
2.) B to A
Look at the figure Supply of Coconuts. An expectation on the part of coconut suppliers that the price of coconuts will be significantly higher in the very near future would be represented in the figure as a movement from: 1.) A to B 2.) B to E 3.) B to A 4.) A to C
2.) B to E
Look at the figure Demand for Coconuts. If coconuts are a normal good and the income level of consumers falls, it will be represented in the figure as a movement from: 1.) B to A 2.) C to A 3.) A to C 4.) E to B
2.) C to A
In the market for grass-fed beef, what would cause a price increase? 1.) Doctors tell patients that beef is full of saturated fat that causes heart attacks. 2.) The price of grass and corn increase 3.) The price of chicken decreases 4.) There is a movement in the United States toward vegetarianism
2.) The price of grass and corn increase
Suppose that supply increases and demand decreases. What is the most likely effect on price and quantity? 1.) The price will increase, but quantity may increase, decrease, or stay the same 2.) The price will decrease, but quantity may increase, decrease, or stay the same 3.) The price will increase and quantity will increase 4.) The price will decrease and quantity will decrease
2.) The price will decrease, but quantity may increase, decrease, or stay the same
Which of the following factors would result solely in a movement along the demand curve for a particular good? 1.) a change in the prices of related goods 2.) a change in the price of that good 3.) a change in the size of the population 4.) both a change in the price of that goods and a change in the size of the population
2.) a change in the price of that good
If chicken and beef are substitutes, then a fall in the price of chicken will bring about: 1.) no change in the demand for beef 2.) a decrease in the demand for beef 3.) a decrease in the quantity demanded of beef 4.) an increase in the demand for beef
2.) a decrease in the demand for beef
If the supply and demand curves intersect at $14, then any price below that would result in: 1.) a surplus 2.) a shortage 3.) equilibrium 4.) an increase in demand
2.) a shortage
Raclette is a popular wintertime dish in Switzerland. It is essentially melted Raclette cheese over boiled new potatoes. If the price of Raclette cheese decreased, we would expect to see: 1.) an increase in demand for Raclette cheese 2.) an increase in demand for new potatoes 3.) no effect on the demand for either of the Raclette ingredients, since this is a traditional dish and its consumption does not depend of the prices of the ingredients. 4.) an increase in demand for Raclette cheese and for new potatoes
2.) an increase in demand for new potatoes
Pizza is a normal good. If students' incomes at your college increase, the effect on pizza will be: 1.) no change in the demand 2.) an increase in the demand 3.) a decrease in the demand 4.) an increase in the quantity demanded
2.) an increase in the demand
Which of the following will NOT cause an increase in the supply of cornflakes? 1.) a reduction in the price of corn 2.) an increase in the price of cornflakes 3.) the expectation by producers that the price of cornflakes will fall in the future 4.) a cost-saving improvement in the technology of corn production
2.) an increase in the price of cornflakes
In the local market for coffee, a normal good, the price will ______ and the quantity will _______ if new coffee shops open and consumers' incomes decrease because of a recession 1.) be indeterminate; increase 2.) decrease; be indeterminate 3.) increase; be indeterminate 4.) be indeterminate; decrease
2.) decrease; be indeterminate
A technological advance in the production of automobiles will _____ the _____ automobiles. 1.) decrease; demand 2.) increase; supply of 3.) decrease; demand for 4.) decrease; supply of
2.) increase; supply of
Which of the following describes two goods that are most likely substitutes in consumption? 1.) loaves of bread and toasters 2.) loaves of bread and hamburger buns 3.) loaves of bread and gasoline 4.) loaves of bread and sticks of butter
2.) loaves of bread and hamburger buns
Which of the following influences does NOT shift the supply curve? 1.) the development of a new production technology 2.) people deciding that they want to buy more of the product 3.) a rise in the wages paid to workers 4.) a decrease in the price firms expect to receive in the future.
2.) people deciding that they want to buy more of the product
Suppose that more police and security workers become aware that wearing bulletproof vests can protect them from injury and decide to start wearing bulletproof vests. At the same time, the price of ceramics used to produce the vests falls. The equilibrium price of bulletproof vests _________ and the equilibrium quantity produced _________. 1.) decreases; decreases 2.) probably changes, but in an ambiguous direction; increases 3.) probably changes, but in an ambiguous direction; probably changes, but in an ambiguous direction 4.) increases; increases
2.) probably changes, but in an ambiguous direction; increases
If the price of a commodity increases, you can expect the: 1.) quantity supplied to decrease 2.) quantity supplied to increase 3.) supply curve to shift to the right 4.) supply to increase
2.) quantity supplied to increase
It is certain that the equilibrium quantity will fall when: 1.) the supply curve shifts to the left and demand shifts to the right 2.) supply shifts to the left and demand stays the same 3.) the supply curve shifts to the right and the demand curve shifts to the left 4.) the supply curve and the demand curve both shift to the right
2.) supply shifts to the left and demand stays the same
The demand for meals at a local Applebee's will shift to the left if: 1.) the price of gasoline falls in the area 2.) the Olive Garden offers a 10 percent discount coupon in the local newspaper 3.) the price of a meal at Applebee's rises 4.) local incomes increase and Applebee's is a normal good
2.) the Olive Garden offers a 10 percent discount coupon in the local newspaper
The market for milk is initially in equilibrium. Milk producers successfully advertise to encourage milk drinking. At the same time, more milk producers enter the market. Standard demand and supply analysis tells us that: 1.) the equilibrium price and quantity of milk will rise. 2.) the equilibrium quantity of milk will rise, but we can't determine how the equilibrium price will be affected 3.) the equilibrium price and quantity of milk will fall 4.) the equilibrium price of milk will rise, but we can't determine how the equilibrium quantity will be affected
2.) the equilibrium quantity of milk will rise, but we can't determine how the equilibrium price will be affected
An increase in the price of hamburger would probably result in _________ in the demand for hamburger buns. 1.) random fluctuations 2.) no change 3.) a decrease 4.) an increase
3.) a decrease
A decrease in demand with no change in supply with lead to ________ in equilibrium quantity and _________ in equilibrium price 1.) an increase; a decrease 2.) an increase; an increase 3.) a decrease; a decrease 4.) a decrease; an increase
3.) a decrease; a decrease
Which of the following is likely to cause a rightward shift in the demand for home-delivered pizza? 1.) a lower price of fast-food hamburgers 2.) a lower price of pizza 3.) a larger population 4.) a higher price of pepperoni
3.) a larger population
A recent news story reported that the Organization of Petroleum Exporting Countries is expected to decrease the supply of oil next summer. Summer is traditionally a time of increased demand for oil beacuse of vacation travel. What would be the combined effect of these two events on the summer market for gasoline? 1.) an increase in the price and the quantity 2.) an unpredictable change in the price and a decrease in the quantity 3.) an increase in the price and an unpredictable change in the quantity 4.) an unpredictable change in both the price and the quantity
3.) an increase in the price and an unpredictable change in the quantity
Look at the figure Demand and Supply of Gasoline. Given the equilibrium after a change in supply from S1 to S2: 1.) the new quantity will be 600 2.) the price will remain constant 3.) at the old price of $2.50, there will be pressure for the price to fall 4.) the new price will be $2.00
3.) at the old price of $2.50, there will be pressure for the price to fall
If people demand more product of A when the price of B falls, then A and B are: 1.) substitutes 2.) not related 3.) complements 4.) inferior goods
3.) complements
If in a competitive market the quantity supplied exceeds the quantity demanded, we expect prices to: 1.) stay the same 2.) rise 3.) fall 4.) rise to clear the market
3.) fall
French fries and hamburgers are complements in consumption. Suppose the cost of the ingredients used to make hamburgers rises, so that the price of a hamburger rises. Then the equilibrium relative price of french fries _______ and the equilibrium quantity _________. 1.) rises; decrease 2.) falls; increases 3.) falls; decreases 4.) rises; increases
3.) falls; decreases
A shift of a demand curve to the right, all other things unchanged, will: 1.) decrease equilibrium quantity and increase equilibrium price 2.) decrease equilibrium price and quantity 3.) increase equilibrium price and quantity 4.) increase equilibrium quantity and decrease equilibrium price
3.) increase equilibrium price and quantity
After graduation from college, you might have an increase in your income from a new job. If as a result you decide that you will purchase more T-bone steak and less hamburger, then for you hamburger is a(n) ____________ good. 1.) normal 2.) substitute 3.) inferior 4.) complementary
3.) inferior
If the quantity of housing supplied in a community is greater than the quantity of houses demanded, the existing price: 1.) will either rise or remain unchanged 2.) is below the market equilibrium price 3.) is above the market equilibrium price 4.) will rise to clear the market
3.) is above the market equilibrium price
The market for corn in Kansas is considered to be competitive. This means there are ________ buyers and __________ sellers of corn in Kansas. 1.) many; few 2.) few; many 3.) many; many 4.) few; few
3.) many; many
Look at the table The Market for Chocolate-Covered Peanuts. If the price of chocolate-covered peanuts is $0.80, there is a monthly: 1.) surplus of 70 bags 2.) shortage of 140 bags 3.) surplus of 140 bags 4.) shortage of 70 bags
3.) surplus of 140 bags
Suppose the equilibrium price of good X is $25 and the equilibrium quantity is 124 units. If the price of good X is $2 1.) there will be an excess supply of good X 2.) the market will clear 3.) there will be excess demand for good X 4.) the quantity demanded of good X will be less than 124 units
3.) there will be excess demand for good X
Look at the figure Demand and Supply of Gasoline. When the supply curve shifted from the initial equilibrium, the new intersection of supply and demand has a price of ________ and quantity of 400. This supply shift could have resulted from _________. 1.) $1.50; an increase in consumers' income 2.) $2.00; an increase in the number of buyers 3.) $2.00; an increase in consumers' income 4.) $1.50; an improvement in refining technology
4.) $1.50; an improvement in refining technology
Look at the table The Market for Chocolate-Covered Peanuts. The equilibrium quantity and the equilibrium price are _______ bags and _________. 1.) 175; $0.80 2.) 210; $0.50 3.) 140; $0.40 4.) 175; $0.60
4.) 175; $0.60
Look at the figure Supply and Demand in the Orange Juice Market. The market is currently in equilibrium at point C. Suppose a hurricane hits Florida, where oranges are grown. What will be the most likely new equilibrium point in the orange juice market? 1.) D 2.) E 3.) B 4.) A
4.) A
Which of the following best describes demand? 1.) Both a change in quantity demanded and a change in demand are movements along the demand curve, only in different directions 2.) A change in demand is a movement along the demand curve, and a change in quantity demanded is a shift in the demand curve 3.) Both a change in quantity demanded and a change in demand are shifts in the demand curve, only in different directions 4.) A change in quantity demanded is a movement along the demand curve, and a change in demand is a shift in the demand curve
4.) A change in quantity demanded is a movement along the demand curve, and a change in demand is a shift in the demand curve
Look at the figure Supply and Demand in the Orange Juice Market. The market is in equilibrium at point C. A reputable scientist assets in a major scientific publication that drinking orange juice will increase your lifespan. What will be the most likely new equilibrium point in the orange juice market? 1.) A 2.) D 3.) E 4.) B
4.) B
Look at the figure Supply of Coconuts. If the prices of inputs (e.g., labor, fertilizer, and fuel) used to produce and transport coconuts increased, it would be represented in the figure as a movement from: 1.) A to B 2.) E to B 3.) B to A 4.) C to A
4.) C to A
Which of the following illustrates the law of demand? 1.) Fewer people play golf because incomes are lower 2.) An increase in intuition encourages more students to enroll in college because the quality of education has risen 3.) Oil companies drill for new sources because prices are higher 4.) Consumers buy more personal computers because prices have fallen
4.) Consumers buy more personal computers because prices have fallen
Look at the figure Supply and Demand in the Orange Juice Market. The market is in equilibrium at point C. Suppose most people drink orange juice only with champagne. What will be the new equilibrium point in the orange juice market if a law banning alcohol passes? 1.) A 2.) B 3.) E 4.) D
4.) D
What is the difference between a shortage and scarcity? 1.) Scarcity is a result of two or more alternative uses, and quantities of supply and demand adjusting to flexible prices will create shortages. 2.) There is no distinction between the two. They are the same thing. 3.) A shortage will exist when a good is scarce. 4.) Scarcity will almost always exist, but a shortage will exist only if the price is kept below the equilibrium level.
4.) Scarcity will almost always exist, but a shortage will exist only if the price is kept below the equilibrium level.
Consider the market for corn. What happens if there is an increased demand for corn tortillas and at the same time a new corn seed becomes available that dramatically increases the yield per acre? 1.) Price and quantity decrease 2.) The change in price is indeterminate; quantity decreases 3.) Price increases; the change in quantity is indeterminate 4.) The change in price is indeterminate; quantity increases
4.) The change in price is indeterminate; quantity increases
In the market for tacos, each of the following shifts the supply curve to the left EXCEPT: 1.) An increase in the price of beef 2.) an increase in the wages of taco shop workers 3.) fewer taco shops 4.) a decrease in the price of tacos
4.) a decrease in the price of tacos
In much of the country, homeowners choose to heat their houses with either natural gas or heating oil. Which of the following would cause an increase in the demand for natural gas? 1.) a decrease in the price of natural gas 2.) a decrease in the price of heating oil 3.) an increase in the price of natural gas 4.) an increase in consumer incomes
4.) an increase in consumer incomes
An increase in the supply of a good is caused by: 1.) expectations of future price increases 2.) input prices rising 3.) a fall in the price of the good 4.) an increase in the number of sellers
4.) an increase in the number of sellers
Which of the following will NOT cause an increase in the supply of good X? 1.) an improvement in the technology used to produce good X 2.) a decrease in the price of good Y, a substitute in production 3.) a decrease in the price of inputs used to produce good X 4.) an increase in the price of inputs used to produce good X
4.) an increase in the price of inputs used to produce good X
If tortilla chips are a normal good, when there is an increase in income, equilibrium price _______ and equilibrium quantity ________. 1.) decreases;decreases 2.) increases; decreases 3.) decreases; increases 4.) increases; increases
4.) increases; increases
Look at the figure The Demand and Supply of Wheat. A temporary price of $2 in this market would result in a _________ of __________ bushels. 1.) shortage; 10,000 2.) surplus; 4,000 3.) surplus; 10,000 4.) shortage; 8,000
4.) shortage; 8,000
In the market for wheat, if the price of ethanol (which is made from corn, a substitute in production) increased dramatically, the _________ wheat would __________. 1.) demand for; increase 2.) supply of; increase 3.) demand for; decrease 4.) supply of; decrease
4.) supply of; decrease
Consider the market for iPods. What happens if a fantastic new alternative MP3 player is developed and at the same time a boat carrying a large shipment of iPods is attacked by Pirates and sunk? 1.) price decreases and quantity increases 2.) price increases and the change in quantity is indeterminate 3.) price increases and quantity increases 4.) the change in price is indeterminate and quantity decreases
4.) the change in price is indeterminate and quantity decreases
Suppose you managed a corner grocery store. If peanut butter is an inferior good, what do you suppose would happen to the price and quantity sold of peanut butter as incomes fell during a recession? 1.) the price and quantity would both decrease 2.) the price would decrease and the quantity would increase 3.) the price would increase and the quantity would decrease 4.) the price and quantity would both increase
4.) the price and quantity would both increase
It is certain that the equilibrium price will fall when: 1.) supply and demand both increase 2.) supply decreases and demand stays the same 3.) the supply curve and the demand curve both shift to the right 4.) the supply curve shifts to the right and the demand curve shifts to the left
4.) the supply curve shifts to the right and the demand curve shifts to the left
