University of Lethbridge — Department of Economics
ECON 1012 — Introduction to Microeconomics
Instructor: Michael G. Lanyi
Chapter 3 — Demand and Supply
1) The relative price of a good is all of the following except
A) the money price of the good divided by a price index.
B) an opportunity cost.
C) the ratio of one price to another.
D) the same as the money price of a good.
E) determined in a market.
Topic: Markets and Prices
2) How many sides does a market have?
A) one side - buyers
B) one side - sellers
C) two sides - domestic and foreign
D) two sides - buyers and sellers
E) three sides - buyers, sellers, and the government
Topic: Markets and Prices
3) Which market is an example of a market for goods?
A) labour market
B) haircut market
C) energy market
D) manufactured input market
E) apple market
Topic: Markets and Prices
4) Which market is an example of a market for services?
A) manufactured input market
B) orange market
C) labour market
D) tennis lessons market
E) energy market
Topic: Markets and Prices
5) Which market is an example of a resource market?
A) furniture market
B) labour market
C) automobile market
D) haircut market
E) apple market
Topic: Markets and Prices
6) The demand and supply model determines
A) money prices.
B) demand prices.
C) supply prices.
D) absolute prices.
E) relative prices.
Topic: Markets and Prices
1
Use the table below to answer the following questions.
Table 3.1.1
Year
2007
2008
2009
Coffee Price
$1.25
$1.50
$1.25
Tea Price
$1.10
$1.00
$1.20
Cola Price
$0.80
$1.00
$1.00
7) Refer to Table 3.1.1. In 2007, the relative price of coffee in terms of tea is
A) 1.25.
B) 1.10.
C) 0.88.
D) 1.14.
E) 1.00.
Topic: Markets and Prices
8) Refer to Table 3.1.1. In 2009, the relative price of coffee in terms of cola is
A) 1.00.
B) 1.56.
C) 1.25.
D) 0.67.
E) unknown without more information.
Topic: Markets and Prices
9) Refer to Table 3.1.1. In 2009, the relative price of cola in terms of tea is
A) 1.00.
B) 1.20.
C) 1.25.
D) 0.83.
E) unknown without more information.
Topic: Markets and Prices
10) Refer to Table 3.1.1. Between 2007 and 2008, the price of coffee relative to the price of tea ________ while the price of coffee
relative to the price of cola ________.
A) fell; rose
B) fell; stayed constant
C) rose; rose
D) rose; fell
E) fell; fell
Topic: Markets and Prices
11) Refer to Table 3.1.1. Between 2008 and 2009, the price of coffee relative to the price of tea ________ while the price of coffee
relative to the price of cola ________.
A) fell; fell
B) fell; stayed constant
C) rose; fell
D) fell; rose
E) rose; rose
Topic: Markets and Prices
2
12) A market where no single buyer or seller can influence the price is
A) a buyer's market.
B) a competitive market.
C) an output market.
D) an input market.
E) a seller's market.
Topic: Markets and Prices
13) A relative price is
A) an opportunity cost.
B) the ratio of one price to another.
C) determined by demand and supply.
D) a quantity of a "basket" of goods and services forgone.
E) all of the above.
Topic: Markets and Prices
14) William Gregg owned a mill in South Carolina. In December 1862, he placed a notice in the Edgehill Advertister announcing
his willingness to exchange cloth for food and other items. Here is an extract:
1 yard of cloth for 1 pound of bacon
2 yards of cloth for 1 pound of butter
4 yards of cloth for 1 pound of wool
8 yards of cloth for 1 bushel of salt
If the money price of bacon was 20¢ a pound and the money price of salt was $2.00 a bushel, people would ________.
A) buy bacon and trade it for cloth and then trade the cloth for salt because salt is more important for life than either cloth
or bacon
B) not buy bacon and trade it for cloth because they would have to buy 8 yards of cloth for $1.60 and then give Mr. Gregg
an extra $0.40 to buy a bushel of salt
C) not buy bacon and trade it for cloth because the relative price of 1 bushel of salt is only 1/8 yard of cloth
D) buy bacon and trade it for cloth because cloth is more expensive than bacon
E) buy bacon and trade it for cloth because they could buy 8 yards of cloth for only $1.60, and use that cloth to obtain a
bushel of salt
Topic: Markets and Prices
15) The law of demand states that, other things remaining the same,
A) the higher the price of a good, the greater is the quantity demanded.
B) the higher the price of a good, the smaller is the quantity demanded.
C) the higher the price of a good, the smaller is the quantity supplied.
D) as income increases, willingness to pay for the last unit increases.
E) price and quantity supplied are positively related.
Topic: Demand
16) Which one of the following events shifts the demand curve for grape jelly to the right?
A) an increase in income if grape jelly is a normal good
B) a decrease in the price of strawberry preserves, a substitute for grape jelly
C) a decrease in the price of grape jelly
D) a decrease in the population
E) an increase in the price of peanut butter, a complement of grape jelly
Topic: Demand
3
17) The demand curve slopes downward to the right because
A) of the law of supply.
B) an increase in income leads to increased consumption.
C) of the law of demand.
D) of comparative advantage.
E) as income rises, the quantity demanded increases.
Topic: Demand
18) An increase in the price of ground beef
A) increases the demand for chicken, a substitute for ground beef.
B) increases the quantity demanded of ground beef.
C) increases the demand for hamburger buns, a complement of ground beef.
D) decreases the quantity demanded of ground beef.
E) both A and D.
Topic: Demand
19) An increase in income
A) increases the supply of turnips.
B) decreases the supply of turnips.
C) decreases the demand for turnips if turnips have a very low price.
D) increases the demand for turnips if a turnip is a normal good.
E) increases the demand for turnips if a turnip is an inferior good.
Topic: Demand
20) A turnip is an inferior good if
A) turnips violate the law of demand.
B) an increase in income decreases the demand for turnips.
C) an increase in income increases the demand for turnips.
D) an increase in the price of a turnip decreases the quantity of turnips that consumers want to buy.
E) turnips are a low quality good.
Topic: Demand
21) If a turnip is an inferior good, then, ceteris paribus, an increase in the price of a turnip will
A) increase the supply of turnips.
B) increase the demand for turnips.
C) decrease the demand for turnips.
D) decrease the supply of turnips.
E) none of the above.
Topic: Demand
22) Suppose income increases. Choose the correct statement.
A) The equilibrium price of turnips falls if a turnip is an inferior good.
B) The equilibrium price of turnips rises if a turnip is an inferior good.
C) The equilibrium quantity of turnips decreases if a turnip is an inferior good.
D) The supply of turnips decreases whether or not a turnip is an inferior good.
E) Both A and C.
Topic: Demand
4
Use the figure below to answer the following questions.
Figure 3.2.1
23) Point A in Figure 3.2.1 indicates that
A) consumers will only pay $1 for any apple.
B) if the price is $1, consumers will plan to buy 4,000 apples.
C) consumers will not be in equilibrium if the price of an apple is $1.
D) $1 is the least that consumers are willing to pay for the 4,000th apple.
E) if the price is more than $1, consumers will buy 9,000 apples.
Topic: Demand
24) Which one of the following statements best characterizes point B in Figure 3.2.1?
A) At point B, the market is in equilibrium.
B) Producers would be unwilling to sell the 9,000th apple for less than $0.50.
C) At a price of $0.50, consumers will be unwilling to buy any apples.
D) The most that consumers would be willing to pay for the 9,000th apple is $0.50.
E) At a price of $0.50, there will be an apple shortage.
Topic: Demand
25) Given Figure 3.2.1, under what condition are consumers willing to buy more than 9,000 apples per week?
A) if the price is between $1 and $1.50
B) if the price is between $1 and $0.50
C) if the price is above $1
D) if the price is $0.75
E) if the price is below $0.50
Topic: Demand
26) Which one of the following would result in a movement from point A to point B in Figure 3.2.1?
A) a rise in the price of oranges
B) a fall in the price of apples
C) a rise in the price of bananas
D) an increase in population size
E) public concern about chemicals sprayed on apples
Topic: Demand
5
Use the figure below to answer the following questions.
Figure 3.2.2
27) Which one of the following would result in the demand curve shifting from D1 to D2 in Figure 3.2.2?
A) a rise in the price of Coke, a complement of pizza
B) an increase in the supply of pizza
C) a rise in the price of hamburgers, a substitute for pizza
D) a rise in the price of pizza
E) a fall in the price of pizza
Topic: Demand
28) Refer to Figure 3.2.2. Which one of the following represents a decrease in quantity demanded?
A) a shift from D2 to D1
B) a movement from B to A
C) a shift from D1 to D2
D) a movement from A to B
E) none of the above
Topic: Demand
29) Refer to Figure 3.2.2. If consumers' income increases,
A) the quantity of pizzas demanded increases.
B) a movement from point A to point B on D1 occurs.
C) the quantity of pizzas supplied decreases.
D) the demand curve for pizzas shifts from D1 to D2 if a pizza is a normal good.
E) the supply of pizzas increases.
Topic: Demand
30) The price of good A rises, and the demand curve for good B shifts leftward. We can conclude that
A) A and B are complements.
B) B is a normal good.
C) B is an inferior good.
D) A and B are substitutes.
E) A and B are complements in production.
Topic: Demand
6
31) The price of good X falls and the demand for good Y decreases. We can conclude that
A) X and Y are independent of each other.
B) X and Y are substitutes.
C) X and Y are complements.
D) X is a normal good.
E) X is an inferior good.
Topic: Demand
32) Which one of the following would lead to an increase in the demand for hamburgers?
A) a news report that hamburgers can cause skin diseases
B) a rise in the price of French fries, a complement of hamburgers
C) a decrease in consumer income if hamburgers are a normal good
D) a decrease in population size
E) a new fad hamburger diet
Topic: Demand
33) Which of the following "other things" are not held constant along a demand curve?
A) prices of related goods
B) income
C) the price of the good itself
D) preferences
E) expected future income and credit
Topic: Demand
34) Good A is a normal good if
A) a rise in the price of a complement causes the demand for A to decrease.
B) income and the demand for A are negatively related.
C) good A satisfies the law of demand.
D) the demand for A increases when income rises.
E) a rise in the price of a substitute causes the demand for A to increase.
Topic: Demand
35) A decrease in quantity demanded is represented by a
A) rightward shift of the supply curve.
B) movement upward and to the left along the demand curve.
C) rightward shift of the demand curve.
D) movement downward and to the right along the demand curve.
E) leftward shift of the demand curve.
Topic: Demand
36) Some sales managers are talking shop. Which of the following quotations refers to a movement along the demand curve?
A) "The Green movement has sparked an increase in our sales of biodegradable products."
B) "It has been an unusually mild winter; our sales of wool scarves are down from last year."
C) "Since our competitors raised their prices, our sales have doubled."
D) "We decided to cut our prices, and the increase in our sales has been remarkable."
E) None of the above.
Topic: Demand
37) Some sales managers are talking shop. Which one of the following quotations refers to a rightward shift of the demand curve?
A) "Since our competitors raised their prices, our sales have doubled."
B) "The Green movement has sparked an increase in our sales of biodegradable products."
C) "We decided to cut our prices, and the increase in our sales has been remarkable."
D) "It has been an unusually harsh winter; our sales of wool scarves are up from last year."
E) All of the above except C.
Topic: Demand
7
38) Some sales managers are talking shop. Which one of the following quotations refers to a leftward shift of the demand curve?
A) "The Green movement has sparked an increase in our sales of biodegradable products."
B) "Since our competitors raised their prices, our sales have doubled."
C) "We decided to cut our prices, and the increase in our sales has been remarkable."
D) "It has been an unusually mild winter; our sales of wool scarves are down from last year."
E) None of the above.
Topic: Demand
39) If Hamburger Helper is an inferior good, then, ceteris paribus, a decrease in income will lead to
A) a movement up along the demand curve for Hamburger Helper.
B) an initial movement up and then down along the demand curve for Hamburger Helper.
C) a leftward shift of the demand curve for Hamburger Helper.
D) a rightward shift of the demand curve for Hamburger Helper.
E) a movement down along the demand curve for Hamburger Helper.
Topic: Demand
40) Consider the market for cell phones. Suppose the price of a cell phone falls. Explain the effect of this event on the quantity of
cell phones demanded and on the demand for cell phones.
A) The quantity of cell phones demanded is unchanged and the demand for cell phones increases.
B) The quantity of cell phones demanded is unchanged and the demand for cell phones decreases.
C) The quantity of cell phones demanded decreases and the demand for cell phones is unchanged.
D) The quantity of cell phones demanded increases and the demand for cell phones is unchanged.
E) The quantity of cell phones demanded increases and the demand for cell phones also increases.
Topic: Demand
41) The law of supply tells us that other things remaining the same, as the
A) cost of producing gasoline falls, the supply of gasoline will increase.
B) cost of producing gasoline increases, the price of gasoline rises.
C) price of gasoline rises, the quantity of gasoline supplied decreases.
D) supply of gasoline increases, the price of gasoline falls.
E) price of gasoline falls, the quantity of gasoline supplied decreases.
Topic: Supply
42) The supply curve of a good slopes upward to the right because of
A) the existence of substitutes in production.
B) the law of demand.
C) the fact that prices tend to rise over time.
D) the law of supply.
E) technological improvements over time.
Topic: Supply
43) An increase in supply is shown by
A) a movement up along the supply curve.
B) a leftward shift of the supply curve.
C) an initial movement up and then down along the same supply curve.
D) a rightward shift of the supply curve.
E) a movement down along the supply curve.
Topic: Supply
8
44) If goods X and Y are substitutes in production, then a rise in the price of good X
A) increases the demand for good Y.
B) decreases the supply of good Y.
C) increases the supply of good Y.
D) decreases the demand for good Y.
E) might change the supply of Y; it depends on whether X and Y are also substitutes.
Topic: Supply
45) If a producer can use its factors of production to produce either good A or good B, then a rise in the price of A
A) increases the supply of A.
B) decreases the supply of B.
C) decreases the supply of A.
D) increases the supply of B.
E) both C and D.
Topic: Supply
46) The fact that a fall in the price of a good results in a decrease in the quantity of the good supplied illustrates
A) technological improvement.
B) the law of demand.
C) the law of supply.
D) a change in supply.
E) the nature of an inferior good.
Topic: Supply
47) Which one of the following would not shift the supply curve of good X to the right?
A) a fall in the price of Y, a substitute in production of X
B) a fall in the price of the factors of production used in producing X
C) an improvement in technology used in the production of X
D) an increase in the price of Y, a complement in production of X
E) a rise in the price of X
Topic: Supply
48) A decrease in the quantity supplied is shown by a
A) rightward shift of the supply curve.
B) movement up along the supply curve.
C) leftward shift of the supply curve.
D) rightward shift of the demand curve.
E) movement down along the supply curve.
Topic: Supply
49) Which one of the following will shift the supply curve of good X leftward?
A) a technological improvement in the production of X
B) a decrease in the wages of workers employed to produce X
C) a situation where quantity demanded exceeds quantity supplied
D) an increase in the cost of machinery used to produce X
E) a decrease in the cost of capital used to produce X
Topic: Supply
50) Which of the following will shift the supply curve of good X rightward?
A) a decrease in the number of suppliers of good X
B) an increase in the cost of capital used to produce good X
C) a decrease in the wages of workers employed to produce good X
D) the price of Y, a substitute in production for good X, rises
E) an increase in the price of energy
Topic: Supply
9
51) If a factor of production can be used to produce either good A or good B, then A and B are
A) substitutes in production.
B) normal goods.
C) substitutes.
D) complements.
E) complements in production.
Topic: Supply
52) A rise in the price of a good
A) creates a movement up along the supply curve.
B) creates a movement down along the demand curve.
C) decreases demand for the good.
D) increases the supply of the good.
E) increases preferences for the good.
Topic: Supply
53) If the number of suppliers of good Y increases, then
A) a movement down along the supply curve of good Y will occur.
B) a movement up along the supply curve of good Y will occur.
C) the supply curve of good Y will remain unchanged.
D) the supply curve of good Y shifts leftward.
E) the supply curve of good Y shifts rightward.
Topic: Supply
54) A shift of the supply curve for rutabagas occurs if there is
A) a change in the price of a related good that is a substitute for rutabagas.
B) a change in the price of rutabagas.
C) a change in income.
D) a change in preferences for rutabagas.
E) none of the above.
Topic: Supply
55) Some producers are chatting over a beer. Which one of the following quotations refers to a movement along the supply
curve?
A) "Our new, sophisticated equipment will enable us to undercut our competitors."
B) "Raw material prices have sky-rocketed; we will have to pass the cost on to our customers."
C) "We anticipate a big increase in demand. Our product price should rise, so we are planning for an increase in output."
D) "New competitors in the industry are causing prices to fall."
E) "Wage increases have forced us to raise our prices."
Topic: Supply
56) Some producers are chatting over a beer. Which one of the following quotations refers to a rightward shift of the supply
curve?
A) "Wage increases have forced us to raise our prices."
B) "We anticipate a big increase in demand. Our product price should rise, so we are planning for an increase in output."
C) "Raw material prices have sky-rocketed; we will have to pass the cost on to our customers."
D) "Our new, sophisticated equipment will enable us to undercut our competitors."
E) Both A and C.
Topic: Supply
10
57) Some producers are chatting over a beer. Which one of the following quotations refers to a leftward shift of the supply curve?
A) "Wage increases have forced us to raise our prices."
B) "Our new, sophisticated equipment will enable us to undercut our competitors."
C) "Raw material prices have sky-rocketed; we will have to pass the cost on to our customers."
D) "We anticipate a big increase in demand. Our product price should rise, so we are planning for an increase in output."
E) Both A and C.
Topic: Supply
58) A decrease in the quantity supplied of a good is shown by
A) a movement down along the supply curve.
B) a movement up along the supply curve.
C) an initial rightward shift and then leftward shift of the supply curve.
D) a leftward shift of the supply curve.
E) a rightward shift of the supply curve.
Topic: Supply
Use the table below to answer the following questions.
Table 3.4.1
Price
(dollars per
unit)
1
2
3
4
5
6
7
8
Quantity
Demanded
(units)
1,100
800
600
500
420
350
320
300
59) Refer to Table 3.4.1. At a price of $3 a unit
A) the market is in equilibrium.
B) there is a 180-unit surplus.
C) there is a 180-unit shortage.
D) there is a tendency for the price to rise.
E) C and D.
Topic: Market Equilibrium
60) In Table 3.4.1, the equilibrium price is
A) $5 a unit.
B) $7 a unit.
C) $4 a unit.
D) $1 a unit.
E) $3 a unit.
Topic: Market Equilibrium
61) In Table 3.4.1, the equilibrium quantity is
A) 200 units.
B) 320 units.
C) 500 units.
D) 420 units.
E) none of the above; there is no equilibrium.
Topic: Market Equilibrium
11
Quantity
Supplied
(units)
50
200
420
500
580
640
680
700
62) Refer to Table 3.4.1. The equilibrium quantity is 420 units if
A) the price is fixed at $3 a unit.
B) the price is fixed at $5 a unit.
C) the price is fixed at $4 a unit.
D) both A and C are correct.
E) none of the above.
Topic: Market Equilibrium
63) Refer to Table 3.4.1. A shortage occurs if
A) the price is below $4 a unit.
B) the price is $7 a unit.
C) the price is $6 a unit.
D) the price is $4 a unit.
E) the price is $5 a unit.
Topic: Market Equilibrium
64) Refer to Table 3.4.1. A surplus occurs if
A) the price is $2 a unit.
B) the price is $4 a unit.
C) the price is above $4 a unit.
D) the price is $1 a unit.
E) the price is $3 a unit.
Topic: Market Equilibrium
65) Refer to Table 3.4.1. If the price is $7, then the surplus is
A) zero units.
B) 400 units.
C) 290 units.
D) 360 units.
E) 160 units.
Topic: Market Equilibrium
66) Refer to Table 3.4.1. If the price is $3, then the shortage is
A) 1,050 units.
B) 180 units.
C) 600 units.
D) zero units.
E) 160 units.
Topic: Market Equilibrium
12
Use the figure below to answer the following questions.
Figure 3.4.1
67) At price P3 in Figure 3.4.1,
A) this market is in equilibrium.
B) there is a shortage in the amount of Q5 - Q1 .
C) equilibrium quantity is Q5 .
D) there is a surplus in the amount of Q5 - Q1 .
E) there is a tendency for the price to rise.
Topic: Market Equilibrium
68) At price P2 in Figure 3.4.1, which one of the following is not true?
A) The quantity demanded is equal to the quantity supplied.
B) The quantity supplied is Q3 .
C) There is no surplus.
D) This market is in equilibrium.
E) The quantity demanded is Q1 .
Topic: Market Equilibrium
69) At price P1 in Figure 3.4.1
A) there is a shortage in the amount of Q4 - Q2 .
B) the equilibrium quantity is Q2 .
C) there is a surplus in the amount of Q4 - Q2 .
D) there is a tendency for the price to fall.
E) the equilibrium quantity is Q4 .
Topic: Market Equilibrium
70) At price P1 in Figure 3.4.1,
A) producers can sell all they plan to sell.
B) a surplus exists.
C) consumers can buy all they want.
D) producers are unwilling to sell any goods.
E) both sides of the market are able to carry out their desired transactions.
Topic: Market Equilibrium
13
Use the figure below to answer the following questions.
Figure 3.4.2
71) The equilibrium price in the market illustrated by Figure 3.4.2 is
A) $4 a unit.
B) $2 a unit.
C) $8 a unit.
D) $6 a unit.
E) $10 a unit.
Topic: Market Equilibrium
72) Refer to Figure 3.4.2. When the price is $10 a unit
A) a shortage occurs.
B) consumers will buy 500 units of output.
C) the surplus is zero.
D) consumers will buy only 100 units of output.
E) consumers will buy nothing.
Topic: Market Equilibrium
73) At a price of $10 a unit in Figure 3.4.2
A) quantity will rise.
B) there is a surplus of 200 units.
C) there is a surplus of 400 units.
D) there is a shortage of 200 units.
E) there is a shortage of 400 units.
Topic: Market Equilibrium
74) At a price of $4 a unit in Figure 3.4.2
A) the quantity demanded is 200 units.
B) the equilibrium quantity is 400 units.
C) there is a surplus of 200 units.
D) the quantity supplied is 400 units.
E) there is a shortage of 200 units.
Topic: Market Equilibrium
14
75) Which one of the following correctly describes how price adjustment eliminates a surplus?
A) As the price rises, the quantity demanded decreases and the quantity supplied increases.
B) As the price falls, the quantity demanded increases and the quantity supplied decreases.
C) As the price falls, the quantity demanded decreases and the quantity supplied increases.
D) As the price falls, the demand for substitutes decreases, which eliminates the surplus.
E) As the price rises, the quantity demanded increases and the quantity supplied decreases.
Topic: Market Equilibrium
76) Which one of the following correctly describes how price adjustment eliminates a shortage?
A) As the price rises, the quantity demanded increases and the quantity supplied decreases.
B) As the price falls, the quantity demanded increases and the quantity supplied decreases.
C) As the price falls, the quantity demanded increases and the quantity supplied increases.
D) As the price rises, the quantity demanded decreases and the quantity supplied increases.
E) As the price falls, the quantity demanded decreases and the quantity supplied increases.
Topic: Market Equilibrium
77) If the price is above the equilibrium price, then
A) a surplus exists.
B) a shortage exists.
C) none of the good will be sold.
D) the price must rise further to reach the new market equilibrium.
E) price will not change; producers will cut back production until the market is in equilibrium.
Topic: Market Equilibrium
78) A shortage will exist if
A) there are not enough producers.
B) there are not enough consumers.
C) demand decreases.
D) the price is below the equilibrium price.
E) the price is above the equilibrium price.
Topic: Market Equilibrium
79) The price of a good will tend to fall if
A) there is a surplus at the current price.
B) the current price is below the equilibrium price.
C) the quantity supplied exceeds the quantity demanded at the current price.
D) both A and C are true.
E) none of the above are true.
Topic: Market Equilibrium
80) If the market for Twinkies is in equilibrium, then
A) the equilibrium quantity equals the quantity demanded.
B) there is a surplus.
C) producers would like to sell more at the current price.
D) consumers would like to buy more at the current price.
E) Twinkies must be a normal good.
Topic: Market Equilibrium
81) A shortage is the amount by which quantity
A) demanded exceeds the equilibrium quantity.
B) demanded increases when the price rises.
C) supplied exceeds the equilibrium quantity.
D) supplied exceeds quantity demanded.
E) demanded exceeds quantity supplied.
Topic: Market Equilibrium
15
82) Complete the following sentence. A surplus
A) is the amount by which the quantity demanded exceeds the quantity supplied.
B) is the amount by which the quantity supplied exceeds the equilibrium quantity.
C) is the amount by which the quantity demanded exceeds the equilibrium quantity.
D) exists if the price is above the equilibrium price.
E) will lead to rising prices.
Topic: Market Equilibrium
83) When a shortage occurs, there is a tendency for the
A) price to fall.
B) price to rise.
C) price to remain unchanged.
D) quantity supplied to decrease.
E) quantity demanded to increase.
Topic: Market Equilibrium
Refer to the table below for the following question.
Table 3.4.2
Price
(dollars per bottle)
2
6
10
14
18
Quantity demanded
(bottles per week)
180
140
100
60
20
Quantity supplied
(bottles per week)
60
100
140
180
220
84) Refer to Table 3.4.2. The table shows the demand and supply schedules for shampoo. If the price is $6 a bottle, there is a
________ of shampoo. So the price of a bottle of shampoo ________, the quantity demanded ________ and the quantity
supplied ________. The market moves to equilibrium.
A) shortage; rises; decreases; increases
B) shortage; rises; increases; decreases
C) surplus; falls; increases; decreases
D) shortage; falls; decreases; increases
E) surplus; rises; increases; decreases
Topic: Market Equilibrium
85) Since 1980, there has been a dramatic increase in the number of working mothers. Based on this information alone, we can
predict that the market for child care services has experienced
A) an increase in quantity demanded.
B) an increase in demand.
C) an increase in supply.
D) a decrease in quantity supplied.
E) a decrease in demand.
Topic: Predicting Changes in Price and Quantity
16
Use the figure below to answer the following questions.
Figure 3.5.1
86) If the demand curve is D2 in Figure 3.5.1,
A) price will rise.
B) the equilibrium price is P2 and the equilibrium quantity is Q2 .
C) a rise in price will shift the demand curve to D3 .
D) the equilibrium price is P2 and the equilibrium quantity is Q0 .
E) there is a shortage in the amount of Q2 - Q0 .
Topic: Predicting Changes in Price and Quantity
87) Initially, the demand curve for good A is D2 in Figure 3.5.1. Suppose good B is a substitute for good A. If the price of B falls
A) the equilibrium quantity of good A will increase.
B) the price of A will rise.
C) there will be a surplus of good A at P2 .
D) the demand curve for good A will shift from D2 to D3 .
E) all of the above are true except B.
Topic: Predicting Changes in Price and Quantity
88) Initially, the demand curve for good A is D2 in Figure 3.5.1. If income increases and A is a normal good, we would expect to
see a movement from point A to point
A) B.
B) D.
C) E.
D) C.
E) C and back to point A.
Topic: Predicting Changes in Price and Quantity
89) The price of a good will rise if
A) supply of the good decreases.
B) there is a surplus of the good.
C) the good is an inferior good and income increases.
D) the price of a substitute for the good decreases.
E) demand for the good decreases.
Topic: Predicting Changes in Price and Quantity
17
90) The price of a good will fall if
A) there is a shortage of the good.
B) if the supply of the good decreases.
C) if demand for the good increases.
D) there is a surplus of the good.
E) if demand for the good does not change.
Topic: Predicting Changes in Price and Quantity
91) The price of a good will fall if
A) supply of the good remains constant.
B) supply of the good decreases.
C) supply of the good increases.
D) demand for the good remains constant.
E) demand for the good increases.
Topic: Predicting Changes in Price and Quantity
92) Suppose we observe a rise in the price of good A and an increase in the quantity of good A bought and sold. Which one of the
following is a likely explanation?
A) The law of demand is violated.
B) The demand for A decreased.
C) The supply of A increased.
D) The supply of A decreased.
E) The demand for A increased.
Topic: Predicting Changes in Price and Quantity
93) Suppose we observe a rise in the price of good A and a decrease in the quantity of good A bought and sold. Which one of the
following is a likely explanation?
A) The supply of A decreased.
B) The law of supply is violated.
C) The demand for A increased.
D) The supply of A increased.
E) The demand for A decreased.
Topic: Predicting Changes in Price and Quantity
94) Suppose we observe a fall in the price of good A and an increase in the quantity of good A bought and sold. Which one of the
following is a likely explanation?
A) The supply of A increased.
B) The demand for A increased.
C) The law of supply is violated.
D) The demand for A decreased.
E) The supply of A decreased.
Topic: Predicting Changes in Price and Quantity
95) Suppose we observe a fall in the price of good A and a decrease in the quantity of good A bought and sold. Which one of the
following is a likely explanation?
A) The supply of A decreased.
B) The demand for A decreased.
C) The law of demand is violated.
D) The demand for A increased.
E) The supply of A increased.
Topic: Predicting Changes in Price and Quantity
18
96) When the demand for good A increases,
A) the equilibrium price and equilibrium quantity will decrease.
B) a surplus will result.
C) the equilibrium price will rise but the equilibrium quantity will decrease.
D) the equilibrium price and equilibrium quantity will increase.
E) the equilibrium price will decrease but the equilibrium quantity will increase.
Topic: Predicting Changes in Price and Quantity
97) When the supply of good A decreases,
A) the equilibrium price and the equilibrium quantity will decrease.
B) the equilibrium price will decrease but the equilibrium quantity will increase.
C) the equilibrium price will increase but the equilibrium quantity will decrease.
D) a surplus will result.
E) the equilibrium price and the equilibrium quantity will increase.
Topic: Predicting Changes in Price and Quantity
98) If A is an inferior good and consumer income rises, the demand for A
A) decreases and the equilibrium price falls but the equilibrium quantity increases.
B) decreases and the equilibrium price and the equilibrium quantity decrease.
C) decreases and the equilibrium price rises; as a result, the equilibrium quantity decreases.
D) increases and the equilibrium price rises but the equilibrium quantity decreases.
E) increases and the equilibrium price and the equilibrium quantity increase.
Topic: Predicting Changes in Price and Quantity
99) If A and B are substitutes and the price of A rises, we will observe
A) a decrease in equilibrium price but an increase in the equilibrium quantity of B.
B) a decrease in the equilibrium price and the equilibrium quantity of B.
C) an increase in the equilibrium price and the equilibrium quantity of B.
D) an increase in the equilibrium price but a decrease in the equilibrium quantity of B.
E) none of the above.
Topic: Predicting Changes in Price and Quantity
100) If A and B are substitutes and the cost of a factor of production used in the production of A increases, then the price of
A) B rises but the price of A falls.
B) A and B fall.
C) A and B rise.
D) A falls, and the price of B will stay unchanged.
E) B falls but the price of A rises.
Topic: Predicting Changes in Price and Quantity
101) If A and B are substitutes in production and the price of A falls, the supply of B
A) does not change.
B) decreases and the price of B rises.
C) decreases and the price of B falls.
D) increases and the price of B rises.
E) increases and the price of B falls.
Topic: Predicting Changes in Price and Quantity
102) If A and B are complements in production and the price of A falls, the supply of B
A) does not change.
B) increases and the price of B rises.
C) decreases and the price of B falls.
D) decreases and the price of B rises.
E) increases and the price of B falls.
Topic: Predicting Changes in Price and Quantity
19
103) Crude oil is a very important factor of production used in the production of gasoline. If the price of crude oil rises, we would
expect the
A) price of gasoline to rise due to a decrease in supply.
B) equilibrium quantity of gasoline to fall due to an increase in supply.
C) equilibrium quantity of gasoline to rise due to an increase in demand.
D) price of gasoline to fall due to an increase in demand.
E) price of gasoline to rise due to an increase in demand.
Topic: Predicting Changes in Price and Quantity
104) If demand increases and supply decreases, then the
A) equilibrium quantity increases but the effect on the equilibrium price is unknown.
B) equilibrium price rises but the effect on the equilibrium quantity is unknown.
C) equilibrium quantity decreases but the effect on the equilibrium price is unknown.
D) equilibrium price falls but the effect on the equilibrium quantity is unknown.
E) effect on both equilibrium price and quantity is unknown.
Topic: Predicting Changes in Price and Quantity
105) If demand decreases and supply increases, then the
A) equilibrium price rises but the effect on equilibrium quantity is unknown.
B) equilibrium price falls but the effect on equilibrium quantity is unknown.
C) equilibrium quantity decreases but the effect on the equilibrium price is unknown.
D) equilibrium quantity increases but the effect on the equilibrium price is unknown.
E) effect on both equilibrium price and quantity is unknown.
Topic: Predicting Changes in Price and Quantity
106) If we observe a rise in the equilibrium price of good A, we know that either the demand for A has
A) decreased or the supply of A has increased or both.
B) increased or the supply of A has decreased or both.
C) decreased or the supply of A has decreased or both.
D) increased or the supply of A has increased or both.
E) none of the above.
Topic: Predicting Changes in Price and Quantity
107) If we observe a fall in the equilibrium price of good A, we know that either the demand for A has
A) increased or the supply of A has decreased or both.
B) decreased or the supply of A has increased or both.
C) decreased or the supply of A has decreased or both.
D) increased or the supply of A has increased or both.
E) none of the above.
Topic: Predicting Changes in Price and Quantity
108) If we observe an increase in the equilibrium quantity of good A, we know that
A) either the demand for A has decreased or the supply of A has increased or both.
B) either the demand for A has increased or the supply of A has increased or both.
C) either the demand for A has increased or the supply of A has decreased or both.
D) either the demand for A has decreased or the supply of A has decreased or both.
E) none of the above.
Topic: Predicting Changes in Price and Quantity
20
109) If we observe a decrease in the equilibrium quantity of good A, we know that
A) either the demand for A has decreased or the supply of A has increased or both.
B) either the demand for A has decreased or the supply of A has decreased or both.
C) either the demand for A has increased or the supply of A has decreased or both.
D) either the demand for A has increased or the supply of A has increased or both.
E) none of the above.
Topic: Predicting Changes in Price and Quantity
110) Which of the following will definitely result in an increase in the equilibrium price?
A) a decrease in both demand and supply
B) an increase in both demand and supply
C) an increase in demand combined with a decrease in supply
D) a decrease in demand combined with an increase in supply
E) an increase in supply combined with a decrease in demand
Topic: Predicting Changes in Price and Quantity
111) Which one of the following will definitely lower the equilibrium price?
A) an increase in demand combined with a decrease in supply
B) an increase in both demand and supply
C) a decrease in demand combined with an increase in supply
D) a decrease in both demand and supply
E) a decrease in supply combined with an increase in demand
Topic: Predicting Changes in Price and Quantity
112) Which one of the following will definitely decrease the equilibrium quantity?
A) a decrease in demand combined with an increase in supply
B) a decrease in both demand and supply
C) an increase in both demand and supply
D) an increase in demand combined with a decrease in supply
E) none of the above
Topic: Predicting Changes in Price and Quantity
113) A technological improvement in the production of good A
A) decreases the quantity demanded of A.
B) increases the demand for A.
C) decreases the supply of A.
D) decreases the equilibrium price of A and decreases the equilibrium quantity.
E) increases the supply of A.
Topic: Predicting Changes in Price and Quantity
114) Which of the following events leads to a rise in the price of oranges?
A) a rise in the price of apples
B) good growing weather in Florida
C) a technological improvement in the production of oranges
D) a scientific discovery that oranges cause hair loss
E) a decrease in income if oranges are a normal good
Topic: Predicting Changes in Price and Quantity
115) If A and B are complements and the cost of a factor of production used in the production of A decreases, then the price of
A) A will fall and the price of B will remain unchanged.
B) A will rise and the price of B will fall.
C) both A and B will rise.
D) A will fall and the price of B will rise.
E) both A and B will fall.
Topic: Predicting Changes in Price and Quantity
21
116) If both demand and supply increase, then the equilibrium price
A) rises and the equilibrium quantity could either increase or decrease.
B) falls and the equilibrium quantity could either increase or decrease.
C) falls but the equilibrium quantity increases.
D) could either rise or fall, but the equilibrium quantity increases.
E) and equilibrium quantity increases.
Topic: Predicting Changes in Price and Quantity
117) There have been severe problems in the Atlantic fishing industry, with large falls in the fish stocks. As a result,
A) the equilibrium price and the equilibrium quantity will fall or rise depending on how large the fall in fish stocks.
B) both the equilibrium price and the equilibrium quantity will rise, as consumers will desire even more fish, because they
are scarce.
C) the fall in the fish stocks will lead to a shortage, and a rise in the equilibrium price and a decrease in the equilibrium
quantity.
D) the price of fish will fall.
E) the quantity of fish sold will increase as fishermen will catch more to make up for the shortage.
Topic: Predicting Changes in Price and Quantity
118) There have been severe falls in the fish stocks in the Atlantic fishing industry. As a result, we would expect
A) an increase in the demand for meat, because meat is a substitute for fish.
B) a fall in the price of fish, leading to an increase in the demand for meat, because meat and fish are substitutes.
C) a rise in the price of fish, leading to a decrease in the demand for meat, because meat and fish are complements.
D) a fall in the price of fish, leading to a decrease in the demand for meat, because meat and fish are substitutes.
E) an increase in the demand for meat (e.g., beef), because meat is a complement of fish.
Topic: Predicting Changes in Price and Quantity
119) If Canadians suddenly develop a strong urge to escape the cold winter by taking vacations in Hawaii, the
A) price of a vacation in Hawaii rises and the quantity demanded of Hawaiian vacations decreases.
B) price of luggage will rise, because luggage and vacations are complements.
C) price of airline tickets falls as ticket agents make deals in response to this change.
D) initial result of the change is a surplus of vacations in Hawaii, leading to a price rise.
E) price of a skiing vacation in the mountains rises.
Topic: Predicting Changes in Price and Quantity
120) The Genius Software Company has developed an amazing new software package to be used only with Einstein Computers.
As a result, the equilibrium price of
A) all computers rises.
B) all software packages rises.
C) Einstein computers rises, accompanied by an increase in the equilibrium quantity.
D) rival software packages falls leading to an overall increase in the equilibrium quantity of these packages.
E) Einstein computers rises, leading to a decrease in the equilibrium quantity.
Topic: Predicting Changes in Price and Quantity
22
Use the information below to answer the following questions.
Fact 3.5.1
The market for coffee is initially in equilibrium. Pepsi is a substitute for coffee; cream is a complement of coffee. Consider the market for
coffee. Assume that all ceteris paribus assumptions continue to hold except for the event listed.
121) Refer to Fact 3.5.1. If coffee is a normal good, then a decrease in income will
A) decrease the price and the quantity supplied of coffee.
B) decrease the price and the quantity demanded of coffee.
C) increase the price and the quantity supplied of coffee.
D) increase the price and the quantity demanded of coffee.
E) cause none of the above.
Topic: Predicting Changes in Price and Quantity
122) Refer to Fact 3.5.1. An increase in the price of Pepsi, a substitute for coffee will
A) decrease the price and the quantity supplied of coffee.
B) decrease the price and the quantity demanded of coffee.
C) increase the price and the quantity supplied of coffee.
D) increase the price and the quantity demanded of coffee.
E) cause none of the above.
Topic: Predicting Changes in Price and Quantity
123) Refer to Fact 3.5.1. A technological improvement lowers the cost of producing coffee. At the same time, preferences for coffee
decrease. The equilibrium quantity of coffee
A) decreases.
B) remains the same.
C) increases or decreases depending on whether the price of coffee falls or rises.
D) increases.
E) increases, decreases, or remains the same depending on the relative shifts of the demand and supply curves.
Topic: Predicting Changes in Price and Quantity
124) Refer to Fact 3.5.1. If there is an increase in the wages of farm workers who harvest coffee beans, the equilibrium quantity of
coffee
A) decreases.
B) increases or decreases depending on the slope of the supply and demand curves.
C) increases or decreases depending on the relative shifts of the supply and demand curves.
D) increases.
E) remains the same.
Topic: Predicting Changes in Price and Quantity
125) Refer to Fact 3.5.1. The price of cream falls. Simultaneously, there is an increase in the wages of farm workers who harvest
coffee beans. The equilibrium quantity of coffee
A) decreases.
B) remains the same.
C) increases or decreases depending on the slope of the supply and demand curves.
D) increases.
E) increases, decreases, or remains the same depending on the relative shifts of the supply and demand curves.
Topic: Predicting Changes in Price and Quantity
23
126) Refer to Fact 3.5.1. A new study comes out, revealing that drinking Pepsi increases your ability to study. The equilibrium
quantity of coffee
A) decreases.
B) remains the same.
C) increases.
D) increases or decreases depending on the relative shifts of the supply and demand curves.
E) increases or decreases depending on the slope of the supply and demand curves.
Topic: Predicting Changes in Price and Quantity
127) Farm land can be used to produce either cattle or corn. If the demand for cattle increases, then the
A) supply of corn decreases.
B) demand for corn decreases.
C) supply of corn increases.
D) demand for corn increases.
E) both B and C.
Topic: Predicting Changes in Price and Quantity
128) When the price of good A rises, the supply curve of good B shifts rightward. Which of the following statements are true?
A) A is a factor used in the production of B.
B) A and B are complements.
C) A and B are substitutes in production.
D) A and B are complements in production.
E) A and B are substitutes.
Topic: Predicting Changes in Price and Quantity
129) "As domestic car prices have increased, consumers have found foreign cars to be a better bargain. Consequently, domestic car
sales have fallen and foreign car sales have risen." Based on this information alone, there has been a
A) shift of the demand curve for domestic cars and a movement along the demand curve for foreign cars.
B) shift in the demand curves for both domestic and foreign cars.
C) movement along the demand curve for domestic cars and a shift of the demand curve for foreign cars.
D) movement along the demand curves for both domestic and foreign cars.
E) shift in the supply curves for both domestic and foreign cars.
Topic: Predicting Changes in Price and Quantity
24
Use the figure below to answer the following questions.
Figure 3.5.2
Original equilibrium at 1.
130) Refer to Figure 3.5.2, which represents the market for beans. If the price of peas, a substitute for beans rises, what is the new
beans equilibrium, ceteris paribus?
A) 8
B) 5
C) 9
D) 6
E) 3
Topic: Predicting Changes in Price and Quantity
131) Refer to Figure 3.5.2, which represents the market for beer. If the price of pizza, a complement of beer rises, what is the new
beer equilibrium, ceteris paribus?
A) 3
B) 8
C) 9
D) 6
E) 5
Topic: Predicting Changes in Price and Quantity
132) Refer to Figure 3.5.2, which represents the market for beans. If the price of peas, a substitute for beans in production, rises,
what is the new beans equilibrium, ceteris paribus?
A) 5
B) 8
C) 3
D) 9
E) 6
Topic: Predicting Changes in Price and Quantity
25
133) Refer to Figure 3.5.2, which represents the market for cow manure. If the price of milk, a complement in production of
manure, rises, what is the new manure equilibrium, ceteris paribus?
A) 9
B) 6
C) 3
D) 5
E) 8
Topic: Predicting Changes in Price and Quantity
134) Refer to Figure 3.5.2, which represents the market for beans. If the price of peas, a substitute for beans and a substitute in
production, rises, what is the new beans equilibrium, ceteris paribus?
A) 3
B) 9
C) 2
D) 7
E) 4
Topic: Predicting Changes in Price and Quantity
135) Refer to Figure 3.5.2, which represents the market for beans. If the price of peas, a substitute for beans, rises, and the cost of
producing beans decreases, what is the new beans equilibrium, ceteris paribus?
A) 2
B) 9
C) 4
D) 3
E) 7
Topic: Predicting Changes in Price and Quantity
136) Refer to Figure 3.5.2, which represents the market for tacos. A new scientific study reveals that tacos cause bad breath.
Simultaneously, the cost of producing tacos decreases. What is the new equilibrium, ceteris paribus?
A) 2
B) 9
C) 3
D) 4
E) 7
Topic: Predicting Changes in Price and Quantity
137) Refer to Figure 3.5.2, which represents the market for tacos. A new scientific study reveals that tacos cause bad breath.
Simultaneously, the cost of producing tacos increases. What is the new equilibrium, ceteris paribus?
A) 9
B) 2
C) 7
D) 3
E) 4
Topic: Predicting Changes in Price and Quantity
26
Use the table below to answer the following questions.
Table 3.5.1
The Market for Car-Seat Heaters
Price
(dollars per heater)
40
50
60
70
80
90
100
Quantity Demanded
(heaters per month)
500
450
400
350
300
250
200
Quantity Supplied
(heaters per month)
300
350
400
450
500
550
600
138) Refer to Table 3.5.1. The equilibrium price is $________ and the equilibrium quantity is ________ heaters per month.
A) 80; 300
B) 50; 350
C) 50; 450
D) 80; 500
E) 60; 400
Topic: Predicting Changes in Price and Quantity
139) Refer to Table 3.5.1. If the price is set at $80, there will be a
A) shortage of 200 units and price will rise.
B) shortage of 200 units and demand will fall.
C) surplus of 200 units and demand will rise.
D) surplus of 200 units and price will fall.
E) surplus of 200 units and supply will fall.
Topic: Predicting Changes in Price and Quantity
140) Refer to Table 3.5.1. Suppose the cost of production rises, causing supply to decrease by 100 units at each price. The new
equilibrium price is $________ and equilibrium quantity is ________ units.
A) 50; 450
B) 70; 350
C) 60; 400
D) 50; 350
E) 70; 450
Topic: Predicting Changes in Price and Quantity
141) Refer to Table 3.5.1. Suppose a problem develops with car-seat heaters - they malfunction and occasionally cause serious
burns. As a result, demand decreases by 100 heaters at each price. The new equilibrium price is $________ and the new
equilibrium quantity is ________ heaters per month.
A) 70; 350
B) 50; 450
C) 50; 350
D) 60; 400
E) 70; 450
Topic: Predicting Changes in Price and Quantity
27
142) Refer to Table 3.5.1. Suppose a problem develops with car-seat heaters - they malfunction and occasionally cause serious
burns. As a result, demand decreases by 100 heaters at each price. Simultaneously, the cost of production rises, and supply
decreases by 100 heaters at each price. The new equilibrium price is $________ and the new equilibrium quantity is ________
heaters per month.
A) 70; 350
B) 50; 450
C) 60; 300
D) 70; 450
E) 50; 350
Topic: Predicting Changes in Price and Quantity
Use the figure below to answer the following questions.
Table 3.5.2
Demand and Supply Schedules for Cups of Coffee each day at CoolU
Price
(dollars per cup)
0.70
0.80
0.90
1.00
1.10
1.20
1.30
1.40
1.50
Quantity Demanded
Quantity Supplied
(cups of coffee per day) (cups of coffee per day)
1,200
0
1,100
200
1,000
400
900
600
800
800
700
1,000
600
1,200
500
1,400
400
1,600
143) Refer to Table 3.5.2. The equilibrium price is $________ and the equilibrium quantity is ________ cups a day.
A) 1.10; 800
B) 0.90; 1000
C) 1.30; 1200
D) 1.10; 900
E) 1.00; 800
Topic: Predicting Changes in Price and Quantity
144) Refer to Table 3.5.2. If the price is set at $0.80 per cup, there is a ________ leading to a price ________.
A) equilibrium; rise
B) shortage; rise
C) shortage; fall
D) surplus; rise
E) surplus; fall
Topic: Predicting Changes in Price and Quantity
145) Refer to Table 3.5.2. If the price is set at $1.30 per cup, there is a ________ leading to a price ________.
A) shortage; rise
B) shortage; fall
C) equilibrium; rise
D) surplus; fall
E) surplus; rise
Topic: Predicting Changes in Price and Quantity
28
146) Refer to Table 3.5.2. A premature frost destroys half the coffee trees. This change would be represented as a
A) movement down along the supply curve.
B) leftward shift of the demand curve.
C) rightward shift of the supply curve.
D) leftward shift of the supply curve.
E) rightward shift of the demand curve.
Topic: Predicting Changes in Price and Quantity
147) Refer to Table 3.5.2. A premature frost destroys half the coffee trees and the supply of coffee is cut in half. The new
equilibrium price is $________ and the new equilibrium quantity is ________ cups a day.
A) 1.30; 500
B) 1.50; 400
C) 1.30; 600
D) 1.20; 700
E) 0.90; 400
Topic: Predicting Changes in Price and Quantity
148) Refer to Table 3.5.2. Professor Hyper publishes a new study, showing that coffee raises the test performance of students.
Students double their demand for coffee. This change would be represented as a
A) rightward shift of the supply curve.
B) leftward shift of the demand curve.
C) rightward shift of the demand curve.
D) leftward shift of the supply curve.
E) movement up along the demand curve.
Topic: Predicting Changes in Price and Quantity
149) Refer to Table 3.5.2. Professor Hyper publishes a new study, showing that coffee raises the test performance of students.
Students double their demand for coffee. The new equilibrium price is $________, and the new equilibrium quantity is
________ cups a day.
A) 1.40; 1,400
B) 1.20; 1,000
C) 1.50; 1,600
D) 1.30; 1,200
E) none of the above
Topic: Predicting Changes in Price and Quantity
150) Refer to Table 3.5.2. Professor Hyper publishes a new study, showing that coffee raises the test performance of students.
Students double their demand for coffee. In addition, a premature frost destroys half the coffee trees and the supply of coffee
is cut in half. The new equilibrium price is $________ and the new equilibrium quantity is ________ cups a day.
A) 1.10; 400
B) 1.10; 800
C) 1.10; 1,600
D) 1.50; 800
E) 1.50; 400.
Topic: Predicting Changes in Price and Quantity
29
Use the table below to answer the following questions.
Table 3.5.3
Demand and supply schedules for designer sport t-shirts at CoolU
Price
(dollars per t-shirt)
3
4
5
6
7
8
9
10
11
12
Quantity Supplied
(t-shirts per month)
150
160
170
180
190
200
210
220
230
240
Quantity Demanded
(t-shirts per month)
300
280
260
240
220
200
180
160
140
120
151) Refer to Table 3.5.3. The equilibrium price is $________ and the equilibrium quantity is ________ t -shirts per month.
A) 8; 180
B) 7; 200
C) 7; 220
D) 6; 200
E) 8; 220
Topic: Predicting Changes in Price and Quantity
152) Refer to Table 3.5.3. Suppose that the price of a designer sport t-shirt is $6. The market has ________ leading to ________.
A) a shortage; a rise in the price
B) a surplus; a rise in the price
C) an equilibrium; no change in the price
D) a shortage; a fall in the price
E) a surplus; a fall in the price
Topic: Predicting Changes in Price and Quantity
153) Refer to Table 3.5.3. Suppose that the price of a designer sport t-shirt is $10. The market has ________ leading to ________.
A) a shortage; a rise in the price
B) a shortage; a fall in the price
C) an equilibrium; no change in the price
D) a surplus; a rise in the price
E) a surplus; a fall in the price
Topic: Predicting Changes in Price and Quantity
154) Refer to Table 3.5.3. In a television interview, Joe Cool shows off his designer sport t-shirt, setting off a new craze that
doubles business at the sportswear establishments. This would be represented as a
A) rightward shift of the demand curve.
B) leftward shift of the supply curve.
C) movement up along the demand curve.
D) rightward shift of the supply curve.
E) leftward shift of the demand curve.
Topic: Predicting Changes in Price and Quantity
30
155) Refer to Table 3.5.3. In a television interview, Joe Cool shows off his designer sport t-shirt, setting off a new craze that
doubles business at the sportswear establishments. The new equilibrium price is $________ and the new equilibrium quantity
is ________ t-shirts per month.
A) 16; 400
B) 12; 240
C) 16; 200
D) 12; 120
E) 8; 400
Topic: Predicting Changes in Price and Quantity
156) Refer to Table 3.5.3. A new store opens up on the edge of campus, Great Wild North Sportswear, which has the capacity to do
as much business as all the existing businesses. This would be represented as a
A) rightward shift of the demand curve.
B) rightward shift of the supply curve.
C) leftward shift of the demand curve.
D) leftward shift of the supply curve.
E) movement up along the demand curve.
Topic: Predicting Changes in Price and Quantity
157) Refer to Table 3.5.3. A new store opens up on the edge of campus, Great Wild North Sportswear, which has the capacity to do
as much business as all the existing businesses. The new equilibrium price is $________ and the new equilibrium quantity is
________ t-shirts per month.
A) 4; 400
B) 3; 300
C) 0; 400
D) 16; 200
E) 8; 400
Topic: Predicting Changes in Price and Quantity
158) Refer to Table 3.5.3. A new store opens up on the edge of campus, Great Wild North Sportswear, which has the capacity to do
as much business as all the existing businesses. In addition, in a television interview, Joe Cool shows off his designer sport
t-shirt, setting off a new craze that doubles business at the local sportswear establishments. The new equilibrium price is
$________ and the new equilibrium quantity is ________ t-shirts per month.
A) 3; 400
B) 8; 400
C) 8; 200
D) 12; 240
E) 16; 400
Topic: Predicting Changes in Price and Quantity
31
Use the table below to answer the following questions.
Table 3.5.4
Quantities demanded and supplied in equilibrium
before and after a drought strikes potato farms
Potatoes
before
Region 1
100
Region 2
10
Hamburgers
after
before
30
50
5
4
after
20
50
Rice
before
3
50
after
50
60
159) Refer to Table 3.5.4. In Region 1, potatoes and hamburgers are
A) normal goods.
B) inferior goods.
C) complements.
D) unrelated goods.
E) substitutes.
Topic: Predicting Changes in Price and Quantity
160) In Table 3.5.4 potatoes and rice are
A) substitutes in Region 2 and complements in Region 1.
B) unrelated goods in both regions.
C) complements in both regions.
D) substitutes in both regions.
E) substitutes in Region 1 and complements in Region 2.
Topic: Predicting Changes in Price and Quantity
161) According to the information in Table 3.5.4, in Region 1 there is
A) an increase in the supply of rice.
B) a decrease in the quantity of rice supplied
C) an increase in the quantity of rice supplied.
D) an increase in the quantity of rice demanded.
E) a decrease in the supply of rice.
Topic: Predicting Changes in Price and Quantity
162) "As fewer people buy computers, the demand for Internet service will decrease and the price of Internet service will increase.
The rise in the price of Internet service will increase the supply of Internet service." This statement is ________ because
________.
A) false; a decrease in demand for Internet service does not increase the price of Internet service and an increase in the
price of Internet service does not increase the supply of Internet service
B) true; when the demand for Internet service increases, the supply of Internet service increases so that the price of Internet
service does not increase
C) false; the decrease in the demand for Internet service creates a surplus and to eliminate the surplus, supply increases
D) true, when the demand for Internet service increases, the supply of Internet service increases too so that no surplus
occurs
E) true; the increase in the price of Internet service increases the supply of Internet service to eliminate the shortage
Topic: Predicting Changes in Price and Quantity
32
163) The following events occur one at a time:
I.
II.
III.
IV.
The price of crude oil rises.
The price of a car rises.
All speed limits on highways are abolished.
Robots cut car production costs.
The quantity of gasoline supplied ________.
A) increases when the price of crude oil rises
B) decreases when robots cut car production costs
C) decreases when the price of crude oil rises
D) increases when the price of a car rises
E) increases when all speed limits on highways are abolished
Topic: Predicting Changes in Price and Quantity
164) The demand curve for knobs is P = 75 - 6QD and the supply curve for knobs is P = 35 + 2QS. What is the equilibrium price of
a knob?
A) $40.
B) $10.
C) None of the above.
D) $5.
E) $45.
Topic: Mathematical Note
165) The y- axis intercept of the supply curve is 40 and the slope is 6. The equation of the supply curve is ________.
A) P = 40 + 6QS
B) QS = 40 - 6P
C) P = 40 - 6QS
D) QS = 40 + 6P
E) P = 3 + 40QS
Topic: Mathematical Note
166) The y- axis intercept of the demand curve is 60 and the slope is - 8. The equation of the demand curve is ________.
A) P = 8 - 60QD
B) P = 60 + 8QD
C) P = 60 - 8QD
D) QD = 60 - 8P
E) QD = 60 + 8P
Topic: Mathematical Note
167) The demand curve is P = 700 - 10QD. The supply curve is P = 400 + 5QS. At market equilibrium, the equilibrium quantity is
________ and the equilibrium price is ________.
A) 20; 500
B) 300; 15
C) 0.05; 5
D) 500; 20
E) 5; 0.05
Topic: Mathematical Note
33
168) The demand curve is P = 700 - 20QD. The supply curve is P = 300 + 20QS. At market equilibrium, the equilibrium quantity is
________ and the equilibrium price is ________.
A) 500; 10
B) 400; 40
C) 0.10; 20
D) 10; 500
E) 20; 0.10
Topic: Mathematical Note
169) The demand curve is P = 800 - 25QD. The supply curve is P = 500 + 25QS. At market equilibrium, the equilibrium quantity is
________ and the equilibrium price is ________.
A) 0.17; 25
B) 1,300; zero
C) 6.0; 650
D) 650; 6.0
E) 25; 0.17
Topic: Mathematical Note
34
Answer Key
Testname: 03 DEMAND & SUPPLY
1) D
2) D
3) E
4) D
5) B
6) E
7) D
8) C
9) D
10) D
11) A
12) B
13) E
14) E
15) B
16) A
17) C
18) E
19) D
20) B
21) E
22) E
23) B
24) D
25) E
26) B
27) C
28) B
29) D
30) A
31) B
32) E
33) C
34) D
35) B
36) D
37) E
38) D
39) D
40) D
41) E
42) D
43) D
44) B
45) B
46) C
47) E
48) E
49) D
50) C
51) A
52) A
53) E
54) E
55) C
56) D
57) E
58) A
59) E
60) C
61) C
62) E
63) A
64) C
65) D
66) B
67) D
68) E
69) A
70) A
71) D
72) D
73) C
74) E
75) B
76) D
77) A
78) D
79) D
80) A
81) E
82) D
83) B
84) A
85) B
86) B
87) C
88) D
89) A
90) D
91) C
92) E
93) A
94) A
95) B
96) D
97) C
98) B
99) C
100) C
101) E
102) D
103) A
104) B
105) B
106) B
107) B
108) B
109) B
110) C
111)
112)
113)
114)
115)
116)
117)
118)
119)
120)
121)
122)
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156)
157)
158)
159)
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161)
162)
163)
164)
165)
35
C
B
E
A
D
D
C
A
B
C
A
C
E
A
E
A
A
D
C
A
A
A
B
D
B
D
B
E
D
B
C
C
A
B
D
D
C
C
D
D
B
A
E
A
B
B
B
B
C
D
C
A
E
E
A
166)
167)
168)
169)
C
A
D
C
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36