Principles of Microeconomics, 7e (Case/Fair)

Principles of Microeconomics, 8e (Case/Fair)

Chapter 3: Demand, Supply, and Market Equilibrium

Firms and Households

Multiple Choice

1)

Michael Dell was the first individual who sold computers by mail order. The company founded by Dell is now one of the largest and most successful computer companies in the United States. Michael Dell would be classified as a(n)

A)

entrepreneur.

B)

opportunist.

C)

monopolist.

D)

socialist.

Answer:

A

Diff: 2

Type: D

True/False

1)

Economists would classify the Boston Symphony Orchestra as a firm.

Answer:

TRUE

Diff: 2

Type: D

Input Markets and Output Markets

Multiple Choice

1)

Households are on the ______ side of input (factor) markets and on the _______ side of output (product) markets.

A)

demand; supply

B)

demand; demand

C)

supply; demand

D)

supply; supply

Answer:

C

Diff: 2

Type: F

2)

Firms are on the ______ side of input (factor) markets and on the _______ side of output (product) markets.

A)

demand; supply

B)

demand; demand

C)

supply; demand

D)

supply; supply

Answer:

A

Diff: 2

Type: F

True/False

1)

Products are traded in factor markets.

Answer:

FALSE

Diff: 1

Type: F

Demand in Product/Output Markets

Multiple Choice

1)

Which of the following is held constant along the demand curve?

A)

Price of the good

B)

Quantity

C)

Income

D)

Both A and B

Answer:

C

Diff: 1

Type: F

2)

________ causes a shift in the demand curve for compact discs.

A)

A rise in the price of compact discs

B)

A fall in the price of compact discs

C)

No change in the price of compact discs

D)

A change in the price of prerecorded cassette tapes

Answer:

D

Diff: 1

Type: F

3)

The "law of demand" implies that as prices __________ increases.

A)

fall, demand

B)

rise, demand

C)

fall, quantity demanded

D)

rise, quantity demanded

Answer:

C

Diff: 2

Type: D

4)

According to the law of demand, as prices fall, ceteris paribus,

A)

demand increases.

B)

demand decreases.

C)

quantity demanded decreases.

D)

quantity demanded increases.

Answer:

D

Diff: 2

Type: D

5)

According to the law of demand there is __________ relationship between price and quantity demanded.

A)

a positive

B)

a negative

C)

either a positive or negative

D)

a constantly changing

Answer:

B

Diff: 1

Type: F

6)

As an individual consumes more of a product within a given period of time, it is likely that each additional unit consumed will yield

A)

successively less satisfaction.

B)

successively more satisfaction.

C)

the same amount of satisfaction.

D)

less satisfaction for a while and then start to add more satisfaction.

Answer:

A

Diff: 2

Type: D

7)

Which of the following explains the law of demand?

A)

The law of diminishing marginal utility

B)

A normal versus inferior good effect

C)

A tastes and preferences effect

D)

The law of output increasing at a decreasing rate

Answer:

A

Diff: 2

Type: C

8)

As long as households have limited incomes and wealth, all _______ curves will intersect the __________ axis.

A)

demand; price

B)

demand; quantity

C)

supply; price

D)

supply; quantity

Answer:

A

Diff: 2

Type: F

9)

Demand curves

A)

have a negative slope.

B)

decrease at an increasing rate.

C)

increase at a decreasing rate.

D)

do not intersect either coordinate axis.

Answer:

A

Diff: 3

Type: F

Refer to the information provided in Figure 3.1 below to answer the questions that follow.

Figure 3.1

10)

Refer to Figure 3.1. Which of the following would be most likely to cause the demand for Dr. Pepper to shift from D0 to D1?

A)

a decrease in income, assuming that Dr. Pepper is a normal good

B)

an increase in the price of 7-UP, assuming 7-UP is a substitute for Dr. Pepper

C)

a decrease in the price of Dr. Pepper

D)

a reduction in the price of sugar used to make Dr. Pepper

Answer:

A

Diff: 2

Type: A

Refer to the information provided in Figure 3.2 below to answer the questions that follow.

Figure 3.2

11)

Refer to Figure 3.2. A decrease in _________ would most likely cause the demand for macaroni and cheese to shift from D0 to D1?

A)

the price of macaroni and cheese

B)

the price of flour used to make macaroni and cheese

C)

income, assuming macaroni and cheese is a normal good

D)

the quantity demanded for macaroni and cheese

Answer:

C

Diff: 2

Type: A

12)

If the demand for coffee decreases as income decreases, coffee is a(n) _______ good.

A)

normal

B)

inferior

C)

substitute

D)

complementary

Answer:

A

Diff: 2

Type: D

13)

If a buyers demand for chicken thighs decreases as her income increases, chicken thighs for her are a(n) ______ good.

A)

normal

B)

inferior

C)

substitute

D)

complementary

Answer:

B

Diff: 2

Type: D

Refer to the information provided in Figure 3.3 below to answer the questions that follow.

Figure 3.314)

Refer to Figure 3.3. As your income increased, your demand for X shifted from D1 to D2. X is a(n) ________ good for you.

A)

inferior

B)

normal

C)

luxury

D)

income-neutral

Answer:

A

Diff: 2

Type: D

Refer to the information provided in Figure 3.4 below to answer the questions that follow.

Figure 3.4

15)

Refer to Figure 3.4. If consumer income falls, the demand for tuna fish sandwiches shifts from D0 to D1. This implies that for consumers tuna fish sandwiches are a(n) ______ good.

A)

normal

B)

inferior

C)

substitute

D)

complementary

Answer:

B

Diff: 2

Type: D

Refer to the information provided in Figure 3.5 below to answer the questions that follow.

Figure 3.5

16)

Refer to Figure 3.5. If consumer income increases, the demand for chili peppers shifts from D0 to D1. This implies that chili peppers are a(n) _______ good.

A)

normal

B)

inferior

C)

substitute

D)

complementary

Answer:

B

Diff: 2

Type: D

17)

Suppose the demand for newspapers goes up when the price of coffee goes down. We can say that these two goods are

A)

complements.

B)

substitutes.

C)

normal goods.

D)

perfect substitutes.

Answer:

A

Diff: 2

Type: D

18)

During an economic downturn when consumer income falls, the demand for ice cream cones increases and the demand for chocolate cheesecake decreases. This implies ice cream cones

A)

and chocolate cheesecake are complements.

B)

are a normal good and chocolate cheesecake is an inferior good.

C)

are an inferior good and chocolate cheesecake is a normal good.

D)

are an economic bad and chocolate cheesecake is an economic good.

Answer:

C

Diff: 2

Type: D

19)

A good whose demand is directly proportional to income is a(n) ______ good.

A)

normal

B)

inferior

C)

regular

D)

substitute

Answer:

A

Diff: 2

Type: D

20)

In college you practically existed on instant noodles, but now you earn $95,000 a year. You never want to see instant noodles again. We can safely conclude that you consider instant noodles to be a(n)

A)

normal good.

B)

complementary good.

C)

luxury.

D)

inferior good.

Answer:

D

Diff: 2

Type: D

21)

For inferior goods, an increase in income will cause the

A)

quantity demanded to fall.

B)

demand to increase.

C)

demand to decrease.

D)

quantity demanded to increase.

Answer:

C

Diff: 1

Type: F

22)

When the decrease in the price of one good causes the demand for another good to decrease, the goods are

A)

normal.

B)

inferior.

C)

substitutes.

D)

complements.

Answer:

C

Diff: 2

Type: D

23)

Demand for one item goes down when the price of another item goes up. These items must be

A)

substitutes.

B)

complements.

C)

normal goods.

D)

inferior goods.

Answer:

B

Diff: 2

Type: D

24)

In response to news reports that taking aspirin daily can reduce an individual's risk of a heart attack, there will most likely be a(n)

A)

increase in the supply of aspirins.

B)

decrease in the supply of aspirins.

C)

increase in the demand for aspirins.

D)

increase in the quantity demanded of aspirins.

Answer:

C

Diff: 3

Type: C

25)

Demand curves are derived while holding constant

A)

income, tastes, and the price of the good.

B)

only income and tastes.

C)

income, tastes, and the prices of other goods.

D)

only tastes and the price of other goods.

Answer:

C

Diff: 2

Type: D

26)

The __________ best explains why the quantity demanded of Pepsi decreased.

A)

price of Coca-Cola increased.

B)

Pepsi advertising was not as effective as in the past.

C)

price of Pepsi increased.

D)

income of Pepsi consumers increased.

Answer:

C

Diff: 2

Type: D

Refer to the information provided in Figure 3.6 below to answer the questions that follow.

Figure 3.6

27)

Refer to Figure 3.6. A(n) ___________ causes the number of videotapes Amy rents per week to increase from 3 to 5.

A)

increase in her income if videotapes are a normal good for her.

B)

decrease in the price of popcorn which is a complement to videotapes.

C)

decrease in the rental price of videotapes.

D)

increase in her taste and preference for videotapes.

Answer:

C

Diff: 2

Type: A

28)

A change in the price of a good or service leads to a change in __________ that leads to a ________ the demand curve.

A)

demand; movement along

B)

quantity demanded; movement along

C)

demand; shift in

D)

quantity demanded; shift in

Answer:

B

Diff: 1

Type: F

29)

A change in income, preferences, or prices of other goods or services leads to a change in __________ that causes a __________ the demand curve.

A)

demand; movement along

B)

quantity demanded; movement along

C)

demand; shift of

D)

quantity demanded; shift of

Answer:

C

Diff: 3

Type: C

Refer to the information provided in Figure 3.7 below to answer the following questions.

Figure 3.7

30)

Refer to Figure 3.7. Assume buyers are initially at Point B on market demand curve D2 and that pizza is a normal good. A decrease in the income of buyers would cause the market ________ to move from Point B to ________.

A)

demand; a point on demand curve D1.

B)

demand; a point on demand curve D3.

C)

quantity demanded; point A on demand curve D2.

D)

quantity demanded; point C on demand curve D2.

Answer:

A

Diff: 2

Type: A

31)

Refer to Figure 3.7. If pizza and beer are complementary goods, a decrease in the price of beer will cause a movement from Point B on demand curve D2 to

A)

demand curve D1.

B)

demand curve D3.

C)

Point A on demand curve D2.

D)

Point C on demand curve D2.

Answer:

B

Diff: 2

Type: A

32)

Refer to Figure 3.7. If pizza and hamburgers are substitutes, an increase in the price of hamburgers will cause a movement from Point B on demand curve D2 to

A)

demand curve D1.

B)

demand curve D3.

C)

Point A on demand curve D2.

D)

Point C on demand curve D2.

Answer:

B

Diff: 3

Type: C

33)

Refer to Figure 3.7. A(n) _________ will cause a movement from Point C to Point B on demand curve D2.

A)

decrease in income, assuming pizza is a normal good

B)

decrease in the price of hamburgers, assuming that pizza and hamburgers are substitutes

C)

decrease in the price of pizza

D)

increase in the price of pizza

Answer:

D

Diff: 3

Type: C

34)

Refer to Figure 3.7. A decrease in demand is represented by a ________ from _______.

A)

shift; D2 to D1.

B)

shift; D2 to D3.

C)

movement along D2; Point B to Point A.

D)

movement along D2; Point B to Point C.

Answer:

A

Diff: 3

Type: C

35)

Refer to Figure 3.7. An increase in quantity demanded is represented by a _______ from _______.

A)

shift; D2 to D1.

B)

shift; D2 to D3.

C)

movement along D2; Point B to point A.

D)

movement along D2; Point B to point C.

Answer:

D

Diff: 3

Type: C

Refer to the information provided in Figure 3.8 below to answer the following questions.

Figure 3.836)

Refer to Figure 3.8. Assume that there are only two people in the market for compact discs: Person A and Person B. Along the market demand curve for compact disks, at a price of __________, quantity demanded would be __________.

A)

$12; 5

B)

$12; 7

C)

$10; 13

D)

$10; 16

Answer:

B

Diff: 2

Type: A

37)

Refer to Figure 3.8. Assume there are only two people in the market for compact disks: Person A and Person B. Along the market demand curve, at a price of __________, quantity demanded would be __________.

A)

$12; 5

B)

$12; 8

C)

$10; 10

D)

$10; 13

Answer:

C

Diff: 2

Type: A

Refer to the information provided in Figure 3.9 below to answer the following questions.

Figure 3.938)

Refer to Figure 3.9. Assume that there are only two people in the market for movies: Person A and Person B. Along the market demand curve for movies, at a price of __________, quantity demanded would be __________.

A)

$12; 5

B)

$12; 7

C)

$8; 7

D)

$8; 6

Answer:

A

Diff: 2

Type: A

39)

Refer to Figure 3.9. Assume there are only two people in the market for movies: Person A and Person B. Along the market demand curve, at a price of __________, quantity demanded would be __________.

A)

$8; 5

B)

$8; 8

C)

$12; 7

D)

$12; 13

Answer:

B

Diff: 2

Type: A

Refer to the information provided in Figure 3.10 below to answer the questions that follow.

Figure 3.1040)

Refer to Figure 3.10. Assume hamburgers are a normal good. An increase in income will cause a _______ from ________.

A)

movement; Point A to Point B.

B)

movement; Point B to Point A.

C)

shift; D1 to D2.

D)

shift; D2 to D1

Answer:

C

Diff: 2

Type: A

41)

Refer to Figure 3.10. Assume hamburgers and hot dogs are substitutes. A fall in the price of hot dogs will cause a movement from

A)

Point A to Point B.

B)

Point B to Point A.

C)

D2 to D1.

D)

D1 to D2.

Answer:

C

Diff: 2

Type: A

42)

Refer to Figure 3.10. Assume hamburgers and french fries are complements. A fall in the price of french fries will cause a movement from

A)

Point A to Point B.

B)

Point B to Point A.

C)

D1 to D2.

D)

D2 to D1.

Answer:

C

Diff: 2

Type: A

43)

Refer to Figure 3.10. Assume hamburgers are an inferior good. An increase in income will cause a ______ from ________.

A)

movement; Point B to Point A

B)

movement; Point A to Point B

C)

shift; D2 to D1

D)

shift; D1 to D2

Answer:

C

Diff: 3

Type: A

Refer to the information provided in Scenario 1 below to answer the following questions.SCENARIO 1: Rented videotapes and movies shown in theaters are substitutes. Rented videotapes and big screen TVs are complements. Rented videotapes, big screen TVs, and movies shown in theaters are normal goods. People watch rented videotapes more often in the winter than in the summer.

44)

Refer to Scenario 1. Most big screen TVs sold in the United States are imported from Japan. If the United States government reduces the number of big screen TVs that can be imported into the United States, ceteris paribus, the price of big screen TVs ______ the rental price of videotapes would __________.

A)

and; fall.

B)

would fall and; rise.

C)

would rise and; fall.

D)

and; rise.

Answer:

C

Diff: 3

Type: C

45)

Refer to Scenario 1. To raise additional revenues, the government imposes an entertainment tax on movie tickets, but there are no new additional taxes levied on rented videotapes. This would lead to

A)

a rise in the price of movie tickets, but no change in the rental price of videotapes.

B)

a rise in the price of movie tickets and the rental price of videotapes.

C)

a rise in the price of a movie ticket and a fall in the rental price of videotapes.

D)

no change in the price of a movie ticket and a rise in the rental price of videotapes.

Answer:

B

Diff: 3

Type: C

46)

Refer to Scenario 1. You observe that the rental price for videotapes is higher in the winter than in the summer. This would be explained by the fact that

A)

demand for rented videotapes is higher in the winter than in the summer.

B)

the quantity demanded of rented videotapes is higher in the winter than in the summer.

C)

there are more videotapes released into the rental market in the winter than in the summer.

D)

consumer income tends to fall in the winter and increase in the summer.

Answer:

A

Diff: 3

Type: C

47)

Refer to Scenario 1. If the number of stores renting videotapes is reduced by 25%, the rental price of videotapes

A)

would rise, and the price of big screen TVs and movie tickets would fall.

B)

would rise, but the price of big screen TVs and movie tickets would be unaffected.

C)

and movie tickets would fall, but the price of big screen TVs would rise.

D)

and the price of movie tickets would rise, but the price of big screen TVs would fall.

Answer:

D

Diff: 3

Type: C

True/False

1)

Wealth is a flow measure.

Answer:

FALSE

Diff: 1

Type: F

2)

A change in the price of a good or service leads to a change in quantity demanded of the good.

Answer:

TRUE

Diff: 1

Type: F

3)

Quantity demanded is determined only by how much consumers want.

Answer:

FALSE

Diff: 1

Type: F

4)

Quantity supplied is determined by how much suppliers are willing and able to supply.

Answer:

TRUE

Diff: 1

Type: F

5)

If cameras and film are complements, then a decrease in the price of cameras will result in a decrease in the demand for film.

Answer:

FALSE

Diff: 1

Type: F

Supply in Product/Output Markets

Multiple Choice

1)

According to the law of supply, there is a

A)

negative relationship between price and the quantity of a good supplied.

B)

positive relationship between price and the quantity of a good supplied.

C)

negative relationship between price and the change in supply.

D)

positive relationship between price and the change in supply.

Answer:

B

Diff: 2

Type: D

2)

The price of computer chips used in the manufacturing of personal computers rises. This will lead to a(n) __________ in the ________ of personal computers.

A)

increase; supply

B)

decrease; supply

C)

increase; quantity supplied

D)

decrease; quantity supplied

Answer:

B

Diff: 3

Type: C

3)

If the price of pizza sauce rises, there will be a(n) __________ of pizza.

A)

increase in the supply

B)

decrease in the supply

C)

increase in the quantity supplied

D)

decrease in the quantity supplied

Answer:

B

Diff: 3

Type: C

4)

A frozen food manufacturer can produce either pizzas or calzones. As the result of a rise in the price of calzones, the firm produces more calzones and fewer pizzas. An economist would explain this by saying

A)

the supply of calzones increased and the supply of pizzas decreased.

B)

there has been an increase in the quantity supplied of calzones and a decrease in the quantity supplied of pizzas.

C)

there has been an increase in the quantity supplied of calzones and a decrease in the supply of pizza.

D)

the supply of calzones increased and the quantity supplied of pizza decreased.

Answer:

C

Diff: 3

Type: C

Refer to the information provided in Figure 3.11 below to answer the following questions.

Figure 3.115)

Refer to Figure 3.11. A decrease in the wage rate of pizza makers will cause a movement from Point B on supply curve S2 to

A)

Point A on supply curve S2.

B)

Point B on supply curve S2.

C)

supply curve S3.

D)

supply curve S1.

Answer:

C

Diff: 2

Type: A

6)

Refer to Figure 3.11. An increase in supply is represented by the movement from

A)

S2 to S3.

B)

S2 to S1.

C)

Point B to Point A along supply curve S2.

D)

Point B to Point C along supply curve S2.

Answer:

A

Diff: 2

Type: A

7)

Refer to Figure 3.11. A decrease in quantity supplied is represented by a movement from

A)

S2 to S3.

B)

S2 to S1.

C)

Point B to Point A along supply curve S2.

D)

Point B to Point C along supply curve S2.

Answer:

D

Diff: 2

Type: A

8)

Refer to Figure 3.11. An increase in the price of pizza sauce will cause a movement from Point B on supply curve S2 to

A)

supply curve S3.

B)

supply curve S1.

C)

Point A on supply curve S2.

D)

Point C on supply curve S2.

Answer:

B

Diff: 2

Type: A

9)

Refer to Figure 3.11. A movement from Point A to Point B on supply curve S2 would be caused by a(n)

A)

increase in the price of pizza.

B)

decrease in the demand for pizza.

C)

increase in the price of pizza dough.

D)

increase in the price of hamburgers, assuming hamburgers are a substitute for pizza.

Answer:

B

Diff: 2

Type: A

Refer to the information provided in Figure 3.12 below to answer the following questions.

Figure 3.1210)

Refer to Figure 3.12. An increase in the wage rate of gardenburger makers will cause a movement from Point B on supply curve S2 to

A)

Point A on supply curve S2.

B)

Point B on supply curve S2.

C)

supply curve S3.

D)

supply curve S1.

Answer:

D

Diff: 2

Type: A

11)

Refer to Figure 3.12. A decrease in supply is represented by the movement from

A)

S2 to S3.

B)

S2 to S1.

C)

Point B to Point A along supply curve S2.

D)

Point B to Point C along supply curve S2.

Answer:

B

Diff: 2

Type: A

12)

Refer to Figure 3.12. An increase in quantity supplied is represented by a movement from

A)

S2 to S1.

B)

S2 to S3.

C)

Point B to Point A along supply curve S2.

D)

Point B to Point C along supply curve S2.

Answer:

C

Diff: 2

Type: A

13)

Refer to Figure 3.12. A decrease in the price of mushrooms (an input for gardenburgers) will cause a movement from Point B on supply curve S2 to

A)

supply curve S3.

B)

supply curve S1.

C)

Point A on supply curve S2.

D)

Point C on supply curve S2.

Answer:

A

Diff: 2

Type: A

14)

Refer to Figure 3.12. A movement from Point C to Point B on supply curve S2 would be caused by a(n)

A)

decrease in the price of gardenburgers.

B)

increase in the demand for gardenburgers.

C)

decrease in the price of mushrooms.

D)

decrease in the price of hamburgers, assuming hamburgers are a substitute for gardenburgers.

Answer:

B

Diff: 2

Type: A

15)

The change in the price of a good leads to a change in __________, which leads to a __________.

A)

quantity supplied; movement along a supply curve

B)

quantity supplied; shift of the supply curve

C)

supply; movement along a supply curve

D)

supply; shift of the supply curve

Answer:

A

Diff: 3

Type: C

Refer to the information provided in Figure 3.13 below to answer the questions that follow.

Figure 3.13

16)

Refer to Figure 3.13. The supply curve of hula hoops shifts from S0 to S1. This could be caused by

A)

an decrease in the price of hula hoops.

B)

a decrease in the number of firms selling hula hoops.

C)

a decrease in the demand for hula hoops.

D)

Either B or C

Answer:

B

Diff: 3

Type: C

True/False

1)

A technological advance for making a product causes an increase (shift) in the supply curve for the product.

Answer:

TRUE

Diff: 1

Type: F

Market Equilibrium

Multiple Choice

1)

Equilibrium is the condition that exists when

A)

there is no government intervention in the market.

B)

the demand curve intersects the price axis.

C)

quantity demanded equals quantity supplied.

D)

the demand curve intersects the quantity axis.

Answer:

C

Diff: 2

Type: D

Refer to the information provided in Table 3.1 below to answer the questions that follow.Table 3.1

2)

Refer to Table 3.1. This market will be in equilibrium if the price per pizza is

A)

$6.

B)

$8.

C)

$10.

D)

$12.

Answer:

B

Diff: 2

Type: A

3)

Refer to Table 3.1. If the price per pizza is $10, the price will

A)

remain constant because the market is in equilibrium.

B)

rise because there is an excess demand in the market.

C)

fall because there is an excess demand in the market.

D)

fall because there is an excess supply in the market.

Answer:

D

Diff: 2

Type: A

4)

Refer to Table 3.1. If the price per pizza is $12, there is a(n)

A)

market equilibrium.

B)

excess demand of 100 units.

C)

excess demand of 750 units.

D)

excess supply of 300 units.

Answer:

D

Diff: 2

Type: A

5)

Refer to Table 3.1. If the price per pizza is $6, there is an excess _________ pizzas.

A)

demand of 150

B)

demand of 50

C)

supply of 200

D)

supply of 50

Answer:

A

Diff: 2

Type: A

6)

Refer to Table 3.1. In this market there will be an excess demand of 150 pizzas at a price of

A)

$6.

B)

$8.

C)

$10.

D)

$12.

Answer:

A

Diff: 2

Type: A

7)

Refer to Table 3.1. In this market there will be an excess supply of 150 pizzas at a price of

A)

$6.

B)

$8.

C)

$10.

D)

$12.

Answer:

C

Diff: 2

Type: A

8)

Refer to Table 3.1. If the price per pizza is $12, the price will

A)

remain constant because the market is in equilibrium.

B)

rise because there is an excess demand in the market.

C)

fall because there is an excess demand in the market.

D)

fall because there is an excess supply in the market.

Answer:

D

Diff: 2

Type: A

Refer to the information provided in Table 3.2 below to answer the questions that follow.Table 3.2

9)

Refer to Table 3.2. This market will be in equilibrium if the price per gardenburger is

A)

$6.

B)

$8.

C)

$10.

D)

$12.

Answer:

D

Diff: 2

Type: A

10)

Refer to Table 3.2. If the price per gardenburger is $10, the price will

A)

remain constant because the market is in equilibrium.

B)

fall because there is an excess demand in the market.

C)

rise because there is an excess demand in the market.

D)

rise because there is an excess supply in the market.

Answer:

C

Diff: 2

Type: A

11)

Refer to Table 3.2. If the price per gardenburger is $14, there is a(n)

A)

market equilibrium.

B)

excess demand of 100 units.

C)

excess demand of 700 units.

D)

excess supply of 150 units.

Answer:

D

Diff: 2

Type: A

12)

Refer to Table 3.2. If the price per gardenburger is $6, there is an excess _______ of ________ gardenburgers.

A)

demand; 150

B)

supply; 50

C)

demand; 450

D)

supply; 150

Answer:

C

Diff: 2

Type: A

13)

Refer to Table 3.2. In this market there will be an excess demand of 150 gardenburgers at a price of

A)

$6.

B)

$8.

C)

$10.

D)

$12.

Answer:

C

Diff: 2

Type: A

14)

Refer to Table 3.2. In this market there will be an excess supply of 150 gardenburgers at a price of

A)

$6.

B)

$10.

C)

$12.

D)

$14.

Answer:

D

Diff: 2

Type: A

15)

Refer to Table 3.2. If the price per gardenburger is $12, the price will

A)

remain constant because the market is in equilibrium.

B)

rise because there is an excess demand in the market.

C)

fall because there is an excess supply in the market.

D)

fall because there is an excess supply in the market.

Answer:

A

Diff: 2

Type: A

16)

When there is an excess supply of a product in an unregulated market, the tendency is for

A)

price to rise.

B)

price to fall.

C)

quantity supplied to increase.

D)

quantity demanded to decrease.

Answer:

B

Diff: 3

Type: C

Refer to the information provided in Figure 3.14 below to answer the questions that follow.

Figure 3.1417)

Refer to Figure 3.14. The market for blue jeans is in equilibrium at a price of __________ and a quantity of __________ blue jeans.

A)

$20; 1,000

B)

$20; 200

C)

$30; 175

D)

$40; 100

Answer:

C

Diff: 2

Type: A

18)

Refer to Figure 3.14. At a price of $20, there is an excess _______ of ______ blue jeans.

A)

demand; 75

B)

demand; 50

C)

demand; 25

D)

supply; 50

Answer:

A

Diff: 2

Type: A

19)

Refer to Figure 3.14. If this market is unregulated and the price is currently $40, you would expect that the price

A)

of blue jeans would remain at $40, because firms would not want to reduce the price.

B)

of blue jeans would fall to $20, so the firm could sell its excess supply.

C)

would fall to $30, where quantity demanded equals quantity supplied.

D)

would fall, but the new price is indeterminate from the information provided.

Answer:

C

Diff: 2

Type: A

20)

Refer to Figure 3.14. At a price of $40, there is an excess _______ of _______ blue jeans.

A)

demand; 50

B)

supply; 75

C)

demand; 75

D)

supply; 50

Answer:

B

Diff: 2

Type: A

21)

A _________ in the price of ________ will cause a decrease in demand for cameras.

A)

rise; a substitute good.

B)

rise; cameras.

C)

rise; a complementary good.

D)

fall; cameras.

Answer:

C

Diff: 3

Type: C

22)

When there is a shortage of a product in an unregulated market, there is a tendency for

A)

price to rise.

B)

price to fall.

C)

quantity demanded to increase.

D)

quantity supplied to decrease.

Answer:

A

Diff: 3

Type: C

23)

Presently the tire market is unregulated and characterized by excess supply. You accurately predict that the price of tires will _______, the quantity demanded will ______, and the quantity supplied will _______.

A)

rise; fall; rise.

B)

rise; rise; fall.

C)

fall; rise; fall.

D)

fall; fall; rise.

Answer:

C

Diff: 3

Type: C

24)

DVD players and DVDs are complements. A rise in the player price would cause which of the following in the market for DVDs? The equilibrium price

A)

and quantity of DVDs would rise.

B)

and quantity of DVDs would fall.

C)

of DVDs would rise and the equilibrium quantity would fall.

D)

of DVDs would fall and the equilibrium quantity would rise.

Answer:

B

Diff: 3

Type: C

25)

Suppose that video game cartridges are a normal good. If the income of video game players increases, you predict that in the market for video games

A)

both equilibrium price and quantity will fall.

B)

both equilibrium price and quantity will rise.

C)

equilibrium price will rise and quantity will decrease.

D)

equilibrium price will fall but quantity will increase.

Answer:

B

Diff: 3

Type: C

Refer to the information provided in Figure 3.15 below to answer the questions that follow.

Figure 3.1526)

Refer to Figure 3.15. The current price of a bag of pretzels is $1.10. You accurately predict that in this market

A)

price tends to remain constant and quantity supplied increases.

B)

price, quantity demanded, and quantity supplied decrease.

C)

price and quantity demanded increase and quantity supplied decreases.

D)

price and quantity supplied decrease and quantity demanded increases.

Answer:

D

Diff: 3

Type: C

Refer to the information provided in Figure 3.16 below to answer the questions that follow.

Figure 3.16

27)

Refer to Figure 3.16. In the Rollerblade market, you accurately predict that price will

A)

rise, the quantity demanded will fall, and the quantity supplied will rise.

B)

rise, the quantity demanded will rise, and the quantity supplied will fall.

C)

fall, the quantity demanded will fall, and the quantity supplied will fall.

D)

fall, the quantity demanded will rise, and the quantity supplied will fall.

Answer:

A

Diff: 3

Type: C

Refer to the information provided in Figure 3.17 below to answer the questions that follow.

Figure 3.1728)

Refer to Figure 3.17. The market is initially in equilibrium at Point A. If demand shifts from D1 to D2 and the price of burritos remains constant at $3.00, there will be an excess _________ million pounds of burritos.

A)

supply of 150

B)

demand of 150

C)

supply of 50

D)

demand of 100

Answer:

B

Diff: 2

Type: A

29)

Refer to Figure 3.17. The market is initially in equilibrium at Point B. If demand shifts from D2 to D1 and the price of burritos remains constant at $4.00, there will be an excess _______million pounds of burritos.

A)

supply of 200

B)

demand of 200

C)

supply of 100

D)

demand of 100

Answer:

A

Diff: 2

Type: A

30)

Refer to Figure 3.17. The market is initially in equilibrium at Point A. If demand shifts from D1 to D2, the new equilibrium price will be __________ and the new equilibrium quantity will be __________.

A)

$3.00; 250

B)

$6.00; 250

C)

$4.00; 350

D)

$4.00; 150

Answer:

C

Diff: 2

Type: A

31)

Refer to Figure 3.17. The market is initially in equilibrium at Point B. If demand shifts from D2 to D1, the new equilibrium price will be __________ and the new equilibrium quantity will be __________.

A)

$4.00; 350

B)

$3.00; 250

C)

$3.00; 400

D)

$4.00; 150

Answer:

B

Diff: 2

Type: A

Refer to the information provided in Figure 3.18 below to answer the questions that follow.

Figure 3.1832)

Refer to Figure 3.18. The market is initially in equilibrium at Point A. If supply shifts from S1 to S2 and the price of pizzas remains constant at $7.00, there will be an excess ________ pizzas.

A)

supply of 5

B)

demand of 5

C)

supply of 2

D)

demand of 7

Answer:

B

Diff: 2

Type: A

33)

Refer to Figure 3.18. The market is initially in equilibrium at Point A. If supply shifts from S1 to S2, the new equilibrium price will be __________ and the new equilibrium quantity will be __________.

A)

$5.00; 12

B)

$7.00; 10

C)

$13.00; 12

D)

$10.00; 10

Answer:

D

Diff: 2

Type: A

34)

Refer to Figure 3.18. The market is initially in equilibrium at Point B. If supply shifts from S2 to S1, the new equilibrium price will be __________ and the new equilibrium quantity will be __________.

A)

$5.00; 14

B)

$7.00; 12

C)

$13.00; 12

D)

$10.00; 10

Answer:

B

Diff: 1

Type: F

35)

When it passed through Louisiana in the summer of 2005, a hurricane destroyed approximately a quarter of the sugar cane crop. Ceteris paribus, the

A)

supply of sugar decreased and the price of sugar increased.

B)

supply of sugar decreased and the price of sugar decreased.

C)

demand for sugar increased and the price of sugar increased.

D)

demand for sugar decreased and the price of sugar decreased.

Answer:

A

Diff: 3

Type: C

36)

The price of mozzarella cheese increases. In the market for pizza you would expect that the

A)

demand for pizza would increase and the price of pizza would increase.

B)

demand for pizza would decrease and the price of pizza would fall.

C)

supply of pizza would decrease and the price of pizza would increase.

D)

supply of pizza would increase and the price of pizza would decrease.

Answer:

C

Diff: 3

Type: C

37)

Improvements in technology have reduced the cost of producing personal computers. As a result, you accurately predict that in the market for personal computers, there will be a(n)

A)

increase in the quantity supplied of personal computers, a reduction in the price, and an increase in the quantity demanded.

B)

increase in the supply of personal computers, a decrease in the price, and an increase in the quantity demanded.

C)

increase in the supply of personal computers, a reduction in the price, and an increase in the demand.

D)

decrease in the supply of personal computers, an increase in the price, and a decrease in the demand.

Answer:

B

Diff: 3

Type: C

38)

A(n) ________ in equilibrium ________ will occur when there is a simultaneous decrease in demand and supply.

A)

increase; price

B)

decrease; price

C)

increase; quantity

D)

decrease; quantity

Answer:

D

Diff: 3

Type: C

39)

A movement along the demand curve to the left may be caused by a

A)

rise in income.

B)

decrease in supply.

C)

fall in the number of substitute goods.

D)

fall in the price of inputs.

Answer:

B

Diff: 3

Type: C

40)

A(n) _________ in equilibrium _______ will occur when there is an increase in the supply of and decrease in demand for cassette tapes.

A)

increase; price

B)

decrease; price

C)

increase; quantity

D)

decrease; quantity

Answer:

B

Diff: 3

Type: C

41)

A(n) _______ in equilibrium _______ will occur when there is an increase in demand for and a decrease in supply of milk.

A)

increase; price

B)

decrease; price

C)

increase; quantity

D)

decrease; quantity

Answer:

A

Diff: 3

Type: C

42)

An insect that is resistant to currently used pesticides has infested the cotton crop, and this year's crop is only half of what was produced last year. You accurately predict that this will

A)

shift the supply curve of cotton to the right, the equilibrium price of cotton will increase, and the demand for cotton will fall.

B)

shift the supply curve of cotton to the right, the equilibrium price of cotton will increase, and the quantity demanded of cotton will decrease.

C)

shift the supply curve of cotton to the left, the equilibrium price of cotton will increase, and the quantity demanded of cotton will decrease.

D)

shift the supply curve of cotton to the left, the equilibrium price of cotton will increase, and the demand for cotton will fall.

Answer:

C

Diff: 3

Type: C

43)

Apples and oranges are substitute goods. A freeze in Florida destroyed a good portion of the orange crop. Ceteris paribus, the price of

A)

both apples and oranges will rise.

B)

both apples and oranges will fall.

C)

oranges will rise and the price of apples will fall.

D)

oranges will fall and the price of apples will rise.

Answer:

A

Diff: 3

Type: C

Refer to the information provided in Figure 3.19 below to answer the questions that follow.

Figure 3.1944)

Refer to Figure 3.19. When the economy moves from Point A to Point B, there has been an __________ and an ________.

A)

increase in demand; increase in supply

B)

increase in demand; increase in quantity supplied

C)

increase in quantity demanded; increase in quantity supplied

D)

increase in quantity demanded; increase in supply

Answer:

B

Diff: 2

Type: A

44)

Refer to Figure 3.19. When the economy moves from Point A to Point C, there has been

A)

a decrease in supply and a decrease in quantity demanded.

B)

a decrease in quantity supplied and a decrease in demand.

C)

a decrease in supply and an increase in quantity demanded.

D)

an increase in supply and a decrease in quantity demanded.

Answer:

A

Diff: 2

Type: A

45)

Refer to Figure 3.19. When the economy moves from Point A to Point E, there has been

A)

an increase in demand and an increase in supply.

B)

a decrease in demand and a decrease in supply.

C)

an increase in demand and a decrease in supply.

D)

an increase in quantity demanded and an increase in quantity supplied.

Answer:

C

Diff: 2

Type: A

45)

Refer to Figure 3.19. When the economy moves from Point E to Point B, there has been

A)

an increase in supply and an increase in quantity demanded.

B)

an increase in both supply and demand.

C)

a decrease in supply and an increase in demand.

D)

a decrease in supply and an increase in quantity demanded.

Answer:

A

Diff: 2

Type: A

46)

Why do firms engage in the activity of production?

A)

To help society advance technologically

B)

To participate in the circular flow

C)

To acquire profits

D)

To develop a supply schedule

Answer:

C

Diff: 1

Type: F

Refer to Scenario 2 below to answer the questions that follow.SCENARIO 2: Lettuce and spinach are substitutes. Lettuce and tomatoes are complements. Lettuce is a normal good. During the winter, about 20% of the lettuce crop was destroyed by flooding.

47)

Refer to Scenario 2. As a result of the flooding during the winter, you would expect that

A)

the price of lettuce would rise, the supply of lettuce would increase, and the quantity demanded of lettuce would decrease.

B)

the supply of lettuce decreased, the price of lettuce rose, and the quantity demanded of lettuce decreased.

C)

the price of lettuce rose and both the quantity of lettuce supplied and the quantity of lettuce demanded increased.

D)

the supply of lettuce decreased, the price of lettuce rose, and the demand for lettuce decreased.

Answer:

B

Diff: 3

Type: C

48)

Refer to Scenario 2. The floods that destroyed part of the lettuce crop would have caused the equilibrium price of spinach to __________ and the equilibrium quantity of spinach to __________.

A)

fall; decrease

B)

fall; increase

C)

rise; increase

D)

rise; decrease

Answer:

C

Diff: 3

Type: C

49)

Refer to Scenario 2. The floods that destroyed part of the lettuce crop would have caused a(n) ________ in the __________ tomatoes.

A)

increase; demand for

B)

decrease; demand for

C)

increase; quantity demanded of

D)

decrease; quantity demanded of

Answer:

B

Diff: 3

Type: C

50)

Refer to Scenario 2. At the same time that part of the lettuce crop was destroyed, consumer income also decreased. Ceteris paribus, in the market for lettuce this would have caused

A)

both the equilibrium price and quantity to decrease.

B)

the equilibrium price to rise and the equilibrium quantity to decrease.

C)

the equilibrium price to fall. The equilibrium quantity could have increased, decreased, or remained the same.

D)

the equilibrium price to either rise, fall, or remain the same and the equilibrium quantity to decrease.

Answer:

D

Diff: 3

Type: C

51)

Refer to Scenario 2. The government wants to protect consumers from rising food prices. Therefore, price restrictions are imposed on lettuce growers prohibiting them from raising the price of lettuce. This will cause

A)

an excess supply of lettuce.

B)

an excess demand for lettuce.

C)

an increase in the demand for lettuce.

D)

a decrease in the supply of lettuce.

Answer:

B

Diff: 3

Type: C

52)

A rising market price provides incentives for market participants to behave in ways to help eliminate a market shortage and also make buyer or seller better off. Which of the following is most in agreement with this statement?

A)

To increase profits a seller looks for substitute products to produce.

B)

To gain from trade a buyer looks for relatively cheaper substitutes to buy.

C)

To increase profits a seller tries to decrease production.

D)

To gain from trade a buyer offers to pay less for the product.

Answer:

B

Diff: 3

Type: C

53)

A falling market price provides incentives for market participants to behave in ways to help eliminate a market surplus and also make buyer or seller better off. Which of the following is most in agreement with this statement?

A)

To increase profits a seller tries to increase his/her product inventory.

B)

To gain from trade a buyer looks for relatively cheaper substitutes to buy.

C)

To increase profits a seller tries to produce more product.

D)

To gain from trade a buyer buys more of the now relatively cheaper product and uses it to replace relatively more expensive substitute goods.

Answer:

D

Diff: 3

Type: C

True/False

1)

A decrease in demand for a product will cause the price of the product to fall and supply of the product to decrease.

Answer:

FALSE

Diff: 1

Type: F

2)

A simultaneous increase in both the supply of and the demand for plaid flannel shirts would cause an increase in the equilibrium quantity of plaid flannel shirts.

Answer:

TRUE

Diff: 1

Type: F

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