The Exploration of Microeconomics International Edition 6th Edition by Robert L. Sexton - Test Bank

The Exploration of Microeconomics International Edition 6th Edition by Robert L. Sexton – Test Bank

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Chapter 4—Demand, Supply, and Market Equilibrium

TRUE/FALSE

A market is not really a place but rather the process of buyers and sellers exchanging goods and services.

ANS: T PTS: 1 REF: p. 99

TOP: 4.1 Markets | Defining a Market

An economist would likely consider the sale of soft drinks at a major league baseball stadium to represent the same market as the sale of soft drinks at a gas station.

ANS: F PTS: 1 REF: p. 99

TOP: 4.1 Markets | Defining a Market

When the price of steak falls, we would expect the quantity demanded of steak to rise.

ANS: T PTS: 1 REF: p. 101

TOP: 4.2 Demand | The Law of Demand

If consumers were originally willing to buy 500 units of a good at a price of $20 are now willing to buy 500 units of the same good at a price of $10, that change would be described as a decrease in demand.

ANS: T PTS: 1 REF: p. 105

TOP: 4.3 Shifts in the Demand Curve | A Change in Demand Versus a Change in Quantity Demanded

If the price of Good A increases and the demand for Good B increases as well, Goods A and B are most likely complements.

ANS: F PTS: 1 REF: p. 106

TOP: 4.3 Shifts in the Demand Curve | Changes in the Prices of Related Goods and Services

If watermelons are normal goods, the demand for them will rise as the income of consumers rises.

ANS: T PTS: 1 REF: p. 107

TOP: 4.3 Shifts in the Demand Curve | Changes in Income

If hot dogs are inferior goods, the demand for hot dogs will rise as consumer income falls.

ANS: T PTS: 1 REF: p. 107

TOP: 4.3 Shifts in the Demand Curve | Changes in Income

Ceteris paribus, if the price of lumber increases, we would expect an increase in the supply of lumber.

ANS: F PTS: 1 REF: p. 115

TOP: 4.5 Shifts in the Supply Curve | A Change in Quantity Supplied Versus a Change in Supply

When the price of corn falls, the market supply of wheat (which can be grown using the same land) is likely to increase.

ANS: T PTS: 1 REF: p. 116

TOP: 4.5 Shifts in the Supply Curve | Shifts in Supply

A technological advance that reduces the cost of producing computers will shift the supply curve of computers to the right.

ANS: T PTS: 1 REF: p. 116

TOP: 4.5 Shifts in the Supply Curve | Shifts in Supply

Increasing government taxation or regulation of an industry generally increases the supply of goods.

ANS: F PTS: 1 REF: p. 116

TOP: 4.5 Shifts in the Supply Curve | Shifts in Supply

If the price of pizza falls, the demand for pizza will rise.

ANS: F PTS: 1 REF: p. 105

TOP: 4.3 Shifts in the Demand Curve | A Change in Demand Versus a Change in Quantity Demanded

According to the law of demand, other things equal, when the price of a good or service falls, demand increases.

ANS: F PTS: 1 REF: p. 105

TOP: 4.3 Shifts in the Demand Curve | A Change in Demand Versus a Change in Quantity Demanded

According to the law of supply, other things equal, when the price of a good or service rises, the quantity supplied increases, but supply does not.

ANS: T PTS: 1 REF: p. 115

TOP: 4.5 Shifts in the Supply Curve | A Change in Quantity Supplied Versus a Change in Supply

Two goods are complements if an increase in the price of one causes an increase in the demand for the other good.

ANS: F PTS: 1 REF: p. 106

TOP: 4.3 Shifts in the Demand Curve | Changes in the Prices of Related Goods and Services

If input prices fall, it will lower the cost of production, causing the supply curve to shift to the right.

ANS: T PTS: 1 REF: p. 116

TOP: 4.5 Shifts in the Supply Curve | Shifts in Supply

Because personal tastes differ, what are substitutes for one person need not be substitutes for another person.

ANS: T PTS: 1 REF: p. 106

TOP: 4.3 Shifts in the Demand Curve | Changes in the Prices of Related Goods and Services

Either technological progress or cost increasing new government regulations will increase supply.

ANS: F PTS: 1 REF: p. 116

TOP: 4.5 Shifts in the Supply Curve | Shifts in Supply

Either an increase in the number of buyers or an increase in tastes or preferences for a good or service will increase the market demand for that good or service.

ANS: T PTS: 1 REF: p. 109

TOP: 4.3 Shifts in the Demand Curve | Changes in Number of Buyers

An increase in the price of ice cream would cause a decrease in the demand for ice cream and an increase in the demand for frozen yogurt, a substitute.

ANS: F PTS: 1 REF: p. 105-106

TOP: 4.3 Shifts in the Demand Curve | A Change in Demand Versus a Change in Quantity Demanded

If the market for wheat is in equilibrium, the quantity of wheat demanded will equal the quantity of wheat supplied.

ANS: T PTS: 1 REF: p. 121

TOP: 4.6 Market Equilibrium Price and Quantity | Equilibrium Price and Quantity

Price reductions will usually result whenever the quantity supplied exceeds the quantity demanded at the current price.

ANS: T PTS: 1 REF: p. 121

TOP: 4.6 Market Equilibrium Price and Quantity | Shortages and Surpluses

MULTIPLE CHOICE

Which of the following relationships reflect the law of supply?

a.	Q_S => P
b.	¯ P => ¯ S
c.	P => Q_S
d.	¯ P => Q_S

ANS: C PTS: 1 REF: p. 113

TOP: 4.4 Supply | The Law of Supply

The law of demand refers to the:

a.	decrease in price that results as more units of a product are demanded.
b.	increase in price that results from an increase in demand for a good of limited supply.
c.	inverse relationship between the price of a good and the quantity demanded.
d.	increase in the quantity of a good made available when its price increases.

ANS: C PTS: 1 REF: p. 101

TOP: 4.2 Demand | The Law of Demand

Which of the following is not held constant along a given demand curve?

a.	income
b.	price
c.	tastes
d.	expectations

ANS: B PTS: 1 REF: p. 101

TOP: 4.2 Demand | The Law of Demand

The law of demand illustrates a(n) ____ relationship between price and ____.

a.	direct; quantity demanded
b.	inverse; quantity demanded
c.	inverse; demand
d.	direct; demand

ANS: B PTS: 1 REF: p. 101

TOP: 4.2 Demand | The Law of Demand

Which of the following is true of a competitive market?

a.	The rules of supply and demand do not apply to it.
b.	Buyers and sellers have little market power.
c.	Each buyer’s or seller’s effect on market price is substantial.
d.	Few sellers offer similar products.

ANS: B PTS: 1 REF: p. 100

TOP: 4.1 Markets | Buyers and Sellers

The law of demand asserts that:

a.	output prices are more important than input prices.
b.	when people want a good badly enough they will find a way to pay for it.
c.	people want to buy more of goods that are priced very high because of their prestige.
d.	the quantity of a good that people will buy is inversely related to the product’s price.

ANS: D PTS: 1 REF: p. 101

TOP: 4.2 Demand | The Law of Demand

In economics, the demand for a good refers to the amount of the good people:

a.	would like to have if the good were free.
b.	will buy at various prices.
c.	need to achieve a minimum standard of living.
d.	will buy at alternative income levels.

ANS: B PTS: 1 REF: p. 102

TOP: 4.2 Demand | What Is a Market Demand Curve?

The quantity demanded of a good is the amount that buyers are

a.	willing to buy.
b.	willing and able to buy.
c.	willing, able, and need to buy.
d.	able to buy.

ANS: B PTS: 1 REF: p. 101

TOP: 4.2 Demand | The Law of Demand

An increase in quantity demanded

a.	illustrated by a movement downward and to the right along a demand curve.
b.	illustrated by a movement upward and to the left along a demand curve.
c.	shifts the demand curve to the left.
d.	shifts the demand curve to the right.

ANS: A PTS: 1 REF: p. 102

TOP: 4.2 Demand | Individual Demand

A decrease in quantity demanded

a.	illustrated by a movement downward and to the right along a demand curve.
b.	illustrated by a movement upward and to the left along a demand curve.
c.	shifts the demand curve to the left.
d.	shifts the demand curve to the right.

ANS: B PTS: 1 REF: p. 102

TOP: 4.2 Demand | Individual Demand

A decrease in the price of a good will

a.	increase demand.
b.	decrease demand.
c.	increase quantity demanded.
d.	decrease quantity demanded.

ANS: C PTS: 1 REF: p. 101

TOP: 4.2 Demand | The Law of Demand

An increase in the price of a good will

a.	increase demand.
b.	decrease demand.
c.	increase quantity demanded.
d.	decrease quantity demanded.

ANS: D PTS: 1 REF: p. 101

TOP: 4.2 Demand | The Law of Demand

When the price of a good or service changes

a.	the supply curve shifts in the opposite direction.
b.	the demand curve shifts in the opposite direction.
c.	the demand curve shifts in the same direction.
d.	there is a movement along a given demand curve.

ANS: D PTS: 1 REF: p. 101

TOP: 4.2 Demand | The Law of Demand

A decrease in the price of a good would

a.	increase the supply of the good.
b.	increase the quantity demanded of the good.
c.	give producers an incentive to produce more to keep profits from falling.
d.	shift the supply curve for the good to the left.

ANS: B PTS: 1 REF: p. 101

TOP: 4.2 Demand | The Law of Demand

“Other things equal, when the price of a good rises, the quantity demanded of the good falls, and when the price falls, the quantity demanded rises.” This relationship between price and quantity demanded is referred to as

a.	equilibrium.
b.	the law of demand.
c.	the relationship between demand and income.
d.	the definition of a normal good.

ANS: B PTS: 1 REF: p. 101

TOP: 4.2 Demand | The Law of Demand

The law of demand states that, ceteris paribus, an increase in

a.	price causes quantity demanded to increase.
b.	price causes quantity demanded to decrease.
c.	quantity demanded causes price to increase.
d.	quantity demanded causes price to decrease.

ANS: B PTS: 1 REF: p. 101

TOP: 4.2 Demand | The Law of Demand

Which of these statements best represents the law of demand?

a.	When buyers’ tastes for a good increase, they buy more of the good.
b.	When the size of the consumer population rises, buyers purchase more of most goods.
c.	When the price of a good decreases, buyers purchase more of the good.
d.	Changes in preferences lead to changes in demand.

ANS: C PTS: 1 REF: p. 101

TOP: 4.2 Demand | The Law of Demand

A downward-sloping demand curve illustrates

a.	that demand increases.
b.	that prices fall.
c.	the relationship between income and demand.
d.	the law of demand.

ANS: D PTS: 1 REF: p. 101

TOP: 4.2 Demand | Why Is There a Negative Relationship Between Price and the Quantity Demanded?

To find the market demand curve for a product, we sum the individual demand curves

a.	vertically.
b.	diagonally.
c.	horizontally.
d.	perpendicularly.

ANS: C PTS: 1 REF: p. 102-103

TOP: 4.2 Demand | What Is a Market Demand Curve?

Which of the following is true of a demand curve?

a.	It must remain stable over time.
b.	It can shift either rightward or leftward.
c.	It is possible to move along the curve, but the demand curve will not shift.
d.	None of the above are true.

ANS: B PTS: 1 REF: p. 105

TOP: 4.3 Shifts in the Demand Curve | A Change in Demand Versus a Change in Quantity Demanded

When quantity demanded decreases at every possible price, the demand curve

a.	shifts to the left.
b.	shifts to the right.
c.	there is a movement along the given demand curve.
d.	none of the above.

ANS: A PTS: 1 REF: p. 105

TOP: 4.3 Shifts in the Demand Curve | A Change in Demand Versus a Change in Quantity Demanded

When quantity demanded increases at every possible price, the demand curve

a.	shifts to the left.
b.	shifts to the right.
c.	there is a movement along the given demand curve.
d.	none of the above.

ANS: B PTS: 1 REF: p. 105

TOP: 4.3 Shifts in the Demand Curve | A Change in Demand Versus a Change in Quantity Demanded

Which of the following relationships reflect the law of demand?

a.
b.
c.
d.

ANS: B PTS: 1 REF: p. 101

TOP: 4.2 Demand | The Law of Demand

The demand schedule for a good:

a.	indicates the quantity that people will buy at the prevailing price.
b.	indicates the quantities that suppliers will sell at various market prices.
c.	indicates the quantities that will be purchased at alternative market prices.
d.	is determined primarily by the cost of producing the good.

ANS: C PTS: 1 REF: p. 102

TOP: 4.2 Demand | Individual Demand

The law of demand refers to the:

a.	negative relationship between the price of a good and the willingness of producers to sell it.
b.	price increase that results from an increase in demand.
c.	inverse relationship between the price of a good and the quantity demanded.
d.	increase in the quantity of a good made available when its price increases.

ANS: C PTS: 1 REF: p. 101

TOP: 4.2 Demand | The Law of Demand

A downward-sloping demand curve shows:

a.	the direct relationship between price and quantity supplied; as price increases, the quantity supplied increases.
b.	the inverse relationship between price and quantity supplied; as price increases, the quantity supplied decreases.
c.	the direct relationship between price and quantity demanded; as price increases, the quantity demanded increases.
d.	the inverse relationship between price and quantity demanded; as price increases, the quantity demanded decreases.

ANS: D PTS: 1 REF: p. 101

TOP: 4.2 Demand | Why Is There a Negative Relationship Between Price and the Quantity Demanded?

If the demand for milk is downward sloping, then an increase in the price of milk will result in a(n):

a.	increase in the demand for milk.
b.	decrease in the demand for milk.
c.	increase in the quantity of milk demanded.
d.	decrease in the quantity of milk demanded.

ANS: D PTS: 1 REF: p. 101

TOP: 4.2 Demand | Why Is There a Negative Relationship Between Price and the Quantity Demanded?

If the price of music downloads decreases, which of the following is most likely to occur?

a.	Quantity demanded will decrease.
b.	Quantity demanded will increase.
c.	Demand will increase.
d.	Demand will decrease.

ANS: B PTS: 1 REF: p. 101

TOP: 4.2 Demand | The Law of Demand

Assume the demand schedule for cookies is downward sloping. If the price of cookies falls from $2.50 to $2.25 per dozen:

a.	the demand for cookies will fall.
b.	the demand for cookies will rise.
c.	a larger quantity of cookies will be demanded.
d.	a smaller quantity of cookies will be demanded.

ANS: C PTS: 1 REF: p. 101

TOP: 4.2 Demand | The Law of Demand

When a demand schedule is drawn in a graph:

a.	price is measured on the vertical axis.
b.	quantity is measured on the horizontal axis.
c.	other variables are held constant.
d.	all of the above are correct.

ANS: D PTS: 1 REF: p. 102

TOP: 4.2 Demand | Individual Demand

Exhibit 4-1

Price per lb. of ice cream	Sven	Larry	Rest of Market	Market
$8	5	0	7
$6	8	5	9
$5	11	9	11
$4	14	11	14
$3	17	14	20

Refer to Exhibit 4-1. Shown are the demand schedules for gourmet ice cream of two individuals and the rest of the market. At a price of $8, the quantity demanded in the market would be:

a.	12.
b.	22.
c.	31.
d.	39.

ANS: A PTS: 1 REF: p. 103

TOP: 4.2 Demand | What Is a Market Demand Curve?

Refer to Exhibit 4-1. At $4 the quantity demanded in the market would be:

a.	12.
b.	22.
c.	31.
d.	39.

ANS: D PTS: 1 REF: p. 103

TOP: 4.2 Demand | What Is a Market Demand Curve?

Which of the following explains why the quantity of a good demanded decreases when its price increases?

a.	Consumer preferences change when the price of a good changes.
b.	The nominal income of consumers falls when the price of a good increases.
c.	Substitutes become relatively cheaper when the price of a good increases.
d.	Complements become relatively cheaper when the price of a good increases.

ANS: C PTS: 1 REF: p. 102

TOP: 4.2 Demand | Why Is There a Negative Relationship Between Price and the Quantity Demanded?

The quantity of a good demanded tends to increase as its price falls because:

a.	a decrease in price shifts the demand curve to the right.
b.	a decrease in price shifts the demand curve to the left.
c.	a decrease in price shifts the supply curve to the right.
d.	a decrease in price leads consumers to substitute toward this now relatively cheaper product.

ANS: D PTS: 1 REF: p. 102

TOP: 4.2 Demand | Why Is There a Negative Relationship Between Price and the Quantity Demanded?

A change in which of the following variables does not cause a change in demand?

a.	prices of unrelated goods
b.	incomes of demanders
c.	the number of demanders
d.	tastes of demanders

ANS: A PTS: 1 REF: p. 105

TOP: 4.3 Shifts in the Demand Curve | A Change in Demand Versus a Change in Quantity Demanded

AWhen quantity demanded decreases in response to a change in price:

a.	the demand curve shifts to the right.
b.	the demand curve shifts to the left.
c.	there is a movement down along the demand curve.
d.	there is a movement up along the demand curve.

ANS: D PTS: 1 REF: p. 101

TOP: 4.2 Demand | Why Is There a Negative Relationship Between Price and the Quantity Demanded?

If consumers are less willing and able to pay for each level of output than they were previously, then apparently:

a.	demand has increased.
b.	supply has increased.
c.	demand has decreased.
d.	there has been a movement down along the demand curve.

ANS: C PTS: 1 REF: p. 105

TOP: 4.3 Shifts in the Demand Curve | A Change in Demand Versus a Change in Quantity Demanded

Which of the following would not cause a change in the demand for cheese?

a.	an increase in the price of crackers, which are consumed with cheese
b.	an increase in the income of cheese consumers
c.	an increase in the population of cheese lovers
d.	an increase in the price of cheese

ANS: D PTS: 1 REF: p. 105

TOP: 4.3 Shifts in the Demand Curve | A Change in Demand Versus a Change in Quantity Demanded

Which of the following would cause the demand curve for DVDs to shift to the right?

a.	a decrease in the price of DVDs
b.	a decrease in the price of DVD players
c.	a change in the tastes towards watching movies in movie theaters
d.	a decrease in the number of people in the market for DVDs

ANS: B PTS: 1 REF: p. 106

TOP: 4.3 Shifts in the Demand Curve | Changes in the Prices of Related Goods and Services

Which of the following would cause an increase in demand for golf balls?

a.	a decrease in the price of golf balls
b.	an increase in the price of green fees
c.	an expectation by buyers that their incomes will increase in the very near future
d.	a change in consumer tastes away from golf and toward tennis

ANS: B PTS: 1 REF: p. 106

TOP: 4.3 Shifts in the Demand Curve | Changes in the Prices of Related Goods and Services

Which of the following would cause an increase in the demand curve for oranges?

a.	a freeze in Florida (a major orange producing state)
b.	a new machine that allows orange growers to harvest oranges faster
c.	a decrease in the price of apples
d.	an announcement by the FDA that oranges lowers cholesterol

ANS: D PTS: 1 REF: p. 109

TOP: 4.3 Shifts in the Demand Curve | Changes in Tastes

Economists normally

a.	do not try to explain people’s tastes, but they do try to explain what happens when tastes change.
b.	believe that they must be able to explain people’s tastes in order to explain what happens when tastes change.
c.	do not believe that people’s tastes determine demand, so they ignore the subject of tastes.
d.	incorporate tastes into economic models only to the extent that tastes determine whether pairs of goods are substitutes or complements.

ANS: A PTS: 1 REF: p. 109

TOP: 4.3 Shifts in the Demand Curve | Changes in Tastes

If there is a decrease in demand

a.	firms would be willing to supply less of the good than before at each possible price.
b.	buyers are willing to purchase less of the good than before at each possible price.
c.	buyer’s taste for the good has increased.
d.	the price of the product has increased, causing consumers to buy less of the product.

ANS: B PTS: 1 REF: p. 105

TOP: 4.3 Shifts in the Demand Curve | A Change in Demand Versus a Change in Quantity Demanded

A decrease in demand could be caused by

a.	an increase in price.
b.	a decrease in the price of a complement.
c.	a technological advance.
d.	a decrease in the price of a substitute.

ANS: D PTS: 1 REF: p. 106

TOP: 4.3 Shifts in the Demand Curve | Changes in the Prices of Related Goods and Services

An increase in demand could be caused by

a.	a decrease in price.
b.	a decrease in income, assuming the good is inferior.
c.	buyers expecting the price of the good to fall in the near future.
d.	an increase in the price of a complement.

ANS: B PTS: 1 REF: p. 107

TOP: 4.3 Shifts in the Demand Curve | Changes in Income

Which of the following changes would not shift the demand curve for a good or service?

a.	a change in income
b.	a change in the price of the good or service
c.	a change in expectations about the future price of the good or service
d.	a change in the price of a related good or service

ANS: B PTS: 1 REF: p. 105

TOP: 4.3 Shifts in the Demand Curve | A Change in Demand Versus a Change in Quantity Demanded

Which of the following events would cause an upward movement along the demand curve for olives?

a.	The number of people who purchase olives decreases.
b.	Consumer income decreases, and olives are a normal good.
c.	The price of pickles decreases, and pickles are a substitute for olives.
d.	The price of olives rises.

ANS: D PTS: 1 REF: p. 105

TOP: 4.3 Shifts in the Demand Curve | A Change in Demand Versus a Change in Quantity Demanded

Which of the following events would cause an upward movement along the demand curve for olives?

a.	The number of people who purchase olives decreases.
b.	Consumer income decreases, and olives are a normal good.
c.	The price of pickles decreases, and pickles are a substitute for olives.
d.	The price of olives rises.

ANS: D PTS: 1 REF: p. 105

TOP: 4.3 Shifts in the Demand Curve | A Change in Demand Versus a Change in Quantity Demanded

A movement along the demand curve might be caused by a change in

a.	income.
b.	the prices of substitutes or complements.
c.	expectations about future prices.
d.	the price of the good or service that is being demanded.

ANS: D PTS: 1 REF: p. 105

TOP: 4.3 Shifts in the Demand Curve | A Change in Demand Versus a Change in Quantity Demanded

Each of the following is a determinant of demand except

a.	tastes.
b.	production technology.
c.	expectations.
d.	the prices of related goods.

ANS: B PTS: 1 REF: p. 105-109

TOP: 4.3 Shifts in the Demand Curve | Shifts in Demand

You lose your job and, as a result, you buy fewer iTunes music downloads. This shows that you consider iTunes music downloads to be a(n)

a.	luxury good.
b.	inferior good.
c.	normal good.
d.	complementary good.

ANS: C PTS: 1 REF: p. 107-108

TOP: 4.3 Shifts in the Demand Curve | Changes in Income

Pizza is a normal good if the demand

a.	for pizza rises when income rises.
b.	for pizza rises when the price of pizza falls.
c.	curve for pizza slopes upward.
d.	curve for pizza shifts to the right when the price of burritos rises, assuming pizza and burritos are substitutes.

ANS: A PTS: 1 REF: p. 107-108

TOP: 4.3 Shifts in the Demand Curve | Changes in Income

Which of the following would shift the demand curve for gasoline to the right?

a.	a decrease in the price of gasoline
b.	an increase in consumer income, assuming gasoline is a normal good
c.	an increase in the price of cars, a complement for gasoline
d.	a decrease in the expected future price of gasoline

ANS: B PTS: 1 REF: p. 107-108

TOP: 4.3 Shifts in the Demand Curve | Changes in Income

Which of the following would not cause an increase in the demand for cheese?

a.	a decrease in the price of crackers, which are consumed with cheese
b.	an increase in the income of cheese consumers, assuming that cheese is a normal good
c.	an increase in the population
d.	a technological advance that makes it cheaper to produce cheese

ANS: D PTS: 1 REF: p. 116

TOP: 4.5 Shifts in the Supply Curve | Shifts in Supply

Based on widespread reaction to the threat of the H1N1 virus, the likely effect on the demand curve for hand sanitizers would be

a.	a shift of the demand curve to the right.
b.	a movement downward along the demand curve to the right.
c.	a shift of the demand curve to the left.
d.	a movement upward along the demand curve to the left.

ANS: A PTS: 1 REF: p. 109

TOP: 4.3 Shifts in the Demand Curve | Shifts in Demand

A demand curve shows the relationship between price and quantity demanded, “other things remaining constant.” The other things that remain constant include all of the following except the:

a.	price of the product.
b.	price of complementary products.
c.	price of substitute products.
d.	number of consumers in the demographic group purchasing the product.

ANS: A PTS: 1 REF: p. 102

TOP: 4.2 Demand | Individual Demand

According to the income effect, an increase in the price of oranges will:

a.	cause consumers to consume more apples because of greater savings on that good.
b.	cause consumers to spend more on oranges because a higher price signals that oranges are better than apples.
c.	cause consumers to replace some oranges with other fruit that is now relatively cheaper than oranges.
d.	leave consumers with less real income to spend on all goods.

ANS: D PTS: 1 REF: p. 102

TOP: 4.2 Demand | Why Is There a Negative Relationship Between Price and the Quantity Demanded?

All of the following would shift a product’s demand curve except a(n):

a.	increase in the price of the product.
b.	decrease in consumer income.
c.	increase in the price of a substitute.
d.	increase in the price of a complement.

ANS: A PTS: 1 REF: p. 105

TOP: 4.3 Shifts in the Demand Curve | A Change in Demand Versus a Change in Quantity Demanded

Which of the following will not increase the demand for iced tea?

a.	an increase in advertising that makes drinking iced tea more appealing
b.	an increase in the price of iced coffee, a substitute product
c.	an increase in the income of consumers (assume that iced tea is a normal good)
d.	a decrease in the price of iced tea

ANS: D PTS: 1 REF: p. 105

TOP: 4.3 Shifts in the Demand Curve | Changes in the Prices of Related Goods and Services

Two goods are substitutes when a decrease in the price of one good

a.	decreases the demand for the other good.
b.	decreases the quantity demanded of the other good.
c.	increases the demand for the other good.
d.	increases the quantity demanded of the other good.

ANS: A PTS: 1 REF: p. 106

TOP: 4.3 Shifts in the Demand Curve | Changes in the Prices of Related Goods and Services

If muffins and bagels are substitutes, a higher price for bagels would result in a(n)

a.	increase in the demand for bagels.
b.	decrease in the demand for bagels.
c.	increase in the demand for muffins.
d.	decrease in the demand for muffins.

ANS: C PTS: 1 REF: p. 106

TOP: 4.3 Shifts in the Demand Curve | Changes in the Prices of Related Goods and Services

If the price of tennis rackets were to increase, we would expect:

a.	the demand for tennis balls to increase.
b.	the demand for tennis balls to decrease.
c.	the supply of tennis balls to increase, leading to a movement along the demand curve for tennis balls.
d.	the supply of tennis balls to decrease.

ANS: B PTS: 1 REF: p. 106

TOP: 4.3 Shifts in the Demand Curve | Changes in the Prices of Related Goods and Services

Exhibit 4-2

Refer to Exhibit 4-2. Using the graph and beginning on D₁, a shift to D₀ would indicate a(n):

a.	increase in demand.
b.	decrease in demand.
c.	increase in quantity demanded.
d.	decrease in quantity demanded.

ANS: B PTS: 1 REF: p. 106

TOP: 4.3 Shifts in the Demand Curve | Shifts in Demand

Refer to Exhibit 4-2. Using the graph and beginning on D₁, a shift to D₂ would indicate a(n):

a.	increase in demand.
b.	decrease in demand.
c.	increase in quantity demanded.
d.	decrease in quantity demanded.

ANS: A PTS: 1 REF: p. 106

TOP: 4.3 Shifts in the Demand Curve | Shifts in Demand

Other things constant, an increase in the price of beef will:

a.	encourage consumers to buy more beef.
b.	discourage consumers from buying as much beef.
c.	shift the demand curve for beef to the right.
d.	shift the demand curve for beef to the left.

ANS: B PTS: 1 REF: p. 101

TOP: 4.2 Demand | Why Is There a Negative Relationship Between Price and the Quantity Demanded?

Suppose the price of gasoline and other petroleum products decline sharply. Which of the following will most likely occur as a result of the lower petroleum prices?

a.	an increase in demand for solar heating systems
b.	an increase in demand for larger, more powerful automobiles
c.	an increase in demand for home insulation products
d.	an increase in demand for gasoline

ANS: B PTS: 1 REF: p. 106

TOP: 4.3 Shifts in the Demand Curve | Changes in the Prices of Related Goods and Services

Assuming that Chinese food and Thai food are substitutes, if P. F. Chang’s Chinese Restaurant reduces its prices:

a.	the sales of the nearby Bahn Thai restaurant will increase.
b.	demand for meals at P. F. Chang’s will increase.
c.	the demand for meals at the Bahn Thai restaurant will decrease.
d.	the quantity of food demanded from P. F. Chang’s will decrease.

ANS: C PTS: 1 REF: p. 106

TOP: 4.3 Shifts in the Demand Curve | Changes in the Prices of Related Goods and Services

If an increase in the price of Product X causes an increase in the demand for Product Y, we can conclude that:

a.	Products X and Y are complements.
b.	Products X and Y are substitutes.
c.	Products X and Y are normal goods.
d.	The price of Product Y will decrease.

ANS: B PTS: 1 REF: p. 106

TOP: 4.3 Shifts in the Demand Curve | Changes in the Prices of Related Goods and Services

If the price of ice cream increases and the quantity demanded decreases, economists would describe this as:

a.	a change in demand.
b.	a change in quantity demanded.
c.	a change in consumer income.
d.	a change in one of the variables that shift demand.

ANS: B PTS: 1 REF: p. 105

TOP: 4.3 Shifts in the Demand Curve | A Change in Demand Versus a Change in Quantity Demanded

Which of the following is not a valid relationship?

a.	For a normal good: Income Demand
b.	For a normal good: Income Demand
c.	For an inferior good: Income Demand
d.	For an inferior good: Income Demand

ANS: A PTS: 1 REF: p. 107

TOP: 4.3 Shifts in the Demand Curve | Changes in Income

Whenever the price of Good A decreases, the demand for Good B increases. Good A and B appear to be:

a.	complements.
b.	substitutes.
c.	inferior goods.
d.	normal goods.

ANS: A PTS: 1 REF: p. 106

TOP: 4.3 Shifts in the Demand Curve | Changes in the Prices of Related Goods and Services

Whenever the price of Good A increases, the demand for Good B increases as well. Good A and B appear to be:

a.	complements.
b.	substitutes.
c.	inferior goods.
d.	normal goods.

ANS: B PTS: 1 REF: p. 106

TOP: 4.3 Shifts in the Demand Curve | Changes in the Prices of Related Goods and Services

Two donut chains in your town are battling for customers. The manager of the Real Yum Donut Shop lowered donut prices. As a result, customers:

a.	increase the quantity demanded of Real Yum donuts.
b.	decrease the quantity demanded of Real Yum donuts.
c.	buy the same quantity of Real Yum donuts as before the price change.
d.	decrease their demand for Real Yum donuts.

ANS: A PTS: 1 REF: p. 105

TOP: 4.3 Shifts in the Demand Curve | A Change in Demand Versus a Change in Quantity Demanded

As a result of the decrease in donut prices at Real Yum Donuts, Dippin Donuts managers discover that the demand for their donuts has:

a.	increased.
b.	decreased.
c.	not changed.
d.	none of the above

ANS: B PTS: 1 REF: p. 106

TOP: 4.3 Shifts in the Demand Curve | Changes in the Prices of Related Goods and Services

If an increase in the price of Good X causes a decrease in the demand for Good Y, we can conclude that:

a.	Goods X and Y are complements.
b.	Goods X and Y are substitutes.
c.	Goods X and Y are normal goods.
d.	the price of Good Y will increase.

ANS: A PTS: 1 REF: p. 106

TOP: 4.3 Shifts in the Demand Curve | Changes in the Prices of Related Goods and Services

The difference between a change in quantity demanded and a change in demand is that a change in:

a.	quantity demanded is caused by a change in a good’s own current price, while a change in demand is caused by a change in some other variable, such as income, tastes, or expectations.
b.	demand is caused by a change in a good’s own current price, while a change in quantity demanded is caused by a change in some other variable, such as income, tastes, or expectations.
c.	quantity demanded is a change in the amount people actually buy, while a change in demand is a change in the amount they want to buy.
d.	A change in demand and a change in quantity demanded are the same thing.

ANS: A PTS: 1 REF: p. 105

TOP: 4.3 Shifts in the Demand Curve | A Change in Demand Versus a Change in Quantity Demanded

Which of the following will not cause a change in the demand for a product?

a.	a change in consumer income
b.	a change in consumer preferences
c.	a change in the price of the product
d.	a change in the price of a substitute product

ANS: C PTS: 1 REF: p. 105

TOP: 4.3 Shifts in the Demand Curve | A Change in Demand Versus a Change in Quantity Demanded

Andy views beer and pizza as complements to one another. If the price of pizza decreases, economists would expect:

a.	Andy’s demand for pizza to increase.
b.	Andy’s demand for pizza to decrease.
c.	Andy’s quantity of pizza demanded to decrease.
d.	Andy’s demand for beer to increase.

ANS: D PTS: 1 REF: p. 106

TOP: 4.3 Shifts in the Demand Curve | Changes in the Prices of Related Goods and Services

The price of automobiles has increased sharply lately. As a result, automobile dealers have noticed that:

a.	demand has increased.
b.	demand has decreased.
c.	quantity demanded has increased.
d.	quantity demanded has decreased.

ANS: D PTS: 1 REF: p. 105

TOP: 4.3 Shifts in the Demand Curve | A Change in Demand Versus a Change in Quantity Demanded

When the price of automobile insurance increases sharply, the likely impact on the market for automobiles is:

a.	an increase in demand.
b.	an increase in quantity demanded.
c.	a decrease in demand.
d.	a decrease in quantity demanded.

ANS: C PTS: 1 REF: p. 105

TOP: 4.3 Shifts in the Demand Curve | Changes in the Prices of Related Goods and Services

CNN announces that bad weather in Central America has greatly reduced the number of cocoa bean plants, and, as a result, it is expected that the price of chocolate will rise in the near future. As a result:

a.	the current market demand for chocolate will decrease.
b.	the current market demand for chocolate will increase.
c.	the current quantity demanded for chocolate will decrease.
d.	there is no change in the current market for chocolate, but there will be after the current crop of cocoa bean plants is processed into chocolate.

ANS: B PTS: 1 REF: p. 109

TOP: 4.3 Shifts in the Demand Curve | Changes in Expectations

Exhibit 4-3

Refer to Exhibit 4-3. The University Theater faces market demand curve D₀ and has begun charging $10, up from $5, for tickets for Friday and Saturday night shows. As a result, students have:

a.	increased their demand for tickets to Q₄.
b.	increased their quantity of tickets demanded to Q₄.
c.	decreased their demand for tickets to Q₁.
d.	decreased their quantity of tickets demanded to Q₁.

ANS: D PTS: 1 REF: p. 105

TOP: 4.2 Demand | Why Is There a Negative Relationship Between Price and the Quantity Demanded?

Refer to Exhibit 4-3. Everyone has been raving about the newest summer blockbuster film. Since your Aunt Finola just sent you a nice letter with $20 enclosed, you decide to see the movie even though ticket prices have risen to $10 per ticket. You are not alone, as many students are waiting in line at the theater, shifting the demand curve to D₁. The theater owners are now selling:

a.	Q₁ tickets.
b.	Q₂ tickets.
c.	Q₃ tickets.
d.	Q₄ tickets.

ANS: B PTS: 1 REF: p. 106

TOP: 4.3 Shifts in the Demand Curve | Changes in the Prices of Related Goods and Services

According to the substitution effect, an increase in the price of oranges will:

a.	cause consumers to consume fewer apples because more money is spent on oranges.
b.	cause consumers to spend more on oranges because a higher price signals that oranges are better than apples.
c.	cause consumers to replace some oranges with other fruit that is now relatively cheaper than oranges.
d.	leave consumers with less money to spend on all goods.

ANS: C PTS: 1 REF: p. 102

TOP: 4.2 Demand | Why Is There a Negative Relationship Between Price and the Quantity Demanded?

Skateboards International of Long Beach, California, was able to sell 20,000 skateboards at a price of $60 in 2008. In 2009, it is able to sell only 12,000 of the same skateboards at a price of $60. Evidently, Skateboard International has experienced a(n):

a.	increase in quantity supplied.
b.	increase in demand.
c.	increase in supply.
d.	decrease in demand.

ANS: D PTS: 1 REF: p. 105

TOP: 4.3 Shifts in the Demand Curve | A Change in Demand Versus a Change in Quantity Demanded

Suppose Sprite and 7-Up are considered by consumers to be substitutes. The likely economic impact of a decrease in the price of 7-Up is a:

a.	movement up along the demand curve for Sprite.
b.	decrease in the supply of 7-Up.
c.	rightward shift of the demand curve for Sprite.
d.	leftward shift of the demand curve for Sprite.

ANS: D PTS: 1 REF: p. 106

TOP: 4.3 Shifts in the Demand Curve | Changes in the Prices of Related Goods and Services

Today, people changed their expectations about the future. This change

a.	can cause a movement along a demand curve.
b.	can affect future demand but not today’s demand.
c.	can affect today’s demand.
d.	cannot affect either today’s demand or future demand.

ANS: C PTS: 1 REF: p. 109

TOP: 4.3 Shifts in the Demand Curve | Changes in Expectations

If Ralph expects to earn more income next month, he may choose to

a.	save more now and spend less of his current income on goods and services.
b.	save less now and spend more of his current income on goods and services.
c.	decrease his current demand for goods and services.
d.	decrease his current demand for goods and services.

ANS: C PTS: 1 REF: p. 109

TOP: 4.3 Shifts in the Demand Curve | Changes in Expectations

Roxanne views movie tickets and DVD rentals to be substitute forms of entertainment. An increase in the price of a DVD rental will probably result in an increase in the:

a.	supply of movie tickets.
b.	quantity of movie tickets demanded.
c.	quantity of DVD rentals demanded.
d.	demand for movie tickets.

ANS: D PTS: 1 REF: p. 106

TOP: 4.3 Shifts in the Demand Curve | Changes in the Prices of Related Goods and Services

Exhibit 4-4

Refer to Exhibit 4-4. A change from Point A to Point B represents a(n):

a.	increase in demand.
b.	decrease in demand.
c.	decrease in quantity demanded.
d.	increase in quantity demanded.

ANS: C PTS: 1 REF: p. 105

TOP: 4.3 Shifts in the Demand Curve | A Change in Demand Versus a Change in Quantity Demanded

Refer to Exhibit 4-4. A change from Point A to Point C represents a(n):

a.	increase in demand.
b.	decrease in demand.
c.	decrease in quantity demanded.
d.	increase in quantity demanded.

ANS: D PTS: 1 REF: p. 105

TOP: 4.3 Shifts in the Demand Curve | A Change in Demand Versus a Change in Quantity Demanded

Refer to Exhibit 4-4. A change from Point A to Point D represents a(n):

a.	increase in demand.
b.	decrease in demand.
c.	decrease in quantity demanded.
d.	increase in quantity demanded.

ANS: A PTS: 1 REF: p. 105

TOP: 4.3 Shifts in the Demand Curve | Changes in the Prices of Related Goods and Services

Refer to Exhibit 4-4. A change from Point A to Point E represents a(n):

a.	increase in demand.
b.	decrease in demand.
c.	decrease in quantity demanded.
d.	increase in quantity demanded.

ANS: B PTS: 1 REF: p. 105

TOP: 4.3 Shifts in the Demand Curve | Changes in the Prices of Related Goods and Services

Which of the following would not cause an increase in demand for tennis balls?

a.	a reduction in the price of tennis racquets
b.	a decrease in the price of tennis balls
c.	an unusually sunny fall and winter
d.	an increase in the popularity of tennis

ANS: B PTS: 1 REF: p. 105

TOP: 4.3 Shifts in the Demand Curve | Changes in the Prices of Related Goods and Services

Which of the following would be most likely to cause an outward shift of the demand curve for electricity?

a.	a decrease in the price of electricity
b.	an increase in the price of air conditioners
c.	an increase in the price of heating oil
d.	a decrease in the price of natural gas

ANS: C PTS: 1 REF: p. 106

TOP: 4.3 Shifts in the Demand Curve | Changes in the Prices of Related Goods and Services

Along a supply curve:

a.	supply changes as price changes.
b.	quantity supplied changes as price changes.
c.	supply changes as technology changes.
d.	quantity supplied changes as technology changes.

ANS: B PTS: 1 REF: p. 114

TOP: 4.4 Supply | An Individual Supply Curve

The supply curve shows:

a.	the same basic information as a demand curve.
b.	how the average cost of production varies with price.
c.	how the quantity supplied varies with price.
d.	how the quantity demanded varies with price.

ANS: C PTS: 1 REF: p. 114

TOP: 4.4 Supply | An Individual Supply Curve

The quantity supplied of a good is the amount that

a.	buyers are willing and able to purchase.
b.	sellers are able to produce.
c.	buyers and sellers agree will be brought to market.
d.	sellers are willing and able to sell.

ANS: C PTS: 1 REF: p. 113

TOP: 4.4 Supply | The Law of Supply

An upward-sloping supply curve shows that:

a.	buyers are willing to pay more for particularly scarce products.
b.	suppliers expand production as the product price falls.
c.	suppliers are willing to increase production of their goods if they receive higher prices for them.
d.	buyers are willing to buy more as the product price falls.
e.	buyers are not affected either directly or indirectly by the sellers’ costs of production.

ANS: C PTS: 1 REF: p. 113

TOP: 4.4 Supply | The Law of Supply

A supply schedule shows:

a.	projected sales as ad spending varies.
b.	how many units producers are willing and able to sell at various prices.
c.	possible combinations of output as input prices vary.
d.	how many units consumers would like to buy at various prices.

ANS: B PTS: 1 REF: p. 114

TOP: 4.4 Supply | The Market Supply Curve

Each point on the supply curve shows the:

a.	amount that people want to buy at that price.
b.	quantity supplied at that price.
c.	productive capacity of an individual producer.
d.	the amount producers want to sell to buyers of different income levels.

ANS: B PTS: 1 REF: p. 114

TOP: 4.4 Supply | The Market Supply Curve

As a result of an increase in a product’s price:

a.	product supply increases.
b.	product supply decreases.
c.	product supply does not change, but quantity supplied increases.
d.	the impact on product supply is uncertain. Economic theory has no answer to this question.

ANS: C PTS: 1 REF: p. 113

TOP: 4.4 Supply | A Positive Relationship Between Price and Quantity Supplied

If a product’s price increases, quantity:

a.	supplied increases.
b.	supplied decreases.
c.	supplied does not change, but supply does increase.
d.	demanded increases.

ANS: A PTS: 1 REF: p. 113

TOP: 4.4 Supply | A Positive Relationship Between Price and Quantity Supplied

According to the law of supply, when the price of a good increases we would predict that:

a.	less will be produced.
b.	less will be consumed.
c.	more will be produced.
d.	more will be consumed.

ANS: C PTS: 1 REF: p. 113

TOP: 4.4 Supply | The Law of Supply

A supply curve slopes upward because

a.	as more is produced, total cost of production falls.
b.	an increase in input prices increases supply.
c.	the quantity supplied of most goods and services increases over time.
d.	an increase in price gives producers an incentive to supply a larger quantity.

ANS: C PTS: 1 REF: p. 113

TOP: 4.4 Supply | A Positive Relationship Between Price and Quantity Supplied

Which of the following demonstrates the law of supply?

a.	When leather became more expensive, belt producers decreased their supply of belts.
b.	When car production technology improved, car producers increased their supply of cars.
c.	When sweater producers expected sweater prices to rise in the near future, they decreased their current supply of sweaters.
d.	When lemon prices rose, lemon growers increased their quantity supplied of lemons.

ANS: D PTS: 1 REF: p. 113

TOP: 4.4 Supply | A Positive Relationship Between Price and Quantity Supplied

Which of the following scenarios would prompt producers to supply less now than they otherwise would have?

a.	Producers expecting a higher price in the future
b.	Producers expecting prices to remain unchanged
c.	Producers expecting a lower price in the future
d.	Producers expecting prices to be volatile

ANS: A PTS: 1 REF: p. 116

TOP: 4.5 Shifts in the Supply Curve | Shifts in Supply

Dean bakes his famous apple pies and sells them at the local farmer’s market. If the price of apples increases, the

a.	supply curve for Dean’s pies will increase.
b.	supply curve for Dean’s pies will decrease.
c.	demand curve for Dean’s pies will increase.
d.	demand curve for Dean’s pies will decrease.

ANS: B PTS: 1 REF: p. 116

TOP: 4.5 Shifts in the Supply Curve | Shifts in Supply

A decrease in the number of sellers in the market causes

a.	the supply curve to shift to the left.
b.	the supply curve to shift to the right.
c.	a movement up and to the right along a stationary supply curve.
d.	a movement downward and to the left along a stationary supply curve.

ANS: A PTS: 1 REF: p. 116

TOP: 4.5 Shifts in the Supply Curve | Shifts in Supply

An increase in which of the following would shift the supply curve for gasoline to the right?

a.	demand for gasoline
b.	price of gasoline
c.	number of producers of gasoline
d.	price of oil, an input into the production of gasoline

ANS: C PTS: 1 REF: p. 116

TOP: 4.5 Shifts in the Supply Curve | Shifts in Supply

A decrease in the price of a good will

a.	increase supply.
b.	decrease supply.
c.	increase quantity supplied.
d.	decrease quantity supplied.

ANS: D PTS: 1 REF: p. 115

TOP: 4.5 Shifts in the Supply Curve | A Change in Quantity Supplied Versus a Change in Supply

An increase in the price of a good will

a.	increase supply.
b.	decrease supply.
c.	increase quantity supplied.
d.	decrease quantity supplied.

ANS: C PTS: 1 REF: p. 115

TOP: 4.5 Shifts in the Supply Curve | A Change in Quantity Supplied Versus a Change in Supply

A movement along the supply curve might be caused by a change in

a.	technology.
b.	supplier’s input prices.
c.	expectations about future prices.
d.	the price of the good or service that is being supplied.

ANS: D PTS: 1 REF: p. 115

TOP: 4.5 Shifts in the Supply Curve | A Change in Quantity Supplied Versus a Change in Supply

The difference between a change in quantity supplied and a change in supply is that a change in:

a.	quantity supplied is caused by a change in a good’s own, current price, while a change in supply is caused by a change in some other variable, such as input prices, prices of related goods, expectations, or taxes.
b.	supply is caused by a change in a good’s own, current price, while a change in the quantity supplied is caused by a change in some other variable, such as input prices, prices of related goods, expectations, or taxes.
c.	quantity supplied is a change in the amount people want to sell, while a change in supply is a change in the amount they actually sell.
d.	supply and a change in the quantity supplied are the same thing.

ANS: A PTS: 1 REF: p. 115-116

TOP: 4.5 Shifts in the Supply Curve | A Change in Quantity Supplied Versus a Change in Supply

Which of the following will cause a change in the supply of a product?

a.	a change in the price of suppliers’ inputs
b.	a change in the price of alternative goods that could be produced with the same resources
c.	a change in the expected future price of the product
d.	all of the above

ANS: D PTS: 1 REF: p. 115-116

TOP: 4.5 Shifts in the Supply Curve | A Change in Quantity Supplied Versus a Change in Supply

Steel producers offer to sell steel to U.S. auto producers at a much lower price than in the past. As a result one would expect:

a.	no change in the supply of automobiles.
b.	an increase in the demand for automobiles.
c.	an increase in the supply of automobiles.
d.	a decrease in the supply of automobiles.

ANS: C PTS: 1 REF: p. 116

TOP: 4.5 Shifts in the Supply Curve | Shifts in Supply

Antonio’s makes the greatest pizza and delivers it hot to all the dorms around campus. Last week Antonio’s supplier of pepperoni informed him of a 25% increase in price. Which variable determining the position of the supply curve has changed and what effect does it have on supply?

a.	future expectations; supply decreases
b.	future expectations; supply increases
c.	input prices; supply decreases
d.	input prices; supply increases

ANS: C PTS: 1 REF: p. 116

TOP: 4.5 Shifts in the Supply Curve | Shifts in Supply

If new manufacturers enter the computer industry, then (ceteris paribus):

a.	some established manufacturers must exit the industry.
b.	the equilibrium price of computers must rise.
c.	the supply curve shifts to the right.
d.	the supply curve shifts to the left.

ANS: C PTS: 1 REF: p. 118

TOP: 4.5 Shifts in the Supply Curve | Shifts in Supply

A severe freeze has once again damaged the Florida orange crop. The impact on the market for oranges will be a leftward shift of:

a.	the demand curve, as consumers try to economize because of the shortage.
b.	the demand curve and a rightward shift of the supply curve.
c.	the supply curve.
d.	the supply curve and a rightward shift of the demand curve, resulting in a higher equilibrium price.

ANS: C PTS: 1 REF: p. 118

TOP: 4.5 Shifts in the Supply Curve | Shifts in Supply

All of the following factors will affect the supply of shoes except one. Which will not affect the supply of shoes?

a.	higher wages for shoe factory workers
b.	higher prices for leather
c.	a technological improvement that reduces waste of leather and other raw materials in shoe production
d.	an increase in consumer income

ANS: D PTS: 1 REF: p. 115-116

TOP: 4.5 Shifts in the Supply Curve | A Change in Quantity Supplied Versus a Change in Supply

Other things constant, a decrease in the price of fertilizer will:

a.	increase the supply of wheat.
b.	decrease the supply of wheat.
c.	increase the demand for wheat.
d.	decrease the demand for wheat.

ANS: A PTS: 1 REF: p. 116

TOP: 4.5 Shifts in the Supply Curve | Shifts in Supply

Exhibit 4-5

Refer to Exhibit 4-5. A change from Point A to Point B represents a(n):

a.	increase in supply.
b.	decrease in supply.
c.	increase in quantity supplied.
d.	decrease in quantity supplied.

ANS: C PTS: 1 REF: p. 116

TOP: 4.5 Shifts in the Supply Curve | Shifts in Supply

Refer to Exhibit 4-5. A change from Point A to Point C represents a(n):

a.	increase in supply.
b.	decrease in supply.
c.	increase in quantity supplied.
d.	decrease in quantity supplied.

ANS: D PTS: 1 REF: p. 115

TOP: 4.5 Shifts in the Supply Curve | A Change in Quantity Supplied Versus a Change in Supply

Refer to Exhibit 4-5. A change from Point A to Point D represents a(n):

a.	increase in supply.
b.	decrease in supply.
c.	increase in quantity supplied.
d.	decrease in quantity supplied.

ANS: A PTS: 1 REF: p. 116

TOP: 4.5 Shifts in the Supply Curve | Shifts in Supply

Refer to Exhibit 4-5. A change from Point A to Point E represents a(n):

a.	increase in supply.
b.	decrease in supply.
c.	increase in quantity supplied.
d.	decrease in quantity supplied.

ANS: B PTS: 1 REF: p. 116

TOP: 4.5 Shifts in the Supply Curve | Shifts in Supply

The supply curve of books (which are produced using paper made from trees) will shift to the left in response to:

a.	a decline in college tuition.
b.	a sharp increase in the demand for and construction of wood-frame homes.
c.	an increase in the supply of lumberjacks.
d.	an end to government regulations that limit timber harvesting in national forests.

ANS: B PTS: 1 REF: p. 116

TOP: 4.5 Shifts in the Supply Curve | Shifts in Supply

The quantity of newspapers sold will decline if:

a.	newsprint becomes more expensive.
b.	the printers’ union makes wage concessions.
c.	newspaper prices are reduced.
d.	magazine prices rise.

ANS: A PTS: 1 REF: p. 116

TOP: 4.5 Shifts in the Supply Curve | Shifts in Supply

Which of the following would not cause a change in the supply of milk?

a.	an increase in government subsidies to dairy farmers
b.	an increase in the price of milk
c.	the discovery of growth hormones to stimulate the milk production of cows
d.	an increase in the cost of feed for cows

ANS: B PTS: 1 REF: p. 116

TOP: 4.5 Shifts in the Supply Curve | Shifts in Supply

Refer to the table below. If these three firms represented the entire market, how many mid-sized autos would be supplied at a price of $30,000?

Price for Mid-Sized Auto	GM	Ford	Chrysler	Market
$22,000	10,000	8,000	4,000
$24,000	12,000	10,000	5,000
$26,000	15,000	12,000	7,000
$28,000	19,000	14,000	10,000
$30,000	24,000	16,000	14,000

a.	43,000
b.	54,000
c.	126,000
d.	158,000

ANS: D PTS: 1 REF: p. 114

TOP: 4.4 Supply | The Market Supply Curve

To an economist, a decrease in supply means a:

a.	rightward shift of the supply curve.
b.	movement up along a supply curve.
c.	leftward shift of the supply curve.
d.	movement down along the supply curve.

ANS: D PTS: 1 REF: p. 116

TOP: 4.5 Shifts in the Supply Curve | Shifts in Supply

Which of the following would not shift the supply curve for swordfish?

a.	a reduction in the number of available fishing boats
b.	unusually stormy weather during fishing season
c.	the development of innovative new fishing equipment that makes it easier to catch swordfish
d.	an increase in the price of swordfish

ANS: D PTS: 1 REF: p. 116

TOP: 4.5 Shifts in the Supply Curve | Shifts in Supply

Technological advances in recycling make it possible to produce a greater quantity of paper from a given quantity of recycled newspapers. Predict the likely impact on the supply curve for paper.

a.	There is a movement down along the supply curve.
b.	There is a movement up along the supply curve.
c.	The supply curve shifts to the left.
d.	The supply curve shifts to the right.

ANS: D PTS: 1 REF: p. 116

TOP: 4.5 Shifts in the Supply Curve | Shifts in Supply

A supply curve illustrates a(n) ____ relationship between ____ and ____.

a.	direct; price; supply
b.	direct; price; quantity demanded
c.	direct; price; quantity supplied
d.	inverse; price; quantity demanded

ANS: C PTS: 1 REF: p. 113

TOP: 4.4 Supply | The Law of Supply

Which of the following reflects the law of supply?

a.
b.
c.
d.

ANS: D PTS: 1 REF: p. 113

TOP: 4.4 Supply | The Law of Supply

According to the law of supply:

a.	there is an inverse relationship between price and quantity demanded.
b.	there is a direct relationship between price and quantity demanded.
c.	there is an inverse relationship between price and the quantity supplied.
d.	there is a direct relationship between price and the quantity supplied.

ANS: D PTS: 1 REF: p. 113

TOP: 4.4 Supply | The Law of Supply

Which of the following would be least likely to affect the supply of automobiles?

a.	higher prices for steel and other resources used in producing automobiles
b.	a successful physical fitness plan encouraging Americans to walk rather than drive to their destinations
c.	a technological improvement reducing the production costs of automobiles
d.	increased wages for members of the United Auto Workers union

ANS: B PTS: 1 REF: p. 115

TOP: 4.5 Shifts in the Supply Curve | A Change in Quantity Supplied Versus a Change in Supply

A technological improvement that lowers production costs for Good A will shift:

a.	the supply curve for A to the left.
b.	the demand curve for A to the left.
c.	the demand curve for A to the right.
d.	the supply curve for A to the right.

ANS: D PTS: 1 REF: p. 116

TOP: 4.5 Shifts in the Supply Curve | Shifts in Supply

Which of the following would be most likely to cause a reduction in the supply of Nintendo video games?

a.	a decrease in the price of Nintendo video games
b.	a decrease in the price of computer chips used to make Nintendo games
c.	an increase in the demand for Nintendo video games
d.	an increase in the price of computer chips used to make Nintendo games

ANS: D PTS: 1 REF: p. 116

TOP: 4.5 Shifts in the Supply Curve | Shifts in Supply

Which of the following would reduce the supply of computers?

a.	higher wage rates for the workers that assemble the computers
b.	a technological improvement that lowers the cost of producing the computers
c.	a reduction in the price of computer chips used to produce the computers
d.	All of the above would reduce the supply of computers.

ANS: A PTS: 1 REF: p. 116

TOP: 4.5 Shifts in the Supply Curve | Shifts in Supply

How will a decrease in price tend to affect supply?

a.	Supply will increase.
b.	Supply will decrease.
c.	Supply will not change.
d.	It is uncertain.

ANS: C PTS: 1 REF: p. 116

TOP: 4.5 Shifts in the Supply Curve | Shifts in Supply

What is the most likely effect of deregulation on the supply curve?

a.	The supply curve will shift to the left
b.	The quantity supplied will reduce
c.	The supply curve will shift to the right
d.	The supply curve will not be effected

ANS: C PTS: 1 REF: p. 116

TOP: 4.5 Shifts in the Supply Curve | Shifts in Supply

Which of the following would shift a supply curve to the right?

a.	Taxes
b.	Import restrictions
c.	Import duties
d.	Subsidies

ANS: D PTS: 1 REF: p. 116

TOP: 4.5 Shifts in the Supply Curve | Shifts in Supply

Which of the following would cause the quantity of wheat bread demanded to increase, but not the demand for wheat?

a.	a reduction in the price of rye, used to produce rye bread
b.	a new scientific study demonstrating that wheat bread reduces the risk of colon cancer
c.	a decrease in the price of rye bread
d.	an increase in the number of farmers growing wheat

ANS: D PTS: 1 REF: p. 116

TOP: 4.5 Shifts in the Supply Curve | Shifts in Supply

Identify the scenario that will cause the supply curve to shift to the left.

a.	Producer expects now that the price will be lower later
b.	Price decreases for a substitute in production
c.	Input price increases
d.	Increase in number of suppliers

ANS: C PTS: 1 REF: p. 116

TOP: 4.5 Shifts in the Supply Curve | Shifts in Supply

How do orange growers react to the news of medical research findings that suggest that eating oranges leads to greater health benefits than were previously known?

a.	They increase the supply of oranges.
b.	They increase the quantity of oranges supplied.
c.	They decrease the supply of oranges.
d.	They decrease the quantity of oranges supplied.

ANS: B PTS: 1 REF: p. 116

TOP: 4.5 Shifts in the Supply Curve | Shifts in Supply

Which of the following would increase the supply of childcare services?

a.	An increase number of childcare facilities
b.	An increase in the cost of certification for workers in this field
c.	An increase in the price of childcare
d.	none of the above

ANS: A PTS: 1 REF: p. 116

TOP: 4.5 Shifts in the Supply Curve | Shifts in Supply

Which of the following is true?

a.	A fall in a good’s price leads to a decrease in quantity demanded, illustrated by moving along a demand curve.
b.	According to the law of demand, other things equal, when the price of a good or service falls, demand increases.
c.	A change in demand for chocolate bars is caused by a change in the price of chocolate bars.
d.	None of the above is true.

ANS: D PTS: 1 REF: p. 105

TOP: 4.3 Shifts in the Demand Curve | A Change in Demand Versus a Change in Quantity Demanded

Which of the following is not held constant when moving along a product’s demand curve?

a.	The price of the product itself.
b.	The expected price of the product in the near future.
c.	Income.
d.	Prices of complementary goods.
e.	Prices of substitutes.

ANS: A PTS: 1 REF: p. 102

TOP: 4.2 Demand | Individual Demand

If peanut butter and jelly are complements, but peanut butter and tuna fish are substitutes,

a.	an increase in the price of peanut butter will increase the demand for jelly.
b.	an increase in the price of peanut butter will decrease the demand for jelly.
c.	an increase in the price of peanut butter will decrease the demand for tuna fish.
d.	a decrease in the price of peanut butter will increase the demand for tuna fish.

ANS: D PTS: 1 REF: p. 106

TOP: 4.3 Shifts in the Demand Curve | Changes in the Prices of Related Goods and Services

Which of the following best represents the effects of a decrease in the price of tea?

a.	A leftward shift in the demand for tea.
b.	A downward movement along the demand curve for tea.
c.	A rightward shift in the demand for tea.
d.	An upward movement along the demand curve for tea.

ANS: B PTS: 1 REF: p. 102

TOP: 4.2 Demand | What Is a Market Demand Curve?

Assuming that coffee and tea are substitutes, a decrease in the price of coffee will result in

a.	A leftward shift in the demand for tea.
b.	A downward movement along the demand curve for tea.
c.	A rightward shift in the demand for tea.
d.	An upward movement along the demand curve for tea.

ANS: A PTS: 1 REF: p. 106

TOP: 4.3 Shifts in the Demand Curve | Changes in the Prices of Related Goods and Services

Buyers who were originally willing to buy 800 units of a good at $4 per unit are now willing to buy 1200 units at $4 per unit. That change would be described as:

a.	an increase in demand.
b.	a decrease in demand.
c.	an increase in quantity demanded.
d.	a decrease in quantity demanded.

ANS: A PTS: 1 REF: p. 105

TOP: 4.3 Shifts in the Demand Curve | A Change in Demand Versus a Change in Quantity Demanded

The market supply schedule reflects the total quantity:

a.	supplied at market price.
b.	supplied by all of the producers at the equilibrium price.
c.	supplied at each price by all of the producers.
d.	the vertical summation of the supply curves for individual firms.

ANS: C PTS: 1 REF: p. 114

TOP: 4.4 Supply | The Market Supply Curve

Which of the following is expected to happen if import restrictions are removed for a particular industry?

a.	Supply will increase
b.	Supply curve will shift to the left
c.	Demand curve will shift to the left
d.	Prices will increase

ANS: A PTS: 1 REF: p. 116

TOP: 4.5 Shifts in the Supply Curve | Shifts in Supply

Which of the following is most likely to be an inferior good?

a.	Porsches.
b.	Lobster.
c.	Used clothing.
d.	An Ivy League education.

ANS: C PTS: 1 REF: p. 107-108

TOP: 4.3 Shifts in the Demand Curve | Changes in Income

A decrease in consumer incomes will:

a.	decrease the demand for an inferior good.
b.	decrease the supply of an inferior good.
c.	increase the demand for a normal good.
d.	do none of the above

ANS: D PTS: 1 REF: p. 107-108

TOP: 4.3 Shifts in the Demand Curve | Changes in Income

Which of the following would most likely cause a decrease in the current demand for a normal good?

a.	An increase in the price of the good.
b.	An increase in the expected future price of the good.
c.	A decrease in the price of a complement for the good.
d.	None of the above would be likely to cause a decrease in current demand for a normal good.

ANS: D PTS: 1 REF: p. 105-106

TOP: 4.3 Shifts in the Demand Curve | A Change in Demand Versus a Change in Quantity Demanded

If bad weather destroyed half of the current coffee crop, ceteris paribus, it would:

a.	increase the demand for coffee.
b.	decrease the demand for coffee.
c.	increase the demand for tea.
d.	decrease the demand for tea.

ANS: C PTS: 1 REF: p. 101

TOP: 4.3 Shifts in the Demand Curve | Changes in Expectations

Which of the following is true?

a.	According to the law of supply, the higher the price of the good, the greater the quantity supplied.
b.	An individual supply curve is a graphical representation that shows the negative relationship between the price and the quantity an individual is willing and able to supply.
c.	The market supply curve is the vertical summation of the individual firm supply curves.
d.	An increase in supply is illustrated by an upward shift in the supply curve.

ANS: A PTS: 1 REF: p. 113

TOP: 4.4 Supply | The Law of Supply

Which of the following would lead to a decrease in the supply of watches?

a.	An increase in the price of watches
b.	A decrease in the price of watches
c.	A decrease in the expected future price of watches
d.	None of the above

ANS: D PTS: 1 REF: p. 116

TOP: 4.5 Shifts in the Supply Curve | Shifts in Supply

Upward shifts are

a.	increases in both demand and supply.
b.	decreases in both demand and supply.
c.	increases in demand and decreases in supply.
d.	increases in supply and decreases in demand.

ANS: C PTS: 1 REF: p. 116

TOP: 4.5 Shifts in the Supply Curve | Shifts in Supply

Downward shifts are

a.	increases in both demand and supply.
b.	decreases in both demand and supply.
c.	increases in demand and decreases in supply.
d.	increases in supply and decreases in demand.

ANS: D PTS: 1 REF: p. 116

TOP: 4.5 Shifts in the Supply Curve | Shifts in Supply

A decrease in demand and an increase in supply are indicated by

a.	Upward shifts in both curves.
b.	Downward shifts in both curves.
c.	Rightward shifts in both curves.
d.	Leftward shifts in both curves.

ANS: B PTS: 1 REF: p. 116

TOP: 4.5 Shifts in the Supply Curve | Shifts in Supply

Which of the following is true?

a.	A decrease in the price of ice cream would cause a decrease in the demand for frozen yogurt, a substitute.
b.	Just as demanders will demand more now if the price of a good is expected to rise in the near future, sellers will supply more now if the price of a good is expected to rise in the near future.
c.	An increase in supply leads to a movement up along the supply curve.
d.	Both technological progress and cost-increasing regulations will increase supply.

ANS: A PTS: 1 REF: p. 106

TOP: 4.3 Shifts in the Demand Curve | Changes in the Prices of Related Goods and Services

Which of the following is not a determinant of supply?

a.	input prices
b.	technology
c.	tastes
d.	expectations

ANS: C PTS: 1 REF: p. 116

TOP: 4.5 Shifts in the Supply Curve | Shifts in Supply

Sellers who were originally willing to supply 800 units of a good at $4 per unit are now willing to supply 600 units at $4 per unit. That change would be described as:

a.	an increase in supply.
b.	a decrease in supply.
c.	an increase in quantity supplied.
d.	a decrease in quantity supplied.

ANS: B PTS: 1 REF: p. 115-116

TOP: 4.5 Shifts in the Supply Curve | A Change in Quantity Supplied Versus a Change in Supply

A leftward shift in supply could be caused by:

a.	an improvement in productive technology.
b.	a decrease in income.
c.	some firms leaving the industry.
d.	a fall in the price of inputs to the industry.

ANS: C PTS: 1 REF: p. 116

TOP: 4.5 Shifts in the Supply Curve | Shifts in Supply

Sellers who were originally willing to supply 800 units of a good at $4 per unit are now willing to supply 800 units at $3 per unit. That change would be described as:

a.	an increase in supply.
b.	a decrease in supply.
c.	an increase in quantity supplied.
d.	a decrease in quantity supplied.

ANS: A PTS: 1 REF: p. 115

TOP: 4.5 Shifts in the Supply Curve | A Change in Quantity Supplied Versus a Change in Supply

Suppose that a more efficient way to produce a good is discovered, thus lowering production costs for the good. This will cause:

a.	an increase in supply, or a rightward shift of the supply curve.
b.	a decrease in supply, or a leftward shift of the supply curve.
c.	an increase in quantity supplied, or a movement down the supply curve.
d.	a decrease in quantity supplied, or a movement up the supply curve.

ANS: A PTS: 1 REF: p. 116

TOP: 4.5 Shifts in the Supply Curve | Shifts in Supply

The quantity of hamburger that households are willing to purchase is predicted to rise if there is:

a.	a fall in the price of hot dogs
b.	a fall in the price of hamburger buns
c.	a rise in the price of onion rings
d.	a rise in the price of catsup

ANS: B PTS: 1 REF: p. 105

TOP: 4.3 Shifts in the Demand Curve | A Change in Demand Versus a Change in Quantity Demanded

The price of peanut butter falls and as a result the demand for jelly increases. We can conclude that:

a.	peanut butter and jelly are substitutes.
b.	peanut butter and jelly are complements.
c.	peanut butter and jelly are inferior goods.
d.	the marginal value of jelly is greater than the marginal value of peanut butter.

ANS: B PTS: 1 REF: p. 106

TOP: 4.3 Shifts in the Demand Curve | Changes in the Prices of Related Goods and Services

Exhibit 4-6

Refer to Exhibit 4-6. A supply shift from S₀ to S₁ can be best explained by:

a.	decrease in input prices.
b.	price decreases for a substitute in production.
c.	rise in taxes.
d.	a technological advance.

ANS: C PTS: 1 REF: p. 116

TOP: 4.5 Shifts in the Supply Curve | Shifts in Supply

Refer to Exhibit 4-6. A supply shift from S₀to S₂ can be best explained by:

a.	input price increases.
b.	rise in taxes.
c.	bad weather
d.	a technological advance.

ANS: D PTS: 1 REF: p. 116

TOP: 4.5 Shifts in the Supply Curve | Shifts in Supply

Which of the following is the correct way to describe equilibrium in a market?

a.	At equilibrium, demand equals supply.
b.	At equilibrium, quantity demanded equals quantity supplied.
c.	At equilibrium, market forces no longer apply.
d.	At equilibrium, the “fairest” price for output is achieved.

ANS: B PTS: 1 REF: p. 121

TOP: 4.6 Market Equilibrium Price and Quantity | Equilibrium Price and Quantity

At the equilibrium price for gasoline:

a.	everyone with the desire and the income to buy gasoline at that price can do so.
b.	surpluses are inevitable.
c.	quantity demanded exceeds the quantity supplied.
d.	none of the above

ANS: A PTS: 1 REF: p. 121

TOP: 4.6 Market Equilibrium Price and Quantity | Equilibrium Price and Quantity

At an equilibrium price:

a.	quantity demanded exceeds quantity supplied.
b.	quantity demanded equals quantity supplied.
c.	quantity demanded is less than quantity supplied.
d.	there is no scarcity.

ANS: B PTS: 1 REF: p. 121

TOP: 4.6 Market Equilibrium Price and Quantity | Equilibrium Price and Quantity

At the equilibrium price, the quantity of the good that buyers are willing and able to buy

a.	is greater than the quantity that sellers are willing and able to sell.
b.	exactly equals the quantity that sellers are willing and able to sell.
c.	is less than the quantity that sellers are willing and able to sell.
d.	there is no scarcity.

ANS: B PTS: 1 REF: p. 121

TOP: 4.6 Market Equilibrium Price and Quantity | Equilibrium Price and Quantity

Buyers are able to buy all they want to buy and sellers are able to sell all they want to sell at

a.	prices at and above the equilibrium price.
b.	prices at and below the equilibrium price.
c.	prices above and below the equilibrium price, but not at the equilibrium price.
d.	the equilibrium price but not above or below the equilibrium price.

ANS: D PTS: 1 REF: p. 121

TOP: 4.6 Market Equilibrium Price and Quantity | Equilibrium Price and Quantity

In markets, prices move toward equilibrium because of

a.	the actions of buyers and sellers.
b.	government regulations placed on market participants.
c.	increased competition among sellers.
d.	buyers’ ability to affect market outcomes.

ANS: A PTS: 1 REF: p. 121

TOP: 4.6 Market Equilibrium Price and Quantity | Equilibrium Price and Quantity

Exhibit 4-7

PRICE per large pepperoni pizza	QUANTITY DEMANDED of large pepperoni pizzas	QUANTITY SUPPLIED of large pepperoni pizzas
$10	1,000 units	5,500 units
9	2,000 units	5,000 units
8	3,000 units	4,500 units
7	4,000 units	4,000 units
6	5,000 units	3,500 units
5	6,000 units	3,000 units
4	7,000 units	2,500 units
3	8,000 units	2,000 units
2	9,000 units	1,500 units
1	10,000 units	1,000 units

Refer to Exhibit 4-7. What is the equilibrium price in the example?

a.	$9
b.	$8
c.	$7
d.	$6

ANS: C PTS: 1 REF: p. 121

TOP: 4.6 Market Equilibrium Price and Quantity | Equilibrium Price and Quantity

Refer to Exhibit 4-7. At a price of $10, there is a ____ of ____ pizzas.

a.	shortage; 4,500
b.	surplus; 4,500
c.	shortage; 6,500
d.	surplus; 6,500

ANS: B PTS: 1 REF: p. 121

TOP: 4.6 Market Equilibrium Price and Quantity | Equilibrium Price and Quantity

Refer to Exhibit 4-7. At a price of $4, there is a ____ of ____ pizzas

a.	shortage; 4,500
b.	surplus; 4,500
c.	shortage; 6,500
d.	surplus; 6,500

ANS: A PTS: 1 REF: p. 121

TOP: 4.6 Market Equilibrium Price and Quantity | Shortages and Surpluses

Exhibit 4-8

PRICE music downloads	QUANTITY DEMANDED music downloads	QUANTITY SUPPLIED music downloads
$2.00	1,000,000 units	5,500,000 units
1.80	2,000,000 units	5,000,000 units
1.60	3,000,000 units	4,500,000 units
1.40	4,000,000 units	4,000,000 units
1.20	5,000,000 units	3,500,000 units
1.00	6,000,000 units	3,000,000 units
0.80	7,000,000 units	2,500,000 units
0.65	8,000,000 units	2,000,000 units
0.40	9,000,000 units	1,500,000 units
0.20	10,000,000 units	1,000,000 units

Refer to Exhibit 4-8. What is the equilibrium price in the example?

a.	$0.80
b.	$1.00
c.	$1.20
d.	$1.40

ANS: D PTS: 1 REF: p. 121

TOP: 4.6 Market Equilibrium Price and Quantity | Equilibrium Price and Quantity

Refer to Exhibit 4-8. At $0.40 there is a ____ of ____ downloads.

a.	surplus; 10,500,000
b.	surplus; 7,500,000
c.	shortage; 7,500,000
d.	shortage; 10,500,000

ANS: C PTS: 1 REF: p. 121

TOP: 4.6 Market Equilibrium Price and Quantity | Shortages and Surpluses

Refer to Exhibit 4-8. At $1.80 there is a ____ of ____ downloads.

a.	shortage; 3,000,000
b.	shortage; 7,000,000
c.	surplus; 7,000,000
d.	surplus; 3,000,000

ANS: D PTS: 1 REF: p. 121

TOP: 4.6 Market Equilibrium Price and Quantity | Shortages and Surpluses

When there is an excess quantity demanded of a product at the current price, then:

a.	the price will tend to fall.
b.	the price will tend to rise.
c.	the price must be above the equilibrium price.
d.	producers will reduce output and sales will fall.

ANS: B PTS: 1 REF: p. 121

TOP: 4.6 Market Equilibrium Price and Quantity | Shortages and Surpluses

When there is an excess quantity supplied of a product at the current price, then:

a.	the market price must be below equilibrium price.
b.	the quantity demanded is greater than the equilibrium quantity.
c.	the market price will tend to rise.
d.	the market price will tend to fall.

ANS: D PTS: 1 REF: p. 121

TOP: 4.6 Market Equilibrium Price and Quantity | Shortages and Surpluses

When the price of a good is higher than the equilibrium price,

a.	a shortage will exist.
b.	buyers desire to purchase more than is produced.
c.	sellers desire to produce and sell more than buyers wish to purchase.
d.	quantity demanded exceeds quantity supplied.

ANS: C PTS: 1 REF: p. 121

TOP: 4.6 Market Equilibrium Price and Quantity | Shortages and Surpluses

A surplus exists in a market if

a.	there is an excess demand for the good.
b.	quantity demanded exceeds quantity supplied.
c.	the current price is above its equilibrium price.
d.	All of the above are correct.

ANS: C PTS: 1 REF: p. 121

TOP: 4.6 Market Equilibrium Price and Quantity | Shortages and Surpluses

If a surplus exists in a market, then we know that the actual price is

a.	above the equilibrium price, and quantity supplied is greater than quantity demanded.
b.	above the equilibrium price, and quantity demanded is greater than quantity supplied.
c.	below the equilibrium price, and quantity demanded is greater than quantity supplied.
d.	below the equilibrium price, and quantity supplied is greater than quantity demanded.

ANS: A PTS: 1 REF: p. 121

TOP: 4.6 Market Equilibrium Price and Quantity | Shortages and Surpluses

If, at the current price, there is a surplus of a good, then

a.	the quantity supplied is greater than the quantity demanded.
b.	the market must be in equilibrium.
c.	the price is below the equilibrium price.
d.	quantity demanded equals quantity supplied.

ANS: A PTS: 1 REF: p. 121

TOP: 4.6 Market Equilibrium Price and Quantity | Shortages and Surpluses

When a surplus exists in a market, sellers

a.	raise price, which increases quantity demanded and decreases quantity supplied, until the surplus is eliminated.
b.	raise price, which decreases quantity demanded and increases quantity supplied, until the surplus is eliminated.
c.	lower price, which increases quantity demanded and decreases quantity supplied, until the surplus is eliminated.
d.	lower price, which decreases quantity demanded and increases quantity supplied, until the surplus is eliminated.

ANS: C PTS: 1 REF: p. 121

TOP: 4.6 Market Equilibrium Price and Quantity | Shortages and Surpluses

Suppose roses are currently selling for $30 per dozen, but the equilibrium price of roses is $20 per dozen. We would expect a

a.	shortage to exist and the market price of roses to increase.
b.	shortage to exist and the market price of roses to decrease.
c.	surplus to exist and the market price of roses to increase.
d.	surplus to exist and the market price of roses to decrease.

ANS: D PTS: 1 REF: p. 121

TOP: 4.6 Market Equilibrium Price and Quantity | Shortages and Surpluses

The current price of wheat is $10 per bushel, but the equilibrium price of wheat is $5 per bushel. As a result,

a.	the quantity supplied of wheat exceeds the quantity demanded of wheat at $10 per bushel.
b.	the equilibrium quantity of wheat exceeds the quantity demanded at the $10 price.
c.	there is a surplus of wheat at the $10 price.
d.	All of the above are correct.

ANS: D PTS: 1 REF: p. 121

TOP: 4.6 Market Equilibrium Price and Quantity | Shortages and Surpluses

A university’s basketball gymnasium is never more than half-full during basketball games. This implies

a.	the ticket price is above the equilibrium price.
b.	the ticket price is below the equilibrium price.
c.	the ticket price is at the equilibrium price.
d.	nothing about the equilibrium price.

ANS: A PTS: 1 REF: p. 121

TOP: 4.6 Market Equilibrium Price and Quantity | Shortages and Surpluses

When the price of a good is lower than the equilibrium price,

a.	a surplus will exist.
b.	buyers desire to purchase more than is produced.
c.	sellers desire to produce and sell more than buyers wish to purchase.
d.	quantity supplied exceeds quantity demanded.

ANS: B PTS: 1 REF: p. 121

TOP: 4.6 Market Equilibrium Price and Quantity | Shortages and Surpluses

A shortage exists in a market if

a.	there is an excess supply of the good.
b.	quantity supplied exceeds quantity demanded.
c.	the current price is below its equilibrium price.
d.	All of the above are correct.

ANS: C PTS: 1 REF: p. 121

TOP: 4.6 Market Equilibrium Price and Quantity | Shortages and Surpluses

If a shortage exists in a market, then we know that the actual price is

a.	above the equilibrium price, and quantity supplied is greater than quantity demanded.
b.	above the equilibrium price, and quantity demanded is greater than quantity supplied.
c.	below the equilibrium price, and quantity demanded is greater than quantity supplied.
d.	below the equilibrium price, and quantity supplied is greater than quantity demanded.

ANS: C PTS: 1 REF: p. 121

TOP: 4.6 Market Equilibrium Price and Quantity | Shortages and Surpluses

If, at the current price, there is a shortage of a good, then

a.	sellers are producing more than buyers wish to buy.
b.	the market must be in equilibrium.
c.	the price is below the equilibrium price.
d.	quantity demanded equals quantity supplied.

ANS: C PTS: 1 REF: p. 121

TOP: 4.6 Market Equilibrium Price and Quantity | Shortages and Surpluses

When a shortage exists in a market, sellers

a.	raise price, which increases quantity demanded and decreases quantity supplied until the shortage is eliminated.
b.	raise price, which decreases quantity demanded and increases quantity supplied until the shortage is eliminated.
c.	lower price, which increases quantity demanded and decreases quantity supplied until the shortage is eliminated.
d.	lower price, which decreases quantity demanded and increases quantity supplied until the shortage is eliminated.

ANS: B PTS: 1 REF: p. 121

TOP: 4.6 Market Equilibrium Price and Quantity | Shortages and Surpluses

Suppose roses are currently selling for $20 per dozen, but the equilibrium price of roses is $30 per dozen. We would expect a

a.	shortage to exist and the market price of roses to increase.
b.	shortage to exist and the market price of roses to decrease.
c.	surplus to exist and the market price of roses to increase.
d.	surplus to exist and the market price of roses to decrease.

ANS: A PTS: 1 REF: p. 121

TOP: 4.6 Market Equilibrium Price and Quantity | Shortages and Surpluses

Exhibit 4-9

The diagram below represents the market for butter.

Refer to Exhibit 4-9. The equilibrium price of butter is:

a.	$5
b.	$3
c.	$2
d.	none of the above

ANS: B PTS: 1 REF: p. 121

TOP: 4.6 Market Equilibrium Price and Quantity | Equilibrium Price and Quantity

Refer to Exhibit 4-9. If the current price of butter equals $5, you would expect to find:

a.	the market in equilibrium at 2,000 pounds per year.
b.	the market in equilibrium at 8,000 pounds per year.
c.	that the market is not in equilibrium, and that the quantity supplied is greater than the quantity demanded.
d.	that the market is not in equilibrium, and that the quantity demanded is greater than the quantity supplied.

ANS: C PTS: 1 REF: p. 121

TOP: 4.6 Market Equilibrium Price and Quantity | Shortages and Surpluses

Refer to Exhibit 4-9. If the current price of butter equals $2, you would expect to find:

a.	the market in equilibrium at 3,000 pounds per year.
b.	the market in equilibrium at 8,000 pounds per year.
c.	that the market is not in equilibrium, and that the quantity supplied is greater than the quantity demanded.
d.	that the market is not in equilibrium, and that the quantity demanded is greater than the quantity supplied.

ANS: D PTS: 1 REF: p. 121

TOP: 4.6 Market Equilibrium Price and Quantity | Shortages and Surpluses

Refer to Exhibit 4-9. At a market price of $4, there exists a:

a.	shortage equal to 4,000 pounds of butter.
b.	surplus equal to 4,000 pounds of butter.
c.	shortage equal to 7,000 pounds of butter.
d.	surplus equal to 7,000 pounds of butter.

ANS: B PTS: 1 REF: p. 121

TOP: 4.6 Market Equilibrium Price and Quantity | Shortages and Surpluses

Refer to Exhibit 4-9. At a market price of $1, there exists a:

a.	shortage equal to 5,000 pounds of butter.
b.	surplus equal to 5,000 pounds of butter.
c.	shortage equal to 11,000 pounds of butter.
d.	surplus equal to 11,000 pounds of butter.

ANS: C PTS: 1 REF: p. 121

TOP: 4.6 Market Equilibrium Price and Quantity | Shortages and Surpluses

If the electronics market is experiencing a shortage in the supply of mobile phones being sold at a cost that buyers are more than willing to pay for, then:

a.	the selling price is higher than the equilibrium price
b.	the equilibrium price is higher than the selling price.
c.	the quantity demanded is less than the quantity supplied.
d.	the shortage could be eliminated by lowering the price.

ANS: B PTS: 1 REF: p. 121

TOP: 4.6 Market Equilibrium Price and Quantity | Shortages and Surpluses

Which of the following would increase the quantity of LCD TVs demanded but would not increase the demand for LCD TVs?

a.	an increase in the price of plasma TVs, a substitute
b.	an increase in incomes assuming that LCD TVs are normal goods
c.	an increase in the expected future price of LCD TVs
d.	a decrease in the current price of LCD TVs

ANS: D PTS: 1 REF: p. 115

TOP: 4.5 Shifts in the Supply Curve | A Change in Quantity Supplied Versus a Change in Supply

SHORT ANSWER

The federal government’s “Cash For Clunkers” program provided consumers up to $4,500 towards new, environmentally friendly automobiles when trading in a less fuel efficient vehicle. Discuss the effect of this move on the industry’s demand curve.

ANS:

The “Cash For Clunkers” program made consumers more interested in purchasing an auto. This increased interest or change in preferences caused an increase in demand shifting the demand curve to the right.

PTS: 1 REF: p. 109 TOP: 4.3 Shifts in the Demand Curve | Changes in Tastes

Define what a market is and provide three examples of where a market can be found.

ANS:

A market is the process of buyers and sellers exchanging goods and services. Examples are abundant: bookstores, corner grocery markets, stock markets such as the New York Stock Exchange, barbershops, roadside markets, online auction markets, etc.

PTS: 1 REF: p. 99 TOP: 4.1 Markets | Defining a Market

In the three months before a $1 per pack cigarette tax took effect in Alaska, smokers bought 175 million more cigarettes than during the same period a year earlier. What explains this behavior by consumers?

ANS:

The increase of $1 per pack is pretty significant given the price of cigarettes. Many smokers may have decided that the best way to save money would be to stockpile cigarettes before the expected tax increase took effect. So an expectation of a price increase in the near future caused the current demand curve for cigarettes to shift to the right (an increase in demand).

PTS: 1 REF: p. 109

TOP: 4.3 Shifts in the Demand Curve | Changes in Expectations

Differentiate between a change in quantity demanded and a change in demand.

ANS:

A change in a good’s own, current price is said to lead to a change in quantity demanded. The movement happens along the demand curve. Changes in factors other than price can shift the entire demand curve. A change in demand happens due to changes in the prices of related goods, income, number of buyers, tastes, and expectations.

PTS: 1 REF: p. 105

TOP: 4.3 Shifts in the Demand Curve | A Change in Demand Versus a Change in Quantity Demanded

As the price of DVD players has fallen over the last two years, more DVD players have been sold by consumer electronics firms. Is this a violation of the law of supply?

ANS:

No. Very likely the reduction in price is due to an increase in supply (not an increase in quantity supplied). As DVD technology has progressed, DVD players have become standardized and more efficiently mass-produced, leading to an increase in supply. What has likely been observed is a rightward shift of the supply curve, not a movement along the supply curve.

PTS: 1 REF: p. 115-116

TOP: 4.5 Shifts in the Supply Curve | A Change in Quantity Supplied Versus a Change in Supply

An increase in the price of Product X leads to a decrease in demand for Product Y. The price increase also increases the demand for Product Z, a related good. Discuss the relationship between these products.

ANS:

Product X and Product Y: complements.

Product X and Product Z: substitutes.

PTS: 1 REF: p. 106

TOP: 4.3 Shifts in the Demand Curve | Changes in the Prices of Related Goods and Services

Beach resorts raise their prices during the summer months and yet more people book rooms at those times. Is this a violation of the law of demand?

ANS:

No. During summer months, the demand for beach resort accommodations tends to increase, pushing up both prices and occupancy for the duration. An increase in demand (a shift of the curve. occurs. This does not violate the law of demand, which states that there is an inverse relationship between price and quantity demanded, all other things being equal.

PTS: 1 REF: p. 105

TOP: 4.3 Shifts in the Demand Curve | A Change in Demand Versus a Change in Quantity Demanded

The face value of a ticket to the Super Bowl was approximately $1,200 in 2011. The game is very popular and there are a number of fans who are not able to get tickets to this game. At the same time, many fans claim that prices are too high and that the NFL should lower the face value of the ticket prices. Would a decrease in ticket prices move the market towards equilibrium? Would it eliminate the shortage of tickets? Why or why not?

ANS:

Lowering the ticket prices would not move the market towards equilibrium. The fact that there is a greater quantity demanded than quantity supplied indicates that the face value is currently below the equilibrium price. Lowering the face value would cause a more severe shortage as more consumers would want to purchase tickets at the lower price, increasing the quantity demanded. At the same time the quantity supplied would likely remain the same given the size of the stadium.

PTS: 1 REF: p. 121-122

TOP: 4.6 Market Equilibrium Price and Quantity | Shortages and Surpluses

Explain how both sales and long lines prior to store openings are characteristic of markets in disequilibrium.

ANS:

One function of sales is to reduce the price of products and bring markets with current excess supply into equilibrium. If the quantity of a product demanded exceeds the quantity supplied at the current market price, goods may be allocated to consumers on a first-come, first-served basis. Standing in line is one way to allocate goods, which also increases the opportunity cost of buying the goods.

PTS: 1 REF: p. 121-122

TOP: 4.6 Market Equilibrium Price and Quantity | Shortages and Surpluses

Markets tend toward equilibrium and, as a result, will tend to eliminate shortages and surpluses. Why?

ANS:

Markets tend toward equilibrium because when a shortage exists, consumers who are unhappy about not being able to purchase the products or services they want will tend to bid the prices higher, moving the market toward equilibrium. If a surplus exists, suppliers are unhappy about not being able to sell the quantity of goods or services they wish, and will tend to lower prices in order to persuade consumers to purchase more goods and services.

PTS: 1 REF: p. 121-122

TOP: 4.6 Market Equilibrium Price and Quantity | Shortages and Surpluses

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The Exploration of Microeconomics International Edition 6th Edition by Robert L. Sexton - Test Bank

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