Supply and Demand
Multiple Choice
1) The mechanism by which buyers and sellers negotiate an exchange is called a/an
A) equilibrium.
B) model.
C) market.
D) meeting.
Answer: C
2) The supply and demand model examines the how prices and quantities are determined
A) in markets.
B) by governments.
C) by churches.
D) by monopolists.
Answer: A
3) A market must be in a physical location
A) True
B) False
Answer: B
4) Ebay does not qualify as a market for the good being sold because it is not a specific physical
location.
A) True
B) False
Answer: B
5) On the Heritage Foundation’s scale of “Economic Freedom,” the least “free” country would be
that one who’s economic system was purely
A) capitalist.
B) socialist.
C) utilitarian.
D) communist.
Answer: D
6) The amount of money that must be paid per unit of output is called the
A) market.
B) equilibrium.
C) wage.
D) price.
Answer: D
7) The quantity demanded is the amount households wish to purchase
A) at all possible prices during a specified period of time.
B) at a particular price during a specified period of time.
C) at a particular price (the timeframe is irrelevant).
D) at all possible prices (the timeframe is irrelevant).
Answer: B
8) Economists argue that markets serve the interests of society primarily because
A) consumers are made better off (regardless of whether producers are made better off).
B) producers are made better off (regardless of whether consumers are made better off).
C) both consumers and producers are made better off.
D) money is made available for government.
Answer: C
9) Economists know that consumers and producers are both made better off than they would be
without free exchange because the exchanges are
A) mandated by government.
B) voluntary.
C) able to make consumers better off by an amount that compensates producers for their
losses.
D) able to make producers better off by an amount that compensates consumers for their
losses.
Answer: C
10) The group of people who are willing to provide goods and services in exchange for money are
called
A) profiteers.
B) benefactors.
C) consumers.
D) producers.
Answer: D
11) The group of people who are willing to offer money in exchange for goods and services are
called
A) profiteers.
B) benefactors.
C) consumers.
D) producers.
Answer: C
12) The price at which the amount consumers wish to purchase equals the amount firms wish to
sell is called the
A) equilibrium quantity.
B) equilibrium price.
C) optimal quantity.
D) optimal result.
Answer: B
13) At the equilibrium price
A) the amount buyers wish to purchase equals the amount producers wish to sell.
B) the amount buyers wish to purchase is greater than the amount producers wish to sell.
C) the amount buyers wish to purchase is less than the amount producers wish to sell.
Answer: A
14) The equilibrium quantity is
A) the amount exchanged at the equilibrium price.
B) an amount higher than consumers were wanted to buy.
C) an amount lower than producers wanted to sell.
D) always less than the equilibrium price.
Answer: A
15) At the equilibrium price
A) quantity demanded exceeds quantity supplied.
B) quantity demanded equals quantity supplied.
C) quantity demanded is less than quantity supplied.
D) quantity demanded is unrelated to quantity supplied.
Answer: B
16) The amount consumers are willing and able to buy at a particular price during a specified
period of time is the
A) demand.
B) supply.
C) quantity demanded.
D) quantity supplied.
Answer: C
17) The amount that firms are willing and able to sell at a particular price during a particular period
of time is the
A) demand.
B) supply.
C) quantity demanded.
D) quantity supplied.
Answer: D
18) The underlying reason for the upward sloping nature of the supply curve is that
A) the production of most goods comes with increasing marginal benefits.
B) the production of most goods comes with increasing marginal costs.
C) the consumption of most goods comes with decreasing marginal utility.
D) the consumption of most goods comes with increasing marginal utility.
Answer: B
19) The Latin phrase “ceteris paribus” is used by economists to mean
A) “all other things being equal” or “all other things held constant”.
B) all is lost.
C) freedom is better than regulation.
D) the only constant is change.
Answer: A
20) Ceteris paribus is Latin for
A) all is lost.
B) at equilibrium.
C) equilibrium is optimal.
D) holding all other things constant.
Answer: D
21) When an economics students draws a supply and demand diagram to model an increase in the
income, she is assuming this change happens
A) semper fidelis.
B) ceteris paribus.
C) ipso facto.
D) de facto.
Answer: B
22) The relationship between price and quantity demanded, ceteris paribus is
A) demand.
B) supply.
C) equilibrium.
D) quantity supplied.
Answer: A
23) The relationship between price and quantity supplied, ceteris paribus is
A) demand.
B) supply.
C) quantity demanded.
D) equilibrium.
Answer: B
24) Unless circumstances are quite out of the ordinary, a demand curve will be
A) vertical
B) horizontal
C) downward sloping
D) upward sloping
Answer: C
25) If the price of a typical good rises, the quantity demanded for that good will
A) decrease.
B) increase.
C) remain the same.
D) automatically decrease to zero.
Answer: A
26) If the price of a typical good falls, the quantity demanded for that good will
A) decrease.
B) increase.
C) remain the same.
D) automatically increase to infinity.
Answer: B
27) In drawing a demand curve, the labels for the axes are
A) price (on the vertical axis) and quantity (on the horizontal axis).
B) price (on the vertical axis) and quantity per unit of time (on the horizontal axis).
C) price (on the horizontal axis) and quantity (on the vertical axis).
D) price (on the horizontal axis) and quantity per unit of time (on the vertical axis).
Answer: B
Use the following to answer questions 28-31:
Table 2.1
28) 1 From Table 2.1 above, which column is likely to be the one for quantity demanded?
A) column A
B) neither A nor B
C) column B
D) either A or B are equally likely
Answer: A
Refer to: Table 2.1
29) From Table 2.1 above, which column is likely to be the one for quantity supplied?
A) column A
B) neither A nor B
C) column B
D) either A or B are equally likely
Answer: C
Refer to: Table 2.1
Price Column A Column B
$1 5 1
$2 4 2
$3 3 3
$4 2 4
$5 1 5
30) From Table 2.1 above, and under the most likely scenario where columns A and B are assigned
to represent quantity demanded and quantity supplied, which is the equilibrium price?
A) $1
B) $2
C) $3
D) $4
Answer: C
Refer to: Table 2.1
31) From Table 2.1 above, and under the most likely scenario where columns A and B are assigned
to represent quantity demanded and quantity supplied, which is the equilibrium quantity?
A) 1 unit
B) 2 units
C) 3 units
D) 4 units
Answer: C
Refer to: Table 2.1
Use the following to answer questions 32-43:
Figure 2.1
Box 6
Box 2
Box 1
Box 5
Box 3
Box 4
32) In Figure 2.1 above, Box 1 would be labeled
A) P* for equilibrium price.
B) P for price.
C) S for supply.
D) D for demand.
Answer: B
Refer to: Figure 2.1
33) In Figure 2.1 above, Box 2 would be labeled
A) P* for equilibrium price.
B) P for price.
C) S for supply.
D) D for demand.
Answer: C
Refer to: Figure 2.1
34) In Figure 2.1 above, Box 3 would be labeled
A) P* for equilibrium price.
B) P for price.
C) S for supply.
D) D for demand.
Answer: A
Refer to: Figure 2.1
35) In Figure 2.1 above, Box 4 would be labeled
A) Q* for equilibrium quantity.
B) S for supply.
C) P for price.
D) D for demand.
Answer: A
Refer to: Figure 2.1
36) In Figure 2.1 above, Box 5 would be labeled
A) P* for equilibrium price.
B) P for price.
C) S for supply.
D) D for demand.
Answer: D
Refer to: Figure 2.1
37) In Figure 2.1 above, Box 6 would be labeled
A) P* for equilibrium price.
B) S for supply.
C) P for price.
D) Q/t for quantity per unit of time.
Answer: D
Refer to: Figure 2.1
38) In Figure 2.1 above, a “P” for price would go in
A) Box 1.
B) Box 2.
C) Box 4.
D) Box 6.
Answer: A
Refer to: Figure 2.1
39) In Figure 2.1 above, a “P*” for equilibrium price would go in
A) Box 1.
B) Box 2.
C) Box 3.
D) Box 4.
Answer: C
Refer to: Figure 2.1
40) In Figure 2.1 above, a “D” for Demand would go in
A) Box 2.
B) Box 4.
C) Box 5.
D) Box 6.
Answer: C
Refer to: Figure 2.1
41) In Figure 2.1 above, a “S” for Supply would go in
A) Box 2.
B) Box 4.
C) Box 5.
D) Box 6.
Answer: A
Refer to: Figure 2.1
42) In Figure 2.1 above, a “q/t” for quantity per unit time price would go in
A) Box 1.
B) Box 2.
C) Box 4.
D) Box 6.
Answer: D
Refer to: Figure 2.1
43) In Figure 2.1 above, a “Q*” for equilibrium quantity would go in
A) Box 1.
B) Box 2.
C) Box 3.
D) Box 4.
Answer: D
Refer to: Figure 2.1
44) The condition where firms do not want to sell as many as consumers want to buy is called
A) a shortage.
B) a surplus.
C) an equilibrium.
D) a market collapse.
Answer: A
45) The condition where firms want to sell more than consumers want to buy is called
A) a shortage.
B) a surplus.
C) an equilibrium.
D) a market collapse.
Answer: B
46) If the supply and demand curves cross at a price of $2, at any price above that there will be
A) an equilibrium.
B) a surplus.
C) a shortage.
D) a crisis.
Answer: B
47) If the supply and demand curves cross at a quantity of 100, then the price necessary to get
firms to sell more than that will have to be _______ equilibrium.
A) above
B) at
C) below
D) within 10% either way of
Answer: A
48) A surplus exists when
A) QD>QS
B) QD<QS
C) QD=QS
D) an act of god makes goods available only at very high prices.
Answer: B
49) A shortage exists when
A) QD>QS
B) QD<QS
C) QD=QS
D) an act of god makes goods available at very low prices.
Answer: A
50) Another term for surplus is
A) excess supply.
B) excess demand.
C) equilibrium supply.
D) equilibrium demand.
Answer: A
51) Another term for shortage is
A) excess supply.
B) excess demand.
C) equilibrium supply.
D) equilibrium demand.
Answer: B
Use the following to answer questions 52-53:
Table 2.2
52) From Table 2.2 above, which column is the one for shortage?
A) column A
B) neither A nor B
C) column B
D) either A or B are equally likely
Answer: C
Refer to: Table 2.2
Price Quantity Demanded Quantity Supplied Column A Column B
$1 5 1 4
$2 4 2 2
$3 3 3 0 0
$4 2 4 2
$5 1 5 4
Price Quantity Demanded Quantity Supplied
