Foundations of Macroeconomics, 7e (Bade/Parkin)
Chapter 4 Demand and Supply
4.1 Demand
1) A market is deined as
A) a physical place where people buy only goods.
B) a physical place where people buy both goods and services.
C) a store where people buy physical goods.
D) any arrangement that brings buyers and sellers together.
E) a place where one good is bartered for another.
Skill: Level 1: Deinition
Section: Checkpoint 4.1
Status: Old
AACSB: Relective thinking
2) EBay
A) will be considered a market when the Internet irms are proitable.
B) is a market because buyers and sellers are brought together to buy and sell.
C) would be a market if there was only one physical location.
D) cannot function as a market.
E) is not a market because buyers can buy from only one seller at any point in time.
Skill: Level 1: Deinition
Section: Checkpoint 4.1
Status: Old
AACSB: Relective thinking
3) Which of the following statements is true about a competitive market? A competitive
market
A) must have a physical location.
B) includes markets for goods and services but not for inputs.
C) has so many buyers and sellers that no one can inluence the price.
D) has one seller competing to sell his or her product.
E) has a handful of sellers but always has many buyers.
Skill: Level 1: Deinition
Section: Checkpoint 4.1
Status: Old
AACSB: Relective thinking
1
4) If Mark tries to purchase a new refrigerator in a perfectly competitive market, then
A) he will ind himself constantly haggling with sellers over the price.
B) he will have only a few sellers available to him.
C) he will have a very limited ability to negotiate over the price.
D) he will see large diferences in the types of refrigerators sold across sellers.
E) None of the above is correct.
Skill: Level 2: Using deinitions
Section: Checkpoint 4.1
Status: New
AACSB: Relective thinking
5) In a perfectly competitive market, an individual ________ has ________ inluence over the
market price of the good or service being sold.
A) buyer; basically no
B) seller; basically no
C) buyer; a great deal of
D) seller; a great deal of
E) Both A and B are correct.
Skill: Level 2: Using deinitions
Section: Checkpoint 4.1
Status: New
AACSB: Relective thinking
6) Assume that the market for consumer gasoline is perfectly competitive. When one
additional seller (gas station) enters the market,
A) the price of gasoline increases.
B) the price of gasoline decreases.
C) the price of gasoline is left unafected.
D) then at least one other seller must exit the market.
E) None of the above is correct.
Skill: Level 2: Using deinitions
Section: Checkpoint 4.1
Status: New
AACSB: Relective thinking
2
7) What is the “quantity demanded”?
A) the amount of a good people desire
B) the amount of a good people are able and willing to buy during a speciic time period
and at a given price
C) the amount of a good people are able and willing to buy at all possible prices
D) the maximum amount of a good that can be consumed during a speciic time period
E) the minimum amount of a good that people are willing to buy during a speciic time
period and at a given price
Skill: Level 1: Deinition
Section: Checkpoint 4.1
Status: Old
AACSB: Relective thinking
8) The “quantity demanded” of any good or service is ________ during a speciied time
period and at a speciied price.
A) the amount people are willing to buy
B) the amount people are able to buy
C) the amount people are willing and able to ofer
D) the amount people are willing and able to buy
E) the amount people are willing to buy because it is the amount sellers are willing to sell
Skill: Level 1: Deinition
Section: Checkpoint 4.1
Status: Old
AACSB: Relective thinking
9) The “law of demand” refers to the fact that, other things remaining the same, when the
price of a good rises,
A) the demand curve shifts rightward.
B) the demand curve shifts leftward.
C) there is a movement down along the demand curve to a larger quantity demanded.
D) there is a movement up along the demand curve to a smaller quantity demanded.
E) the demand curve shifts rightward and there is a movement up along the demand curve
to a smaller quantity demanded.
Skill: Level 1: Deinition
Section: Checkpoint 4.1
Status: Old
AACSB: Relective thinking
3
10) The law of demand refers to how
A) demand changes when people’s incomes change.
B) demand changes when the prices of substitutes and complements change.
C) the quantity demanded changes when the price of the good changes.
D) the price of the good changes when people’s demand for the good changes.
E) the quantity demanded changes when the demand for the good changes.
Skill: Level 2: Using deinitions
Section: Checkpoint 4.1
Status: Old
AACSB: Relective thinking
11) Which of the following describes the law of demand? When other things remain the
same, as
A) the price of gas falls, the quantity demanded of gas increases.
B) the quantity demanded of bread increases, the price of bread falls.
C) the price of peanut butter increases, the quantity demanded of jelly decreases.
D) your income increases, you’ll buy more hamburgers.
E) more people decide to eat pizza, the demand for pizza increases.
Skill: Level 1: Deinition
Section: Checkpoint 4.1
Status: Old
AACSB: Relective thinking
12) Gasoline prices increase by 50 percent and other things remain the same. As a result,
there is
A) an increase in the demand for gasoline.
B) a decrease in the demand for gasoline.
C) no change in the quantity of gasoline demanded.
D) a decrease in the quantity of gasoline demanded.
E) More information is needed to determine if the demand for gasoline increases or
decreases.
Skill: Level 2: Using deinitions
Section: Checkpoint 4.1
Status: Old
AACSB: Relective thinking
4
13) The law of demand asserts that all else equal, if the price of a good ________, the
quantity demanded of that good ________.
A) falls; decreases
B) falls; increases
C) rises; stays the same
D) stays the same; decreases
E) None of the above is correct.
Skill: Level 1: Deinition
Section: Checkpoint 4.1
Status: New
AACSB: Relective thinking
14) In stores, it is common to ind seasonal products marked down when the season ends.
What explains this behavior?
A) The law of demand is being used to increase the quantity demanded.
B) The store is trying to increase its customers’ demand for the product.
C) The store manager must be trying to drive away customers by selling low quality
products.
D) The store is trying to increase its consumers’ incomes by increasing their purchasing
power.
E) The store is trying to sell the goods and realizes that they are substitutes for other goods
whose prices have risen.
Skill: Level 4: Applying models
Section: Checkpoint 4.1
Status: Old
AACSB: Relective thinking
15) The law of demand implies that, other things remaining the same,
A) as the price of a cheeseburger rises, the quantity of cheeseburgers demanded increases.
B) as the price of a cheeseburger rises, the quantity of cheeseburgers demanded
decreases.
C) as income increases, the quantity of cheeseburgers demanded increases.
D) as the demand for cheeseburgers increases, the price of a cheeseburger falls.
E) as more people demand cheeseburgers, the quantity demanded increases.
Skill: Level 4: Applying models
Section: Checkpoint 4.1
Status: Old
AACSB: Relective thinking
5
16) An increase in the quantity demanded is shown as
A) a movement along the demand curve.
B) a movement toward the demand curve.
C) a rightward shift of the demand curve.
D) a leftward shift of the demand curve.
E) both a movement along the demand curve and a shift of the demand curve.
Skill: Level 2: Using deinitions
Section: Checkpoint 4.1
Status: Old
AACSB: Relective thinking
17) Which of the following results in a movement upward along the demand curve for
movies?
A) an increase in the price of movie tickets
B) a decrease in the price of movie tickets
C) an increase in income, assuming that movies are a normal good
D) a decrease in income, assuming that movies are a normal good
E) a decrease in the price of NetFlix, a substitute for movies
Skill: Level 3: Using models
Section: Checkpoint 4.1
Status: Old
AACSB: Analytical thinking
18) Which of the following is true regarding demand?
i. Demand is the relationship between quantity demanded and the price of a good when
all other inluences on buying plans remain the same.
ii. Demand refers to one quantity at one time.
iii. “Demand” and “quantity demanded” are the same thing.
A) i only
B) ii only
C) both i and ii
D) iii only
E) both ii and iii
Skill: Level 1: Deinition
Section: Checkpoint 4.1
Status: Old
AACSB: Relective thinking
6
19) The price of cotton clothing falls. As a result,
A) the quantity demanded of cotton clothing increases.
B) the demand for cotton clothing increases.
C) the quantity demanded of cotton clothing decreases.
D) the demand for cotton clothing decreases.
E) both the demand for cotton clothing increases and the quantity demand of cotton
clothing increases.
Skill: Level 2: Using deinitions
Section: Checkpoint 4.1
Status: Old
AACSB: Relective thinking
20) The American Dairy Association starts a highly successful advertising campaign that
makes most people want to drink more milk. As a result,
A) the demand for milk increases.
B) the quantity demanded of milk increases.
C) the price of milk falls to encourage people to drink more milk.
D) the demand for milk is not afected.
E) the demand for milk decreases because the price of milk rises.
Skill: Level 2: Using deinitions
Section: Checkpoint 4.1
Status: Old
AACSB: Relective thinking
21) A demand schedule shows
A) the quantities that people plan to buy in all possible circumstances.
B) the quantities that people plan to buy at each diferent price when all other inluences
on buying plans remain the same.
C) the quantities that people would plan to buy if they could aford them at each diferent
price when all other inluences on buying plans remain the same.
D) the quantities that people plan to buy at each diferent income when all other inluences
on buying plans remain the same.
E) the quantities that people plan to buy at each diferent price as long as producers are
willing to supply that quantity.
Skill: Level 1: Deinition
Section: Checkpoint 4.1
Status: Old
AACSB: Relective thinking
7
22) A demand schedule
A) shows the quantity demanded at one price.
B) is a graph showing a relationship between the quantity demanded and the price of a
good.
C) is a list of the quantities demanded at each diferent price when all other inluences on
buying plans remain the same.
D) shows that demand is on schedule.
E) shows how the demand changes when the supply changes.
Skill: Level 1: Deinition
Section: Checkpoint 4.1
Status: Old
AACSB: Relective thinking
23) The downward slope of a demand curve
A) represents the law of demand.
B) shows that as the price of a good rises, consumers increase the quantity they demand.
C) indicates how the quantity demanded changes when incomes rise and the good is a
normal good.
D) indicates how demand changes when incomes rise and the good is a normal good.
E) indicates how demand changes when the price changes and the good is a normal good.
Skill: Level 2: Using deinitions
Section: Checkpoint 4.1
Status: Old
AACSB: Relective thinking
24) A demand curve
A) has an upward slope.
B) has a downward slope.
C) is a graph of the relationship between quantity demanded of a good and its price.
D) Both answers B and C are correct.
E) Both answers A and C are correct.
Skill: Level 1: Deinition
Section: Checkpoint 4.1
Status: Old
AACSB: Relective thinking
8
25) Demand curves slope ________ because as the price increases and other things remain
the same, the quantity demanded ________.
A) downward; decreases
B) downward; increases
C) upward; decreases
D) upward; increases
E) downward; does not change
Skill: Level 2: Using deinitions
Section: Checkpoint 4.1
Status: Old
AACSB: Relective thinking
26) The market demand curve
A) cannot show how quantity demanded changes in response to a change in price.
B) cannot show a change in demand for a good.
C) is the horizontal sum of individual demand curves.
D) is the vertical sum of individual demand curves.
E) is upward sloping.
Skill: Level 1: Deinition
Section: Checkpoint 4.1
Status: Old
AACSB: Analytical thinking
27) The market demand curve for mangos is
A) the same as the demand curve of one buyer in a market with many buyers.
B) upward sloping because rich people can aford more mangos than poor people can buy.
C) the horizontal sum of the individual demand curves of all the buyers.
D) the vertical sum of the individual demand curves of all the buyers.
E) the horizontal average of the individual demand curves of all the buyers.
Skill: Level 1: Deinition
Section: Checkpoint 4.1
Status: Old
AACSB: Analytical thinking
9
28) There are ive hundred buyers in the market for cheese. If we know each individual’s
demand curves, to ind the market demand, we must
A) add the prices that each buyer will pay at every quantity.
B) add the quantities that each buyer will purchase at every price.
C) multiply the price times quantity for each buyer and then add the resulting products
together.
D) average the price each buyer is willing to pay for each given quantity.
E) give up because there is no way to ind the market demand.
Skill: Level 3: Using models
Section: Checkpoint 4.1
Status: Old
AACSB: Analytical thinking
29) Market demand curves are obtained by
A) determining the price each consumer is willing to pay for the good and summing those
prices across all consumers.
B) observing the prices and quantities sold in a market over time and plotting those price-
quantity combinations in a graph.
C) summing the quantities every consumer is willing to buy at each diferent price.
D) observing the behavior of an individual consumer in a market.
E) averaging the quantities every consumer is willing to buy at each diferent price.
Skill: Level 2: Using deinitions
Section: Checkpoint 4.1
Status: Old
AACSB: Analytical thinking
30) The market demand curve for mousetraps is
A) found by summing the quantities of mousetraps demanded at each income level by each
buyer.
B) found by summing the prices of mousetraps at each quantity of mousetraps demanded
by each buyer.
C) the horizontal sum of the individual demand curves for mousetraps of all the buyers.
D) Both answers B and C are correct.
E) Both answers A and C are correct.
Skill: Level 1: Deinition
Section: Checkpoint 4.1
Status: Old
AACSB: Analytical thinking
10