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54) Contractors can use plywood or brick to construct walls. Suppose the price of bricks
increases. Which of the figures above best illustrates the effect of this change on the market for
plywood?
A) Figure A
B) Figure B
C) Figure C
D) Figure D
E) Figure A or Figure C depending on how contractors react to the higher price of bricks.
55) The number of logging firms increases. Which of the figures above best illustrates this
change?
A) Figure A
B) Figure B
C) Figure C
D) Figure D
E) Figure A and Figure D
56) New technology for producing plywood is developed. Which of the figures above best
illustrates this change?
A) Figure A
B) Figure B
C) Figure C
D) Figure D
E) Figure A and Figure D
57) In an effort to protect endangered species from the effects of logging in America's national
forests, the federal government passes a law prohibiting logging in most of the state of
Washington. Which of the figures above best illustrates the effect of this new law?
A) Figure A
B) Figure B
C) Figure C
D) Figure D
E) None of the above because a prohibition cannot be illustrated using demand and supply
figures.
58) Which figure above shows the effect if research is published claiming that eating pizza is
healthy?
A) Figure A
B) Figure B
C) Figure C
D) Figure D
E) Both Figure A and Figure D
59) Pizza is a normal good. Which figure above shows the effect of a decrease in consumers'
incomes?
A) Figure A
B) Figure B
C) Figure C
D) Figure D
E) Both Figure B and Figure C
60) Which figure above shows the effect of a technological advance in the production of pizza?
A) Figure A
B) Figure B
C) Figure C
D) Figure D
E) Both Figure A and Figure D
61) Which figure above shows the effect of a decrease in the number of pizza sellers?
A) Figure A
B) Figure B
C) Figure C
D) Figure D
E) Both Figure B and Figure C
62) Which figure above shows the effect of an increase in the cost of the tomato sauce used to
produce pizza?
A) Figure A
B) Figure B
C) Figure C
D) Figure D
E) Both Figure B and Figure C
63) The above figure shows the market for pizza. The market is in equilibrium when people's
incomes decrease. If pizza is a normal good, then which point represents the most likely new
price and quantity?
A) A
B) B
C) C
D) D
E) E
64) The above figure shows the market for pizza. The market is in equilibrium when the cheese
used to produce pizza falls in price. What point represents the most likely new price and
quantity?
A) A
B) B
C) C
D) D
E) E
65) The above figure shows the market for pizza. The market is in equilibrium when the wages
paid pizza workers increases. What point represents the most likely new price and quantity?
A) A
B) B
C) C
D) D
E) E
66) The above figure shows the market for pizza. The market is in equilibrium when new pizza
firms enter the market. What point represents the most likely new price and quantity?
A) A
B) B
C) C
D) D
E) E
67) The above figure shows the market for pizza. The market is in equilibrium when some of the
pizza firms go out of business. What point represents the most likely new price and quantity?
A) A
B) B
C) C
D) D
E) E
68) The above figure shows the market for pizza. The market is in equilibrium when people learn
that eating pizza helps prevent heart disease. What point represents the most likely new price and
quantity?
A) A
B) B
C) C
D) D
E) E
69) The above figure shows the market for pizza. The market is in equilibrium. Pizza and tacos
are substitutes for consumers. The price of tacos falls. What point represents the most likely new
price and quantity?
A) A
B) B
C) C
D) D
E) E
70) If both the supply and demand curves shift simultaneously, we can always predict what will
happen to
A) both the price and the quantity.
B) either the price or the quantity, but not both.
C) only the price.
D) only the quantity.
E) neither the price nor the quantity.
71) A competitive market is in equilibrium. Then there is an increase in demand and an increase
in supply. The equilibrium price ________, and the equilibrium quantity ________.
A) rises; increases
B) perhaps changes but we can't say if it rises, falls, or stays the same; does not change
C) falls; increases
D) perhaps changes but we can't say if it rises, falls, or stays the same; increases
E) falls; perhaps changes but we can't say if it increases, decreases, or stays the same
72) If the demand and supply both increase equally, then the equilibrium price ________ and the
equilibrium quantity ________.
A) increases; increase
B) increases; does not change
C) does not change; increases
D) increases; decreases
E) decreases; does not change
73) Kiwis and strawberries are substitutes for consumers. An increase in the price of a kiwi
coupled with an increase in the number of strawberry growers ________ the equilibrium price of
a pound of strawberries and ________ the equilibrium quantity of strawberries.
A) raises; increases
B) probably changes, but more information is needed to determine if it rises or falls; increases
C) raises; probably changes, but more information is needed to determine if it increases or
decreases
D) lowers; probably changes, but more information is needed to determine if it increases or
decreases
E) lowers; increases
74) A competitive market is in equilibrium. Then there is a decrease in demand and a decrease in
supply. The equilibrium price ________, and the equilibrium quantity ________.
A) rises; decreases
B) perhaps changes but we can't say if it rises, falls, or stays the same; decreases
C) falls; increases
D) perhaps changes but we can't say if it rises, falls, or stays the same; increases
E) rises; increases
75) If both supply and demand decrease by the same amount, the equilibrium price
A) does not change.
B) rises.
C) falls.
D) cannot be predicted.
E) None of the answers is correct because the price depends on what happens to the equilibrium
quantity.
76) Both the demand for and supply of cars changes in France. You observe that the quantity of
cars does not change but the price rises. Thus, which of the following occurred?
A) Demand and supply increased by an equal amount.
B) Demand and supply decreased by an equal amount.
C) Demand increased and supply decreased by an equal amount.
D) Demand decreased and supply increased by an equal amount.
E) Demand increased by a larger magnitude than supply decreased.
77) Suppose that the demand curve for desktop computers shifts rightward and at the same time
the supply curve shifts leftward. Which of the following could have caused these shifts?
A) Desktop computers are a normal good and incomes increased, while more firms entered the
market.
B) The price of a laptop computer, a substitute for desktop computers, fell and the cost of
producing desktop computers decreased.
C) Consumers purchased more computers because of the Christmas season and the labor costs of
producing desktop computers decreased.
D) Desktop computers are a normal good and incomes increased, while the labor costs of
producing personal computers increased.
E) Desktop computers are a normal good and incomes decreased, while the labor costs of
producing personal computers increased.
78) If the demand curve for desktop computers shifts rightward and at the same time the supply
curve shifts leftward, then
A) the equilibrium price definitely rises.
B) the equilibrium price definitely falls.
C) the equilibrium price definitely remains the same.
D) More information is needed to determine the effect on the equilibrium price.
E) the equilibrium quantity definitely increases.
79) If the demand curve for desktop computers shifts rightward and at the same time the supply
curve shifts leftward, then
A) the equilibrium quantity definitely increases.
B) the equilibrium quantity definitely decreases.
C) the equilibrium quantity definitely remains the same.
D) More information is needed to determine the effect on the equilibrium quantity.
E) the equilibrium price definitely falls.
80) The demand for oranges increases while the supply decreases. The equilibrium price of
oranges ________, and the equilibrium quantity ________.
A) rises; decreases
B) falls; perhaps changes but we can't say if it increases, decreases, or stays the same
C) falls; increases
D) does not change; perhaps changes but we can't say if it increases, decreases, or stays the same
E) rises; perhaps changes but we can't say if it increases, decreases, or stays the same
81) The demand for cat food decreases while the supply increases. The equilibrium price of cat
food ________, and the equilibrium quantity ________.
A) does not change; increases
B) rises; decreases
C) falls; perhaps changes but we can't say if it increases, decreases, or stays the same
D) rises; perhaps changes but we can't say if it increases, decreases, or stays the same
E) falls; increases
82) Suppose the government imposes a small carbon tax on automakers. But the price of gasoline
has doubled due to a Middle East crisis which has reduced oil production. In the market for
autos, these changes mean that supply and demand have both changed with the effect on the
demand larger than the effect on the supply. The result is that the price of autos will ________
and the number of autos sold will ________.
A) rise; perhaps change but we can't say if it increases, decreases, or stays the same
B) rise; increase
C) rise; decrease
D) fall; perhaps change but we can't say if it increases, decreases, or stays the same
E) fall; decrease
83) If both producers and consumers believe that a product's price will rise in the future, then at
the present, demand ________ and supply ________.
A) increases; increases
B) decreases; decreases
C) increases; decreases
D) decreases; increases
E) does not change; does not change
84) If both producers and consumers believe that a product's price will rise in the future, then at
the present, the equilibrium price
A) does not change.
B) rises.
C) falls.
D) might rise, fall, or not change, but the change can never be predicted.
E) might rise, fall, or not change depending on whether the effect from the producers is greater
than or less than the effect from the consumers.
85) The equilibrium price of a good occurs if the
A) quantity of the good demanded equals the quantity of the good supplied.
B) quantity of the good demanded is greater than the quantity of the good supplied.
C) quantity of the good demanded is less than the quantity of the good supplied.
D) demand for the good is equal to the supply of the good.
E) price of the good seems reasonable to most buyers.
86) If there is a surplus of a good, the quantity demanded is ________ the quantity supplied and
the price will ________.
A) less than; rise
B) less than; fall
C) greater than; rise
D) greater than; fall
E) equal to; fall
87) The graph illustrates the market for bottled water. When the price exceeds the equilibrium
price, the quantity demanded is ________ the quantity supplied and the price of the good will
________.
A) less then; fall
B) greater than; rise
C) greater than; fall
D) less than; rise
E) equal to; fall
88) Which of the following is correct?
i. A surplus puts downward pressure on the price of a good.
ii. A shortage puts upward pressure on the price of a good.
iii. There is no surplus or shortage at equilibrium.
A) i and ii
B) i and iii
C) ii and iii
D) i, ii, and iii
E) only iii
89) Which of the following is the best explanation for why the price of gasoline increases during
the summer months?
A) Oil producers have higher costs of production in the summer.
B) Sellers have to earn profits during the summer to cover losses in the winter.
C) There is increased driving by families going on vacation.
D) There is less competition among oil refineries in the summer.
E) The number of gas stations open 24 hours a day rises in the summer months and so the price
must rise to cover the higher costs.
90) The number of people looking to buy ceiling fan buyers increases, so there is an increase in
the
A) quantity of ceiling fans demanded and a surplus of ceiling fans.
B) demand for ceiling fans and a rise in the price of a ceiling fan.
C) demand for ceiling fans and a surplus of ceiling fans.
D) supply of ceiling fans and no change in the price of a ceiling fan.
E) demand for ceiling fans and in the supply of ceiling fans.
91) When the demand for a good decreases, its equilibrium price ________ and equilibrium
quantity ________.
A) falls; decreases
B) falls; increases
C) rises; decreases
D) rises; increases
E) falls; does not change
92) A technological improvement lowers the cost of producing corn. As a result, the price of a
pound of corn ________ and the quantity of corn ________.
A) rises; increases
B) rises; decreases
C) falls; increases
D) falls; decreases
E) falls; does not change
93) The technology associated with manufacturing computers has advanced enormously. This
change has led to the price of a computer ________ and the quantity ________.
A) rising; increasing
B) rising; decreasing
C) falling; increasing
D) falling; decreasing
E) falling; not changing
94) The graph illustrates the market for bottled water. If the producers of bottled water switch to
using improved technology, then the
A) supply of bottled water decreases.
B) quantity demanded of bottled water increases.
C) quantity demanded of bottled water does not change.
D) price of bottled water rises.
E) supply curve shifts leftward.
95) Suppose that the price of lettuce used to produce tacos increases. This change means that the
equilibrium price of a taco ________ and the equilibrium quantity ________.
A) rises; increases
B) rises; decreases
C) falls; increases
D) falls; decreases
E) does not change; decreases
96) Suppose a medical study reveals new benefits to consuming beef and at the same time a
bumper corn crop reduces the cost of feeding steers. The equilibrium quantity of beef will
A) decrease.
B) perhaps increase, decrease, or stay the same, but more information is needed to determine
which it does.
C) stay the same.
D) increase.
E) definitely either stay the same or decrease.
97) Candy makers accurately anticipate the increase in demand for candy for Halloween so that
the supply of candy and demand for candy increase the same amount. As a result, the price of
candy ________ and the quantity of candy ________.
A) rises; does not change
B) falls; increases
C) does not change; increases
D) does not change; does not change
E) rises; increases
98) The graph illustrates the market for British pounds, the currency of the United Kingdom. As
the number of buyers of pounds increases and the number of sellers of pounds increases, the
equilibrium price of a pound
A) will rise.
B) will fall
C) will remain the same.
D) might rise, fall, or remain the same depending on whether the effect on buyers is larger than,
less than, or the same as the effect on sellers.
E) None of the above answers is correct.
99) The graph illustrates the market for computers. If the number of buyers of computers
increases and technology advances, you predict that the
A) equilibrium quantity of computers will increase.
B) equilibrium quantity of computers will decrease.
C) equilibrium price of a computer will rise.
D) equilibrium price of a computer will fall.
E) equilibrium quantity of computers might increase, decrease, or not change.
100) Which of the following definitely results in a product's equilibrium price rising?
A) an increase in both demand and supply
B) a decrease in both demand and supply
C) an increase in demand combined with a decrease in supply
D) a decrease in demand combined with an increase in supply
E) an increase in the supply combined with no change in the demand
