a. shift from S1 to S3. d. shift from S2 to S1.
b. remain at S1. e. shift from S2 to S3.
c. shift from S1 to S2.
87. If the price of Gatorade increases, the equilibrium price of Powerade, a substitute good, will
________ because of a shift in ________.
a. increase; demand d. decrease; supply
b. increase; supply e. decrease; demand
c. decrease; demand
88. Which of the quantity (Q) and price (P) combinations in the accompanying figure represents the
market at competitive equilibrium?
a. (15, $10) d. (30, $6)
b. (15, $6) e. (30, $10)
c. (22, $8)
89. According to the accompanying figure, if the price is $10, there is a ________ of ________ units.
a. shortage; 15 d. surplus; 30
b. surplus; 15 e. surplus; 22
c. shortage; 30
90. The equilibrium price and quantity in this market are
a. $4.00 and 40 units. d. $2.00 and 60 units.
b. $4.00 and 80 units. e. $8.00 and 40 units.
c. $2.00 and 50 units.
91. If the price of this good is $2.00, there would be a ________ of ________ units.
a. shortage; 20 d. surplus; 30
b. surplus; 50 e. surplus; 20
c. shortage; 30
92. A shortage occurs whenever
a. the quantity supplied is greater than the quantity demanded.
b. the price is above the equilibrium quantity.
c. the quantity supplied is less than the quantity demanded.
d. the government places a binding price floor.
e. the government places a nonbinding price ceiling.
93. When the price is ________ the equilibrium price, we would expect there to be a ________,
causing the market to put ________ pressure on the price until it went back to the equilibrium
price.
a. above; surplus; upward d. below; shortage; downward
b. above; shortage; downward e. above; surplus; downward
c. below; surplus; upward
94. When the demand curve shifts to the right and the supply curve is held constant,
a. the equilibrium price and quantity decrease.
b. the equilibrium price increases and the equilibrium quantity decreases.
c. the equilibrium price decreases and the equilibrium quantity increases.
d. the equilibrium price and quantity increase.
e. one can see a movement along the demand curve.
95. The equilibrium price of peanut butter is $5. A study comes out that says the fat in peanut butter is
good for the heart. Holding all other factors constant, which of the following scenarios could
happen?
a. The price of peanut butter increases to $7 because of a supply shift.
b. The price of peanut butter decreases to $4 because of a supply shift.
c. The price of peanut butter decreases to $4 because of a demand shift.
d. The price of peanut butter increases to $7 because of a demand shift.
e. The price of peanut butter increases to $7 because of a demand and a supply shift.
96. Some studies have shown that eating chocolate before a test can increase brain activity, thereby
causing students to score higher on exams. When these findings were announced, the price and
quantity sold of chocolate increased in college towns. One reason for this could have been that the
a. producers increased their supply of chocolate.
b. consumers increased their demand for chocolate.
c. producers increased their supply of chocolate and consumers increased their demand for
chocolate.
d. producers decreased their supply of chocolate.
e. consumers decreased their demand of chocolate.
97. The latest data from the movie studios reveals that attendance at movies has declined as well as the
average ticket price. How could this have possibly happened?
a. There was an increase in demand and no change in supply.
b. There was a decrease in demand and an increase in supply.
c. There was no change in demand and an increase in supply.
d. There was a decrease in demand and no change in supply.
e. There was no change in demand and a decrease in supply.
98. After a new technology is introduced, the price typically falls. What is a possible explanation for
this?
a. More people purchase the product and more firms produce the product.
b. Fewer people purchase the product and fewer firms produce the product.
c. More firms produce the product.
d. More people purchase the product.
e. Fewer people purchase the product.
99. The economists at JET Consulting consider Campbell’s Soup to be an inferior good. During a
recession, when the income in the economy is decreasing, economists at JET Consulting would
expect the demand curve for Campbell’s Soup to ________, causing the equilibrium price to
________ and the equilibrium quantity to ________.
a. shift to the left; decrease; decrease
b. shift to the left; increase; increase
c. shift to the right; decrease; increase
d. shift to the right; increase; decrease
e. shift to the right; increase; increase
100. In the first few months of 2012, the price of gasoline increased by approximately 15 percent.
Because of this increase, we would expect the ________ curve in the market for hybrid cars to
________.
a. demand; shift to the right d. demand; shift to the left
b. demand; make no movement e. supply; shift to the right
c. supply; shift to the left
101. If the number of buyers in a market increases from 50 to 100, you would expect the equilibrium
price to ________ and the equilibrium quantity to ________, holding all else constant.
a. increase; increase d. decrease; increase
b. increase; decrease e. remain the same; remain the same
c. decrease; decrease
102. Refer to the accompanying diagram. Which of the following scenarios would explain this change
in equilibrium?
a. A number of firms left the market.
b. A number of buyers entered the market, and a number of firms entered the market.
c. The price of a complement of this good increased.
d. The price of a substitute of this good increased.
e. The price of this good decreased.
103. A decrease in demand is represented by a
a. shift of the demand curve to the right.
b. movement along the demand curve to the right.
c. shift of the demand curve to the left.
d. movement along the demand curve to the left.
e. shift in the supply curve.
104. When the demand curve shifts to the left and all else is held constant, the equilibrium price
________ and the equilibrium quantity ________.
a. falls; rises d. rises; rises
b. rises; falls e. falls; remains constant
c. falls; falls
105. The equilibrium price of teddy bears is $5. A study comes out that says owning a teddy bear causes
you to earn a lower salary. If all other factors are held constant, which of the following scenarios
could happen?
a. The price of teddy bears increases to $7 because of a supply shift.
b. The price of teddy bears decreases to $4 because of a supply shift.
c. The price of teddy bears decreases to $4 because of a demand shift.
d. The price of teddy bears increases to $7 because of a demand shift.
e. The price of teddy bears increases to $7 because of both a demand shift and a supply shift.
106. If all else is held constant, what would happen to the equilibrium price and quantity of iPhones if
the price of an Android phone decreased?
a. They would both increase.
b. They would both decrease.
c. One would increase and one would decrease, but we don’t know which would do what.
d. The price would increase and the quantity would decrease.
e. The price would decrease and the quantity would increase.
107. Assume that the market for baseballs is in equilibrium. There is a sudden decrease in income
throughout the economy. If all else is held constant, we would expect that if baseballs are a(n)
________ good, then the demand curve will shift to the ________, causing the equilibrium price
and quantity to ________.
a. inferior; left; fall d. normal; left; fall
b. normal; right; rise e. normal; left; rise
c. inferior; right; fall
108. Wine and cheese are complement goods because they are consumed together. What would we
expect to happen to the equilibrium quantity of cheese if the price of wine increased and all else is
held constant?
a. It would increase because of a supply shift.
b. It would increase because of a demand shift.
c. It would stay the same because of both a demand and a supply shift.
d. It would decrease because of a supply shift.
e. It would decrease because of a demand shift.
109. When supply shifts to the right and demand stays constant, the equilibrium price ________ and the
equilibrium quantity ________.
a. increases; decreases d. decreases; increases
b. increases; increases e. stays the same; increases
c. decreases; decreases
110. A technological advancement for Good A will shift the ________ curve of Good A to the
________, making the equilibrium price ________.
a. demand; left; decrease d. supply; left; increase
b. supply; right; increase e. supply; right; decrease
c. demand; right; increase
111. The difference between a tax and a subsidy is that when the government places a tax on a good, it
________ the equilibrium price and ________ the equilibrium quantity, whereas when the
government places a subsidy on a good, it ________ the equilibrium price and ________ the
equilibrium quantity.
a. increases; decreases; decreases; increases
b. increases; increases; decreases; decreases
c. decreases; decreases; increases; increases
d. decreases; increases; increases; decreases
e. increases; does not change; does not change; increases
112. When a hurricane rips through Florida, the price of oranges rises because the
a. demand curve shifts to the left.
b. supply curve shifts to the right.
c. demand curve shifts to the right.
d. supply curve shifts to the left.
e. supply and demand curves both shift to the left.
113. Sabrina decided to start selling lemonade on her street. The other kids in the neighborhood noticed
that Sabrina was making a lot of money selling lemonade. These kids decided to open their own
lemonade stand. When they opened their own lemonade stand, the equilibrium price ________ and
the equilibrium quantity ________.
a. increased; decreased d. decreased; decreased
b. decreased; increased e. stayed the same; stayed the same
c. increased; increased
114. What would happen to the equilibrium price and quantity of shirts if the price of cotton decreases
and all else is held constant?
a. The price falls and the quantity rises.
b. The price rises and the quantity falls.
c. The price falls and the quantity falls.
d. The price rises and the quantity rises.
e. The price falls and the quantity remains constant.
115. The market for footballs is perfectly competitive. If all else is held constant and the price of leather
decreases, we would expect that the equilibrium quantity of footballs would ________ and the
equilibrium price would ________.
a. fall; rise d. rise; rise
b. rise; fall e. fall; remain constant
c. fall; fall
116. According to the supply and demand model, when the cotton gin was invented, if all else was held
constant, we would expect the equilibrium price of cotton to ________ and the equilibrium
quantity of cotton to ________.
a. increase; increase d. decrease; decrease
b. increase; decrease e. remain the same; increase
c. decrease; increase
117. Refer to the accompanying figure. What event would cause the supply curve to shift out?
a. Consumers earn higher incomes.
b. Consumers earn lower incomes.
c. The price of an input increased.
d. Firms entered the market.
e. Firms expected the price to rise in the future.
118. Taxes cause the equilibrium price of a good to
a. increase. d. go up only for producers.
b. decrease. e. go down only for consumers.
c. remain the same.
119. When firms in a market expect the price of their products to rise, the supply curve of their goods
________, causing the equilibrium price to ________.
a. decreases; rise
b. decreases; fall
c. increases; fall
d. increases; rise
e. increases; rise and the equilibrium quantity to fall
120. Oil is a main component in the manufacture of plastic bags. If the price of oil were to increase, the
price of plastics bags would ________ and the quantity would ________.
a. increase; increase d. decrease; decrease
b. increase; decrease e. increase; stay the same
c. decrease; increase
121. Leading economic indicators suggest that incomes will be going up next year. In response to these
reports, companies are forecasting increased prices for future sales of their goods. As a result of
these increases, the supply curve will
a. shift to the right, causing the equilibrium price to decrease.
b. remain the same, but the equilibrium price will increase.
c. remain the same, but the equilibrium price will decrease.
d. shift to the right, causing the equilibrium price to increase.
e. shift to the left, causing the equilibrium price to increase.
122. With no barriers to entry or exit and when firms in a market are operating at a loss, we can expect
other firms to exit, causing the ________ curve to shift to the ________ and making the
equilibrium price ________ and the equilibrium quantity ________.
a. demand; right; increase; increase d. supply; left; increase; increase
b. demand; left; decrease; decrease e. supply; left; increase; decrease
c. supply; right; decrease; increase
123. Which of the following scenarios best describes the change in the equilibrium shown in the
accompanying graph?
a. firms entering the market d. buyers leaving the market
b. firms leaving the market e. an input cost decreasing
c. buyers entering the market
124. A “twofold” change is when
a. income goes up and then it goes down.
b. the equilibrium price of both a complement and a substitute changes.
c. supply and demand both shift.
d. equilibrium price and equilibrium quantity both change.
e. some input costs go up and some go down.
125. If the price and quantity for a normal good, Good X, is $8 and 6 units at the original equilibrium,
what is one possibility for the new equilibrium of Good X if we see income increase and all other
factors stay constant?
a. $10 and 4 units d. $6 and 8 units
b. $10 and 8 units e. $10 and 2 units
c. $6 and 4 units
126. During the winter months, many elderly people leave their homes in northern New York and travel
south to Florida or Arizona. What would we expect to happen to the equilibrium price and quantity
of items most used by the elderly in northern New York?
a. They would both increase.
b. They would both decrease.
c. One would increase and one would decrease, but we don’t know which would do what.
d. The price would increase and the quantity would decrease.
e. The price would decrease and the quantity would increase.
127. If the price and quantity for an inferior good, Good X, is $8 and 6 units at the original equilibrium,
what is one possibility for the new equilibrium of Good X if we see income increase and all other
factors stay constant?
a. $10 and 4 units d. $6 and 8 units
b. $10 and 8 units e. $10 and 2 units
c. $6 and 4 units
128. When both supply and demand shift to the left, the equilibrium
a. price always rises. d. quantity always rises.
b. price always falls. e. quantity is indeterminate.
c. quantity always falls.
129. When both curves shift
a. equilibrium price is always indeterminate.
b. equilibrium quantity is always indeterminate.
c. equilibrium price and equilibrium quantity are indeterminate.
d. equilibrium price or equilibrium quantity is indeterminate, but we can’t predict which one.
e. neither equilibrium price nor equilibrium quantity is indeterminate.
130. The change in an equilibrium value is sometimes indeterminate due to the fact that
a. it is possible for demand to increase or decrease more than supply increases or decreases.
b. demand always shifts less than supply.
c. supply always shifts less than demand.
d. both supply and demand may not change.
e. both supply and demand may increase or decrease by equal amounts.
131. When both supply and demand shift to the right, equilibrium
a. price always rises. d. quantity always rises.
b. price always falls. e. quantity is indeterminate.
c. quantity always falls.
132. Spam is considered an inferior good. What would happen to the equilibrium price and quantity of
Spam if income decreased and more firms started producing Spam?
a. Equilibrium price will go up and equilibrium quantity will go down.
b. Equilibrium price will go up and equilibrium quantity will go up.
c. Equilibrium price will go down and equilibrium quantity will be indeterminate.
d. Equilibrium price will be indeterminate and equilibrium quantity will go up.
e. Equilibrium price will go up and equilibrium quantity will be indeterminate.
133. In one year, 15 bowling alleys opened in California. During that same year, ESPN started
broadcasting professional bowling on TV, which sparked more interest in the sport. What would
we expect to happen to the price and quantity of a game of bowling in California during that year?
a. Equilibrium price will be indeterminate and equilibrium quantity will go down.
b. Equilibrium price will go up and equilibrium quantity will go up.
c. Equilibrium price will go down and equilibrium quantity will be indeterminate.
d. Equilibrium price will be indeterminate and equilibrium quantity will go up.
e. Equilibrium price will go up and equilibrium quantity will be indeterminate.
134. The government offers numerous educational subsidies through grants and low-cost equipment to
schools. They also provide a lot of incentives to go to school. Because of this, we expect that the
equilibrium price of education will ________ and the equilibrium quantity of students will
________.
a. be indeterminate; go up d. be indeterminate; go down
b. go up; go up e. go up; be indeterminate
c. go down; be indeterminate
135. What would we expect to happen to the price of bagels if the price of flour decreased and the price
of cream cheese decreased?
a. The equilibrium price of bagels will be indeterminate and the equilibrium quantity will go up.
b. The equilibrium price will go up and the equilibrium quantity will go up.
c. The equilibrium price will go down and the equilibrium quantity will be indeterminate.
d. The equilibrium price will be indeterminate and the equilibrium quantity will go down.
e. The equilibrium price will go up and the equilibrium quantity will be indeterminate.
136. When people move to an area of the world that was previously unpopulated, we expect more
consumers and more producers to spring up in that area. What would we expect to happen to the
price and quantity in the markets where this happens?
a. The equilibrium price will go up and the equilibrium quantity will go up.
b. The equilibrium price will go down and equilibrium quantity will be indeterminate.
c. The equilibrium price will be indeterminate and equilibrium quantity will go up.
d. The equilibrium price will go up and equilibrium quantity will be indeterminate.
e. The equilibrium price will be indeterminate and equilibrium quantity will go down.
137. When both supply and demand decrease, the equilibrium price ________ and equilibrium quantity
________.
a. increases; increases d. increases; is indeterminate
b. is indeterminate; increases e. is indeterminate; decreases
c. decreases; is indeterminate
138. What would happen to the equilibrium price and quantity for the market for cigarettes if the
government increased the tax and a scientific study came out confirming that smoking cigarettes
increased the rate of heart disease?
a. Equilibrium price will be indeterminate and equilibrium quantity will go down.
b. Equilibrium price will go up and equilibrium quantity will go up.
c. Equilibrium price will go down and equilibrium quantity will be indeterminate.
d. Equilibrium price will be indeterminate and equilibrium quantity will go up.
e. Equilibrium price will go up and equilibrium quantity will be indeterminate.
139. According to a supply and demand model for apples, if the average household income decreases at
the same time 10 apple orchards go out of business, one would expect the equilibrium
a. price of apples to increase and the equilibrium quantity of apples in the market to decrease.
b. price of apples to be indeterminate and the equilibrium quantity of apples in the market to
increase.
c. quantity of apples in the market to be indeterminate and the equilibrium price of apples to
increase.
d. quantity of apples in the market to decrease and the equilibrium price of apples to stay the
same.
e. quantity of apples in the market to decrease and the equilibrium price of apples to be
indeterminate.
140. Many consumer items eventually go out of style, and because fewer people want these items,
demand for them drops. When this happens, we usually see production of these items stop. What
happens to the equilibrium price and equilibrium quantity in a market like this?
a. The equilibrium price goes up and equilibrium quantity goes up.
b. The equilibrium price is indeterminate and equilibrium quantity goes up.
c. The equilibrium price goes down and equilibrium quantity is indeterminate.
d. The equilibrium price is indeterminate and equilibrium quantity goes down.
e. The equilibrium price goes up and equilibrium quantity is indeterminate.
141. The change in equilibrium shown in the accompanying figure would be explained by a(n)
________ in the price of an input and a(n) ________ in the price of a ________.
a. increase; increase; complement d. increase; decrease; complement
b. decrease; increase; complement e. increase; increase; substitute
c. decrease; increase; substitute
142. When supply shifts left and demand shifts right,
a. the equilibrium price always rises.
b. the equilibrium price always falls.
c. the equilibrium quantity always falls.
d. the equilibrium quantity always rises.
e. the equilibrium price is indeterminate.
143. When supply shifts right and demand shifts left,
a. the equilibrium price always rises.
b. the equilibrium price always falls.
c. the equilibrium quantity always falls.
d. the equilibrium quantity always rises.
e. the equilibrium price is indeterminate.
144. What happens to the equilibrium price and equilibrium quantity of a good if both the producers and
the consumers of that good expect its price to be higher in the future?
a. The equilibrium price will go up and equilibrium quantity will go up.
b. The equilibrium price will go down and equilibrium quantity will be indeterminate.
c. The equilibrium price will be indeterminate and equilibrium quantity will go up.
d. The equilibrium price will go up and equilibrium quantity will be indeterminate.
e. The equilibrium price will be indeterminate and equilibrium quantity will go down.
145. Assume that the price of rubber increased at the same time that Michael Jordan, arguably the best
NBA basketball player of all time, became famous. What do you expect to happen to the
equilibrium price and equilibrium quantity of the basketball shoes that are promoted by Michael
Jordan?
a. Equilibrium price will go up and equilibrium quantity will go down.
b. Equilibrium price will go up and equilibrium quantity will go up.
c. Equilibrium price will go down and equilibrium quantity will be indeterminate.
d. Equilibrium price will go down and equilibrium quantity will go up.
e. Equilibrium price will go up and equilibrium quantity will be indeterminate.
146. Shoes are considered to be a normal good. What would happen to the equilibrium price and
equilibrium quantity of shoes if income increases and the cost of labor to produce shoes increases?
a. The equilibrium price will go up and equilibrium quantity will go up.
b. The equilibrium price will be indeterminate and equilibrium quantity will go up.
c. The equilibrium price will go down and equilibrium quantity will be indeterminate.
d. The equilibrium price will go up and equilibrium quantity will be indeterminate.
e. The equilibrium price will be indeterminate and equilibrium quantity will go down.
147. In agriculture, a “bumper crop” refers to a particularly productive harvest. If there is a bumper crop
for wheat at the same time that more people become allergic to wheat and all else is held constant,
what will happen to the equilibrium price and quantity for wheat?
a. The equilibrium price will go up and equilibrium quantity will go up.
b. The equilibrium price will be indeterminate and equilibrium quantity will go up.
c. The equilibrium price will go down and equilibrium quantity will be indeterminate.
d. The equilibrium price will go up and equilibrium quantity will be indeterminate.
e. The equilibrium price will be indeterminate and equilibrium quantity will go down.
148. Top Ramen is a brand of noodles that is widely considered to be an inferior good with a high salt
content. What would happen to the equilibrium price and equilibrium quantity of Top Ramen if
income went up and the price of salt decreased?
a. The equilibrium price will go up and equilibrium quantity will go up.
b. The equilibrium price will go down and equilibrium quantity will be indeterminate.
c. The equilibrium price will be indeterminate and equilibrium quantity will go up.
d. The equilibrium price will go up and equilibrium quantity will be indeterminate.
e. The equilibrium price will be indeterminate and equilibrium quantity will go down.
149. A new car is typically considered to be a normal good. What would happen to the equilibrium
price and quantity of new cars if there is a recession where many people lose their jobs?
a. The equilibrium price would rise and the equilibrium price would fall as demand shifts to the
left.
b. The equilibrium price and quantity would both fall as demand shifts to the left.
c. The equilibrium price and quantity would both rise as demand shifts to the right.
d. The equilibrium price would fall and the equilibrium quantity would rise as demand shifts to
the right.
e. There would be no change to the equilibrium price or quantity.
150. What would happen in the market for SUVs if the government started to subsidize the production
of SUVs that get very few miles per gallon and the price of gasoline went up?
a. The equilibrium price will go up and equilibrium quantity will go up.
b. The equilibrium price will go down and equilibrium quantity will be indeterminate.
c. The equilibrium price will be indeterminate and equilibrium quantity will go up.
d. The equilibrium price will go up and equilibrium quantity will be indeterminate.
e. The equilibrium price will be indeterminate and equilibrium quantity will go down.
SHORT ANSWER
1. Compare and contrast the differences between a competitive market and an imperfect market, and
give an example of an imperfect market.
2. Assume that the market for cheeseburgers consists of only three individuals: Jerry, George, and
Elaine. Here are their demand schedules:
Price Jerry’s
Demand Price George’s
Demand Price Elaine’s
Demand
$0 5 $0 8 $0 2
$2 4 $2 7 $2 2
$4 4 $4 7 $4 1
$6 3 $6 6 $6 1
$8 2 $8 5 $8 0
$10 1 $10 4 $10 0
From the information in demand schedules, answer the following questions:
a. If the price of a cheeseburger was $2, how many cheeseburgers would be sold?
b. If the price of a cheeseburger was $8, how many cheeseburgers would be sold?
c. Construct the market demand schedule for cheeseburgers.
3. Without using a graph, explain the difference between a movement along a demand curve and a
shift in the entire demand curve.
4. You are given the following demand schedule:
Price Quantity
Demanded
$0 40
$3 30
$6 20
$9 10
$12 0
a. Graph the information from this demand schedule. Be sure to label everything.
b. Graph the following demand schedule:
Price Quantity
Demanded
$3 50
$6 40
$9 30
$12 20