141) In the above figure, if D2 is the demand curve, then a price of P3 would result in
A) a shortage of Q3 – Q1.
B) a shortage of Q4 – Q3.
C) a surplus of Q3 – Q1.
D) a surplus of Q4 – Q0.
142) In the above figure, if D2 is the original demand curve for a normal good and income
decreases, which price and quantity might result?
A) point a, with price P2 and quantity Q2
B) point b, with price P1 and quantity Q1
C) point c, with price P3 and quantity Q3
D) point d, with price P1 and quantity Q3
143) In the above figure, if D2 is the original demand curve and the price of a substitute in
consumption rises, which price and quantity might result?
A) point a, with price P2 and quantity Q2
B) point b, with price P1 and quantity Q1
C) point c, with price P3 and quantity Q3
D) point d, with price P1 and quantity Q3
144) In the above figure, if D2 is the original demand curve and consumers come to expect that
the price of the good will rise in the future, which price and quantity might result?
A) point a, with price P2 and quantity Q2
B) point b, with price P1 and quantity Q1
C) point c, with price P3 and quantity Q3
D) point d, with price P1 and quantity Q3
145) In the above figure, if D2 is the original demand curve and the population falls, which price
and quantity might result?
A) point a, with price P2 and quantity Q2
B) point b, with price P1 and quantity Q1
C) point c, with price P3 and quantity Q3
D) point d, with price P1 and quantity Q3
146) In the figure, the equilibrium price is initially $3 per bushel of wheat. If suppliers come to
expect that the price of a bushel of wheat will rise in the future, but buyers do not, the current
equilibrium price will
A) rise.
B) not change.
C) fall.
D) Perhaps rise, fall, or stay the same, depending on whether there are more demanders or
suppliers in the market.
147) In the figure, the equilibrium price is initially $3 per bushel of wheat. If buyers come to
expect that the price of a bushel of wheat will rise in the future, but sellers do not, the current
equilibrium price will
A) rise.
B) not change.
C) fall.
D) Perhaps rise, fall, or stay the same, depending on whether there are more demanders or
suppliers in the market.
148) Using the above figure, suppose that roses are a normal good. If there is an increase in
income
A) the equilibrium price will rise above $25 per dozen roses.
B) the equilibrium quantity will decrease below 10 dozen roses.
C) we cannot predict what will happen to the equilibrium price.
D) we cannot predict what will happen to the equilibrium quantity.
149) Using the above figure, suppose there is a decrease in the number of suppliers. Then
A) the equilibrium price will decrease below $25 per dozen roses.
B) we cannot predict what will happen to equilibrium quantity.
C) the equilibrium quantity will decrease below 10 dozen roses.
D) both the equilibrium price and quantity will increase.
150) In the above figure, in order for the equilibrium price to remain constant while the
equilibrium quantity increases, the
A) supply and demand curves both would have to shift leftward.
B) supply curve would have to shift leftward and the demand curve would have to shift
rightward.
C) supply curve would have to shift rightward and the demand curve would have to shift
leftward.
D) supply and demand curves both would have to shift rightward.
151) Using the above figure, suppose that roses are a normal good. If incomes decrease while
simultaneously there is an increase in the price of the resources used to produce roses, then
A) the price will definitely increase above $25 per dozen roses.
B) the quantity will definitely decrease below 10 dozen roses.
C) the price will definitely decrease below $25 per dozen roses.
D) we cannot tell what will happen to equilibrium quantity.
152) Pizza and hamburgers are substitutes for consumers. A fall in the price of a pizza ________
the price of a hamburger and ________ the quantity of hamburgers.
A) raises; increases
B) raises; decreases
C) lowers; increases
D) lowers; decreases
153) How does an unusually warm winter affect the equilibrium price and quantity of gloves?
A) It raises both the price and the quantity.
B) It raises the price and decreases the quantity.
C) It lowers the price and increases the quantity.
D) It lowers both the price and the quantity.
154) You notice that the price and quantity of wheat both decrease. This observation can be the
result of the
A) demand curve for wheat shifting rightward.
B) demand curve for wheat shifting leftward.
C) supply curve of wheat shifting rightward.
D) supply curve of wheat shifting leftward.
155) The number of firms producing computer memory chips decreases. As a result, the price of
a memory chip ________ and the quantity of memory chips ________.
A) rises; increases
B) rises; decreases
C) falls; increases
D) falls; decreases
156) A technological improvement lowers the cost of producing coffee. At the same time,
consumers’ preferences for coffee increase. The equilibrium price of coffee will
A) rise.
B) fall.
C) remain the same.
D) rise, fall, or stay the same, depending on the relative size of the shifts in the demand and
supply curves.
157) Producers of tablet computers will be able to lower the wage rate that they pay to their
workers. You are asked to predict the effects on the supply of tablet computers, and the price of a
tablet computer. You predict that the supply curve shifts
A) rightward, and the price is constant.
B) leftward, and the price is constant.
C) rightward, and the price falls.
D) leftward, and the price rises.
6 News Based Questions
1) A ticket to see the Radio City Rockettes costs $90. You buy a ticket for $30 to see the New
York Jets play football. The money price for
A) the Rockettes ticket is $90 and the relative price is 3 Jets tickets per Rockette ticket.
B) the Rockettes ticket is 3 Jets tickets per Rockette ticket and the relative price is $90.
C) a Jets ticket is $30 and the relative price is 3 Rockettes tickets per Jets ticket.
D) a Jets ticket is $30 and $3 for a Rockettes ticket.
2) You can buy a season ticket to the Metropolitan Opera for $800. A season ticket plan to see
the New York Knicks is $1600. Which of the following is a CORRECT statement?
A) The money price of opera tickets is 1/2 of a Knicks ticket per opera ticket.
B) The opportunity cost of a Knicks ticket is 2 opera tickets per Knicks ticket.
C) The relative price of an opera ticket is $800.
D) the money price of a Knicks ticket is 2 opera tickets per Knicks ticket.
3) There are 72,922 seats in Lambeau Field where the Green Bay Packers play football. The
Packers have sold out their season tickets since 1960. There are about 80,000 people on the
waiting list to buy season tickets in 2015. This means that at the price in 2015, the
A) quantity demanded of Packer season tickets is 72,922.
B) quantity demanded of Packer season tickets is about 80,000.
C) quantity demanded of Packer season tickets is about 153,000.
D) demand for Packer season tickets is 72,922.
4) There are 72,922 seats in Lambeau Field where the Green Bay Packers play football. The
Packers have sold out their season tickets since 1960. There are about 80,000 people on the
waiting list to buy season tickets in 2015. If the Packers raised ticket prices, the
A) demand for Packers tickets decreases.
B) demand curve for Packers tickets shifts leftward.
C) demand curve for Packers tickets shifts rightward.
D) the quantity demanded of Packers tickets decreases.
5) There are 72,922 seats in Lambeau Field where the Green Bay Packers play football. The
Packers have sold out their season tickets since 1960. There were about 70,000 people on the
waiting list to buy season tickets in 2010. Packers tickets are a normal good. As a result of the
economic recession in 2010 during which people’s incomes decreased, the
A) demand for Packers tickets decreased.
B) demand curve for Packers tickets shifted rightward.
C) quantity demanded of Packers tickets decreased.
D) substitution effect changed the quantity demanded.
6) In 2012 Nike reduced the price of its running shoes by 20 percent. As a result, the substitution
effect caused
A) the demand for Nike shoes to increase.
B) people to switch from Adidas shoes and buy more Nikes.
C) the relative price of Nikes to increase.
D) the demand curve for Nikes to shift rightward.
7) In mid-2012 Delta increased the price of a New York to LA ticket by 10 percent. As a result
of this price hike, there was a ________ shift in the demand curve for a ticket on Continental
because the price of a ________ had risen.
A) rightward; complement
B) leftward; substitute
C) leftward; complement
D) rightward; substitute
8) The figure above shows the market for airline tickets. If airline tickets are a normal good, then
the recession in 2008 that caused people’s incomes to decrease lead to a shift from
A) D0 to D1.
B) D1 to D0.
C) S0 to S1.
D) S1 to S0.
9) The figure above shows the market for airline tickets. In early 2008 the price of jet fuel rose.
This change is shown in the figure as a shift from
A) D0 to D1.
B) D1 to D0.
C) S0 to S1.
D) S1 to S0.
10) The figure above shows the market for airline tickets. In early 2008 firms negotiated lower
wages with their workers. This change is shown in the figure as a shift from
A) D0 to D1.
B) D1 to D0.
C) S0 to S1.
D) S1 to S0.
11) The Miami Dolphins play football in Joe Robbie Stadium which holds 76,500 seats. In 2009,
attendance averaged about 70,000 fans per game. This means that the quantity supplied of seats
is
A) 76,500.
B) 70,000.
C) 6,500.
D) 126,500.
12) General Electric (GE) produces wind turbines that generate wind power. Over the past 10
years, the advances in technology used to produce wind turbines has resulted in
A) a movement up along the supply curve for wind-generated power.
B) a rightward shift in the supply curve for wind-generated power.
C) a decrease in the supply of wind-generated power.
D) GE increasing the quantity supplied of wind turbines.
13) Farmers can use their land to grow soy beans or corn. If the price of corn rises,
A) the supply of soybeans decreases and the soybean supply curve shifts leftward.
B) the supply of soybeans increases.
C) the supply of corn increases and the corn supply curve shifts rightward.
D) the supply of corn increases.
14) In 2006, the base price of a Hummer SUV was about $30,000. By 2008 as gasoline prices
increased,
A) the demand curve for Hummers shifted leftward and Hummer prices decreased.
B) the demand curve for Hummers shifted rightward and Hummer prices increased.
C) there was a movement down along the Hummer demand curve.
D) there was a movement up along the Hummer supply curve.
1) Explain why a relative price is an opportunity cost.
2) What is the difference between a money price and a relative price? When the demand and
supply model predicts that the price of coffee will rise, is the model predicting that the money
price rises or the relative price rises?
3) What is the law of demand?
4) What leads to a decrease in the quantity demanded of a good or service?
5) An economist says: “The demand curve has two interpretations.” What does the economist
mean?
6) List the factors change demand and shift the demand curve. Tell what happens to demand and
the demand curve when there is an increase in the factor.
7) Computers are a complement to computer software. Suppose the price of a computer falls.
How does this fall in price affect the demand for computer software and the demand curve for
computer software?
8) What is the difference between a normal good and an inferior good? Give an example of each.
9) Consumers’ income declines and, as a result, the demand for margarine increases. Is margarine
a normal or an inferior good? Explain.
10) Explain the difference between a change in demand and a change in quantity demanded.
What leads to each of these changes?
11) Your friend Tony opened a pizzeria. You helped him to advertise his pizza, which is in fact
the best pizza in town. As a result, the demand for Tony’s pizza increases and your friend,
noticing lines of customers, raises the price of his pizza. But then he fears that the higher price
will cause demand to decline, which will cause the price to drop. Is Tony right in his analysis of
the situation? Explain.
12) An economist says: “The supply curve has two interpretations.” What does the economist
mean?
13) List the factors that change supply and shift the supply curve. Tell what happens to supply
and the supply curve when there is an increase in the factor.
14) What are substitutes in production?
15) Suppose that the number of companies selling computer software decreases. How does this
change affect the supply of computer software and the supply curve of computer software?
16) Suppose that the technology used to produce computers advances. How does this change
affect the supply of computers and the supply curve of computers?
17) What leads to a decrease in the quantity supplied of a good or service?
18) What is the difference between quantity supplied and supply?
19) Explain how price can be a regulator, that is, how it can coordinate the plans of buyers and
sellers.
20) When does a shortage occur?
21) When does a surplus occur?
22) At prices above the equilibrium price, what occurs?
23) When the demand for blue jeans increases, what happens next?
24) Why does an increase in the supply of computers lead to a lower price for a computer?
25) “If the price of crude oil falls, the demand for gasoline will increase, so people will by more
gas and the price of gas will go up.” Is this statement true or false? Explain.
26) Personal computers are becoming less expensive as new technology reduces the cost of
production. In a supply and demand model, explain the effects of the technological innovations
and their effect on the quantity of computers.
27) In the market for bicycles, explain what happens to the supply and demand curves when
there is an increase in the price of steel used to make bikes.
28) What is the effect on the price and quantity of a product if both the demand and supply
simultaneously increase?
29) What is the effect on the price and quantity of a product if the demand decreases and the
supply simultaneously increases?
30) Computers are a complement to computer software. Suppose the price of a computer falls.
Simultaneously, suppose that the number of companies selling computer software decreases.
How do these changes affect the price and quantity of computer software?
31) In early 2009 the price of computer memory chips rose. In a demand and supply model,
shifts in what curve(s) could have brought about the higher price?
32) If the equilibrium price for a two-liter bottle of Coca-Cola is $1.50 today, just like it was ten
years ago, can we safely say that all supply and demand conditions in the market for Coke have
remained very stable all these years?
8 Numeric and Graphing Questions
1) The price of a computer is $1,000 and the price of a car is $12,000. What is the relative price
of a car? What is the relative price of a computer?