21) If equilibrium price falls and the equilibrium quantity of the good purchased decreases, what
has happened to either the supply curve or to the demand curve?
A) Supply increased.
B) Demand decreased.
C) Demand increased.
D) Supply decreased.
22) A change in an equilibrium price can result from
I. A change in demand
II. A change in supply
A) I only
B) II only
C) Both I and II
D) Neither I nor II
23) An increase in supply, other things being equal, will cause which of the following to occur?
A) quantity supplied to decrease.
B) quantity demanded to increase.
C) a rightward shift in the demand curve as the price falls.
D) a leftward shift in the demand curves as the price increases.
24) Suppose the price of pepperoni falls. In the market for pizza, in which pepperoni of a popular
ingredient, one would expect that
A) the supply of pizza would increase, and the price would fall.
B) the demand for pizza would increase, and the price would increase.
C) the demand for pizza would decrease, and price would fall.
D) the supply of pizza would decrease, and price would rise.
25) The prices of certain goods, such as ice and gasoline, often increase after a natural disaster
such as a hurricane. The economic explanation for this observation is that
A) people panic in disaster situations.
B) disasters bring out the worst in people.
C) the disaster temporarily reduces the supply of the goods and increases the demand for the
goods.
D) the disaster temporarily reduces the supply of the goods and reduces the demand for the
goods.
26) People often complain about price gouging after a disaster such as a hurricane. Suppose the
government successfully prevented price increases due to the disaster. We would expect
A) reconstruction to take longer because the quantity supplied of new materials would increase
more slowly.
B) reconstruction to take less time because the demand for materials would increase faster.
C) reconstruction never to occur.
D) reconstruction to take less time because the government could rebuild more quickly when
people are not in the way.
27) In the labor market, adjustments to changes in supply and demand
A) usually occur instantly.
B) usually take time to occur.
C) do not apply, since the labor market does not respond to supply and demand forces.
D) do not apply, since wages in the labor market always go up.
28) Hospitals announce that there are not enough nurses available to keep them fully staffed.
Economically speaking, what does this announcement mean?
A) The market wage for trained nurses is currently above the equilibrium wage.
B) There is currently a surplus of nurses in this market.
C) The market wage for nurses will eventually rise to the market clearing wage.
D) The market will adjust very rapidly to correct this imbalance because anyone can be a nurse
without any training.
29) Holding supply constant, a reduction in demand leads to
A) lower prices and higher quantity supplied.
B) lower prices and lower quantity supplied.
C) higher prices and higher quantity supplied.
D) higher prices and lower quantity supplied.
30) A drought destroyed a large amount of orange crops in California, leading to
A) a decrease in supply of oranges.
B) a decrease in quantity supplied of oranges.
C) a decrease in demand for oranges.
D) a decrease in quantity demanded for oranges.
31) In recent years, the price of smartphones has fallen, while the quantity exchanged of
smartphones has risen. We can conclude that this is most likely a result of
A) a decrease in supply while demand remained constant.
B) an increase in demand while supply remained constant.
C) an increase in demand that exceeded an increase in supply.
D) an increase in supply that exceeded an increase in demand.
32) Holding supply constant, an increase in demand leads to
A) lower prices and higher quantity supplied.
B) lower prices and lower quantity supplied.
C) higher prices and higher quantity supplied.
D) higher prices and lower quantity supplied.
33) The decrease in the price of gasoline to a national average of less than $2.0 during the
summer of 2016 was most likely a result of
A) an increase in demand due to reduced summer driving.
B) an increase in supply resulting from higher refinery output.
C) an increase in demand due to increase in summer driving along with a decrease in supply
resulting from reduced refinery output.
D) an increase in supply resulting from higher refinery output along with a decrease in demand
in summer driving.
34) Holding demand constant, a reduction in supply leads to
A) lower prices and higher quantity demanded.
B) lower prices and lower quantity demanded.
C) higher prices and higher quantity demanded.
D) higher prices and lower quantity demanded.
35) Holding demand constant, an increase in supply leads to
A) lower prices and higher quantity demanded.
B) lower prices and lower quantity demanded.
C) higher prices and higher quantity demanded.
D) higher prices and lower quantity demanded.
36) If price increases and the quantity purchased increases, we know that
A) supply increased.
B) supply decreased.
C) demand increased.
D) demand decreased.
37) The price of a good always changes when
A) either a shortage or a surplus occurs.
B) quantity demanded and quantity supplied are constant.
C) there is an increase in demand and an increase in supply.
D) there is a decrease in demand and a decrease in supply.
38) The price of labor in the agricultural industry has just increased. For agricultural products,
this will lead to
A) an increase in price and a decrease in quantity.
B) an increase in price and an increase in quantity.
C) a decrease in price and a decrease in quantity.
D) a decrease in price and an increase in quantity.
39) Refer to the above table for smartphones. Suppose there are technological advances in the
production of tablets. The new equilibrium price will be
A) $275.
B) $375.
C) less than $275.
D) between $275 and $375.
40) Refer to the above table for tablets. Suppose the demand for smartphones rises because more
people use the Internet with a tablet. The new equilibrium price will be
A) $200.
B) $275.
C) more than $275.
D) impossible to be determined given the information.
41) An increase in the equilibrium quantity of good B can be caused by
A) an increase the price of inputs utilized in producing good B.
B) an increase in the price of good B.
C) a technological improvement in the process of producing good B.
D) a reduction in the number of producers of good B.
42) An increase in the price of labor used to produce good A will lead to
A) an increase in the market clearing price of good A.
B) an increase in the supply of good A.
C) a decrease in the demand for good A.
D) an increase in the demand for good A.
43) The market clearing price of corn has just increased. Which of the following could have
caused this change?
A) a reduction in demand
B) a reduction in supply
C) an increase in quantity demanded
D) an increase in quantity supplied
44) Suppose the equilibrium quantity of ethanol has decreased. Which of the following could
have caused this change?
A) a decrease in demand
B) an increase in supply
C) an increase in quantity demanded
D) an increase in quantity supplied
45) The market clearing price of computer modems has just decreased. Which of the following
could have caused this change?
A) a decrease in supply at the same time that demand increases
B) an increase in supply at the same time that demand decreases
C) a decrease in supply with demand unchanged
D) an increase in demand with supply unchanged
46) Firms that produce 90 percent of all phone cameras have shut down their facilities for
maintenance. In the phone camera market this will lead to
A) an increase in price and a decrease in quantity.
B) an increase in price and an increase in quantity.
C) a decrease in price and a decrease in quantity.
D) a decrease in price and an increase in quantity.
47) A technological advancement has just occurred in the phone camera industry. In the
computer chip market this will lead to
A) an increase in price and a decrease in quantity.
B) an increase in price and an increase in quantity.
C) a decrease in price and a decrease in quantity.
D) a decrease in price and an increase in quantity.
48) The economy is undergoing a recession that has reduced consumers’ incomes. In the
computer chip market, this will lead to
A) an increase in price and a decrease in quantity.
B) an increase in price and an increase in quantity.
C) a decrease in price and a decrease in quantity.
D) a decrease in price and an increase in quantity.
49) Red wine has just been found to increase your expected life span by 5 years if you eat it
every day. In the market for red wine, this information will lead to
A) an increase in price and a decrease in quantity.
B) an increase in price and an increase in quantity.
C) a decrease in price and a decrease in quantity.
D) a decrease in price and an increase in quantity.
50) Goods A and B are complementary goods. An increase in the price of good A has occurred.
In the market for good B this will lead to
A) an increase in price and a decrease in quantity.
B) an increase in price and an increase in quantity.
C) a decrease in price and a decrease in quantity.
D) a decrease in price and an increase in quantity.
51) Goods A and B are complementary goods. A decrease in price of good A has occurred. In the
market for good B, this will lead to
A) an increase in price and a decrease in quantity.
B) an increase in price and an increase in quantity.
C) a decrease in price and a decrease in quantity.
D) a decrease in price and an increase in quantity.
52) An increase in supply causes
A) quantity supplied to decrease.
B) supply and price to increase.
C) price to decrease.
D) price to increase.
53) A severe drought has devastated cocoa plants, causing an increase in the price of chocolate.
In the market for chocolate chip cookies
A) a surplus will arise.
B) supply has decreased and price has increased.
C) quantity has decreased and price has decreased.
D) quantity demanded has increased.
54) More farmers have recently entered the corn industry. In addition there has been a
technological advancement in the fertilizer industry providing corn farmers with a cheaper and a
more effective fertilizer. In the market for corn, the effects these changes will have on the
equilibrium price and quantity are
A) price will increase, and quantity will decrease.
B) price will increase, and the effect on quantity is indeterminate.
C) price will decrease, and quantity will increase.
D) price will decrease, and the effect on quantity is indeterminate.
55) In the automobile industry, workers have just negotiated a new contract giving workers a
large raise. There has also been an increase in the number of licensed drivers who are in the
market for a new car. In the market for new automobiles, the effects that these changes will have
on the equilibrium price and quantity are
A) price will increase, and quantity will decrease.
B) price will increase, and the effect on quantity is indeterminate.
C) price will decrease, and quantity will increase.
D) price will decrease, and the effect on quantity is indeterminate.
56) There has recently been an increase in the price of dairy products used in the production of
ice cream. High temperatures have also induced people to consume more ice cream. In the
market for ice cream, the effects these changes will have on equilibrium price and quantity are
A) price will increase, and quantity will decrease.
B) price will increase, and the effect on quantity is indeterminate.
C) price will decrease, and quantity will increase.
D) price will decrease, and the effect on quantity is indeterminate.
57) Following adjustments to a new equilibrium in a market, the equilibrium quantity remains
unchanged, but the market clearing price is now lower. Which of the following could definitely
have caused this outcome?
A) Demand and supply both increased.
B) Demand and supply both decreased.
C) Demand increased, and supply decreased.
D) Demand decreased, and supply increased.
58) An increase in demand and a decrease in supply will lead to an
A) unambiguous increases in both price and quantity.
B) unambiguous decreases in both price and quantity.
C) an unambiguous increase in quantity, but the effect on price is indeterminate.
D) an unambiguous increase in price, but the effect on quantity is indeterminate.
59) An increase in demand and an increase in supply will lead to
A) unambiguous increases in both price and quantity.
B) unambiguous decreases in both price and quantity.
C) an unambiguous increase in quantity, but the effect on price is indeterminate.
D) an unambiguous increase in price, but the effect on quantity is indeterminate.
60) A decrease in demand and a decrease in supply will lead to
A) unambiguous increases in both price and quantity.
B) unambiguous decreases in both price quantity.
C) an unambiguous decrease in price, but the effect on quantity is indeterminate.
D) an unambiguous decrease in quantity, but the effect on price is indeterminate.
61) A decrease in demand and an increase in supply will lead to
A) unambiguous increases in both price and quantity.
B) unambiguous decreases in both price and quantity.
C) an unambiguous decrease in price, but the effect on quantity is indeterminate.
D) an unambiguous decrease in quantity, but the effect on price is indeterminate.
62) Following adjustments to a new equilibrium in a market, the market clearing price remains
unchanged, but the equilibrium quantity is now lower. Which of the following could definitely
have caused this outcome?
A) Demand and supply both increased.
B) Demand and supply both decreased.
C) Demand increased, and supply decreased.
D) Demand decreased, and supply increased.
63) The income of consumers increases. and the wage rate in the seafood industry increases. As a
result
A) the price of seafood stays the same and the quantity sold can either increase or decrease,
depending on whether the change in demand is greater than the change in supply.
B) the price of seafood increases and the quantity sold can either increase, decrease or stay the
same depending on whether the change in demand was greater than the change in supply.
C) the equilibrium quantity sold increases and price can either increase or decrease, depending
on whether the change in demand is greater than the change in supply.
D) the equilibrium quantity sold can either increase or decrease and the price can either increase
or decrease, depending on whether the change in demand was greater than the change in supply.
64) The supply of eggs comes from chickens. The price of eggs will decrease if
A) the supply of chickens decreases.
B) the supply of eggs decreases.
C) the price of chickens increases.
D) the demand for eggs decreases.
65) The more flexible prices are, the
A) greater demand shifts have to be to bring about a new equilibrium.
B) larger the shifts in supply will be after a change in demand.
C) greater the reliance by sellers to change the nominal price.
D) more quickly a shock to the economy can be absorbed.
66) Suppose a hurricane causes a great deal of destruction in Texas. After the hurricane, it takes
much longer than usual for the reconstruction of homes to take place. A possible explanation for
this is
A) greed by suppliers of construction materials increased.
B) government prevented price gouging during the reconstruction period.
C) prices of construction materials fell in the rest of the nation
D) environmental restrictions on lumbering in the Pacific Northwest were relaxed.
67) For which situation would we expect the adjustment speed to be the fastest?
A) The demand for surgeons increases.
B) A large increase in birth rates leads to an increase in elementary school teachers.
C) The demand for movie videos increases.
D) The demand for office space in downtown Chicago increases.
68) What will happen when there is a rightward shift in the demand curve?
A) The product price will instantaneously adjust downward.
B) Product prices do not change in this situation.
C) Producers will decrease the product price.
D) A new, higher price is not instantaneously achieved, but the price will rise over time.
69) During the 2016 Summer Olympics in the city of Rio, some Rio residents rented rooms to
visitors. This behavior
A) helped reduce the shortage of hotel rooms caused by the high demand during the Olympics.
B) reduced the demand for tickets to the Olympics since many local residents left town while
they rented out space in their homes.
C) helped raise the prices that visitors paid for hotel rooms in Rio.
D) raised the demand for hotel rooms in Rio and should have been prevented by the city of Rio.
70) List prices on new cars do NOT change very often, so
A) the real price of cars is very inflexible.
B) the prices of new cars can only be flexible if there are changes in the cost of materials.
C) price flexibility is not an important feature in the auto market.
D) price flexibility shows up primarily through the negotiations between buyers and sellers.
71) After an increase in the demand for construction workers, the market will attain its new long-
run equilibrium faster if
A) wages are flexible.
B) wages are inflexible, forcing new people to enter the market.
C) unions restrict the number of new construction workers.
D) people ignore the shortage in the short run.
72) To enhance their prestige, some country clubs like to point to the fact that they have a
waiting list for new members. Even at clubs with high initiation fees, it is common that
prospective members have to wait three or more years before there is room for them on the
membership rolls. How do these country clubs set the price of membership to ensure that they
have a waiting list?
A) Set the membership price above the market clearing price.
B) Set the membership price below the market clearing price.
C) Set the price so that the quantity supplied of memberships exceeds the quantity demanded.
D) Set the price at a level that will generate a surplus of memberships.
73) Suppose new research shows that soy milk and other products derived from soybeans
provide more health benefits than previously thought. At the same time, drought conditions
result in extensive damage to the soybean crop. What will be the combined impact of these two
factors on the equilibrium price and quantity of soybeans?
A) Price will decrease, but the effect on quantity is indeterminate.
B) Price will increase, but the effect on quantity is indeterminate.
C) Quantity will decrease, but the effect on price is indeterminate.
D) Quantity will increase, but the effect on price is indeterminate.
74) Suppose that an early frost damages the Florida orange crop. As a result, the price of
California oranges increases. Ceteris paribus, which one of the following statements best
explains this situation?
A) The supply of Florida oranges decreased, causing the supply of California oranges to
increase, which resulted in a higher price.
B) The supply of Florida oranges decreased, causing the supply of California oranges to
decrease, which resulted in a higher price.
C) The supply of Florida oranges decreased, causing their price to increase, and thus causing the
demand for California oranges to increase.
D) The demand for Florida oranges fell because of the freeze, and this led to a higher demand for
California oranges.
75) A newspaper headline asserts: “Falling Demand Pushes Down Housing Prices.” This
headline
A) incorrectly implies that the demand for housing can change, whereas in fact only the quantity
of housing demanded can change.
B) incorrectly implies that the price of housing will rise when demand increases.
C) incorrectly implies that more housing will be demanded at higher prices.
D) correctly implies that a decrease in demand will decrease the market clearing price.
76) Suppose you observe that the price of a good increases and that the quantity of this good sold
also increases. If only the demand curve or the supply curve shifts this suggests that
A) supply increased over time while demand remained the same.
B) supply decreased over time while demand remained the same.
C) demand increased over time while supply remained the same.
D) demand decreased over time while supply remained the same.
77) People consume more fresh fruit in the summer than during the rest of the year, yet the prices
of fresh fruit are lower in the summer than in other seasons. What accounts for this?
A) Fresh fruit is not subject to the law of supply.
B) The supply of fresh fruit increases in the summer.
C) Fresh fruit is an inferior good.
D) Fresh fruit is not subject to the law of demand.
78) Suppose you observe that the price of movie admissions decline and that the number of
people attending movies declines as well. If only the demand curve or the supply curve shifts,
this suggests that
A) movies are a normal good and incomes have increased.
B) high salaries for Hollywood actors have increased the cost of movie making.
C) movie theaters have experienced an increase in their operating costs due to increases in the
minimum wage.
D) admission prices for other types of entertainment, such as live shows and sporting events,
have also declined.
79) Roses are more expensive on Valentine’s Day than at other times of the year, yet sales of
roses are highest on that day. How does economic theory account for this?
A) An increase in demand pushes up the market clearing price of roses.
B) People buying the roses are irrational.
C) Roses are not subject to the law of demand.
D) Florists know that there are no substitutes for roses, so they take advantage of consumers on
Valentine’s Day.
80) In which of the following situations will both market clearing price and the equilibrium
quantity increase?
A) an increase in demand with no change in supply
B) an increase in supply with no change in demand
C) a decrease in supply with no change in demand
D) a decrease in demand with no change in supply
81) In which of the following situations will both market clearing price and the equilibrium
quantity decrease?
A) an increase in demand and no change in supply
B) an increase in supply with no change in demand
C) a decrease in supply with no change in demand
D) a decrease in demand with no change in supply
82) In which of the following situations will market clearing price increase and the equilibrium
quantity decrease?
A) an increase in demand with no change in supply
B) an increase in supply with no change in demand
C) a decrease in supply with no change in demand
D) a decrease in demand with no change in supply
83) In which of the following situations will market clearing price decrease and the equilibrium
quantity increase?
A) an increase in demand with no change in supply
B) an increase in supply with no change in demand
C) a decrease in supply with no change in demand
D) a decrease in demand with no change in supply
84) If demand and supply both increase
A) the equilibrium quantity definitely will increase and market clearing price definitely will
decrease.
B) the equilibrium quantity definitely will increase and market clearing price definitely will
increase.
C) the equilibrium quantity definitely will increase but the change in market clearing price
cannot be determined without more information.
D) market clearing price definitely will increase but the change in the equilibrium quantity
cannot be determined without further information.
85) If demand and supply both decrease
A) the equilibrium quantity definitely will decrease, and the market clearing price definitely will
decrease.
B) the equilibrium quantity definitely will decrease, and the market clearing price definitely will
increase.
C) the market clearing price definitely will decrease, but the change in the equilibrium quantity
cannot be determined without more information.
D) the equilibrium quantity definitely will decrease, but the change in market clearing price
cannot be determined without more information.
86) If demand increases and supply decreases
A) the market clearing price definitely will increase, and the equilibrium quantity definitely will
increase.
B) the market clearing price definitely will increase, and the equilibrium quantity definitely will
decrease.
C) the market clearing price definitely will increase, but the change in the equilibrium quantity
cannot be determined without more information.
D) the equilibrium quantity definitely will decrease, but the change in the market clearing price
cannot be determined without more information.
87) If demand decreases and supply increases
A) the market clearing price will decrease, and the equilibrium quantity will increase.
B) the market clearing price will decrease, and equilibrium quantity will decrease.
C) the equilibrium quantity will decrease, but the change in the market clearing price cannot be
determined without more information.
D) the equilibrium price will decrease, but the change in the equilibrium quantity cannot be
determined without more information.
88) Suppose that the supply curve remains unchanged. If the demand curve shifts to the right
A) the market clearing price definitely will decrease.
B) the market clearing price definitely will increase.
C) there will be no change in the market clearing price.
D) the market will collapse.
89) If supply increases and demand decreases
A) the market clearing price definitely rises, and the equilibrium quantity definitely falls.
B) the market clearing price definitely rises, and the effect on the equilibrium quantity is
indeterminate.
C) the market clearing price definitely falls, and the effect on the equilibrium quantity is
indeterminate.
D) the effect on the market clearing price is indeterminate, and the equilibrium quantity
definitely falls.