Chapter 4/The Market Forces of Supply and Demand ❖ 81
94. Suppose the incomes of buyers in a market for a particular normal good decrease and there is also a reduction
in input prices. What would we expect to occur in this market?
a.
Equilibrium price would decrease, but the impact on equilibrium quantity would be ambiguous.
b.
Equilibrium price would increase, but the impact on equilibrium quantity would be ambiguous.
c.
Equilibrium quantity would decrease, but the impact on equilibrium price would be ambiguous.
d.
Equilibrium quantity would increase, but the impact on equilibrium price would be ambiguous.
95. What would happen to the equilibrium price and quantity of coffee if the wages of coffee-bean pickers fell and
the price of tea fell?
a.
Price would fall, and the effect on quantity would be ambiguous.
b.
Price would rise, and the effect on quantity would be ambiguous.
c.
Quantity would fall, and the effect on price would be ambiguous.
d.
Quantity would rise, and the effect on price would be ambiguous.
96. Which of the following events would cause both the equilibrium price and equilibrium quantity of number two
grade potatoes to increase if number two grade potatoes are an inferior good?
a.
an increase in consumer income
b.
a decrease in consumer income
c.
greater government restrictions on agricultural chemicals
d.
fewer government restrictions on agricultural chemicals
97. Beef is a normal good. You observe that both the equilibrium price and quantity of beef have fallen over time.
Which of the following explanations would be most consistent with this observation?
a.
Consumers have experienced an increase in income, and beef–production technology has improved.
b.
The price of chicken has risen, and the price of steak sauce has fallen.
c.
New medical evidence has been released that indicates a negative correlation between a person’s
beef consumption and life expectancy.
d.
The demand curve for beef must be positively sloped.
98. During the last few decades in the United States, health officials have argued that eating too much beef might
be harmful to human health. As a result, there has been a significant decrease in the amount of beef produced.
Which of the following best explains the decrease in production?
a.
Beef producers, concerned about the health of their customers, decided to produce relatively less
beef.
b.
Government officials, concerned about consumer health, ordered beef producers to produce
relatively less beef.
c.
Individual consumers, concerned about their own health, decreased their demand for beef, which
lowered the equilibrium price of beef, making it less attractive to produce.
d.
Anti-beef protesters have made it difficult for both buyers and sellers of beef to meet in the
marketplace.
82 ❖ Chapter 4/The Market Forces of Supply and Demand
99. Which of the following events would unambiguously cause a decrease in the equilibrium price of cotton
shirts?
a.
an increase in the price of wool shirts and a decrease in the price of raw cotton
b.
a decrease in the price of wool shirts and a decrease in the price of raw cotton
c.
an increase in the price of wool shirts and an increase in the price of raw cotton
d.
a decrease in the price of wool shirts and an increase in the price of raw cotton
100. Which of the following events would cause the price of oranges to fall?
a.
There is a shortage of oranges.
b.
The FDA announces that bananas cause strokes, and oranges and bananas are substitutes.
c.
The price of land throughout Florida decreases, and Florida produces a significant proportion of the
nation’s oranges.
d.
All of the above are correct.
101. What would happen to the equilibrium price and quantity of lattés if consumers’ incomes rise and lattés are a
normal good?
a.
Both the equilibrium price and quantity would increase.
b.
Both the equilibrium price and quantity would decrease.
c.
The equilibrium price would increase, and the equilibrium quantity would decrease.
d.
The equilibrium price would decrease, and the equilibrium quantity would increase.
102. If macaroni and cheese is an inferior good, what would happen to the equilibrium price and quantity of maca-
roni and cheese if consumers’ incomes rise?
a.
Both the equilibrium price and quantity would increase.
b.
Both the equilibrium price and quantity would decrease.
c.
The equilibrium price would increase, and the equilibrium quantity would decrease.
d.
The equilibrium price would decrease, and the equilibrium quantity would increase.
103. If consumers often purchase muffins to eat while they drink their lattés at local coffee shops, what would hap-
pen to the equilibrium price and quantity of lattés if the price of muffins rises?
a.
Both the equilibrium price and quantity would increase.
b.
Both the equilibrium price and quantity would decrease.
c.
The equilibrium price would increase, and the equilibrium quantity would decrease.
d.
The equilibrium price would decrease, and the equilibrium quantity would increase.
Chapter 4/The Market Forces of Supply and Demand ❖ 83
104. If consumers often purchase muffins to eat while they drink their lattés at local coffee shops, what would hap-
pen to the equilibrium price and quantity of lattés if the price of muffins falls?
a.
Both the equilibrium price and quantity would increase.
b.
Both the equilibrium price and quantity would decrease.
c.
The equilibrium price would increase, and the equilibrium quantity would decrease.
d.
The equilibrium price would decrease, and the equilibrium quantity would increase.
105. If consumers view cappuccinos and lattés as substitutes, what would happen to the equilibrium price and quan–
tity of lattés if the price of cappuccinos rises?
a.
Both the equilibrium price and quantity would increase.
b.
Both the equilibrium price and quantity would decrease.
c.
The equilibrium price would increase, and the equilibrium quantity would decrease.
d.
The equilibrium price would decrease, and the equilibrium quantity would increase.
106. If consumers view cappuccinos and lattés as substitutes, what would happen to the equilibrium price and quan–
tity of lattés if the price of cappuccinos falls?
a.
Both the equilibrium price and quantity would increase.
b.
Both the equilibrium price and quantity would decrease.
c.
The equilibrium price would increase, and the equilibrium quantity would decrease.
d.
The equilibrium price would decrease, and the equilibrium quantity would increase.
107. If scientists discover that steamed milk, which is used to make lattés, prevents heart attacks, what would hap-
pen to the equilibrium price and quantity of lattés?
a.
Both the equilibrium price and quantity would increase.
b.
Both the equilibrium price and quantity would decrease.
c.
The equilibrium price would increase, and the equilibrium quantity would decrease.
d.
The equilibrium price would decrease, and the equilibrium quantity would increase.
108. What would happen to the equilibrium price and quantity of lattés if the cost of producing steamed milk,
which is used to make lattés, rises?
a.
Both the equilibrium price and quantity would increase.
b.
Both the equilibrium price and quantity would decrease.
c.
The equilibrium price would increase, and the equilibrium quantity would decrease.
d.
The equilibrium price would decrease, and the equilibrium quantity would increase.
84 ❖ Chapter 4/The Market Forces of Supply and Demand
109. What would happen to the equilibrium price and quantity of lattés if coffee shops began using a machine that
reduced the amount of labor necessary to produce them?
a.
Both the equilibrium price and quantity would increase.
b.
Both the equilibrium price and quantity would decrease.
c.
The equilibrium price would increase, and the equilibrium quantity would decrease.
d.
The equilibrium price would decrease, and the equilibrium quantity would increase.
110. Saddle shoes are not popular right now, so very few are being produced. If saddle shoes become popular, then
how will this affect the market for saddle shoes?
a.
The supply curve for saddle shoes will shift right, which will create a shortage at the current price.
Price will increase, which will decrease quantity demanded and increase quantity supplied. The
new market equilibrium will be at a higher price and higher quantity.
b.
The supply curve for saddle shoes will shift right, which will create a surplus at the current price.
Price will decrease, which will increase quantity demanded and decrease quantity supplied. The
new market equilibrium will be at a lower price and higher quantity.
c.
The demand curve for saddle shoes will shift right, which will create a shortage at the current price.
Price will increase, which will decrease quantity demanded and increase quantity supplied. The
new market equilibrium will be at a higher price and higher quantity.
d.
The demand curve for saddle shoes will shift right, which will create a surplus at the current price.
Price will decrease, which will increase quantity demanded and decrease quantity supplied. The
new market equilibrium will be at a lower price and higher quantity.
111. The market for diamond rings is closely linked to the market for high–quality diamonds. If a large quantity of
high-quality diamonds enters the market, then the
a.
supply curve for diamond rings will shift right, which will create a shortage at the current price.
Price will increase, which will decrease quantity demanded and increase quantity supplied. The
new market equilibrium will be at a higher price and higher quantity.
b.
supply curve for diamond rings will shift right, which will create a surplus at the current price.
Price will decrease, which will increase quantity demanded and decrease quantity supplied. The
new market equilibrium will be at a lower price and higher quantity.
c.
demand curve for diamond rings will shift right, which will create a shortage at the current price.
Price will increase, which will decrease quantity demanded and increase quantity supplied. The
new market equilibrium will be at a higher price and higher quantity.
d.
demand curve for diamond rings will shift right, which will create a surplus at the current price.
Price will decrease, which will increase quantity demanded and decrease quantity supplied. The
new market equilibrium will be at a lower price and higher quantity.
Chapter 4/The Market Forces of Supply and Demand ❖ 85
112. Music compact discs are normal goods. What will happen to the equilibrium price and quantity of music
compact discs if musicians accept lower royalties, compact disc players become cheaper, more firms start pro-
ducing music compact discs, and music lovers experience an increase in income?
a.
Price will fall, and the effect on quantity is ambiguous.
b.
Price will rise, and the effect on quantity is ambiguous.
c.
Quantity will fall, and the effect on price is ambiguous.
d.
Quantity will rise, and the effect on price is ambiguous.
113. What will happen to the equilibrium price of new textbooks if more students attend college, paper becomes
cheaper, textbook authors accept lower royalties, and fewer used textbooks are sold?
a.
Price will rise.
b.
Price will fall.
c.
Price will stay exactly the same.
d.
The price change will be ambiguous.
114. New oak tables are normal goods. What would happen to the equilibrium price and quantity in the market for
oak tables if the price of maple tables rises, the price of oak wood rises, more buyers enter the market for oak
tables, and the price of the glue used in the production of the new oak tables increased?
a.
Price will fall, and the effect on quantity is ambiguous.
b.
Price will rise, and the effect on quantity is ambiguous.
c.
Quantity will fall, and the effect on price is ambiguous.
d.
Quantity will rise, and the effect on price is ambiguous.
115. What would happen to the equilibrium price and quantity of peanut butter if the price of peanuts went up, the
price of jelly fell, fewer firms decided to produce peanut butter, and health officials announced that eating
peanut butter was good for you?
a.
Price will fall, and the effect on quantity is ambiguous.
b.
Price will rise, and the effect on quantity is ambiguous.
c.
Quantity will fall, and the effect on price is ambiguous.
d.
Quantity will rise, and the effect on price is ambiguous.
116. Pens are normal goods. What will happen to the equilibrium price of pens if the price of pencils rises, con-
sumers experience an increase in income, writing in ink becomes fashionable, people expect the price of pens
to rise in the near future, the population increases, fewer firms manufacture pens, and the wages of pen-makers
increase?
a.
Price will rise.
b.
Price will fall.
c.
Price will stay exactly the same.
d.
The price change will be ambiguous.
86 ❖ Chapter 4/The Market Forces of Supply and Demand
117. What will happen to the equilibrium price and quantity of traditional camera film if traditional cameras be-
come more expensive, digital cameras become cheaper, the cost of the resources needed to manufacture tradi-
tional film falls, and more firms decide to manufacture traditional film?
a.
Price will fall, and the effect on quantity is ambiguous.
b.
Price will rise, and the effect on quantity is ambiguous.
c.
Quantity will fall, and the effect on price is ambiguous.
d.
Quantity will rise, and the effect on price is ambiguous.
118. New cars are normal goods. What will happen to the equilibrium price of new cars if the price of gasoline
rises, the price of steel falls, public transportation becomes cheaper and more comfortable, auto-workers ac-
cept lower wages, and automobile insurance becomes more expensive?
a.
Price will rise.
b.
Price will fall.
c.
Price will stay exactly the same.
d.
The price change will be ambiguous.
119. What will happen to the equilibrium price and quantity of new cars if the price of gasoline rises, the price of
steel rises, public transportation becomes cheaper and more comfortable, and auto-workers negotiate higher
wages?
a.
Price will fall, and the effect on quantity is ambiguous.
b.
Price will rise, and the effect on quantity is ambiguous.
c.
Quantity will fall, and the effect on price is ambiguous.
d.
Quantity will rise, and the effect on price is ambiguous.
120. Consider the market for new DVDs. If DVD players became cheaper, buyers expected DVD prices to fall
next year, used DVDs became more expensive, and DVD production technology improved, then the equilibri-
um price of a new DVD would
a.
rise.
b.
fall.
c.
stay the same.
d.
could rise, fall, or remain unchanged.
Chapter 4/The Market Forces of Supply and Demand ❖ 87
121. Which of the following sets of events must cause an increase in the price of a new house?
a.
higher wages for carpenters, higher wood prices, increases in consumer incomes, higher apartment
rents, increases in population, and expectations of higher house prices in the future
b.
lower wages for carpenters, lower wood prices, increases in consumer incomes, higher apartment
rents, increases in population and expectations of higher house prices in the future
c.
lower wages for carpenters, higher wood prices, decreases in consumer incomes, higher apartment
rents, decreases in population and expectations of higher house prices in the future
d.
higher wages for carpenters, lower wood prices, decreases in consumer incomes, lower apartment
rents, decreases in population and expectations of lower house prices in the future
122. What would happen to the equilibrium price and quantity of lattés if coffee shops began using a machine that
reduced the amount of labor necessary to produce steamed milk, which is used to make lattés, and scientists
discovered that coffee prevents heart attacks?
a.
Both the equilibrium price and quantity would increase.
b.
Both the equilibrium price and quantity would decrease.
c.
The equilibrium price would increase, and the effect on equilibrium quantity would be ambiguous.
d.
The equilibrium quantity would increase, and the effect on equilibrium price would be ambiguous.
123. What would happen to the equilibrium price and quantity of lattés if coffee shops began using a machine that
reduced the amount of labor necessary to produce steamed milk, which is used to make lattés, and scientists
discovered that lattés cause heart attacks?
a.
Both the equilibrium price and quantity would increase.
b.
Both the equilibrium price and quantity would decrease.
c.
The equilibrium price would decrease, and the effect on equilibrium quantity would be ambiguous.
d.
The equilibrium quantity would decrease, and the effect on equilibrium price would be ambiguous.
124. What would happen to the equilibrium price and quantity of lattés if the cost to produce steamed milk, which
is used to make lattés, increased, and scientists discovered that lattés cause heart attacks?
a.
Both the equilibrium price and quantity would increase.
b.
Both the equilibrium price and quantity would decrease.
c.
The equilibrium price would decrease, and the effect on equilibrium quantity would be ambiguous.
d.
The equilibrium quantity would decrease, and the effect on equilibrium price would be ambiguous.
88 ❖ Chapter 4/The Market Forces of Supply and Demand
Figure 4-19
The diagram below pertains to the demand for turkey in the United States.
D
B
D
A
x
y
quantity
price
125. Refer to Figure 4-19. All else equal, an increase in the income of buyers who consider turkey to be an inferi–
or good would cause a move from
a.
DA to DB.
b.
DB to DA.
c.
x to y.
d.
y to x.
126. Refer to Figure 4-19. All else equal, a sale on chicken would cause a move from
a.
DA to DB.
b.
DB to DA.
c.
x to y.
d.
y to x.
127. Refer to Figure 4-19. All else equal, the approach of Thanksgiving would cause a move from
a.
DA to DB.
b.
DB to DA.
c.
x to y.
d.
y to x.
128. Refer to Figure 4-19. All else equal, buyers expecting turkey to be more expensive in the future would cause
a current move from
a.
DA to DB.
b.
DB to DA.
c.
x to y.
d.
y to x.
Chapter 4/The Market Forces of Supply and Demand ❖ 89
129. Refer to Figure 4-19. All else equal, a large number of people becoming vegetarians would cause a move
from
a.
DA to DB.
b.
DB to DA.
c.
x to y.
d.
y to x.
130. Refer to Figure 4-19. All else equal, the premature deaths of thousands of turkeys would cause a move from
a.
DA to DB.
b.
DB to DA.
c.
x to y.
d.
y to x.
131. Refer to Figure 4-19. All else equal, an increase in the productivity of turkey farmers would cause a move
from
a.
DA to DB.
b.
DB to DA.
c.
x to y.
d.
y to x.
132. Refer to Figure 4-19. All else equal, a decrease in the price of the grain fed to turkeys would cause a move
from
a.
DA to DB.
b.
DB to DA.
c.
x to y.
d.
y to x.
133. Refer to Figure 4-19. All else equal, sellers expecting the price of turkey to rise in the future would cause a
current move from
a.
DA to DB.
b.
DB to DA.
c.
x to y.
d.
y to x.
90 ❖ Chapter 4/The Market Forces of Supply and Demand
Figure 4-20
The graph below pertains to the supply of paper to colleges and universities.
S
S
B
A
x
y
quantity
price
134. Refer to Figure 4-20. All else equal, an increase in the price of the pulp used in the paper production process
would cause a move from
a.
x to y.
b.
y to x.
c.
SA to SB.
d.
SB to SA.
135. Refer to Figure 4-20. All else equal, sellers expecting the price of paper to decrease next month when many
college students leave campuses for the summer would cause a current move from
a.
x to y.
b.
y to x.
c.
SA to SB.
d.
SB to SA.
136. Refer to Figure 4-20. All else equal, a major paper manufacturer filing for bankruptcy and shutting down as
a result of an IRS tax evasion investigation would cause a move from
a.
x to y.
b.
y to x.
c.
SA to SB.
d.
SB to SA.
Chapter 4/The Market Forces of Supply and Demand ❖ 91
137. Refer to Figure 4-20. All else equal, an increase in the use of laptop computers for note-taking would cause a
move from
a.
x to y.
b.
y to x.
c.
SA to SB.
d.
SB to SA.
138. Refer to Figure 4-20. All else equal, buyers expecting paper to be more expensive in the future would cause
a current move from
a.
x to y.
b.
y to x.
c.
SA to SB.
d.
SB to SA.
139. Refer to Figure 4-20. All else equal, the return of college students to campus in the fall would cause a move
from
a.
x to y.
b.
y to x.
c.
SA to SB.
d.
SB to SA.
92 ❖ Chapter 4/The Market Forces of Supply and Demand
Figure 4-21
Demand 1 Demand 2
Supply 1 Supply 2
A
B
C
D
Quantity
Price
140. Refer to Figure 4-21. Which of the following movements would illustrate the effect in the market for golf
balls of an increase in green fees?
a.
Point A to Point B
b.
Point C to Point B
c.
Point C to Point D
d.
Point A to Point D
141. Refer to Figure 4-21. Which of the following movements would illustrate the effect in the market for paper
napkins as a result of a “Go Green” advertising campaign encouraging people to use cloth napkins?
a.
Point A to Point B
b.
Point C to Point B
c.
Point C to Point D
d.
Point A to Point D
142. Refer to Figure 4-21. Which of the following movements would illustrate the effect in the market for orange
juice of an announcement by the American Dental Association that orange juice erodes tooth enamel?
a.
Point A to Point B
b.
Point C to Point B
c.
Point C to Point D
d.
Point A to Point D
Chapter 4/The Market Forces of Supply and Demand ❖ 93
143. Refer to Figure 4-21. Which of the following movements would illustrate the effect in the market for swim-
ming lessons of an increase in the incomes of parents with school-aged children?
a.
Point A to Point B
b.
Point C to Point B
c.
Point C to Point D
d.
Point A to Point D
144. Refer to Figure 4-21. Which of the following movements would illustrate the effect in the market for Ramen
noodles of a decrease in the incomes of young adults, assuming that Ramen noodles are an inferior good?
a.
Point A to Point B
b.
Point C to Point B
c.
Point C to Point D
d.
Point A to Point D
145. Refer to Figure 4-21. Which of the following movements would illustrate the effect in the market for ball-
room dancing lessons resulting from the introduction of a popular new television show called “Dancing with
the Stars”?
a.
Point A to Point B
b.
Point C to Point B
c.
Point C to Point D
d.
Point A to Point D
146. Refer to Figure 4-21. Which of the following movements would illustrate the effect in the market for bread
of an increase in the price of flour?
a.
Point A to Point B
b.
Point C to Point B
c.
Point C to Point D
d.
Point A to Point D
147. Refer to Figure 4-21. Which of the following movements would illustrate the effect in the market for kitchen
cabinets of an increase in the price of wood?
a.
Point A to Point B
b.
Point C to Point B
c.
Point C to Point D
d.
Point A to Point D
94 ❖ Chapter 4/The Market Forces of Supply and Demand
148. Refer to Figure 4-21. Which of the following movements would illustrate the effect in the market for wed-
ding cakes resulting from a decrease in the price number of pastry chefs?
a.
Point A to Point B
b.
Point C to Point B
c.
Point C to Point D
d.
Point A to Point D
149. Refer to Figure 4-21. Which of the following movements would illustrate the effect in the market for choco-
late chip cookies of an improved high-speed mixer that allows bakers to produce cookies in less time?
a.
Point A to Point B
b.
Point C to Point B
c.
Point C to Point D
d.
Point A to Point D
150. Refer to Figure 4-21. Which of the following movements would illustrate the effect in the market for choco-
late chip cookies of a decrease in the price of flour?
a.
Point A to Point B
b.
Point C to Point B
c.
Point C to Point D
d.
Point A to Point D
151. Refer to Figure 4-21. Which of the following movements would illustrate the effect in the market for doc-
tor’s visits of an increase in the number of medical students graduating from medical school and successfully
completing their residency programs?
a.
Point A to Point B
b.
Point C to Point B
c.
Point C to Point D
d.
Point A to Point D
Chapter 4/The Market Forces of Supply and Demand ❖ 95
Figure 4-22
Panel (a)
Panel (b)
quantity
price
quantity
price
Panel (c)
Panel (d)
quantity
price
quantity
price
152. Refer to Figure 4-22. Panel (a) shows which of the following?
a.
an increase in demand and an increase in quantity supplied
b.
an increase in demand and an increase in supply
c.
an increase in quantity demanded and an increase in quantity supplied
d.
an increase in quantity demanded and an increase in supply
153. Refer to Figure 4-22. Panel (b) shows which of the following?
a.
a decrease in demand and a decrease in quantity supplied
b.
a decrease in demand and a decrease in supply
c.
a decrease in quantity demanded and a decrease in quantity supplied
d.
a decrease in quantity demanded and a decrease in supply
96 ❖ Chapter 4/The Market Forces of Supply and Demand
154. Refer to Figure 4-22. Panel (c) shows which of the following?
a.
an increase in demand and an increase in quantity supplied
b.
an increase in demand and an increase in supply
c.
an increase in quantity demanded and an increase in quantity supplied
d.
an increase in quantity demanded and an increase in supply
155. Refer to Figure 4-22. Panel (d) shows which of the following?
a.
a decrease in demand and a decrease in quantity supplied
b.
a decrease in demand and a decrease in supply
c.
a decrease in quantity demanded and a decrease in quantity supplied
d.
a decrease in quantity demanded and a decrease in supply
156. Refer to Figure 4-22. Which of the four panels illustrates a decrease in quantity demanded?
a.
Panel (a)
b.
Panel (b)
c.
Panel (c)
d.
Panel (d)
157. Refer to Figure 4-22. Which of the four panels illustrates an increase in quantity demanded?
a.
Panel (a)
b.
Panel (b)
c.
Panel (c)
d.
Panel (d)
158. Refer to Figure 4-22. Which of the four panels illustrates a decrease in quantity supplied?
a.
Panel (a)
b.
Panel (b)
c.
Panel (c)
d.
Panel (d)
159. Refer to Figure 4-22. Which of the four panels illustrates an increase in quantity supplied?
a.
Panel (a)
b.
Panel (b)
c.
Panel (c)
d.
Panel (d)
Chapter 4/The Market Forces of Supply and Demand ❖ 97
160. Refer to Figure 4-22. Which of the four panels represents the market for pizza delivery in a college town as
we go from summer to the beginning of the fall semester?
a.
Panel (a)
b.
Panel (b)
c.
Panel (c)
d.
Panel (d)
161. Refer to Figure 4-22 Which of the four panels represents the market for winter coats as we progress from
winter to spring?
a.
Panel (a)
b.
Panel (b)
c.
Panel (c)
d.
Panel (d)
162. Refer to Figure 4-22. Which of the four panels represents the market for cars as a result of the adoption of
new technology on assembly lines?
a.
Panel (a)
b.
Panel (b)
c.
Panel (c)
d.
Panel (d)
163. Refer to Figure 4-22. Which of the four panels represents the market for peanut butter after a major hurricane
hits the peanut-growing south?
a.
Panel (a)
b.
Panel (b)
c.
Panel (c)
d.
Panel (d)
CONCLUSION
1. In any economic system, scarce resources have to be allocated among competing uses. Market economies
harness the forces of
a.
government to allocate scarce resources.
b.
supply and demand to allocate scarce resources.
c.
credit cards to allocate scarce resources.
d.
nature to allocate scarce resources.