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Name:
Class:
Date:
Chapter 04: Demand, Supply, and Markets
a.
increase the supply of corn.
b.
increase the supply of soybeans.
c.
decrease the supply of soybeans.
d.
decrease the supply of corn.
e.
decrease the demand for soybeans.
87. Which of the following is likely to increase the supply of wheat?
a.
An increase in the cost of fertilizer
b.
A decrease in the price of bread
c.
A decrease in the price of corn
d.
An increase in land prices
e.
An expectation that the price of wheat will be higher in near future
88. Which of the following is likely to shift the market supply curve for corn in the short run?
a.
A change in the price of corn
b.
A change in the price of pesticides
c.
A change in the number of corn consumers
d.
A change in the expectations of consumers about the future price of corn
e.
A change in the money income of corn consumers
89. Which of the following is likely to bring about a movement along the supply curve for oranges?
a.
A change in weather conditions
b.
A change in the price of fertilizer
c.
A change in wages paid to orange pickers
d.
A change in the price of oranges
e.
A change in the demand for grapefruit
90. Which of the following is likely to change the quantity supplied of wheat?
a.
A government subsidy to farmers who do not grow wheat
b.
An increase in the price of soybeans
c.
A decrease in the price of fertilizer
d.
A fall in the price of wheat
e.
An expectation of a future price increase
91. The supply of index cards is likely to shift to the right if:
a.
the price of wood pulp used in the production of index cards increases.
b.
the technology used in index card production becomes more expensive.
c.
the price of index cards increases.
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Chapter 04: Demand, Supply, and Markets
d.
the price of its substitute good decreases.
e.
the expected future price of index cards is higher than the current price.
92. Figure 4.5 shows the supply curves of a durable good. A shift from the supply curve S to S’ could be caused by a(n):
Figure 4.5
a.
decrease in consumer income.
b.
increase in the current price of the product.
c.
patent application that restricts the use of a particular production technology.
d.
several competing producers going out of business.
e.
expectation of a higher product price in the future among suppliers.
93. Markets reduce transactions costs:
a.
by decreasing the time spent searching for information about goods and services.
b.
only when they have a highly structured set of rules like the New York Stock Exchange.
c.
because each market uses the same set of rules for buying and selling goods and services.
d.
only when the government coordinates the plans of many buyers and sellers.
e.
when prices are set by the sellers and are not determined by negotiation between the buyers and the sellers.
94. When quantity demanded of a good exceeds the quantity supplied at the prevailing market price, _____.
a.
the market is in equilibrium
b.
the price of the good will decrease
c.
the price of the good will tend to increase
d.
the demand curve shifts rightward until the surplus is eliminated
e.
the supply curve shifts leftward until the surplus is eliminated
95. A surplus of shoes will cause:
a.
a decrease in the supply of shoes.
b.
a decrease in the demand for shoes.
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Chapter 04: Demand, Supply, and Markets
c.
an increase in the price of leather.
d.
a rightward shift of the supply curve of shoes.
e.
a decrease in the price of shoes.
96. Which of the following will indicate a shortage of a product in the market to suppliers?
a.
The quantity supplied exceeds the quantity demanded at a particular price.
b.
The quantity demanded decreases substantially.
c.
The stock of inventories of most suppliers increases.
d.
The quantity demanded exceeds the quantity supplied at a particular price.
e.
The price of the product declines to an all-time low.
97. When a surplus arises in the market for swimwear:
a.
the price of swimwear will increase.
b.
the production of swimwear will increase.
c.
the supply of swimwear will increase.
d.
the price of swimwear at retail outlets will fall.
e.
the demand for swimwear will increase.
98. A shortage of textbooks is most likely to cause:
a.
a decrease in the supply of textbooks.
b.
a decrease in the demand for textbooks.
c.
a decrease in the price of paper.
d.
an increase in the cost of printing.
e.
an increase in the price of textbooks.
99. If there is a shortage in the market for athletic shoes, _____.
a.
the price of athletic shoes will increase to eliminate the shortage
b.
inventories of athletic shoes will accumulate
c.
the demand for athletic shoes will decrease to restore equilibrium
d.
production of athletic shoes will decrease to restore equilibrium
e.
the supply of athletic shoes will increase to restore equilibrium
100. The table given below shows the quantity supplied and the quantity demanded for a good at different prices. If the
market price of the good is $1.20, there will be a _____.
Table 4.1
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Chapter 04: Demand, Supply, and Markets
a.
shortage of 30 units
b.
surplus of 30 units
c.
shortage of 60 units
d.
surplus of 60 units
e.
surplus of 20 units
101. The table given below shows the quantity supplied and the quantity demanded for a good at different prices. If the
price of the good is $1.40, there is a _____.
Table 4.1
a.
shortage of 30 units
b.
surplus of 30 units
c.
shortage of 20 units
d.
surplus of 20 units
e.
surplus of 10 units
102. The table given below shows the quantity supplied and the quantity demanded for a good at different prices. If the
price of the good described in the table given below is $1.60, then there is a:
Table 4.1
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Chapter 04: Demand, Supply, and Markets
a.
shortage of 30 units.
b.
surplus of 30 units.
c.
shortage of 20 units.
d.
surplus of 20 units.
e.
surplus of 10 units.
103. The table given below shows the quantity supplied and the quantity demanded for a good at different prices. If the
price of the good described in the table given below is $1.50, then:
Table 4.1
a.
there is a shortage in the market.
b.
there is a surplus in the market.
c.
the market is in equilibrium.
d.
the supply of the good increases by 30 units.
e.
the demand for the good increases by 30 units.
104. The table given below shows the quantity supplied and the quantity demanded for a good at different prices. If the
price of the good described in the table below is $1.60, then an economist would expect the:
Table 4.1
a.
price to decrease to $1.40.
b.
price to decrease to $1.50.
c.
quantity supplied to decrease to 50 units.
d.
quantity demanded to increase to 80 units.
e.
quantity demanded to decrease to 50 units.
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Chapter 04: Demand, Supply, and Markets
105. The most important characteristic of the equilibrium price is that it:
a.
guarantees that producers earn profit.
b.
clears the market, leaving neither a surplus nor a shortage.
c.
maximizes the quantity demanded.
d.
minimizes the quantity demanded.
e.
guarantees that all buyers who want to buy the product will get it.
106. The equilibrium point represents the only price-quantity combination in a market that:
a.
causes both buyers and sellers to agree to a price increase.
b.
causes both buyers and sellers to agree to a price decrease.
c.
exactly matches the independent plans of buyers and sellers.
d.
allows buyers to purchase what they want.
e.
allows sellers to earn a positive profit.
107. When a market is in equilibrium:
a.
producers earn economic profits.
b.
production exhibit diminishing returns to scale.
c.
market forces exert no pressure for change in price.
d.
industry output is maximized.
e.
market forces allow producers to charge the maximum price.
108. Saccharin and aspartame are both low-calorie substitutes for sugar. If saccharin is found to cause cancer, then:
a.
the price of aspartame will increase.
b.
the price of sugar will decrease.
c.
the price of saccharin will increase.
d.
the demand curve for saccharin will shift to the right.
e.
the supply curve for aspartame will shift to the left.
109. Suppose a market is in equilibrium. An increase in demand in this market will lead to a(n):
a.
increase in supply.
b.
decrease in supply.
c.
decrease in quantity supplied.
d.
increase in quantity supplied.
e.
decrease in equilibrium price.
110. For a given upward-sloping supply curve, a decrease in demand will lead to a(n):
a.
increase in supply.
b.
decrease in supply.
c.
increase in quantity supplied.
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Chapter 04: Demand, Supply, and Markets
d.
increase in equilibrium price.
e.
decrease in equilibrium price.
111. For a given upward-sloping supply curve, an increase in demand for chocolate chips will result in a:
a.
higher equilibrium price and a lower equilibrium quantity.
b.
lower equilibrium price and a lower equilibrium quantity.
c.
lower equilibrium price and a higher equilibrium quantity.
d.
higher equilibrium price and a higher equilibrium quantity.
e.
decrease in the quantity supplied of chocolate chips.
112. Suppose the price of compact disks (CDs) increases, other things equal. Which of these is most likely to occur in the
market for DVDs, a substitute?
a.
The demand for DVDs is likely to decrease.
b.
The demand for DVDs is likely to increase.
c.
The quantity of DVDs demanded is likely to increase.
d.
A decrease in the quantity of DVDs demanded is likely to decrease.
e.
A decrease in the quantity of DVDs supplied is likely to decrease.
113. Consider a market for kids’ shoes that is initially in equilibrium. For a given upward-sloping demand curve, an
increase in the price of Velcro which is used as fasteners for kids’ shoes will result in a(n):
a.
increase in both equilibrium price and quantity of shoes.
b.
increase in both quantity demanded and quantity supplied of shoes.
c.
increase in equilibrium price but a decrease in equilibrium quantity of shoes.
d.
decrease in equilibrium price but an increase in equilibrium quantity of shoes.
e.
decrease in both quantity demanded and quantity supplied of shoes.
114. Consider a market for cookies that is initially in equilibrium. For a given upward-sloping supply curve, the
equilibrium price and equilibrium quantity of cookies is most likely to decline when:
a.
the price of milk, a complement, increases.
b.
consumer income increases.
c.
the number of consumers increases.
d.
the price of coffee, a complement, decreases.
e.
price of crackers, a substitute, increases.
115. Attempts are being made to develop a biodegradable plastic using agricultural produce such as potatoes. Identify a
likely impact on the equilibrium price and quantity of potatoes if such attempts are successful, all other things remaining
constant.
a.
The equilibrium price will increase and the equilibrium quantity will decrease.
b.
The equilibrium price will decrease and the equilibrium quantity will increase.
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Chapter 04: Demand, Supply, and Markets
c.
Both equilibrium price and quantity will decrease.
d.
Both equilibrium price and quantity will increase.
e.
There will be no change in the equilibrium price and quantity.
116. Consider the market for a good that is initially in equilibrium. For a given upward-sloping supply curve, an increase
in demand will typically:
a.
increase price but quantity could change in either direction.
b.
increase quantity but price could change in either direction.
c.
increase price but leave quantity unchanged.
d.
decrease both quantity and price.
e.
increase both quantity and price.
117. What is the effect of a decrease in the price of potato chips on the market for pretzels, a substitute good, that is
initially in equilibrium?
a.
Both equilibrium price and equilibrium quantity of pretzels will increase.
b.
Both equilibrium price and equilibrium quantity of pretzels will fall.
c.
Equilibrium price will increase and equilibrium quantity of pretzels will fall.
d.
Equilibrium price will fall and equilibrium quantity of pretzels will increase.
e.
Equilibrium price and equilibrium quantity of pretzels remain unchanged.
118. The market for chewing gum is in equilibrium with a current price of 50 cents per pack and a quantity of 100,000
packs per day. Which of the following events is most likely to result in a new equilibrium price of 75 cents and a new
equilibrium quantity of 125,000 packs, if the supply curve for chewing gums remains unchanged?
a.
An increase in the price of other kinds of candy
b.
An increase in the price of the ingredients used to make chewing gum
c.
An agreement among workers in the chewing gum industry to work for lower wages
d.
A decrease in the number of young people in the population
e.
A decrease in income of chewing gum consumers
119. Consider a market for coffee that is initially in equilibrium. If tea harvest is bad in a particular year, then identify the
most likely impact on the equilibrium price and quantity of coffee.
a.
The price of coffee will increase, while the quantity of coffee will decrease.
b.
Both the price and the quantity of coffee will increase.
c.
The price of coffee will decrease while the quantity of coffee will increase.
d.
Both the price and the quantity of coffee will decrease.
e.
There will be no impact on the equilibrium price and quantity of coffee.
120. The following figure shows the market for a good. Which of the following is most likely to shift demand from D' to
D?
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Chapter 04: Demand, Supply, and Markets
Figure 4.6
a.
An increase in the price of a substitute good
b.
An increase in the number of consumers
c.
A decrease in the price of a complementary good
d.
A decline in consumers' incomes if it is a normal good
e.
An increase in consumers' incomes if it is a normal good
121. The figure given below shows the market for a good. Which of the following is least likely to shift demand from D to
D'?
Figure 4.6
a.
A decrease in the price of a complement
b.
An increase in the price of a substitute
c.
A decrease in the price of the good in question
d.
An increase in the number of consumers
e.
A decrease in income, if the good in question is an inferior good
122. For a downward-sloping demand curve, a rightward shift of a supply curve:
a.
has no impact on the equilibrium price and quantity.
b.
decreases both price and equilibrium quantity.
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Chapter 04: Demand, Supply, and Markets
c.
increases both price and equilibrium quantity.
d.
decreases equilibrium price and increases equilibrium quantity.
e.
increases equilibrium price and decreases equilibrium quantity.
123. For a given downward-sloping demand curve, a decrease in supply will cause a(n):
a.
increase in demand.
b.
increase in equilibrium quantity.
c.
increase in quantity demanded.
d.
decrease in quantity demanded.
e.
decrease in equilibrium price.
124. A new cattle feed has been found to increase the amount of milk each cow produces. Which of these is a likely
impact in the market for milk, if this cattle feed is used by most of the dairies?
a.
A rightward shift of the supply curve for milk
b.
A leftward shift of the supply curve for milk
c.
An increase in the price of milk
d.
An increase in the demand for milk
e.
A decrease in the quantity demanded of milk
125. Identify the effect of a reduction in the price of steel on the equilibrium price and quantity of automobiles, for a given
demand curve.
a.
An increase in both equilibrium price and equilibrium quantity
b.
A decrease in both equilibrium price and equilibrium quantity
c.
An increase in equilibrium price and a decrease in equilibrium quantity
d.
A decrease in equilibrium price and an increase in equilibrium quantity
e.
An increase in equilibrium price but no change in equilibrium quantity
126. In the market for chewing gum, the current price is 50 cents per pack and 100,000 packs are sold. Which of the
following events is most likely to result in a new equilibrium price of 60 cents and quantity of 90,000 packs?
a.
An increase in the price of other kinds of candy
b.
An increase in the price of the ingredients used to make chewing gum
c.
A decrease in the number of young people in the population
d.
An agreement among workers in the chewing gum industry to work for lower wages
e.
An increase in income of consumers of chewing gum
127. If supply decreases along a given demand curve, ______.
a.
there will be an excess quantity demanded in the market, resulting in an increase in the equilibrium price and a
decrease in the equilibrium quantity
b.
there will be an excess quantity supplied in the market, resulting in a decrease in the equilibrium price and an
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Chapter 04: Demand, Supply, and Markets
increase in the equilibrium quantity
c.
there will be an excess quantity demanded in the market, resulting in an increase in both the equilibrium price
and quantity
d.
there will be an excess quantity supplied in the market, resulting in a decrease in both the equilibrium price
and quantity
e.
price will fall, shifting the demand curve outward and raising the equilibrium quantity
128. Suppose the market for beef cattle was initially in equilibrium .An increase in the price of the fodder used to feed
cattle would cause:
a.
the demand for beef cattle to increase, driving the price of beef upward.
b.
the supply of beef cattle to decline, driving the price of beef upward in the long run.
c.
the supply of beef to increase, placing downward pressure on the price of beef in the long run.
d.
both supply and demand to fall, leaving the price of beef virtually unchanged.
e.
the supply of beef to increase, driving the price of beef down and increasing demand.
129. Consider the market for a good that is in equilibrium. Which of these is most likely to occur if both demand and
supply for this good decrease during a particular point in time?
a.
The equilibrium price will increase.
b.
The equilibrium price will decrease.
c.
The equilibrium quantity will increase.
d.
The equilibrium quantity will decrease.
e.
Both equilibrium price and quantity will increase.
130. Consider the market for a good that is initially in equilibrium. Which of these is most likely to occur if both demand
and supply for this good increases during a particular point in time?
a.
Equilibrium price will increase
b.
Equilibrium price will decrease
c.
Equilibrium quantity will increase
d.
Equilibrium quantity will decrease
e.
Both equilibrium price and equilibrium quantity will decrease
131. Consider the market for a good that is initially in equilibrium. Which of the following is most likely to happen if
supply increases by a smaller amount than the increase in demand?
a.
Equilibrium price will fall and equilibrium quantity will rise.
b.
Equilibrium price will rise and equilibrium quantity will fall.
c.
Both equilibrium price and equilibrium quantity will rise.
d.
Equilibrium price will rise but the change in equilibrium quantity is indeterminate.
e.
Both equilibrium price and equilibrium quantity will fall.
132. If both demand and supply increases in a market that is initially in equilibrium, price will:
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Chapter 04: Demand, Supply, and Markets
a.
remain unchanged while quantity will decrease.
b.
remain unchanged while quantity will increase.
c.
increase only if supply increases more than demand.
d.
increase only if demand increases more than supply.
e.
decrease only if supply increases less than demand.
133. If demand increases and supply decreases in a market that is in equilibrium, quantity will:
a.
increase while price will remain unchanged.
b.
remain unchanged while price will decrease.
c.
increase only if decrease in supply is more than increase in demand.
d.
increase only if decrease in supply is less than increase in demand.
e.
increase only if decrease in supply is more than decrease in demand.
134. If demand decreases and supply increases in a market that is initially in equilibrium,
a.
price will remain unchanged.
b.
price will always decrease.
c.
price will always increase.
d.
quantity will always decrease.
e.
quantity will remain unchanged.
135. Over the last few years, demand for DVDs has increased, but their equilibrium price has fallen. Which of the
following, if true, best explains this situation?
a.
The quantity supplied of DVDs has decreased during this period.
b.
There has been a shortage of DVDs during this period.
c.
The supply of DVDs decreased more than the increase in demand for DVDs.
d.
The demand for DVDs has increased more than the decrease in supply of DVDs.
e.
The supply of DVDs increased more than the increase in demand for DVDs.
136. Consider the market for wheat that is initially in equilibrium. In which of the following situations will the
equilibrium price of wheat increase and the change in the equilibrium quantity of wheat be indeterminate?
a.
If supply and demand both decline
b.
If supply and demand both rise
c.
If supply declines and demand rises
d.
If supply rises and demand declines
e.
If supply remains constant and demand rises
137. Two events occur simultaneously in the market for automobiles: (1) an improvement in assembly line technology
and (2) a recession in the economy that decreases consumers' income. Which of the following can be predicted about this
market with certainty?
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Chapter 04: Demand, Supply, and Markets
a.
Equilibrium quantity will rise.
b.
Equilibrium quantity will fall.
c.
Equilibrium price will rise.
d.
Equilibrium price will fall.
e.
Equilibrium price will remain the same.
138. In which of the following situations is the change in the equilibrium price of a good indeterminate?
a.
When supply decreases and demand increases
b.
When demand decreases and supply increases
c.
When demand remains constant and supply increases
d.
When supply and demand both decreases
e.
When supply remains constant and demand increases
139. In the table given below, which of the following statements is correct regarding the market for corn?
Table 4.2
a.
In 2008, there was an excess supply of corn in the economy.
b.
In 2008, the corn market was not in equilibrium.
c.
The weather for corn production was probably better in 2010 than in 2009.
d.
Between 2010 and 2011, both the supply and demand for corn must have increased by the same amount.
e.
Between 2009 and 2010, the demand for corn decreased.
140. Tickets to the Michigan-Notre Dame football game are usually sold out in advance of game day. This suggests that:
a.
the price of the tickets is set by the football teams.
b.
the price of the tickets is set below the equilibrium level.
c.
the football stadium is relatively small.
d.
the demand for the tickets is highly price elastic.
e.
the price of the tickets is set above the equilibrium level.
141. Suppose a market is in equilibrium. If a price floor is set in this market below the equilibrium price it is likely that:
a.
quantity demanded will increase.
b.
a surplus will arise.
c.
a shortage will arise.
d.
the quantity sold will rise.
e.
the market will remain in equilibrium.
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Chapter 04: Demand, Supply, and Markets
142. In the figure given below, a price floor set at $20.00 will:
Figure 4.7
a.
reduce the equilibrium quantity.
b.
lead to a surplus of 10 units.
c.
increase the equilibrium price.
d.
lead to a surplus of 20 units.
e.
have no impact on the equilibrium price and quantity.
143. Suppose current equilibrium price of pizza is $5. If the government decides the price of pizza cannot rise above $4,
there would be:
a.
a shortage of pizzas.
b.
a surplus of pizzas.
c.
a rightward shift of the supply curve of pizzas.
d.
no impact on the equilibrium price and quantity of pizzas.
e.
a rightward shift in the demand curve for pizzas.
144. Suppose a price floor for a good is set above the equilibrium price. At this price:
a.
quantity supplied will be less than quantity demanded.
b.
quantity supplied will exceed quantity demanded.
c.
there will be a shortage of the good.
d.
more number of consumers will be willing and able to purchase the good.
e.
producers will suffer an economic loss.
145. If the government imposes a ceiling price on apartment rents, we would expect to observe all of the following except
one. Which of these is the exception?
a.
An increase in the number of new apartment complexes being built
b.
Long waiting lists for apartment seekers
c.
Lower maintenance of existing apartments
d.
An increase in the rent for the apartments
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Chapter 04: Demand, Supply, and Markets
e.
A shortage of rented apartments
146. The figure given below depicts the milk market. The horizontal line, P, represents a price ceiling imposed by the
government. Which of the following is true?
Figure 4.8
a.
In equilibrium, the quantity demanded is 800 gallons.
b.
There is a surplus when price per gallon is $1.
c.
The quantity demanded at the price ceiling will equal the quantity produced.
d.
The equilibrium price would be $1 per unit without the price ceiling.
e.
The quantity supplied at the price ceiling is 500 gallons.
147. In the figure given below, which of the following is true at the price ceiling, P?
Figure 4.8
a.
Excess quantity supplied equals 300 gallons.
b.
Excess quantity demanded equals 300 gallons.
c.
Excess quantity supplied equals 500 gallons.
d.
Excess quantity demanded equals 800 gallons.
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Chapter 04: Demand, Supply, and Markets
e.
Quantity demanded will be equal to quantity supplied.
148. Suppose a market is in equilibrium. If a price ceiling is set by the government below the equilibrium price, which of
the following is most likely to happen?
a.
A decline in quantity demanded
b.
A surplus
c.
A shortage
d.
An increase in the quantity being sold
e.
A new equilibrium
149. In a rental market like the one in the figure given below, a government-imposed rule that rent cannot exceed $750 per
month is referred to as:
Figure 4.9
a.
a trade barrier.
b.
a quality control.
c.
a price ceiling.
d.
a price floor.
e.
a subsidy.
150. As shown in the figure given below, when a government sets a rent ceiling at $750 per month, the result is a(n):
Figure 4.9
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Chapter 04: Demand, Supply, and Markets
a.
equilibrium in the market for rented apartments.
b.
increase in supply of rented apartments.
c.
shortage of rented apartments.
d.
economic profit for the owners of rented apartments.
e.
decrease in demand for rented apartments.
151. In the figure given below, the number of units of rented apartments being supplied in the market when the maximum
rent is fixed by the government at $750 is _____.
Figure 4.9
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Chapter 04: Demand, Supply, and Markets
a.
40,000 units
b.
80,000 units
c.
130,000 units
d.
90,000 units
e.
50,000 units
152. Rent controls usually result in:
a.
an economic profit for the owners of the rented apartments.
b.
an efficient allocation of rented apartments among tenants.
c.
an excess supply of rented apartments.
d.
deterioration and poor maintenance of the rented apartments.
e.
an equilibrium in the market for rented apartments.
