Chapter 4 The Market Forces of Supply and Demand

TRUE/FALSE 1. Prices allocate a market economys scarce resources. ANS: T DIF: 1 REF: 4NAT: Analytic !"#: $arkets% market &ailure% an' e(ternalities T"P: $arket economies $S#: De&initional ). In a market economy% su**ly an' 'eman' 'etermine +ot, t,e -uantity o& eac, .oo' *ro'uce' an' t,e *rice at /,ic, it is sol'. ANS: T DIF: 1 REF: 4NAT: Analytic !"#: $arkets% market &ailure% an' e(ternalities T"P: $arket economies $S#: De&initional 0. A market is a .rou* o& +uyers an' sellers o& a *articular .oo' or ser1ice. ANS: T DIF: 1 REF: 4-1 NAT: Analytic !"#: $arkets% market &ailure% an' e(ternalities T"P: $arkets $S#: De&initional 4. Sellers as a .rou* 'etermine t,e 'eman' &or a *ro'uct% an' +uyers as a .rou* 'etermine t,e su**ly o& a *ro'uct. ANS: F DIF: 1 REF: 4-1 NAT: Analytic !"#: Su**ly an' 'eman' T"P: Deman' 2 Su**ly $S#: De&initional 3. A yar' sale is an e(am*le o& a market. ANS: T DIF: ) REF: 4-1 NAT: Analytic !"#: $arkets% market &ailure% an' e(ternalities T"P: $arkets $S#: A**licati1e 4. A ne/s*a*ers classi&ie' a's are an e(am*le o& a market. ANS: T DIF: ) REF: 4-1 NAT: Analytic !"#: $arkets% market &ailure% an' e(ternalities T"P: $arkets $S#: A**licati1e 5. $ost markets in t,e economy are ,i.,ly com*etiti1e. ANS: T DIF: 1 REF: 4-1 NAT: Analytic !"#: $arkets% market &ailure% an' e(ternalities T"P: $arkets $S#: De&initional 6. In a com*etiti1e market% t,e -uantity o& eac, .oo' *ro'uce' an' t,e *rice at /,ic, it is sol' are not 'etermine' +y any sin.le +uyer or seller. ANS: T DIF: 1 REF: 4-1 NAT: Analytic !"#: $arkets% market &ailure% an' e(ternalities T"P: #om*etiti1e markets $S#: De&initional 7. In a com*etiti1e market% t,ere are so &e/ +uyers an' so &e/ sellers t,at eac, ,as a si.ni&icant im*act on t,e market *rice. ANS: F DIF: 1 REF: 4-1 NAT: Analytic !"#: $arkets% market &ailure% an' e(ternalities T"P: #om*etiti1e markets $S#: De&initional 1 . In a *er&ectly com*etiti1e market% t,e .oo's o&&ere' &or sale are all e(actly t,e same. ANS: T DIF: 1 REF: 4-1 NAT: Analytic !"#: Per&ect com*etition T"P: Per&ect com*etition $S#: De&initional

) )

) 0

#,a*ter 4 8T,e $arket Forces o& Su**ly an' Deman'

11. In a *er&ectly com*etiti1e market% +uyers an' sellers are *rice setters. ANS: F DIF: 1 REF: 4-1 NAT: Analytic !"#: Per&ect com*etition T"P: $S#: De&initional 1). All .oo's an' ser1ices are sol' in *er&ectly com*etiti1e markets. ANS: F DIF: 1 REF: 4-1 NAT: Analytic !"#: Per&ect com*etition $S#: De&initional

Per&ect com*etition

T"P:

Per&ect com*etition

10. I& a .oo' or ser1ice ,as only one seller% t,en t,e seller is calle' a mono*oly. ANS: T DIF: 1 REF: 4-1 NAT: Analytic !"#: $ono*oly T"P: $ono*oly $S#: De&initional 14. $ono*olists are *rice takers. ANS: F DIF: ) NAT: Analytic !"#: $ono*oly REF: T"P: 4-1 $ono*oly

$S#: Inter*reti1e

13. !ocal ca+le T9 com*anies &re-uently are mono*olists. ANS: T DIF: 1 REF: 4-1 NAT: Analytic !"#: $ono*oly T"P: $ono*oly 14.

$S#: De&initional

T,e -uantity 'eman'e' o& a *ro'uct is t,e amount t,at +uyers are /illin. an' a+le to *urc,ase at a *articular *rice. ANS: T DIF: 1 REF: 4-) NAT: Analytic !"#: Su**ly an' 'eman' T"P: :uantity 'eman'e' $S#: De&initional 15. T,e la/ o& 'eman' is true &or most .oo's in t,e economy. ANS: T DIF: 1 REF: 4-) NAT: Analytic !"#: Su**ly an' 'eman' $S#: De&initional 16.

T"P:

!a/ o& 'eman'

T,e la/ o& 'eman' states t,at% ot,er t,in.s e-ual% /,en t,e *rice o& a .oo' rises% t,e -uantity 'eman'e' o& t,e .oo' rises% an' /,en t,e *rice &alls% t,e -uantity 'eman'e' &alls. ANS: F DIF: 1 REF: 4-) NAT: Analytic !"#: Su**ly an' 'eman' T"P: !a/ o& 'eman' $S#: De&initional 17. T,e 'eman' cur1e is t,e u*/ar'-slo*in. line relatin. *rice an' -uantity 'eman'e'. ANS: F DIF: 1 REF: 4-) NAT: Analytic !"#: Su**ly an' 'eman' T"P: Deman' cur1e $S#: De&initional ) . In'i1i'ual 'eman' cur1es are summe' ,ori;ontally to o+tain t,e market 'eman' cur1e. ANS: T DIF: 1 REF: 4-) NAT: Analytic !"#: Su**ly an' 'eman' T"P: $arket 'eman' cur1e $S#: De&initional )1. T,e market 'eman' cur1e s,o/s ,o/ t,e total -uantity 'eman'e' o& a .oo' 1aries as t,e income o& +uyers 1aries% /,ile all t,e ot,er &actors t,at a&&ect ,o/ muc, consumers /ant to +uy are ,el' constant. ANS: F DIF: 1 REF: 4-) NAT: Analytic !"#: Su**ly an' 'eman' T"P: $arket 'eman' cur1e $S#: De&initional )). I& somet,in. ,a**ens to alter t,e -uantity 'eman'e' at any .i1en *rice% t,en t,e 'eman' cur1e s,i&ts. ANS: T DIF: 1 REF: 4-) NAT: Analytic !"#: Su**ly an' 'eman' T"P: Deman' cur1e $S#: De&initional

#,a*ter 4 8T,e $arket Forces o& Su**ly an' Deman' )0. A mo1ement u*/ar' an' to t,e le&t alon. a .i1en 'eman' cur1e is calle' a 'ecrease in 'eman'.. ANS: F DIF: ) REF: 4-) NAT: Analytic !"#: Su**ly an' 'eman' T"P: Deman' cur1e $S#: Inter*reti1e )4. An increase in 'eman' s,i&ts t,e 'eman' cur1e to t,e le&t. ANS: F DIF: 1 REF: 4-) NAT: Analytic !"#: Su**ly an' 'eman' $S#: De&initional

) 4

T"P:

Deman' cur1e

)3. I& t,e 'eman' &or a .oo' &alls /,en income &alls% t,en t,e .oo' is calle' an in&erior .oo'. ANS: F DIF: 1 REF: 4-) NAT: Analytic !"#: Su**ly an' 'eman' T"P: Normal .oo's $S#: De&initional )4. <,en $ario=s income 'ecreases% ,e +uys more *asta. For $ario% *asta is a normal .oo'. ANS: F DIF: ) REF: 4-) NAT: Analytic !"#: Su**ly an' 'eman' T"P: In&erior .oo's $S#: A**licati1e )5. A 'ecrease in income /ill s,i&t t,e 'eman' cur1e &or an in&erior .oo' to t,e ri.,t. ANS: T DIF: ) REF: 4-) NAT: Analytic !"#: Su**ly an' 'eman' T"P: In&erior .oo's $S#: Inter*reti1e )6. An increase in t,e *rice o& a su+stitute .oo' /ill s,i&t t,e 'eman' cur1e &or a .oo' to t,e ri.,t. ANS: T DIF: ) REF: 4-) NAT: Analytic !"#: Su**ly an' 'eman' T"P: Su+stitutes $S#: Inter*reti1e )7. >ase+alls an' +ase+all +ats are su+stitute .oo's. ANS: F DIF: ) REF: NAT: Analytic !"#: Su**ly an' 'eman' $S#: A**licati1e 4-) T"P: #om*lements

0 . A 'ecrease in t,e *rice o& a com*lement /ill s,i&t t,e 'eman' cur1e &or a .oo' to t,e le&t. ANS: F DIF: ) REF: 4-) NAT: Analytic !"#: Su**ly an' 'eman' T"P: #om*lements $S#: Inter*reti1e 01. <,en an increase in t,e *rice o& one .oo' lo/ers t,e 'eman' &or anot,er .oo'% t,e t/o .oo's are calle' com*lements. ANS: T DIF: 1 REF: 4-) NAT: Analytic !"#: Su**ly an' 'eman' T"P: #om*lements $S#: De&initional 0). #ocoa an' mars,mallo/s are com*lements% so a 'ecrease in t,e *rice o& cocoa /ill cause an increase in t,e 'eman' &or mars,mallo/s. ANS: T DIF: ) REF: 4-) NAT: Analytic !"#: Su**ly an' 'eman' T"P: #om*lements $S#: A**licati1e 00. I& a *erson e(*ects t,e *rice o& socks to increase ne(t mont,% t,en t,at *ersons current 'eman' &or socks /ill increase. ANS: T DIF: ) REF: 4-) NAT: Analytic !"#: Su**ly an' 'eman' T"P: E(*ectations $S#: A**licati1e

) 3
04.

#,a*ter 4 8T,e $arket Forces o& Su**ly an' Deman'

A 'ecrease in t,e *rice o& a *ro'uct an' an increase in t,e num+er o& +uyers in t,e market a&&ect t,e 'eman' cur1e in t,e same .eneral /ay. ANS: F DIF: ) REF: 4-) NAT: Analytic !"#: Su**ly an' 'eman' T"P: Deman' cur1e $S#: Inter*reti1e 03. <,ene1er a 'eterminant o& 'eman' ot,er t,an *rice c,an.es% t,e 'eman' cur1e s,i&ts. ANS: T DIF: ) REF: 4-) NAT: Analytic !"#: Su**ly an' 'eman' T"P: Deman' cur1e $S#: Inter*reti1e 04. An increase in t,e *rice o& *i;;a /ill s,i&t t,e 'eman' cur1e &or *i;;a to t,e le&t. ANS: F DIF: ) REF: 4-) NAT: Analytic !"#: Su**ly an' 'eman' T"P: Deman' cur1e $S#: A**licati1e 05. Pu+lic ser1ice announcements% man'atory ,ealt, /arnin.s on ci.arette *acka.es% an' t,e *ro,i+ition o& ci.arette a'1ertisin. on tele1ision are all *olicies aime' at s,i&tin. t,e 'eman' cur1e &or ci.arettes to t,e ri.,t. ANS: F DIF: ) REF: 4-) NAT: Analytic !"#: Su**ly an' 'eman' T"P: Deman' cur1e $S#: A**licati1e 06. $ost stu'ies ,a1e &oun' t,at to+acco an' mari?uana are com*lements rat,er t,an su+stitutes. ANS: T DIF: ) REF: 4-) NAT: Analytic !"#: Su**ly an' 'eman' T"P: #om*lements $S#: A**licati1e 07. T,e -uantity su**lie' o& a .oo' or ser1ice is t,e amount t,at sellers are /illin. an' a+le to sell at a *articular *rice. ANS: T DIF: 1 REF: 4-0 NAT: Analytic !"#: Su**ly an' 'eman' T"P: :uantity su**lie' $S#: De&initional 4 . <,en t,e *rice o& a .oo' is ,i.,% sellin. t,e .oo' is *ro&ita+le% an' so t,e -uantity su**lie' is lar.e. ANS: T DIF: 1 REF: 4-0 NAT: Analytic !"#: Su**ly an' 'eman' T"P: !a/ o& su**ly $S#: De&initional 41. <,en t,e *rice o& a .oo' is lo/% sellin. t,e .oo' is *ro&ita+le% an' so t,e -uantity su**lie' is lar.e. ANS: F DIF: 1 REF: 4-0 NAT: Analytic !"#: Su**ly an' 'eman' T"P: !a/ o& su**ly $S#: De&initional 4). Price cannot &all so lo/ t,at some sellers c,oose to su**ly a -uantity o& ;ero. ANS: F DIF: ) REF: 4-0 NAT: Analytic !"#: Su**ly an' 'eman' T"P: :uantity su**lie' $S#: Inter*reti1e 40. T,e la/ o& su**ly states t,at% ot,er t,in.s e-ual% /,en t,e *rice o& a .oo' rises% t,e -uantity su**lie' o& t,e .oo' &alls. ANS: F DIF: 1 REF: 4-0 NAT: Analytic !"#: Su**ly an' 'eman' T"P: !a/ o& su**ly $S#: De&initional 44. T,e la/ o& su**ly states t,at% ot,er t,in.s e-ual% /,en t,e *rice o& a .oo' &alls% t,e -uantity su**lie' &alls as /ell. ANS: T DIF: 1 REF: 4-0 NAT: Analytic !"#: Su**ly an' 'eman' T"P: !a/ o& su**ly $S#: De&initional

#,a*ter 4 8T,e $arket Forces o& Su**ly an' Deman' 43. I& a ,i.,er *rice means a .reater -uantity su**lie'% t,en t,e su**ly cur1e slo*es u*/ar'. ANS: T DIF: 1 REF: 4-0 NAT: Analytic !"#: Su**ly an' 'eman' T"P: Su**ly cur1e $S#: De&initional 44. In'i1i'ual su**ly cur1es are summe' 1ertically to o+tain t,e market su**ly cur1e. ANS: F DIF: 1 REF: 4-0 NAT: Analytic !"#: Su**ly an' 'eman' T"P: $arket su**ly cur1e $S#: De&initional 45.

) 4

T,e market su**ly cur1e s,o/s ,o/ t,e total -uantity su**lie' o& a .oo' 1aries as in*ut *rices 1ary% ,ol'in. constant all t,e ot,er &actors t,at in&luence *ro'ucers 'ecisions a+out ,o/ muc, to sell. ANS: F DIF: 1 REF: 4-0 NAT: Analytic !"#: Su**ly an' 'eman' T"P: $arket su**ly cur1e $S#: De&initional 46. I& somet,in. ,a**ens to alter t,e -uantity su**lie' at any .i1en *rice% t,en /e mo1e alon. t,e &i(e' su**ly cur1e to a ne/ -uantity su**lie'. ANS: F DIF: ) REF: 4-0 NAT: Analytic !"#: Su**ly an' 'eman' T"P: Su**ly cur1e $S#: Inter*reti1e 47. A mo1ement alon. a su**ly cur1e is calle' a c,an.e in su**ly /,ile a s,i&t o& t,e su**ly cur1e is calle' a c,an.e in -uantity su**lie'. ANS: F DIF: ) REF: 4-0 NAT: Analytic !"#: Su**ly an' 'eman' T"P: Su**ly 2 :uantity su**lie' $S#: Inter*reti1e 3 . A 'ecrease in su**ly s,i&ts t,e su**ly cur1e to t,e le&t. ANS: T DIF: 1 REF: 4-0 NAT: Analytic !"#: Su**ly an' 'eman' $S#: De&initional

T"P:

Su**ly cur1e

31. A re'uction in an in*ut *rice /ill cause a c,an.e in -uantity su**lie'% +ut not a c,an.e in su**ly. ANS: F DIF: ) REF: 4-0 NAT: Analytic !"#: Su**ly an' 'eman' T"P: In*ut *rices $S#: Inter*reti1e 3). An increase in t,e *rice o& ink /ill s,i&t t,e su**ly cur1e &or *ens to t,e le&t. ANS: T DIF: ) REF: 4-0 NAT: Analytic !"#: Su**ly an' 'eman' T"P: In*ut *rices $S#: A**licati1e 30. I& t,ere is an im*ro1ement in t,e tec,nolo.y use' to *ro'uce a .oo'% t,en t,e su**ly cur1e &or t,at .oo' /ill s,i&t to t,e le&t. ANS: F DIF: ) REF: 4-0 NAT: Analytic !"#: Su**ly an' 'eman' T"P: Tec,nolo.y $S#: Inter*reti1e 34. A'1ances in *ro'uction tec,nolo.y ty*ically re'uce &irms costs. ANS: T DIF: ) REF: 4-0 NAT: Analytic !"#: Su**ly an' 'eman' T"P: $S#: Inter*reti1e 33.

Tec,nolo.y

I& a com*any makin. &ro;en oran.e ?uice e(*ects t,e *rice o& its *ro'uct to +e ,i.,er ne(t mont,% it /ill su**ly more to t,e market t,is mont,. ANS: F DIF: ) REF: 4-0 NAT: Analytic !"#: Su**ly an' 'eman' T"P: E(*ectations $S#: A**licati1e

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#,a*ter 4 8T,e $arket Forces o& Su**ly an' Deman'

34. <,en a seller e(*ects t,e *rice o& its *ro'uct to 'ecrease in t,e &uture% t,e seller=s su**ly cur1e s,i&ts le&t no/. ANS: F DIF: ) REF: 4-0 NAT: Analytic !"#: Su**ly an' 'eman' T"P: E(*ectations $S#: Inter*reti1e 35. An increase in t,e *rice o& a *ro'uct an' an increase in t,e num+er o& sellers in t,e market a&&ect t,e su**ly cur1e in t,e same .eneral /ay. ANS: F DIF: ) REF: 4-0 NAT: Analytic !"#: Su**ly an' 'eman' T"P: Su**ly cur1e $S#: Inter*reti1e 36. <,ene1er a 'eterminant o& su**ly ot,er t,an *rice c,an.es% t,e su**ly cur1e s,i&ts. ANS: T DIF: ) REF: 4-0 NAT: Analytic !"#: Su**ly an' 'eman' T"P: Su**ly cur1e $S#: Inter*reti1e 37. A 'ecrease in t,e *rice o& *i;;a /ill s,i&t t,e su**ly cur1e &or *i;;a to t,e le&t. ANS: F DIF: ) REF: 4-0 NAT: Analytic !"#: Su**ly an' 'eman' T"P: Su**ly cur1e $S#: A**licati1e 4 . Su**ly an' 'eman' to.et,er 'etermine t,e *rice an' -uantity o& a .oo' sol' in a market. ANS: T DIF: 1 REF: 4-4 NAT: Analytic !"#: Su**ly an' 'eman' T"P: E-uili+rium $S#: De&initional 41. A markets e-uili+rium is t,e *oint at /,ic, t,e su**ly an' 'eman' cur1es intersect. ANS: T DIF: 1 REF: 4-4 NAT: Analytic !"#: Su**ly an' 'eman' T"P: E-uili+rium $S#: De&initional 4). At t,e e-uili+rium *rice% -uantity 'eman'e' is e-ual to -uantity su**lie'. ANS: T DIF: 1 REF: 4-4 NAT: Analytic !"#: E-uili+rium T"P: E-uili+rium $S#: De&initional 40. T,e e-uili+rium *rice is t,e same as t,e market-clearin. *rice. ANS: T DIF: 1 REF: 4-4 NAT: Analytic !"#: E-uili+rium T"P: E-uili+rium 44.

$S#: De&initional

At t,e e-uili+rium *rice% +uyers ,a1e +ou.,t all t,ey /ant to +uy% +ut sellers ,a1e not sol' all t,ey /ant to sell. ANS: F DIF: 1 REF: 4-4 NAT: Analytic !"#: E-uili+rium T"P: E-uili+rium $S#: De&initional 43. T,e actions o& +uyers an' sellers naturally mo1e markets to/ar' e-uili+rium. ANS: T DIF: 1 REF: 4-4 NAT: Analytic !"#: E-uili+rium T"P: E-uili+rium $S#: De&initional 44. <,en t,e market *rice is a+o1e t,e e-uili+rium *rice% t,e -uantity o& t,e .oo' 'eman'e' e(cee's t,e -uantity su**lie'. ANS: F DIF: 1 REF: 4-4 NAT: Analytic !"#: E-uili+rium T"P: E-uili+rium $S#: De&initional 45. <,en t,e market *rice is a+o1e t,e e-uili+rium *rice% su**liers are una+le to sell all t,ey /ant to sell. ANS: T DIF: 1 REF: 4-4 NAT: Analytic !"#: E-uili+rium T"P: E-uili+rium $S#: De&initional 46. A sur*lus is t,e same as an e(cess 'eman'. ANS: F DIF: 1 REF: NAT: Analytic !"#: Su**ly an' 'eman' $S#: De&initional 4-4 T"P: Sur*lus

#,a*ter 4 8T,e $arket Forces o& Su**ly an' Deman' 47. Sellers res*on' to a sur*lus +y cuttin. t,eir *rices. ANS: T DIF: 1 REF: 4-4 NAT: Analytic !"#: Su**ly an' 'eman' $S#: De&initional 5 . Price /ill rise to eliminate a sur*lus. ANS: F DIF: ) NAT: Analytic !"#: E-uili+rium 51. REF: T"P: 4-4 Sur*lus

) 6

T"P:

Sur*lus

$S#: Inter*reti1e

<,en -uantity su**lie' e(cee's -uantity 'eman'e' at t,e current market *rice% t,e market ,as a sur*lus an' market *rice /ill likely rise in t,e &uture to eliminate t,e sur*lus. ANS: F DIF: ) REF: 4-4 NAT: Analytic !"#: E-uili+rium T"P: Sur*lus $S#: Inter*reti1e 5). <,en t,e market *rice is +elo/ t,e e-uili+rium *rice% t,e -uantity o& t,e .oo' 'eman'e' e(cee's t,e -uantity su**lie'. ANS: T DIF: 1 REF: 4-4 NAT: Analytic !"#: E-uili+rium T"P: E-uili+rium $S#: De&initional 50. <,en t,e market *rice is +elo/ t,e e-uili+rium *rice% su**liers are una+le to sell all t,ey /ant to sell. ANS: F DIF: 1 REF: 4-4 NAT: Analytic !"#: E-uili+rium T"P: E-uili+rium $S#: De&initional 54. A s,orta.e is t,e same as an e(cess 'eman'. ANS: T DIF: 1 REF: NAT: Analytic !"#: Su**ly an' 'eman' $S#: De&initional 4-4 T"P: S,orta.e

53. Sellers res*on' to a s,orta.e +y cuttin. t,eir *rices. ANS: F DIF: 1 REF: 4-4 NAT: Analytic !"#: Su**ly an' 'eman' $S#: De&initional 54. Price /ill rise to eliminate a s,orta.e. ANS: T DIF: ) NAT: Analytic !"#: E-uili+rium 55. REF: T"P: 4-4 S,orta.e

T"P:

S,orta.e

$S#: Inter*reti1e

<,en -uantity 'eman'e' e(cee's -uantity su**lie' at t,e current market *rice% t,e market ,as a s,orta.e an' market *rice /ill likely rise in t,e &uture to eliminate t,e s,orta.e. ANS: T DIF: ) REF: 4-4 NAT: Analytic !"#: E-uili+rium T"P: S,orta.e $S#: Inter*reti1e 56. Sur*luses 'ri1e *rice u* /,ile s,orta.es 'ri1e *rice 'o/n. ANS: F DIF: ) REF: 4-4 NAT: Analytic !"#: E-uili+rium T"P: S,orta.e 2 Sur*lus $S#: Inter*reti1e 57. A s,orta.e /ill occur at any *rice +elo/ e-uili+rium *rice an' a sur*lus /ill occur at any *rice a+o1e e-uili+rium *rice. ANS: T DIF: ) REF: 4-4 NAT: Analytic !"#: E-uili+rium T"P: S,orta.e 2 Sur*lus $S#: Inter*reti1e 6 . In a market% t,e *rice o& any .oo' a'?usts until -uantity 'eman'e' e-uals -uantity su**lie'. ANS: T DIF: ) REF: 4-4 NAT: Analytic !"#: E-uili+rium T"P: E-uili+rium $S#: Inter*reti1e 61. <,en a su**ly cur1e or a 'eman' cur1e s,i&ts% t,e e-uili+rium *rice an' e-uili+rium -uantity c,an.e. ANS: T DIF: 1 REF: 4-4 NAT: Analytic !"#: E-uili+rium T"P: E-uili+rium $S#: De&initional

) 7
6).

#,a*ter 4 8T,e $arket Forces o& Su**ly an' Deman'

Deman' re&ers to t,e amount +uyers /is, to +uy% /,ereas t,e -uantity 'eman'e' re&ers to t,e *osition o& t,e 'eman' cur1e. ANS: F DIF: 1 REF: 4-4 NAT: Analytic !"#: Su**ly an' 'eman' T"P: Deman' 2 :uantity 'eman'e' $S#: De&initional 60. Su**ly re&ers to t,e *osition o& t,e su**ly cur1e% /,ereas t,e -uantity su**lie' re&ers to t,e amount su**liers /is, to sell. ANS: T DIF: 1 REF: 4-4 NAT: Analytic !"#: Su**ly an' 'eman' T"P: Su**ly 2 :uantity su**lie' $S#: De&initional 64. It is not *ossi+le &or 'eman' an' su**ly to s,i&t at t,e same time. ANS: F DIF: ) REF: 4-4 NAT: Analytic !"#: Su**ly an' 'eman' T"P: $S#: Inter*reti1e

Su**ly 2 Deman'

63. A 'ecrease in 'eman' /ill cause a 'ecrease in *rice% /,ic, /ill cause a 'ecrease in su**ly. ANS: F DIF: ) REF: 4-4 NAT: Analytic !"#: Su**ly an' 'eman' T"P: E-uili+rium $S#: Inter*reti1e 64. An increase in 'eman' /ill cause an increase in *rice% /,ic, /ill cause an increase in -uantity su**lie'. ANS: T DIF: ) REF: 4-4 NAT: Analytic !"#: Su**ly an' 'eman' T"P: E-uili+rium $S#: Inter*reti1e 65. An increase in su**ly /ill cause a 'ecrease in *rice% /,ic, /ill cause an increase in 'eman'. ANS: F DIF: ) REF: 4-4 NAT: Analytic !"#: Su**ly an' 'eman' T"P: E-uili+rium $S#: Inter*reti1e 66. A 'ecrease in su**ly /ill cause an increase in *rice% /,ic, /ill cause a 'ecrease in -uantity 'eman'e'. ANS: T DIF: ) REF: 4-4 NAT: Analytic !"#: Su**ly an' 'eman' T"P: E-uili+rium $S#: Inter*reti1e 67. In a market economy% *rices are t,e si.nals t,at .ui'e t,e allocation o& scarce resources. ANS: T DIF: 1 REF: 4-3 NAT: Analytic !"#: $arkets% market &ailure% an' e(ternalities T"P: $arket economies $S#: De&initional S !RT A"S#ER 1. a. <,at is t,e 'i&&erence +et/een a @c,an.e in 'eman'@ an' a @c,an.e in -uantity 'eman'e'A@ Bra*, your ans/er. +. For eac, o& t,e &ollo/in. c,an.es% 'etermine /,et,er t,ere /ill +e a c,an.e in -uantity 'eman'e' or a c,an.e in 'eman'. i. a c,an.e in t,e *rice o& a relate' .oo' ii. a c,an.e in tastes iii. a c,an.e in t,e num+er o& +uyers i1. a c,an.e in *rice 1. a c,an.e in consumer e(*ectations 1i. a c,an.e in income ANS: a. +. A c,an.e in 'eman' re&ers to a s,i&t o& t,e 'eman' cur1e. A c,an.e in -uantity 'eman'e' re&ers to a mo1ement alon. a &i(e' 'eman' cur1e. A c,an.e in *rice causes a c,an.e in -uantity 'eman'e'. All o& t,e ot,er c,an.es liste' s,i&t t,e 'eman' cur1e.

#,a*ter 4 8T,e $arket Forces o& Su**ly an' Deman' A chan$e %n &uant%ty demanded
price

)1

A chan$e %n demand
price

D quantity

D= quantity

DIF: ) REF: !"#: Su**ly an' 'eman' $S#: Inter*reti1e ). a. +.

4-)

NAT: Analytic T"P: Deman' 2 :uantity 'eman'e'

<,at is t,e 'i&&erence +et/een a @c,an.e in su**ly@ an' a @c,an.e in -uantity su**lie'A@ Bra*, your ans/er. For eac, o& t,e &ollo/in. c,an.es% 'etermine /,et,er t,ere /ill +e a c,an.e in -uantity su**lie' or a c,an.e in su**ly. i. a c,an.e in in*ut costs ii a c,an.e in *ro'ucer e(*ectations iii. a c,an.e in *rice i1. a c,an.e in tec,nolo.y 1. a c,an.e in t,e num+er o& sellers A c,an.e in su**ly re&ers to a s,i&t o& t,e su**ly cur1e. A c,an.e in -uantity su**lie' re&ers to a mo1ement alon. a &i(e' su**ly cur1e. A c,an.e in *rice causes a c,an.e in -uantity su**lie'. All o& t,e ot,er c,an.es liste' s,i&t t,e su**ly cur1e. A chan$e %n &uant%ty suppl%ed
price price

ANS: a. +.

A chan$e %n supply

S=

quantity

quantity

DIF: ) REF: !"#: Su**ly an' 'eman' $S#: Inter*reti1e

4-0

NAT: Analytic T"P: Su**ly 2 :uantity su**lie'

)11
0. a.

#,a*ter 4 8T,e $arket Forces o& Su**ly an' Deman' Bi1en t,e ta+le +elo/% .ra*, t,e 'eman' an' su**ly cur1es &or &las,li.,ts. $ake certain to la+el t,e e-uili+rium *rice an' e-uili+rium -uantity. :uantity Deman'e' Per $ont, 4% 6% 1 % 1)% 14% :uantity Su**lie' Per $ont, 1 % 6% 4% 4% )%

Price C3 C4 C0 C) C1 +. c. '.

<,at is t,e e-uili+rium *rice an' t,e e-uili+rium -uantityA Su**ose t,e *rice is currently C3. <,at *ro+lem /oul' e(ist in t,e marketA <,at /oul' you e(*ect to ,a**en to *riceA S,o/ t,is on your .ra*,. Su**ose t,e *rice is currently C). <,at *ro+lem /oul' e(ist in t,e marketA <,at /oul' you e(*ect to ,a**en to *riceA S,o/ t,is on your .ra*,. a.
3 4.3 price

ANS:
Sur*lus o& 4
S

Pe

4 0.3 0 ).3 ) 1.3 1 .3 1 ) 0 4 3 4 5 6 7 1 11 1) quantity

S,orta.e o& 6

:e

+. c. '.

T,e e-uili+rium *rice DPeE is C4 an' t,e e-uili+rium -uantity D:eE is 6% . A sur*lus o& 4% &las,li.,ts /oul' +e t,e *ro+lem in t,e market% an' /e /oul' e(*ect t,e *rice to &all. A s,orta.e o& 6% &las,li.,ts /oul' +e t,e *ro+lem in t,e market% an' /e /oul' e(*ect t,e *rice to rise. 4-4 NAT: Analytic T"P: E-uili+rium 2 S,orta.e 2 Sur*lus

DIF: ) REF: !"#: Su**ly an' 'eman' $S#: A**licati1e 4.

Fill in t,e ta+le +elo/% s,o/in. /,et,er e-uili+rium *rice an' e-uili+rium -uantity .o u*% .o 'o/n% stay t,e same% or c,an.e am+i.uously. No #,an.e in Su**ly An Increase in Su**ly A Decrease in Su**ly

No #,an.e in Deman' An Increase in Deman' A Decrease in Deman'

#,a*ter 4 8T,e $arket Forces o& Su**ly an' Deman'

)1)

ANS:
No #,an.e in Deman' An Increase in Deman' A Decrease in Deman' No #,an.e in Su**ly P same : same P u* : u* P 'o/n : 'o/n 4-4 An Increase in Su**ly P 'o/n : u* P am+i.uous : u* P 'o/n : am+i.uous NAT: Analytic T"P: Deman' 2 Su**ly A Decrease in Su**ly P u* : 'o/n P u* : am+i.uous P am+i.uous : 'o/n

DIF: ) REF: !"#: Su**ly an' 'eman' $S#: Inter*reti1e 3.

Su**ose /e are analy;in. t,e market &or ,ot c,ocolate. Bra*,ically illustrate t,e im*act eac, o& t,e &ollo/in. /oul' ,a1e on 'eman' or su**ly. Also s,o/ ,o/ e-uili+rium *rice an' e-uili+rium -uantity /oul' c,an.e. a. <inter starts an' t,e /eat,er turns s,ar*ly col'er. +. T,e *rice o& tea% a su+stitute &or ,ot c,ocolate% &alls. c. T,e *rice o& cocoa +eans 'ecreases. '. T,e *rice o& /,i**e' cream &alls. e. A +etter met,o' o& ,ar1estin. cocoa +eans is intro'uce'. &. T,e Sur.eon Beneral o& t,e F.S. announces t,at ,ot c,ocolate cures acne. .. Protestin. &armers 'um* millions o& .allons o& milk% causin. t,e *rice o& milk to rise. ,. #onsumer income &alls +ecause o& a recession% an' ,ot c,ocolate is consi'ere' a normal .oo'. i. Pro'ucers e(*ect t,e *rice o& ,ot c,ocolate to increase ne(t mont,. ?. #urrently% t,e *rice o& ,ot c,ocolate is C .3 *er cu* a+o1e e-uili+rium.

)10
ANS:

#,a*ter 4 8T,e $arket Forces o& Su**ly an' Deman' 'a(

price price

')(

Pe= Pe

Pe Pe=

D= quantity

D=

D quantity

:e

:e=

:e=

:e

'c(
price price

'd(

S=

Pe= Pe Pe=
D D quantity D= quantity

Pe

:e

:e=

:e

:e=

'e(
price price

'f(

S=

Pe= Pe Pe=
D D quantity D= quantity

Pe

:e

:e=

:e

:e=

'$(

'h(

#,a*ter 4 8T,e $arket Forces o& Su**ly an' Deman'

price price

)14

S=

Pe Pe= Pe
D D= quantity D quantity

Pe=

:e=

:e

:e=

:e

'%(
price price

'*(

S=

Pe= Pe
D

PeG C .3 Pe

Sur*lus

D quantity

:e=

:e

:'

:e

:s

quantity

In D?E% a *rice a+o1e e-uili+rium /ill a&&ect +ot, -uantity 'eman'e' an' -uantity su**lie' an' /ill cause a sur*lus in t,e market. It /ill not cause eit,er 'eman' or su**ly to s,i&t. DIF: ) REF: !"#: Su**ly an' 'eman' $S#: A**licati1e 4-4 NAT: Analytic T"P: Deman' 2 Su**ly

Sec++ , The Market Forces of Supply and Demand

MULT-.LE C !-CE 1. T,e t/o /or's most o&ten use' +y economists are a. *rices an' -uantities. +. resources an' allocation. c. su**ly an' 'eman'. '. e&&iciency an' e-uity. DIF: 1 REF: 4!"#: T,e stu'y o& economics an' 'e&initions o& economics $S#: De&initional

ANS: # NAT: Analytic T"P: Economists ).

T,e &orces t,at make market economies /ork are a. /ork an' leisure. +. *olitics an' reli.ion. c. su**ly an' 'eman'. '. ta(es an' .o1ernment s*en'in..

)13

#,a*ter 4 8T,e $arket Forces o& Su**ly an' Deman'

ANS: # DIF: 1 REF: 4NAT: Analytic !"#: $arkets% market &ailure% an' e(ternalities T"P: $arket economies $S#: De&initional 0. In a market economy% su**ly an' 'eman' 'etermine a. +ot, t,e -uantity o& eac, .oo' *ro'uce' an' t,e *rice at /,ic, it is sol'. +. t,e -uantity o& eac, .oo' *ro'uce'% +ut not t,e *rice at /,ic, it is sol'. c. t,e *rice at /,ic, eac, .oo' is sol'% +ut not t,e -uantity o& eac, .oo' *ro'uce'. '. neit,er t,e -uantity o& eac, .oo' *ro'uce' nor t,e *rice at /,ic, it is sol'.

ANS: A DIF: 1 REF: 4NAT: Analytic !"#: $arkets% market &ailure% an' e(ternalities T"P: $arket economies $S#: De&initional 4. In a market economy% su**ly an' 'eman' are im*ortant +ecause t,ey a. *lay a critical role in t,e allocation o& t,e economys scarce resources. +. 'etermine ,o/ muc, o& eac, .oo' .ets *ro'uce'. c. can +e use' to *re'ict t,e im*act on t,e economy o& 1arious e1ents an' *olicies. '. All o& t,e a+o1e are correct.

ANS: D DIF: 1 REF: 4NAT: Analytic !"#: $arkets% market &ailure% an' e(ternalities T"P: $arket economies $S#: De&initional 3. In a market economy% a. su**ly 'etermines 'eman' an' 'eman'% in turn% 'etermines *rices. +. 'eman' 'etermines su**ly an' su**ly% in turn% 'etermines *rices. c. t,e allocation o& scarce resources 'etermines *rices an' *rices% in turn% 'etermine su**ly an' 'eman'. '. su**ly an' 'eman' 'etermine *rices an' *rices% in turn% allocate t,e economys scarce resources.

ANS: D DIF: 1 REF: 4NAT: Analytic !"#: $arkets% market &ailure% an' e(ternalities T"P: $arket economies $S#: De&initional

Sec+/ , The Market Forces of Supply and Demand , Markets and Compet%t%on
MULT-.LE C !-CE 1. A .rou* o& +uyers an' sellers o& a *articular .oo' or ser1ice is calle' aDnE a. coalition. +. economy. c. market. '. com*etition. DIF: 1 REF: 4-1 !"#: $arkets% market &ailure% an' e(ternalities $S#: De&initional

ANS: # NAT: Analytic T"P: $arkets ).

<,ic, o& t,e &ollo/in. statements is correctA a. >uyers 'etermine su**ly an' sellers 'etermine 'eman'. +. >uyers 'etermine 'eman' an' sellers 'etermine su**ly. c. >uyers 'etermine +ot, 'eman' an' su**ly. '. Sellers 'etermine +ot, 'eman' an' su**ly. DIF: 1 REF: !"#: Su**ly an' 'eman' 4-1 T"P: Deman' 2 Su**ly

ANS: > NAT: Analytic $S#: De&initional 0.

T,e 'eman' &or a .oo' or ser1ice is 'etermine' +y a. t,ose /,o +uy t,e .oo' or ser1ice. +. t,e .o1ernment. c. t,ose /,o sell t,e .oo' or ser1ice. '. +ot, t,ose /,o +uy an' t,ose /,o sell t,e .oo' or ser1ice.

#,a*ter 4 8T,e $arket Forces o& Su**ly an' Deman' ANS: A NAT: Analytic $S#: De&initional 4. DIF: 1 REF: !"#: Su**ly an' 'eman' 4-1 T"P: Deman'

)14

T,e su**ly o& a .oo' or ser1ice is 'etermine' +y a. t,ose /,o +uy t,e .oo' or ser1ice. +. t,e .o1ernment. c. t,ose /,o sell t,e .oo' or ser1ice. '. +ot, t,ose /,o +uy an' t,ose /,o sell t,e .oo' or ser1ice. DIF: 1 REF: !"#: Su**ly an' 'eman' 4-1 T"P: Su**ly

ANS: # NAT: Analytic $S#: De&initional 3.

For a market &or a .oo' or ser1ice to e(ist% a. t,ere must +e a .rou* o& +uyers an' sellers. +. t,ere must +e a s*eci&ic time an' *lace at /,ic, t,e .oo' or ser1ice is tra'e'. c. t,ere must +e a ,i., 'e.ree o& or.ani;ation *resent. '. All o& t,e a+o1e are correct. DIF: 1 REF: 4-1 !"#: $arkets% market &ailure% an' e(ternalities $S#: De&initional

ANS: A NAT: Analytic T"P: $arkets 4.

<,ic, o& t,e &ollo/in. is an e(am*le o& a marketA a. a .as station +. a .ara.e sale c. a +ar+er s,o* '. All o& t,e a+o1e are e(am*les o& markets. DIF: ) REF: 4-1 !"#: $arkets% market &ailure% an' e(ternalities $S#: A**licati1e

ANS: D NAT: Analytic T"P: $arkets 5.

T,e market &or ice cream is a. a mono*olistic market. +. a ,i.,ly com*etiti1e market. c. a ,i.,ly or.ani;e' market. '. +ot, D+E an' DcE are correct. DIF: 1 REF: 4-1 !"#: $arkets% market &ailure% an' e(ternalities $S#: De&initional

ANS: > NAT: Analytic T"P: $arkets 6.

$ost markets in t,e economy are a. markets in /,ic, sellers% rat,er t,an +uyers% control t,e *rice o& t,e *ro'uct. +. markets in /,ic, +uyers% rat,er t,an sellers% control t,e *rice o& t,e *ro'uct. c. *er&ectly com*etiti1e. '. ,i.,ly com*etiti1e. DIF: 1 REF: 4-1 !"#: $arkets% market &ailure% an' e(ternalities $S#: De&initional

ANS: D NAT: Analytic T"P: $arkets 7.

In a com*etiti1e market% t,e *rice o& a *ro'uct a. is 'etermine' +y +uyers an' t,e -uantity o& t,e *ro'uct *ro'uce' is 'etermine' +y sellers. +. is 'etermine' +y sellers an' t,e -uantity o& t,e *ro'uct *ro'uce' is 'etermine' +y +uyers. c. an' t,e -uantity o& t,e *ro'uct *ro'uce' are +ot, 'etermine' +y sellers. '. None o& t,e a+o1e is correct.

ANS: D DIF: ) REF: 4-1 NAT: Analytic !"#: $arkets% market &ailure% an' e(ternalities T"P: #om*etiti1e markets $S#: Inter*reti1e

)15
1 .

#,a*ter 4 8T,e $arket Forces o& Su**ly an' Deman' In a com*etiti1e market% t,e -uantity o& a *ro'uct *ro'uce' an' t,e *rice o& t,e *ro'uct are 'etermine' +y a. +uyers. +. sellers. c. +ot, +uyers an' sellers. '. None o& t,e a+o1e is correct.

ANS: # DIF: ) REF: 4-1 NAT: Analytic !"#: $arkets% market &ailure% an' e(ternalities T"P: #om*etiti1e markets $S#: Inter*reti1e 11. In a com*etiti1e market% t,e -uantity o& a *ro'uct *ro'uce' an' t,e *rice o& t,e *ro'uct are 'etermine' +y a. a sin.le +uyer. +. a sin.le seller. c. one +uyer an' one seller /orkin. to.et,er. '. all +uyers an' all sellers.

ANS: D DIF: ) REF: 4-1 NAT: Analytic !"#: $arkets% market &ailure% an' e(ternalities T"P: #om*etiti1e markets $S#: Inter*reti1e 1). A com*etiti1e market is a market in /,ic, a. an auctioneer ,el*s set *rices an' arran.e sales. +. t,ere are only a &e/ sellers. c. t,e &orces o& su**ly an' 'eman' 'o not a**ly. '. no in'i1i'ual +uyer or seller ,as any si.ni&icant im*act on t,e market *rice.

ANS: D DIF: 1 REF: 4-1 NAT: Analytic !"#: $arkets% market &ailure% an' e(ternalities T"P: #om*etiti1e markets $S#: De&initional 10. A com*etiti1e market is one in /,ic, a. t,ere is only one seller% +ut t,ere are many +uyers. +. t,ere are many sellers an' eac, seller ,as t,e a+ility to set t,e *rice o& ,is *ro'uct. c. t,ere are many sellers an' t,ey com*ete /it, one anot,er in suc, a /ay t,at some sellers are al/ays +ein. &orce' out o& t,e market. '. t,ere are so many +uyers an' so many sellers t,at eac, ,as a ne.li.i+le im*act on t,e *rice o& t,e *ro'uct.

ANS: D DIF: 1 REF: 4-1 NAT: Analytic !"#: $arkets% market &ailure% an' e(ternalities T"P: #om*etiti1e markets $S#: De&initional 14. Assume Ti+ana +uys com*uters in a com*etiti1e market. It &ollo/s t,at a. Ti+ana ,as a limite' num+er o& sellers to turn to /,en s,e +uys a com*uter. +. Ti+ana /ill &in' ,ersel& ne.otiatin. /it, sellers /,ene1er s,e +uys a com*uter. c. i& Ti+ana +uys a lar.e num+er o& com*uters% t,e *rice o& com*uters /ill rise noticea+ly. '. None o& t,e a+o1e is correct.

ANS: D DIF: ) REF: 4-1 NAT: Analytic !"#: $arkets% market &ailure% an' e(ternalities T"P: #om*etiti1e markets $S#: A**licati1e 13. In a com*etiti1e market% eac, seller ,as limite' control o1er t,e *rice o& ,is *ro'uct +ecause a. ot,er sellers are o&&erin. similar *ro'ucts. +. +uyers e(ert more control o1er t,e *rice t,an 'o sellers. c. t,ese markets are ,i.,ly re.ulate' +y t,e .o1ernment. '. sellers usually a.ree to set a common *rice t,at /ill allo/ eac, seller to earn a com&orta+le *ro&it.

ANS: A DIF: 1 REF: 4-1 NAT: Analytic !"#: $arkets% market &ailure% an' e(ternalities T"P: #om*etiti1e markets $S#: De&initional

#,a*ter 4 8T,e $arket Forces o& Su**ly an' Deman' 14. For a com*etiti1e market% /,ic, o& t,e &ollo/in. statements is correctA a. A seller can al/ays increase ,er *ro&it +y raisin. t,e *rice o& ,er *ro'uct. +. I& a seller c,ar.es more t,an t,e .oin. *rice% +uyers /ill .o else/,ere to make t,eir *urc,ases. c. A seller o&ten c,ar.es less t,an t,e .oin. *rice to increase sales an' *ro&it. '. A sin.le +uyer can in&luence t,e *rice o& t,e *ro'uct% +ut only /,en *urc,asin. &rom se1eral sellers in a s,ort *erio' o& time.

)16

ANS: > DIF: 1 REF: 4-1 NAT: Analytic !"#: $arkets% market &ailure% an' e(ternalities T"P: #om*etiti1e markets $S#: De&initional 15. I& a seller in a com*etiti1e market c,ooses to c,ar.e more t,an t,e .oin. *rice% t,en a. t,e sellers *ro&its 'e&initely /oul' increase. +. t,e o/ners o& t,e ra/ materials use' in *ro'uction /oul' raise t,e *rices &or t,e ra/ materials. c. ot,er sellers /oul' also raise t,eir *rices. '. +uyers /ill make *urc,ases &rom ot,er sellers.

ANS: D DIF: 1 REF: 4-1 NAT: Analytic !"#: $arkets% market &ailure% an' e(ternalities T"P: #om*etiti1e markets $S#: De&initional 16. T,e ,i.,est &orm o& com*etition is calle' a. a+solute com*etition. +. cutt,roat com*etition. c. *er&ect com*etition. '. market com*etition. DIF: 1 REF: !"#: Per&ect com*etition 4-1 T"P: Per&ect com*etition

ANS: # NAT: Analytic $S#: De&initional 17.

<,ic, o& t,e &ollo/in. is not a c,aracteristic o& a *er&ectly com*etiti1e marketA a. Di&&erent sellers sell i'entical *ro'ucts. +. T,ere are many sellers. c. Sellers must acce*t t,e *rice t,e market 'etermines. '. All o& t,e a+o1e are c,aracteristics o& a *er&ectly com*etiti1e market. DIF: ) REF: !"#: Per&ect com*etition 4-1 T"P: Per&ect com*etition

ANS: D NAT: Analytic $S#: Inter*reti1e ) .

<,ic, o& t,e &ollo/in. is not a c,aracteristic o& a *er&ectly com*etiti1e marketA a. Sellers set t,e *rice o& t,e *ro'uct. +. T,ere are many sellers. c. >uyers must acce*t t,e *rice t,e market 'etermines. '. All o& t,e a+o1e are c,aracteristics o& a *er&ectly com*etiti1e market. DIF: ) REF: !"#: Per&ect com*etition 4-1 T"P: Per&ect com*etition

ANS: A NAT: Analytic $S#: Inter*reti1e )1.

T,e term *rice takers re&ers to +uyers an' sellers in a. *er&ectly com*etiti1e markets. +. mono*olistic markets. c. markets t,at are re.ulate' +y t,e .o1ernment. '. markets in /,ic, +uyers cannot +uy all t,ey /ant an'8or sellers cannot sell all t,ey /ant. DIF: ) REF: !"#: Per&ect com*etition 4-1 T"P: Per&ect com*etition

ANS: A NAT: Analytic $S#: Inter*reti1e

)17
)).

#,a*ter 4 8T,e $arket Forces o& Su**ly an' Deman' >uyers an' sellers /,o ,a1e no in&luence on market *rice are re&erre' to as a. market *a/ns. +. mono*olists. c. *rice takers. '. *rice makers. DIF: 1 REF: !"#: Per&ect com*etition 4-1 T"P: Per&ect com*etition

ANS: # NAT: Analytic $S#: De&initional )0.

All market *artici*ants are *rice takers t,at ,a1e no in&luence o1er *rices in markets t,at &eature a. only a &e/ +uyers an' a &e/ sellers. +. numerous sellers +ut only a &e/ +uyers. c. numerous +uyers +ut only a &e/ sellers. '. numerous +uyers an' numerous sellers. DIF: ) REF: !"#: Per&ect com*etition 4-1 T"P: Per&ect com*etition

ANS: D NAT: Analytic $S#: Inter*reti1e )4.

I& +uyers an' sellers in a certain market are *rice takers% t,en in'i1i'ually a. t,ey ,a1e no in&luence on market *rice. +. t,ey ,a1e some in&luence on market *rice% +ut t,at in&luence is limite'. c. +uyers /ill +e a+le to &in' *rices lo/er t,an t,ose 'etermine' in t,e market. '. sellers /ill &in' it 'i&&icult to sell all t,ey /ant to sell at t,e market *rice. DIF: ) REF: !"#: Per&ect com*etition 4-1 T"P: Per&ect com*etition

ANS: A NAT: Analytic $S#: Inter*reti1e )3.

In a *er&ectly com*etiti1e market% at t,e market *rice% a. +uyers cannot +uy all t,ey /ant an' sellers cannot sell all t,ey /ant. +. +uyers cannot +uy all t,ey /ant% +ut sellers can sell all t,ey /ant. c. +uyers can +uy all t,ey /ant% +ut sellers cannot sell all t,ey /ant. '. +uyers can +uy all t,ey /ant an' sellers can sell all t,ey /ant. DIF: 1 REF: !"#: Per&ect com*etition 4-1 T"P: Per&ect com*etition

ANS: D NAT: Analytic $S#: De&initional )4.

An e(am*le o& a *er&ectly com*etiti1e market /oul' +e t,e a. ca+le T9 market. +. soy+ean market. c. +reak&ast cereal market. '. s,am*oo market. DIF: ) REF: !"#: Per&ect com*etition 4-1 T"P: Per&ect com*etition

ANS: > NAT: Analytic $S#: A**licati1e )5.

Assume t,e market &or tennis +alls is *er&ectly com*etiti1e. <,en one tennis +all *ro'ucer e(its t,e market% a. t,e *rice o& tennis +alls increases. +. t,e *rice o& tennis +alls 'ecreases. c. t,e *rice o& tennis +alls 'oes not c,an.e. '. t,ere is no lon.er a market &or tennis +alls. DIF: ) REF: !"#: Per&ect com*etition 4-1 T"P: Per&ect com*etition

ANS: # NAT: Analytic $S#: A**licati1e )6.

Assume t,e market &or *ork is *er&ectly com*etiti1e. <,en one *ork +uyer e(its t,e market% a. t,e *rice o& *ork increases. +. t,e *rice o& *ork 'ecreases. c. t,e *rice o& *ork 'oes not c,an.e. '. t,ere is no lon.er a market &or *ork.

#,a*ter 4 8T,e $arket Forces o& Su**ly an' Deman' ANS: # NAT: Analytic $S#: A**licati1e )7. DIF: ) REF: !"#: Per&ect com*etition 4-1 T"P: Per&ect com*etition

))

A mono*oly is a market a. /it, one seller% an' t,at seller is a *rice taker. +. /it, one seller% an' t,at seller sets t,e *rice. c. /it, one +uyer% an' t,at +uyer is a *rice taker. '. /it, one +uyer% an' t,at +uyer sets t,e *rice. DIF: 1 !"#: $ono*oly REF: T"P: 4-1 $ono*oly $S#: De&initional

ANS: > NAT: Analytic 0 .

<,ic, o& t,e &ollo/in. /oul' most likely ser1e as an e(am*le o& a mono*olyA a. a +akery in a lar.e city +. a +ank in a lar.e city c. a local ca+le tele1ision com*any '. a small .rou* o& corn &armers DIF: ) !"#: $ono*oly REF: T"P: 4-1 $ono*oly $S#: A**licati1e

ANS: # NAT: Analytic 01.

<,ic, o& t,e &ollo/in. is not a reason *er&ect com*etition is a use&ul sim*li&ication% 'es*ite t,e 'i1ersity o& market ty*es /e &in' in t,e /orl'A a. Per&ectly com*etiti1e markets are t,e easiest to analy;e +ecause e1eryone *artici*atin. in t,e market takes t,e *rice as .i1en +y market con'itions. +. Some 'e.ree o& com*etition is *resent in most markets. c. T,ere are many +uyers an' many sellers in all ty*es o& markets. '. $any o& t,e lessons t,at /e learn +y stu'yin. su**ly an' 'eman' un'er *er&ect com*etition a**ly in more com*licate' markets as /ell. DIF: 1 REF: !"#: Per&ect com*etition 4-1 T"P: Per&ect com*etition

ANS: # NAT: Analytic $S#: De&initional

Sec+0 , The Market Forces of Supply and Demand , Demand

MULT-.LE C !-CE 1. T,e -uantity 'eman'e' o& a .oo' is t,e amount t,at +uyers a. are /illin. to *urc,ase. +. are /illin. an' a+le to *urc,ase. c. are /illin. an' a+le an' nee' to *urc,ase. '. are a+le to *urc,ase. DIF: 1 REF: !"#: Su**ly an' 'eman' 4-) T"P: :uantity 'eman'e'

ANS: > NAT: Analytic $S#: De&initional ).

H"t,er t,in.s e-ual% /,en t,e *rice o& a .oo' rises% t,e -uantity 'eman'e' o& t,e .oo' &alls% an' /,en t,e *rice &alls% t,e -uantity 'eman'e' rises.I T,is relations,i* +et/een *rice an' -uantity 'eman'e' a. a**lies to most .oo's in t,e economy. +. is re*resente' +y a 'o/n/ar'-slo*in. 'eman' cur1e. c. is re&erre' to as t,e la/ o& 'eman'. '. All o& t,e a+o1e are correct. DIF: 1 REF: !"#: Su**ly an' 'eman' 4-) T"P: !a/ o& 'eman'

ANS: D NAT: Analytic $S#: De&initional 0.

T,e la/ o& 'eman' states t,at% ot,er t,in.s e-ual% a. /,en t,e *rice o& a .oo' &alls% t,e 'eman' &or t,e .oo' rises. +. /,en t,e *rice o& a .oo' rises% t,e -uantity 'eman'e' o& t,e .oo' rises. c. /,en t,e *rice o& a .oo' rises% t,e 'eman' &or t,e .oo' &alls. '. /,en t,e *rice o& a .oo' &alls% t,e -uantity 'eman'e' o& t,e .oo' rises.

))1

#,a*ter 4 8T,e $arket Forces o& Su**ly an' Deman' DIF: 1 REF: !"#: Su**ly an' 'eman' 4-) T"P: !a/ o& 'eman'

ANS: D NAT: Analytic $S#: De&initional 4.

T,e la/ o& 'eman' states t,at% ot,er t,in.s e-ual% a. an increase in *rice causes -uantity 'eman'e' to increase. +. an increase in *rice causes -uantity 'eman'e' to 'ecrease. c. an increase in -uantity 'eman'e' causes *rice to increase. '. an increase in -uantity 'eman'e' causes *rice to 'ecrease. DIF: ) REF: !"#: Su**ly an' 'eman' 4-) T"P: !a/ o& 'eman'

ANS: > NAT: Analytic $S#: Inter*reti1e 3.

<,ic, o& t,ese statements +est re*resents t,e la/ o& 'eman'A a. <,en +uyers tastes &or a .oo' increase% t,ey *urc,ase more o& t,e .oo'. +. <,en income le1els increase% +uyers *urc,ase more o& most .oo's. c. <,en t,e *rice o& a .oo' 'ecreases% +uyers *urc,ase more o& t,e .oo'. '. <,en +uyers 'eman's &or a .oo' increase% t,e *rice o& t,e .oo' increases. DIF: ) REF: !"#: Su**ly an' 'eman' 4-) T"P: !a/ o& 'eman'

ANS: # NAT: Analytic $S#: Inter*reti1e 4.

A 'o/n/ar'-slo*in. 'eman' cur1e illustrates a. t,at 'eman' 'ecreases o1er time. +. t,at *rices &all o1er time. c. t,e relations,i* +et/een income an' -uantity 'eman'e'. '. t,e la/ o& 'eman'. DIF: ) REF: !"#: Su**ly an' 'eman' 4-) T"P: !a/ o& 'eman'

ANS: D NAT: Analytic $S#: Inter*reti1e 5.

>enny rents 3 mo1ies *er mont, /,en t,e *rice is C0. *er rental an' 5 mo1ies *er mont, /,en t,e *rice is C).3 *er rental. >ennys 'eman' 'emonstrates t,e la/ o& a. *rice. +. su**ly. c. 'eman'. '. income. DIF: ) REF: !"#: Su**ly an' 'eman' 4-) T"P: !a/ o& 'eman'

ANS: # NAT: Analytic $S#: A**licati1e 6.

<,ic, o& t,e &ollo/in. 'emonstrates t,e la/ o& 'eman'A a. A&ter Jon .ot a raise at /ork% ,e +ou.,t more *ret;els at C1.3 *er *ret;el t,an ,e 'i' +e&ore ,is raise. +. $elissa +uys &e/er mu&&ins at C .53 *er mu&&in t,an at C1 *er mu&&in% ot,er t,in.s e-ual. c. Da1e +uys more 'onuts at C .)3 *er 'onut t,an at C .3 *er 'onut% ot,er t,in.s e-ual. '. Ken'ra +uys &e/er Snickers at C .4 *er Snickers since t,e *rice o& $ilky <ays &ell to C .3 *er $ilky <ay. DIF: ) REF: !"#: Su**ly an' 'eman' 4-) T"P: !a/ o& 'eman'

ANS: # NAT: Analytic $S#: A**licati1e 7.

T,e &ollo/in. ta+le contains a 'eman' sc,e'ule &or a .oo'. .r%ce C1 C) 1uant%ty Demanded 1 A

#,a*ter 4 8T,e $arket Forces o& Su**ly an' Deman' I& t,e la/ o& 'eman' a**lies to t,is .oo'% t,en HAI coul' +e a. . +. 1 . c. ) . '. 4 . ANS: A NAT: Analytic $S#: A**licati1e 1 . DIF: ) REF: !"#: Su**ly an' 'eman' 4-) T"P: !a/ o& 'eman'

)))

A ta+le t,at s,o/s t,e relations,i* +et/een t,e *rice o& a .oo' an' t,e -uantity 'eman'e' o& t,at .oo' is calle' a a. *rice--uantity sc,e'ule. +. +uyer sc,e'ule. c. 'eman' sc,e'ule. '. 'eman' cur1e. DIF: 1 REF: !"#: Su**ly an' 'eman' 4-) T"P: Deman' sc,e'ule

ANS: # NAT: Analytic $S#: De&initional 11.

A 'eman' sc,e'ule is a ta+le t,at s,o/s t,e relations,i* +et/een a. -uantity 'eman'e' an' -uantity su**lie'. +. income an' -uantity 'eman'e'. c. *rice an' -uantity 'eman'e'. '. *rice an' income. DIF: 1 REF: !"#: Su**ly an' 'eman' 4-) T"P: Deman' sc,e'ule

ANS: # NAT: Analytic $S#: De&initional 1).

<,ic, o& t,e &ollo/in. is not ,el' constant in a 'eman' sc,e'uleA a. income +. tastes c. *rice '. e(*ectations DIF: ) REF: !"#: Su**ly an' 'eman' 4-) T"P: Deman' sc,e'ule

ANS: # NAT: Analytic $S#: Inter*reti1e 10.

T,e 'eman' cur1e &or a .oo' is a. a line t,at relates *rice an' -uantity 'eman'e'. +. a line t,at relates income an' -uantity 'eman'e'. c. a line t,at relates -uantity 'eman'e' an' -uantity su**lie'. '. a line t,at relates *rice an' income. DIF: 1 REF: !"#: Su**ly an' 'eman' 4-) T"P: Deman' cur1e

ANS: A NAT: Analytic $S#: De&initional 14.

T,e line t,at relates t,e *rice o& a .oo' an' t,e -uantity 'eman'e' o& t,at .oo' is calle' t,e a. 'eman' sc,e'ule% an' it usually slo*es u*/ar'. +. 'eman' sc,e'ule% an' it usually slo*es 'o/n/ar'. c. 'eman' cur1e% an' it usually slo*es u*/ar'. '. 'eman' cur1e% an' it usually slo*es 'o/n/ar'. DIF: 1 REF: !"#: Su**ly an' 'eman' 4-) T"P: Deman' cur1e

ANS: D NAT: Analytic $S#: De&initional

))0
13.

#,a*ter 4 8T,e $arket Forces o& Su**ly an' Deman' <,en 'ra/in. a 'eman' cur1e% a. 'eman' is on t,e 1ertical a(is an' *rice is on t,e ,ori;ontal a(is. +. -uantity 'eman'e' is on t,e 1ertical a(is an' *rice is on t,e ,ori;ontal a(is. c. *rice is on t,e 1ertical a(is an' 'eman' is on t,e ,ori;ontal a(is. '. *rice is on t,e 1ertical a(is an' -uantity 'eman'e' is on t,e ,ori;ontal a(is. DIF: 1 REF: !"#: Su**ly an' 'eman' 4-) T"P: Deman' cur1e

ANS: D NAT: Analytic $S#: De&initional 14.

T,e sum o& all t,e in'i1i'ual 'eman' cur1es &or a *ro'uct is calle' a. total 'eman'. +. consumer 'eman'. c. a..re.ate 'eman'. '. market 'eman'. DIF: 1 REF: !"#: Su**ly an' 'eman' 4-) T"P: $arket 'eman'

ANS: D NAT: Analytic $S#: De&initional 15.

T,e market 'eman' cur1e a. is &oun' +y 1ertically a''in. t,e in'i1i'ual 'eman' cur1es. +. slo*es u*/ar'. c. re*resents t,e sum o& t,e *rices t,at all t,e +uyers are /illin. to *ay &or a .i1en -uantity o& t,e .oo'. '. re*resents t,e sum o& t,e -uantities 'eman'e' +y all t,e +uyers at eac, *rice o& t,e .oo'. DIF: ) REF: !"#: Su**ly an' 'eman' 4-) T"P: $arket 'eman'

ANS: D NAT: Analytic $S#: Inter*reti1e 16.

T,e market 'eman' cur1e a. is t,e sum o& all in'i1i'ual 'eman' cur1es. +. is t,e 'eman' cur1e &or e1ery *ro'uct in an in'ustry. c. s,o/s t,e a1era.e -uantity 'eman'e' +y in'i1i'ual 'eman'ers at eac, *rice. '. is al/ays &latter t,an an in'i1i'ual 'eman' cur1e. DIF: 1 REF: !"#: Su**ly an' 'eman' 4-) T"P: $arket 'eman'

ANS: A NAT: Analytic $S#: De&initional 17.

To o+tain t,e market 'eman' cur1e &or a *ro'uct% sum t,e in'i1i'ual 'eman' cur1es a. 1ertically. +. 'ia.onally. c. ,ori;ontally. '. an' t,en a1era.e t,em. DIF: ) REF: !"#: Su**ly an' 'eman' 4-) T"P: $arket 'eman'

ANS: # NAT: Analytic $S#: Inter*reti1e ) .

A market 'eman' cur1e s,o/s a. t,e relations,i* +et/een *rice an' t,e num+er o& +uyers in a market. +. ,o/ -uantity 'eman'e' c,an.es /,en t,e num+er o& +uyers c,an.es. c. t,e sum o& all *rices t,at in'i1i'ual +uyers are /illin. an' a+le to *ay &or eac, *ossi+le -uantity o& t,e .oo'. '. ,o/ muc, o& a .oo' all +uyers are /illin. an' a+le to +uy at eac, *ossi+le *rice. DIF: ) REF: !"#: Su**ly an' 'eman' 4-) T"P: $arket 'eman'

ANS: D NAT: Analytic $S#: Inter*reti1e

#,a*ter 4 8T,e $arket Forces o& Su**ly an' Deman' )1. A market 'eman' cur1e s,o/s ,o/ t,e total -uantity 'eman'e' o& a .oo' 1aries as a. income 1aries. +. *rice 1aries. c. t,e num+er o& +uyers 1aries. '. su**ly 1aries. DIF: ) REF: !"#: Su**ly an' 'eman' 4-) T"P: $arket 'eman'

))4

ANS: > NAT: Analytic $S#: Inter*reti1e )).

Su**ose S*encer an' Kate are t,e only t/o 'eman'ers o& lemona'e. Eac, mont,% S*encer +uys si( .lasses o& lemona'e /,en t,e *rice is C1. *er .lass% an' ,e +uys &our .lasses /,en t,e *rice is C1.3 *er .lass. Eac, mont,% Kate +uys &our .lasses o& lemona'e /,en t,e *rice is C1. *er .lass% an' s,e +uys t/o .lasses /,en t,e *rice is C1.3 *er .lass. <,ic, o& t,e &ollo/in. *oints is on t,e market 'eman' cur1eA a. D-uantity 'eman'e' L )% *rice L C1.3 E +. D-uantity 'eman'e' L 4% *rice L C).3 E c. D-uantity 'eman'e' L 1 % *rice L C1. E '. D-uantity 'eman'e' L 14% *rice L C).3 E DIF: ) REF: !"#: Su**ly an' 'eman' 4-) T"P: $arket 'eman'

ANS: # NAT: Analytic $S#: A**licati1e Table 4-1 Price C . C .3 C1. C1.3 C). C).3 )0. Aarons :uantity Deman'e' ) 16 14 1) 4

An.elas :uantity Deman'e' 14 1) 1 6 4 4

Austins :uantity Deman'e' 4 4 )

Alyssas :uantity Deman'e' 6 4 3 4 )

Refer to Ta)le 4,/. <,ose 'eman' 'oes not o+ey t,e la/ o& 'eman'A a. Aarons +. An.elas c. Austins '. Alyssas DIF: ) REF: !"#: Su**ly an' 'eman' 4-) T"P: !a/ o& 'eman'

ANS: # NAT: Analytic $S#: A**licati1e )4.

Refer to Ta)le 4,/. I& t,ese are t,e only &our +uyers in t,e market% t,en t,e market -uantity 'eman'e' at a *rice o& C1 is a. 4 units. +. 5.53 units. c. 14 units. '. 01 units. DIF: ) REF: !"#: Su**ly an' 'eman' 4-) T"P: $arket 'eman'

ANS: D NAT: Analytic $S#: A**licati1e )3.

Refer to Ta)le 4,/. I& t,ese are t,e only &our +uyers in t,e market% t,en t,e market -uantity 'eman'e' at a *rice o& C) is a. units. +. 0.3 units. c. 4 units. '. 14 units.

))3

#,a*ter 4 8T,e $arket Forces o& Su**ly an' Deman' DIF: ) REF: !"#: Su**ly an' 'eman' 4-) T"P: $arket 'eman'

ANS: D NAT: Analytic $S#: A**licati1e )4.

Refer to Ta)le 4,/. I& t,ese are t,e only &our +uyers in t,e market% t,en /,en t,e *rice increases &rom C1. to C1.3 % t,e market -uantity 'eman'e' a. 'ecreases +y 1.53 units. +. increases +y ) units. c. 'ecreases +y 5 units. '. 'ecreases +y )4 units. DIF: ) REF: !"#: Su**ly an' 'eman' 4-) T"P: $arket 'eman'

ANS: # NAT: Analytic $S#: A**licati1e )5.

Refer to Ta)le 4,/. For /,om is t,e .oo' a normal .oo'A a. Aaron +. Austin c. all o& t,e &our 'eman'ers '. T,is cannot +e 'etermine' &rom t,e ta+le. DIF: ) REF: !"#: Su**ly an' 'eman' 4-) T"P: Normal .oo's

ANS: D NAT: Analytic $S#: A**licati1e Table 4-2 Price C1) C1 C6 C4 C4 C) )6. Au'reys :uantity Deman'e' ) 4 4 6 1 1)

>o+s :uantity Deman'e' 1 4 5 6 7 1

#,ucks :uantity Deman'e' 0 4 3 4 0 )

Dotties :uantity Deman'e' 4 3 4 5 6 7

Refer to Ta)le 4,0. <,ose 'eman' 'oes not o+ey t,e la/ o& 'eman'A a. Au'reys +. >o+s c. #,ucks '. Dotties DIF: ) REF: !"#: Su**ly an' 'eman' 4-) T"P: !a/ o& 'eman'

ANS: # NAT: Analytic $S#: A**licati1e )7.

Refer to Ta)le 4,0. I& t,ese are t,e only &our +uyers in t,e market% t,en t,e market -uantity 'eman'e' at a *rice o& C6 is a. 4 units. +. 4 units. c. )4 units. '. 0) units. DIF: ) REF: !"#: Su**ly an' 'eman' 4-) T"P: $arket 'eman'

ANS: # NAT: Analytic $S#: A**licati1e

#,a*ter 4 8T,e $arket Forces o& Su**ly an' Deman' 0 .

))4

Refer to Ta)le 4,0. I& t,ese are t,e only &our +uyers in t,e market% t,en /,en t,e *rice 'ecreases &rom C4 to C4% t,e market -uantity 'eman'e' a. increases +y .53 units. +. increases +y 0 units. c. increases +y 6 units. '. 'ecreases +y )5 units. DIF: ) REF: !"#: Su**ly an' 'eman' 4-) T"P: $arket 'eman'

ANS: > NAT: Analytic $S#: A**licati1e Figure 4-1

Consumer /
) 16 14 14 1) 1 6 4 4 ) D ) 4 4 6 1 1) 14 14 quantity 3 1 price 0 )5 )4 )1 16 13 1) 7 4 0 price

Consumer 0

D 13 ) )3 0 03 4 quantity

01.

Refer to F%$ure 4,/2 I& t,ese are t,e only t/o consumers in t,e market% t,en t,e market -uantity 'eman'e' at a *rice o& C4 is a. 1) units. +. 14 units. c. 17 units. '. )1 units. DIF: ) REF: !"#: Su**ly an' 'eman' 4-) T"P: $arket 'eman'

ANS: # NAT: Analytic $S#: A**licati1e 0).

<,en /e mo1e alon. a .i1en 'eman' cur1e% a. only *rice is ,el' constant. +. income an' *rice are ,el' constant. c. all non*rice 'eterminants o& 'eman' are ,el' constant. '. all 'eterminants o& -uantity 'eman'e' are ,el' constant. DIF: ) REF: !"#: Su**ly an' 'eman' 4-) T"P: Deman' cur1e

ANS: # NAT: Analytic $S#: Inter*reti1e 00.

"nce t,e 'eman' cur1e &or a *ro'uct or ser1ice is 'ra/n% it a. remains sta+le o1er time. +. can s,i&t eit,er ri.,t/ar' or le&t/ar'. c. is *ossi+le to mo1e alon. t,e cur1e% +ut t,e cur1e /ill not s,i&t. '. ten's to +ecome stee*er o1er time. DIF: ) REF: !"#: Su**ly an' 'eman' 4-) T"P: Deman' cur1e

ANS: > NAT: Analytic $S#: Inter*reti1e

))5
04.

#,a*ter 4 8T,e $arket Forces o& Su**ly an' Deman' I& somet,in. ,a**ens to alter t,e -uantity 'eman'e' at any .i1en *rice% t,en a. t,e 'eman' cur1e +ecomes stee*er. +. t,e 'eman' cur1e +ecomes &latter. c. t,e 'eman' cur1e s,i&ts. '. /e mo1e alon. t,e 'eman' cur1e. DIF: 1 REF: !"#: Su**ly an' 'eman' 4-) T"P: Deman' cur1e

ANS: # NAT: Analytic $S#: De&initional 03.

<,en -uantity 'eman'e' 'ecreases at e1ery *ossi+le *rice% /e kno/ t,at t,e 'eman' cur1e ,as a. s,i&te' to t,e le&t. +. s,i&te' to t,e ri.,t. c. not s,i&te'M rat,er% /e ,a1e mo1e' alon. t,e 'eman' cur1e to a ne/ *oint on t,e same cur1e. '. not s,i&te'M rat,er% t,e 'eman' cur1e ,as +ecome &latter. DIF: ) REF: !"#: Su**ly an' 'eman' 4-) T"P: Deman' cur1e

ANS: A NAT: Analytic $S#: Inter*reti1e 04.

<,en -uantity 'eman'e' increases at e1ery *ossi+le *rice% /e kno/ t,at t,e 'eman' cur1e ,as a. s,i&te' to t,e le&t. +. s,i&te' to t,e ri.,t. c. not s,i&te'M rat,er% /e ,a1e mo1e' alon. t,e 'eman' cur1e to a ne/ *oint on t,e same cur1e. '. not s,i&te'M rat,er% t,e 'eman' cur1e ,as +ecome stee*er. DIF: ) REF: !"#: Su**ly an' 'eman' 4-) T"P: Deman' cur1e

ANS: > NAT: Analytic $S#: Inter*reti1e 05.

An increase in 'eman' is re*resente' +y a. a mo1ement 'o/n/ar' an' to t,e ri.,t alon. a 'eman' cur1e. +. a mo1ement u*/ar' an' to t,e le&t alon. a 'eman' cur1e. c. a ri.,t/ar' s,i&t o& a 'eman' cur1e. '. a le&t/ar' s,i&t o& a 'eman' cur1e. DIF: ) REF: !"#: Su**ly an' 'eman' 4-) T"P: Deman' cur1e

ANS: # NAT: Analytic $S#: Inter*reti1e 06.

A 'ecrease in 'eman' is re*resente' +y a. a mo1ement 'o/n/ar' an' to t,e ri.,t alon. a 'eman' cur1e. +. a mo1ement u*/ar' an' to t,e le&t alon. a 'eman' cur1e. c. a ri.,t/ar' s,i&t o& a 'eman' cur1e. '. a le&t/ar' s,i&t o& a 'eman' cur1e. DIF: ) REF: !"#: Su**ly an' 'eman' 4-) T"P: Deman' cur1e

ANS: D NAT: Analytic $S#: Inter*reti1e 07.

An increase in -uantity 'eman'e' a. results in a mo1ement 'o/n/ar' an' to t,e ri.,t alon. a &i(e' 'eman' cur1e. +. results in a mo1ement u*/ar' an' to t,e le&t alon. a &i(e' 'eman' cur1e. c. s,i&ts t,e 'eman' cur1e to t,e le&t. '. s,i&ts t,e 'eman' cur1e to t,e ri.,t. DIF: ) REF: !"#: Su**ly an' 'eman' 4-) T"P: Deman' cur1e

ANS: A NAT: Analytic $S#: Inter*reti1e 4 .

A 'ecrease in -uantity 'eman'e' a. results in a mo1ement 'o/n/ar' an' to t,e ri.,t alon. a &i(e' 'eman' cur1e. +. results in a mo1ement u*/ar' an' to t,e le&t alon. a &i(e' 'eman' cur1e. c. s,i&ts t,e 'eman' cur1e to t,e le&t. '. s,i&ts t,e 'eman' cur1e to t,e ri.,t.

#,a*ter 4 8T,e $arket Forces o& Su**ly an' Deman' ANS: > NAT: Analytic $S#: Inter*reti1e 41. DIF: ) REF: !"#: Su**ly an' 'eman' 4-) T"P: Deman' cur1e

))6

A le&t/ar' s,i&t o& a 'eman' cur1e is calle' a. an increase in 'eman'. +. a 'ecrease in 'eman'. c. a 'ecrease in -uantity 'eman'e'. '. an increase in -uantity 'eman'e'. DIF: ) REF: !"#: Su**ly an' 'eman' 4-) T"P: Deman' cur1e

ANS: > NAT: Analytic $S#: Inter*reti1e 4).

A ri.,t/ar' s,i&t o& a 'eman' cur1e is calle' a. an increase in 'eman'. +. a 'ecrease in 'eman'. c. a 'ecrease in -uantity 'eman'e'. '. an increase in -uantity 'eman'e'. DIF: ) REF: !"#: Su**ly an' 'eman' 4-) T"P: Deman' cur1e

ANS: A NAT: Analytic $S#: Inter*reti1e 40.

A mo1ement u*/ar' an' to t,e le&t alon. a 'eman' cur1e is calle' a. an increase in 'eman'. +. a 'ecrease in 'eman'. c. a 'ecrease in -uantity 'eman'e'. '. an increase in -uantity 'eman'e'. DIF: ) REF: !"#: Su**ly an' 'eman' 4-) T"P: Deman' cur1e

ANS: # NAT: Analytic $S#: Inter*reti1e 44.

A mo1ement 'o/n/ar' an' to t,e ri.,t alon. a 'eman' cur1e is calle' a. an increase in 'eman'. +. a 'ecrease in 'eman'. c. a 'ecrease in -uantity 'eman'e'. '. an increase in -uantity 'eman'e'. DIF: ) REF: !"#: Su**ly an' 'eman' 4-) T"P: Deman' cur1e

ANS: D NAT: Analytic $S#: Inter*reti1e 43.

An increase in t,e *rice o& a .oo' /ill a. increase 'eman'. +. 'ecrease 'eman'. c. increase -uantity 'eman'e'. '. 'ecrease -uantity 'eman'e'. DIF: ) REF: !"#: Su**ly an' 'eman' 4-) T"P: Deman' cur1e

ANS: D NAT: Analytic $S#: Inter*reti1e 44.

A 'ecrease in t,e *rice o& a .oo' /ill a. increase 'eman'. +. 'ecrease 'eman'. c. increase -uantity 'eman'e'. '. 'ecrease -uantity 'eman'e'. DIF: ) REF: !"#: Su**ly an' 'eman' 4-) T"P: Deman' cur1e

ANS: # NAT: Analytic $S#: Inter*reti1e

))7
45.

#,a*ter 4 8T,e $arket Forces o& Su**ly an' Deman' <,en t,e *rice o& a .oo' or ser1ice c,an.es% a. t,e su**ly cur1e s,i&ts in t,e o**osite 'irection. +. t,e 'eman' cur1e s,i&ts in t,e o**osite 'irection. c. t,e 'eman' cur1e s,i&ts in t,e same 'irection. '. t,ere is a mo1ement alon. a .i1en 'eman' cur1e. DIF: ) REF: !"#: Su**ly an' 'eman' 4-) T"P: Deman' cur1e

ANS: D NAT: Analytic $S#: Inter*reti1e 46.

T,e 'eman' cur1e &or ,ot 'o.s a. s,i&ts /,en t,e *rice o& ,ot 'o.s c,an.es +ecause t,e *rice o& ,ot 'o.s is measure' on t,e 1ertical a(is o& t,e .ra*,. +. s,i&ts /,en t,e *rice o& ,ot 'o.s c,an.es +ecause t,e -uantity 'eman'e' o& ,ot 'o.s is measure' on t,e ,ori;ontal a(is o& t,e .ra*,. c. 'oes not s,i&t /,en t,e *rice o& ,ot 'o.s c,an.es +ecause t,e *rice o& ,ot 'o.s is measure' on t,e 1ertical a(is o& t,e .ra*,. '. 'oes not s,i&t /,en t,e *rice o& ,ot 'o.s c,an.es +ecause t,e -uantity 'eman'e' o& ,ot 'o.s is measure' on t,e ,ori;ontal a(is o& t,e .ra*,. DIF: ) REF: !"#: Su**ly an' 'eman' 4-) T"P: Deman' cur1e

ANS: # NAT: Analytic $S#: A**licati1e 47.

<,ic, o& t,e &ollo/in. c,an.es /oul' not s,i&t t,e 'eman' cur1e &or a .oo' or ser1iceA a. a c,an.e in income +. a c,an.e in t,e *rice o& t,e .oo' or ser1ice c. a c,an.e in e(*ectations a+out t,e &uture *rice o& t,e .oo' or ser1ice '. a c,an.e in t,e *rice o& a relate' .oo' or ser1ice DIF: ) REF: !"#: Su**ly an' 'eman' 4-) T"P: Deman' cur1e

ANS: > NAT: Analytic $S#: Inter*reti1e 3 .

<,ic, o& t,e &ollo/in. /oul' not s,i&t t,e 'eman' cur1e &or m*0 *layersA a. a 'ecrease in t,e *rice o& m*0 *layers +. a &a' t,at makes m*0 *layers more *o*ular amon. 1)-)3 year ol's c. an increase in t,e *rice o& #Ds% a com*lement &or m*0 *layers '. a 'ecrease in t,e *rice o& satellite ra'io% a su+stitute &or m*0 *layers DIF: ) REF: !"#: Su**ly an' 'eman' 4-) T"P: Deman' cur1e

ANS: A NAT: Analytic $S#: A**licati1e 31.

<,ic, o& t,e &ollo/in. e1ents /oul' cause a mo1ement u*/ar' an' to t,e le&t alon. t,e 'eman' cur1e &or oli1esA a. T,e num+er o& +uyers o& oli1es 'ecreases. +. #onsumer income 'ecreases% an' oli1es are a normal .oo'. c. T,e *rice o& *ickles 'ecreases% an' *ickles are a su+stitute &or oli1es. '. T,e *rice o& oli1es rises. DIF: ) REF: !"#: Su**ly an' 'eman' 4-) T"P: Deman' cur1e

ANS: D NAT: Analytic $S#: A**licati1e 3).

A mo1ement alon. t,e 'eman' cur1e mi.,t +e cause' +y a c,an.e in a. income. +. t,e *rices o& su+stitutes or com*lements. c. e(*ectations a+out &uture *rices. '. t,e *rice o& t,e .oo' or ser1ice t,at is +ein. 'eman'e'. DIF: ) REF: !"#: Su**ly an' 'eman' 4-) T"P: Deman' cur1e

ANS: D NAT: Analytic $S#: Inter*reti1e

#,a*ter 4 8T,e $arket Forces o& Su**ly an' Deman' 30. Nol'in. t,e non*rice 'eterminants o& 'eman' constant% a c,an.e in *rice /oul' a. result in eit,er a 'ecrease in 'eman' or an increase in 'eman'. +. result in a mo1ement alon. a stationary 'eman' cur1e. c. result in a s,i&t o& su**ly. '. ,a1e no e&&ect on t,e -uantity 'eman'e'. DIF: ) REF: !"#: Su**ly an' 'eman' 4-) T"P: Deman' cur1e

)0

ANS: > NAT: Analytic $S#: Inter*reti1e 34.

A 'ecrease in t,e *rice o& a .oo' /oul' a. increase t,e su**ly o& t,e .oo'. +. increase t,e -uantity 'eman'e' o& t,e .oo'. c. .i1e *ro'ucers an incenti1e to *ro'uce more to kee* *ro&its &rom &allin.. '. s,i&t t,e su**ly cur1e &or t,e .oo' to t,e le&t. DIF: ) REF: !"#: Su**ly an' 'eman' 4-) T"P: Deman' cur1e

ANS: > NAT: Analytic $S#: Inter*reti1e 33.

T,e 'eman' cur1e &or te(t+ooks s,i&ts a. /,en a 'eterminant o& t,e 'eman' &or te(t+ooks ot,er t,an income c,an.es. +. /,en a 'eterminant o& t,e 'eman' &or te(t+ooks ot,er t,an t,e *rice o& te(t+ooks c,an.es. c. /,en any 'eterminant o& t,e 'eman' &or te(t+ooks c,an.es. '. only /,en t,e num+er o& te(t+ook-+uyers c,an.es. DIF: ) REF: !"#: Su**ly an' 'eman' 4-) T"P: Determinants o& 'eman'

ANS: > NAT: Analytic $S#: A**licati1e 34.

<,ic, o& t,e &ollo/in. is not a 'eterminant o& t,e 'eman' &or a *articular .oo'A a. t,e *rices o& relate' .oo's +. income c. tastes '. t,e *rices o& t,e in*uts use' to *ro'uce t,e .oo' DIF: ) REF: !"#: Su**ly an' 'eman' 4-) T"P: Determinants o& 'eman'

ANS: D NAT: Analytic $S#: Inter*reti1e 35.

Eac, o& t,e &ollo/in. is a 'eterminant o& 'eman' e(ce*t a. tastes. +. tec,nolo.y. c. e(*ectations. '. t,e *rices o& relate' .oo's. DIF: ) REF: !"#: Su**ly an' 'eman' 4-) T"P: Determinants o& 'eman'

ANS: > NAT: Analytic $S#: Inter*reti1e 36.

<,ic, o& t,e &ollo/in. is not a 'eterminant o& 'eman'A a. t,e *rice o& a resource t,at is use' to *ro'uce t,e .oo' +. t,e *rice o& a com*lementary .oo' c. t,e *rice o& t,e .oo' ne(t mont, '. t,e *rice o& a su+stitute .oo' DIF: ) REF: !"#: Su**ly an' 'eman' 4-) T"P: Determinants o& 'eman'

ANS: A NAT: Analytic $S#: Inter*reti1e 37.

I& t,e 'eman' &or a .oo' &alls /,en income &alls% t,en t,e .oo' is calle' a. a normal .oo'. +. a re.ular .oo'. c. a lu(ury .oo'. '. an in&erior .oo'.

)01

#,a*ter 4 8T,e $arket Forces o& Su**ly an' Deman' DIF: 1 REF: !"#: Su**ly an' 'eman' 4-) T"P: Normal .oo's

ANS: A NAT: Analytic $S#: De&initional 4 .

I& a .oo' is normal% t,en an increase in income /ill result in a. an increase in t,e 'eman' &or t,e .oo'. +. a 'ecrease in t,e 'eman' &or t,e .oo'. c. a mo1ement 'o/n an' to t,e ri.,t alon. t,e 'eman' cur1e &or t,e .oo'. '. a mo1ement u* an' to t,e le&t alon. t,e 'eman' cur1e &or t,e .oo'. DIF: ) REF: !"#: Su**ly an' 'eman' 4-) T"P: Normal .oo's

ANS: A NAT: Analytic $S#: Inter*reti1e 41.

I& Francis e(*eriences a 'ecrease in ,is income% t,en /e /oul' e(*ect Franciss 'eman' &or a. eac, .oo' ,e *urc,ases to remain unc,an.e'. +. normal .oo's to 'ecrease. c. lu(ury .oo's to increase. '. in&erior .oo's to 'ecrease. DIF: ) REF: !"#: Su**ly an' 'eman' 4-) T"P: Normal .oo's

ANS: > NAT: Analytic $S#: A**licati1e 4).

Oou lose your ?o+ an'% as a result% you +uy &e/er romance no1els. T,is s,o/s t,at you consi'er romance no1els to +e aDnE a. lu(ury .oo'. +. in&erior .oo'. c. normal .oo'. '. com*lementary .oo'. DIF: ) REF: !"#: Su**ly an' 'eman' 4-) T"P: Normal .oo's

ANS: # NAT: Analytic $S#: A**licati1e 40.

Pi;;a is a normal .oo' i& a. t,e 'eman' &or *i;;a rises /,en income rises. +. t,e 'eman' &or *i;;a rises /,en t,e *rice o& *i;;a &alls. c. t,e 'eman' cur1e &or *i;;a slo*es 'o/n/ar'. '. t,e 'eman' cur1e &or *i;;a s,i&ts to t,e ri.,t /,en t,e *rice o& +urritos rises% assumin. *i;;a an' +urritos are su+stitutes. DIF: ) REF: !"#: Su**ly an' 'eman' 4-) T"P: Normal .oo's

ANS: A NAT: Analytic $S#: A**licati1e 44.

Su**ose t,at /,en income rises% t,e 'eman' cur1e &or com*uters s,i&ts to t,e ri.,t. In t,is case% /e kno/ com*uters are a. in&erior .oo's. +. normal .oo's. c. *er&ectly com*etiti1e .oo's. '. 'ura+le .oo's. DIF: ) REF: !"#: Su**ly an' 'eman' 4-) T"P: Normal .oo's

ANS: > NAT: Analytic $S#: A**licati1e 43.

<,ic, o& t,e &ollo/in. /oul' s,i&t t,e 'eman' cur1e &or .asoline to t,e ri.,tA a. a 'ecrease in t,e *rice o& .asoline +. an increase in consumer income% assumin. .asoline is a normal .oo' c. an increase in t,e *rice o& cars% a com*lement &or .asoline '. a 'ecrease in t,e e(*ecte' &uture *rice o& .asoline

#,a*ter 4 8T,e $arket Forces o& Su**ly an' Deman' ANS: > NAT: Analytic $S#: A**licati1e 44. DIF: ) REF: !"#: Su**ly an' 'eman' 4-) T"P: Normal .oo's

)0)

I& a 'ecrease in income increases t,e 'eman' &or a .oo'% t,en t,e .oo' is a. a su+stitute .oo'. +. a com*lementary .oo'. c. a normal .oo'. '. an in&erior .oo'. DIF: 1 REF: !"#: Su**ly an' 'eman' 4-) T"P: In&erior .oo's

ANS: D NAT: Analytic $S#: De&initional 45.

I& a .oo' is in&erior% t,en an increase in income /ill result in a. an increase in t,e 'eman' &or t,e .oo'. +. a 'ecrease in t,e 'eman' &or t,e .oo'. c. a mo1ement 'o/n an' to t,e ri.,t alon. t,e 'eman' cur1e &or t,e .oo'. '. a mo1ement u* an' to t,e le&t alon. t,e 'eman' cur1e &or t,e .oo'. DIF: ) REF: !"#: Su**ly an' 'eman' 4-) T"P: In&erior .oo's

ANS: > NAT: Analytic $S#: Inter*reti1e 46.

#urrently you *urc,ase 4 *acka.es o& ,ot 'o.s a mont,. Oou /ill .ra'uate &rom colle.e in Decem+er% an' you /ill start a ne/ ?o+ in January. Oou ,a1e no *lans to *urc,ase ,ot 'o.s in January. For you% ,ot 'o.s are a. a su+stitute .oo'. +. a normal .oo'. c. an in&erior .oo'. '. a com*lementary .oo'. DIF: ) REF: !"#: Su**ly an' 'eman' 4-) T"P: In&erior .oo's

ANS: # NAT: Analytic $S#: A**licati1e 47.

Sou* is an in&erior .oo' i& a. t,e 'eman' &or sou* &alls /,en t,e *rice o& a su+stitute &or sou* rises. +. t,e 'eman' &or sou* rises /,en t,e *rice o& sou* &alls. c. t,e 'eman' cur1e &or sou* slo*es u*/ar'. '. t,e 'eman' &or sou* &alls /,en income rises. DIF: ) REF: !"#: Su**ly an' 'eman' 4-) T"P: In&erior .oo's

ANS: D NAT: Analytic $S#: A**licati1e 5 .

Su**ose t,at #arolyn recei1es a *ay increase. <e /oul' e(*ect a. to o+ser1e #arolyn mo1in. 'o/n an' to t,e ri.,t alon. ,er .i1en 'eman' cur1e. +. #arolyn=s 'eman' &or in&erior .oo's to 'ecrease. c. #arolyn=s 'eman' &or eac, o& t/o .oo's t,at are com*lements to increase. '. #arolyn=s 'eman' &or normal .oo's to 'ecrease. DIF: ) REF: !"#: Su**ly an' 'eman' 4-) T"P: In&erior .oo's

ANS: > NAT: Analytic $S#: A**licati1e 51.

T/o .oo's are su+stitutes /,en a 'ecrease in t,e *rice o& one .oo' a. 'ecreases t,e 'eman' &or t,e ot,er .oo'. +. 'ecreases t,e -uantity 'eman'e' o& t,e ot,er .oo'. c. increases t,e 'eman' &or t,e ot,er .oo'. '. increases t,e -uantity 'eman'e' o& t,e ot,er .oo'. DIF: 1 REF: !"#: Su**ly an' 'eman' 4-) T"P: Su+stitutes

ANS: A NAT: Analytic $S#: De&initional

)00
5).

#,a*ter 4 8T,e $arket Forces o& Su**ly an' Deman' Su**ose t,at a 'ecrease in t,e *rice o& .oo' P results in &e/er units o& .oo' O +ein. sol'. T,is im*lies t,at P an' O are a. com*lementary .oo's. +. normal .oo's. c. in&erior .oo's. '. su+stitute .oo's. DIF: ) REF: !"#: Su**ly an' 'eman' 4-) T"P: Su+stitutes

ANS: D NAT: Analytic $S#: Inter*reti1e 50.

Boo' P an' .oo' O are su+stitutes. I& t,e *rice o& .oo' O increases% t,en t,e a. 'eman' &or .oo' P /ill 'ecrease. +. -uantity 'eman'e' o& .oo' P /ill 'ecrease. c. 'eman' &or .oo' P /ill increase. '. -uantity 'eman'e' o& .oo' P /ill increase. DIF: ) REF: !"#: Su**ly an' 'eman' 4-) T"P: Su+stitutes

ANS: # NAT: Analytic $S#: Inter*reti1e 54.

A likely e(am*le o& su+stitute .oo's &or most *eo*le /oul' +e a. *eanut +utter an' ?elly. +. tennis +alls an' tennis rackets. c. tele1isions an' su+scri*tions to ca+le tele1ision ser1ices. '. *encils an' *ens. DIF: ) REF: !"#: Su**ly an' 'eman' 4-) T"P: Su+stitutes

ANS: D NAT: Analytic $S#: A**licati1e 53.

A ,i.,er *rice &or +a.els /oul' result in aDnE a. increase in t,e 'eman' &or +a.els. +. 'ecrease in t,e 'eman' &or +a.els. c. increase in t,e 'eman' &or mu&&ins. '. 'ecrease in t,e 'eman' &or mu&&ins. DIF: ) REF: !"#: Su**ly an' 'eman' 4-) T"P: Su+stitutes

ANS: # NAT: Analytic $S#: A**licati1e 54.

Oou /ear eit,er s,orts or s/eat*ants e1ery 'ay. Oou notice t,at s/eat*ants ,a1e .one on sale% so your 'eman' &or a. s/eat*ants /ill increase. +. s/eat*ants /ill 'ecrease. c. s,orts /ill increase. '. s,orts /ill 'ecrease. DIF: ) REF: !"#: Su**ly an' 'eman' 4-) T"P: Su+stitutes

ANS: D NAT: Analytic $S#: A**licati1e 55.

T/o .oo's are com*lements /,en a 'ecrease in t,e *rice o& one .oo' a. 'ecreases t,e -uantity 'eman'e' o& t,e ot,er .oo'. +. 'ecreases t,e 'eman' &or t,e ot,er .oo'. c. increases t,e -uantity 'eman'e' o& t,e ot,er .oo'. '. increases t,e 'eman' &or t,e ot,er .oo'. DIF: 1 REF: !"#: Su**ly an' 'eman' 4-) T"P: #om*lements

ANS: D NAT: Analytic $S#: De&initional

#,a*ter 4 8T,e $arket Forces o& Su**ly an' Deman' 56. I& .oo's A an' > are com*lements% t,en an increase in t,e *rice o& .oo' A /ill result in a. more o& .oo' A +ein. sol'. +. more o& .oo' > +ein. sol'. c. less o& .oo' > +ein. sol'. '. no 'i&&erence in t,e -uantity sol' o& eit,er .oo'. DIF: ) REF: !"#: Su**ly an' 'eman' 4-) T"P: #om*lements

)04

ANS: # NAT: Analytic $S#: Inter*reti1e 57.

A likely e(am*le o& com*lementary .oo's &or most *eo*le /oul' +e a. +utter an' mar.arine. +. la/nmo/ers an' automo+iles. c. c,i*s an' salsa. '. cola an' lemona'e. DIF: ) REF: !"#: Su**ly an' 'eman' 4-) T"P: #om*lements

ANS: # NAT: Analytic $S#: A**licati1e 6 .

A ,i.,er *rice &or +atteries /oul' result in aDnE a. increase in t,e 'eman' &or &las,li.,ts. +. 'ecrease in t,e 'eman' &or &las,li.,ts. c. increase in t,e 'eman' &or +atteries. '. 'ecrease in t,e 'eman' &or +atteries. DIF: ) REF: !"#: Su**ly an' 'eman' 4-) T"P: #om*lements

ANS: > NAT: Analytic $S#: A**licati1e 61.

Su**ose you like to make% &rom scratc,% *ies &ille' /it, +anana cream an' 1anilla *u''in.. Oou notice t,at t,e *rice o& +ananas ,as increase'. No/ /oul' t,is *rice increase a&&ect your 'eman' &or 1anilla *u''in.A a. It /oul' 'ecrease. +. It /oul' increase. c. It /oul' +e una&&ecte'. '. T,ere is insu&&icient in&ormation .i1en to ans/er t,e -uestion. DIF: ) REF: !"#: Su**ly an' 'eman' 4-) T"P: #om*lements

ANS: A NAT: Analytic $S#: A**licati1e 6).

Nol'in. all ot,er t,in.s constant% a ,i.,er *rice &or ski li&t tickets /oul' a. increase t,e num+er o& skiers. +. increase t,e *rice o& skis. c. 'ecrease t,e num+er o& skis sol'. '. 'ecrease t,e 'eman' &or ot,er /inter recreational acti1ities. DIF: ) REF: !"#: Su**ly an' 'eman' 4-) T"P: #om*lements

ANS: # NAT: Analytic $S#: A**licati1e 60.

<,en -uantity 'eman'e' ,as increase' at e1ery *rice% it mi.,t +e +ecause a. t,e num+er o& +uyers in t,e market ,as 'ecrease'. +. income ,as increase' an' t,e .oo' is an in&erior .oo'. c. t,e costs incurre' +y sellers *ro'ucin. t,e .oo' ,a1e 'ecrease'. '. t,e *rice o& a com*lementary .oo' ,as 'ecrease'. DIF: ) REF: !"#: Su**ly an' 'eman' 4-) T"P: #om*lements

ANS: D NAT: Analytic $S#: Inter*reti1e

)03
64.

#,a*ter 4 8T,e $arket Forces o& Su**ly an' Deman' <,ic, o& t,e &ollo/in. mi.,t cause t,e 'eman' cur1e &or an in&erior .oo' to s,i&t to t,e le&tA a. a 'ecrease in income +. an increase in t,e *rice o& a su+stitute c. an increase in t,e *rice o& a com*lement '. None o& t,e a+o1e is correct. DIF: 0 REF: !"#: Su**ly an' 'eman' 4-) T"P: #om*lements

ANS: # NAT: Analytic $S#: Analytical 63.

<,en it comes to *eo*le=s tastes% economists .enerally +elie1e t,at a. tastes are +ase' on &orces t,at are /ell /it,in t,e realm o& economics. +. tastes are +ase' on ,istorical an' *syc,olo.ical &orces t,at are +eyon' t,e realm o& economics. c. tastes can only +e stu'ie' t,rou., /ell-constructe'% real-li&e mo'els. '. since tastes 'o not 'irectly a&&ect 'eman'% t,ere is little nee' to e(*lain *eo*le=s tastes. DIF: 1 REF: !"#: Su**ly an' 'eman' 4-) T"P: Tastes

ANS: > NAT: Analytic $S#: De&initional 64.

Economists normally a. 'o not try to e(*lain *eo*le=s tastes% +ut t,ey 'o try to e(*lain /,at ,a**ens /,en tastes c,an.e. +. +elie1e t,at t,ey must +e a+le to e(*lain *eo*le=s tastes in or'er to e(*lain /,at ,a**ens /,en tastes c,an.e. c. 'o not +elie1e t,at *eo*le=s tastes 'etermine 'eman' an' t,ere&ore t,ey i.nore t,e su+?ect o& tastes. '. incor*orate tastes into economic mo'els only to t,e e(tent t,at tastes 'etermine /,et,er *airs o& .oo's are su+stitutes or com*lements. DIF: ) REF: !"#: Su**ly an' 'eman' 4-) T"P: Tastes

ANS: A NAT: Analytic $S#: Inter*reti1e 65.

Su**ose t,e American $e'ical Association announces t,at men /,o s,a1e t,eir ,ea's are less likely to 'ie o& ,eart &ailure. <e coul' e(*ect t,e current 'eman' &or a. ,air .el to increase. +. ra;ors to increase. c. com+s to increase. '. s,am*oo to increase. DIF: ) REF: !"#: Su**ly an' 'eman' 4-) T"P: Tastes

ANS: > NAT: Analytic $S#: A**licati1e 66.

Su**ose scientists *ro1i'e e1i'ence t,at c,ocolate *u''in. increases t,e +a' c,olesterol le1els o& t,ose /,o eat it. <e /oul' e(*ect to see a. no c,an.e in t,e 'eman' &or c,ocolate *u''in.. +. a 'ecrease in t,e 'eman' &or c,ocolate *u''in.. c. an increase in t,e 'eman' &or c,ocolate *u''in.. '. a 'ecrease in t,e su**ly o& c,ocolate *u''in.. DIF: ) REF: !"#: Su**ly an' 'eman' 4-) T"P: Tastes

ANS: > NAT: Analytic $S#: A**licati1e 67.

I& +uyers to'ay +ecome more /illin. an' a+le t,an +e&ore to *urc,ase lar.er -uantities o& 9anilla #oke at eac, *rice o& 9anilla #oke% t,en a. /e /ill o+ser1e a mo1ement 'o/n/ar' an' to t,e ri.,t alon. t,e 'eman' cur1e &or 9anilla #oke. +. /e /ill o+ser1e a mo1ement u*/ar' an' to t,e le&t alon. t,e 'eman' cur1e &or 9anilla #oke. c. t,e 'eman' cur1e &or 9anilla #oke /ill s,i&t to t,e ri.,t. '. t,e 'eman' cur1e &or 9anilla #oke /ill s,i&t to t,e le&t. DIF: ) REF: !"#: Su**ly an' 'eman' 4-) T"P: Tastes

ANS: # NAT: Analytic $S#: A**licati1e

#,a*ter 4 8T,e $arket Forces o& Su**ly an' Deman' 7 . A 1ery ,ot summer in Atlanta /ill cause a. t,e 'eman' cur1e &or lemona'e to s,i&t to t,e le&t. +. t,e 'eman' &or air con'itioners to 'ecrease. c. t,e 'eman' &or ?ackets to 'ecrease. '. a mo1ement 'o/n/ar' an' to t,e ri.,t alon. t,e 'eman' cur1e &or tank to*s. DIF: ) REF: !"#: Su**ly an' 'eman' 4-) T"P: Tastes

)04

ANS: # NAT: Analytic $S#: A**licati1e 71.

I& a stu'y +y me'ical researc,ers &oun' t,at +ro/n su.ar cause' /ei.,t loss /,ile /,ite su.ar cause' /ei.,t .ain% t,en /e likely /oul' see a. an increase in 'eman' &or +ro/n su.ar an' a 'ecrease in 'eman' &or /,ite su.ar. +. a 'ecrease in 'eman' &or +ro/n su.ar an' an increase in 'eman' &or /,ite su.ar. c. an increase in 'eman' &or +ot, +ro/n su.ar an' /,ite su.ar. '. no c,an.e in 'eman' &or eit,er ty*e o& su.ar +ecause /ei.,t loss is not a 'eterminant o& 'eman'. DIF: ) REF: !"#: Su**ly an' 'eman' 4-) T"P: Tastes

ANS: A NAT: Analytic $S#: A**licati1e 7).

<,ic, o& t,e &ollo/in. e1ents coul' s,i&t t,e 'eman' cur1e &or .asoline to t,e le&tA a. T,e income o& .asoline +uyers rises% an' .asoline is a normal .oo'. +. T,e income o& .asoline +uyers &alls% an' .asoline is an in&erior .oo'. c. Pu+lic ser1ice announcements run on tele1ision encoura.e *eo*le to /alk or ri'e +icycles instea' o& 'ri1in. cars. '. T,e *rice o& .asoline rises. DIF: ) REF: !"#: Su**ly an' 'eman' 4-) T"P: Tastes

ANS: # NAT: Analytic $S#: A**licati1e 70.

An increase in t,e num+er o& colle.e sc,olars,i*s issue' +y *ri1ate &oun'ations /oul' a. increase t,e su**ly o& e'ucation. +. 'ecrease t,e su**ly o& e'ucation. c. increase t,e 'eman' &or e'ucation. '. 'ecrease t,e 'eman' &or e'ucation. DIF: ) REF: !"#: Su**ly an' 'eman' 4-) T"P: Tastes

ANS: # NAT: Analytic $S#: A**licati1e 74.

To'ay% *eo*le c,an.e' t,eir e(*ectations a+out t,e &uture. T,is c,an.e a. can cause a mo1ement alon. a 'eman' cur1e. +. can a&&ect &uture 'eman'% +ut not to'ays 'eman'. c. can a&&ect to'ays 'eman'. '. cannot a&&ect eit,er to'ays 'eman' or &uture 'eman'. DIF: ) REF: !"#: Su**ly an' 'eman' 4-) T"P: E(*ectations

ANS: # NAT: Analytic $S#: Inter*reti1e 73.

I& Juan e(*ects to earn a ,i.,er income ne(t mont,% ,e may c,oose to a. sa1e more no/ an' s*en' less o& ,is current income on .oo's an' ser1ices. +. sa1e less no/ an' s*en' more o& ,is current income on .oo's an' ser1ices. c. 'ecrease ,is current 'eman' &or .oo's an' ser1ices. '. mo1e alon. ,is current 'eman' cur1es &or .oo's an' ser1ices. DIF: ) REF: !"#: Su**ly an' 'eman' 4-) T"P: E(*ectations

ANS: > NAT: Analytic $S#: A**licati1e

)05
74.

#,a*ter 4 8T,e $arket Forces o& Su**ly an' Deman' Oou lo1e *eanut +utter. Oou ,ear on t,e ne/s t,at 3 *ercent o& t,e *eanut cro* in t,e Sout, ,as +een /i*e' out +y 'rou.,t% an' t,at t,is /ill cause t,e *rice o& *eanuts to 'ou+le +y t,e en' o& t,e year. As a result% a. your 'eman' &or *eanut +utter /ill increase% +ut not until t,e en' o& t,e year. +. your 'eman' &or *eanut +utter increases to'ay. c. your 'eman' &or *eanut +utter 'ecreases as you look &or a su+stitute .oo'. '. your 'eman' &or *eanut +utter s,i&ts le&t to'ay. DIF: ) REF: !"#: Su**ly an' 'eman' 4-) T"P: E(*ectations

ANS: > NAT: Analytic $S#: A**licati1e 75.

For' $otor #om*any announces t,at ne(t mont, it /ill o&&er C0% re+ates on ne/ $ustan.s. As a result o& t,is in&ormation% to'ays 'eman' cur1e &or $ustan.s a. s,i&ts to t,e ri.,t. +. s,i&ts to t,e le&t. c. s,i&ts eit,er to t,e ri.,t or to t,e le&t% +ut /e cannot 'etermine t,e 'irection o& t,e s,i&t &rom t,e .i1en in&ormation. '. /ill not s,i&tM rat,er% t,e 'eman' cur1e &or $ustan.s /ill s,i&t to t,e ri.,t ne(t mont,. DIF: ) REF: !"#: Su**ly an' 'eman' 4-) T"P: E(*ectations

ANS: > NAT: Analytic $S#: A**licati1e 76.

<,at /ill ,a**en in t,e rice market no/ i& +uyers e(*ect ,i.,er rice *rices in t,e near &utureA a. T,e 'eman' &or rice /ill increase. +. T,e 'eman' &or rice /ill 'ecrease. c. T,e 'eman' &or rice /ill +e una&&ecte'. '. T,e su**ly o& rice /ill increase. DIF: ) REF: !"#: Su**ly an' 'eman' 4-) T"P: E(*ectations

ANS: A NAT: Analytic $S#: A**licati1e 77.

To'ay=s 'eman' cur1e &or .asoline coul' s,i&t in res*onse to a. a c,an.e in to'ay=s *rice o& .asoline. +. a c,an.e in t,e e(*ecte' &uture *rice o& .asoline. c. a c,an.e in t,e num+er o& sellers o& .asoline. '. All o& t,e a+o1e are correct. DIF: ) REF: !"#: Su**ly an' 'eman' 4-) T"P: E(*ectations

ANS: > NAT: Analytic $S#: A**licati1e 1

. I& t,e num+er o& +uyers in a market 'ecreases% t,en a. 'eman' /ill increase. +. 'eman' /ill 'ecrease. c. su**ly /ill increase. '. su**ly /ill 'ecrease. DIF: ) REF: !"#: Su**ly an' 'eman' 4-) T"P: Num+er o& +uyers

ANS: > NAT: Analytic $S#: Inter*reti1e

1 1. <,ic, o& t,e &ollo/in. 'oes not a&&ect an in'i1i'ual=s 'eman' cur1eA a. e(*ectations +. income c. *rices o& relate' .oo's '. t,e num+er o& +uyers ANS: D NAT: Analytic $S#: Inter*reti1e DIF: ) REF: !"#: Su**ly an' 'eman' 4-) T"P: Num+er o& +uyers

#,a*ter 4 8T,e $arket Forces o& Su**ly an' Deman'

)06

1 ). <arrens+ur. is a small colle.e to/n in $issouri. At t,e en' o& Au.ust eac, year% t,e market 'eman' &or &ast &oo' in <arrens+ur. a. increases. +. 'ecreases. c. remains constant% +ut /e o+ser1e a mo1ement 'o/n/ar' an' to t,e ri.,t alon. t,e 'eman' cur1e. '. remains constant% +ut /e o+ser1e a mo1ement u*/ar' an' to t,e le&t alon. t,e 'eman' cur1e. ANS: A NAT: Analytic $S#: A**licati1e Figure 4-2
price

DIF: ) REF: !"#: Su**ly an' 'eman'

4-) T"P: Num+er o& +uyers

P P=

>

:=

quantity

1 0. Refer to F%$ure 4,0. T,e mo1ement &rom *oint A to *oint > on t,e .ra*, s,o/s a. a 'ecrease in 'eman'. +. an increase in 'eman'. c. a 'ecrease in -uantity 'eman'e'. '. an increase in -uantity 'eman'e'. ANS: D NAT: Analytic $S#: Inter*reti1e DIF: ) REF: !"#: Su**ly an' 'eman' 4-) T"P: Deman' cur1e

1 4. Refer to F%$ure 4,0. T,e mo1ement &rom *oint A to *oint > on t,e .ra*, is cause' +y a. an increase in *rice. +. a 'ecrease in *rice. c. a 'ecrease in t,e *rice o& a su+stitute .oo'. '. an increase in income. ANS: > NAT: Analytic $S#: Inter*reti1e DIF: ) REF: !"#: Su**ly an' 'eman' 4-) T"P: Deman' cur1e

1 3. Refer to F%$ure 4,0. It is a**arent &rom t,e &i.ure t,at a. t,e .oo' is in&erior. +. t,e 'eman' &or t,e .oo' 'ecreases as income increases. c. t,e 'eman' &or t,e .oo' con&orms to t,e la/ o& 'eman'. '. All o& t,e a+o1e are correct. ANS: # NAT: Analytic $S#: Inter*reti1e DIF: ) REF: !"#: Su**ly an' 'eman' 4-) T"P: !a/ o& 'eman'

)07

#,a*ter 4 8T,e $arket Forces o& Su**ly an' Deman'

price

Figure 4-3

D=

D quantity

1 4. Refer to F%$ure 4,3. T,e s,i&t &rom D to D is calle' a. an increase in 'eman'. +. a 'ecrease in 'eman'. c. a 'ecrease in -uantity 'eman'e'. '. an increase in -uantity 'eman'e'. ANS: > NAT: Analytic $S#: Inter*reti1e DIF: ) REF: !"#: Su**ly an' 'eman' 4-) T"P: Deman' cur1e

1 5. Refer to F%$ure 4,3. T,e mo1ement &rom D to D coul' +e cause' +y a. an increase in *rice. +. a 'ecrease in t,e *rice o& a com*lement. c. a tec,nolo.ical a'1ance. '. a 'ecrease in t,e *rice o& a su+stitute. ANS: D NAT: Analytic $S#: Inter*reti1e DIF: ) REF: !"#: Su**ly an' 'eman' 4-) T"P: Su+stitutes

1 6. Refer to F%$ure 4,3. T,e mo1ement &rom D to D coul' +e cause' +y a. a 'ecrease in *rice. +. a 'ecrease in income% assumin. t,e .oo' is in&erior. c. +uyers e(*ectin. t,e *rice o& t,e .oo' to &all in t,e near &uture. '. an increase in t,e *rice o& a com*lement. ANS: > NAT: Analytic $S#: Inter*reti1e DIF: ) REF: !"#: Su**ly an' 'eman' 4-) T"P: In&erior .oo's

1 7. Refer to F%$ure 4,3. I& t,e 'eman' cur1e s,i&ts &rom D to D% t,en a. &irms /oul' +e /illin. to su**ly less o& t,e .oo' t,an +e&ore at eac, *ossi+le *rice. +. *eo*le are /illin. to +uy less o& t,e .oo' t,an +e&ore at eac, *ossi+le *rice. c. *eo*les incomes e1i'ently ,a1e 'ecrease'. '. t,e *rice o& t,e *ro'uct ,as increase'% causin. consumers to +uy less o& t,e *ro'uct. ANS: > NAT: Analytic $S#: Inter*reti1e DIF: ) REF: !"#: Su**ly an' 'eman' 4-) T"P: Deman' cur1e

#,a*ter 4 8T,e $arket Forces o& Su**ly an' Deman' Figure 4-4 .anel 'a(
price price

)4

.anel ')(

P= P

D= quantity

D quantity

:=

11 . Refer to F%$ure 4,4. T,e .ra*,s s,o/ t,e 'eman' &or ci.arettes. In Panel DaE% t,e arro/s are consistent /it, /,ic, o& t,e &ollo/in. e1entsA a. T,e *rice o& mari?uana% a com*lement to ci.arettes% increase'. +. $an'atory ,ealt, /arnin.s /ere *lace' on ci.arette *acka.es. c. Se1eral &orei.n countries +anne' F.S. ci.arettes in t,eir countries. '. A ta( /as *lace' on ci.arettes. ANS: D NAT: Analytic $S#: A**licati1e DIF: ) REF: !"#: Su**ly an' 'eman' 4-) T"P: Deman' cur1e

111. Refer to F%$ure 4,4. T,e .ra*,s s,o/ t,e 'eman' &or ci.arettes. In Panel DaE% t,e arro/s are consistent /it, /,ic, o& t,e &ollo/in. e1entsA a. To+acco an' mari?uana are com*lements an' t,e *rice o& mari?uana 'ecrease'. +. To+acco is a H.ate/ay 'ru.I an' t,e *rice o& mari?uana increase'. c. T,e *rice o& ci.arettes increase'. '. T,e arro/s are consistent /it, all o& t,ese e1ents. ANS: # NAT: Analytic $S#: A**licati1e DIF: ) REF: !"#: Su**ly an' 'eman' 4-) T"P: Deman' cur1e

11). Refer to F%$ure 4,4. T,e .ra*,s s,o/ t,e 'eman' &or ci.arettes. In Panel D+E% t,e arro/s are consistent /it, /,ic, o& t,e &ollo/in. e1entsA a. T,e *rice o& ci.arettes increase'. +. A ta( /as *lace' on ci.arettes. c. T,e *ro,i+ition o& ci.arette a'1ertisements on tele1ision. '. To+acco an' mari?uana are com*lements an' t,e *rice o& mari?uana 'ecrease'. ANS: # NAT: Analytic $S#: A**licati1e DIF: ) REF: !"#: Su**ly an' 'eman' 4-) T"P: Deman' cur1e

110. For t,e .eneral *o*ulation% a 1 *ercent increase in t,e *rice o& ci.arettes lea's to a a. 1 *ercent re'uction in t,e -uantity 'eman'e' o& ci.arettes. +. 4 *ercent re'uction in t,e -uantity 'eman'e' o& ci.arettes. c. 1 *ercent re'uction in t,e -uantity 'eman'e' o& ci.arettes. '. 1) *ercent re'uction in t,e -uantity 'eman'e' o& ci.arettes. ANS: > NAT: Analytic $S#: De&initional DIF: 1 REF: !"#: Su**ly an' 'eman' 4-) T"P: Deman'

)41

#,a*ter 4 8T,e $arket Forces o& Su**ly an' Deman'

114. For teena.ers% a 1 *ercent increase in t,e *rice o& ci.arettes lea's to a a. 1 *ercent re'uction in t,e -uantity 'eman'e' o& ci.arettes. +. 4 *ercent re'uction in t,e -uantity 'eman'e' o& ci.arettes. c. 1 *ercent re'uction in t,e -uantity 'eman'e' o& ci.arettes. '. 1) *ercent re'uction in t,e -uantity 'eman'e' o& ci.arettes. ANS: D NAT: Analytic $S#: De&initional DIF: 1 REF: !"#: Su**ly an' 'eman' 4-) T"P: Deman'

113. "**onents o& ci.arette ta(es o&ten ar.ue t,at to+acco an' mari?uana are su+stitutes so t,at ,i., ci.arette *rices a. encoura.e mari?uana use% an' t,e e1i'ence su**orts t,is ar.ument. +. encoura.e mari?uana use% +ut t,e e1i'ence 'oes not su**ort t,is ar.ument. c. 'iscoura.e mari?uana use% an' t,e e1i'ence su**orts t,is ar.ument. '. 'iscoura.e mari?uana use% +ut t,e e1i'ence 'oes not su**ort t,is ar.ument. ANS: > NAT: Analytic $S#: De&initional DIF: 1 REF: !"#: Su**ly an' 'eman' 4-) T"P: Su+stitutes 2 #om*lements

114. T,e +elie& t,at to+acco is a H.ate/ay 'ru.I is consistent /it, a. t,e i'ea t,at to+acco an' mari?uana are su+stitutes. +. t,e i'ea t,at an increase in income causes a 'ecrease in t,e 'eman' &or to+acco an' an increase in t,e 'eman' &or mari?uana. c. t,e i'ea t,at lo/er ci.arette *rices are associate' /it, less use o& mari?uana. '. most o& t,e a1aila+le e1i'ence. ANS: D NAT: Analytic $S#: A**licati1e DIF: ) REF: !"#: Su**ly an' 'eman' 4-) T"P: #om*lements

115. $ost stu'ies in'icate t,at to+acco an' mari?uana ten' to +e a. su+stitutes. +. com*lements. c. not relate' since one is le.al an' one is ille.al. '. in&erior .oo's. ANS: > NAT: Analytic $S#: De&initional DIF: 1 REF: !"#: Su**ly an' 'eman' 4-) T"P: #om*lements

Sec+3 , The Market Forces of Supply and Demand , Supply

MULT-.LE C !-CE 1. T,e -uantity su**lie' o& a .oo' is t,e amount t,at a. +uyers are /illin. an' a+le to *urc,ase. +. sellers are a+le to *ro'uce. c. +uyers an' sellers a.ree /ill +e +rou.,t to market. '. sellers are /illin. an' a+le to sell. DIF: 1 REF: !"#: Su**ly an' 'eman' 4-0 T"P: :uantity su**lie'

ANS: D NAT: Analytic $S#: De&initional ).

I& t,e *rice o& a .oo' is lo/% a. &irms /oul' increase *ro&it +y increasin. out*ut. +. t,e -uantity su**lie' o& t,e .oo' coul' +e ;ero. c. t,e su**ly cur1e &or t,e .oo' /ill s,i&t to t,e le&t. '. &irms can an' s,oul' raise t,e *rice o& t,e *ro'uct. DIF: ) REF: !"#: Su**ly an' 'eman' 4-0 T"P: :uantity su**lie'

ANS: > NAT: Analytic $S#: Inter*reti1e

#,a*ter 4 8T,e $arket Forces o& Su**ly an' Deman' 0.

)4)

H"t,er t,in.s e-ual% /,en t,e *rice o& a .oo' rises% t,e -uantity su**lie' o& t,e .oo' also rises% an' /,en t,e *rice &alls% t,e -uantity su**lie' &alls as /ell.I T,is relations,i* +et/een *rice an' -uantity su**lie' a. is re&erre' to as t,e la/ o& su**ly. +. a**lies only to a &e/ .oo's in t,e economy. c. is re*resente' +y a 'o/n/ar'-slo*in. su**ly cur1e. '. All o& t,e a+o1e are correct. DIF: 1 REF: !"#: Su**ly an' 'eman' 4-0 T"P: !a/ o& su**ly

ANS: A NAT: Analytic $S#: De&initional 4.

T,e la/ o& su**ly states t,at% ot,er t,in.s e-ual% a. /,en t,e *rice o& a .oo' &alls% t,e su**ly o& t,e .oo' rises. +. /,en t,e *rice o& a .oo' rises% t,e -uantity su**lie' o& t,e .oo' rises. c. /,en t,e *rice o& a .oo' rises% t,e su**ly o& t,e .oo' &alls. '. /,en t,e *rice o& a .oo' &alls% t,e -uantity su**lie' o& t,e .oo' rises. DIF: 1 REF: !"#: Su**ly an' 'eman' 4-0 T"P: !a/ o& su**ly

ANS: > NAT: Analytic $S#: De&initional 3.

T,e la/ o& su**ly states t,at% ot,er t,in.s e-ual% a. an increase in *rice causes -uantity su**lie' to increase. +. an increase in *rice causes -uantity su**lie' to 'ecrease. c. an increase in -uantity su**lie' causes *rice to increase. '. an increase in -uantity su**lie' causes *rice to 'ecrease. DIF: ) REF: !"#: Su**ly an' 'eman' 4-0 T"P: !a/ o& su**ly

ANS: A NAT: Analytic $S#: Inter*reti1e 4.

"t,er t,in.s e-ual% /,en t,e *rice o& a .oo' &alls% t,e a. -uantity 'eman'e' o& t,e .oo' 'ecreases. +. su**ly 'ecreases. c. -uantity su**lie' o& t,e .oo' 'ecreases. '. 'eman' increases. DIF: ) REF: !"#: Su**ly an' 'eman' 4-0 T"P: !a/ o& su**ly

ANS: # NAT: Analytic $S#: Inter*reti1e 5.

<,ic, o& t,ese statements +est re*resents t,e la/ o& su**lyA a. <,en in*ut *rices increase% sellers *ro'uce less o& t,e .oo'. +. <,en *ro'uction tec,nolo.y im*ro1es% sellers *ro'uce less o& t,e .oo'. c. <,en t,e *rice o& a .oo' 'ecreases% sellers *ro'uce less o& t,e .oo'. '. <,en sellers su**lies o& a .oo' increase% t,e *rice o& t,e .oo' increases. DIF: ) REF: !"#: Su**ly an' 'eman' 4-0 T"P: !a/ o& su**ly

ANS: # NAT: Analytic $S#: Inter*reti1e 6.

A su**ly cur1e slo*es u*/ar' +ecause a. as more is *ro'uce'% total cost o& *ro'uction &alls. +. an increase in in*ut *rices increases su**ly. c. t,e -uantity su**lie' o& most .oo's an' ser1ices increases o1er time. '. an increase in *rice .i1es *ro'ucers an incenti1e to su**ly a lar.er -uantity. DIF: ) REF: !"#: Su**ly an' 'eman' 4-0 T"P: !a/ o& su**ly

ANS: D NAT: Analytic $S#: Inter*reti1e

)40
7.

#,a*ter 4 8T,e $arket Forces o& Su**ly an' Deman' <,ic, o& t,e &ollo/in. 'emonstrates t,e la/ o& su**lyA a. <,en leat,er +ecame more e(*ensi1e% +elt *ro'ucers 'ecrease' t,eir su**ly o& +elts. +. <,en car *ro'uction tec,nolo.y im*ro1e'% car *ro'ucers increase' t,eir su**ly o& cars. c. <,en s/eater *ro'ucers e(*ecte' s/eater *rices to rise in t,e near &uture% t,ey 'ecrease' t,eir current su**ly o& s/eaters. '. <,en ketc,u* *rices rose% ketc,u* sellers increase' t,eir -uantity su**lie' o& ketc,u*. DIF: ) REF: !"#: Su**ly an' 'eman' 4-0 T"P: !a/ o& su**ly

ANS: D NAT: Analytic $S#: A**licati1e 1 .

T,e &ollo/in. ta+le contains a su**ly sc,e'ule &or a .oo'. .r%ce C1 C) 1uant%ty Suppl%ed 1 A

I& t,e la/ o& su**ly a**lies to t,is .oo'% t,en HAI coul' +e a. . +. 3 . c. 1 . '. 13 . ANS: D NAT: Analytic $S#: A**licati1e 11. DIF: ) REF: !"#: Su**ly an' 'eman' 4-0 T"P: !a/ o& su**ly

A su**ly sc,e'ule is a ta+le t,at s,o/s t,e relations,i* +et/een a. *rice an' -uantity su**lie'. +. in*ut costs an' -uantity su**lie'. c. -uantity 'eman'e' an' -uantity su**lie'. '. *ro&it an' -uantity su**lie'. DIF: 1 REF: !"#: Su**ly an' 'eman' 4-0 T"P: Su**ly sc,e'ule

ANS: A NAT: Analytic $S#: De&initional 1).

<,ic, o& t,e &ollo/in. is not ,el' constant in a su**ly sc,e'uleA a. tec,nolo.y +. t,e *rice o& t,e .oo' c. t,e *rices o& in*uts '. e(*ectations DIF: ) REF: !"#: Su**ly an' 'eman' 4-0 T"P: Su**ly sc,e'ule

ANS: > NAT: Analytic $S#: Inter*reti1e 10.

T,e 'i&&erence +et/een a su**ly sc,e'ule an' a su**ly cur1e is t,at a. a su**ly sc,e'ule incor*orates 'eman' an' a su**ly cur1e 'oes not. +. a su**ly sc,e'ule incor*orates *ro&it an' a su**ly cur1e 'oes not. c. a su**ly sc,e'ule can s,i&t% +ut a su**ly cur1e cannot s,i&t. '. a su**ly sc,e'ule is a ta+le an' a su**ly cur1e is 'ra/n on a .ra*,.

ANS: D DIF: ) REF: 4-0 NAT: Analytic !"#: Su**ly an' 'eman' T"P: Su**ly sc,e'ule 2 Su**ly cur1e $S#: Inter*reti1e 14. T,e su**ly cur1e &or a .oo' is a. a line t,at relates *ro&it an' -uantity su**lie'. +. a line t,at relates in*ut *rices an' -uantity su**lie'. c. a line t,at relates *rice an' -uantity su**lie'. '. a line t,at relates *rice an' *ro&it.

#,a*ter 4 8T,e $arket Forces o& Su**ly an' Deman' ANS: # NAT: Analytic $S#: De&initional 13. DIF: 1 REF: !"#: Su**ly an' 'eman' 4-0 T"P: Su**ly cur1e

)44

T,e line t,at relates t,e *rice o& a .oo' an' t,e -uantity su**lie' o& t,at .oo' is calle' t,e a. su**ly sc,e'ule% an' it usually slo*es u*/ar'. +. su**ly sc,e'ule% an' it usually slo*es 'o/n/ar'. c. su**ly cur1e% an' it usually slo*es u*/ar'. '. su**ly cur1e% an' it usually slo*es 'o/n/ar'. DIF: 1 REF: !"#: Su**ly an' 'eman' 4-0 T"P: Su**ly cur1e

ANS: # NAT: Analytic $S#: De&initional 14.

T,e sum o& all t,e in'i1i'ual su**ly cur1es &or a *ro'uct is calle' a. total su**ly. +. market su**ly. c. a..re.ate su**ly. '. total out*ut. DIF: 1 REF: !"#: Su**ly an' 'eman' 4-0 T"P: $arket su**ly

ANS: > NAT: Analytic $S#: De&initional 15.

T,e market su**ly cur1e a. is &oun' +y 1ertically a''in. t,e in'i1i'ual su**ly cur1es. +. slo*es 'o/n/ar'. c. re*resents t,e sum o& t,e *rices t,at all t,e sellers are /illin. to acce*t &or a .i1en -uantity o& t,e .oo'. '. re*resents t,e sum o& t,e -uantities su**lie' +y all t,e sellers at eac, *rice o& t,e .oo'. DIF: ) REF: !"#: Su**ly an' 'eman' 4-0 T"P: $arket su**ly

ANS: D NAT: Analytic $S#: Inter*reti1e 16.

In a market% to &in' t,e total amount su**lie' at a *articular *rice% a. /e must a'' u* all o& t,e amounts t,at &irms are /illin. an' a+le to su**ly at t,at *rice. +. /e must take t,e a1era.e o& t,e amounts t,at &irms are /illin. an' a+le to su**ly at t,at *rice. c. /e must a'' all o& t,e costs t,at &irms incur to su**ly t,e *ro'uct at t,at *rice. '. all 'eterminants o& 'eman' must +e taken into account. DIF: ) REF: !"#: Su**ly an' 'eman' 4-0 T"P: $arket su**ly

ANS: A NAT: Analytic $S#: Inter*reti1e 17.

A market su**ly cur1e is 'etermine' +y a. 1ertically summin. in'i1i'ual su**ly cur1es. +. ,ori;ontally summin. in'i1i'ual su**ly cur1es. c. &in'in. t,e a1era.e -uantity su**lie' +y sellers at eac, *ossi+le *rice. '. &in'in. t,e a1era.e *rice at /,ic, sellers are /illin. an' a+le to sell a *articular -uantity o& t,e .oo'. DIF: ) REF: !"#: Su**ly an' 'eman' 4-0 T"P: $arket su**ly

ANS: > NAT: Analytic $S#: Inter*reti1e ) .

A market su**ly cur1e s,o/s a. t,e total -uantity su**lie' at all *ossi+le *rices. +. t,e a1era.e -uantity su**lie' +y *ro'ucers at all *ossi+le *rices. c. ,o/ -uantity su**lie' c,an.es /,en t,e num+er o& sellers c,an.es. '. su**liers res*onses% in terms o& t,e amounts t,ey /ill su**ly% to t,e 'eman's o& +uyers. DIF: ) REF: !"#: Su**ly an' 'eman' 4-0 T"P: $arket su**ly

ANS: A NAT: Analytic $S#: Inter*reti1e

)43
)1.

#,a*ter 4 8T,e $arket Forces o& Su**ly an' Deman' A market su**ly cur1e s,o/s ,o/ t,e total -uantity su**lie' o& a .oo' 1aries as a. tec,nolo.y 1aries. +. *rice 1aries. c. in*ut *rices 1ary. '. 'eman' 1aries. DIF: ) REF: !"#: Su**ly an' 'eman' 4-0 T"P: $arket su**ly

ANS: > NAT: Analytic $S#: Inter*reti1e Table 4-3 Price C C) C4 C4 C6 C1 )). Firm As :uantity Su**lie' 1 6 4 4 )

Firm >s :uantity Su**lie' 0 4 7 1) 13

Firm #s :uantity Su**lie' 4 6 1) 6 4

Firm Ds :uantity Su**lie' 3 1 13 ) )3

Refer to Ta)le 4,32 <,ic, su**ly sc,e'ules o+ey t,e la/ o& su**lyA a. Firm As only. +. Firm >s% Firm #s% an' Firm Ds. c. Firm As an' Firm #s. '. Firm >s an' Firm Ds. DIF: ) REF: !"#: Su**ly an' 'eman' 4-0 T"P: !a/ o& su**ly

ANS: D NAT: Analytic $S#: A**licati1e )0.

Refer to Ta)le 4,32 I& t,ese are t,e only &our sellers in t,e market% t,en t,e market -uantity su**lie' at a *rice o& C4 is a. 4 units. +. 5.3 units. c. 1 units. '. 0 units. DIF: ) REF: !"#: Su**ly an' 'eman' 4-0 T"P: $arket su**ly

ANS: D NAT: Analytic $S#: A**licati1e )4.

Refer to Ta)le 4,32 I& t,ese are t,e only &our sellers in t,e market% t,en t,e market -uantity su**lie' at a *rice o& C1 is a. 0 units. +. 11 units. c. )3 units. '. 44 units. DIF: ) REF: !"#: Su**ly an' 'eman' 4-0 T"P: $arket su**ly

ANS: D NAT: Analytic $S#: A**licati1e )3.

Refer to Ta)le 4,32 I& t,ese are t,e only &our sellers in t,e market% t,en /,en t,e *rice increases &rom C4 to C6% t,e market -uantity su**lie' a. increases +y .3 unit. +. increases +y ) units. c. 'ecreases +y 4 units. '. increases +y 4) units. DIF: ) REF: !"#: Su**ly an' 'eman' 4-0 T"P: $arket su**ly

ANS: > NAT: Analytic $S#: A**licati1e

#,a*ter 4 8T,e $arket Forces o& Su**ly an' Deman' Table 4-4 Price C C) C4 C4 C6 C1 )4. Firm As :uantity Su**lie' 0 4 7 1) 13 Firm >s :uantity Su**lie' 4 6 1) 14 ) Firm #s :uantity Su**lie' ) 4 4 6 1 Firm Ds :uantity Su**lie' 1 ) 0 4 3

)44

Refer to Ta)le 4,42 I& t,ese are t,e only &our sellers in t,e market% t,en t,e market -uantity su**lie' at a *rice o& C4 is a. 4 units. +. 3 units. c. ) units. '. 6 units. DIF: ) REF: !"#: Su**ly an' 'eman' 4-0 T"P: $arket su**ly

ANS: # NAT: Analytic $S#: A**licati1e )5.

Refer to Ta)le 4,42 I& t,ese are t,e only &our sellers in t,e market% t,en /,en t,e *rice 'ecreases &rom C1 to C6% t,e market -uantity su**lie' a. 'ecreases +y ).3 units. +. 'ecreases +y 4 units. c. 'ecreases +y 1 units. '. 'ecreases +y 3 units. DIF: ) REF: !"#: Su**ly an' 'eman' 4-0 T"P: $arket su**ly

ANS: # NAT: Analytic $S#: A**licati1e Figure 4-5

F%rm A
) 16 14 14 1) 1 6 4 4 ) ) 4 4 6 1 1) 14 14 16 ) quantity S price ) 16 14 14 1) 1 6 4 4 ) ) 4 4 price

F%rm 4

1)

14

14

quantity

)6.

Refer to F%$ure 4,52 I& t,ese are t,e only t/o sellers in t,e market% t,en t,e market -uantity su**lie' at a *rice o& C4 is a. ) units. +. 1 units. c. 1) units. '. )) units.

)45

#,a*ter 4 8T,e $arket Forces o& Su**ly an' Deman' DIF: ) REF: !"#: Su**ly an' 'eman' 4-0 T"P: $arket su**ly

ANS: D NAT: Analytic $S#: A**licati1e )7.

<,en /e mo1e alon. a .i1en su**ly cur1e% a. only *rice is ,el' constant. +. tec,nolo.y an' *rice are ,el' constant. c. all non*rice 'eterminants o& su**ly are ,el' constant. '. all 'eterminants o& -uantity su**lie' are ,el' constant. DIF: ) REF: !"#: Su**ly an' 'eman' 4-0 T"P: Su**ly cur1e

ANS: # NAT: Analytic $S#: Inter*reti1e 0 .

"nce t,e su**ly cur1e &or a *ro'uct or ser1ice is 'ra/n% it a. remains sta+le o1er time. +. can s,i&t eit,er ri.,t/ar' or le&t/ar'. c. is *ossi+le to mo1e alon. t,e cur1e% +ut t,e cur1e /ill not s,i&t. '. ten's to +ecome stee*er o1er time. DIF: ) REF: !"#: Su**ly an' 'eman' 4-0 T"P: Su**ly cur1e

ANS: > NAT: Analytic $S#: Inter*reti1e 01.

I& somet,in. ,a**ens to alter t,e -uantity su**lie' at any .i1en *rice% t,en a. /e mo1e alon. t,e su**ly cur1e. +. t,e su**ly cur1e s,i&ts. c. t,e su**ly cur1e +ecomes stee*er. '. t,e su**ly cur1e +ecomes &latter. DIF: 1 REF: !"#: Su**ly an' 'eman' 4-0 T"P: Su**ly cur1e

ANS: > NAT: Analytic $S#: De&initional 0).

<,en -uantity su**lie' 'ecreases at e1ery *ossi+le *rice% /e kno/ t,at t,e su**ly cur1e ,as a. s,i&te' to t,e le&t. +. s,i&te' to t,e ri.,t. c. not s,i&te'M rat,er% /e ,a1e mo1e' alon. t,e su**ly cur1e to a ne/ *oint on t,e same cur1e. '. not s,i&te'M rat,er% t,e su**ly cur1e ,as +ecome &latter. DIF: ) REF: !"#: Su**ly an' 'eman' 4-0 T"P: Su**ly cur1e

ANS: A NAT: Analytic $S#: Inter*reti1e 00.

<,en -uantity su**lie' increases at e1ery *ossi+le *rice% /e kno/ t,at t,e su**ly cur1e ,as a. s,i&te' to t,e le&t. +. s,i&te' to t,e ri.,t. c. not s,i&te'M rat,er% /e ,a1e mo1e' alon. t,e su**ly cur1e to a ne/ *oint on t,e same cur1e. '. not s,i&te'M rat,er% t,e su**ly cur1e ,as +ecome &latter. DIF: ) REF: !"#: Su**ly an' 'eman' 4-0 T"P: Su**ly cur1e

ANS: > NAT: Analytic $S#: Inter*reti1e 04.

An increase in su**ly is re*resente' +y a. a mo1ement 'o/n/ar' an' to t,e le&t alon. a su**ly cur1e. +. a mo1ement u*/ar' an' to t,e ri.,t alon. a su**ly cur1e. c. a ri.,t/ar' s,i&t o& a su**ly cur1e. '. a le&t/ar' s,i&t o& a su**ly cur1e. DIF: ) REF: !"#: Su**ly an' 'eman' 4-0 T"P: Su**ly cur1e

ANS: # NAT: Analytic $S#: Inter*reti1e

#,a*ter 4 8T,e $arket Forces o& Su**ly an' Deman' 03. A 'ecrease in su**ly is re*resente' +y a. a mo1ement 'o/n/ar' an' to t,e le&t alon. a su**ly cur1e. +. a mo1ement u*/ar' an' to t,e ri.,t alon. a su**ly cur1e. c. a ri.,t/ar' s,i&t o& a su**ly cur1e. '. a le&t/ar' s,i&t o& a su**ly cur1e. DIF: ) REF: !"#: Su**ly an' 'eman' 4-0 T"P: Su**ly cur1e

)46

ANS: D NAT: Analytic $S#: Inter*reti1e 04.

An increase in -uantity su**lie' a. results in a mo1ement 'o/n/ar' an' to t,e le&t alon. a &i(e' su**ly cur1e. +. results in a mo1ement u*/ar' an' to t,e ri.,t alon. a &i(e' su**ly cur1e. c. s,i&ts t,e su**ly cur1e to t,e le&t. '. s,i&ts t,e su**ly cur1e to t,e ri.,t. DIF: ) REF: !"#: Su**ly an' 'eman' 4-0 T"P: Su**ly cur1e

ANS: > NAT: Analytic $S#: Inter*reti1e 05.

A 'ecrease in -uantity su**lie' a. results in a mo1ement 'o/n/ar' an' to t,e le&t alon. a &i(e' su**ly cur1e. +. results in a mo1ement u*/ar' an' to t,e ri.,t alon. a &i(e' su**ly cur1e. c. s,i&ts t,e su**ly cur1e to t,e le&t. '. s,i&ts t,e su**ly cur1e to t,e ri.,t. DIF: ) REF: !"#: Su**ly an' 'eman' 4-0 T"P: Su**ly cur1e

ANS: A NAT: Analytic $S#: Inter*reti1e 06.

A le&t/ar' s,i&t o& a su**ly cur1e is calle' a. an increase in su**ly. +. a 'ecrease in su**ly. c. a 'ecrease in -uantity su**lie'. '. an increase in -uantity su**lie'. DIF: ) REF: !"#: Su**ly an' 'eman' 4-0 T"P: Su**ly cur1e

ANS: > NAT: Analytic $S#: Inter*reti1e 07.

A ri.,t/ar' s,i&t o& a su**ly cur1e is calle' a. an increase in su**ly. +. a 'ecrease in su**ly. c. a 'ecrease in -uantity su**lie'. '. an increase in -uantity su**lie'. DIF: ) REF: !"#: Su**ly an' 'eman' 4-0 T"P: Su**ly cur1e

ANS: A NAT: Analytic $S#: Inter*reti1e 4 .

A mo1ement u*/ar' an' to t,e ri.,t alon. a su**ly cur1e is calle' a. an increase in su**ly. +. a 'ecrease in su**ly. c. a 'ecrease in -uantity su**lie'. '. an increase in -uantity su**lie'. DIF: ) REF: !"#: Su**ly an' 'eman' 4-0 T"P: Su**ly cur1e

ANS: D NAT: Analytic $S#: Inter*reti1e 41.

A mo1ement 'o/n/ar' an' to t,e le&t alon. a su**ly cur1e is calle' a. an increase in su**ly. +. a 'ecrease in su**ly. c. a 'ecrease in -uantity su**lie'. '. an increase in -uantity su**lie'.

)47

#,a*ter 4 8T,e $arket Forces o& Su**ly an' Deman' DIF: ) REF: !"#: Su**ly an' 'eman' 4-0 T"P: Su**ly cur1e

ANS: # NAT: Analytic $S#: Inter*reti1e 4).

A 'ecrease in t,e *rice o& a .oo' /ill a. increase su**ly. +. 'ecrease su**ly. c. increase -uantity su**lie'. '. 'ecrease -uantity su**lie'. DIF: ) REF: !"#: Su**ly an' 'eman' 4-0 T"P: Su**ly cur1e

ANS: D NAT: Analytic $S#: Inter*reti1e 40.

An increase in t,e *rice o& a .oo' /ill a. increase su**ly. +. 'ecrease su**ly. c. increase -uantity su**lie'. '. 'ecrease -uantity su**lie'. DIF: ) REF: !"#: Su**ly an' 'eman' 4-0 T"P: Su**ly cur1e

ANS: # NAT: Analytic $S#: Inter*reti1e 44.

<,en t,e *rice o& a .oo' or ser1ice c,an.es% a. t,e 'eman' cur1e s,i&ts in t,e o**osite 'irection. +. t,e su**ly cur1e s,i&ts in t,e o**osite 'irection. c. t,e su**ly cur1e s,i&ts in t,e same 'irection. '. t,ere is a mo1ement alon. a .i1en su**ly cur1e. DIF: ) REF: !"#: Su**ly an' 'eman' 4-0 T"P: Su**ly cur1e

ANS: D NAT: Analytic $S#: Inter*reti1e 43.

T,e su**ly cur1e &or co&&ee a. s,i&ts /,en t,e *rice o& co&&ee c,an.es +ecause t,e *rice o& co&&ee is measure' on t,e 1ertical a(is o& t,e .ra*,. +. s,i&ts /,en t,e *rice o& co&&ee c,an.es +ecause t,e -uantity su**lie' o& co&&ee is measure' on t,e ,ori;ontal a(is o& t,e .ra*,. c. 'oes not s,i&t /,en t,e *rice o& co&&ee c,an.es +ecause t,e *rice o& co&&ee is measure' on t,e 1ertical a(is o& t,e .ra*,. '. 'oes not s,i&t /,en t,e *rice o& co&&ee c,an.es +ecause t,e -uantity su**lie' o& co&&ee is measure' on t,e ,ori;ontal a(is o& t,e .ra*,. DIF: ) REF: !"#: Su**ly an' 'eman' 4-0 T"P: Su**ly cur1e

ANS: # NAT: Analytic $S#: A**licati1e 44.

<,ic, o& t,e &ollo/in. c,an.es /oul' not s,i&t t,e su**ly cur1e &or a .oo' or ser1iceA a. a c,an.e in tec,nolo.y +. a c,an.e in t,e *rice o& t,e .oo' or ser1ice c. a c,an.e in e(*ectations a+out t,e &uture *rice o& t,e .oo' or ser1ice '. a c,an.e in in*ut *rices DIF: ) REF: !"#: Su**ly an' 'eman' 4-0 T"P: Su**ly cur1e

ANS: > NAT: Analytic $S#: Inter*reti1e 45.

<,ic, o& t,e &ollo/in. /oul' not s,i&t t,e su**ly cur1e &or m*0 *layersA a. an increase in t,e *rice o& m*0 *layers +. a 'ecrease in t,e num+er o& sellers o& m*0 *layers c. an increase in t,e *rice o& *lastic% an in*ut into t,e *ro'uction o& m*0 *layers '. an im*ro1ement in t,e tec,nolo.y use' to *ro'uce m*0 *layers

#,a*ter 4 8T,e $arket Forces o& Su**ly an' Deman' ANS: A NAT: Analytic $S#: A**licati1e 46. DIF: ) REF: !"#: Su**ly an' 'eman' 4-0 T"P: Su**ly cur1e

)3

<,ic, o& t,e &ollo/in. e1ents /oul' cause a mo1ement u*/ar' an' to t,e ri.,t alon. t,e su**ly cur1e &or tomatoesA a. T,e num+er o& sellers o& tomatoes increases. +. T,ere is an a'1ance in tec,nolo.y t,at re'uces t,e cost o& *ro'ucin. tomatoes. c. T,e *rice o& &ertili;er 'ecreases% an' &ertili;er is an in*ut in t,e *ro'uction o& tomatoes. '. T,e *rice o& tomatoes rises. DIF: ) REF: !"#: Su**ly an' 'eman' 4-0 T"P: Su**ly cur1e

ANS: D NAT: Analytic $S#: A**licati1e 47.

A mo1ement alon. t,e su**ly cur1e mi.,t +e cause' +y a c,an.e in a. tec,nolo.y. +. in*ut *rices. c. e(*ectations a+out &uture *rices. '. t,e *rice o& t,e .oo' or ser1ice t,at is +ein. su**lie'. DIF: ) REF: !"#: Su**ly an' 'eman' 4-0 T"P: Su**ly cur1e

ANS: D NAT: Analytic $S#: Inter*reti1e 3 .

Nol'in. t,e non*rice 'eterminants o& su**ly constant% a c,an.e in *rice /oul' a. result in eit,er a 'ecrease in su**ly or an increase in su**ly. +. result in a mo1ement alon. a stationary su**ly cur1e. c. result in a s,i&t o& 'eman'. '. ,a1e no e&&ect on t,e -uantity su**lie'. DIF: ) REF: !"#: Su**ly an' 'eman' 4-0 T"P: Su**ly cur1e

ANS: > NAT: Analytic $S#: Inter*reti1e 31.

An increase in t,e *rice o& a .oo' /oul' a. increase t,e su**ly o& t,e .oo'. +. increase t,e amount *urc,ase' +y +uyers. c. .i1e *ro'ucers an incenti1e to *ro'uce more. '. 'ecrease +ot, t,e -uantity 'eman'e' o& t,e .oo' an' t,e -uantity su**lie' o& t,e .oo'. DIF: ) REF: !"#: Su**ly an' 'eman' 4-0 T"P: Su**ly cur1e

ANS: # NAT: Analytic $S#: Inter*reti1e 3).

An increase in t,e *rice o& oran.es /oul' lea' to a. an increase' su**ly o& oran.es. +. a re'uction in t,e *rices o& in*uts use' in oran.e *ro'uction. c. an increase' 'eman' &or oran.es. '. a mo1ement u* an' to t,e ri.,t alon. t,e su**ly cur1e &or oran.es. DIF: ) REF: !"#: Su**ly an' 'eman' 4-0 T"P: Su**ly cur1e

ANS: D NAT: Analytic $S#: A**licati1e 30.

T,e su**ly cur1e &or cook+ooks s,i&ts a. /,en a 'eterminant o& t,e su**ly o& cook+ooks ot,er t,an tec,nolo.y c,an.es. +. /,en a 'eterminant o& t,e su**ly o& cook+ooks ot,er t,an t,e *rice o& cook+ooks c,an.es. c. /,en any 'eterminant o& t,e su**ly o& cook+ooks c,an.es. '. only /,en t,e num+er o& cook+ook-sellers c,an.es. DIF: ) REF: !"#: Su**ly an' 'eman' 4-0 T"P: Determinants o& su**ly

ANS: > NAT: Analytic $S#: A**licati1e

)31
34.

#,a*ter 4 8T,e $arket Forces o& Su**ly an' Deman' !ea' is an im*ortant in*ut in t,e *ro'uction o& crystal. I& t,e *rice o& lea' 'ecreases% t,en /e /oul' e(*ect t,e su**ly o& a. crystal to +e una&&ecte'. +. crystal to 'ecrease. c. crystal to increase. '. lea' to increase. DIF: ) REF: !"#: Su**ly an' 'eman' 4-0 T"P: In*ut *rices

ANS: # NAT: Analytic $S#: A**licati1e 33.

Su**ose you make ?e/elry. I& t,e *rice o& .ol' &alls% t,en /e /oul' e(*ect you to a. +e /illin. an' a+le to *ro'uce less ?e/elry t,an +e&ore at eac, *ossi+le *rice. +. +e /illin. an' a+le to *ro'uce more ?e/elry t,an +e&ore at eac, *ossi+le *rice. c. &ace a .reater 'eman' &or your ?e/elry. '. &ace a /eaker 'eman' &or your ?e/elry. DIF: ) REF: !"#: Su**ly an' 'eman' 4-0 T"P: In*ut *rices

ANS: > NAT: Analytic $S#: A**licati1e 34.

<orkers at a +icycle assem+ly *lant currently earn t,e man'atory minimum /a.e. I& t,e &e'eral .o1ernment increases t,e minimum /a.e +y C1. *er ,our% t,en it is likely t,at t,e a. 'eman' &or +icycle assem+ly /orkers /ill increase. +. su**ly o& +icycles /ill s,i&t to t,e ri.,t. c. su**ly o& +icycles /ill s,i&t to t,e le&t. '. &irm must increase out*ut to maintain *ro&it le1els. DIF: ) REF: !"#: Su**ly an' 'eman' 4-0 T"P: In*ut *rices

ANS: # NAT: Analytic $S#: A**licati1e 35.

Su**ose t,ere is an increase in t,e *rice o& steel. <e /oul' e(*ect t,e su**ly cur1e &or steel +eams a. to s,i&t ri.,t/ar'. +. to s,i&t le&t/ar'. c. to +ecome &latter. '. to remain unc,an.e'. DIF: ) REF: !"#: Su**ly an' 'eman' 4-0 T"P: In*ut *rices

ANS: > NAT: Analytic $S#: A**licati1e 36.

<,eat is t,e main in*ut in t,e *ro'uction o& &lour. I& t,e *rice o& /,eat 'ecreases% t,en /e /oul' e(*ect t,e a. 'eman' &or &lour to increase. +. 'eman' &or &lour to 'ecrease. c. su**ly o& &lour to increase. '. su**ly o& &lour to 'ecrease. DIF: ) REF: !"#: Su**ly an' 'eman' 4-0 T"P: In*ut *rices

ANS: # NAT: Analytic $S#: A**licati1e 37.

An increase in t,e *rice o& ru++er coinci'es /it, an a'1ance in t,e tec,nolo.y o& tire *ro'uction. As a result o& t,ese t/o e1ents% a. t,e 'eman' &or tires 'ecreases an' t,e su**ly o& tires increases. +. t,e 'eman' &or tires is una&&ecte' an' t,e su**ly o& tires 'ecreases. c. t,e 'eman' &or tires is una&&ecte' an' t,e su**ly o& tires increases. '. None o& t,e a+o1e is necessarily correct. DIF: 0 REF: !"#: Su**ly an' 'eman' 4-0 T"P: In*ut *rices 2 Tec,nolo.y

ANS: D NAT: Analytic $S#: Analytical

#,a*ter 4 8T,e $arket Forces o& Su**ly an' Deman' 4 . A tec,nolo.ical a'1ance /ill s,i&t t,e a. su**ly cur1e to t,e ri.,t. +. su**ly cur1e to t,e le&t. c. 'eman' cur1e to t,e ri.,t. '. 'eman' cur1e to t,e le&t. DIF: ) REF: !"#: Su**ly an' 'eman' 4-0 T"P: Tec,nolo.y

)3)

ANS: A NAT: Analytic $S#: Inter*reti1e 41.

An a'1ance in *ro'uction tec,nolo.y /ill a. increase a &irm=s costs an' increase its su**ly. +. increase a &irms costs an' 'ecrease its su**ly. c. 'ecrease a &irms costs an' increase its su**ly. '. 'ecrease a &irms costs an' 'ecrease its su**ly. DIF: ) REF: !"#: Su**ly an' 'eman' 4-0 T"P: Tec,nolo.y

ANS: # NAT: Analytic $S#: Inter*reti1e 4).

I& car manu&acturers +e.in utili;in. ne/ la+or-sa1in. tec,nolo.y on t,eir assem+ly lines% /e /oul' not e(*ect a. a smaller -uantity o& la+or to +e use'. +. t,e su**ly o& cars to increase. c. t,e &irms costs to &all. '. in'i1i'ual car manu&acturers to mo1e u* an' to t,e ri.,t alon. t,eir in'i1i'ual su**ly cur1es. DIF: ) REF: !"#: Su**ly an' 'eman' 4-0 T"P: Tec,nolo.y

ANS: D NAT: Analytic $S#: A**licati1e 40.

<,ic, o& t,e &ollo/in. mi.,t cause t,e su**ly cur1e &or an in&erior .oo' to s,i&t to t,e ri.,tA a. An increase in in*ut *rices. +. A 'ecrease in consumer income. c. An im*ro1ement in *ro'uction tec,nolo.y t,at makes *ro'uction o& t,e .oo' more *ro&ita+le. '. A 'ecrease in t,e num+er o& sellers in t,e market. DIF: 0 REF: !"#: Su**ly an' 'eman' 4-0 T"P: Tec,nolo.y

ANS: # NAT: Analytic $S#: Analytical 44.

To'ay% *ro'ucers c,an.e' t,eir e(*ectations a+out t,e &uture. T,is c,an.e a. can cause a mo1ement alon. a su**ly cur1e. +. can a&&ect &uture su**ly% +ut not to'ays su**ly. c. can a&&ect to'ays su**ly. '. cannot a&&ect eit,er to'ays su**ly or &uture su**ly. DIF: ) REF: !"#: Su**ly an' 'eman' 4-0 T"P: E(*ectations

ANS: # NAT: Analytic $S#: Inter*reti1e 43.

I& su**liers e(*ect t,e *rice o& t,eir *ro'uct to &all in t,e &uture% t,en t,ey /ill a. 'ecrease su**ly no/. +. increase su**ly no/. c. 'ecrease su**ly in t,e &uture +ut not no/. '. increase su**ly in t,e &uture +ut not no/. DIF: ) REF: !"#: Su**ly an' 'eman' 4-0 T"P: E(*ectations

ANS: > NAT: Analytic $S#: Inter*reti1e 44.

<,at /ill ,a**en in t,e rice market no/ i& sellers e(*ect ,i.,er rice *rices in t,e near &utureA a. T,e su**ly o& rice /ill increase. +. T,e su**ly o& rice /ill 'ecrease. c. T,e su**ly o& rice /ill +e una&&ecte'. '. T,e 'eman' &or rice /ill 'ecrease.

)30

#,a*ter 4 8T,e $arket Forces o& Su**ly an' Deman' DIF: ) REF: !"#: Su**ly an' 'eman' 4-0 T"P: E(*ectations

ANS: > NAT: Analytic $S#: A**licati1e 45.

To'ay=s su**ly cur1e &or .asoline coul' s,i&t in res*onse to a. a c,an.e in to'ay=s *rice o& .asoline. +. a c,an.e in t,e e(*ecte' &uture *rice o& .asoline. c. a c,an.e in t,e num+er o& +uyers o& .asoline. '. All o& t,e a+o1e are correct. DIF: ) REF: !"#: Su**ly an' 'eman' 4-0 T"P: E(*ectations

ANS: > NAT: Analytic $S#: A**licati1e 46.

A 'ress manu&acturer recently ,as come to e(*ect ,i.,er *rices &or 'resses in t,e near &uture. <e /oul' e(*ect a. t,e 'ress manu&acturer to su**ly more 'resses no/ t,an it /as su**lyin. *re1iously. +. t,e 'ress manu&acturer to su**ly &e/er 'resses no/ t,an it /as su**lyin. *re1iously. c. t,e 'eman' &or t,is manu&acturer=s 'resses to &all. '. no c,an.e in t,e 'ress manu&acturer=s current su**lyM instea'% &uture su**ly /ill +e a&&ecte'. DIF: ) REF: !"#: Su**ly an' 'eman' 4-0 T"P: E(*ectations

ANS: > NAT: Analytic $S#: A**licati1e 47.

Recent &orest &ires in t,e /estern states are e(*ecte' to cause t,e *rice o& lum+er to rise in t,e ne(t 4 mont,s. As a result% /e can e(*ect t,e su**ly o& lum+er to a. &all in 4 mont,s% +ut not no/. +. increase in 4 mont,s /,en t,e *rice .oes u*. c. &all no/. '. increase no/ to meet as muc, 'eman' as *ossi+le. DIF: ) REF: !"#: Su**ly an' 'eman' 4-0 T"P: E(*ectations

ANS: # NAT: Analytic $S#: A**licati1e 5 .

Funsters% Inc.% t,e lar.est toy com*any in t,e country% sells its most *o*ular 'oll &or C13. It ,as ?ust learne' t,at its lea'in. com*etitor% Toysorama% is mass-*ro'ucin. an e(cellent co*y an' *lans to &loo' t,e market /it, t,eir C3 'oll in 4 /eeks. Funsters s,oul' a. H&i.,t &ire /it, &ireI +y 'ecreasin. su**ly o& its 'oll &or 4 /eeks an' t,en increasin. t,e su**ly. +. increase t,e su**ly o& t,eir 'oll no/ +e&ore t,e ot,er 'oll ,its t,e market. c. increase t,e *rice o& t,eir 'oll no/. '. 'iscontinue t,eir 'oll. DIF: ) REF: !"#: Su**ly an' 'eman' 4-0 T"P: E(*ectations

ANS: > NAT: Analytic $S#: A**licati1e 51.

<,ic, o& t,e &ollo/in. is a 'eterminant o& t,e market su**ly cur1e +ut not a 'eterminant o& an in'i1i'ual sellers su**lyA a. tec,nolo.y +. e(*ectations c. in*ut *rices '. t,e num+er o& sellers DIF: ) REF: !"#: Su**ly an' 'eman' 4-0 T"P: Num+er o& sellers

ANS: D NAT: Analytic $S#: Inter*reti1e 5).

I& t,e num+er o& sellers in a market increases% t,en t,e a. 'eman' in t,at market /ill increase. +. su**ly in t,at market /ill increase. c. su**ly in t,at market /ill 'ecrease. '. 'eman' in t,at market /ill 'ecrease.

#,a*ter 4 8T,e $arket Forces o& Su**ly an' Deman' ANS: > NAT: Analytic $S#: Inter*reti1e 50. DIF: ) REF: !"#: Su**ly an' 'eman' 4-0 T"P: Num+er o& sellers

)34

A 'ecrease in t,e num+er o& sellers in t,e market causes a. t,e su**ly cur1e to s,i&t to t,e le&t. +. t,e su**ly cur1e to s,i&t to t,e ri.,t. c. a mo1ement u* an' to t,e ri.,t alon. a stationary su**ly cur1e. '. a mo1ement 'o/n/ar' an' to t,e le&t alon. a stationary su**ly cur1e. DIF: ) REF: !"#: Su**ly an' 'eman' 4-0 T"P: Num+er o& sellers

ANS: A NAT: Analytic $S#: Inter*reti1e 54.

<,ic, o& t,e &ollo/in. /oul' s,i&t t,e su**ly cur1e &or .asoline to t,e ri.,tA a. An increase in t,e 'eman' &or .asoline. +. An increase in t,e *rice o& .asoline. c. An increase in t,e num+er o& *ro'ucers o& .asoline '. An increase in t,e *rice o& oil% an in*ut into t,e *ro'uction o& .asoline. DIF: ) REF: !"#: Su**ly an' 'eman' 4-0 T"P: Num+er o& sellers

ANS: # NAT: Analytic $S#: A**licati1e 53.

<,ic, o& t,e &ollo/in. e1ents coul' cause an increase in t,e su**ly o& ceilin. &ansA a. T,e num+er o& sellers o& ceilin. &ans increases. +. T,ere is an increase in t,e *rice o& air con'itioners% an' consumers re.ar' air con'itioners an' ceilin. &ans as su+stitutes. c. T,ere is an increase in t,e *rice o& t,e motor t,at *o/ers ceilin. &ans. '. All o& t,e a+o1e are correct. DIF: ) REF: !"#: Su**ly an' 'eman' 4-0 T"P: Num+er o& sellers

ANS: A NAT: Analytic $S#: A**licati1e Figure 4-6

price

S >

P= P
A

:=

quantity

54.

Refer to F%$ure 4,6. T,e mo1ement &rom *oint A to *oint > on t,e .ra*, is calle' a. a 'ecrease in su**ly. +. an increase in su**ly. c. an increase in t,e -uantity su**lie'. '. a 'ecrease in t,e -uantity su**lie'. DIF: ) REF: !"#: Su**ly an' 'eman' 4-0 T"P: Su**ly cur1e

ANS: # NAT: Analytic $S#: Inter*reti1e

)33
55.

#,a*ter 4 8T,e $arket Forces o& Su**ly an' Deman' Refer to F%$ure 4,6. T,e mo1ement &rom *oint A to *oint > on t,e .ra*, is cause' +y a. a 'ecrease in t,e *rice o& t,e .oo'. +. an increase in t,e *rice o& t,e .oo'. c. an a'1ance in tec,nolo.y. '. a 'ecrease in in*ut *rices. DIF: ) REF: !"#: Su**ly an' 'eman' 4-0 T"P: Su**ly cur1e

ANS: > NAT: Analytic $S#: Inter*reti1e 56.

Refer to F%$ure 4,6. T,e mo1ement &rom *oint A to *oint > on t,e .ra*, re*resents a. an increase' /illin.ness an' a+ility on t,e *art o& su**liers to su**ly t,e .oo' at eac, *ossi+le *rice. +. an increase in t,e num+er o& su**liers. c. a 'ecrease in t,e *rice o& a rele1ant in*ut. '. an increase in t,e *rice o& t,e .oo' t,at is +ein. su**lie' an' su**liers res*onse to t,at *rice c,an.e. DIF: ) REF: !"#: Su**ly an' 'eman' 4-0 T"P: Su**ly cur1e

ANS: D NAT: Analytic $S#: Inter*reti1e Figure 4-7

price

S=

quantity

57.

Refer to F%$ure 4,7. T,e s,i&t &rom S to S is calle' a. a 'ecrease in su**ly. +. a 'ecrease in -uantity su**lie'. c. an increase in su**ly. '. an increase in -uantity su**lie'. DIF: ) REF: !"#: Su**ly an' 'eman' 4-0 T"P: Su**ly cur1e

ANS: # NAT: Analytic $S#: Inter*reti1e 6 .

Refer to F%$ure 4,7. T,e mo1ement &rom S to S coul' +e cause' +y a. an increase in t,e *rice o& t,e .oo'. +. an im*ro1ement in tec,nolo.y. c. an increase in income. '. an increase in in*ut *rices. DIF: ) REF: !"#: Su**ly an' 'eman' 4-0 T"P: Tec,nolo.y

ANS: > NAT: Analytic $S#: Inter*reti1e

#,a*ter 4 8T,e $arket Forces o& Su**ly an' Deman' 61.

)34

Refer to F%$ure 4,7. I& t,e su**ly cur1es t,at are 'ra/n re*resent su**ly cur1es &or sin.le-&amily resi'ential ,ouses% t,en t,e mo1ement &rom S to S coul' +e cause' +y a. an increase in t,e *rice o& a*artments Da su+stitute &or sin.le-&amily ,ouses &or many *eo*le lookin. &or a *lace to li1eE. +. a ne/ly-&orme' e(*ectation +y ,ouse-+uil'ers t,at *rices o& ,ouses /ill increase si.ni&icantly in t,e ne(t si( mont,s. c. a 'ecrease in t,e *rice o& lum+er. '. All o& t,e a+o1e are correct. DIF: ) REF: !"#: Su**ly an' 'eman' 4-0 T"P: In*ut *rices

ANS: # NAT: Analytic $S#: A**licati1e

Sec+4 , The Market Forces of Supply and Demand , Supply and Demand To$ether
MULT-.LE C !-CE 1. T,e uni-ue *oint at /,ic, t,e su**ly an' 'eman' cur1es intersect is calle' a. market ,armony. +. coinci'ence. c. e-ui1alence. '. e-uili+rium. DIF: 1 !"#: E-uili+rium REF: T"P: 4-4 E-uili+rium $S#: De&initional

ANS: D NAT: Analytic ).

T,e 'ictionary 'e&ines e-uili+rium as a situation in /,ic, &orces a. are in +alance. +. are t,e same. c. clas,. '. remain constant. DIF: 1 !"#: E-uili+rium REF: T"P: 4-4 E-uili+rium $S#: De&initional

ANS: A NAT: Analytic 0.

At t,e e-uili+rium *rice% t,e -uantity o& t,e .oo' t,at +uyers are /illin. an' a+le to +uy a. is .reater t,an t,e -uantity t,at sellers are /illin. an' a+le to sell. +. e(actly e-uals t,e -uantity t,at sellers are /illin. an' a+le to sell. c. is less t,an t,e -uantity t,at sellers are /illin. an' a+le to sell. '. DaE an' DcE coul' +ot, +e correct. DIF: 1 !"#: E-uili+rium REF: T"P: 4-4 E-uili+rium $S#: De&initional

ANS: > NAT: Analytic 4.

Anot,er term &or e-uili+rium *rice is a. 'ynamic *rice. +. market-clearin. *rice. c. -uantity-'e&inin. *rice. '. +alance *rice. DIF: 1 !"#: E-uili+rium REF: T"P: 4-4 E-uili+rium $S#: De&initional

ANS: > NAT: Analytic 3.

In a .i1en market% ,o/ are t,e e-uili+rium *rice an' t,e market-clearin. *rice relate'A a. T,ere is no relations,i*. +. T,ey are t,e same *rice. c. T,e market-clearin. *rice e(cee's t,e e-uili+rium *rice. '. T,e e-uili+rium *rice e(cee's t,e market-clearin. *rice. DIF: ) !"#: E-uili+rium REF: T"P: 4-4 E-uili+rium $S#: Inter*reti1e

ANS: > NAT: Analytic

)35
4.

#,a*ter 4 8T,e $arket Forces o& Su**ly an' Deman' >uyers are a+le to +uy all t,ey /ant to +uy an' sellers are a+le to sell all t,ey /ant to sell a. at *rices at an' a+o1e t,e e-uili+rium *rice. +. at *rices at an' +elo/ t,e e-uili+rium *rice. c. at *rices a+o1e an' +elo/ t,e e-uili+rium *rice% +ut not at t,e e-uili+rium *rice. '. at t,e e-uili+rium *rice% +ut not a+o1e or +elo/ t,e e-uili+rium *rice. DIF: ) !"#: E-uili+rium REF: T"P: 4-4 E-uili+rium $S#: Inter*reti1e

ANS: D NAT: Analytic 5.

In markets% *rices mo1e to/ar' e-uili+rium +ecause o& a. t,e actions o& +uyers an' sellers. +. .o1ernment re.ulations *lace' on market *artici*ants. c. increase' com*etition amon. sellers. '. +uyers= a+ility to a&&ect market outcomes. DIF: 1 !"#: E-uili+rium REF: T"P: 4-4 E-uili+rium $S#: De&initional

ANS: A NAT: Analytic 6.

<,en t,e *rice o& a .oo' is ,i.,er t,an t,e e-uili+rium *rice% a. a s,orta.e /ill e(ist. +. +uyers 'esire to *urc,ase more t,an is *ro'uce'. c. sellers 'esire to *ro'uce an' sell more t,an +uyers /is, to *urc,ase. '. -uantity 'eman'e' e(cee's -uantity su**lie'. DIF: ) !"#: E-uili+rium REF: T"P: 4-4 Sur*lus $S#: Inter*reti1e

ANS: # NAT: Analytic 7.

A sur*lus e(ists in a market i& a. t,ere is an e(cess 'eman' &or t,e .oo'. +. t,e situation is suc, t,at t,e la/ o& su**ly an' 'eman' /oul' *re'ict an increase in t,e *rice o& t,e .oo' &rom its current le1el. c. t,e current *rice is a+o1e its e-uili+rium *rice. '. -uantity 'eman'e' e(cee's -uantity su**lie'. DIF: ) !"#: E-uili+rium REF: T"P: 4-4 Sur*lus $S#: Inter*reti1e

ANS: # NAT: Analytic 1 .

I& a sur*lus e(ists in a market% t,en /e kno/ t,at t,e actual *rice is a. a+o1e t,e e-uili+rium *rice an' -uantity su**lie' is .reater t,an -uantity 'eman'e'. +. a+o1e t,e e-uili+rium *rice an' -uantity 'eman'e' is .reater t,an -uantity su**lie'. c. +elo/ t,e e-uili+rium *rice an' -uantity 'eman'e' is .reater t,an -uantity su**lie'. '. +elo/ t,e e-uili+rium *rice an' -uantity su**lie' is .reater t,an -uantity 'eman'e'. DIF: ) !"#: E-uili+rium REF: T"P: 4-4 Sur*lus $S#: Inter*reti1e

ANS: A NAT: Analytic 11.

I&% at t,e current *rice% t,ere is a sur*lus o& a .oo'% t,en a. sellers are *ro'ucin. more t,an +uyers /is, to +uy. +. t,e market must +e in e-uili+rium. c. t,e *rice is +elo/ t,e e-uili+rium *rice. '. -uantity 'eman'e' e-uals -uantity su**lie'. DIF: ) !"#: E-uili+rium REF: T"P: 4-4 Sur*lus $S#: Inter*reti1e

ANS: A NAT: Analytic 1).

<,ic, o& t,e &ollo/in. /oul' cause *rice to 'ecreaseA a. a 'ecrease in su**ly +. an increase in 'eman' c. a sur*lus o& t,e .oo' '. a s,orta.e o& t,e .oo' DIF: ) !"#: E-uili+rium REF: T"P: 4-4 Sur*lus $S#: Inter*reti1e

ANS: # NAT: Analytic

#,a*ter 4 8T,e $arket Forces o& Su**ly an' Deman' 10. <,en a sur*lus e(ists in a market% sellers a. raise *rice% /,ic, increases -uantity 'eman'e' an' 'ecreases -uantity su**lie'% until t,e sur*lus is eliminate'. +. raise *rice% /,ic, 'ecreases -uantity 'eman'e' an' increases -uantity su**lie'% until t,e sur*lus is eliminate'. c. lo/er *rice% /,ic, increases -uantity 'eman'e' an' 'ecreases -uantity su**lie'% until t,e sur*lus is eliminate'. '. lo/er *rice% /,ic, 'ecreases -uantity 'eman'e' an' increases -uantity su**lie'% until t,e sur*lus is eliminate'. DIF: ) !"#: E-uili+rium REF: T"P: 4-4 Sur*lus $S#: Inter*reti1e

)36

ANS: # NAT: Analytic 14.

Su**ose roses are currently sellin. &or C4 *er 'o;en% +ut t,e e-uili+rium *rice o& roses is C0 *er 'o;en. <e /oul' e(*ect a a. s,orta.e to e(ist an' t,e market *rice o& roses to increase. +. s,orta.e to e(ist an' t,e market *rice o& roses to 'ecrease. c. sur*lus to e(ist an' t,e market *rice o& roses to increase. '. sur*lus to e(ist an' t,e market *rice o& roses to 'ecrease. DIF: ) !"#: E-uili+rium REF: T"P: 4-4 Sur*lus $S#: A**licati1e

ANS: D NAT: Analytic 13.

T,e current *rice o& neckties is C0 % +ut t,e e-uili+rium *rice o& neckties is C)3. As a result% a. t,e -uantity su**lie' o& neckties e(cee's t,e -uantity 'eman'e' o& neckties at t,e C0 *rice. +. t,e e-uili+rium -uantity o& neckties e(cee's t,e -uantity 'eman'e' at t,e C0 *rice. c. t,ere is a sur*lus o& neckties at t,e C0 *rice. '. All o& t,e a+o1e are correct. DIF: ) !"#: E-uili+rium REF: T"P: 4-4 Sur*lus $S#: A**licati1e

ANS: D NAT: Analytic 14.

A uni1ersity=s &oot+all sta'ium is ne1er more t,an ,al&-&ull 'urin. &oot+all .ames. T,is in'icates a. t,e ticket *rice is a+o1e t,e e-uili+rium *rice. +. t,e ticket *rice is +elo/ t,e e-uili+rium *rice. c. t,e ticket *rice is at t,e e-uili+rium *rice. '. not,in. a+out t,e e-uili+rium *rice. DIF: ) !"#: E-uili+rium REF: T"P: 4-4 Sur*lus $S#: A**licati1e

ANS: A NAT: Analytic 15.

<,en t,e *rice o& a .oo' is lo/er t,an t,e e-uili+rium *rice% a. a sur*lus /ill e(ist. +. +uyers 'esire to *urc,ase more t,an is *ro'uce'. c. sellers 'esire to *ro'uce an' sell more t,an +uyers /is, to *urc,ase. '. -uantity su**lie' e(cee's -uantity 'eman'e'. DIF: ) !"#: E-uili+rium REF: T"P: 4-4 S,orta.e $S#: Inter*reti1e

ANS: > NAT: Analytic 16.

A s,orta.e e(ists in a market i& a. t,ere is an e(cess su**ly o& t,e .oo'. +. t,e situation is suc, t,at t,e la/ o& su**ly an' 'eman' /oul' *re'ict a 'ecrease in t,e *rice o& t,e .oo' &rom its current le1el. c. t,e current *rice is +elo/ its e-uili+rium *rice. '. -uantity su**lie' e(cee's -uantity 'eman'e'. DIF: ) !"#: E-uili+rium REF: T"P: 4-4 S,orta.e $S#: Inter*reti1e

ANS: # NAT: Analytic 17.

I& a s,orta.e e(ists in a market% t,en /e kno/ t,at t,e actual *rice is a. a+o1e t,e e-uili+rium *rice an' -uantity su**lie' is .reater t,an -uantity 'eman'e'. +. a+o1e t,e e-uili+rium *rice an' -uantity 'eman'e' is .reater t,an -uantity su**lie'. c. +elo/ t,e e-uili+rium *rice an' -uantity 'eman'e' is .reater t,an -uantity su**lie'. '. +elo/ t,e e-uili+rium *rice an' -uantity su**lie' is .reater t,an -uantity 'eman'e'.

)37

#,a*ter 4 8T,e $arket Forces o& Su**ly an' Deman' DIF: ) !"#: E-uili+rium REF: T"P: 4-4 S,orta.e $S#: Inter*reti1e

ANS: # NAT: Analytic ) .

I&% at t,e current *rice% t,ere is a s,orta.e o& a .oo'% t,en a. sellers are *ro'ucin. more t,an +uyers /is, to +uy. +. t,e market must +e in e-uili+rium. c. t,e *rice is +elo/ t,e e-uili+rium *rice. '. -uantity 'eman'e' e-uals -uantity su**lie'. DIF: ) !"#: E-uili+rium REF: T"P: 4-4 S,orta.e $S#: Inter*reti1e

ANS: # NAT: Analytic )1.

<,ic, o& t,e &ollo/in. /oul' cause *rice to increaseA a. an increase in su**ly +. a 'ecrease in 'eman' c. a sur*lus o& t,e .oo' '. a s,orta.e o& t,e .oo' DIF: ) !"#: E-uili+rium REF: T"P: 4-4 S,orta.e $S#: Inter*reti1e

ANS: D NAT: Analytic )).

<,en a s,orta.e e(ists in a market% sellers a. raise *rice% /,ic, increases -uantity 'eman'e' an' 'ecreases -uantity su**lie'% until t,e s,orta.e is eliminate'. +. raise *rice% /,ic, 'ecreases -uantity 'eman'e' an' increases -uantity su**lie'% until t,e s,orta.e is eliminate'. c. lo/er *rice% /,ic, increases -uantity 'eman'e' an' 'ecreases -uantity su**lie'% until t,e s,orta.e is eliminate'. '. lo/er *rice% /,ic, 'ecreases -uantity 'eman'e' an' increases -uantity su**lie'% until t,e s,orta.e is eliminate'. DIF: ) !"#: E-uili+rium REF: T"P: 4-4 S,orta.e $S#: Inter*reti1e

ANS: > NAT: Analytic )0.

I& t,ere is a s,orta.e o& &arm la+orers% /e /oul' e(*ect a. t,e /a.e o& &arm la+orers to increase. +. t,e /a.e o& &arm la+orers to 'ecrease. c. t,e *rice o& &arm commo'ities to 'ecrease. '. a 'ecrease in t,e 'eman' &or su+stitutes &or &arm la+or. DIF: ) !"#: E-uili+rium REF: T"P: 4-4 S,orta.e $S#: A**licati1e

ANS: A NAT: Analytic )4.

Su**ose roses are currently sellin. &or C) *er 'o;en% +ut t,e e-uili+rium *rice o& roses is C0 *er 'o;en. <e /oul' e(*ect a a. s,orta.e to e(ist an' t,e market *rice o& roses to increase. +. s,orta.e to e(ist an' t,e market *rice o& roses to 'ecrease. c. sur*lus to e(ist an' t,e market *rice o& roses to increase. '. sur*lus to e(ist an' t,e market *rice o& roses to 'ecrease. DIF: ) !"#: E-uili+rium REF: T"P: 4-4 S,orta.e $S#: A**licati1e

ANS: A NAT: Analytic )3.

Oears a.o% t,ousan's o& country music &ans riske' t,eir li1es +y rus,in. to +uy tickets &or a <illie Nelson concert at #arne.ie Nall. T,is +e,a1ior in'icates a. t,e ticket *rice /as a+o1e t,e e-uili+rium *rice. +. t,e ticket *rice /as +elo/ t,e e-uili+rium *rice. c. t,e ticket *rice /as at t,e e-uili+rium *rice. '. not,in. a+out t,e e-uili+rium *rice. DIF: ) !"#: E-uili+rium REF: T"P: 4-4 S,orta.e $S#: A**licati1e

ANS: > NAT: Analytic

#,a*ter 4 8T,e $arket Forces o& Su**ly an' Deman' )4. T,e la/ o& su**ly an' 'eman' asserts t,at a. 'eman' cur1es an' su**ly cur1es ten' to s,i&t to t,e ri.,t as time .oes +y. +. t,e *rice o& a .oo' /ill e1entually rise in res*onse to an e(cess 'eman' &or t,at .oo'. c. /,en t,e su**ly cur1e &or a .oo' s,i&ts% t,e 'eman' cur1e &or t,at .oo' s,i&ts in res*onse. '. t,e e-uili+rium *rice o& a .oo' /ill +e risin. more o&ten t,an it /ill +e &allin.. DIF: ) !"#: E-uili+rium REF: T"P: 4-4 !a/ o& su**ly an' 'eman'

)4

ANS: > NAT: Analytic $S#: Inter*reti1e )5.

Ste* one o& t,e HT,ree Ste*s &or Analy;in. #,an.es in E-uili+riumI is a. 'eci'e /,ic, 'irection t,e cur1e s,i&ts. +. 'eci'e /,et,er t,e e1ent s,i&ts t,e su**ly or 'eman' cur1e. c. use t,e su**ly-an'-'eman' 'ia.ram to see ,o/ t,e s,i&t c,an.es t,e e-uili+rium. '. Any o& t,ese coul' +e use' &irst. DIF: 1 !"#: E-uili+rium REF: T"P: 4-4 E-uili+rium $S#: De&initional

ANS: > NAT: Analytic )6.

Oou ,a1e +een aske' +y your economics *ro&essor to .ra*, t,e market &or lum+er an' t,en to analy;e t,e c,an.e t,at /oul' occur in e-uili+rium *rice as a result o& recent &orest &ires in t,e /est. Oour &irst ste* /oul' +e to a. 'eci'e /,ic, 'irection to s,i&t t,e cur1e. +. 'eci'e /,et,er t,e &ires a&&ecte' 'eman' or su**ly. c. .ra*, t,e s,i&t to see t,e e&&ect on e-uili+rium. '. None o& t,e a+o1e are correct. DIF: ) !"#: E-uili+rium REF: T"P: 4-4 E-uili+rium $S#: A**licati1e

ANS: > NAT: Analytic Table 4-5 Price C1 C6 C4 C4 C) )7. :uantity Deman'e' 1 ) 0 4 3

:uantity Su**lie' 4 43 0 13

Refer to Ta)le 4,5. T,e e-uili+rium *rice an' -uantity% res*ecti1ely% are a. C) an' 3 . +. C4 an' 0 . c. C4 an' 4 . '. C1) an' 0 . DIF: ) !"#: E-uili+rium REF: T"P: 4-4 E-uili+rium $S#: A**licati1e

ANS: > NAT: Analytic 0 .

Refer to Ta)le 4,5. I& t,e *rice /ere C6% a a. s,orta.e o& ) units /oul' e(ist an' *rice /oul' ten' to rise. +. sur*lus o& )3 units /oul' e(ist an' *rice /oul' ten' to &all. c. s,orta.e o& )3 units /oul' e(ist an' *rice /oul' ten' to rise. '. sur*lus o& 43 units /oul' e(ist an' *rice /oul' ten' to &all. DIF: ) !"#: E-uili+rium REF: T"P: 4-4 Sur*lus $S#: A**licati1e

ANS: > NAT: Analytic 01.

Refer to Ta)le 4,5. I& t,e *rice /ere C4% a a. sur*lus o& 13 units /oul' e(ist an' *rice /oul' ten' to &all. +. s,orta.e o& )3 units /oul' e(ist an' *rice /oul' ten' to rise. c. sur*lus o& )3 units /oul' e(ist an' *rice /oul' ten' to &all. '. s,orta.e o& 4 units /oul' e(ist an' *rice /oul' ten' to rise.

)41

#,a*ter 4 8T,e $arket Forces o& Su**ly an' Deman' DIF: ) !"#: E-uili+rium REF: T"P: 4-4 S,orta.e $S#: A**licati1e

ANS: > NAT: Analytic Table 4-6

A country clu+ usually only allo/s mem+ers to *urc,ase tickets &or its cele+rity .ol& tournament% +ut t,e clu+ is consi'erin. allo/in. non-mem+ers to *urc,ase tickets t,is year. T,e 'eman' an' su**ly sc,e'ules are as &ollo/s: Price C1 C13 C) C)3 C0 0). :uantity Deman'e' +y $em+ers 1 6 4 4 ) :uantity Deman'e' +y Non-mem+ers 3 4 0 ) 1 :uantity Su**lie' 4 4 4 4 4

Refer to Ta)le 4,62 I& only mem+ers are allo/e' to *urc,ase tickets to t,is year=s cele+rity .ol& tournament% t,en /,at /ill +e t,e e-uili+rium *riceA a. C1 +. C13 c. C) '. C)3 DIF: ) !"#: E-uili+rium REF: T"P: 4-4 E-uili+rium $S#: A**licati1e

ANS: # NAT: Analytic 00.

Refer to Ta)le 4,62 I& +ot, mem+ers an' non-mem+ers are allo/e' to *urc,ase tickets to t,is year=s cele+rity .ol& tournament% t,en /,at /ill +e t,e e-uili+rium *riceA a. C1 +. C13 c. C) '. C)3 DIF: ) !"#: E-uili+rium REF: T"P: 4-4 E-uili+rium $S#: A**licati1e

ANS: D NAT: Analytic 04.

Refer to Ta)le 4,62 I& +ot, mem+ers an' non-mem+ers are allo/e' to *urc,ase tickets to t,is year=s cele+rity .ol& tournament an' t,e country clu+ sets t,e ticket *rice at C0 % t,en t,ere /ill +e a. a s,orta.e o& 0 tickets. +. a sur*lus o& 0 tickets. c. 4 tickets sol'. '. 4 tickets unsol'. DIF: ) !"#: E-uili+rium REF: T"P: 4-4 Sur*lus $S#: A**licati1e

ANS: > NAT: Analytic 03.

Refer to Ta)le 4,62 I& +ot, mem+ers an' non-mem+ers are allo/e' to *urc,ase tickets to t,is year=s cele+rity .ol& tournament an' t,e country clu+ sets t,e ticket *rice at C) % t,en t,ere /ill +e a. a s,orta.e o& 0 tickets. +. a sur*lus o& 0 tickets. c. 0 tickets sol'. '. 4 tickets unsol'. DIF: ) !"#: E-uili+rium REF: T"P: 4-4 S,orta.e $S#: A**licati1e

ANS: A NAT: Analytic

#,a*ter 4 8T,e $arket Forces o& Su**ly an' Deman' Table 4-7 T,e 'eman' sc,e'ule +elo/ *ertains to san'/ic,es 'eman'e' *er /eek. Price C0 C3 04. #,arlies :uantity Deman'e' 0 1 $a(ines :uantity Deman'e' 4 ) :uinns :uantity Deman'e' 0 (

)4)

Refer to Ta)le 4,72 Re.ar'in. #,arlie an' $a(ine% /,ose 'eman' &or san'/ic,es con&orms to t,e la/ o& 'eman'A a. only #,arlies +. only $a(ines c. +ot, #,arlies an' $a(ines '. neit,er #,arlies nor $a(ines DIF: ) REF: !"#: Su**ly an' 'eman' 4-4 T"P: !a/ o& 'eman'

ANS: # NAT: Analytic $S#: A**licati1e 05.

Refer to Ta)le 4,72 Re.ar'in. #,arlie an' $a(ine% &or /,om are san'/ic,es a normal .oo'A a. only &or #,arlie +. only &or $a(ine c. &or #,arlie an' &or $a(ine '. T,is cannot +e 'etermine' &rom t,e .i1en in&ormation. DIF: ) REF: !"#: Su**ly an' 'eman' 4-4 T"P: Normal .oo's

ANS: D NAT: Analytic $S#: A**licati1e 06.

Refer to Ta)le 4,72 Su**ose ( L 1. T,en it must +e true t,at a. #,arlie an' :uinn ,a1e t,e same income% /,ic, is lo/er t,an $a(ines income. +. i& san'/ic,es an' *otato c,i*s are com*lements &or #,arlie% t,en t,ose t/o .oo's are also com*lements &or :uinn. c. #,arlies 'eman' cur1e is i'entical to :uinns 'eman' cur1e. '. All o& t,e a+o1e are correct. DIF: ) REF: !"#: Su**ly an' 'eman' 4-4 T"P: Deman' cur1e

ANS: # NAT: Analytic $S#: A**licati1e 07.

Refer to Ta)le 4,72 Su**ose ( L 1. T,en t,e slo*e o& t,e market 'eman' cur1e is a. -0. +. -180. c. 180. '. 0. DIF: 0 REF: !"#: Su**ly an' 'eman' 4-4 T"P: $arket 'eman' cur1e

ANS: > NAT: Analytic $S#: Analytical 4 .

Refer to Ta)le 4,72 Su**ose #,arlie% $a(ine% an' :uinn are t,e only 'eman'ers o& san'/ic,es. Also su**ose ( L ). T,en a. t,e slo*e o& :uinns 'eman' cur1e is -18) an' t,e slo*e o& t,e market 'eman' cur1e is -38). +. t,e slo*e o& :uinns 'eman' cur1e is -18) an' t,e slo*e o& t,e market 'eman' cur1e is -)83. c. t,e slo*e o& :uinns 'eman' cur1e is -) an' t,e slo*e o& t,e market 'eman' cur1e is -38). '. t,e slo*e o& :uinns 'eman' cur1e is -) an' t,e slo*e o& t,e market 'eman' cur1e is -)83.

ANS: D DIF: 0 REF: 4-4 NAT: Analytic !"#: Su**ly an' 'eman' T"P: In'i1i'ual 'eman' cur1e 2 $arket 'eman' cur1e $S#:

Analytical

)40
41.

#,a*ter 4 8T,e $arket Forces o& Su**ly an' Deman' Refer to Ta)le 4,72 Su**ose #,arlie% $a(ine% an' :uinn are t,e only 'eman'ers o& san'/ic,es an' t,at t,e market 'eman' 1iolates t,e la/ o& 'eman'. T,en% in t,e ta+le% a. ( 3. +. ( 3. c. ( 5. '. ( 1 . DIF: 0 REF: !"#: Su**ly an' 'eman' 4-4 T"P: $arket 'eman'

ANS: # NAT: Analytic $S#: Analytical 4). Q Q Q Q T,en

Refer to Ta)le 4,72 Su**ose #,arlie% $a(ine% an' :uinn are t,e only 'eman'ers o& san'/ic,es. Also su**ose t,e &ollo/in.: (L) t,e current *rice o& a san'/ic, is C3. t,e market -uantity su**lie' o& san'/ic,es is 1 t,e la/ o& su**ly a**lies to t,e su**ly o& san'/ic,es a. +. c. '. t,ere is a s,orta.e o& 3 san'/ic,es an' t,e *rice /oul' +e e(*ecte' to rise &rom its current le1el o& C3. . t,ere is a s,orta.e o& 3 san'/ic,es an' t,e *rice /oul' +e e(*ecte' to &all &rom its current le1el o& C3. . t,ere is a sur*lus o& 3 san'/ic,es an' t,e *rice /oul' +e e(*ecte' to rise &rom its current le1el o& C3. . t,ere is a sur*lus o& 3 san'/ic,es an' t,e *rice /oul' +e e(*ecte' to &all &rom its current le1el o& C3. . DIF: 0 !"#: E-uili+rium REF: T"P: 4-4 Sur*lus $S#: Analytical

ANS: D NAT: Analytic 40. Q Q Q Q T,en

Refer to Ta)le 4,72 Su**ose #,arlie% $a(ine% an' :uinn are t,e only 'eman'ers o& san'/ic,es. Also su**ose t,e &ollo/in.: (L) t,e current *rice o& a san'/ic, is C0. t,e market -uantity su**lie' o& san'/ic,es is 4 t,e slo*e o& t,e su**ly cur1e is ) a. +. c. '. t,ere is currently a s,orta.e o& 4 san'/ic,es an' t,e e-uili+rium *rice o& a san'/ic, is less t,an C0. . t,ere is currently a s,orta.e o& 4 san'/ic,es an' t,e e-uili+rium *rice o& a san'/ic, is C3. . t,ere is currently a sur*lus o& 4 san'/ic,es an' t,e e-uili+rium *rice o& a san'/ic, is less t,an C0. . t,ere is currently a sur*lus o& 4 san'/ic,es an' t,e e-uili+rium *rice o& a san'/ic, is C3. . DIF: 0 !"#: E-uili+rium REF: T"P: 4-4 S,orta.e $S#: Analytical

ANS: > NAT: Analytic 44. Q Q Q Q T,en

Refer to Ta)le 4,72 Su**ose #,arlie% $a(ine% an' :uinn are t,e only 'eman'ers o& san'/ic,es. Also su**ose t,e &ollo/in.: (L) t,e current *rice o& a san'/ic, is C0. t,e market -uantity su**lie' o& san'/ic,es is 3 t,e slo*e o& t,e su**ly cur1e is 1 a. +. c. '. t,ere is currently a s,orta.e o& 3 san'/ic,es an' t,e e-uili+rium *rice o& a san'/ic, is +et/een C0. an' C3. . t,ere is currently a s,orta.e o& 3 san'/ic,es an' t,e e-uili+rium *rice o& a san'/ic, is C3. . t,ere is currently a sur*lus o& 3 san'/ic,es an' t,e e-uili+rium *rice o& a san'/ic, is +et/een C0. an' C3. . t,ere is currently a sur*lus o& 3 san'/ic,es an' t,e e-uili+rium *rice o& a san'/ic, is C3. . DIF: 0 !"#: E-uili+rium REF: T"P: 4-4 S,orta.e $S#: Analytical

ANS: A NAT: Analytic

#,a*ter 4 8T,e $arket Forces o& Su**ly an' Deman' Table 4-8 An Increase in Su**ly A # A Decrease in Su**ly > D

)44

An Increase in Deman' A Decrease in Deman' 43.

Refer to Ta)le 4,82 <,ic, s*ace re*resents an increase in e-uili+rium -uantity an' an in'eterminate c,an.e in e-uili+rium *riceA a. A +. > c. # '. D DIF: ) !"#: E-uili+rium REF: T"P: 4-4 E-uili+rium $S#: Inter*reti1e

ANS: A NAT: Analytic 44.

Refer to Ta)le 4,82 <,ic, s*ace re*resents an increase in e-uili+rium *rice an' an in'eterminate c,an.e in e-uili+rium -uantityA a. A +. > c. # '. D DIF: ) !"#: E-uili+rium REF: T"P: 4-4 E-uili+rium $S#: Inter*reti1e

ANS: > NAT: Analytic 45.

Refer to Ta)le 4,82 <,ic, s*ace re*resents a 'ecrease in e-uili+rium *rice an' an in'eterminate c,an.e in e-uili+rium -uantityA a. A +. > c. # '. D DIF: ) !"#: E-uili+rium REF: T"P: 4-4 E-uili+rium $S#: Inter*reti1e

ANS: # NAT: Analytic 46.

Refer to Ta)le 4,82 <,ic, s*ace re*resents a 'ecrease in e-uili+rium -uantity an' an in'eterminate c,an.e in e-uili+rium *riceA a. A +. > c. # '. D DIF: ) !"#: E-uili+rium REF: T"P: 4-4 E-uili+rium $S#: Inter*reti1e

ANS: D NAT: Analytic

)43
3 43 4 03 0 )3 ) 13 1 3

#,a*ter 4 8T,e $arket Forces o& Su**ly an' Deman'

price

Figure 4-8
S

D
1 ) 0 4 3 4 5 6 quantity

47.

Refer to F%$ure 4,8. E-uili+rium *rice an' -uantity are% res*ecti1ely% a. C13 an' ) . +. C)3 an' 4 . c. C)3 an' 4 . '. C03 an' ) . DIF: ) !"#: E-uili+rium REF: T"P: 4-4 E-uili+rium $S#: A**licati1e

ANS: # NAT: Analytic 3 .

Refer to F%$ure 4,8. At t,e e-uili+rium *rice% a. ) units /oul' +e su**lie' an' 'eman'e'. +. 4 units /oul' +e su**lie' an' 'eman'e'. c. 4 units /oul' +e su**lie' an' 'eman'e'. '. 4 units /oul' +e su**lie'% +ut only ) /oul' +e 'eman'e'. DIF: ) !"#: E-uili+rium REF: T"P: 4-4 E-uili+rium $S#: A**licati1e

ANS: > NAT: Analytic 31.

Refer to F%$ure 4,8. At a *rice o& C03% a. t,ere /oul' +e a s,orta.e o& 4 units. +. t,ere /oul' +e a sur*lus o& ) units. c. t,ere /oul' +e a sur*lus o& 4 units. '. t,ere /oul' +e a sur*lus o& 4 units. DIF: ) !"#: E-uili+rium REF: T"P: 4-4 Sur*lus $S#: A**licati1e

ANS: # NAT: Analytic 3).

Refer to F%$ure 4,8. At a *rice o& C03% a. a s,orta.e /oul' e(ist an' t,e *rice /oul' ten' to rise &rom C03 to a ,i.,er *rice. +. a sur*lus /oul' e(ist an' t,e *rice /oul' ten' to rise &rom C03 to a ,i.,er *rice. c. an e(cess 'eman' /oul' e(ist an' t,e *rice /oul' ten' to &all &rom C03 to a lo/er *rice. '. an e(cess su**ly /oul' e(ist an' t,e *rice /oul' ten' to &all &rom C03 to a lo/er *rice. DIF: ) !"#: E-uili+rium REF: T"P: 4-4 Sur*lus $S#: A**licati1e units o& t,e .oo'A

ANS: D NAT: Analytic 30.

Refer to F%$ure 4,8. At /,at *rice /oul' t,ere +e an e(cess su**ly o& ) a. C13 +. C) c. C0 '. C03 DIF: ) !"#: E-uili+rium REF: T"P: 4-4 Sur*lus

ANS: # NAT: Analytic

$S#: A**licati1e

#,a*ter 4 8T,e $arket Forces o& Su**ly an' Deman' 34. Refer to F%$ure 4,8. At a *rice o& C13% a. t,ere /oul' +e a sur*lus o& 4 units. +. t,ere /oul' +e a s,orta.e o& ) units. c. t,ere /oul' +e a s,orta.e o& 4 units. '. t,ere /oul' +e a s,orta.e o& 4 units. DIF: ) !"#: E-uili+rium REF: T"P: 4-4 S,orta.e $S#: A**licati1e

)44

ANS: # NAT: Analytic 33.

Refer to F%$ure 4,8. At a *rice o& C) % a. t,ere /oul' +e a s,orta.e an' t,e la/ o& su**ly an' 'eman' *re'icts t,at t,e *rice /ill &all &rom C) to a lo/er *rice. +. t,ere /oul' +e a sur*lus an' t,e la/ o& su**ly an' 'eman' *re'icts t,at t,e *rice /ill rise &rom C) to a ,i.,er *rice. c. t,ere /oul' +e an e(cess 'eman' an' t,e la/ o& su**ly an' 'eman' *re'icts t,at t,e *rice /ill rise &rom C) to a ,i.,er *rice. '. t,ere /oul' +e an e(cess su**ly an' t,e la/ o& su**ly an' 'eman' *re'icts t,at t,e *rice /ill &all &rom C) to a lo/er *rice. DIF: ) !"#: E-uili+rium REF: T"P: 4-4 S,orta.e $S#: A**licati1e units o& t,e .oo'A

ANS: # NAT: Analytic 34.

Refer to F%$ure 4,8. At /,at *rice /oul' t,ere +e an e(cess 'eman' o& ) a. C13 +. C) c. C0 '. C03 DIF: ) !"#: E-uili+rium REF: T"P: 4-4 S,orta.e

ANS: > NAT: Analytic Figure 4-9

) 16 14 14 1) 1 6 4 4 ) 1 ) 0 4 price

$S#: A**licati1e

D
3 4 5 6 7 quantity

35.

Refer to F%$ure 4,9. In t,is market% e-uili+rium *rice an' -uantity% res*ecti1ely% are a. C1 an' 0 . +. C1 an' 3 . c. C1 an' 5 . '. C4 an' 3 . DIF: ) !"#: E-uili+rium REF: T"P: 4-4 E-uili+rium $S#: A**licati1e

ANS: > NAT: Analytic

)45
36.

#,a*ter 4 8T,e $arket Forces o& Su**ly an' Deman' Refer to F%$ure 4,9. I& *rice in t,is market is currently C14% t,en t,ere /oul' +e aDnE a. sur*lus o& ) units an' t,e la/ o& su**ly an' 'eman' *re'icts t,at t,e *rice /ill rise &rom C14 to a ,i.,er *rice. +. e(cess su**ly o& ) units an' t,e la/ o& su**ly an' 'eman' *re'icts t,at t,e *rice /ill &all &rom C14 to a lo/er *rice. c. sur*lus o& 4 units an' t,e la/ o& su**ly an' 'eman' *re'icts t,at t,e *rice /ill rise &rom C14 to a ,i.,er *rice. '. e(cess su**ly o& 4 units an' t,e la/ o& su**ly an' 'eman' *re'icts t,at t,e *rice /ill &all &rom C14 to a lo/er *rice. DIF: ) !"#: E-uili+rium REF: T"P: 4-4 Sur*lus $S#: A**licati1e

ANS: D NAT: Analytic 37.

Refer to F%$ure 4,9. I& t,ere is currently a s,orta.e o& ) units o& t,e .oo'% t,en a. t,e la/ o& 'eman' *re'icts t,at t,e *rice /ill rise +y C) to eliminate t,e s,orta.e. +. t,e la/ o& su**ly *re'icts t,at t,e *rice /ill rise +y C) to eliminate t,e s,orta.e. c. t,e la/ o& su**ly an' 'eman' *re'icts t,at t,e *rice /ill rise +y C) to eliminate t,e s,orta.e. '. t,e la/ o& su**ly an' 'eman' *re'icts t,at t,e *rice /ill &all +y C) to eliminate t,e s,orta.e. DIF: 0 !"#: E-uili+rium REF: T"P: 4-4 S,orta.e $S#: Analytical

ANS: # NAT: Analytic Figure 4-10

3 43 4 03 0 )3 ) 13 1 3 1 ) 0 4 3 price

D
4 5 6 7 quantity

4 .

Refer to F%$ure 4,/+. In t,is market% e-uili+rium *rice an' -uantity% res*ecti1ely% are a. C13 an' 4 . +. C) an' 4 . c. C)3 an' 3 . '. C)3 an' 6 . DIF: ) !"#: E-uili+rium REF: T"P: 4-4 E-uili+rium $S#: A**licati1e

ANS: > NAT: Analytic 41.

Refer to F%$ure 4,/+. At a *rice o& C) % /,ic, o& t,e &ollo/in. statements is not correctA a. T,e market is in e-uili+rium. +. E-uili+rium *rice is e-ual to e-uili+rium -uantity. c. T,ere is no *ressure &or *rice to c,an.e. '. T,e -uantity o& t,e .oo' t,at is +ou.,t an' sol' is 4 . DIF: ) !"#: E-uili+rium REF: T"P: 4-4 E-uili+rium $S#: A**licati1e

ANS: > NAT: Analytic 4).

Refer to F%$ure 4,/+. I& *rice is C)3% t,en -uantity 'eman'e' an' -uantity su**lie'% res*ecti1ely% are a. 3 an' 3 . +. 3 an' 6 . c. 4 an' 4 . '. 6 an' 3 .

#,a*ter 4 8T,e $arket Forces o& Su**ly an' Deman' ANS: > NAT: Analytic 40. DIF: ) !"#: E-uili+rium REF: T"P: 4-4 Sur*lus $S#: A**licati1e

)46

Refer to F%$ure 4,/+. I& t,e *rice is C)3% t,en t,ere /oul' +e an a. e(cess su**ly o& 1 an' *rice /oul' &all. +. e(cess su**ly o& 0 an' *rice /oul' &all. c. e(cess 'eman' o& 1 an' *rice /oul' &all. '. e(cess 'eman' o& 0 an' *rice /oul' &all. DIF: ) !"#: E-uili+rium REF: T"P: 4-4 Sur*lus $S#: A**licati1e

ANS: > NAT: Analytic 44.

Refer to F%$ure 4,/+. I& t,e *rice is C1 % t,en t,ere /oul' +e a a. s,orta.e o& 4 an' *rice /oul' rise. +. sur*lus o& 4 an' *rice /oul' rise. c. s,orta.e o& 4 an' *rice /oul' rise. '. sur*lus o& 4 an' *rice /oul' rise. DIF: ) !"#: E-uili+rium REF: T"P: 4-4 S,orta.e $S#: A**licati1e

ANS: # NAT: Analytic 43.

Refer to F%$ure 4,/+. At a *rice o& C13% a. -uantity 'eman'e' e(cee's -uantity su**lie'. +. t,ere is a s,orta.e. c. t,ere is an e(cess 'eman'. '. All o& t,e a+o1e are correct. DIF: ) !"#: E-uili+rium REF: T"P: 4-4 S,orta.e $S#: A**licati1e

ANS: D NAT: Analytic Figure 4-11

) 16 14 14 1) 1 6 4 4 ) price

D 1 ) 0 4 3 4 5 6 7 1 quantity

44.

Refer to F%$ure 4,//2 <,at is t,e e-uili+rium *rice in t,is marketA a. C +. C3 c. C5.3 '. C1 DIF: ) !"#: E-uili+rium REF: T"P: 4-4 E-uili+rium $S#: A**licati1e

ANS: D NAT: Analytic 45.

Refer to F%$ure 4,//2 <,at is t,e e-uili+rium -uantity in t,is marketA a. 3 units +. 5.3 units c. 1 units '. T,e e-uili+rium -uantity cannot +e 'etermine' &rom t,is .ra*,.

)47

#,a*ter 4 8T,e $arket Forces o& Su**ly an' Deman' DIF: ) !"#: E-uili+rium REF: T"P: 4-4 E-uili+rium $S#: A**licati1e

ANS: A NAT: Analytic 46.

Refer to F%$ure 4,//2 At a *rice o& C1)% /,ic, o& t,e &ollo/in. is correctA a. t,ere is a sur*lus o& 1 unit +. t,ere is a sur*lus o& ) units c. t,ere is a s,orta.e o& 1 unit '. t,ere is a s,orta.e o& ) units DIF: ) !"#: E-uili+rium REF: T"P: 4-4 Sur*lus $S#: A**licati1e

ANS: > NAT: Analytic 47.

Refer to F%$ure 4,//2 At a *rice o& C4% /,ic, o& t,e &ollo/in. is correctA a. t,ere is a sur*lus o& 0 units +. t,ere is a sur*lus o& 4 units c. t,ere is a s,orta.e o& 0 units '. t,ere is a s,orta.e o& 4 units DIF: ) !"#: E-uili+rium REF: T"P: 4-4 S,orta.e $S#: A**licati1e

ANS: D NAT: Analytic Figure 4-12

T,e 'ia.ram +elo/ *ertains to t,e 'eman' &or turkey in t,e Fnite' States.
price

DA D>
quantity

5 .

Refer to F%$ure 4,/02 All else e-ual% an increase in t,e income o& +uyers /,o consi'er turkey to +e an in&erior .oo' /oul' cause a mo1e a. &rom DA to D>. +. &rom D> to DA. c. &rom ( to y. '. &rom y to (. DIF: ) REF: !"#: Su**ly an' 'eman' 4-4 T"P: In&erior .oo's

ANS: A NAT: Analytic $S#: A**licati1e 51.

Refer to F%$ure 4,/02 All else e-ual% a sale on c,icken /oul' cause a mo1e a. &rom DA to D>. +. &rom D> to DA. c. &rom ( to y. '. &rom y to (. DIF: ) REF: !"#: Su**ly an' 'eman' 4-4 T"P: Su+stitutes

ANS: A NAT: Analytic $S#: A**licati1e

#,a*ter 4 8T,e $arket Forces o& Su**ly an' Deman' 5). Refer to F%$ure 4,/02 All else e-ual% t,e a**roac, o& T,anks.i1in. /oul' cause a mo1e a. &rom DA to D>. +. &rom D> to DA. c. &rom ( to y. '. &rom y to (. DIF: ) REF: !"#: Su**ly an' 'eman' 4-4 T"P: Tastes

)5

ANS: > NAT: Analytic $S#: A**licati1e 50.

Refer to F%$ure 4,/02 All else e-ual% +uyers e(*ectin. turkey to +e more e(*ensi1e in t,e &uture /oul' cause a current mo1e a. &rom DA to D>. +. &rom D> to DA. c. &rom ( to y. '. &rom y to (. DIF: ) REF: !"#: Su**ly an' 'eman' 4-4 T"P: E(*ectations

ANS: > NAT: Analytic $S#: A**licati1e 54.

Refer to F%$ure 4,/02 All else e-ual% a lar.e num+er o& *eo*le +ecomin. 1e.etarians /oul' cause a mo1e a. &rom DA to D>. +. &rom D> to DA. c. &rom ( to y. '. &rom y to (. DIF: ) REF: !"#: Su**ly an' 'eman' 4-4 T"P: Num+er o& +uyers

ANS: A NAT: Analytic $S#: A**licati1e 53.

Refer to F%$ure 4,/02 All else e-ual% t,e 'estruction o& t,ousan's o& turkeys /oul' cause a mo1e a. &rom DA to D>. +. &rom D> to DA. c. &rom ( to y. '. &rom y to (. DIF: 0 REF: !"#: Su**ly an' 'eman' 4-4 T"P: Pro'ucti1ity

ANS: # NAT: Analytic $S#: Analytical 54.

Refer to F%$ure 4,/02 All else e-ual% an increase in t,e *ro'ucti1ity o& turkey &armers /oul' cause a mo1e a. &rom DA to D>. +. &rom D> to DA. c. &rom ( to y. '. &rom y to (. DIF: 0 REF: !"#: Su**ly an' 'eman' 4-4 T"P: Pro'ucti1ity

ANS: D NAT: Analytic $S#: Analytical 55.

Refer to F%$ure 4,/02 All else e-ual% a 'ecrease in t,e *rice o& t,e .rain &e' to turkeys /oul' cause a mo1e a. &rom DA to D>. +. &rom D> to DA. c. &rom ( to y. '. &rom y to (. DIF: 0 REF: !"#: Su**ly an' 'eman' 4-4 T"P: In*ut *rices

ANS: D NAT: Analytic $S#: Analytical

)51
56.

#,a*ter 4 8T,e $arket Forces o& Su**ly an' Deman' Refer to F%$ure 4,/02 All else e-ual% sellers e(*ectin. t,e *rice o& turkey to rise in t,e &uture /oul' cause a current mo1e a. &rom DA to D>. +. &rom D> to DA. c. &rom ( to y. '. &rom y to (. DIF: 0 REF: !"#: Su**ly an' 'eman' 4-4 T"P: E(*ectations

ANS: # NAT: Analytic $S#: Analytical Figure 4-13

T,e 'ia.ram +elo/ *ertains to t,e su**ly o& *a*er in uni1ersity markets.
price

S A
y

S
(

>

quantity

57.

Refer to F%$ure 4,/32 All else e-ual% an increase in t,e *rice o& t,e *ul* use' in t,e *a*er *ro'uction *rocess /oul' cause a mo1e a. &rom ( to y. +. &rom y to (. c. &rom SA to S>. '. &rom S> to SA. DIF: ) REF: !"#: Su**ly an' 'eman' 4-4 T"P: In*ut *rices

ANS: D NAT: Analytic $S#: A**licati1e 6 .

Refer to F%$ure 4,/32 All else e-ual% sellers e(*ectin. t,e *rice o& *a*er to 'ecrease ne(t mont, /,en many colle.e stu'ents lea1e cam*uses &or t,e summer /oul' cause a current mo1e a. &rom ( to y. +. &rom y to (. c. &rom SA to S>. '. &rom S> to SA. DIF: ) REF: !"#: Su**ly an' 'eman' 4-4 T"P: E(*ectations

ANS: # NAT: Analytic $S#: A**licati1e 61.

Refer to F%$ure 4,/32 All else e-ual% a ma?or *a*er com*any +ein. s,ut 'o/n &or ta( e1asion /oul' cause a mo1e a. &rom ( to y. +. &rom y to (. c. &rom SA to S>. '. &rom S> to SA. DIF: ) REF: !"#: Su**ly an' 'eman' 4-4 T"P: Num+er o& sellers

ANS: D NAT: Analytic $S#: A**licati1e

#,a*ter 4 8T,e $arket Forces o& Su**ly an' Deman' 6).

)5)

Refer to F%$ure 4,/32 All else e-ual% an increase in t,e use o& la*to* com*uters &or note-takin. /oul' cause a mo1e a. &rom ( to y. +. &rom y to (. c. &rom SA to S>. '. &rom S> to SA. DIF: 0 REF: !"#: Su**ly an' 'eman' 4-4 T"P: Tastes

ANS: > NAT: Analytic $S#: Analytical 60.

Refer to F%$ure 4,/32 All else e-ual% +uyers e(*ectin. *a*er to +e more e(*ensi1e in t,e &uture /oul' cause a current mo1e a. &rom ( to y. +. &rom y to (. c. &rom SA to S>. '. &rom S> to SA. DIF: 0 REF: !"#: Su**ly an' 'eman' 4-4 T"P: E(*ectations

ANS: A NAT: Analytic $S#: Analytical 64.

Refer to F%$ure 4,/32 All else e-ual% t,e return o& colle.e stu'ents to cam*us in t,e &all /oul' cause a mo1e a. &rom ( to y. +. &rom y to (. c. &rom SA to S>. '. &rom S> to SA. DIF: 0 REF: !"#: Su**ly an' 'eman' 4-4 T"P: Num+er o& +uyers

ANS: A NAT: Analytic $S#: Analytical

)50

#,a*ter 4 8T,e $arket Forces o& Su**ly an' Deman' .anel 'a(
price price

Figure 4-14 .anel ')(

Pe= Pe

Pe Pe=

D= quantity

D=

D quantity

:e

:e=

:e=

:e

.anel 'c(
price price

.anel 'd(

S=

S=

Pe Pe=
D

Pe= Pe
D quantity

:e

:e=

:e=

:e

quantity

63.

Refer to F%$ure 4,/4. Panel DaE s,o/s /,ic, o& t,e &ollo/in.A a. an increase in 'eman' an' an increase in -uantity su**lie' +. an increase in 'eman' an' an increase in su**ly c. an increase in -uantity 'eman'e' an' an increase in -uantity su**lie' '. an increase in -uantity 'eman'e' an' an increase in su**ly DIF: ) REF: !"#: Su**ly an' 'eman' 4-4 T"P: Deman' 2 :uantity su**lie'

ANS: A NAT: Analytic $S#: A**licati1e 64.

Refer to F%$ure 4,/4. Panel D+E s,o/s /,ic, o& t,e &ollo/in.A a. a 'ecrease in 'eman' an' a 'ecrease in -uantity su**lie' +. a 'ecrease in 'eman' an' a 'ecrease in su**ly c. a 'ecrease in -uantity 'eman'e' an' a 'ecrease in -uantity su**lie' '. a 'ecrease in -uantity 'eman'e' an' a 'ecrease in su**ly DIF: ) REF: !"#: Su**ly an' 'eman' 4-4 T"P: Deman' 2 :uantity su**lie'

ANS: A NAT: Analytic $S#: A**licati1e 65.

Refer to F%$ure 4,/4. Panel DcE s,o/s /,ic, o& t,e &ollo/in.A a. an increase in 'eman' an' an increase in -uantity su**lie' +. an increase in 'eman' an' an increase in su**ly c. an increase in -uantity 'eman'e' an' an increase in -uantity su**lie' '. an increase in -uantity 'eman'e' an' an increase in su**ly

#,a*ter 4 8T,e $arket Forces o& Su**ly an' Deman' ANS: D NAT: Analytic $S#: A**licati1e 66. DIF: ) REF: !"#: Su**ly an' 'eman' 4-4 T"P: Su**ly 2 :uantity 'eman'e'

)54

Refer to F%$ure 4,/4. Panel D'E s,o/s /,ic, o& t,e &ollo/in.A a. a 'ecrease in 'eman' an' a 'ecrease in -uantity su**lie' +. a 'ecrease in 'eman' an' a 'ecrease in su**ly c. a 'ecrease in -uantity 'eman'e' an' a 'ecrease in -uantity su**lie' '. a 'ecrease in -uantity 'eman'e' an' a 'ecrease in su**ly DIF: ) REF: !"#: Su**ly an' 'eman' 4-4 T"P: Su**ly 2 :uantity 'eman'e'

ANS: D NAT: Analytic $S#: A**licati1e 67.

Refer to F%$ure 4,/4. <,ic, o& t,e &our *anels illustrates a 'ecrease in -uantity 'eman'e'A a. Panel DaE +. Panel D+E c. Panel DcE '. Panel D'E DIF: ) REF: !"#: Su**ly an' 'eman' 4-4 T"P: :uantity 'eman'e'

ANS: D NAT: Analytic $S#: A**licati1e 7 .

Refer to F%$ure 4,/4. <,ic, o& t,e &our *anels illustrates an increase in -uantity 'eman'e'A a. Panel DaE +. Panel D+E c. Panel DcE '. Panel D'E DIF: ) REF: !"#: Su**ly an' 'eman' 4-4 T"P: :uantity 'eman'e'

ANS: # NAT: Analytic $S#: A**licati1e 71.

Refer to F%$ure 4,/4. <,ic, o& t,e &our *anels illustrates a 'ecrease in -uantity su**lie'A a. Panel DaE +. Panel D+E c. Panel DcE '. Panel D'E DIF: ) REF: !"#: Su**ly an' 'eman' 4-4 T"P: :uantity su**lie'

ANS: > NAT: Analytic $S#: A**licati1e 7).

Refer to F%$ure 4,/4. <,ic, o& t,e &our *anels illustrates an increase in -uantity su**lie'A a. Panel DaE +. Panel D+E c. Panel DcE '. Panel D'E DIF: ) REF: !"#: Su**ly an' 'eman' 4-4 T"P: :uantity su**lie'

ANS: A NAT: Analytic $S#: A**licati1e 70.

Refer to F%$ure 4,/4. <,ic, o& t,e &our *anels re*resents t,e market &or *i;;a 'eli1ery in a colle.e to/n as /e .o &rom summer to t,e +e.innin. o& t,e &all semesterA a. Panel DaE +. Panel D+E c. Panel DcE '. Panel D'E DIF: ) REF: !"#: Su**ly an' 'eman' 4-4 T"P: Num+er o& +uyers

ANS: A NAT: Analytic $S#: A**licati1e

)53
74.

#,a*ter 4 8T,e $arket Forces o& Su**ly an' Deman' Refer to F%$ure 4,/4. <,ic, o& t,e &our *anels re*resents t,e market &or /inter coats as /e *ro.ress &rom /inter to s*rin.A a. Panel DaE +. Panel D+E c. Panel DcE '. Panel D'E DIF: ) REF: !"#: Su**ly an' 'eman' 4-4 T"P: Tastes

ANS: > NAT: Analytic $S#: A**licati1e 73.

Refer to F%$ure 4,/4. <,ic, o& t,e &our *anels re*resents t,e market &or cars as a result o& t,e a'o*tion o& ne/ tec,nolo.y on assem+ly linesA a. Panel DaE +. Panel D+E c. Panel DcE '. Panel D'E DIF: ) REF: !"#: Su**ly an' 'eman' 4-4 T"P: Tec,nolo.y

ANS: # NAT: Analytic $S#: A**licati1e 74.

Refer to F%$ure 4,/4. <,ic, o& t,e &our *anels re*resents t,e market &or *eanut +utter a&ter a ma?or ,urricane ,its t,e *eanut-.ro/in. sout,A a. Panel DaE +. Panel D+E c. Panel DcE '. Panel D'E DIF: ) REF: !"#: Su**ly an' 'eman' 4-4 T"P: In*ut *rices

ANS: D NAT: Analytic $S#: A**licati1e 75.

I& t,e 'eman' &or a *ro'uct increases% t,en /e /oul' e(*ect a. e-uili+rium *rice to increase an' e-uili+rium -uantity to 'ecrease. +. e-uili+rium *rice to 'ecrease an' e-uili+rium -uantity to increase. c. e-uili+rium *rice an' e-uili+rium -uantity +ot, to increase. '. e-uili+rium *rice an' e-uili+rium -uantity +ot, to 'ecrease. DIF: ) !"#: E-uili+rium REF: T"P: 4-4 E-uili+rium $S#: Inter*reti1e

ANS: # NAT: Analytic 76.

I& t,e 'eman' &or a *ro'uct 'ecreases% t,en /e /oul' e(*ect a. e-uili+rium *rice to increase an' e-uili+rium -uantity to 'ecrease. +. e-uili+rium *rice to 'ecrease an' e-uili+rium -uantity to increase. c. e-uili+rium *rice an' e-uili+rium -uantity to +ot, increase. '. e-uili+rium *rice an' e-uili+rium -uantity to +ot, 'ecrease. DIF: ) !"#: E-uili+rium REF: T"P: 4-4 E-uili+rium $S#: Inter*reti1e

ANS: D NAT: Analytic 77.

Su**ose +uyers o& com*uters an' *rinters re.ar' t,ose t/o .oo's as com*lements. T,en an increase in t,e *rice o& com*uters /ill cause a. a 'ecrease in t,e 'eman' &or *rinters an' a 'ecrease in t,e -uantity su**lie' o& *rinters. +. a 'ecrease in t,e su**ly o& *rinters an' a 'ecrease in t,e -uantity 'eman'e' o& *rinters. c. a 'ecrease in t,e e-uili+rium *rice o& *rinters an' an increase in t,e e-uili+rium -uantity o& *rinters. '. an increase in t,e e-uili+rium *rice o& *rinters an' a 'ecrease in t,e e-uili+rium -uantity o& *rinters. DIF: ) !"#: E-uili+rium REF: T"P: 4-4 E-uili+rium $S#: A**licati1e

ANS: A NAT: Analytic

#,a*ter 4 8T,e $arket Forces o& Su**ly an' Deman' 1 . <,ic, o& t,e &ollo/in. /oul' increase in res*onse to a 'ecrease in t,e *rice o& ironin. +oar'sA a. t,e -uantity o& irons 'eman'e' at eac, *ossi+le *rice o& irons +. t,e e-uili+rium -uantity o& irons c. t,e e-uili+rium *rice o& irons '. All o& t,e a+o1e are correct. DIF: ) !"#: E-uili+rium REF: T"P: 4-4 E-uili+rium $S#: A**licati1e

)54

ANS: D NAT: Analytic

1 1. Sa''le s,oes are not *o*ular ri.,t no/% so 1ery &e/ are +ein. *ro'uce'. I& sa''le s,oes +ecome *o*ular% t,en ,o/ /ill t,is a&&ect t,e market &or sa''le s,oesA a. T,e su**ly cur1e &or sa''le s,oes /ill s,i&t ri.,t% /,ic, /ill create a s,orta.e at t,e current *rice. T,at /ill increase *rice% /,ic, /ill 'ecrease -uantity 'eman'e' an' increase -uantity su**lie'. T,e ne/ market e-uili+rium /ill +e at a ,i.,er *rice an' ,i.,er -uantity. +. T,e su**ly cur1e &or sa''le s,oes /ill s,i&t ri.,t% /,ic, /ill create a sur*lus at t,e current *rice. T,at /ill 'ecrease *rice% /,ic, /ill increase -uantity 'eman'e' an' 'ecrease -uantity su**lie'. T,e ne/ market e-uili+rium /ill +e at a lo/er *rice an' ,i.,er -uantity. c. T,e 'eman' cur1e &or sa''le s,oes /ill s,i&t ri.,t% /,ic, /ill create a s,orta.e at t,e current *rice. T,at /ill increase *rice% /,ic, /ill 'ecrease -uantity 'eman'e' an' increase -uantity su**lie'. T,e ne/ market e-uili+rium /ill +e at a ,i.,er *rice an' ,i.,er -uantity. '. T,e 'eman' cur1e &or sa''le s,oes /ill s,i&t ri.,t% /,ic, /ill create a sur*lus at t,e current *rice. T,at /ill 'ecrease *rice% /,ic, /ill increase -uantity 'eman'e' an' 'ecrease -uantity su**lie'. T,e ne/ market e-uili+rium /ill +e at a lo/er *rice an' ,i.,er -uantity. ANS: # NAT: Analytic DIF: 0 !"#: E-uili+rium REF: T"P: 4-4 E-uili+rium $S#: Analytical

1 ). I& t,e su**ly o& a *ro'uct increases% t,en /e /oul' e(*ect a. e-uili+rium *rice to increase an' e-uili+rium -uantity to 'ecrease. +. e-uili+rium *rice to 'ecrease an' e-uili+rium -uantity to increase. c. e-uili+rium *rice an' e-uili+rium -uantity +ot, to increase. '. e-uili+rium *rice an' e-uili+rium -uantity +ot, to 'ecrease. ANS: > NAT: Analytic DIF: ) !"#: E-uili+rium REF: T"P: 4-4 E-uili+rium $S#: Inter*reti1e

1 0. I& t,e su**ly o& a *ro'uct 'ecreases% t,en /e /oul' e(*ect a. e-uili+rium *rice to increase an' e-uili+rium -uantity to 'ecrease. +. e-uili+rium *rice to 'ecrease an' e-uili+rium -uantity to increase. c. e-uili+rium *rice an' e-uili+rium -uantity +ot, to increase. '. e-uili+rium *rice an' e-uili+rium -uantity +ot, to 'ecrease. ANS: A NAT: Analytic DIF: ) !"#: E-uili+rium REF: T"P: 4-4 E-uili+rium $S#: Inter*reti1e

1 4. A 'ecrease in in*ut costs to &irms in a market /ill result in a. a 'ecrease in e-uili+rium *rice an' an increase in e-uili+rium -uantity. +. a 'ecrease in e-uili+rium *rice an' a 'ecrease in e-uili+rium -uantity. c. an increase in e-uili+rium *rice an' a 'ecrease in e-uili+rium -uantity. '. an increase in e-uili+rium *rice an' an increase in e-uili+rium -uantity. ANS: A NAT: Analytic DIF: ) !"#: E-uili+rium REF: T"P: 4-4 E-uili+rium $S#: Inter*reti1e

1 3. Su**ose t,ere is an eart,-uake t,at 'estroys se1eral corn canneries. <,ic, o& t,e &ollo/in. /oul' not +e a 'irect result o& t,is e1entA a. Sellers /oul' not +e a+le to *ro'uce an' sell as muc, as +e&ore at eac, rele1ant *rice. +. T,e su**ly /oul' 'ecrease. c. >uyers /oul' not +e /illin. to +uy as muc, as +e&ore at eac, rele1ant *rice. '. T,e e-uili+rium *rice /oul' rise. ANS: # NAT: Analytic DIF: ) !"#: E-uili+rium REF: T"P: 4-4 E-uili+rium $S#: A**licati1e

)55

#,a*ter 4 8T,e $arket Forces o& Su**ly an' Deman'

1 4. An early &rost in t,e 1ineyar's o& Na*a 9alley /oul' cause a. an increase in t,e 'eman' &or /ine% increasin. *rice. +. an increase in t,e su**ly o& /ine% 'ecreasin. *rice. c. a 'ecrease in t,e 'eman' &or /ine% 'ecreasin. *rice. '. a 'ecrease in t,e su**ly o& /ine% increasin. *rice. ANS: D NAT: Analytic DIF: ) !"#: E-uili+rium REF: T"P: 4-4 E-uili+rium $S#: A**licati1e

1 5. T,e market &or 'iamon' rin.s is closely linke' to t,e market &or ,i.,--uality 'iamon's. I& a lar.e -uantity o& ,i.,--uality 'iamon's enters t,e market% t,en a. t,e su**ly cur1e &or 'iamon' rin.s /ill s,i&t ri.,t% /,ic, /ill create a s,orta.e at t,e current *rice. T,at /ill increase *rice% /,ic, /ill 'ecrease -uantity 'eman'e' an' increase -uantity su**lie'. T,e ne/ market e-uili+rium /ill +e at a ,i.,er *rice an' ,i.,er -uantity. +. t,e su**ly cur1e &or 'iamon' rin.s /ill s,i&t ri.,t% /,ic, /ill create a sur*lus at t,e current *rice. T,at /ill 'ecrease *rice% /,ic, /ill increase -uantity 'eman'e' an' 'ecrease -uantity su**lie'. T,e ne/ market e-uili+rium /ill +e at a lo/er *rice an' ,i.,er -uantity. c. t,e 'eman' cur1e &or 'iamon' rin.s /ill s,i&t ri.,t% /,ic, /ill create a s,orta.e at t,e current *rice. T,at /ill increase *rice% /,ic, /ill 'ecrease -uantity 'eman'e' an' increase -uantity su**lie'. T,e ne/ market e-uili+rium /ill +e at a ,i.,er *rice an' ,i.,er -uantity. '. t,e 'eman' cur1e &or 'iamon' rin.s /ill s,i&t ri.,t% /,ic, /ill create a sur*lus at t,e current *rice. T,at /ill 'ecrease *rice% /,ic, /ill increase -uantity 'eman'e' an' 'ecrease -uantity su**lie'. T,e ne/ market e-uili+rium /ill +e at a lo/er *rice an' ,i.,er -uantity. ANS: > NAT: Analytic DIF: 0 !"#: E-uili+rium REF: T"P: 4-4 E-uili+rium $S#: Analytical

1 6. <,en su**ly an' 'eman' +ot, increase% e-uili+rium a. *rice /ill increase. +. *rice /ill 'ecrease. c. -uantity may increase% 'ecrease% or remain unc,an.e'. '. *rice may increase% 'ecrease% or remain unc,an.e'. ANS: D NAT: Analytic DIF: ) !"#: E-uili+rium REF: T"P: 4-4 E-uili+rium $S#: Inter*reti1e

1 7. Su**ose t,at 'eman' &or a .oo' increases an'% at t,e same time% su**ly o& t,e .oo' 'ecreases. <,at /oul' ,a**en in t,e market &or t,e .oo'A a. E-uili+rium *rice /oul' 'ecrease% +ut t,e im*act on e-uili+rium -uantity /oul' +e am+i.uous. +. E-uili+rium *rice /oul' increase% +ut t,e im*act on e-uili+rium -uantity /oul' +e am+i.uous. c. E-uili+rium -uantity /oul' 'ecrease% +ut t,e im*act on e-uili+rium *rice /oul' +e am+i.uous. '. E-uili+rium -uantity /oul' increase% +ut t,e im*act on e-uili+rium *rice /oul' +e am+i.uous. ANS: > NAT: Analytic DIF: ) !"#: E-uili+rium REF: T"P: 4-4 E-uili+rium $S#: Inter*reti1e

11 . A /eaker 'eman' to.et,er /it, a stron.er su**ly /oul' necessarily result in a. a lo/er *rice. +. a ,i.,er *rice. c. an increase in e-uili+rium -uantity. '. a 'ecrease in e-uili+rium -uantity. ANS: A NAT: Analytic DIF: ) !"#: E-uili+rium REF: T"P: 4-4 E-uili+rium $S#: Inter*reti1e

111. Su**ose t,at 'eman' &or a .oo' 'ecreases an'% at t,e same time% su**ly o& t,e .oo' 'ecreases. <,at /oul' ,a**en in t,e market &or t,e .oo'A a. E-uili+rium *rice /oul' 'ecrease% +ut t,e im*act on e-uili+rium -uantity /oul' +e am+i.uous. +. E-uili+rium *rice /oul' increase% +ut t,e im*act on e-uili+rium -uantity /oul' +e am+i.uous. c. E-uili+rium -uantity /oul' 'ecrease% +ut t,e im*act on e-uili+rium *rice /oul' +e am+i.uous. '. E-uili+rium -uantity /oul' increase% +ut t,e im*act on e-uili+rium *rice /oul' +e am+i.uous. ANS: # NAT: Analytic DIF: ) !"#: E-uili+rium REF: T"P: 4-4 E-uili+rium $S#: Inter*reti1e

#,a*ter 4 8T,e $arket Forces o& Su**ly an' Deman' 11). Su**ose t,e num+er o& +uyers in a market increases an' a tec,nolo.ical a'1ancement occurs also. <,at /oul' /e e(*ect to ,a**en in t,e marketA a. E-uili+rium *rice /oul' 'ecrease% +ut t,e im*act on e-uili+rium -uantity /oul' +e am+i.uous. +. E-uili+rium *rice /oul' increase% +ut t,e im*act on e-uili+rium -uantity /oul' +e am+i.uous. c. E-uili+rium -uantity /oul' 'ecrease% +ut t,e im*act on e-uili+rium *rice /oul' +e am+i.uous. '. E-uili+rium -uantity /oul' increase% +ut t,e im*act on e-uili+rium *rice /oul' +e am+i.uous. ANS: D NAT: Analytic DIF: ) !"#: E-uili+rium REF: T"P: 4-4 E-uili+rium $S#: Inter*reti1e

)56

110. Su**ose t,e incomes o& +uyers in a market &or a *articular normal .oo' 'ecrease an' t,ere is also a re'uction in in*ut *rices. <,at /oul' /e e(*ect to occur in t,is marketA a. E-uili+rium *rice /oul' 'ecrease% +ut t,e im*act on e-uili+rium -uantity /oul' +e am+i.uous. +. E-uili+rium *rice /oul' increase% +ut t,e im*act on e-uili+rium -uantity /oul' +e am+i.uous. c. E-uili+rium -uantity /oul' 'ecrease% +ut t,e im*act on e-uili+rium *rice /oul' +e am+i.uous. '. E-uili+rium -uantity /oul' increase% +ut t,e im*act on e-uili+rium *rice /oul' +e am+i.uous. ANS: A NAT: Analytic DIF: ) !"#: E-uili+rium REF: T"P: 4-4 E-uili+rium $S#: Inter*reti1e

114. <,at /oul' ,a**en to t,e e-uili+rium *rice an' -uantity o& co&&ee i& t,e /a.es o& co&&ee-+ean *ickers &ell an' t,e *rice o& tea &ellA a. Price /oul' &all an' t,e e&&ect on -uantity /oul' +e am+i.uous. +. Price /oul' rise an' t,e e&&ect on -uantity /oul' +e am+i.uous. c. :uantity /oul' &all an' t,e e&&ect on *rice /oul' +e am+i.uous. '. :uantity /oul' rise an' t,e e&&ect on *rice /oul' +e am+i.uous. ANS: A NAT: Analytic DIF: ) !"#: E-uili+rium REF: T"P: 4-4 E-uili+rium $S#: A**licati1e

113. $usic com*act 'iscs are normal .oo's. <,at /ill ,a**en to t,e e-uili+rium *rice an' -uantity o& music com*act 'iscs i& musicians acce*t lo/er royalties% com*act 'isc *layers +ecome c,ea*er% more &irms start *ro'ucin. music com*act 'iscs% an' music lo1ers e(*erience an increase in incomeA a. Price /ill &all an' t,e e&&ect on -uantity is am+i.uous. +. Price /ill rise an' t,e e&&ect on -uantity is am+i.uous. c. :uantity /ill &all an' t,e e&&ect on *rice is am+i.uous. '. :uantity /ill rise an' t,e e&&ect on *rice is am+i.uous. ANS: D NAT: Analytic DIF: 0 !"#: E-uili+rium REF: T"P: 4-4 E-uili+rium $S#: Analytical

114. <,at /ill ,a**en to t,e e-uili+rium *rice o& ne/ te(t+ooks i& more stu'ents atten' colle.e% *a*er +ecomes c,ea*er% te(t+ook aut,ors acce*t lo/er royalties% an' &e/er use' te(t+ooks are sol'A a. Price /ill rise. +. Price /ill &all. c. Price /ill stay e(actly t,e same. '. T,e *rice c,an.e /ill +e am+i.uous. ANS: D NAT: Analytic DIF: 0 !"#: E-uili+rium REF: T"P: 4-4 E-uili+rium $S#: Analytical

115. Ne/ oak ta+les are normal .oo's. <,at /oul' ,a**en to t,e e-uili+rium *rice an' -uantity in t,e market &or oak ta+les i& t,e *rice o& ma*le ta+les rises% t,e *rice o& oak /oo' rises% more +uyers enter t,e market &or oak ta+les% an' t,e *rice o& /oo' sa/s increase'A a. Price /ill &all an' t,e e&&ect on -uantity is am+i.uous. +. Price /ill rise an' t,e e&&ect on -uantity is am+i.uous. c. :uantity /ill &all an' t,e e&&ect on *rice is am+i.uous. '. :uantity /ill rise an' t,e e&&ect on *rice is am+i.uous. ANS: > NAT: Analytic DIF: 0 !"#: E-uili+rium REF: T"P: 4-4 E-uili+rium $S#: Analytical

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#,a*ter 4 8T,e $arket Forces o& Su**ly an' Deman'

116. <,at /oul' ,a**en to t,e e-uili+rium *rice an' -uantity o& *eanut +utter i& t,e *rice o& *eanuts /ent u*% t,e *rice o& ?elly &ell% &e/er &irms 'eci'e' to *ro'uce *eanut +utter% an' ,ealt, o&&icials announce' t,at eatin. *eanut +utter /as .oo' &or youA a. Price /ill &all an' t,e e&&ect on -uantity is am+i.uous. +. Price /ill rise an' t,e e&&ect on -uantity is am+i.uous. c. :uantity /ill &all an' t,e e&&ect on *rice is am+i.uous. '. :uantity /ill rise an' t,e e&&ect on *rice is am+i.uous. ANS: > NAT: Analytic DIF: 0 !"#: E-uili+rium REF: T"P: 4-4 E-uili+rium $S#: Analytical

117. Pens are normal .oo's. <,at /ill ,a**en to t,e e-uili+rium *rice o& *ens i& t,e *rice o& *encils rises% consumers e(*erience an increase in income% /ritin. in ink +ecomes &as,iona+le% *eo*le e(*ect t,e *rice o& *ens to rise in t,e near &uture% t,e *o*ulation increases% &e/er &irms manu&acture *ens% an' t,e /a.es o& *enmakers increaseA a. Price /ill rise. +. Price /ill &all. c. Price /ill stay e(actly t,e same. '. T,e *rice c,an.e /ill +e am+i.uous. ANS: A NAT: Analytic DIF: 0 !"#: E-uili+rium REF: T"P: 4-4 E-uili+rium $S#: Analytical

1) . <,at /ill ,a**en to t,e e-uili+rium *rice an' -uantity o& tra'itional camera &ilm i& tra'itional cameras +ecome more e(*ensi1e% 'i.ital cameras +ecome c,ea*er% t,e cost o& t,e resources nee'e' to manu&acture tra'itional &ilm &alls% an' more &irms 'eci'e to manu&acture tra'itional &ilmA a. Price /ill &all an' t,e e&&ect on -uantity is am+i.uous. +. Price /ill rise an' t,e e&&ect on -uantity is am+i.uous. c. :uantity /ill &all an' t,e e&&ect on *rice is am+i.uous. '. :uantity /ill rise an' t,e e&&ect on *rice is am+i.uous. ANS: A NAT: Analytic DIF: 0 !"#: E-uili+rium REF: T"P: 4-4 E-uili+rium $S#: Analytical

1)1. Ne/ cars are normal .oo's. <,at /ill ,a**en to t,e e-uili+rium *rice o& ne/ cars i& t,e *rice o& .asoline rises% t,e *rice o& steel &alls% *u+lic trans*ortation +ecomes c,ea*er an' more com&orta+le% auto-/orkers acce*t lo/er /a.es% an' automo+ile insurance +ecomes more e(*ensi1eA a. Price /ill rise. +. Price /ill &all. c. Price /ill stay e(actly t,e same. '. T,e *rice c,an.e /ill +e am+i.uous. ANS: > NAT: Analytic DIF: 0 !"#: E-uili+rium REF: T"P: 4-4 E-uili+rium $S#: Analytical

1)). <,at /ill ,a**en to t,e e-uili+rium *rice an' -uantity o& ne/ cars i& t,e *rice o& .asoline rises% t,e *rice o& steel rises% *u+lic trans*ortation +ecomes c,ea*er an' more com&orta+le% an' auto-/orkers ne.otiate ,i.,er /a.esA a. Price /ill &all an' t,e e&&ect on -uantity is am+i.uous. +. Price /ill rise an' t,e e&&ect on -uantity is am+i.uous. c. :uantity /ill &all an' t,e e&&ect on *rice is am+i.uous. '. :uantity /ill rise an' t,e e&&ect on *rice is am+i.uous. ANS: # NAT: Analytic DIF: 0 !"#: E-uili+rium REF: T"P: 4-4 E-uili+rium $S#: Analytical

1)0. #onsi'er t,e market &or ne/ D9Ds. I& D9D *layers +ecame c,ea*er% +uyers e(*ecte' D9D *rices to &all ne(t year% use' D9Ds +ecame more e(*ensi1e% an' D9D *ro'uction tec,nolo.y im*ro1e'% t,en /e coul' sa&ely conclu'e t,at t,e e-uili+rium *rice o& a ne/ D9D /oul' a. rise. +. &all. c. stay t,e same. '. <e coul'n=t +e sure /,at it mi.,t 'o.

#,a*ter 4 8T,e $arket Forces o& Su**ly an' Deman' ANS: D NAT: Analytic DIF: 0 !"#: E-uili+rium REF: T"P: 4-4 E-uili+rium $S#: Analytical

)6

1)4. <,ic, o& t,e &ollo/in. e1ents /ill 'e&initely cause e-uili+rium -uantity to &allA a. 'eman' increases an' su**ly 'ecreases +. 'eman' an' su**ly +ot, 'ecrease c. 'eman' 'ecreases an' su**ly increases '. 'eman' an' su**ly +ot, increase ANS: > NAT: Analytic DIF: ) !"#: E-uili+rium REF: T"P: 4-4 E-uili+rium $S#: Inter*reti1e

1)3. E-uili+rium -uantity /ill unam+i.uously 'ecrease /,en a. 'eman' increases an' su**ly 'oes not c,an.e% /,en 'eman' 'oes not c,an.e an' su**ly 'ecreases% an' /,en +ot, 'eman' an' su**ly 'ecrease. +. 'eman' increases an' su**ly 'oes not c,an.e% /,en 'eman' 'oes not c,an.e an' su**ly increases% an' /,en +ot, 'eman' an' su**ly 'ecrease. c. 'eman' 'ecreases an' su**ly 'oes not c,an.e% /,en 'eman' 'oes not c,an.e an' su**ly increases% an' /,en +ot, 'eman' an' su**ly 'ecrease. '. 'eman' 'ecreases an' su**ly 'oes not c,an.e% /,en 'eman' 'oes not c,an.e an' su**ly 'ecreases% an' /,en +ot, 'eman' an' su**ly 'ecrease. ANS: D NAT: Analytic DIF: 0 !"#: E-uili+rium REF: T"P: 4-4 E-uili+rium $S#: Analytical

1)4. <,ic, o& t,e &ollo/in. e1ents /ill 'e&initely cause e-uili+rium -uantity to riseA a. 'eman' increases an' su**ly 'ecreases +. 'eman' an' su**ly +ot, 'ecrease c. 'eman' 'ecreases an' su**ly increases '. 'eman' an' su**ly +ot, increase ANS: D NAT: Analytic DIF: ) !"#: E-uili+rium REF: T"P: 4-4 E-uili+rium $S#: Inter*reti1e

1)5. E-uili+rium -uantity /ill unam+i.uously increase /,en a. 'eman' increases an' su**ly 'oes not c,an.e% /,en 'eman' 'oes not c,an.e an' su**ly increases% an' /,en +ot, 'eman' an' su**ly increase. +. 'eman' increases an' su**ly 'oes not c,an.e% /,en 'eman' 'oes not c,an.e an' su**ly increases% an' /,en +ot, 'eman' an' su**ly 'ecrease. c. 'eman' 'ecreases an' su**ly 'oes not c,an.e% /,en 'eman' 'oes not c,an.e an' su**ly 'ecreases% an' /,en +ot, 'eman' an' su**ly increase. '. 'eman' 'ecreases an' su**ly 'oes not c,an.e% /,en 'eman' 'oes not c,an.e an' su**ly 'ecreases% an' /,en +ot, 'eman' an' su**ly 'ecrease. ANS: A NAT: Analytic DIF: 0 !"#: E-uili+rium REF: T"P: 4-4 E-uili+rium $S#: Analytical

1)6. <,ic, o& t,e &ollo/in. e1ents /ill 'e&initely cause e-uili+rium *rice to &allA a. 'eman' increases an' su**ly 'ecreases +. 'eman' an' su**ly +ot, 'ecrease c. 'eman' 'ecreases an' su**ly increases '. 'eman' an' su**ly +ot, increase ANS: # NAT: Analytic DIF: ) !"#: E-uili+rium REF: T"P: 4-4 E-uili+rium $S#: Inter*reti1e

)61

#,a*ter 4 8T,e $arket Forces o& Su**ly an' Deman'

1)7. E-uili+rium *rice /ill unam+i.uously 'ecrease /,en a. 'eman' increases an' su**ly 'oes not c,an.e% /,en 'eman' 'oes not c,an.e an' su**ly 'ecreases% an' /,en 'eman' 'ecreases an' su**ly increases simultaneously. +. 'eman' increases an' su**ly 'oes not c,an.e% /,en 'eman' 'oes not c,an.e an' su**ly 'ecreases% an' /,en 'eman' increases an' su**ly 'ecreases simultaneously. c. 'eman' 'ecreases an' su**ly 'oes not c,an.e% /,en 'eman' 'oes not c,an.e an' su**ly increases% an' /,en 'eman' 'ecreases an' su**ly increases simultaneously. '. 'eman' 'ecreases an' su**ly 'oes not c,an.e% /,en 'eman' 'oes not c,an.e an' su**ly increases% an' /,en 'eman' increases an' su**ly 'ecreases simultaneously. ANS: # NAT: Analytic DIF: 0 !"#: E-uili+rium REF: T"P: 4-4 E-uili+rium $S#: Analytical

10 . <,ic, o& t,e &ollo/in. e1ents /ill 'e&initely cause e-uili+rium *rice to riseA a. 'eman' increases an' su**ly 'ecreases +. 'eman' an' su**ly +ot, 'ecrease c. 'eman' 'ecreases an' su**ly increases '. 'eman' an' su**ly +ot, increase ANS: A NAT: Analytic DIF: ) !"#: E-uili+rium REF: T"P: 4-4 E-uili+rium $S#: Inter*reti1e

101. E-uili+rium *rice /ill unam+i.uously increase /,en a. 'eman' increases an' su**ly 'oes not c,an.e% /,en 'eman' 'oes not c,an.e an' su**ly 'ecreases% an' /,en 'eman' 'ecreases an' su**ly increases simultaneously. +. 'eman' increases an' su**ly 'oes not c,an.e% /,en 'eman' 'oes not c,an.e an' su**ly 'ecreases% an' /,en 'eman' increases an' su**ly 'ecreases simultaneously. c. 'eman' 'ecreases an' su**ly 'oes not c,an.e% /,en 'eman' 'oes not c,an.e an' su**ly increases% an' /,en 'eman' 'ecreases an' su**ly increases simultaneously. '. 'eman' 'ecreases an' su**ly 'oes not c,an.e% /,en 'eman' 'oes not c,an.e an' su**ly increases% an' /,en 'eman' increases an' su**ly 'ecreases simultaneously. ANS: > NAT: Analytic DIF: 0 !"#: E-uili+rium REF: T"P: 4-4 E-uili+rium $S#: Analytical

10). <,ic, o& t,e &ollo/in. e1ents /oul' cause +ot, t,e e-uili+rium *rice an' e-uili+rium -uantity o& num+er t/o .ra'e *otatoes Dan in&erior .oo'E to increaseA a. an increase in consumer income +. a 'ecrease in consumer income c. .reater .o1ernment restrictions on a.ricultural c,emicals '. &e/er .o1ernment restrictions on a.ricultural c,emicals ANS: > NAT: Analytic DIF: ) !"#: E-uili+rium REF: T"P: 4-4 E-uili+rium $S#: A**licati1e

100. >ee& is a normal .oo'. Oou o+ser1e t,at +ot, t,e e-uili+rium *rice an' -uantity o& +ee& ,a1e &allen o1er time. <,ic, o& t,e &ollo/in. e(*lanations /oul' +e most consistent /it, t,is o+ser1ationA a. #onsumers ,a1e e(*erience' an increase in income an' +ee&-*ro'uction tec,nolo.y ,as im*ro1e'. +. T,e *rice o& c,icken ,as risen an' t,e *rice o& steak sauce ,as &allen. c. Ne/ me'ical e1i'ence ,as +een release' t,at in'icates a ne.ati1e correlation +et/een a *ersons +ee& consum*tion an' ,is or ,er lon.e1ity. '. T,e 'eman' cur1e &or +ee& must +e *ositi1ely slo*e'. ANS: # NAT: Analytic DIF: ) !"#: E-uili+rium REF: T"P: 4-4 E-uili+rium $S#: A**licati1e

#,a*ter 4 8T,e $arket Forces o& Su**ly an' Deman'

)6)

104. Durin. t,e last &e/ 'eca'es in t,e Fnite' States% ,ealt, o&&icials ,a1e ar.ue' t,at eatin. too muc, +ee& mi.,t +e ,arm&ul to ,uman ,ealt,. As a result% t,ere ,as +een a si.ni&icant 'ecrease in t,e amount o& +ee& *ro'uce'. <,ic, o& t,e &ollo/in. +est e(*lains t,e 'ecrease in *ro'uctionA a. >ee& *ro'ucers% concerne' a+out t,e ,ealt, o& t,eir customers% 'eci'e' to *ro'uce relati1ely less +ee&. +. Bo1ernment o&&icials% concerne' a+out consumer ,ealt,% or'ere' +ee& *ro'ucers to *ro'uce relati1ely less +ee&. c. In'i1i'ual consumers% concerne' a+out t,eir o/n ,ealt,% 'ecrease' t,eir 'eman' &or +ee&% /,ic, lo/ere' t,e e-uili+rium *rice o& +ee&% makin. it less attracti1e to *ro'uce. '. Anti-+ee& *rotesters ,a1e ma'e it 'i&&icult &or +ot, +uyers an' sellers o& +ee& to meet in t,e market*lace. ANS: # NAT: Analytic DIF: ) !"#: E-uili+rium REF: T"P: 4-4 E-uili+rium $S#: A**licati1e

103. <,ic, o& t,e &ollo/in. e1ents /oul' unam+i.uously cause a 'ecrease in t,e e-uili+rium *rice o& cotton s,irtsA a. an increase in t,e *rice o& /ool s,irts an' a 'ecrease in t,e *rice o& ra/ cotton +. a 'ecrease in t,e *rice o& /ool s,irts an' a 'ecrease in t,e *rice o& ra/ cotton c. an increase in t,e *rice o& /ool s,irts an' an increase in t,e *rice o& ra/ cotton '. a 'ecrease in t,e *rice o& /ool s,irts an' an increase in t,e *rice o& ra/ cotton ANS: > NAT: Analytic DIF: ) !"#: E-uili+rium REF: T"P: 4-4 E-uili+rium $S#: A**licati1e

104. <,ic, o& t,e &ollo/in. e1ents /oul' cause t,e *rice o& oran.es to &allA a. T,ere is a s,orta.e o& oran.es. +. An article is *u+lis,e' in /,ic, it is claime' t,at tan.erines cause a serious 'isease% an' oran.es an' tan.erines are su+stitutes. c. T,e *rice o& lan' t,rou.,out Flori'a 'ecreases% an' Flori'a *ro'uces a si.ni&icant *ro*ortion o& t,e nations oran.es. '. All o& t,e a+o1e are correct. ANS: # NAT: Analytic DIF: ) !"#: E-uili+rium REF: T"P: 4-4 E-uili+rium $S#: A**licati1e

105. <,ic, o& t,e &ollo/in. e1ents /oul' 'e&initely result in a ,i.,er *rice in t,e market &or SnickersA a. Deman' &or Snickers increases an' su**ly o& Snickers 'ecreases. +. Deman' &or Snickers an' su**ly o& Snickers +ot, 'ecrease. c. Deman' &or Snickers 'ecreases an' su**ly o& Snickers increases. '. Deman' &or Snickers an' su**ly o& Snickers +ot, increase ANS: A NAT: Analytic DIF: ) !"#: E-uili+rium REF: T"P: 4-4 E-uili+rium $S#: A**licati1e

106. <,ic, o& t,e &ollo/in. sets o& e1ents /oul' most likely cause an increase in t,e *rice o& a ne/ ,ouseA a. ,i.,er /a.es &or car*enters% ,i.,er /oo' *rices% increases in consumer incomes% ,i.,er a*artment rents% increases in *o*ulation% an' e(*ectations o& ,i.,er ,ouse *rices in t,e &uture +. lo/er /a.es &or car*enters% lo/er /oo' *rices% increases in consumer incomes% ,i.,er a*artment rents% increases in *o*ulation an' e(*ectations o& ,i.,er ,ouse *rices in t,e &uture c. lo/er /a.es &or car*enters% ,i.,er /oo' *rices% 'ecreases in consumer incomes% ,i.,er a*artment rents% 'ecreases in *o*ulation an' e(*ectations o& ,i.,er ,ouse *rices in t,e &uture '. ,i.,er /a.es &or car*enters% lo/er /oo' *rices% 'ecreases in consumer incomes% lo/er a*artment rents% 'ecreases in *o*ulation an' e(*ectations o& lo/er ,ouse *rices in t,e &uture ANS: A NAT: Analytic DIF: 0 !"#: E-uili+rium REF: T"P: 4-4 E-uili+rium $S#: Analytical

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#,a*ter 4 8T,e $arket Forces o& Su**ly an' Deman'

Sec+5 , The Market Forces of Supply and Demand , Conclus%on: Allocate Resources
MULT-.LE C !-CE 1.

o; .r%ces

In any economic system% scarce resources ,a1e to +e allocate' amon. com*etin. uses. $arket economies ,arness t,e &orces o& a. .o1ernment to allocate scarce resources. +. su**ly an' 'eman' to allocate scarce resources. c. cre'it car's to allocate scarce resources. '. nature to allocate scarce resources.

ANS: > DIF: 1 REF: 4-3 NAT: Analytic !"#: $arkets% market &ailure% an' e(ternalities T"P: $arket economies $S#: De&initional ). T,e si.nals t,at .ui'e t,e allocation o& resources in a market economy are a. sur*luses an' s,orta.es. +. -uantities. c. .o1ernment *olicies. '. *rices.

ANS: D DIF: 1 REF: 4-3 NAT: Analytic !"#: $arkets% market &ailure% an' e(ternalities T"P: $arket economies $S#: De&initional 0. <,o .ets scarce resources in a market economyA a. t,e .o1ernment +. /,oe1er t,e .o1ernment 'eci'es .ets t,em c. /,oe1er /ants t,em '. /,oe1er is /illin. an' a+le to *ay t,e *rice

ANS: D DIF: 1 REF: 4-3 NAT: Analytic !"#: $arkets% market &ailure% an' e(ternalities T"P: $arket economies $S#: De&initional 4. T,ere is no s,orta.e o& scarce resources in a market economy +ecause a. t,e .o1ernment makes s,orta.es ille.al. +. resources are a+un'ant in market economies. c. *rices a'?ust to eliminate s,orta.es. '. -uantity su**lie' is al/ays .reater t,an -uantity 'eman'e' in market economies.

ANS: # DIF: 1 REF: 4-3 NAT: Analytic !"#: $arkets% market &ailure% an' e(ternalities T"P: $arket economies $S#: De&initional 3. In a market economy% /,o or /,at 'etermines /,o *ro'uces eac, .oo' an' ,o/ muc, is *ro'uce'A a. t,e .o1ernment +. la/yers c. lotteries '. *rices

ANS: D DIF: 1 REF: 4-3 NAT: Analytic !"#: $arkets% market &ailure% an' e(ternalities T"P: $arket economies $S#: De&initional 4. <,ic, o& t,ese statements 'oes not a**ly to market economiesA a. Prices *re1ent 'ecentrali;e' 'ecision makin. &rom 'e.eneratin. into c,aos. +. Prices coor'inate t,e actions o& millions o& *eo*le /it, 1aryin. a+ilities an' 'esires. c. Prices ensure t,at anyone /,o /ants a *ro'uct can .et it. '. Prices ensure t,at /,at nee's to .et 'one 'oes in &act .et 'one.

#,a*ter 4 8T,e $arket Forces o& Su**ly an' Deman' ANS: # DIF: ) REF: 4-3 NAT: Analytic !"#: $arkets% market &ailure% an' e(ternalities T"P: $arket economies $S#: Inter*reti1e

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