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100% found this document useful (3 votes)

669 views354 pages

Testbank Chap 04

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The Market Forces of Supply and Demand

Multiple Choice – Section 00: Introduction

1. The two words most often used by economists are

a. prices and quantities.
b. resources and allocation.
c. supply and demand.
d. efficiency and equity.

ANSWER: c
POINTS: 1
DIFFICULTY: Difficulty: Easy
LEARNING OBJECTIVES: ECON.MANK.15.16 - LO: 4-0
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: DISC: Supply and Demand
KEYWORDS: BLOOM'S: Knowledge

2. The two words economists use most often are

a. inflation and trade.
b. supply and demand.
c. competition and prices.
d. markets and equilibrium.

ANSWER: b
POINTS: 1
DIFFICULTY: Difficulty: Easy
LEARNING OBJECTIVES: ECON.MANK.15.16 - LO: 4-0
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: DISC: Supply and Demand
KEYWORDS: BLOOM'S: Comprehension

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
756 The Market Forces of Supply and Demand

3. The forces that make market economies work are

a. work and leisure.
b. politics and religion.
c. supply and demand.
d. taxes and government spending.

4. In a market economy, supply and demand determine

a. both the quantity of each good produced and the price at which it is sold.
b. the quantity of each good produced but not the price at which it is sold.
c. the price at which each good is sold but not the quantity of each good produced.
d. neither the quantity of each good produced nor the price at which it is sold.

ANSWER: a
POINTS: 1
DIFFICULTY: Difficulty: Easy
LEARNING OBJECTIVES: ECON.MANK.15.16 - LO: 4-0
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: DISC: Supply and Demand
KEYWORDS: BLOOM'S: Knowledge

5. In a market economy, supply and demand are important because they

a. play a critical role in the allocation of the economy’s scarce resources.
b. determine how much of each good gets produced.
c. can be used to predict the impact on the economy of various events and policies.
d. All of the above are correct.

ANSWER: d
POINTS: 1
DIFFICULTY: Difficulty: Easy
LEARNING OBJECTIVES: ECON.MANK.15.16 - LO: 4-0
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: DISC: Supply and Demand
KEYWORDS: BLOOM'S: Knowledge

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
The Market Forces of Supply and Demand 757

6. In a market economy, supply and demand are important because they

a. are direct policy tools used by government agencies to regulate the economy.
b. illustrate when an market is in equilibrium, but they are not helpful when a market is out of
equilibrium.
c. can be used to predict the impact on the economy of various events and policies.
d. All of the above are correct.

7. In a market economy,
a. supply determines demand and demand, in turn, determines prices.
b. demand determines supply and supply, in turn, determines prices.
c. the allocation of scarce resources determines prices and prices, in turn, determine supply and
demand.
d. supply and demand determine prices and prices, in turn, allocate the economy’s scarce
resources.

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
758 The Market Forces of Supply and Demand

Multiple Choice – Section 01: Markets and Competition

1. Which of the following statements is correct?

a. Buyers determine supply, and sellers determine demand.
b. Buyers determine demand, and sellers determine supply.
c. Buyers determine both demand and supply.
d. Sellers determine both demand and supply.

ANSWER: b
POINTS: 1
DIFFICULTY: Difficulty: Easy
LEARNING OBJECTIVES: ECON.MANK.15.17 - LO: 4-1
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: DISC: Supply and Demand
KEYWORDS: BLOOM'S: Knowledge

2. The demand for a good or service is determined by

a. those who buy the good or service.
b. the government.
c. those who sell the good or service.
d. both those who buy and those who sell the good or service.

ANSWER: a
POINTS: 1
DIFFICULTY: Difficulty: Easy
LEARNING OBJECTIVES: ECON.MANK.15.17 - LO: 4-1
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: DISC: Supply and Demand
Demand
KEYWORDS: BLOOM'S: Knowledge

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
The Market Forces of Supply and Demand 759

3. The supply of a good or service is determined by

a. those who buy the good or service.
b. the government.
c. those who sell the good or service.
d. both those who buy and those who sell the good or service.

ANSWER: c
POINTS: 1
DIFFICULTY: Difficulty: Easy
LEARNING OBJECTIVES: ECON.MANK.15.17 - LO: 4-1
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: DISC: Supply and Demand
Supply
KEYWORDS: BLOOM'S: Knowledge

4. A group of buyers and sellers of a particular good or service is called a(n)

a. coalition.
b. economy.
c. market.
d. competition.

5. For a market for a good or service to exist, there must be a

a. group of buyers and sellers.
b. specific time and place at which the good or service is traded.
c. high degree of organization present.
d. All of the above are correct.

ANSWER: a
POINTS: 1
DIFFICULTY: Difficulty: Easy
LEARNING OBJECTIVES: ECON.MANK.15.17 - LO: 4-1
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: DISC: Supply and Demand

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
760 The Market Forces of Supply and Demand

KEYWORDS: BLOOM'S: Knowledge

6. Which of the following is an example of a highly organized market?

a. the market for textbooks
b. the market for spa services
c. the market for soybeans
d. the market for ice cream

ANSWER: c
POINTS: 1
DIFFICULTY: Difficulty: Easy
LEARNING OBJECTIVES: ECON.MANK.15.17 - LO: 4-1
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: DISC: General
Micro
KEYWORDS: BLOOM'S: Comprehension
NOTES: r

7. Which of the following is an example of a less-than-highly-organized market?

a. the market for U.S. Treasury bonds
b. the market for corn
c. the market for soybeans
d. the market for ice cream

ANSWER: d
POINTS: 1
DIFFICULTY: Difficulty: Easy
LEARNING OBJECTIVES: ECON.MANK.15.17 - LO: 4-1
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: DISC: General
Micro
KEYWORDS: BLOOM'S: Comprehension
NOTES: r

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
The Market Forces of Supply and Demand 761

8. Which of the following is an example of a market?

a. a gas station
b. a garage sale
c. a barber shop
d. All of the above are examples of markets.

ANSWER: d
POINTS: 1
DIFFICULTY: Difficulty: Moderate
LEARNING OBJECTIVES: ECON.MANK.15.17 - LO: 4-1
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: DISC: General
Micro
KEYWORDS: BLOOM'S: Application

9. The market for ice cream is a

a. monopolistic market.
b. highly competitive market.
c. highly organized market.
d. Both b and c are correct.

ANSWER: b
POINTS: 1
DIFFICULTY: Difficulty: Easy
LEARNING OBJECTIVES: ECON.MANK.15.17 - LO: 4-1
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: DISC: General
Micro
KEYWORDS: BLOOM'S: Knowledge

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
762 The Market Forces of Supply and Demand

10. Most markets in the economy are

a. markets in which sellers, rather than buyers, control the price of the product.
b. markets in which buyers, rather than sellers, control the price of the product.
c. perfectly competitive.
d. highly competitive.

11. A market includes

a. buyers only.
b. sellers only.
c. both buyers and sellers.
d. the place where transactions occur but not the people involved.

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
The Market Forces of Supply and Demand 763

12. Which of the following is not an example of a market?

a. A small town has only one seller of electricity.
b. In the United States, a sick person cannot legally purchase a kidney.
c. In Florida, there are many buyers and sellers of key lime pie.
d. The availability of Internet shopping has expanded the clothing choices for buyers who do not
live near large cities.

13. In a competitive market, the price of a product

a. is determined by buyers, and the quantity of the product produced is determined by sellers.
b. is determined by sellers, and the quantity of the product produced is determined by buyers.
c. and the quantity of the product produced are both determined by sellers.
d. None of the above is correct.

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
764 The Market Forces of Supply and Demand

14. In a competitive market, the quantity of a product produced and the price of the product are
determined by
a. buyers.
b. sellers.
c. both buyers and sellers.
d. None of the above is correct.

ANSWER: c
POINTS: 1
DIFFICULTY: Difficulty: Moderate
LEARNING OBJECTIVES: ECON.MANK.15.17 - LO: 4-1
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: DISC: Supply and Demand
KEYWORDS: BLOOM'S: Comprehension

15. In a competitive market, the quantity of a product produced and the price of the product are
determined by
a. a single buyer.
b. a single seller.
c. one buyer and one seller working together.
d. all buyers and all sellers.

ANSWER: d
POINTS: 1
DIFFICULTY: Difficulty: Moderate
LEARNING OBJECTIVES: ECON.MANK.15.17 - LO: 4-1
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: DISC: Supply and Demand
KEYWORDS: BLOOM'S: Comprehension

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
The Market Forces of Supply and Demand 765

16. A competitive market is a market in which

a. an auctioneer helps set prices and arrange sales.
b. there are only a few sellers.
c. the forces of supply and demand do not apply.
d. no individual buyer or seller has any significant impact on the market price.

ANSWER: d
POINTS: 1
DIFFICULTY: Difficulty: Easy
LEARNING OBJECTIVES: ECON.MANK.15.17 - LO: 4-1
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: DISC: Perfect Competition
KEYWORDS: BLOOM'S: Knowledge

17. A competitive market is one in which there

a. is only one seller, but there are many buyers.
b. are many sellers, and each seller has the ability to set the price of his product.
c. are many sellers, and they compete with one another in such a way that some sellers are
always being forced out of the market.
d. are so many buyers and so many sellers that each has a negligible impact on the price of the
product.

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
766 The Market Forces of Supply and Demand

18. Assume Diana buys computers in a competitive market. It follows that

a. Diana has a limited number of sellers to turn to when she buys a computer.
b. Diana will find herself negotiating with sellers whenever she buys a computer.
c. if Diana buys a large number of computers, the price of computers will rise noticeably.
d. None of the above is correct.

19. Assume Leo buys coffee beans in a competitive market. It follows that
a. Leo has a limited number of sellers from which to buy coffee beans.
b. Leo will negotiate with sellers whenever he buys coffee beans.
c. Leo can influence the price of coffee beans if he buys a large quantity of them.
d. None of the above is correct.

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
The Market Forces of Supply and Demand 767

20. Assume Leo buys coffee beans in a competitive market. It follows that
a. Leo has a limited number of sellers from which to buy coffee beans.
b. Leo will negotiate with sellers whenever he buys coffee beans.
c. Leo cannot influence the price of coffee beans even if he buys a large quantity of them.
d. None of the above is correct.

ANSWER: c
POINTS: 1
DIFFICULTY: Difficulty: Moderate
LEARNING OBJECTIVES: ECON.MANK.15.17 - LO: 4-1
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: DISC: Perfect Competition
KEYWORDS: BLOOM'S: Application
NOTES: r

21. In a competitive market, each seller has limited control over the price of his product because
a. other sellers are offering similar products.
b. buyers exert more control over the price than do sellers.
c. these markets are highly regulated by the government.
d. sellers usually agree to set a common price that will allow each seller to earn a comfortable
profit.

ANSWER: a
POINTS: 1
DIFFICULTY: Difficulty: Easy
LEARNING OBJECTIVES: ECON.MANK.15.17 - LO: 4-1
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: DISC: Perfect Competition
KEYWORDS: BLOOM'S: Knowledge

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
768 The Market Forces of Supply and Demand

22. For a competitive market,

a. a seller can always increase her profit by raising the price of her product.
b. if a seller charges more than the going price, buyers will go elsewhere to make their
purchases.
c. a seller often charges less than the going price to increase sales and profit.
d. a single buyer can influence the price of the product but only when purchasing from several
sellers in a short period of time.

ANSWER: b
POINTS: 1
DIFFICULTY: Difficulty: Easy
LEARNING OBJECTIVES: ECON.MANK.15.17 - LO: 4-1
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: DISC: Perfect Competition
KEYWORDS: BLOOM'S: Knowledge

23. If a seller in a competitive market chooses to charge more than the going price, then
a. the sellers’ profits must increase.
b. the owners of the raw materials used in production would raise the prices for the raw
materials.
c. other sellers would also raise their prices.
d. buyers will make purchases from other sellers.

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
The Market Forces of Supply and Demand 769

24. In competitive markets, buyers

a. are price takers, but sellers are price setters.
b. are price setters, but sellers are price takers.
c. and sellers are price takers.
d. and sellers are price setters.

ANSWER: c
POINTS: 1
DIFFICULTY: Difficulty: Easy
LEARNING OBJECTIVES: ECON.MANK.15.17 - LO: 4-1
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: DISC: Perfect Competition
KEYWORDS: BLOOM'S: Knowledge

25. The term price takers refers to buyers and sellers in

a. perfectly competitive markets.
b. monopolistic markets.
c. markets that are regulated by the government.
d. markets in which buyers cannot buy all they want and/or sellers cannot sell all they want.

ANSWER: a
POINTS: 1
DIFFICULTY: Difficulty: Moderate
LEARNING OBJECTIVES: ECON.MANK.15.17 - LO: 4-1
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: DISC: Perfect Competition
KEYWORDS: BLOOM'S: Comprehension

26. In competitive markets,

a. firms produce identical products.
b. no individual buyer can influence the market price.
c. no individual seller can influence the market price.
d. All of the above are correct.

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
770 The Market Forces of Supply and Demand

27. In competitive markets, which of the following is not correct?

a. Firms produce identical products.
b. No individual buyer can influence the market price.
c. Some sellers can set prices.
d. Buyers are price takers.

28. In competitive markets,

a. firms produce identical products.
b. buyers can influence the market price more easily than sellers.
c. markets are more likely to be in equilibrium.
d. sellers are price setters.

29. The highest form of competition is called

a. absolute competition.
b. cutthroat competition.
c. perfect competition.
d. market competition.

ANSWER: c
POINTS: 1
DIFFICULTY: Difficulty: Easy
LEARNING OBJECTIVES: ECON.MANK.15.17 - LO: 4-1
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: DISC: Perfect Competition

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
The Market Forces of Supply and Demand 771

KEYWORDS: BLOOM'S: Knowledge

30. The highest form of competition is called

a. arbitrage.
b. monopolistic competition.
c. equilibrium.
d. perfect competition.

31. Which of the following is not a characteristic of a perfectly competitive market?

a. Different sellers sell identical products.
b. There are many sellers.
c. Sellers must accept the price the market determines.
d. All of the above are characteristics of a perfectly competitive market.

ANSWER: d
POINTS: 1
DIFFICULTY: Difficulty: Moderate
LEARNING OBJECTIVES: ECON.MANK.15.17 - LO: 4-1
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: DISC: Perfect Competition
KEYWORDS: BLOOM'S: Comprehension

32. Which of the following is not a characteristic of a perfectly competitive market?

a. Sellers set the price of the product.
b. There are many sellers.
c. Buyers must accept the price the market determines.
d. All of the above are characteristics of a perfectly competitive market.

ANSWER: a
POINTS: 1
DIFFICULTY: Difficulty: Moderate
LEARNING OBJECTIVES: ECON.MANK.15.17 - LO: 4-1
NATIONAL STANDARDS: United States - BUSPROG: Analytic

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
772 The Market Forces of Supply and Demand

TOPICS: DISC: Perfect Competition

KEYWORDS: BLOOM'S: Comprehension

33. Buyers and sellers who have no influence on market price are referred to as
a. market pawns.
b. monopolists.
c. price takers.
d. price setters.

34. When all market participants are price takers who have no influence over prices, the markets
have
a. only a few buyers and sellers.
b. numerous sellers but only a few buyers.
c. numerous buyers but only a few sellers.
d. numerous buyers and sellers.

35. If buyers and sellers in a certain market are price takers, then individually
a. they have no influence on market price.
b. they have some influence on market price but that influence is limited.
c. buyers will be able to find prices lower than those determined in the market.
d. sellers will find it difficult to sell all they want to sell at the market price.

ANSWER: a
POINTS: 1
DIFFICULTY: Difficulty: Moderate

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
The Market Forces of Supply and Demand 773

LEARNING OBJECTIVES: ECON.MANK.15.17 - LO: 4-1

NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: DISC: Perfect Competition
KEYWORDS: BLOOM'S: Comprehension

36. In a perfectly competitive market, at the market price, buyers

a. cannot buy all they want, and sellers cannot sell all they want.
b. cannot buy all they want, but sellers can sell all they want.
c. can buy all they want, but sellers cannot sell all they want.
d. can buy all they want, and sellers can sell all they want.

37. An example of a perfectly competitive market would be the

a. cable TV market.
b. soybean market.
c. breakfast cereal market.
d. shampoo market.

ANSWER: b
POINTS: 1
DIFFICULTY: Difficulty: Moderate
LEARNING OBJECTIVES: ECON.MANK.15.17 - LO: 4-1
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: DISC: Perfect Competition
KEYWORDS: BLOOM'S: Application

38. An example of a perfectly competitive market would be the market for

a. tennis racquets.
b. pizza.
c. garbage collection.
d. wheat.

ANSWER: d
POINTS: 1

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
774 The Market Forces of Supply and Demand

DIFFICULTY: Difficulty: Easy

LEARNING OBJECTIVES: ECON.MANK.15.17 - LO: 4-1
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: DISC: Perfect Competition
KEYWORDS: BLOOM'S: Application

39. An example of a perfectly competitive market would be the market for

a. electricity.
b. soybeans.
c. coffee shops.
d. restaurants.

40. Assume a market is perfectly competitive. When a new producer enters the market, the
a. price in the market increases.
b. price in the market decreases.
c. price in the market does not change.
d. market is no longer a competitive market.

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
The Market Forces of Supply and Demand 775

41. Which of the following characteristics is required for a perfectly competitive market?
a. The goods offered for sale are exactly the same.
b. There are so many buyers and sellers that no single buyer or seller has any influence over the
market price.
c. It is difficult for new sellers to enter the market.
d. Both a and b are correct.

42. Which of the following is the least likely to be a competitive market?

a. ice cream
b. soybeans
c. cable television
d. new houses

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
776 The Market Forces of Supply and Demand

43. Assume the market for tennis balls is perfectly competitive. When one tennis ball producer exits
the market,
a. the price of tennis balls increases.
b. the price of tennis balls decreases.
c. the price of tennis balls does not change.
d. there is no longer a market for tennis balls.

44. Assume the market for pork is perfectly competitive. When one pork buyer exits the market,
a. the price of pork increases.
b. the price of pork decreases.
c. the price of pork does not change.
d. there is no longer a market for pork.

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
The Market Forces of Supply and Demand 777

45. Which of the following is not a reason perfect competition is a useful simplification, despite the
diversity of market types we find in the world?
a. Perfectly competitive markets are the easiest to analyze because everyone participating in the
market takes the price as given by market conditions.
b. Some degree of competition is present in most markets.
c. There are many buyers and many sellers in all types of markets.
d. Many of the lessons that we learn by studying supply and demand under perfect competition
apply in more complicated markets as well.

46. If a firm is a price taker, it operates in a

a. competitive market.
b. monopoly market.
c. oligopoly market.
d. monopolistically competitive market.

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
778 The Market Forces of Supply and Demand

47. A monopoly is a market with one

a. seller, and that seller is a price taker.
b. seller, and that seller sets the price.
c. buyer, and that buyer is a price taker.
d. buyer, and that buyer sets the price.

ANSWER: b
POINTS: 1
DIFFICULTY: Difficulty: Easy
LEARNING OBJECTIVES: ECON.MANK.15.17 - LO: 4-1
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: DISC: Monopoly
KEYWORDS: BLOOM'S: Knowledge

48. Which of the following would most likely serve as an example of a monopoly?
a. a bakery in a large city
b. a bank in a large city
c. a local cable television company
d. a small group of corn farmers

ANSWER: c
POINTS: 1
DIFFICULTY: Difficulty: Moderate
LEARNING OBJECTIVES: ECON.MANK.15.17 - LO: 4-1
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: DISC: Monopoly
KEYWORDS: BLOOM'S: Application

49. Which of the following would most likely serve as an example of a monopoly?
a. a restaurant in a large city
b. a dry cleaners in a large city
c. a local gas station
d. a local electrical company

ANSWER: d
POINTS: 1
DIFFICULTY: Difficulty: Moderate
LEARNING OBJECTIVES: ECON.MANK.15.17 - LO: 4-1
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: DISC: Monopoly
KEYWORDS: BLOOM'S: Application

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
The Market Forces of Supply and Demand 779

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
780 The Market Forces of Supply and Demand

Multiple Choice – Section 02: Demand

1. The quantity demanded of a good is the amount that buyers are

a. willing to purchase.
b. willing and able to purchase.
c. willing, able, and need to purchase.
d. able to purchase.

ANSWER: b
POINTS: 1
DIFFICULTY: Difficulty: Easy
LEARNING OBJECTIVES: ECON.MANK.15.18 - LO: 4-2
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: DISC: Supply and Demand
Demand
KEYWORDS: BLOOM'S: Knowledge

2. An increase in quantity demanded

a. results in a movement downward and to the right along a demand curve.
b. results in a movement upward and to the left along a demand curve.
c. shifts the demand curve to the left.
d. shifts the demand curve to the right.

ANSWER: a
POINTS: 1
DIFFICULTY: Difficulty: Moderate
LEARNING OBJECTIVES: ECON.MANK.15.18 - LO: 4-2
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: DISC: Supply and Demand
Demand
KEYWORDS: BLOOM'S: Comprehension

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
The Market Forces of Supply and Demand 781

3. A decrease in quantity demanded

ANSWER: b
POINTS: 1
DIFFICULTY: Difficulty: Moderate
LEARNING OBJECTIVES: ECON.MANK.15.18 - LO: 4-2
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: DISC: Supply and Demand
Demand
KEYWORDS: BLOOM'S: Comprehension

4. A movement upward and to the left along a demand curve is called a(n)
a. increase in demand.
b. decrease in demand.
c. decrease in quantity demanded.
d. increase in quantity demanded.

ANSWER: c
POINTS: 1
DIFFICULTY: Difficulty: Moderate
LEARNING OBJECTIVES: ECON.MANK.15.18 - LO: 4-2
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: DISC: Supply and Demand
Demand
KEYWORDS: BLOOM'S: Comprehension

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
782 The Market Forces of Supply and Demand

5. A movement downward and to the right along a demand curve is called a(n)
a. increase in demand.
b. decrease in demand.
c. decrease in quantity demanded.
d. increase in quantity demanded.

ANSWER: d
POINTS: 1
DIFFICULTY: Difficulty: Moderate
LEARNING OBJECTIVES: ECON.MANK.15.18 - LO: 4-2
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: DISC: Supply and Demand
Demand
KEYWORDS: BLOOM'S: Comprehension

6. An increase in the price of a good will

a. increase demand.
b. decrease demand.
c. increase quantity demanded.
d. decrease quantity demanded.

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
The Market Forces of Supply and Demand 783

7. A decrease in the price of a good will

a. increase demand.
b. decrease demand.
c. increase quantity demanded.
d. decrease quantity demanded.

8. When the price of a good or service changes,

a. the supply curve shifts in the opposite direction.
b. the demand curve shifts in the opposite direction.
c. the demand curve shifts in the same direction.
d. there is a movement along a given demand curve.

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
784 The Market Forces of Supply and Demand

9. A decrease in the price of a good would

a. increase the supply of the good.
b. increase the quantity demanded of the good.
c. give producers an incentive to produce more to keep profits from falling.
d. shift the supply curve for the good to the left.

Figure 4-1

10. Refer to Figure 4-1. The movement from point A to point B on the graph shows a(n)
a. decrease in demand.
b. increase in demand.
c. decrease in quantity demanded.
d. increase in quantity demanded.

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
The Market Forces of Supply and Demand 785

11. Refer to Figure 4-1. The movement from point A to point B on the graph is caused by a(n)
a. increase in price.
b. decrease in price.
c. decrease in the price of a substitute good.
d. increase in income.

12. Refer to Figure 4-1. It is apparent from the figure that the
a. good is inferior.
b. demand for the good decreases as income increases.
c. demand for the good conforms to the law of demand.
d. All of the above are correct.

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
786 The Market Forces of Supply and Demand

13. “Other things equal, when the price of a good rises, the quantity demanded of the good falls, and
when the price falls, the quantity demanded rises.” This relationship between price and quantity
demanded
a. applies to most goods in the economy.
b. is represented by a downward-sloping demand curve.
c. is referred to as the law of demand.
d. All of the above are correct.

14. “Other things equal, when the price of a good rises, the quantity demanded of the good falls, and
when the price falls, the quantity demanded rises.” This relationship between price and quantity
demanded is referred to as
a. equilibrium.
b. the law of demand.
c. the relationship between supply and demand.
d. the definition of an inferior good.

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
The Market Forces of Supply and Demand 787

15. The law of demand states that, other things equal, when the price of a good
a. falls, the demand for the good rises.
b. rises, the quantity demanded of the good rises.
c. rises, the demand for the good falls.
d. falls, the quantity demanded of the good rises.

ANSWER: d
POINTS: 1
DIFFICULTY: Difficulty: Easy
LEARNING OBJECTIVES: ECON.MANK.15.18 - LO: 4-2
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: DISC: Supply and Demand
Demand
KEYWORDS: BLOOM'S: Knowledge

16. The law of demand states that, other things equal, an increase in
a. price causes quantity demanded to increase.
b. price causes quantity demanded to decrease.
c. quantity demanded causes price to increase.
d. quantity demanded causes price to decrease.

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
788 The Market Forces of Supply and Demand

17. Which of these statements best represents the law of demand?

a. When buyers’ tastes for a good increase, they purchase more of the good.
b. When income levels increase, buyers purchase more of most goods.
c. When the price of a good decreases, buyers purchase more of the good.
d. When buyers’ demands for a good increase, the price of the good increases.

18. A downward-sloping demand curve illustrates

a. that demand decreases over time.
b. that prices fall over time.
c. the relationship between income and quantity demanded.
d. the law of demand.

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
The Market Forces of Supply and Demand 789

19. Kari downloads 7 songs per month when the price is $1.29 per song and 10 songs per month
when the price is $0.99 per song. Kari’s behavior demonstrates the law of
a. price.
b. supply.
c. demand.
d. income.

ANSWER: c
POINTS: 1
DIFFICULTY: Difficulty: Easy
LEARNING OBJECTIVES: ECON.MANK.15.18 - LO: 4-2
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: DISC: Supply and Demand
Demand
KEYWORDS: BLOOM'S: Application
NOTES: r

20. Which of the following demonstrates the law of demand?

a. After Jon got a raise at work, he bought more pretzels at $1.50 per pretzel than he did before
his raise.
b. Melissa buys fewer muffins at $0.75 per muffin than at $1 per muffin, other things equal.
c. Dave buys more donuts at $0.25 per donut than at $0.50 per donut, other things equal.
d. Kendra buys fewer Snickers at $0.60 per Snickers after the price of Milky Ways falls to $0.50
per Milky Way.

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
790 The Market Forces of Supply and Demand

21. The following table contains a demand schedule for a good.

Price Quantity Demanded

$10 100
$20 Q1
If the law of demand applies to this good, then Q1 could be
a. 0.
b. 100.
c. 200.
d. 400.

22. The following table contains a demand schedule for a good.

Price Quantity Demanded

$30 A
$50 300
If the law of demand applies to this good, then A could be
a. 0.
b. 100.
c. 200.
d. 400.

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
The Market Forces of Supply and Demand 791

23. The following table contains a monthly demand schedule for large, single-topping, carry-out
pizzas.

Price Quantity Demanded

$15 A
$20 25
If the law of demand applies to these pizzas, then A could be
a. 0.
b. 15.
c. 25.
d. 30.

24. The following table contains a monthly demand schedule for large, single-topping, carry-out
pizzas.

Price Quantity Demanded

$15 A
$20 25
If the law of demand applies to these pizzas, then A could be
a. 40.
b. 35.
c. 30.
d. All of the above could be correct.

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
792 The Market Forces of Supply and Demand

NOTES: r

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The Market Forces of Supply and Demand 793

25. Suppose that when the price of a 16 oz. to-go cup of gourmet coffee is $4.25, students purchase
750 cups per day. If the price decreases to $3.75 per cup, which of the following is the most
likely outcome?
a. Students would purchase fewer than 750 cups per day.
b. Student would continue to purchase 750 cups per day.
c. Students would purchase more than 750 cups per day.
d. We do not have enough information to answer this question.

26. If the price of ice cream rose to $30 per gallon, consumers would purchase fewer gallons of ice
cream than if the price were $4 per gallon. If the price of chocolate sauce fell to $0.50 per can,
consumers would purchase more chocolate sauce than if the price were $5 per can. These
relationships illustrate the
a. law of supply.
b. law of demand.
c. difference between normal and inferior goods.
d. difference between substitute and complement goods.

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
794 The Market Forces of Supply and Demand

27. A table that shows the relationship between the price of a good and the quantity demanded of
that good is called a
a. price-quantity schedule.
b. buyer schedule.
c. demand schedule.
d. demand curve.

28. A demand schedule is a table that shows the relationship between

a. quantity demanded and quantity supplied.
b. income and quantity demanded.
c. price and quantity demanded.
d. price and income.

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
The Market Forces of Supply and Demand 795

29. Which of the following is not held constant in a demand schedule?

a. income
b. tastes
c. price
d. expectations

30. The demand curve for a good is a line that relates

a. price and quantity demanded.
b. income and quantity demanded.
c. quantity demanded and quantity supplied.
d. price and income.

ANSWER: a
POINTS: 1
DIFFICULTY: Difficulty: Easy
LEARNING OBJECTIVES: ECON.MANK.15.18 - LO: 4-2
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: DISC: Supply and Demand
Demand
KEYWORDS: BLOOM'S: Knowledge

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
796 The Market Forces of Supply and Demand

31. The line that relates the price of a good and the quantity demanded of that good is called the
demand
a. schedule, and it usually slopes upward.
b. schedule, and it usually slopes downward.
c. curve, and it usually slopes upward.
d. curve, and it usually slopes downward.

32. When drawing a demand curve,

a. demand is measured along the vertical axis, and price is measured along the horizontal axis.
b. quantity demanded is measured along the vertical axis, and price is measured along the
horizontal axis.
c. price is measured along the vertical axis, and demand is measured along the horizontal axis.
d. price is measured along the vertical axis, and quantity demanded is measured along the
horizontal axis.

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The Market Forces of Supply and Demand 797

33. When we move along a given demand curve,

a. only price is held constant.
b. income and price are held constant.
c. all nonprice determinants of demand are held constant.
d. all determinants of quantity demanded are held constant.

34. Once the demand curve for a product or service is drawn, it

a. remains stable over time.
b. can shift either rightward or leftward.
c. is possible to move along the curve, but the curve will not shift.
d. tends to become steeper over time.

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
798 The Market Forces of Supply and Demand

35. If something happens to alter the quantity demanded at any given price, then
a. the demand curve becomes steeper.
b. the demand curve becomes flatter.
c. the demand curve shifts.
d. we move along the demand curve.

36. When quantity demanded decreases at every possible price, the demand curve has
a. shifted to the left.
b. shifted to the right.
c. not shifted; rather, we have moved along the demand curve to a new point on the same curve.
d. not shifted; rather, the demand curve has become flatter.

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
The Market Forces of Supply and Demand 799

37. When quantity demanded increases at every possible price, the demand curve has
a. shifted to the left.
b. shifted to the right.
c. not shifted; rather, we have moved along the demand curve to a new point on the same curve.
d. not shifted; rather, the demand curve has become steeper.

38. The market demand curve

a. is found by vertically adding the individual demand curves.
b. slopes upward.
c. represents the sum of the prices that all the buyers are willing to pay for a given quantity of
the good.
d. represents the sum of the quantities demanded by all the buyers at each price of the good.

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
800 The Market Forces of Supply and Demand

39. The market demand curve

a. is the sum of all individual demand curves.
b. is the demand curve for every product in an industry.
c. shows the average quantity demanded by individual demanders at each price.
d. is always flatter than an individual demand curve.

40. To obtain the market demand curve for a product, sum the individual demand curves
a. vertically.
b. diagonally.
c. horizontally.
d. and then average them.

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
The Market Forces of Supply and Demand 801

41. A market demand curve shows

a. the relationship between price and the number of buyers in a market.
b. how quantity demanded changes when the number of sellers changes.
c. the sum of all prices that individual buyers are willing and able to pay for each possible
quantity of the good.
d. how much of a good all buyers are willing and able to buy at each possible price.

42. A market demand curve shows how the total quantity demanded of a good varies as
a. income varies.
b. price varies.
c. price of the nearest substitute good varies.
d. supply varies.

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
802 The Market Forces of Supply and Demand

43. The sum of all the individual demand curves for a product is called
a. income demand.
b. equilibrium demand.
c. complementary demand.
d. market demand.

44. Which of the following is not an expression for the sum of all the individual demand curves for a
product?
a. total demand
b. market demand
c. equilibrium demand
d. aggregate demand

Table 4-1

Quantity Demanded Quantity Demanded Quantity Demanded

Price by Michelle by Laura by Hillary
$5 5 4 11
$4 6 6 13
$3 7 8 15
$2 8 10 17
$1 9 12 19
$0 10 14 21

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The Market Forces of Supply and Demand 803

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
804 The Market Forces of Supply and Demand

45. Refer to Table 4-1. If the market consists of Michelle, Laura, and Hillary and the price falls by
$1, the quantity demanded in the market increases by
a. 2 units.
b. 3 units.
c. 4 units.
d. 5 units.

46. Refer to Table 4-1. If the market consists of Michelle and Laura only and the price falls by $1,
the quantity demanded in the market increases by
a. 2 units.
b. 3 units.
c. 4 units.
d. 5 units.

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
The Market Forces of Supply and Demand 805

47. Refer to Table 4-1. If the market consists of Michelle and Hillary only and the price falls by $1,
the quantity demanded in the market increases by
a. 2 units.
b. 3 units.
c. 4 units.
d. 5 units.

48. Refer to Table 4-1. If the market consists of Laura and Hillary only and the price falls by $1,
the quantity demanded in the market increases by
a. 2 units.
b. 3 units.
c. 4 units.
d. 5 units.

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
806 The Market Forces of Supply and Demand

49. Refer to Table 4-1. Which of the following illustrates the market demand curve?

ANSWER: c
POINTS: 1
DIFFICULTY: Difficulty: Easy
LEARNING OBJECTIVES: ECON.MANK.15.18 - LO: 4-2
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: DISC: Supply and Demand
Demand

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
The Market Forces of Supply and Demand 807

KEYWORDS: BLOOM'S: Knowledge

Table 4-2

Abby’s Brandi’s Carrie’s DeeDee’

Quantity Quantity Quantity s
Demanded Demanded Demanded Quantity
Price Demand
ed
$12 2 1 3 4
$10 4 4 4 5
$8 6 7 5 6
$6 8 8 4 7
$4 10 9 3 8
$2 12 10 2 9

50. Refer to Table 4-2. Whose demand does not obey the law of demand?
a. Abby’s
b. Brandi’s
c. Carrie’s
d. DeeDee’s

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
808 The Market Forces of Supply and Demand

51. Refer to Table 4-2. Suppose Abby, Brandi, Carrie, and DeeDee are the only four buyers in the
market. If the price is $8, then the market quantity demanded is
a. 4 units.
b. 6 units.
c. 24 units.
d. 32 units.

52. Refer to Table 4-2. Suppose Abby, Brandi, Carrie, and DeeDee are the only four buyers in the
market. When the price decreases from $6 to $4, the market quantity demanded
a. increases by 0.75 units.
b. increases by 3 units.
c. increases by 4 units.
d. decreases by 27 units.

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
The Market Forces of Supply and Demand 809

Table 4-3

Bert’s Ernie’s Grover’s Oscar’s

Quantity Quantity Quantity Quantity
Price Demanded Demanded Demanded Demanded
$0.00 20 16 4 8
$0.50 18 12 6 6
$1.00 14 10 2 5
$1.50 12 8 0 4
$2.00 6 6 0 2
$2.50 0 4 0 0

53. Refer to Table 4-3. Whose demand does not obey the law of demand?
a. Bert’s
b. Ernie’s
c. Grover’s
d. Oscar’s

54. Refer to Table 4-3. If these are the only four buyers in the market, then the market quantity
demanded at a price of $1 is
a. 4 units.
b. 7.75 units.
c. 14 units.
d. 31 units.

ANSWER: d
POINTS: 1
DIFFICULTY: Difficulty: Moderate
LEARNING OBJECTIVES: ECON.MANK.15.18 - LO: 4-2
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: DISC: Supply and Demand
Demand

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
810 The Market Forces of Supply and Demand

KEYWORDS: BLOOM'S: Application

55. Refer to Table 4-3. If these are the only four buyers in the market, then the market quantity
demanded at a price of $2 is
a. 0 units.
b. 3.5 units.
c. 12 units.
d. 14 units.

56. Refer to Table 4-3. If these are the only four buyers in the market, then when the price increases
from $1.00 to $1.50, the market quantity demanded
a. decreases by 1.75 units.
b. increases by 2 units.
c. decreases by 7 units.
d. decreases by 24 units.

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
The Market Forces of Supply and Demand 811

57. Refer to Table 4-3. For whom is the good a normal good?
a. Bert only
b. Grover only
c. Bert, Ernie, Grover, and Oscar
d. This cannot be determined from the table.

Table 4-4

Quantity Demanded Quantity Demanded Quantity Demanded

by Adam by Barb by Carl
Price
$10 10 8 22
$8 12 12 26
$6 14 16 30
$4 16 20 34
$2 18 24 38
$0 20 28 42

58. Refer to Table 4-4. Suppose the market consists of Adam, Barb, and Carl. If the price falls by
$2, the quantity demanded in the market increases by
a. 4 units.
b. 6 units.
c. 8 units.
d. 10 units.

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
812 The Market Forces of Supply and Demand

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
The Market Forces of Supply and Demand 813

59. Refer to Table 4-4. Suppose the market consists of Barb and Carl only. If the price falls by $2,
the quantity demanded in the market increases by
a. 4 units.
b. 6 units.
c. 8 units.
d. 10 units.

60. Refer to Table 4-4. Suppose the market consists of Adam and Barb only. If the price rises by
$2, the quantity demanded in the market falls by
a. 4 units.
b. 6 units.
c. 8 units.
d. 10 units.

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
814 The Market Forces of Supply and Demand

Table 4-5

The table below shows the quantities demanded of cases of Mt. Dew per month by four families
at various prices.

Price of Case The Adams The Jones The The

of Mr. Dew Family Family Smith Williams
Family Family
$7 9 15 12 14
$8 8 12 10 10
$9 7 9 8 6
$10 6 6 6 2

61. Refer to Table 4-5. Suppose the four families listed in the table are the only demanders of Mt.
Dew in the market. If the price of a case of Mt. Dew decreases by $1, the
a. market quantity demanded decreases by 10.
b. market quantity demanded increases by 10.
c. Adams family increases its quantity demanded by more than the Smith family.
d. Jones family increases its quantity demanded by more than the Williams family.

62. Refer to Table 4-5. If the four families listed in the table are the only demanders of Mt. Dew in
the market, which of the following is a correct graph of the market demand?

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
The Market Forces of Supply and Demand 815

ANSWER: a
POINTS: 1
DIFFICULTY: Difficulty: Challenging
LEARNING OBJECTIVES: ECON.MANK.15.18 - LO: 4-2
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: DISC: Supply and Demand
Demand
KEYWORDS: BLOOM'S: Analysis
NOTES: r

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
816 The Market Forces of Supply and Demand

63. Refer to Table 4-5. Which of the following could cause all four families to demand more Mt.
Dew at all prices?
a. The price of sugar decreases.
b. All four family incomes increase, and Mt. Dew is a normal good.
c. A major university study reveals that drinking Mt. Dew can cause diabetes.
d. The technology for bottling carbonated beverages improves.

Figure 4-2

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The Market Forces of Supply and Demand 817

64. Refer to Figure 4-2. Suppose Phil and Miss Kay are the only consumers in the market. If the
price is $12, then the market quantity demanded is
a. 0 units.
b. 2 units.
c. 4 units.
d. 6 units.

65. Refer to Figure 4-2. Suppose Phil and Miss Kay are the only consumers in the market. If the
price is $10, then the market quantity demanded is
a. 0 units.
b. 2 units.
c. 4 units.
d. 6 units.

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
818 The Market Forces of Supply and Demand

66. Refer to Figure 4-2. Suppose Phil and Miss Kay are the only consumers in the market. If the
price is $6, then the market quantity demanded is
a. 4 units.
b. 6 units.
c. 8 units.
d. 12 units.

Figure 4-3

Consumer 1 Consumer 2

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The Market Forces of Supply and Demand 819

67. Refer to Figure 4-3. If these are the only two consumers in the market, then the market quantity
demanded at a price of $15 is
a. 0 units.
b. 10 units.
c. 15 units.
d. 25 units.

68. Refer to Figure 4-3. If these are the only two consumers in the market, then the market quantity
demanded at a price of $10 is
a. 0 units.
b. 5 units.
c. 8.33 units.
d. 25 units.

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
820 The Market Forces of Supply and Demand

69. Refer to Figure 4-3. If these are the only two consumers in the market, then the market quantity
demanded at a price of $6 is
a. 12 units.
b. 14 units.
c. 19 units.
d. 21 units.

Figure 4-4

Yasmine Mercedes

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The Market Forces of Supply and Demand 821

70. Refer to Figure 4-4. If Yasmine and Mercedes are the only two consumers in the market, then
the market quantity demanded at a price of $12 is
a. 3 units.
b. 6 units.
c. 9 units.
d. 12 units.

71. Refer to Figure 4-4. Suppose Yasmine and Mercedes are the only two consumers in the market.
When the market price falls from $12 to $6, the quantity demanded increases by
a. 6 units.
b. 9 units.
c. 12 units.
d. 15 units.

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
822 The Market Forces of Supply and Demand

72. Refer to Figure 4-4. Which of the following statements is correct?

a. If the price is $6, the market quantity demanded is 15 units.
b. If the price is $9, the market quantity demanded is 24 units.
c. If the price is $12, the market quantity demanded is 9 units.
d. If the price is $15, the market quantity demanded is 39 units.

73. Suppose John and Wayne are the only two demanders of cowboy movies. Each month, John
buys six cowboy movies when the price is $10 each, and he buys four cowboy movies when the
price is $15 each. Each month, Wayne buys four cowboy movies when the price is $10 each, and
he buys two cowboy movies when the price is $15 each. Which of the following points is on the
market demand curve?
a. quantity demanded = 2; price = $15
b. quantity demanded = 4; price = $25
c. quantity demanded = 10; price = $10
d. quantity demanded = 16; price = $25

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
The Market Forces of Supply and Demand 823

74. Suppose Spencer and Kate are the only two demanders of lemonade. Each month, Spencer buys
six glasses of lemonade when the price is $1.00 per glass, and he buys four glasses when the
price is $1.50 per glass. Each month, Kate buys four glasses of lemonade when the price is $1.00
per glass, and she buys two glasses when the price is $1.50 per glass. Which of the following
points is on the market demand curve?
Point Price Quantity
A $1.00 4
B $1.00 10
C $1.50 2
D $1.50 6
a. B only
b. B and D only
c. A and C only
d. D only

75. An increase in demand is represented by a

a. movement downward and to the right along a demand curve.
b. movement upward and to the left along a demand curve.
c. rightward shift of a demand curve.
d. leftward shift of a demand curve.

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
824 The Market Forces of Supply and Demand

76. A decrease in demand is represented by a

a. movement downward and to the right along a demand curve.
b. movement upward and to the left along a demand curve.
c. rightward shift of a demand curve.
d. leftward shift of a demand curve.

77. A leftward shift of a demand curve is called a(n)

a. increase in demand.
b. decrease in demand.
c. decrease in quantity demanded.
d. increase in quantity demanded.

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
The Market Forces of Supply and Demand 825

78. A rightward shift of a demand curve is called a(n)

a. increase in demand.
b. decrease in demand.
c. decrease in quantity demanded.
d. increase in quantity demanded.

79. If buyers today become more willing and able than before to purchase larger quantities of stand
up paddle boards (SUPs) at each price of SUPs, then
a. we will observe a movement downward and to the right along the demand curve for SUPs.
b. we will observe a movement upward and to the left along the demand curve for SUPs.
c. the demand curve for SUPs will shift to the right.
d. the demand curve for SUPs will shift to the left.

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
826 The Market Forces of Supply and Demand

80. When the price of peaches changes, the demand curve for peaches
a. shifts because the price of peaches is measured on the vertical axis of the graph.
b. shifts because the quantity demanded of peaches is measured on the horizontal axis of the
graph.
c. does not shift because the price of peaches is measured on the vertical axis of the graph.
d. does not shift because the price of peaches is measured on the horizontal axis of the graph.

81. Which of the following changes would not shift the demand curve for a good or service?
a. a change in income
b. a change in the price of the good or service
c. a change in expectations about the future price of the good or service
d. a change in the price of a related good or service

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
The Market Forces of Supply and Demand 827

82. Which of the following would not shift the demand curve for mp3 players?
a. a decrease in the price of mp3 players
b. a fad that makes mp3 players more popular among 12-25 year olds
c. an increase in the price of digital music downloads, a complement for mp3 players
d. a decrease in the price of satellite radio, a substitute for mp3 players

83. Which of the following events would cause a movement upward and to the left along the
demand curve for olives?
a. The number of people who purchase olives decreases.
b. Consumer income decreases, and olives are a normal good.
c. The price of pickles decreases, and pickles are a substitute for olives.
d. The price of olives rises.

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
828 The Market Forces of Supply and Demand

84. A movement along the demand curve might be caused by a change in

a. income.
b. the prices of substitutes or complements.
c. expectations about future prices.
d. the price of the good or service that is being demanded.

85. Holding the nonprice determinants of demand constant, a change in price would
a. result in either a decrease in demand or an increase in demand.
b. result in a movement along a stationary demand curve.
c. result in a shift of supply.
d. have no effect on the quantity demanded.

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
The Market Forces of Supply and Demand 829

86. The demand curve for coffee shifts

a. only when income changes.
b. when a determinant of the demand for coffee other than the price of coffee changes.
c. when the price of coffee changes.
d. Both b and c are correct.

87. Which of the following is not a determinant of the demand for a particular good?
a. the prices of related goods
b. income
c. tastes
d. the prices of the inputs used to produce the good

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
830 The Market Forces of Supply and Demand

88. Each of the following is a determinant of demand except

a. tastes.
b. production technology.
c. expectations.
d. the prices of related goods.

89. Which of the following is not a determinant of demand?

a. the price of a resource that is used to produce the good
b. the price of a complementary good
c. the price of the good next month
d. the price of a substitute good

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
The Market Forces of Supply and Demand 831

90. If the demand for a good falls when income falls, then the good is called a(n)
a. normal good.
b. regular good.
c. luxury good.
d. inferior good.

ANSWER: a
POINTS: 1
DIFFICULTY: Difficulty: Easy
LEARNING OBJECTIVES: ECON.MANK.15.18 - LO: 4-2
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: DISC: Elasticity
Income Elasticity of Demand
KEYWORDS: BLOOM'S: Knowledge

91. If a good is normal, then an increase in income will result in a(n)

a. increase in the demand for the good.
b. decrease in the demand for the good.
c. movement down and to the right along the demand curve for the good.
d. movement up and to the left along the demand curve for the good.

ANSWER: a
POINTS: 1

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
832 The Market Forces of Supply and Demand

DIFFICULTY: Difficulty: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.18 - LO: 4-2
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: DISC: Elasticity
Income Elasticity of Demand
KEYWORDS: BLOOM'S: Comprehension

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
The Market Forces of Supply and Demand 833

92. If Max experiences a decrease in his income, then we would expect Max’s demand for
a. each good he purchases to remain unchanged.
b. normal goods to decrease.
c. luxury goods to increase.
d. inferior goods to decrease.

ANSWER: b
POINTS: 1
DIFFICULTY: Difficulty: Moderate
LEARNING OBJECTIVES: ECON.MANK.15.18 - LO: 4-2
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: DISC: Elasticity
Income Elasticity of Demand
KEYWORDS: BLOOM'S: Application

93. You lose your job and, as a result, you buy fewer iTunes music downloads. This shows that you
consider iTunes music downloads to be a(n)
a. luxury good.
b. inferior good.
c. normal good.
d. complementary good.

ANSWER: c
POINTS: 1
DIFFICULTY: Difficulty: Moderate
LEARNING OBJECTIVES: ECON.MANK.15.18 - LO: 4-2
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: DISC: Elasticity
Income Elasticity of Demand
KEYWORDS: BLOOM'S: Application

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
834 The Market Forces of Supply and Demand

94. Pizza is a normal good if the demand

a. for pizza rises when income rises.
b. for pizza rises when the price of pizza falls.
c. curve for pizza slopes upward.
d. curve for pizza shifts to the right when the price of burritos rises, assuming pizza and burritos
are substitutes.

ANSWER: a
POINTS: 1
DIFFICULTY: Difficulty: Moderate
LEARNING OBJECTIVES: ECON.MANK.15.18 - LO: 4-2
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: DISC: Elasticity
Income Elasticity of Demand
KEYWORDS: BLOOM'S: Application

95. Suppose that when income rises, the demand curve for doctor’s visits shifts to the right. In this
case, we know doctor’s visits are
a. inferior goods.
b. normal goods.
c. perfectly competitive goods.
d. durable goods.

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
The Market Forces of Supply and Demand 835

96. Which of the following would shift the demand curve for gasoline to the right?
a. a decrease in the price of gasoline
b. an increase in consumer income, assuming gasoline is a normal good
c. an increase in the price of cars, a complement for gasoline
d. a decrease in the expected future price of gasoline

97. If a decrease in income increases the demand for a good, then the good is a(n)
a. substitute good.
b. complementary good.
c. normal good.
d. inferior good.

ANSWER: d
POINTS: 1
DIFFICULTY: Difficulty: Easy
LEARNING OBJECTIVES: ECON.MANK.15.18 - LO: 4-2
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: DISC: Elasticity
Income Elasticity of Demand
KEYWORDS: BLOOM'S: Knowledge

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
836 The Market Forces of Supply and Demand

98. If a increase in income decreases the demand for a good, then the good is a(n)
a. substitute good.
b. complementary good.
c. normal good.
d. inferior good.

99. If a good is inferior, then an increase in income will result in a(n)

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
The Market Forces of Supply and Demand 837

100. Kara receives a promotion at work, which increases her income. We would expect Kara’s
demand for
a. each good she purchases to remain unchanged.
b. normal goods to decrease.
c. substitute goods to increase.
d. inferior goods to decrease.

ANSWER: d
POINTS: 1
DIFFICULTY: Difficulty: Moderate
LEARNING OBJECTIVES: ECON.MANK.15.18 - LO: 4-2
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: DISC: Elasticity
Income Elasticity of Demand
KEYWORDS: BLOOM'S: Application
NOTES: r

101. You lose your job and, as a result, you buy more frozen pizzas. For you, frozen pizza are a(n)
a. luxury good.
b. inferior good.
c. normal good.
d. complementary good.

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
838 The Market Forces of Supply and Demand

102. Currently you purchase ten frozen pizza per month. You will graduate from college in
December, and you will start a new job in January. You have no plans to purchase frozen
pizzas in January. For you, frozen pizzas are a(n)
a. substitute good.
b. normal good.
c. inferior good.
d. complementary good.

103. Soup is an inferior good if the demand

a. for soup falls when the price of a substitute for soup rises.
b. for soup rises when the price of soup falls.
c. curve for soup slopes upward.
d. for soup falls when income rises.

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
The Market Forces of Supply and Demand 839

104. Suppose that Amanda receives a pay increase. We would expect

a. to observe Amanda moving down and to the right along her given demand curve.
b. Amanda's demand for inferior goods to decrease.
c. Amanda's demand for each of two goods that are complements to increase.
d. Amanda's demand for normal goods to decrease.

105. If macaroni and cheese is an inferior good, then an increase in

a. the price will cause the demand curve for macaroni and cheese to shift to the left.
b. the price will cause the demand curve for macaroni and cheese to shift to the right.
c. a consumer’s income will cause the demand curve for macaroni and cheese to shift to the
left.
d. a consumer’s income will cause the demand curve for macaroni and cheese to shift to the
right.

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
840 The Market Forces of Supply and Demand

106. Two goods are substitutes when a decrease in the price of one good
a. decreases the demand for the other good.
b. decreases the quantity demanded of the other good.
c. increases the demand for the other good.
d. increases the quantity demanded of the other good.

ANSWER: a
POINTS: 1
DIFFICULTY: Difficulty: Easy
LEARNING OBJECTIVES: ECON.MANK.15.18 - LO: 4-2
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: DISC: Elasticity
Cross-Price Elasticity of Demand
KEYWORDS: BLOOM'S: Knowledge

107. Suppose that a decrease in the price of good X results in fewer units of good Y being
demanded. This implies that X and Y are
a. complementary goods.
b. normal goods.
c. inferior goods.
d. substitute goods.

ANSWER: d
POINTS: 1
DIFFICULTY: Difficulty: Moderate
LEARNING OBJECTIVES: ECON.MANK.15.18 - LO: 4-2
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: DISC: Elasticity
Cross-Price Elasticity of Demand
KEYWORDS: BLOOM'S: Comprehension

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
The Market Forces of Supply and Demand 841

108. Good X and good Y are substitutes. If the price of good Y increases, then the
a. demand for good X will decrease.
b. quantity demanded of good X will decrease.
c. demand for good X will increase.
d. quantity demanded of good X will increase.

ANSWER: c
POINTS: 1
DIFFICULTY: Difficulty: Moderate
LEARNING OBJECTIVES: ECON.MANK.15.18 - LO: 4-2
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: DISC: Elasticity
Cross-Price Elasticity of Demand
KEYWORDS: BLOOM'S: Comprehension

109. A likely example of substitute goods for most people would be

a. peanut butter and jelly.
b. tennis balls and tennis rackets.
c. televisions and subscriptions to cable television services.
d. pencils and pens.

ANSWER: d
POINTS: 1
DIFFICULTY: Difficulty: Moderate
LEARNING OBJECTIVES: ECON.MANK.15.18 - LO: 4-2
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: DISC: Elasticity
Cross-Price Elasticity of Demand
KEYWORDS: BLOOM'S: Application

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
842 The Market Forces of Supply and Demand

110. A likely example of substitute goods for most people would be

a. tables and chairs.
b. bicycles and helmets.
c. apple juice and orange juice.
d. coffee and sugar.

ANSWER: c
POINTS: 1
DIFFICULTY: Difficulty: Moderate
LEARNING OBJECTIVES: ECON.MANK.15.18 - LO: 4-2
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: DISC: Elasticity
Cross-Price Elasticity of Demand
KEYWORDS: BLOOM'S: Application
NOTES: r

111. If muffins and bagels are substitutes, a higher price for bagels would result in a(n)
a. increase in the demand for bagels.
b. decrease in the demand for bagels.
c. increase in the demand for muffins.
d. decrease in the demand for muffins.

ANSWER: c
POINTS: 1
DIFFICULTY: Difficulty: Moderate
LEARNING OBJECTIVES: ECON.MANK.15.18 - LO: 4-2
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: DISC: Elasticity
Cross-Price Elasticity of Demand
KEYWORDS: BLOOM'S: Application

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
The Market Forces of Supply and Demand 843

112. If Kindle e-readers and Nook e-readers are substitutes, a higher price for Nooks would result in
a(n)
a. increase in the demand for Nooks.
b. decrease in the demand for Nooks.
c. increase in the demand for Kindles.
d. decrease in the demand for Kindles.

ANSWER: c
POINTS: 1
DIFFICULTY: Difficulty: Moderate
LEARNING OBJECTIVES: ECON.MANK.15.18 - LO: 4-2
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: DISC: Elasticity
Cross-Price Elasticity of Demand
KEYWORDS: BLOOM'S: Application
NOTES: r

113. You wear either shorts or sweatpants every day. You notice that sweatpants have gone on sale,
so your demand for
a. sweatpants will increase.
b. sweatpants will decrease.
c. shorts will increase.
d. shorts will decrease.

ANSWER: d
POINTS: 1
DIFFICULTY: Difficulty: Moderate
LEARNING OBJECTIVES: ECON.MANK.15.18 - LO: 4-2
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: DISC: Elasticity
Cross-Price Elasticity of Demand
KEYWORDS: BLOOM'S: Application

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
844 The Market Forces of Supply and Demand

114. If mayonnaise and Miracle Whip are substitutes, then which of the following would increase
the demand for Miracle Whip?
a. a decrease in the price of Miracle Whip
b. an increase in the price of mayonnaise
c. a decrease in the price of mayonnaise
d. Both a and b are correct.

ANSWER: b
POINTS: 1
DIFFICULTY: Difficulty: Moderate
LEARNING OBJECTIVES: ECON.MANK.15.18 - LO: 4-2
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: DISC: Elasticity
Cross-Price Elasticity of Demand
KEYWORDS: BLOOM'S: Comprehension
NOTES: r

115. Two goods are complements when a decrease in the price of one good
a. decreases the quantity demanded of the other good.
b. decreases the demand for the other good.
c. increases the quantity demanded of the other good.
d. increases the demand for the other good.

ANSWER: d
POINTS: 1
DIFFICULTY: Difficulty: Easy
LEARNING OBJECTIVES: ECON.MANK.15.18 - LO: 4-2
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: DISC: Elasticity
Cross-Price Elasticity of Demand
KEYWORDS: BLOOM'S: Knowledge

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
The Market Forces of Supply and Demand 845

116. If textbooks and study guides are complements, then an increase in the price of textbooks will
result in
a. more textbooks being sold.
b. more study guides being sold.
c. fewer study guides being sold.
d. no difference in the quantity sold of either good.

ANSWER: c
POINTS: 1
DIFFICULTY: Difficulty: Moderate
LEARNING OBJECTIVES: ECON.MANK.15.18 - LO: 4-2
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: DISC: Elasticity
Cross-Price Elasticity of Demand
KEYWORDS: BLOOM'S: Comprehension
NOTES: r

117. A likely example of complementary goods for most people would be

a. butter and margarine.
b. lawnmowers and automobiles.
c. chips and salsa.
d. cola and lemonade.

ANSWER: c
POINTS: 1
DIFFICULTY: Difficulty: Moderate
LEARNING OBJECTIVES: ECON.MANK.15.18 - LO: 4-2
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: DISC: Elasticity
Cross-Price Elasticity of Demand
KEYWORDS: BLOOM'S: Application

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
846 The Market Forces of Supply and Demand

118. A likely example of complementary goods for most people would be

a. canoes and paddles.
b. snow mobiles and sofas.
c. coffee and tea.
d. tennis balls and basketballs.

ANSWER: a
POINTS: 1
DIFFICULTY: Difficulty: Moderate
LEARNING OBJECTIVES: ECON.MANK.15.18 - LO: 4-2
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: DISC: Elasticity
Cross-Price Elasticity of Demand
KEYWORDS: BLOOM'S: Application
NOTES: r

119. A higher price for batteries would result in a(n)

a. increase in the demand for flashlights.
b. decrease in the demand for flashlights.
c. increase in the demand for batteries.
d. decrease in the demand for batteries.

ANSWER: b
POINTS: 1
DIFFICULTY: Difficulty: Moderate
LEARNING OBJECTIVES: ECON.MANK.15.18 - LO: 4-2
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: DISC: Elasticity
Cross-Price Elasticity of Demand
KEYWORDS: BLOOM'S: Application

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
The Market Forces of Supply and Demand 847

120. Suppose you like to make, from scratch, pies filled with banana cream and vanilla pudding.
You notice that the price of bananas has increased. As a result, your demand for vanilla
pudding would
a. decrease.
b. increase.
c. be unaffected.
d. There is insufficient information given to answer the question.

ANSWER: a
POINTS: 1
DIFFICULTY: Difficulty: Moderate
LEARNING OBJECTIVES: ECON.MANK.15.18 - LO: 4-2
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: DISC: Elasticity
Cross-Price Elasticity of Demand
KEYWORDS: BLOOM'S: Application

121. Holding all other things constant, a higher price for ski lift tickets would
a. increase the number of skiers.
b. increase the price of skis.
c. decrease the number of skis sold.
d. decrease the demand for other winter recreational activities.

ANSWER: c
POINTS: 1
DIFFICULTY: Difficulty: Moderate
LEARNING OBJECTIVES: ECON.MANK.15.18 - LO: 4-2
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: DISC: Elasticity
Cross-Price Elasticity of Demand
KEYWORDS: BLOOM'S: Application

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
848 The Market Forces of Supply and Demand

122. When quantity demanded has increased at every price, it might be because
a. the number of buyers in the market has decreased.
b. income has increased, and the good is an inferior good.
c. the costs incurred by sellers producing the good have decreased.
d. the price of a complementary good has decreased.

ANSWER: d
POINTS: 1
DIFFICULTY: Difficulty: Moderate
LEARNING OBJECTIVES: ECON.MANK.15.18 - LO: 4-2
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: DISC: Elasticity
Cross-Price Elasticity of Demand
KEYWORDS: BLOOM'S: Comprehension

123. Which of the following might cause the demand curve for an inferior good to shift to the left?
a. a decrease in income
b. an increase in the price of a substitute
c. an increase in the price of a complement
d. None of the above is correct.

ANSWER: c
POINTS: 1
DIFFICULTY: Difficulty: Challenging
LEARNING OBJECTIVES: ECON.MANK.15.18 - LO: 4-2
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: DISC: Elasticity
Cross-Price Elasticity of Demand
KEYWORDS: BLOOM'S: Analysis

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
The Market Forces of Supply and Demand 849

124. If toast and butter are complements, then which of the following would increase the demand for
toast?
a. a decrease in the price of toast
b. a decrease in the price of butter
c. an increase in the price of butter
d. Both a and b are correct.

ANSWER: b
POINTS: 1
DIFFICULTY: Difficulty: Moderate
LEARNING OBJECTIVES: ECON.MANK.15.18 - LO: 4-2
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: DISC: Elasticity
Cross-Price Elasticity of Demand
KEYWORDS: BLOOM'S: Comprehension

125. When it comes to people's tastes, economists generally believe that

a. tastes are based on forces that are well within the realm of economics.
b. tastes are based on historical and psychological forces that are beyond the realm of
economics.
c. tastes can only be studied through well-constructed, real-life models.
d. because tastes do not directly affect demand, there is little need to explain people's tastes.

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
850 The Market Forces of Supply and Demand

126. Economists normally

a. do not try to explain people's tastes, but they do try to explain what happens when tastes
change.
b. believe that they must be able to explain people's tastes in order to explain what happens
when tastes change.
c. do not believe that people's tastes determine demand, so they ignore the subject of tastes.
d. incorporate tastes into economic models only to the extent that tastes determine whether
pairs of goods are substitutes or complements.

127. Suppose the American Medical Association announces that men who shave their heads are less
likely to die of heart failure. We could expect the current demand for
a. hair gel to increase.
b. razors to increase.
c. combs to increase.
d. shampoo to increase.

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
The Market Forces of Supply and Demand 851

128. Suppose scientists provide evidence that people who drink energy drinks are more likely to
have a heart attack than people who do not drink energy drinks. We would expect to see
a. no change in the demand for energy drinks.
b. a decrease in the demand for energy drinks.
c. an increase in the demand for energy drinks.
d. a decrease in the supply of energy drinks.

129. A very hot summer in Atlanta will cause

a. the demand curve for lemonade to shift to the left.
b. the demand for air conditioners to decrease.
c. the demand for jackets to decrease.
d. a movement downward and to the right along the demand curve for tank tops.

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
852 The Market Forces of Supply and Demand

130. If a study by medical researchers finds that eating brown rice causes weight loss while eating
white rice causes weight gain, then we likely would see
a. an increase in demand for brown rice and a decrease in demand for white rice.
b. a decrease in demand for brown rice and an increase in demand for white rice.
c. an increase in demand for both brown and white rice.
d. no change in demand for either type of rice because weight loss is not a determinant of
demand.

131. Which of the following events could shift the demand curve for gasoline to the left?
a. The income of gasoline buyers rises, and gasoline is a normal good.
b. The income of gasoline buyers falls, and gasoline is an inferior good.
c. Public service announcements run on television encourage people to walk or ride bicycles
instead of driving cars.
d. The price of gasoline rises.

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
The Market Forces of Supply and Demand 853

132. You watch a lot of HGTV during your summer vacation, and you notice that most housing
buyers list granite countertops in their “must have” lists when buying a new or existing house.
You expect the demand for
a. granite countertops to shift to the left.
b. granite countertops to shift to the right.
c. substitute products such as marble countertops to shift to the right.
d. substitute products such as marble countertops to be unaffected by buyers’ preferences for
granite.

133. An increase in the number of college scholarships issued by private foundations would
a. increase the supply of education.
b. decrease the supply of education.
c. increase the demand for education.
d. decrease the demand for education.

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854 The Market Forces of Supply and Demand

134. Today, people changed their expectations about the future. This change
a. can cause a movement along a demand curve.
b. can affect future demand but not today’s demand.
c. can affect today’s demand.
d. cannot affect either today’s demand or future demand.

135. If Miguel expects to earn a higher income next month, he may choose to
a. save more now and spend less of his current income on goods and services.
b. save less now and spend more of his current income on goods and services.
c. decrease his current demand for goods and services.
d. move along his current demand curves for goods and services.

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
The Market Forces of Supply and Demand 855

136. You love peanut butter. You hear on the news that 50 percent of the peanut crop in the South
has been wiped out by drought and that this will cause the price of peanuts to double by the end
of the year. As a result, your demand for peanut butter
a. will increase but not until the end of the year.
b. increases today.
c. decreases as you look for a substitute good.
d. shifts left today.

137. Elena loves orange juice. She reads in the newspaper that 20 percent of the Florida orange crop
was destroyed by a late spring frost. Economists predict that the price of oranges will rise by 50
percent by the end of the year. As a result, Elena’s demand for orange juice
a. will increase but not until the end of the year.
b. increases today.
c. decreases as she looks for a substitute good.
d. shifts left today.

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
856 The Market Forces of Supply and Demand

138. Ford Motor Company announces that next month it will offer $3,000 rebates on new Mustangs.
As a result of this information, today’s demand curve for Mustangs
a. shifts to the right.
b. shifts to the left.
c. shifts either to the right or to the left, but we cannot determine the direction of the shift from
the given information.
d. will not shift; rather, the demand curve for Mustangs will shift to the right next month.

139. What will happen in the market for shotgun-shell ammunition now if buyers expect higher
shotgun-shell prices in the near future?
a. The demand for shotgun-shell ammunition will increase.
b. The demand for shotgun-shell ammunition will decrease.
c. The demand for shotgun-shell ammunition will be unaffected.
d. The supply of shotgun-shell ammunition will increase.

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
The Market Forces of Supply and Demand 857

140. What will happen in the gasoline market now if buyers expect higher gasoline prices in the near
future?
a. The demand for gasoline will increase.
b. The demand for gasoline will decrease.
c. The demand for gasoline will be unaffected.
d. The supply of gasoline will increase.

141. Today's demand curve for gasoline could shift in response to a change in
a. today's price of gasoline.
b. the expected future price of gasoline.
c. the number of sellers of gasoline.
d. All of the above are correct.

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
858 The Market Forces of Supply and Demand

142. If the number of buyers in a market decreases, then

a. demand will increase.
b. demand will decrease.
c. supply will increase.
d. supply will decrease.

143. Which of the following does not affect an individual's demand curve?
a. expectations
b. income
c. prices of related goods
d. the number of buyers

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The Market Forces of Supply and Demand 859

144. Warrensburg is a small college town in Missouri. At the end of August each year, the market
demand for fast food in Warrensburg
a. increases.
b. decreases.
c. remains constant, but we observe a movement downward and to the right along the demand
curve.
d. remains constant, but we observe a movement upward and to the left along the demand
curve.

145. The University of Iowa was voted the #1 “party school” in 2013. The University of Iowa is
located in Iowa City. At the end of August each year, the market demand for beer in Iowa City
a. decreases.
b. increases.
c. remains constant, but we observe a movement downward and to the right along the demand
curve.
d. remains constant, but we observe a movement upward and to the left along the demand
curve.

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
860 The Market Forces of Supply and Demand

Figure 4-5

146. Refer to Figure 4-5. Which of the following would cause the demand curve to shift from
Demand B to Demand C in the market for mattresses?
a. a decrease in the price of mattresses
b. a decrease in the price of custom wooden sleigh bed frames
c. a change in consumer tastes away from wooden bedroom furniture
d. a decrease in the number of people in the United States

ANSWER: b
POINTS: 1
DIFFICULTY: Difficulty: Moderate
LEARNING OBJECTIVES: ECON.MANK.15.18 - LO: 4-2
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: DISC: Elasticity
Cross-Price Elasticity of Demand
KEYWORDS: BLOOM'S: Application
NOTES: r

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
The Market Forces of Supply and Demand 861

147. Refer to Figure 4-5. Which of the following would cause the demand curve to shift from
Demand C to Demand A in the market for DVDs?
a. an increase in the price of DVDs
b. a decrease in the price of DVD players
c. a change in consumer preferences toward watching movies in movie theaters rather than at
home
d. an expectation by buyers that their incomes will increase in the very near future

148. Refer to Figure 4-5. Which of the following would cause the demand curve to shift from
Demand C to Demand A in the market for tennis balls in the United States?
a. an increase in the price of tennis balls
b. a decrease in the price of tennis racquets
c. an expectation by buyers that their incomes will increase in the very near future
d. a decrease in the number of people in the United States under age 70

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
862 The Market Forces of Supply and Demand

149. Refer to Figure 4-5. Which of the following would cause the demand curve to shift from
Demand A to Demand B in the market for golf balls in the United States?
a. a decrease in the price of golf balls
b. an increase in the price of green fees
c. an expectation by buyers that their incomes will increase in the very near future
d. a change in consumer tastes away from golf and toward tennis

150. Refer to Figure 4-5. Which of the following would cause the demand curve to shift from
Demand A to Demand B in the market for oranges in the United States?
a. a freeze in Florida
b. a technological advance that allows oranges to ripen faster
c. a decrease in the price of apples
d. an announcement by the FDA that oranges prevent heart disease

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
The Market Forces of Supply and Demand 863

151. Refer to Figure 4-5. Which of the following would cause the demand curve to shift from
Demand B to Demand A in the market for oranges in the United States?
a. a freeze in Florida
b. a technological advance that allows oranges to ripen faster
c. a decrease in the price of apples
d. an announcement by the FDA that oranges prevent heart disease

ANSWER: c
POINTS: 1
DIFFICULTY: Difficulty: Moderate
LEARNING OBJECTIVES: ECON.MANK.15.18 - LO: 4-2
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: DISC: Elasticity
Cross-Price Elasticity of Demand
KEYWORDS: BLOOM'S: Application
NOTES: r

Figure 4-6

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864 The Market Forces of Supply and Demand

152. Refer to Figure 4-6. Suppose that the federal government is concerned about obesity in the
United States. Congress is considering two plans. One would require “junk food” producers to
include warning labels on all junk food. The other would impose a tax on all products
considered to be junk food. If the warning labels are successful, we could illustrate the plan as
producing a movement from
a. Point A to Point B in Panel 1.
b. Point B to Point A in Panel 1.
c. Point A to Point C in Panel 2.
d. Point C to Point A in Panel 2.

153. Refer to Figure 4-6. Suppose that the federal government is concerned about obesity in the
United States. Congress is considering two plans. One would require “junk food” producers to
include warning labels on all junk food. The other would impose a tax on all products
considered to be junk food. We could illustrate the tax as producing a movement from
a. Point A to Point B in Panel 1.
b. Point B to Point A in Panel 1.
c. Point A to Point C in Panel 2.
d. Point C to Point A in Panel 2.

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
The Market Forces of Supply and Demand 865

Figure 4-7

154. Refer to Figure 4-7. The shift from Da to Db is called

a. an increase in demand.
b. a decrease in demand.
c. a decrease in quantity demanded.
d. an increase in quantity demanded.

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
866 The Market Forces of Supply and Demand

155. Refer to Figure 4-7. The shift from Db to Da is called

a. an increase in demand.
b. a decrease in demand.
c. a decrease in quantity demanded.
d. an increase in quantity demanded.

156. Refer to Figure 4-7. If the demand curve for Good X shifts from Db to Da, then
a. firms would be willing to supply more of Good X than before at each possible price.
b. people are willing to buy less of Good X than before at each possible price.
c. people’s incomes must have increased.
d. the price of Good X has increased.

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
The Market Forces of Supply and Demand 867

157. Refer to Figure 4-7. If the demand curve for Good X shifts from Da to Db, then
a. firms would be willing to supply less of Good X than before at each possible price.
b. people are willing to buy more of Good X than before at each possible price.
c. people’s incomes must have decreased.
d. the price of Good X has decreased.

158. Refer to Figure 4-7. The movement from Db to Da could be caused by

a. a decrease in price.
b. an increase in the price of a complement.
c. a technological advance.
d. an increase in the price of a substitute.

ANSWER: b
POINTS: 1
DIFFICULTY: Difficulty: Moderate
LEARNING OBJECTIVES: ECON.MANK.15.18 - LO: 4-2
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: DISC: Elasticity
Cross-Price Elasticity of Demand
KEYWORDS: BLOOM'S: Comprehension
NOTES: r

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
868 The Market Forces of Supply and Demand

159. Refer to Figure 4-7. The movement from Da to Db could be caused by

a. a decrease in price.
b. a decrease in income, assuming the good is inferior.
c. buyers expecting the price of the good to fall in the near future.
d. an increase in the price of a complement.

160. Refer to Figure 4-7. The movement from Da to Db in the market for potato chips could be
caused by a(n)
a. decrease in the price of potato chips.
b. decrease in income, assuming that potato chips are a normal good.
c. announcement by the FDA that potato chips cause cancer.
d. increase in the price of a pretzels.

ANSWER: d
POINTS: 1
DIFFICULTY: Difficulty: Moderate
LEARNING OBJECTIVES: ECON.MANK.15.18 - LO: 4-2
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: DISC: Elasticity
Cross-Price Elasticity of Demand
KEYWORDS: BLOOM'S: Comprehension
NOTES: r

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
The Market Forces of Supply and Demand 869

161. Refer to Figure 4-7. The movement from Db to Da in the market for potato chips could be
caused by a(n)
a. decrease in the price of potato chips.
b. decrease in income, assuming that potato chips are a normal good.
c. announcement by the FDA that potato chips lower cholesterol.
d. increase in the price of a pretzels.

Figure 4-8

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870 The Market Forces of Supply and Demand

162. Refer to Figure 4-8. Suppose the figure shows the market demand for laptop computers.
Suppose the price of wireless printers, a complementary good, decreases. Which of the
following changes would occur?
a. a movement along D2 from point A to point B
b. a movement along D2 from point B to point A
c. a shift from D1 to D2
d. a shift from D2 to D1

ANSWER: d
POINTS: 1
DIFFICULTY: Difficulty: Moderate
LEARNING OBJECTIVES: ECON.MANK.15.18 - LO: 4-2
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: DISC: Elasticity
Cross-Price Elasticity of Demand
KEYWORDS: BLOOM'S: Application
NOTES: r

163. Refer to Figure 4-8. Suppose the figure shows the market demand for laptop computers.
Suppose the price of wireless keyboards, a complementary good, increases. Which of the
following changes would occur?
a. a movement along D2 from point A to point B
b. a movement along D2 from point B to point A
c. a shift from D1 to D2
d. a shift from D2 to D1

ANSWER: c
POINTS: 1
DIFFICULTY: Difficulty: Moderate
LEARNING OBJECTIVES: ECON.MANK.15.18 - LO: 4-2
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: DISC: Elasticity
Cross-Price Elasticity of Demand
KEYWORDS: BLOOM'S: Application
NOTES: n

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
The Market Forces of Supply and Demand 871

164. Refer to Figure 4-8. Suppose the figure shows the market demand for Big Box e-readers.
Suppose the price of the leading competitor’s ereaders, a substitute good, decreases. Which of
the following changes would occur?
a. a movement along D2 from point A to point B
b. a movement along D2 from point B to point A
c. a shift from D1 to D2
d. a shift from D2 to D1

ANSWER: c
POINTS: 1
DIFFICULTY: Difficulty: Moderate
LEARNING OBJECTIVES: ECON.MANK.15.18 - LO: 4-2
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: DISC: Elasticity
Cross-Price Elasticity of Demand
KEYWORDS: BLOOM'S: Application
NOTES: n

165. Refer to Figure 4-8. Suppose the figure shows the market demand for coffee. Suppose the
price of tea, a substitute good, increases. Which of the following changes would occur?
a. a movement along D2 from point A to point B
b. a movement along D2 from point B to point A
c. a shift from D1 to D2
d. a shift from D2 to D1

ANSWER: d
POINTS: 1
DIFFICULTY: Difficulty: Moderate
LEARNING OBJECTIVES: ECON.MANK.15.18 - LO: 4-2
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: DISC: Elasticity
Cross-Price Elasticity of Demand
KEYWORDS: BLOOM'S: Application
NOTES: n

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
872 The Market Forces of Supply and Demand

166. For the general population, a 10 percent increase in the price of cigarettes leads to a
a. 1 percent reduction in the quantity demanded of cigarettes.
b. 4 percent reduction in the quantity demanded of cigarettes.
c. 10 percent reduction in the quantity demanded of cigarettes.
d. 12 percent reduction in the quantity demanded of cigarettes.

ANSWER: b
POINTS: 1
DIFFICULTY: Difficulty: Easy
LEARNING OBJECTIVES: ECON.MANK.15.18 - LO: 4-2
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: DISC: Elasticity
Price Elasticity of Demand
KEYWORDS: BLOOM'S: Knowledge

167. For teenagers, a 10 percent increase in the price of cigarettes leads to a

a. 1 percent reduction in the quantity demanded of cigarettes.
b. 4 percent reduction in the quantity demanded of cigarettes.
c. 10 percent reduction in the quantity demanded of cigarettes.
d. 12 percent reduction in the quantity demanded of cigarettes.

ANSWER: d
POINTS: 1
DIFFICULTY: Difficulty: Easy
LEARNING OBJECTIVES: ECON.MANK.15.18 - LO: 4-2
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: DISC: Elasticity
Price Elasticity of Demand
KEYWORDS: BLOOM'S: Knowledge

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
The Market Forces of Supply and Demand 873

168. The belief that tobacco is a “gateway drug” is consistent with

a. the idea that tobacco and marijuana are substitutes.
b. the idea that an increase in income causes a decrease in the demand for tobacco and an
increase in the demand for marijuana.
c. the idea that lower cigarette prices are associated with less use of marijuana.
d. most of the available evidence.

ANSWER: d
POINTS: 1
DIFFICULTY: Difficulty: Moderate
LEARNING OBJECTIVES: ECON.MANK.15.18 - LO: 4-2
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: DISC: Elasticity
Cross-Price Elasticity of Demand
KEYWORDS: BLOOM'S: Application

169. Most studies indicate that tobacco and marijuana tend to be

a. substitutes.
b. complements.
c. unrelated because one good is legal while the other one is illegal.
d. inferior goods.

ANSWER: b
POINTS: 1
DIFFICULTY: Difficulty: Easy
LEARNING OBJECTIVES: ECON.MANK.15.18 - LO: 4-2
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: DISC: Elasticity
Cross-Price Elasticity of Demand
KEYWORDS: BLOOM'S: Knowledge

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
874 The Market Forces of Supply and Demand

170. Opponents of cigarette taxes often argue that tobacco and marijuana are substitutes so that high
cigarette prices
a. encourage marijuana use, and the evidence supports this argument.
b. encourage marijuana use, but the evidence does not support this argument.
c. discourage marijuana use, and the evidence supports this argument.
d. discourage marijuana use, but the evidence does not support this argument.

ANSWER: b
POINTS: 1
DIFFICULTY: Difficulty: Easy
LEARNING OBJECTIVES: ECON.MANK.15.18 - LO: 4-2
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: DISC: Elasticity
Cross-Price Elasticity of Demand
KEYWORDS: BLOOM'S: Knowledge

Figure 4-9

Panel (a) Panel (b)

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The Market Forces of Supply and Demand 875

171. Refer to Figure 4-9. The graphs show the demand for cigarettes. In Panel (a), the arrows are
consistent with which of the following events?
a. The price of marijuana, a complement to cigarettes, increased.
b. Mandatory health warnings were placed on cigarette packages.
c. Several foreign countries banned U.S. cigarettes in their countries.
d. A tax was placed on cigarettes.

172. Refer to Figure 4-9. The graphs show the demand for cigarettes. In Panel (a), the arrows are
consistent with which of the following events?
a. Tobacco and marijuana are complements, and the price of marijuana decreased.
b. Tobacco is a “gateway drug,” and the price of marijuana increased.
c. The price of cigarettes increased.
d. The arrows are consistent with all of these events.

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
876 The Market Forces of Supply and Demand

173. Refer to Figure 4-9. The graphs show the demand for cigarettes. In Panel (b), the arrows are
consistent with which of the following events?
a. an increase in the price of cigarettes
b. placing a tax on cigarettes
c. the prohibition of cigarette advertisements on television
d. decreasing the price of marijuana, given that tobacco and marijuana are complements

Multiple Choice – Section 03: Supply

1. The quantity supplied of a good is the amount that

a. buyers are willing and able to purchase.
b. sellers are able to produce.
c. buyers and sellers agree will be brought to market.
d. sellers are willing and able to sell.

ANSWER: d
POINTS: 1
DIFFICULTY: Difficulty: Easy
LEARNING OBJECTIVES: ECON.MANK.15.19 - LO: 4-3
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: DISC: Supply and Demand
Supply
KEYWORDS: BLOOM'S: Knowledge

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
The Market Forces of Supply and Demand 877

2. If the price of a good is low,

a. firms would increase profit by increasing output.
b. the quantity supplied of the good could be zero.
c. the supply curve for the good will shift to the left.
d. firms can and should raise the price of the product.

ANSWER: b
POINTS: 1
DIFFICULTY: Difficulty: Moderate
LEARNING OBJECTIVES: ECON.MANK.15.19 - LO: 4-3
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: DISC: Supply and Demand
Supply
KEYWORDS: BLOOM'S: Comprehension

3. A decrease in the price of a good will

a. increase supply.
b. decrease supply.
c. increase quantity supplied.
d. decrease quantity supplied.

ANSWER: d
POINTS: 1
DIFFICULTY: Difficulty: Moderate
LEARNING OBJECTIVES: ECON.MANK.15.19 - LO: 4-3
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: DISC: Supply and Demand
Supply
KEYWORDS: BLOOM'S: Comprehension

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
878 The Market Forces of Supply and Demand

4. An increase in the price of a good will

a. increase supply.
b. decrease supply.
c. increase quantity supplied.
d. decrease quantity supplied.

ANSWER: c
POINTS: 1
DIFFICULTY: Difficulty: Moderate
LEARNING OBJECTIVES: ECON.MANK.15.19 - LO: 4-3
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: DISC: Supply and Demand
Supply
KEYWORDS: BLOOM'S: Comprehension

5. When the price of a good or service changes,

a. the demand curve shifts in the opposite direction.
b. the supply curve shifts in the opposite direction.
c. the supply curve shifts in the same direction.
d. there is a movement along a given supply curve.

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
The Market Forces of Supply and Demand 879

6. A movement along the supply curve might be caused by a change in

a. production technology.
b. input prices.
c. expectations about future prices.
d. the price of the good or service that is being supplied.

7. Which of the following would cause a movement along the supply curve for cupcakes?
a. an improvement in technology for commercial mixers
b. a decrease in the price of cupcakes
c. an increase in the price of cake flour
d. All of the above are correct.

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
880 The Market Forces of Supply and Demand

8. Holding the nonprice determinants of supply constant, a change in price would

a. result in either a decrease in supply or an increase in supply.
b. result in a movement along a stationary supply curve.
c. result in a shift of demand.
d. have no effect on the quantity supplied.

9. An increase in the price of a good would

a. increase the supply of the good.
b. increase the amount purchased by buyers.
c. give producers an incentive to produce more.
d. decrease both the quantity demanded of the good and the quantity supplied of the good.

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The Market Forces of Supply and Demand 881

10. An decrease in the price of oranges would lead to a(n)

a. increased supply of oranges.
b. increase in the prices of inputs used in orange production.
c. a movement down and to the left along the supply curve for oranges.
d. a movement up and to the right along the supply curve for oranges.

11. An increase in the price of blueberries would lead to a(n)

a. increased supply of blueberries.
b. a movement up and to the right along the supply curve for blueberries.
c. a movement down and to the left along the supply curve for blueberries.
d. Both a and b are correct.

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882 The Market Forces of Supply and Demand

12. An increase in quantity supplied

a. results in a movement downward and to the left along a fixed supply curve.
b. results in a movement upward and to the right along a fixed supply curve.
c. shifts the supply curve to the left.
d. shifts the supply curve to the right.

13. A decrease in quantity supplied

ANSWER: a
POINTS: 1
DIFFICULTY: Difficulty: Moderate
LEARNING OBJECTIVES: ECON.MANK.15.19 - LO: 4-3
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: DISC: Supply and Demand
Supply
KEYWORDS: BLOOM'S: Comprehension

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
The Market Forces of Supply and Demand 883

Figure 4-10

14. Refer to Figure 4-10. The movement from Point A to Point B represents a(n)
a. shift in the supply curve.
b. decrease in the quantity supplied.
c. increase in the quantity supplied.
d. Both a and b are correct.

ANSWER: b
POINTS: 1
DIFFICULTY: Difficulty: Easy
LEARNING OBJECTIVES: ECON.MANK.15.19 - LO: 4-3
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: DISC: Supply and Demand
Supply
KEYWORDS: BLOOM'S: Knowledge

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
884 The Market Forces of Supply and Demand

15. Refer to Figure 4-10. The movement from Point A to Point B represents a(n)
a. increase in the price.
b. decrease in the quantity supplied.
c. shift in the supply curve.
d. Both a and b are correct.

16. “Other things equal, when the price of a good rises, the quantity supplied of the good also rises,
and when the price falls, the quantity supplied falls as well.” This relationship between price and
quantity supplied
a. is referred to as the law of supply.
b. applies only to a few goods in the economy.
c. is represented by a downward-sloping supply curve.
d. All of the above are correct.

ANSWER: a
POINTS: 1
DIFFICULTY: Difficulty: Easy
LEARNING OBJECTIVES: ECON.MANK.15.19 - LO: 4-3
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: DISC: Supply and Demand
Supply
KEYWORDS: BLOOM'S: Knowledge

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
The Market Forces of Supply and Demand 885

17. The law of supply states that, other things equal, when the price of a good
a. falls, the supply of the good rises.
b. rises, the quantity supplied of the good rises.
c. rises, the supply of the good falls.
d. falls, the quantity supplied of the good rises.

18. The law of supply states that, other things equal, an increase in
a. price causes quantity supplied to increase.
b. price causes quantity supplied to decrease.
c. quantity supplied causes price to increase.
d. quantity supplied causes price to decrease.

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886 The Market Forces of Supply and Demand

19. Other things equal, when the price of a good falls, the
a. quantity supplied of the good increases.
b. supply decreases.
c. quantity supplied of the good decreases.
d. demand increases.

20. Which of these statements best represents the law of supply?

a. When input prices increase, sellers produce less of the good.
b. When production technology improves, sellers produce less of the good.
c. When the price of a good decreases, sellers produce less of the good.
d. When sellers’ supplies of a good increase, the price of the good increases.

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The Market Forces of Supply and Demand 887

21. A supply curve slopes upward because

a. as more is produced, total cost of production falls.
b. an increase in input prices increases supply.
c. the quantity supplied of most goods and services increases over time.
d. an increase in price gives producers an incentive to supply a larger quantity.

22. Which of the following demonstrates the law of supply?

a. When leather became more expensive, belt producers decreased their supply of belts.
b. When car production technology improved, car producers increased their supply of cars.
c. When sweater producers expected sweater prices to rise in the near future, they decreased
their current supply of sweaters.
d. When ketchup prices rose, ketchup sellers increased their quantity supplied of ketchup.

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888 The Market Forces of Supply and Demand

23. Which of the following demonstrates the law of supply?

a. When the price of leather belts rose, leather belt sellers increase their quantity supplied of
leather belts.
b. When car production technology improved, car producers increased their supply of cars.
c. When sweater producers expected sweater prices to rise in the near future, they decreased
their current supply of sweaters.
d. When ketchup prices rose, ketchup sellers decreased their quantity supplied of ketchup.

24. The following table contains a supply schedule for a good.

Price Quantity Supplied

$10 100
$20 Q1
If the law of supply applies to this good, then Q1 could be
a. 0.
b. 50.
c. 100.
d. 150.

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The Market Forces of Supply and Demand 889

25. A supply schedule is a table that shows the relationship between

a. price and quantity supplied.
b. input costs and quantity supplied.
c. quantity demanded and quantity supplied.
d. profit and quantity supplied.

26. Which of the following is not held constant in a supply schedule?

a. production technology
b. the price of the good
c. the prices of inputs
d. expectations

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
890 The Market Forces of Supply and Demand

27. The difference between a supply schedule and a supply curve is that a supply schedule
a. incorporates demand and a supply curve does not.
b. incorporates profit and a supply curve does not.
c. can shift, but a supply curve cannot shift.
d. is a table, and a supply curve is drawn on a graph.

Figure 4-11

28. Refer to Figure 4-11. The movement from point A to point B on the graph is called
a. a decrease in supply.
b. an increase in supply.
c. an increase in the quantity supplied.
d. a decrease in the quantity supplied.

ANSWER: c
POINTS: 1
DIFFICULTY: Difficulty: Moderate
LEARNING OBJECTIVES: ECON.MANK.15.19 - LO: 4-3
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: DISC: Supply and Demand
Supply

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
The Market Forces of Supply and Demand 891

KEYWORDS: BLOOM'S: Comprehension

29. Refer to Figure 4-11. The movement from point A to point B on the graph is caused by
a. a decrease in the price of the good.
b. an increase in the price of the good.
c. an advance in production technology.
d. a decrease in input prices.

30. Refer to Figure 4-11. The movement from point A to point B on the graph represents
a. an increased willingness and ability on the part of suppliers to supply the good at each
possible price.
b. an increase in the number of suppliers.
c. a decrease in the price of a relevant input.
d. an increase in the price of the good that is being supplied and the suppliers’ responses to that
price change.

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892 The Market Forces of Supply and Demand

31. The supply curve for a good is a line that relates

a. profit and quantity supplied.
b. quantity supplied and quantity demanded.
c. price and quantity supplied.
d. price and profit.

ANSWER: c
POINTS: 1
DIFFICULTY: Difficulty: Easy
LEARNING OBJECTIVES: ECON.MANK.15.19 - LO: 4-3
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: DISC: Supply and Demand
Supply
KEYWORDS: BLOOM'S: Knowledge

32. The line that relates the price of a good and the quantity supplied of that good is called the
supply
a. schedule, and it usually slopes upward.
b. schedule, and it usually slopes downward.
c. curve, and it usually slopes upward.
d. curve, and it usually slopes downward.

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The Market Forces of Supply and Demand 893

33. When we move along a given supply curve,

a. only price is held constant.
b. technology and price are held constant.
c. all nonprice determinants of supply are held constant.
d. all determinants of quantity supplied are held constant.

34. Once the supply curve for a product or service is drawn, it

a. remains stable over time.
b. can shift either rightward or leftward.
c. is possible to move along the curve, but the curve will not shift.
d. tends to become steeper over time.

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894 The Market Forces of Supply and Demand

35. If something happens to alter the quantity supplied at any given price, then
a. we move along the supply curve.
b. the supply curve shifts.
c. the supply curve becomes steeper.
d. the supply curve becomes flatter.

36. An increase in supply is represented by a

a. movement downward and to the left along a supply curve.
b. movement upward and to the right along a supply curve.
c. rightward shift of a supply curve.
d. leftward shift of a supply curve.

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
The Market Forces of Supply and Demand 895

37. A decrease in supply is represented by a

a. movement downward and to the left along a supply curve.
b. movement upward and to the right along a supply curve.
c. rightward shift of a supply curve.
d. leftward shift of a supply curve.

38. A leftward shift of a supply curve is called a(n)

a. increase in supply.
b. decrease in supply.
c. decrease in quantity supplied.
d. increase in quantity supplied.

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896 The Market Forces of Supply and Demand

39. A rightward shift of a supply curve is called a(n)

a. increase in supply.
b. decrease in supply.
c. decrease in quantity supplied.
d. increase in quantity supplied.

40. A movement upward and to the right along a supply curve is called a(n)
a. increase in supply.
b. decrease in supply.
c. decrease in quantity supplied.
d. increase in quantity supplied.

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The Market Forces of Supply and Demand 897

41. A movement downward and to the left along a supply curve is called a(n)
a. increase in supply.
b. decrease in supply.
c. decrease in quantity supplied.
d. increase in quantity supplied.

42. When quantity supplied decreases at every possible price, we know that the supply curve has
a. shifted to the left.
b. shifted to the right.
c. not shifted; rather, we have moved along the supply curve to a new point on the same curve.
d. not shifted; rather, the supply curve has become flatter.

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898 The Market Forces of Supply and Demand

43. When quantity supplied increases at every possible price, we know that the supply curve has
a. shifted to the left.
b. shifted to the right.
c. not shifted; rather, we have moved along the supply curve to a new point on the same curve.
d. not shifted; rather, the supply curve has become flatter.

44. The supply curve for stand up paddle boards

a. shifts when the price of stand up paddle boards changes because the price of stand up paddle
boards is measured on the vertical axis of the graph.
b. shifts when the price of stand up paddle boards changes because the quantity supplied of stand
up paddle boards is measured on the horizontal axis of the graph.
c. does not shift when the price of stand up paddle boards changes because the price of stand up
paddle boards is measured on the vertical axis of the graph.
d. does not shift when the price of stand up paddle boards changes because the price of stand up
paddle boards is measured on the horizontal axis of the graph.

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The Market Forces of Supply and Demand 899

45. Which of the following changes would not shift the supply curve for a good or service?
a. a change in production technology
b. a change in the price of the good or service
c. a change in expectations about the future price of the good or service
d. a change in input prices

46. Which of the following would not shift the supply curve for mp3 players?
a. an increase in the price of mp3 players
b. a decrease in the number of sellers of mp3 players
c. an increase in the price of plastic, an input into the production of mp3 players
d. an improvement in the technology used to produce mp3 players

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
900 The Market Forces of Supply and Demand

47. Which of the following events would cause a movement upward and to the right along the
supply curve for mangos?
a. The number of sellers of mangos increases.
b. There is an advance in technology that reduces the cost of producing mangos.
c. The price of fertilizer decreases, and fertilizer is an input in the production of mangos.
d. The price of mangos rises.

48. Which of the following events would cause a movement downward and to the left along the
supply curve for mangos?
a. The number of sellers of mangos decreases.
b. There is an advance in technology that reduces the cost of producing mangos.
c. The price of mangos falls.
d. The price of fertilizer increases, and fertilizer is an input in the production of mangos.

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The Market Forces of Supply and Demand 901

49. The sum of all the individual supply curves for a product is called
a. total supply.
b. market supply.
c. aggregate supply.
d. total output.

50. The market supply curve

a. is found by vertically adding the individual supply curves.
b. slopes downward.
c. represents the sum of the prices that all the sellers are willing to accept for a given quantity of
the good.
d. represents the sum of the quantities supplied by all the sellers at each price of the good.

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902 The Market Forces of Supply and Demand

51. In a market, to find the total amount supplied at a particular price, we must
a. sum the quantities that individual firms are willing and able to supply at that price.
b. calculate the average of the quantities that individual firms are willing and able to supply at that price.
c. sum the costs that individual firms incur to supply the product at that price.
d. account for all determinants of demand.

52. A market supply curve is determined by

a. vertically summing individual supply curves.
b. horizontally summing individual supply curves.
c. finding the average quantity supplied by sellers at each possible price.
d. finding the average price at which sellers are willing and able to sell a particular quantity of the good.

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The Market Forces of Supply and Demand 903

53. A market supply curve shows

a. the total quantity supplied at all possible prices.
b. the average quantity supplied by producers at all possible prices.
c. how quantity supplied changes when consumer income changes.
d. suppliers’ responses, in terms of the amounts they will supply, to the demands of buyers.

54. A market supply curve shows how the total quantity supplied of a good varies as
a. production technology varies.
b. price varies.
c. input prices vary.
d. demand varies.

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904 The Market Forces of Supply and Demand

55. Suppose there are six bait and tackle shops that sell worms in a lakeside resort town in
Minnesota. If we add the respective quantities that each shop would produce and sell at each of
the six bait and tackle shops when the price of worms is $2 per bucket, $2.50 per bucket, and $3
per bucket, and so forth, we have found the
a. market demand curve.
b. market supply curve.
c. equilibrium curve.
d. surplus or shortage depending on market conditions.

Table 4-6

Firm Firm Firm Firm

A’s B’s C’s D’s
Quantit Quanti Quanti Quantit
y ty ty y
Supplie Supplie Supplie Supplie
Price d d d d
$0 10 0 0 0
$2 8 3 4 5
$4 6 6 8 10
$6 4 9 12 15
$8 2 12 8 20
$10 0 15 4 25

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The Market Forces of Supply and Demand 905

56. Refer to Table 4-6. Which supply schedules obey the law of supply?
a. Firm A’s only
b. Firm B’s, Firm C’s, and Firm D’s only
c. Firm A’s and Firm C’s only
d. Firm B’s and Firm D’s only

57. Refer to Table 4-6. If these are the only four sellers in the market, then the market quantity
supplied at a price of $4 is
a. 4 units.
b. 7.5 units.
c. 10 units.
d. 30 units.

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906 The Market Forces of Supply and Demand

58. Refer to Table 4-6. If these are the only four sellers in the market, then the market quantity
supplied at a price of $10 is
a. 3 units.
b. 11 units.
c. 25 units.
d. 44 units.

59. Refer to Table 4-6. If these are the only four sellers in the market, then when the price increases
from $6 to $8, the market quantity supplied
a. increases by 0.5 units.
b. increases by 2 units.
c. decreases by 4 units.
d. increases by 42 units.

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The Market Forces of Supply and Demand 907

60. Refer to Table 4-6. If these are the only four sellers in the market, then when the price decreases
from $4 to $2, the market quantity supplied
a. increases by 10 units.
b. decreases by 10 units.
c. decreases by 20 units.
d. decreases by 30 units.

Table 4-7

Dairy Dolly’s Four

Barn’s Dairy’s Queen’s Moo Roo’s
Gallons Gallons Gallons Gallons
Price Supplied Supplied Supplied Supplied
$0 0 0 0 0
$2 3 4 2 1
$4 6 8 4 2
$6 9 12 6 3
$8 12 16 8 4
$10 15 20 10 5

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908 The Market Forces of Supply and Demand

61. Refer to Table 4-7. If these are the only four sellers in the market for ice cream, then the market
quantity supplied at a price of $4 is
a. 4 gallons.
b. 5 gallons.
c. 20 gallons.
d. 80 gallons.

62. Refer to Table 4-7. If these are the only four sellers in the market for ice cream, then the market
quantity supplied at a price of $8 is
a. 10 gallons.
b. 20 gallons.
c. 32 gallons.
d. 40 gallons.

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The Market Forces of Supply and Demand 909

63. Refer to Table 4-7. If these are the only four sellers in the market for ice cream, then when the
price decreases from $10 to $8, the market quantity supplied decreases by
a. 2.5 gallons.
b. 4 gallons.
c. 10 gallons.
d. 50 gallons.

64. Refer to Table 4-7. If these are the only four sellers in the market for ice cream, then when the
price increases from $4 to $6, the market quantity supplied
a. decreases by 10 gallons.
b. decreases by 20 gallons.
c. increases by 10 gallons.
d. increases by 20 gallons.

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910 The Market Forces of Supply and Demand

Table 4-8

Firm Firm Firm

X’s Y’s Z’s
Quant Quant Quant
Price ity ity ity
Suppli Suppli Suppli
ed ed ed
$0 0 0 0
$3 2 4 6
$6 4 8 12
$9 6 12 18
$12 8 16 24
$15 10 20 30

65. Refer to Table 4-8. If these are the only three sellers in the market, then the market quantity
supplied at a price of $6 is
a. 6 units.
b. 12 units.
c. 18 units.
d. 24 units.

66. Refer to Table 4-8. If these are the only three sellers in the market, then an increase in the
market price from $6 to $12 will increase quantity supplied by
a. 12 units.
b. 24 units.
c. 36 units.
d. 48 units.

ANSWER: b
POINTS: 1
DIFFICULTY: Difficulty: Moderate
LEARNING OBJECTIVES: ECON.MANK.15.19 - LO: 4-3

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The Market Forces of Supply and Demand 911

NATIONAL STANDARDS: United States - BUSPROG: Analytic

TOPICS: DISC: Supply and Demand
Supply
KEYWORDS: BLOOM'S: Application

67. Refer to Table 4-8. Suppose Firm X and Firm Y are the only two sellers in the market. If the
market price decreases from $12 to $9, quantity supplied will
a. decrease by 6 units.
b. decrease by 12 units.
c. increase by 6 units.
d. increase by 12 units.

68. Refer to Table 4-8. Suppose Firm X and Firm Y are the only two sellers in the market. If the
market price increases from $12 to $15, quantity supplied will
a. decrease by 6 units.
b. decrease by 12 units.
c. increase by 6 units.
d. increase by 12 units.

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912 The Market Forces of Supply and Demand

Figure 4-12

Firm A Firm B

69. Refer to Figure 4-12. If these are the only two sellers in the market, then the market quantity
supplied at a price of $4 is
a. 6 units.
b. 7 units.
c. 8 units.
d. 14 units.

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The Market Forces of Supply and Demand 913

70. Refer to Figure 4-12. If these are the only two sellers in the market, then the market quantity
supplied at a price of $6 is
a. 2 units.
b. 10 units.
c. 12 units.
d. 22 units.

71. Refer to Figure 4-12. If these are the only two sellers in the market, then the market quantity
supplied at a price of $8 is
a. 14 units.
b. 15 units.
c. 16 units.
d. 29 units.

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914 The Market Forces of Supply and Demand

Figure 4-13

72. Refer to Figure 4-13. If Producer A and Producer B are the only producers in the market, then
the market quantity supplied when the price is $2 is
a. 4 units.
b. 6 units.
c. 8 units.
d. 10 units.

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The Market Forces of Supply and Demand 915

73. Refer to Figure 4-13. If Producer A and Producer B are the only producers in the market, then
the market quantity supplied when the price is $4 is
a. 4 units.
b. 8 units.
c. 12 units.
d. 16 units.

74. Refer to Figure 4-13. If Producer A and Producer B are the only producers in the market, then
the market quantity supplied when the price is $6 is
a. 4 units.
b. 6 units.
c. 12 units.
d. 18 units.

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916 The Market Forces of Supply and Demand

75. Refer to Figure 4-13. If Producer A and Producer B are the only producers in the market, then
the market quantity supplied when the price is $8 is
a. 8 units.
b. 16 units.
c. 24 units.
d. 32 units.

76. The supply curve for portable charcoal grills shifts

a. only when production technology changes.
b. when a determinant of the supply of portable charcoal grills other than the price of portable
charcoal grills changes.
c. when any determinant of the supply of portable charcoal grills changes.
d. only when the number of sellers of portable charcoal grills changes.

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The Market Forces of Supply and Demand 917

77. Lead is an important input in the production of crystal. If the price of lead decreases, then we
would expect the supply of
a. crystal to be unaffected.
b. crystal to decrease.
c. crystal to increase.
d. lead to increase.

78. Suppose you make jewelry. If the price of gold falls, then we would expect you to
a. be willing and able to produce less jewelry than before at each possible price.
b. be willing and able to produce more jewelry than before at each possible price.
c. face a greater demand for your jewelry.
d. face a weaker demand for your jewelry.

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918 The Market Forces of Supply and Demand

79. Workers at a bicycle assembly plant currently earn the mandatory minimum wage. If the federal
government increases the minimum wage by $1.00 per hour, then it is likely that the
a. demand for bicycle assembly workers will increase.
b. supply of bicycles will shift to the right.
c. supply of bicycles will shift to the left.
d. firm must increase output to maintain profit levels.

80. Suppose there is an increase in the price of steel. We would expect the supply curve for steel
beams to
a. shift rightward.
b. shift leftward.
c. become flatter.
d. remain unchanged.

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The Market Forces of Supply and Demand 919

81. Wheat is the main input in the production of flour. If the price of wheat decreases, then we
would expect the
a. demand for flour to increase.
b. demand for flour to decrease.
c. supply of flour to increase.
d. supply of flour to decrease.

82. Matthew bakes apple pies that he sells at the local farmer’s market. If the price of apples
increases, the
a. supply curve for Matthew’s pies will increase.
b. supply curve for Matthew’s pies will decrease.
c. demand curve for Matthew’s pies will increase.
d. demand curve for Matthew’s pies will decrease.

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920 The Market Forces of Supply and Demand

83. Suppose there is a decrease in the price of corn. If corn is an input into the production of ethanol,
we would expect the supply curve for ethanol to
a. shift rightward.
b. shift leftward.
c. become flatter.
d. remain unchanged.

84. Which of the following would shift the supply of Packers football jerseys to the right?
a. The Packers make it to the Super Bowl.
b. The price of the jerseys increases by $15.
c. The cost to distribute the jerseys increases.
d. The cost of the fabric used to make the jerseys decreases.

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
The Market Forces of Supply and Demand 921

85. Which of the following would shift the supply of Green Bay Packers football jerseys to the left?
a. The Green Bay Packers make it to the Super Bowl.
b. The price of the jerseys increases by $15.
c. The technology of sewing machines use to make the jerseys improves.
d. The cost of the fabric used to make the jerseys increases.

86. Suppose an increase in the price of rubber coincides with an advance in the technology of tire
production. As a result of these two events, the demand for tires
a. decreases, and the supply of tires increases.
b. is unaffected, and the supply of tires decreases.
c. is unaffected, and the supply of tires increases.
d. None of the above is necessarily correct.

ANSWER: d
POINTS: 1
DIFFICULTY: Difficulty: Challenging
LEARNING OBJECTIVES: ECON.MANK.15.19 - LO: 4-3
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: DISC: Supply and Demand
Supply
KEYWORDS: BLOOM'S: Analysis

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
922 The Market Forces of Supply and Demand

87. A improvement in production technology will shift the

a. supply curve to the right.
b. supply curve to the left.
c. demand curve to the right.
d. demand curve to the left.

88. An improvement in production technology will

a. increase a firm's costs and increase its supply.
b. increase a firm’s costs and decrease its supply.
c. decrease a firm’s costs and increase its supply.
d. decrease a firm’s costs and decrease its supply.

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
The Market Forces of Supply and Demand 923

89. If car manufacturers begin using new labor-saving technology on their assembly lines, we would
not expect
a. a smaller quantity of labor to be used.
b. the supply of cars to increase.
c. the firms’ costs to fall.
d. individual car manufacturers to move up and to the right along their individual supply curves.

90. Which of the following might cause the supply curve for an inferior good to shift to the right?
a. an increase in input prices
b. a decrease in consumer income
c. an improvement in production technology that makes production of the good more profitable
d. a decrease in the number of sellers in the market

ANSWER: c
POINTS: 1
DIFFICULTY: Difficulty: Challenging
LEARNING OBJECTIVES: ECON.MANK.15.19 - LO: 4-3
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: DISC: Supply and Demand
Supply
KEYWORDS: BLOOM'S: Analysis

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
924 The Market Forces of Supply and Demand

91. Ashley bakes bread that she sells at the local farmer’s market. If she purchases a new convection
oven that reduces the costs of baking bread, the
a. supply curve for Ashley’s bread will increase.
b. supply curve for Ashley’s bread will decrease.
c. demand curve for Ashley’s bread will increase.
d. demand curve for Ashley’s bread will decrease.

92. Today, producers changed their expectations about the future. This change
a. can cause a movement along a supply curve.
b. can affect future supply, but not today’s supply.
c. can affect today’s supply.
d. cannot affect either today’s supply or future supply.

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
The Market Forces of Supply and Demand 925

93. If suppliers expect the price of their product to fall in the future, then they will
a. decrease supply now.
b. increase supply now.
c. decrease supply in the future but not now.
d. increase supply in the future but not now.

94. If sellers expect higher basket prices in the near future, the current
a. supply of baskets will increase.
b. supply of baskets will decrease.
c. supply of baskets will be unaffected.
d. demand for baskets will decrease.

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
926 The Market Forces of Supply and Demand

95. Today's supply curve for gasoline could shift in response to a change in
a. today's price of gasoline.
b. the expected future price of gasoline.
c. the number of buyers of gasoline.
d. All of the above are correct.

96. A CPA recently has come to expect higher prices for expert tax advice in the near future. We
would expect
a. the CPA to supply more expert tax advice now than she was supplying previously.
b. the CPA to supply less expert tax advice now than she was supplying previously.
c. the demand for this CPA’s expert tax advice to fall.
d. no change in the CPA’s current supply; instead, future supply will be affected.

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
The Market Forces of Supply and Demand 927

97. Recent forest fires in the western states are expected to cause the price of lumber to rise in the
next six months. As a result, we can expect the supply of lumber to
a. fall in six months but not now.
b. increase in six months when the price goes up.
c. fall now.
d. increase now to meet as much demand as possible.

98. Funsters, Inc., the largest toy company in the country, sells its most popular doll for $15. It has
just learned that its leading competitor, Toysorama, is mass-producing an excellent copy and
plans to flood the market with their $5 doll in six weeks. Funsters should
a. “fight fire with fire” by decreasing supply of its doll for six weeks and then increasing the
supply.
b. increase the supply of its doll now before the other doll hits the market.
c. increase the price of its doll now.
d. discontinue its doll.

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
928 The Market Forces of Supply and Demand

99. Today's supply curve for iPods could shift in response to a change in
a. today's price of iPods.
b. the expected future price of iPods.
c. the number of buyers of iPods.
d. All of the above are correct.

100. Which of the following is a determinant of the market supply curve but not a determinant of an
individual seller’s supply?
a. production technology
b. expectations
c. input prices
d. the number of sellers

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
The Market Forces of Supply and Demand 929

101. If the number of sellers in a market increases, then the

a. demand in that market will increase.
b. supply in that market will increase.
c. supply in that market will decrease.
d. demand in that market will decrease.

102. A decrease in the number of sellers in the market causes

a. the supply curve to shift to the left.
b. the supply curve to shift to the right.
c. a movement up and to the right along a stationary supply curve.
d. a movement downward and to the left along a stationary supply curve.

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
930 The Market Forces of Supply and Demand

103. An increase in which of the following would shift the supply curve for gasoline to the right?
a. demand for gasoline
b. price of gasoline
c. number of producers of gasoline
d. price of oil, an input into the production of gasoline

104. Which of the following events could cause an increase in the supply of ceiling fans?
a. The number of sellers of ceiling fans increases.
b. There is an increase in the price of air conditioners, and consumers regard air conditioners
and ceiling fans as substitutes.
c. There is an increase in the price of the motor that powers ceiling fans.
d. All of the above are correct.

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
The Market Forces of Supply and Demand 931

Figure 4-14

105. Refer to Figure 4-14. Which of the following best describes the movement from E1 to E2?
a. a decrease in supply
b. an increase in supply
c. a movement along the supply curve
d. a decrease in demand

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
932 The Market Forces of Supply and Demand

106. Refer to Figure 4-14. Which of the following would explain a movement from E1 to E2?
a. There is an improvement in the technology used to produce this good.
b. The cost of an input to the production of this good increases.
c. This good becomes very popular.
d. The price of a substitute good decreases.

Figure 4-15

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
The Market Forces of Supply and Demand 933

107. Refer to Figure 4-15. Which of the following would cause the supply curve to shift from
Supply A to Supply C in the market for beach towels?
a. an increase in the price of beach towels
b. an expectation by firms that the price of beach towels will increase in the very near future
c. a decrease in the price of cotton
d. a decrease in the number of firms selling beach towels

108. Refer to Figure 4-15. Which of the following would cause the supply curve to shift from
Supply A to Supply C in the market for sail boats?
a. an increase in the price of sailboats
b. a decrease in the number of firms selling sailboats
c. a decrease in the price of fiberglass and sail cloth
d. a decrease in the price of America’s Cup sailing tshirts

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
934 The Market Forces of Supply and Demand

109. Refer to Figure 4-15. Which of the following would cause the supply curve to shift from
Supply B to Supply A in the market for butter?
a. a decrease in the price of butter
b. an increase in the price of margarine
c. an increase in the price of milk
d. an improvement in technology that allows firms to use less labor in the production of butter

110. Refer to Figure 4-15. Which of the following would cause the supply curve to shift from
Supply B to Supply A in the market for beer?
a. a decrease in the price of beer
b. an expectation by firms that the price of beer will increase in the very near future
c. a decrease in the price of hops
d. an improvement in technology that allows firms to use less labor in the production of beer

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
The Market Forces of Supply and Demand 935

Figure 4-16

111. Refer to Figure 4-16. The shift from S to S’ is called a(n)

a. decrease in supply.
b. decrease in quantity supplied.
c. increase in supply.
d. increase in quantity supplied.

112. Refer to Figure 4-16. The shift from S to S’ could be caused by an

a. increase in the price of the good.
b. improvement in production technology.
c. increase in income.
d. increase in input prices.

ANSWER: b
POINTS: 1
DIFFICULTY: Difficulty: Moderate
LEARNING OBJECTIVES: ECON.MANK.15.19 - LO: 4-3
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: DISC: Supply and Demand
Supply

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
936 The Market Forces of Supply and Demand

KEYWORDS: BLOOM'S: Comprehension

113. Refer to Figure 4-16. The shift from S to S’ in the market for peaches could be caused by a(n)
a. increase in the price of peaches.
b. decrease in the price of pears.
c. increase in income.
d. decrease in the labor costs of the workers who pick peaches.

114. Refer to Figure 4-16. The shift from S’ to S in the market for chocolate cake could be caused
by a(n)
a. decrease in the number of commercial bakers.
b. improvement in oven technology.
c. decrease in the price of butter.
d. decrease in the price of chocolate cake.

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
The Market Forces of Supply and Demand 937

115. Refer to Figure 4-16. If the supply curves that are drawn represent supply curves for single-
family residential houses, then the movement from S to S’ could be caused by a(n)
a. increase in the price of apartments which are a substitute for single-family houses for many
people looking for a place to live.
b. newly-formed expectation by house-builders that prices of houses will increase significantly
in the next six months.
c. decrease in the price of lumber.
d. All of the above are correct.

Multiple Choice – Section 04: Supply and Demand Together

1. The unique point at which the supply and demand curves intersect is called
a. market harmony.
b. coincidence.
c. equivalence.
d. equilibrium.

ANSWER: d
POINTS: 1
DIFFICULTY: Difficulty: Easy
LEARNING OBJECTIVES: ECON.MANK.15.20 - LO: 4-4
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: DISC: Supply and Demand
Equilibrium
KEYWORDS: BLOOM'S: Knowledge

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
938 The Market Forces of Supply and Demand

2. The dictionary defines equilibrium as a situation in which forces

a. are in balance.
b. are the same.
c. clash.
d. remain constant.

ANSWER: a
POINTS: 1
DIFFICULTY: Difficulty: Easy
LEARNING OBJECTIVES: ECON.MANK.15.20 - LO: 4-4
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: DISC: Supply and Demand
Equilibrium
KEYWORDS: BLOOM'S: Knowledge

3. At the equilibrium price, the quantity of the good that buyers are willing and able to buy
a. is greater than the quantity that sellers are willing and able to sell.
b. exactly equals the quantity that sellers are willing and able to sell.
c. is less than the quantity that sellers are willing and able to sell.
d. Either a) or c) could be correct.

ANSWER: b
POINTS: 1
DIFFICULTY: Difficulty: Easy
LEARNING OBJECTIVES: ECON.MANK.15.20 - LO: 4-4
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: DISC: Supply and Demand
Equilibrium
KEYWORDS: BLOOM'S: Knowledge

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
The Market Forces of Supply and Demand 939

4. Another term for equilibrium price is

a. dynamic price.
b. market-clearing price.
c. quantity-defining price.
d. balance price.

5. In a given market, how are the equilibrium price and the market-clearing price related?
a. There is no relationship.
b. They are the same price.
c. The market-clearing price exceeds the equilibrium price.
d. The equilibrium price exceeds the market-clearing price.

ANSWER: b
POINTS: 1
DIFFICULTY: Difficulty: Moderate
LEARNING OBJECTIVES: ECON.MANK.15.20 - LO: 4-4
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: DISC: Supply and Demand
Equilibrium
KEYWORDS: BLOOM'S: Comprehension

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
940 The Market Forces of Supply and Demand

6. Buyers are able to buy all they want to buy and sellers are able to sell all they want to sell at
a. prices at and above the equilibrium price.
b. prices at and below the equilibrium price.
c. prices above and below the equilibrium price, but not at the equilibrium price.
d. the equilibrium price but not above or below the equilibrium price.

ANSWER: d
POINTS: 1
DIFFICULTY: Difficulty: Moderate
LEARNING OBJECTIVES: ECON.MANK.15.20 - LO: 4-4
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: DISC: Supply and Demand
Equilibrium
KEYWORDS: BLOOM'S: Comprehension

7. In markets, prices move toward equilibrium because of

a. the actions of buyers and sellers.
b. government regulations placed on market participants.
c. increased competition among sellers.
d. buyers' ability to affect market outcomes.

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
The Market Forces of Supply and Demand 941

8. Which of the following events must cause equilibrium quantity to fall?

a. demand increases and supply decreases
b. demand and supply both decrease
c. demand decreases and supply increases
d. demand and supply both increase

9. Which of the following events must cause equilibrium quantity to rise?

a. demand increases and supply decreases
b. demand and supply both decrease
c. demand decreases and supply increases
d. demand and supply both increase

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
942 The Market Forces of Supply and Demand

10. Which of the following events must cause equilibrium price to fall?
a. demand increases and supply decreases
b. demand and supply both decrease
c. demand decreases and supply increases
d. demand and supply both increase

ANSWER: c
POINTS: 1
DIFFICULTY: Difficulty: Moderate
LEARNING OBJECTIVES: ECON.MANK.15.20 - LO: 4-4
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: DISC: Supply and Demand
Equilibrium
KEYWORDS: BLOOM'S: Comprehension

11. Equilibrium quantity must decrease when demand

a. increases and supply does not change, when demand does not change and supply decreases,
and when both demand and supply decrease.
b. increases and supply does not change, when demand does not change and supply increases,
and when both demand and supply decrease.
c. decreases and supply does not change, when demand does not change and supply increases,
and when both demand and supply decrease.
d. decreases and supply does not change, when demand does not change and supply decreases,
and when both demand and supply decrease.

ANSWER: d
POINTS: 1
DIFFICULTY: Difficulty: Challenging
LEARNING OBJECTIVES: ECON.MANK.15.20 - LO: 4-4
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: DISC: Supply and Demand
Equilibrium
KEYWORDS: BLOOM'S: Analysis

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
The Market Forces of Supply and Demand 943

12. Equilibrium quantity must increase when demand

a. increases and supply does not change, when demand does not change and supply increases,
and when both demand and supply increase.
b. increases and supply does not change, when demand does not change and supply increases,
and when both demand and supply decrease.
c. decreases and supply does not change, when demand does not change and supply decreases,
and when both demand and supply increase.
d. decreases and supply does not change, when demand does not change and supply decreases,
and when both demand and supply decrease.

ANSWER: a
POINTS: 1
DIFFICULTY: Difficulty: Challenging
LEARNING OBJECTIVES: ECON.MANK.15.20 - LO: 4-4
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: DISC: Supply and Demand
Equilibrium
KEYWORDS: BLOOM'S: Analysis

13. Equilibrium price must decrease when demand

a. increases and supply does not change, when demand does not change and supply decreases,
and when demand decreases and supply increases simultaneously.
b. increases and supply does not change, when demand does not change and supply decreases,
and when demand increases and supply decreases simultaneously.
c. decreases and supply does not change, when demand does not change and supply increases,
and when demand decreases and supply increases simultaneously.
d. decreases and supply does not change, when demand does not change and supply increases,
and when demand increases and supply decreases simultaneously.

ANSWER: c
POINTS: 1
DIFFICULTY: Difficulty: Challenging
LEARNING OBJECTIVES: ECON.MANK.15.20 - LO: 4-4
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: DISC: Supply and Demand
Equilibrium
KEYWORDS: BLOOM'S: Analysis

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
944 The Market Forces of Supply and Demand

14. Equilibrium price must increase when demand

ANSWER: b
POINTS: 1
DIFFICULTY: Difficulty: Challenging
LEARNING OBJECTIVES: ECON.MANK.15.20 - LO: 4-4
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: DISC: Supply and Demand
Equilibrium
KEYWORDS: BLOOM'S: Analysis

15. Which of the following events must cause equilibrium price to rise?
a. demand increases and supply decreases
b. demand and supply both decrease
c. demand decreases and supply increases
d. demand and supply both increase

ANSWER: a
POINTS: 1
DIFFICULTY: Difficulty: Moderate
LEARNING OBJECTIVES: ECON.MANK.15.20 - LO: 4-4
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: DISC: Supply and Demand
Equilibrium
KEYWORDS: BLOOM'S: Comprehension

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
The Market Forces of Supply and Demand 945

16. If the demand for a product increases, then we would expect equilibrium price
a. to increase and equilibrium quantity to decrease.
b. to decrease and equilibrium quantity to increase.
c. and equilibrium quantity both to increase.
d. and equilibrium quantity both to decrease.

17. If the demand for a product decreases, then we would expect equilibrium price
a. to increase and equilibrium quantity to decrease.
b. to decrease and equilibrium quantity to increase.
c. and equilibrium quantity to both increase.
d. and equilibrium quantity to both decrease.

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
946 The Market Forces of Supply and Demand

18. If the supply of a product increases, then we would expect equilibrium price
a. to increase and equilibrium quantity to decrease.
b. to decrease and equilibrium quantity to increase.
c. and equilibrium quantity to both increase.
d. and equilibrium quantity to both decrease.

19. If the supply of a product decreases, then we would expect equilibrium price
a. to increase and equilibrium quantity to decrease.
b. to decrease and equilibrium quantity to increase.
c. and equilibrium quantity to both increase.
d. and equilibrium quantity to both decrease.

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
The Market Forces of Supply and Demand 947

20. When supply and demand both increase, equilibrium

a. price will increase.
b. price will decrease.
c. quantity may increase, decrease, or remain unchanged.
d. price may increase, decrease, or remain unchanged.

21. Suppose that demand for a good increases and, at the same time, supply of the good decreases.
What would happen in the market for the good?
a. Equilibrium price would decrease, but the impact on equilibrium quantity would be ambiguous.
b. Equilibrium price would increase, but the impact on equilibrium quantity would be ambiguous.
c. Equilibrium quantity would decrease, but the impact on equilibrium price would be ambiguous.
d. Equilibrium quantity would increase, but the impact on equilibrium price would be ambiguous.

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
948 The Market Forces of Supply and Demand

22. Suppose that demand for a good decreases and, at the same time, supply of the good decreases.
What would happen in the market for the good?
a. Equilibrium price would decrease, but the impact on equilibrium quantity would be ambiguous.
b. Equilibrium price would increase, but the impact on equilibrium quantity would be ambiguous.
c. Equilibrium quantity would decrease, but the impact on equilibrium price would be ambiguous.
d. Equilibrium quantity would increase, but the impact on equilibrium price would be ambiguous.

Table 4-9

An Increase in Supply A Decrease in Supply

An Increase in Demand A B
A Decrease in Demand C D

23. Refer to Table 4-9. Which combination would produce an increase in equilibrium quantity and
an indeterminate change in equilibrium price?
a. A
b. B
c. C
d. D

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
The Market Forces of Supply and Demand 949

24. Refer to Table 4-9. Which combination would produce an increase in equilibrium price and
an indeterminate change in equilibrium quantity?
a. A
b. B
c. C
d. D

25. Refer to Table 4-9. Which combination would produce a decrease in equilibrium price and an
indeterminate change in equilibrium quantity?
a. A
b. B
c. C
d. D

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
950 The Market Forces of Supply and Demand

26. Refer to Table 4-9. Which combination would produce a decrease in equilibrium quantity and
an indeterminate change in equilibrium price?
a. A
b. B
c. C
d. D

Table 4-10

The following table shows the number of cases of water each seller is willing to sell at the prices
listed.

Price per case Alpine Springs Brook Mountain Cascade Waters Dew Good
$0.00 0 cases 0 cases 0 cases 0 cases
$3.00 100 cases 40 cases 60 cases 100 cases
$6.00 200 cases 80 cases 120 cases 200 cases
$9.00 300 cases 120 cases 180 cases 300 cases

27. Refer to Table 4-10. If Alpine Springs and Dew Good are the only two suppliers in this market,
by how much does the market quantity supplied change with each $3 increase in price?
a. -200 cases
b. -100 cases
c. 100 cases
d. 200 cases

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
The Market Forces of Supply and Demand 951

28. Refer to Table 4-10. If the four suppliers listed are the only suppliers in this market and the
market demand schedule is:
Price Quantity Demanded
$0.00 1200
$3.00 900
$6.00 600
$9.00 300
the equilibrium price and quantity are
a. $0.00 and 1200 cases
b. $3.00 and 300 cases
c. $6.00 and 600 cases
d. $9.00 and 600 cases

29. Refer to Table 4-10. If the four suppliers listed are the only suppliers in this market and the
market quantity demanded is 500 cases when the price is $5.00, which of the following
statements is correct?
a. The market is in equilibrium at a price of $5.00.
b. There is a surplus of 100 cases at a price of $5.00.
c. There is a shortage of 100 cases at a price of $5.00.
d. There is a shortage of 50 cases at a price of $5.00.

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
952 The Market Forces of Supply and Demand

30. The law of supply and demand asserts that

a. demand curves and supply curves tend to shift to the right as time goes by.
b. the price of a good will eventually rise in response to an excess demand for that good.
c. when the supply curve for a good shifts, the demand curve for that good shifts in response.
d. the equilibrium price of a good will be rising more often than it will be falling.

31. Which of the following would cause price to decrease?

a. a decrease in supply
b. an increase in demand
c. a surplus of the good
d. a shortage of the good

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
The Market Forces of Supply and Demand 953

32. When the price of a good is higher than the equilibrium price,
a. a shortage will exist.
b. buyers desire to purchase more than is produced.
c. sellers desire to produce and sell more than buyers wish to purchase.
d. quantity demanded exceeds quantity supplied.

33. A surplus exists in a market if

a. there is an excess demand for the good.
b. quantity demanded exceeds quantity supplied.
c. the current price is above its equilibrium price.
d. All of the above are correct.

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954 The Market Forces of Supply and Demand

34. If a surplus exists in a market, then we know that the actual price is
a. above the equilibrium price, and quantity supplied is greater than quantity demanded.
b. above the equilibrium price, and quantity demanded is greater than quantity supplied.
c. below the equilibrium price, and quantity demanded is greater than quantity supplied.
d. below the equilibrium price, and quantity supplied is greater than quantity demanded.

35. If, at the current price, there is a surplus of a good, then

a. sellers are producing more than buyers wish to buy.
b. the market must be in equilibrium.
c. the price is below the equilibrium price.
d. quantity demanded equals quantity supplied.

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The Market Forces of Supply and Demand 955

36. When a surplus exists in a market, sellers

a. raise price, which increases quantity demanded and decreases quantity supplied, until the
surplus is eliminated.
b. raise price, which decreases quantity demanded and increases quantity supplied, until the
surplus is eliminated.
c. lower price, which increases quantity demanded and decreases quantity supplied, until the
surplus is eliminated.
d. lower price, which decreases quantity demanded and increases quantity supplied, until the
surplus is eliminated.

37. Suppose roses are currently selling for $40 per dozen, but the equilibrium price of roses is $30
per dozen. We would expect a
a. shortage to exist and the market price of roses to increase.
b. shortage to exist and the market price of roses to decrease.
c. surplus to exist and the market price of roses to increase.
d. surplus to exist and the market price of roses to decrease.

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956 The Market Forces of Supply and Demand

38. Suppose chocolate-dipped strawberries are currently selling for $30 per dozen, but the
equilibrium price of chocolate-dipped strawberries is $20 per dozen. We would expect a
a. shortage to exist and the market price of chocolate-dipped strawberries to increase.
b. shortage to exist and the market price of chocolate-dipped strawberries to decrease.
c. surplus to exist and the market price of chocolate-dipped strawberries to increase.
d. surplus to exist and the market price of chocolate-dipped strawberries to decrease.

39. The current price of blue jeans is $30 per pair, but the equilibrium price of blue jeans is $25 per
pair. As a result,
a. the quantity supplied of blue jeans exceeds the quantity demanded of blue jeans at the $30
price.
b. the equilibrium quantity of blue jeans exceeds the quantity demanded at the $30 price.
c. there is a surplus of blue jeans at the $30 price.
d. All of the above are correct.

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The Market Forces of Supply and Demand 957

40. A university's football stadium is never more than half-full during football games. This indicates
a. the ticket price is above the equilibrium price.
b. the ticket price is below the equilibrium price.
c. the ticket price is at the equilibrium price.
d. nothing about the equilibrium price.

41. A university's football stadium is always sold out, and students who wait in line for hours may
be turned away. This indicates
a. the ticket price is above the equilibrium price.
b. the ticket price is below the equilibrium price.
c. the ticket price is at the equilibrium price.
d. nothing about the equilibrium price.

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958 The Market Forces of Supply and Demand

42. When the price of a good is lower than the equilibrium price,
a. a surplus will exist.
b. buyers desire to purchase more than is produced.
c. sellers desire to produce and sell more than buyers wish to purchase.
d. quantity supplied exceeds quantity demanded.

43. A shortage exists in a market if

a. there is an excess supply of the good.
b. quantity supplied exceeds quantity demanded.
c. the current price is below its equilibrium price.
d. All of the above are correct.

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The Market Forces of Supply and Demand 959

44. If a shortage exists in a market, then we know that the actual price is
a. above the equilibrium price, and quantity supplied is greater than quantity demanded.
b. above the equilibrium price, and quantity demanded is greater than quantity supplied.
c. below the equilibrium price, and quantity demanded is greater than quantity supplied.
d. below the equilibrium price, and quantity supplied is greater than quantity demanded.

45. If, at the current price, there is a shortage of a good, then

a. sellers are producing more than buyers wish to buy.
b. the market must be in equilibrium.
c. the price is below the equilibrium price.
d. quantity demanded equals quantity supplied.

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960 The Market Forces of Supply and Demand

46. Which of the following would cause price to increase?

a. an increase in supply
b. a decrease in demand
c. a surplus of the good
d. a shortage of the good

47. When a shortage exists in a market, sellers

a. raise price, which increases quantity demanded and decreases quantity supplied until the
shortage is eliminated.
b. raise price, which decreases quantity demanded and increases quantity supplied until the
shortage is eliminated.
c. lower price, which increases quantity demanded and decreases quantity supplied until the
shortage is eliminated.
d. lower price, which decreases quantity demanded and increases quantity supplied until the
shortage is eliminated.

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The Market Forces of Supply and Demand 961

48. If there is a shortage of farm laborers, we would expect

a. the wage of farm laborers to increase.
b. the wage of farm laborers to decrease.
c. the price of farm commodities to decrease.
d. a decrease in the demand for substitutes for farm labor.

49. Suppose roses are currently selling for $20 per dozen, but the equilibrium price of roses is $30
per dozen. We would expect a
a. shortage to exist and the market price of roses to increase.
b. shortage to exist and the market price of roses to decrease.
c. surplus to exist and the market price of roses to increase.
d. surplus to exist and the market price of roses to decrease.

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962 The Market Forces of Supply and Demand

50. Years ago, thousands of country music fans risked their lives by rushing to buy tickets for a
Willie Nelson concert at Carnegie Hall. This behavior indicates
a. the ticket price was above the equilibrium price.
b. the ticket price was below the equilibrium price.
c. the ticket price was at the equilibrium price.
d. nothing about the equilibrium price.

Table 4-11

Quantity Quantity
Price Demanded Supplied
$10 10 60
$8 20 45
$6 30 30
$4 40 15
$2 50 0

51. Refer to Table 4-11. The equilibrium price and quantity, respectively, are
a. $2 and 50 units.
b. $6 and 30 units.
c. $6 and 60 units.
d. $12 and 30 units.

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The Market Forces of Supply and Demand 963

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964 The Market Forces of Supply and Demand

52. Refer to Table 4-11. If the price were $8, a

a. shortage of 20 units would exist, and price would tend to rise.
b. surplus of 25 units would exist, and price would tend to fall.
c. shortage of 25 units would exist, and price would tend to rise.
d. surplus of 45 units would exist, and price would tend to fall.

53. Refer to Table 4-11. If the price were $4, a

a. surplus of 15 units would exist, and price would tend to fall.
b. shortage of 25 units would exist, and price would tend to rise.
c. surplus of 25 units would exist, and price would tend to fall.
d. shortage of 40 units would exist, and price would tend to rise.

Table 4-12

A country club usually only allows members to purchase tickets for its celebrity golf
tournament, but the club is considering allowing non-members to purchase tickets this year.
The demand and supply schedules are as follows:

Pric Quantity Demanded Quantity Demanded

e by Members by Non-members Quantity Supplied
$10 1000 500 600
$15 800 400 600
$20 600 300 600
$25 400 200 600

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The Market Forces of Supply and Demand 965

$30 200 100 600

54. Refer to Table 4-12. If only members are allowed to purchase tickets to this year's celebrity golf
tournament, then what will be the equilibrium price?
a. $10
b. $15
c. $20
d. $25

55. Refer to Table 4-12. If both members and non-members are allowed to purchase tickets to this
year's celebrity golf tournament, then what will be the equilibrium price?
a. $10
b. $15
c. $20
d. $25

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966 The Market Forces of Supply and Demand

56. Refer to Table 4-12. If both members and non-members are allowed to purchase tickets to this
year's celebrity golf tournament and the country club sets the ticket price at $30, then there will
be
a. a shortage of 300 tickets.
b. a surplus of 300 tickets.
c. 600 tickets sold.
d. 600 tickets unsold.

57. Refer to Table 4-12. If both members and non-members are allowed to purchase tickets to this
year's celebrity golf tournament and the country club sets the ticket price at $20, then there will
be
a. a shortage of 300 tickets.
b. a surplus of 300 tickets.
c. 300 tickets sold.
d. 600 tickets unsold.

Table 4-13

The demand schedule below pertains to sandwiches demanded per week.

Harry’s Darby’s Jake’s

Pric Quantity Quantity Quantity
e Demanded Demanded Demanded
$3 3 4 3

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The Market Forces of Supply and Demand 967

$5 1 2 x

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968 The Market Forces of Supply and Demand

58. Refer to Table 4-13. Regarding Harry and Darby, whose demand for sandwiches conforms to
the law of demand?
a. only Harry’s
b. only Darby’s
c. both Harry’s and Darby’s
d. neither Harry’s nor Darby’s

59. Refer to Table 4-13. Regarding Harry and Darby, for whom are sandwiches a normal good?
a. only for Harry
b. only for Darby
c. for both Harry and Darby
d. This cannot be determined from the given information.

ANSWER: d
POINTS: 1
DIFFICULTY: Difficulty: Moderate
LEARNING OBJECTIVES: ECON.MANK.15.20 - LO: 4-4
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: DISC: Elasticity
Income Elasticity of Demand
KEYWORDS: BLOOM'S: Application

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The Market Forces of Supply and Demand 969

60. Refer to Table 4-13. Suppose x = 1. Then it must be true that

a. Harry and Jake have the same income, which is lower than Darby’s income.
b. if sandwiches and potato chips are complements for Harry, then those two goods are also
complements for Jake.
c. Harry’s demand curve is identical to Jake’s demand curve.
d. All of the above are correct.

ANSWER: c
POINTS: 1
DIFFICULTY: Difficulty: Moderate
LEARNING OBJECTIVES: ECON.MANK.15.20 - LO: 4-4
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: DISC: Elasticity
Cross-Price Elasticity of Demand
KEYWORDS: BLOOM'S: Application

61. Refer to Table 4-13. Suppose x = 1. Then the slope of the market demand curve is a.
-3.
b. -1/3.
c. 1/3.
d. 3.

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970 The Market Forces of Supply and Demand

62. Refer to Table 4-13. Suppose Harry, Darby, and Jake are the only demanders of sandwiches.
Also suppose x = 2. Then
a. the slope of Jake’s demand curve is 1/2, and the slope of the market demand curve is 5/2.
b. the slope of Jake’s demand curve is 1/2, and the slope of the market demand curve is 2/5.
c. the slope of Jake’s demand curve is 2, and the slope of the market demand curve is 5/2.
d. the slope of Jake’s demand curve is 2, and the slope of the market demand curve is 2/5.

63. Refer to Table 4-13. Suppose Harry, Darby, and Jake are the only demanders of sandwiches and
that the market demand violates the law of demand. Then, in the table, the value of x must be
a. less than or equal to 5.
b. greater than or equal to 5.
c. greater than or equal to 7.
d. greater than or equal to 10.

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The Market Forces of Supply and Demand 971

64. Refer to Table 4-13. Suppose Harry, Darby, and Jake are the only demanders of sandwiches.
Also suppose the following:
• x = 2.
• The current price of a sandwich is $5.00.
• The market quantity supplied of sandwiches is 10.
• The law of supply applies to the supply of sandwiches.
Then there is a
a. shortage of 5 sandwiches, and the price would be expected to rise from its current level of
$5.00.
b. shortage of 5 sandwiches, and the price would be expected to fall from its current level of
$5.00.
c. surplus of 5 sandwiches, and the price would be expected to rise from its current level of $5.00.
d. surplus of 5 sandwiches, and the price would be expected to fall from its current level of $5.00.

65. Refer to Table 4-13. Suppose Harry, Darby, and Jake are the only demanders of sandwiches.
Also suppose the following:
• x = 2.
• The current price of a sandwich is $3.00.
• The market quantity supplied of sandwiches is 4.
• The slope of the supply curve is 2.
Then there is currently a
a. shortage of 6 sandwiches, and the equilibrium price of a sandwich is less than $3.00.
b. shortage of 6 sandwiches, and the equilibrium price of a sandwich is $5.00.
c. surplus of 6 sandwiches, and the equilibrium price of a sandwich is less than $3.00.
d. surplus of 6 sandwiches, and the equilibrium price of a sandwich is $5.00.

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972 The Market Forces of Supply and Demand

66. Refer to Table 4-13. Suppose Harry, Darby, and Jake are the only demanders of sandwiches.
Also suppose the following:
• x = 2.
• The current price of a sandwich is $3.00.
• The market quantity supplied of sandwiches is 5.
• The slope of the supply curve is 1.
Then there is currently a
a. shortage of 5 sandwiches, and the equilibrium price of a sandwich is between $3.00 and $5.00.
b. shortage of 5 sandwiches, and the equilibrium price of a sandwich is $5.00.
c. surplus of 5 sandwiches, and the equilibrium price of a sandwich is between $3.00 and $5.00.
d. surplus of 5 sandwiches, and the equilibrium price of a sandwich is $5.00.

Figure 4-17

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The Market Forces of Supply and Demand 973

67. Refer to Figure 4-17. At a price of

a. $2, there is a surplus of 6 units.
b. $5, there is a surplus of 25 units.
c. $5, there is a shortage of $25.
d. $7, there is a surplus of 4 units.

68. Refer to Figure 4-17. At a price of

a. $2, there is a shortage of 6 units.
b. $5, there is a surplus of 25 units.
c. $5, there is a shortage of $25.
d. $7, there is a shortage of 4 units.

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974 The Market Forces of Supply and Demand

69. Refer to Figure 4-17. At a price of

a. $8, there is a surplus of 6 units.
b. $5, there is neither a shortage nor a surplus.
c. $2, there is a shortage of 6 units.
d. All of the above are correct.

Figure 4-18

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The Market Forces of Supply and Demand 975

70. Refer to Figure 4-18. Equilibrium price and quantity are, respectively,
a. $15 and 200 units.
b. $25 and 600 units.
c. $25 and 400 units.
d. $35 and 200 units.

71. Refer to Figure 4-18. At the equilibrium price,

a. 200 units would be supplied and demanded.
b. 400 units would be supplied and demanded.
c. 600 units would be supplied and demanded.
d. 600 units would be supplied, but only 200 would be demanded.

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976 The Market Forces of Supply and Demand

72. Refer to Figure 4-18. At a price of $35, there would be a

a. shortage of 400 units.
b. surplus of 200 units.
c. surplus of 400 units.
d. surplus of 600 units.

73. Refer to Figure 4-18. At a price of $35, there would be

a. a shortage, and the price would tend to rise from $35 to a higher price.
b. a surplus, and the price would tend to rise from $35 to a higher price.
c. excess demand, and the price would tend to fall from $35 to a lower price.
d. excess supply, and the price would tend to fall from $35 to a lower price.

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The Market Forces of Supply and Demand 977

74. Refer to Figure 4-18. At what price would there be an excess supply of 200 units of the good?
a. $15
b. $20
c. $30
d. $35

75. Refer to Figure 4-18. At a price of $15, there would be a

a. surplus of 400 units.
b. shortage of 200 units.
c. shortage of 400 units.
d. shortage of 600 units.

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978 The Market Forces of Supply and Demand

76. Refer to Figure 4-18. At a price of $20, there would be a(n)

a. shortage. The law of supply and demand predicts that the price will fall from $20 to a lower
price.
b. surplus. The law of supply and demand predicts that the price will rise from $20 to a higher
price.
c. excess demand. The law of supply and demand predicts that the price will rise from $20 to a
higher price.
d. excess supply. The law of supply and demand predicts that the price will fall from $20 to a
lower price.

77. Refer to Figure 4-18. At what price would there be an excess demand of 200 units of the good?
a. $15
b. $20
c. $30
d. $35

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The Market Forces of Supply and Demand 979

Figure 4-19

78. Refer to Figure 4-19. In this market, equilibrium price and quantity, respectively, are
a. $10 and 30 units.
b. $10 and 50 units.
c. $10 and 70 units.
d. $4 and 50 units.

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980 The Market Forces of Supply and Demand

79. Refer to Figure 4-19. If price in this market is currently $14, then there would be a(n)
a. surplus of 20 units. The law of supply and demand predicts that the price will rise from $14 to
a higher price.
b. excess supply of 20 units. The law of supply and demand predicts that the price will fall from
$14 to a lower price.
c. surplus of 40 units. The law of supply and demand predicts that the price will rise from $14 to
a higher price.
d. excess supply of 40 units. The law of supply and demand predicts that the price will fall from
$14 to a lower price.

80. Refer to Figure 4-19. If there is currently a shortage of 20 units of the good, then the law of
a. demand predicts that the price will rise by $2 to eliminate the shortage.
b. supply predicts that the price will rise by $2 to eliminate the shortage.
c. supply and demand predicts that the price will rise by $2 to eliminate the shortage.
d. supply and demand predicts that the price will fall by $2 to eliminate the shortage.

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The Market Forces of Supply and Demand 981

Figure 4-20

81. Refer to Figure 4-20. In this market, equilibrium price and quantity, respectively, are
a. $15 and 400 units.
b. $20 and 600 units.
c. $25 and 500 units.
d. $25 and 800 units.

82. Refer to Figure 4-20. At a price of $20, which of the following statements is not correct?
a. The market is in equilibrium.
b. Equilibrium price is equal to equilibrium quantity.
c. There is no pressure for price to change.
d. The quantity of the good that is bought and sold is 600 units.

ANSWER: b
POINTS: 1
DIFFICULTY: Difficulty: Moderate
LEARNING OBJECTIVES: ECON.MANK.15.20 - LO: 4-4
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: DISC: Supply and Demand
Equilibrium

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982 The Market Forces of Supply and Demand

KEYWORDS: BLOOM'S: Application

83. Refer to Figure 4-20. If price is $25, then quantity demanded and quantity supplied,
respectively, are
a. 500 units and 500 units.
b. 500 units and 800 units.
c. 600 units and 600 units.
d. 800 units and 500 units.

84. Refer to Figure 4-20. If the price is $25, then there would be an excess
a. supply of 100 units, and price would fall.
b. supply of 300 units, and price would fall.
c. demand of 100 units, and price would fall.
d. demand of 300 units, and price would fall.

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The Market Forces of Supply and Demand 983

85. Refer to Figure 4-20. If the price is $10, then there would be a
a. shortage of 400 units, and price would rise.
b. surplus of 400 units, and price would rise.
c. shortage of 600 units, and price would rise.
d. surplus of 600 units, and price would rise.

86. Refer to Figure 4-20. At a price of $15,

a. quantity demanded exceeds quantity supplied.
b. there is a shortage.
c. there is an excess demand.
d. All of the above are correct.

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984 The Market Forces of Supply and Demand

Figure 4-21

87. Refer to Figure 4-21. What is the equilibrium price in this market?
a. $0
b. $5
c. $10
d. $20

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The Market Forces of Supply and Demand 985

88. Refer to Figure 4-21. What is the equilibrium quantity in this market?
a. 2.5 units
b. 5 units
c. 7.5 units
d. 10 units

89. Refer to Figure 4-21. At a price of $16, there is a

a. surplus of 1 unit.
b. surplus of 3 units.
c. shortage of 1 unit.
d. shortage of 3 units.

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986 The Market Forces of Supply and Demand

90. Refer to Figure 4-21. At a price of $4, there is a

a. surplus of 1 unit.
b. surplus of 3 units.
c. shortage of 1 unit.
d. shortage of 3 units.

Figure 4-22

91. Refer to Figure 4-22. What is the equilibrium price in this market?
a. $8
b. $12
c. $16
d. $20

ANSWER: c
POINTS: 1
DIFFICULTY: Difficulty: Moderate
LEARNING OBJECTIVES: ECON.MANK.15.20 - LO: 4-4
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: DISC: Supply and Demand

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The Market Forces of Supply and Demand 987

Equilibrium
KEYWORDS: BLOOM'S: Application

92. Refer to Figure 4-22. What is the equilibrium quantity in this market?
a. 4 units
b. 8 units
c. 12 units
d. 16 units

93. Refer to Figure 4-22. At a price of $12, there is a

a. surplus of 2 units.
b. surplus of 4 units.
c. shortage of 2 units.
d. shortage of 4 units.

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988 The Market Forces of Supply and Demand

94. Refer to Figure 4-22. At a price of $8, there is a

a. surplus of 4 units.
b. surplus of 8 units.
c. shortage of 4 units.
d. shortage of 8 units.

95. Refer to Figure 4-22. At a price of $24, there is a

a. surplus of 4 units.
b. surplus of 8 units.
c. shortage of 4 units.
d. shortage of 8 units.

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The Market Forces of Supply and Demand 989

96. Refer to Figure 4-22. At a price of $20, there is a

a. surplus of 4 units.
b. surplus of 8 units.
c. shortage of 4 units.
d. shortage of 8 units.

97. You have been asked by your economics professor to graph the market for lumber and then to
analyze the change that would occur in equilibrium price as a result of recent forest fires in the
west. Your first step would be to
a. decide which direction to shift the curve.
b. decide whether the fires affected demand or supply.
c. graph the shift to see the effect on equilibrium.
d. None of the above is correct.

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990 The Market Forces of Supply and Demand

98. Which of the following events must result in a lower price in the market for Snickers?
a. Demand for Snickers increases, and supply of Snickers decreases.
b. Demand for Snickers and supply of Snickers both decrease.
c. Demand for Snickers decreases, and supply of Snickers increases.
d. Demand for Snickers and supply of Snickers both increase

99. Which of the following events must result in a higher price in the market for cigars?
a. Demand for cigars increases, and supply of cigars decreases.
b. Demand for cigars and supply of cigars both decrease.
c. Demand for cigars decreases, and supply of cigars increases.
d. Demand for cigars and supply of cigars both increase

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The Market Forces of Supply and Demand 991

100. Suppose buyers of computers and printers regard the two goods as complements. Then an
increase in the price of computers will cause a(n)
a. decrease in the demand for printers and a decrease in the quantity supplied of printers.
b. decrease in the supply of printers and a decrease in the quantity demanded of printers.
c. decrease in the equilibrium price of printers and an increase in the equilibrium quantity of
printers.
d. increase in the equilibrium price of printers and a decrease in the equilibrium quantity of
printers.

101. Suppose buyers of coffee and sugar regard the two goods as complements. Then an increase in
the price of coffee will cause a(n)
a. decrease in the demand for sugar and a decrease in the quantity supplied of sugar.
b. decrease in the supply of sugar and a decrease in the quantity demanded of sugar.
c. decrease in the equilibrium price of sugar and an increase in the equilibrium quantity of
sugar.
d. increase in the equilibrium price of sugar and a decrease in the equilibrium quantity of sugar.

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992 The Market Forces of Supply and Demand

102. Which of the following would increase in response to a decrease in the price of ironing boards?
a. the quantity of irons demanded at each possible price of irons
b. the equilibrium quantity of irons
c. the equilibrium price of irons
d. All of the above are correct.

103. Which of the following would increase in response to a increase in the price of ironing boards?
a. the quantity of irons demanded at each possible price of irons
b. the equilibrium quantity of irons
c. the equilibrium price of irons
d. None of the above is correct.

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The Market Forces of Supply and Demand 993

104. A decrease in input costs to firms in a market will result in a(n)

a. decrease in equilibrium price and an increase in equilibrium quantity.
b. decrease in equilibrium price and a decrease in equilibrium quantity.
c. increase in equilibrium price and a decrease in equilibrium quantity.
d. increase in equilibrium price and an increase in equilibrium quantity.

105. Suppose there is a flood in St. Louis, Missouri, that destroys several beer bottling facilities.
Which of the following would not be a direct result of this event?
a. Sellers would not be able to produce and sell as much as before at each relevant price.
b. The supply would decrease.
c. Buyers would not be willing to buy as much as before at each relevant price.
d. The equilibrium price would rise.

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994 The Market Forces of Supply and Demand

106. An early frost in the vineyards of Napa Valley would cause a(n)
a. increase in the demand for wine, increasing price.
b. increase in the supply of wine, decreasing price.
c. decrease in the demand for wine, decreasing price.
d. decrease in the supply of wine, increasing price.

107. Exceptionally favorable growing conditions in the vineyards of Napa Valley would cause a(n)
a. increase in the demand for wine, increasing price.
b. increase in the supply of wine, decreasing price.
c. decrease in the demand for wine, decreasing price.
d. decrease in the supply of wine, increasing price.

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The Market Forces of Supply and Demand 995

108. Suppose the number of buyers in a market increases and a technological advancement occurs
also. What would we expect to happen in the market?
a. Equilibrium price would decrease, but the impact on equilibrium quantity would be
ambiguous.
b. Equilibrium price would increase, but the impact on equilibrium quantity would be
ambiguous.
c. Equilibrium quantity would decrease, but the impact on equilibrium price would be
ambiguous.
d. Equilibrium quantity would increase, but the impact on equilibrium price would be
ambiguous.

109. Suppose the number of buyers in a market decreases and a technological advancement occurs
also. What would we expect to happen in the market?
a. Equilibrium price would decrease, but the impact on equilibrium quantity would be
ambiguous.
b. Equilibrium quantity would increase, but the impact on equilibrium price would be
ambiguous.
c. Equilibrium quantity would decrease, but the impact on equilibrium price would be
ambiguous.
d. None of the above is correct.

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996 The Market Forces of Supply and Demand

110. Suppose the income of buyers in a market for an inferior good decreases and a technological
advancement occurs also. What would we expect to happen in the market?
a. Equilibrium price would decrease, but the impact on equilibrium quantity would be
ambiguous.
b. Equilibrium quantity would increase, but the impact on equilibrium price would be
ambiguous.
c. Equilibrium quantity would decrease, but the impact on equilibrium price would be
ambiguous.
d. None of the above is correct.

111. Suppose the incomes of buyers in a market for a particular normal good decrease and there is
also a reduction in input prices. What would we expect to occur in this market?
a. Equilibrium price would decrease, but the impact on equilibrium quantity would be
ambiguous.
b. Equilibrium price would increase, but the impact on equilibrium quantity would be
ambiguous.
c. Equilibrium quantity would decrease, but the impact on equilibrium price would be
ambiguous.
d. Equilibrium quantity would increase, but the impact on equilibrium price would be
ambiguous.

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The Market Forces of Supply and Demand 997

112. What would happen to the equilibrium price and quantity of coffee if the wages of coffee-bean
pickers fell and the price of tea fell?
a. Price would fall, and the effect on quantity would be ambiguous.
b. Price would rise, and the effect on quantity would be ambiguous.
c. Quantity would fall, and the effect on price would be ambiguous.
d. Quantity would rise, and the effect on price would be ambiguous.

113. Which of the following events would cause both the equilibrium price and equilibrium quantity
of number two grade potatoes to increase if number two grade potatoes are an inferior good?
a. an increase in consumer income
b. a decrease in consumer income
c. greater government restrictions on agricultural chemicals
d. fewer government restrictions on agricultural chemicals

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998 The Market Forces of Supply and Demand

114. Beef is a normal good. You observe that both the equilibrium price and quantity of beef have
fallen over time. Which of the following explanations would be most consistent with this
observation?
a. Consumers have experienced an increase in income, and beef-production technology has
improved.
b. The price of chicken has risen, and the price of steak sauce has fallen.
c. New medical evidence has been released that indicates a negative correlation between a
person’s beef consumption and life expectancy.
d. The demand curve for beef must be positively sloped.

115. During the last few decades in the United States, health officials have argued that eating too
much beef might be harmful to human health. As a result, there has been a significant decrease
in the amount of beef produced. Which of the following best explains the decrease in
production?
a. Beef producers, concerned about the health of their customers, decided to produce relatively
less beef.
b. Government officials, concerned about consumer health, ordered beef producers to produce
relatively less beef.
c. Individual consumers, concerned about their own health, decreased their demand for beef,
which lowered the equilibrium price of beef, making it less attractive to produce.
d. Anti-beef protesters have made it difficult for both buyers and sellers of beef to meet in the
marketplace.

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The Market Forces of Supply and Demand 999

116. Which of the following events would unambiguously cause a decrease in the equilibrium price
of cotton shirts?
a. an increase in the price of wool shirts and a decrease in the price of raw cotton
b. a decrease in the price of wool shirts and a decrease in the price of raw cotton
c. an increase in the price of wool shirts and an increase in the price of raw cotton
d. a decrease in the price of wool shirts and an increase in the price of raw cotton

117. Which of the following events would unambiguously cause an increase in the equilibrium price
of cotton shirts?
a. an increase in the price of wool shirts and a decrease in the price of raw cotton
b. a decrease in the price of wool shirts and a decrease in the price of raw cotton
c. an increase in the price of wool shirts and an increase in the price of raw cotton
d. a decrease in the price of wool shirts and an increase in the price of raw cotton

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1000 The Market Forces of Supply and Demand

118. Which of the following events would cause the price of oranges to fall?
a. There is a shortage of oranges.
b. The FDA announces that bananas cause strokes, and oranges and bananas are substitutes.
c. The price of land throughout Florida decreases, and Florida produces a significant proportion
of the nation’s oranges.
d. All of the above are correct.

119. What would happen to the equilibrium price and quantity of lattés if consumers’ incomes rise
and lattés are a normal good?
a. Both the equilibrium price and quantity would increase.
b. Both the equilibrium price and quantity would decrease.
c. The equilibrium price would increase, and the equilibrium quantity would decrease.
d. The equilibrium price would decrease, and the equilibrium quantity would increase.

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The Market Forces of Supply and Demand 1001

120. If macaroni and cheese is an inferior good, what would happen to the equilibrium price and
quantity of macaroni and cheese if consumers’ incomes rise?
a. Both the equilibrium price and quantity would increase.
b. Both the equilibrium price and quantity would decrease.
c. The equilibrium price would increase, and the equilibrium quantity would decrease.
d. The equilibrium price would decrease, and the equilibrium quantity would increase.

121. If consumers often purchase muffins to eat while they drink their lattés at local coffee shops,
what would happen to the equilibrium price and quantity of lattés if the price of muffins rises?
a. Both the equilibrium price and quantity would increase.
b. Both the equilibrium price and quantity would decrease.
c. The equilibrium price would increase, and the equilibrium quantity would decrease.
d. The equilibrium price would decrease, and the equilibrium quantity would increase.

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1002 The Market Forces of Supply and Demand

122. If consumers often purchase muffins to eat while they drink their lattés at local coffee shops,
what would happen to the equilibrium price and quantity of lattés if the price of muffins falls?
a. Both the equilibrium price and quantity would increase.
b. Both the equilibrium price and quantity would decrease.
c. The equilibrium price would increase, and the equilibrium quantity would decrease.
d. The equilibrium price would decrease, and the equilibrium quantity would increase.

123. If consumers view cappuccinos and lattés as substitutes, what would happen to the equilibrium
price and quantity of lattés if the price of cappuccinos rises?
a. Both the equilibrium price and quantity would increase.
b. Both the equilibrium price and quantity would decrease.
c. The equilibrium price would increase, and the equilibrium quantity would decrease.
d. The equilibrium price would decrease, and the equilibrium quantity would increase.

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The Market Forces of Supply and Demand 1003

124. If consumers view cappuccinos and lattés as substitutes, what would happen to the equilibrium
price and quantity of lattés if the price of cappuccinos falls?
a. Both the equilibrium price and quantity would increase.
b. Both the equilibrium price and quantity would decrease.
c. The equilibrium price would increase, and the equilibrium quantity would decrease.
d. The equilibrium price would decrease, and the equilibrium quantity would increase.

125. If scientists discover that steamed milk, which is used to make lattés, prevents heart attacks,
what would happen to the equilibrium price and quantity of lattés?
a. Both the equilibrium price and quantity would increase.
b. Both the equilibrium price and quantity would decrease.
c. The equilibrium price would increase, and the equilibrium quantity would decrease.
d. The equilibrium price would decrease, and the equilibrium quantity would increase.

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1004 The Market Forces of Supply and Demand

126. What would happen to the equilibrium price and quantity of lattés if the cost of producing
steamed milk, which is used to make lattés, rises?
a. Both the equilibrium price and quantity would increase.
b. Both the equilibrium price and quantity would decrease.
c. The equilibrium price would increase, and the equilibrium quantity would decrease.
d. The equilibrium price would decrease, and the equilibrium quantity would increase.

127. What would happen to the equilibrium price and quantity of lattés if coffee shops began using a
machine that reduced the amount of labor necessary to produce them?
a. Both the equilibrium price and quantity would increase.
b. Both the equilibrium price and quantity would decrease.
c. The equilibrium price would increase, and the equilibrium quantity would decrease.
d. The equilibrium price would decrease, and the equilibrium quantity would increase.

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The Market Forces of Supply and Demand 1005

128. Saddle shoes are not popular right now, so very few are being produced. If saddle shoes
become popular, then how will this affect the market for saddle shoes?
a. The supply curve for saddle shoes will shift right, which will create a shortage at the current
price. Price will increase, which will decrease quantity demanded and increase quantity
supplied. The new market equilibrium will be at a higher price and higher quantity.
b. The supply curve for saddle shoes will shift right, which will create a surplus at the current
price. Price will decrease, which will increase quantity demanded and decrease quantity
supplied. The new market equilibrium will be at a lower price and higher quantity.
c. The demand curve for saddle shoes will shift right, which will create a shortage at the current
price. Price will increase, which will decrease quantity demanded and increase quantity
supplied. The new market equilibrium will be at a higher price and higher quantity.
d. The demand curve for saddle shoes will shift right, which will create a surplus at the current
price. Price will decrease, which will increase quantity demanded and decrease quantity
supplied. The new market equilibrium will be at a lower price and higher quantity.

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1006 The Market Forces of Supply and Demand

129. The market for diamond rings is closely linked to the market for high-quality diamonds. If a
large quantity of high- quality diamonds enters the market, then the
a. supply curve for diamond rings will shift right, which will create a shortage at the current
price. Price will increase, which will decrease quantity demanded and increase quantity
supplied. The new market equilibrium will be at a higher price and higher quantity.
b. supply curve for diamond rings will shift right, which will create a surplus at the current
price. Price will decrease, which will increase quantity demanded and decrease quantity
supplied. The new market equilibrium will be at a lower price and higher quantity.
c. demand curve for diamond rings will shift right, which will create a shortage at the current
price. Price will increase, which will decrease quantity demanded and increase quantity
supplied. The new market equilibrium will be at a higher price and higher quantity.
d. demand curve for diamond rings will shift right, which will create a surplus at the current
price. Price will decrease, which will increase quantity demanded and decrease quantity
supplied. The new market equilibrium will be at a lower price and higher quantity.

130. Music compact discs are normal goods. What will happen to the equilibrium price and quantity
of music compact discs if musicians accept lower royalties, compact disc players become
cheaper, more firms start producing music compact discs, and music lovers experience an
increase in income?
a. Price will fall, and the effect on quantity is ambiguous.
b. Price will rise, and the effect on quantity is ambiguous.
c. Quantity will fall, and the effect on price is ambiguous.
d. Quantity will rise, and the effect on price is ambiguous.

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The Market Forces of Supply and Demand 1007

131. What will happen to the equilibrium price of new textbooks if more students attend college,
paper becomes cheaper, textbook authors accept lower royalties, and fewer used textbooks are
sold?
a. Price will rise.
b. Price will fall.
c. Price will stay exactly the same.
d. The price change will be ambiguous.

132. New oak tables are normal goods. What would happen to the equilibrium price and quantity in
the market for oak tables if the price of maple tables rises, the price of oak wood rises, more
buyers enter the market for oak tables, and the price of the glue used in the production of the
new oak tables increased?
a. Price will fall, and the effect on quantity is ambiguous.
b. Price will rise, and the effect on quantity is ambiguous.
c. Quantity will fall, and the effect on price is ambiguous.
d. Quantity will rise, and the effect on price is ambiguous.

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1008 The Market Forces of Supply and Demand

133. What would happen to the equilibrium price and quantity of peanut butter if the price of
peanuts went up, the price of jelly fell, fewer firms decided to produce peanut butter, and health
officials announced that eating peanut butter was good for you?
a. Price will fall, and the effect on quantity is ambiguous.
b. Price will rise, and the effect on quantity is ambiguous.
c. Quantity will fall, and the effect on price is ambiguous.
d. Quantity will rise, and the effect on price is ambiguous.

134. Pens are normal goods. What will happen to the equilibrium price of pens if the price of pencils
rises, consumers experience an increase in income, writing in ink becomes fashionable, people
expect the price of pens to rise in the near future, the population increases, fewer firms
manufacture pens, and the wages of pen-makers increase?
a. Price will rise.
b. Price will fall.
c. Price will stay exactly the same.
d. The price change will be ambiguous.

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The Market Forces of Supply and Demand 1009

135. What will happen to the equilibrium price and quantity of traditional camera film if traditional
cameras become more expensive, digital cameras become cheaper, the cost of the resources
needed to manufacture traditional film falls, and more firms decide to manufacture traditional
film?
a. Price will fall, and the effect on quantity is ambiguous.
b. Price will rise, and the effect on quantity is ambiguous.
c. Quantity will fall, and the effect on price is ambiguous.
d. Quantity will rise, and the effect on price is ambiguous.

136. New cars are normal goods. What will happen to the equilibrium price of new cars if the price
of gasoline rises, the price of steel falls, public transportation becomes cheaper and more
comfortable, auto-workers accept lower wages, and automobile insurance becomes more
expensive?
a. Price will rise.
b. Price will fall.
c. Price will stay exactly the same.
d. The price change will be ambiguous.

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1010 The Market Forces of Supply and Demand

137. What will happen to the equilibrium price and quantity of new cars if the price of gasoline
rises, the price of steel rises, public transportation becomes cheaper and more comfortable, and
auto-workers negotiate higher wages?
a. Price will fall, and the effect on quantity is ambiguous.
b. Price will rise, and the effect on quantity is ambiguous.
c. Quantity will fall, and the effect on price is ambiguous.
d. Quantity will rise, and the effect on price is ambiguous.

138. Consider the market for new DVDs. If DVD players became cheaper, buyers expected DVD
prices to fall next year, used DVDs became more expensive, and DVD production technology
improved, then the equilibrium price of a new DVD would
a. rise.
b. fall.
c. stay the same.
d. could rise, fall, or remain unchanged.

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The Market Forces of Supply and Demand 1011

139. Which of the following sets of events must cause an increase in the price of a new house?
a. higher wages for carpenters, higher wood prices, increases in consumer incomes, higher
apartment rents, increases in population, and expectations of higher house prices in the future
b. lower wages for carpenters, lower wood prices, increases in consumer incomes, higher
apartment rents, increases in population and expectations of higher house prices in the future
c. lower wages for carpenters, higher wood prices, decreases in consumer incomes, higher
apartment rents, decreases in population and expectations of higher house prices in the future
d. higher wages for carpenters, lower wood prices, decreases in consumer incomes, lower
apartment rents, decreases in population and expectations of lower house prices in the future

140. What would happen to the equilibrium price and quantity of lattés if coffee shops began using a
machine that reduced the amount of labor necessary to produce steamed milk, which is used to
make lattés, and scientists discovered that coffee prevents heart attacks?
a. Both the equilibrium price and quantity would increase.
b. Both the equilibrium price and quantity would decrease.
c. The equilibrium price would increase, and the effect on equilibrium quantity would be
ambiguous.
d. The equilibrium quantity would increase, and the effect on equilibrium price would be
ambiguous.

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1012 The Market Forces of Supply and Demand

141. What would happen to the equilibrium price and quantity of lattés if coffee shops began using a
machine that reduced the amount of labor necessary to produce steamed milk, which is used to
make lattés, and scientists discovered that lattés cause heart attacks?
a. Both the equilibrium price and quantity would increase.
b. Both the equilibrium price and quantity would decrease.
c. The equilibrium price would decrease, and the effect on equilibrium quantity would be
ambiguous.
d. The equilibrium quantity would decrease, and the effect on equilibrium price would be
ambiguous.

142. What would happen to the equilibrium price and quantity of lattés if the cost to produce
steamed milk, which is used to make lattés, increased, and scientists discovered that lattés cause
heart attacks?
a. Both the equilibrium price and quantity would increase.
b. Both the equilibrium price and quantity would decrease.
c. The equilibrium price would decrease, and the effect on equilibrium quantity would be
ambiguous.
d. The equilibrium quantity would decrease, and the effect on equilibrium price would be
ambiguous.

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The Market Forces of Supply and Demand 1013

143. Consider the market for portable air conditioners in equilibrium. When a heat wave strikes the
equilibrium price
a. and quantity both decrease.
b. and quantity both increase.
c. increases, and the equilibrium quantity decreases.
d. decreases, and the equilibrium quantity increases.

144. Consider the market for portable air conditioners in equilibrium. A summer of unseasonably
cool weather would cause
a. both the equilibrium price and quantity to decrease.
b. both the equilibrium price and quantity to increase.
c. the equilibrium price to increase and the equilibrium quantity to decrease.
d. the equilibrium price to decrease and the equilibrium quantity to increase.

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1014 The Market Forces of Supply and Demand

Figure 4-23

145. Refer to Figure 4-23. In this market for watermelons, a severe drought occurs which affects
the watermelon crop. The equilibrium price
a. increases and the equilibrium quantity decreases.
b. decreases and the equilibrium quantity is ambiguous.
c. and quantity both increase.
d. and quantity both decrease.

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The Market Forces of Supply and Demand 1015

146. Refer to Figure 4-23. In this market for sunscreen, there is a decrease in the price of zinc
oxide, an input into sunscreen, and more producers enter the market. The equilibrium price
a. increases and the equilibrium quantity decreases.
b. decreases and the equilibrium quantity increases.
c. is ambiguous and the equilibrium quantity increases.
d. decreases and the equilibrium quantity is ambiguous.

Figure 4-24

The diagram below pertains to the demand for turkey in the United States.

147. Refer to Figure 4-24. All else equal, an increase in the income of buyers who consider turkey
to be an inferior good would cause a move from
a. DA to DB.