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03 Chapter - Demand, Supply, and Market Equilibrium (+ Appendix) Chapter 03 Demand, Supply, and Market Equilibrium (+ Appendix) Multiple Choice Questions 1. When economists describe "a market," they mean: A. A place where stocks and bonds are traded B. A communication network that allows individuals to keep in touch with each other C. A hypothetical place where the production of goods and services takes place D. A system that allows buyers and sellers to interact with one another AACSB: Analytic Bloom's: Level 1 Remember Difficulty: 1 Easy Learning Objective: 03-01 Describe demand and explain how it can change. Topic: Markets 2. All markets involve the following elements, except: A. Demand B. Government C. Price D. Supply AACSB: Analytic Bloom's: Level 1 Remember Difficulty: 1 Easy Learning Objective: 03-01 Describe demand and explain how it can change. Topic: Markets 3-1 Chapter 03 - Demand, Supply, and Market Equilibrium (+ Appendix) 3. In the labor markets, A. Job applicants are the "buyers" while employers are the "sellers" B. Job applicants are the "sellers" while employers are the "buyers" C. Job applicants and employers are both "sellers" D. Job applicants and employers are both "buyers" AACSB: Analytic Bloom's: Level 2 Understand Difficulty: 1 Easy Learning Objective: 03-01 Describe demand and explain how it can change. Topic: Markets 4. A market demand schedule for a product would indicate that: A. As the product's price falls, consumers buy less of the product B. As buyers' incomes rise, they will buy more of the product C. If buyers demand more of the product, then its price would rise D. There is an inverse relationship between price and quantity demanded AACSB: Analytic Bloom's: Level 1 Remember Difficulty: 1 Easy Learning Objective: 03-01 Describe demand and explain how it can change. Topic: Demand 5. When one speaks of "demand" in a particular market, this refers to: A. The whole demand curve B. One point on the demand curve C. One price-quantity combination on the demand schedule D. How much of an item buyers want to buy at a given price AACSB: Analytic Bloom's: Level 1 Remember Difficulty: 1 Easy Learning Objective: 03-01 Describe demand and explain how it can change. Topic: Demand 3-2 Chapter 03 - Demand, Supply, and Market Equilibrium (+ Appendix) 6. Other things being equal, the law of demand suggests that as: A. The demand for 3-D TVs increases, the price will decrease B. Income increases, the quantity of 3-D TVs demanded will increase C. The price of 3-D TVs decreases, the quantity demanded will increase D. The price of 3-D TVs decreases, the quantity demanded will decrease AACSB: Analytic Bloom's: Level 2 Understand Difficulty: 2 Medium Learning Objective: 03-01 Describe demand and explain how it can change. Topic: Demand 7. A higher price reduces the quantity demanded for a product because: A. The purchasing power of individuals increases B. The financial assets of individuals increase C. Individuals will buy more of the product and less of its substitutes D. Individuals can afford less of the product and will switch to substitutes AACSB: Analytic Bloom's: Level 1 Remember Difficulty: 1 Easy Learning Objective: 03-01 Describe demand and explain how it can change. Topic: Demand 8. Which is consistent with the law of demand? A. A decrease in the price of tacos causes no change in the quantity of tacos demanded B. An increase in the price of pizza causes an increase in the quantity of pizza demanded C. An increase in the price of hamburgers causes a decrease in the quantity of hamburgers demanded D. A decrease in the price of turkey sandwiches causes a decrease in the quantity of turkey sandwiches demanded AACSB: Analytic Bloom's: Level 2 Understand Difficulty: 2 Medium Learning Objective: 03-01 Describe demand and explain how it can change. Topic: Demand 3-3 Chapter 03 - Demand, Supply, and Market Equilibrium (+ Appendix) 9. The demand curve is a representation of the relationship between the quantity of a product demanded and: A. Supply B. Wealth C. Price D. Income AACSB: Analytic Bloom's: Level 1 Remember Difficulty: 1 Easy Learning Objective: 03-01 Describe demand and explain how it can change. Topic: Demand 10. As a result of a fall in the price of gasoline, consumers can afford to take more driving trips. This is an illustration of: A. The income effect B. The substitution effect C. Diminishing marginal utility D. The rationing function of prices AACSB: Analytic Bloom's: Level 2 Understand Difficulty: 2 Medium Learning Objective: 03-01 Describe demand and explain how it can change. Topic: Demand 11. As a result of a decrease in the price of MP3 music, consumers download more songs and buy fewer CDs. This is an illustration of: A. Consumer sovereignty B. The income effect C. The substitution effect D. Diminishing marginal utility AACSB: Analytic Bloom's: Level 2 Understand Difficulty: 2 Medium Learning Objective: 03-01 Describe demand and explain how it can change. Topic: Demand 3-4 Chapter 03 - Demand, Supply, and Market Equilibrium (+ Appendix) 12. Which statement best illustrates the concept of diminishing marginal utility? A. If the price of hamburger declines, there will be a change in consumer tastes in favor of hamburger B. A typical consumer will receive less satisfaction from consuming hamburgers than from consuming pork C. A typical consumer will receive less satisfaction from consuming the fourth hamburger per week than the third hamburger per week D. A decrease in the price of hamburger will cause consumers to buy more hamburger because they have, in effect, received an increase in income AACSB: Reflective Thinking Bloom's: Level 1 Remember Difficulty: 3 Hard Learning Objective: 03-01 Describe demand and explain how it can change. Topic: Demand 13. The rationale for the law of demand can best be understood on the basis of: A. Diminishing marginal utility B. Capitalist markets C. The invisible hand D. The rationing function of price AACSB: Analytic Bloom's: Level 1 Remember Difficulty: 1 Easy Learning Objective: 03-01 Describe demand and explain how it can change. Topic: Demand 14. The horizontal axis of a graph which shows a market demand curve indicates the: A. Prices at which various levels of output can be sold B. Number of consumers who are in the market for this product C. Various quantities of output at which the market will be cleared D. Quantities which consumers will be willing and able to buy at various prices AACSB: Analytic Bloom's: Level 1 Remember Difficulty: 1 Easy Learning Objective: 03-01 Describe demand and explain how it can change. Topic: Demand 3-5 Chapter 03 - Demand, Supply, and Market Equilibrium (+ Appendix) 15. Graphically, the horizontal sum of all individual demand curves is known as: A. Consumers' tastes and preferences B. The market demand curve C. The equilibrium price D. Consumer sovereignty AACSB: Analytic Bloom's: Level 1 Remember Difficulty: 1 Easy Learning Objective: 03-01 Describe demand and explain how it can change. Topic: Demand The table below shows the demand for wheat in a market where there are just three buyers. 16. Refer to the above table. At a price of $6, the market demand for wheat is: A. 17 B. 24 C. 37 D. 49 AACSB: Analytic Bloom's: Level 3 Apply Difficulty: 1 Easy Learning Objective: 03-01 Describe demand and explain how it can change. Topic: Demand 3-6 Chapter 03 - Demand, Supply, and Market Equilibrium (+ Appendix) 17. Refer to the above table. The market quantity demanded for wheat is: A. 17 bushels at $6 and 37 bushels at $5 B. 24 bushels at $5 and 52 bushels at $4 C. 37 bushels at $4 and 52 bushels at $3 D. 52 bushels at $3 and 37 bushels at $5 AACSB: Analytic Bloom's: Level 3 Apply Difficulty: 2 Medium Learning Objective: 03-01 Describe demand and explain how it can change. Topic: Demand 18. If there were 500 buyers with demand schedules similar to the market demand of the three buyers in the table above, then the quantity of wheat demanded at $5 by the 500 buyers would be: A. 8,500 B. 12,000 C. 18,500 D. 26,000 AACSB: Analytic Bloom's: Level 3 Apply Difficulty: 3 Hard Learning Objective: 03-01 Describe demand and explain how it can change. Topic: Demand 19. Which of the following is a determinant of demand? A. Production costs B. Income C. Number of suppliers D. Production technology AACSB: Analytic Bloom's: Level 1 Remember Difficulty: 1 Easy Learning Objective: 03-01 Describe demand and explain how it can change. Topic: Demand 3-7 Chapter 03 - Demand, Supply, and Market Equilibrium (+ Appendix) 20. An increase in the demand for computers indicates that: A. More will be purchased even if prices stayed the same B. More will be demanded at lower prices C. More will be demanded because sellers are selling more D. More will be purchased because sellers are putting them on sale AACSB: Analytic Bloom's: Level 1 Remember Difficulty: 1 Easy Learning Objective: 03-01 Describe demand and explain how it can change. Topic: Demand 21. Which is not a determinant of demand? A. Income B. The cost of inputs in production C. The prices of related goods D. Future price expectations AACSB: Analytic Bloom's: Level 1 Remember Difficulty: 2 Medium Learning Objective: 03-01 Describe demand and explain how it can change. Topic: Demand 22. Which is a determinant of the demand for housing? A. The price of lumber B. Wages for electricians C. The price of housing D. Changes in the expected future price of housing AACSB: Analytic Bloom's: Level 1 Remember Difficulty: 2 Medium Learning Objective: 03-01 Describe demand and explain how it can change. Topic: Demand 3-8 Chapter 03 - Demand, Supply, and Market Equilibrium (+ Appendix) 23. Which would be a likely cause of an increase in the demand for pizza? A. A reduced desire for take-out and fast-food dining B. A decrease in the price of hamburger sandwiches C. A decrease in the prices of cheese, pepperoni, and mushrooms D. A health report showing eating pizza reduces stress AACSB: Analytic Bloom's: Level 2 Understand Difficulty: 1 Easy Learning Objective: 03-01 Describe demand and explain how it can change. Topic: Demand 24. Which will not cause a change in the demand for product A? A. A change in consumer preferences B. A change in the price of A C. A decline in consumer incomes D. A decrease in the price of close-substitute product B AACSB: Analytic Bloom's: Level 1 Remember Difficulty: 1 Easy Learning Objective: 03-01 Describe demand and explain how it can change. Topic: Demand 25. Which goods would usually be an inferior good? A. French wines B. Generic beer C. Theater tickets D. Steak AACSB: Reflective Thinking Bloom's: Level 3 Apply Difficulty: 1 Easy Learning Objective: 03-01 Describe demand and explain how it can change. Topic: Demand 3-9 Chapter 03 - Demand, Supply, and Market Equilibrium (+ Appendix) 26. If product Y is an inferior good, a decrease in consumer incomes will: A. Make buyers want to buy less of Product Y B. Not affect the sales of product Y C. Shift the demand curve for product Y to the left D. Shift the demand curve for product Y to the right AACSB: Analytic Bloom's: Level 1 Remember Difficulty: 1 Easy Learning Objective: 03-01 Describe demand and explain how it can change. Topic: Demand 27. For most products, purchases tend to fall with decreases in buyers' incomes. Such products are known as: A. Inferior goods B. Direct goods C. Average goods D. Normal goods AACSB: Analytic Bloom's: Level 1 Remember Difficulty: 2 Medium Learning Objective: 03-01 Describe demand and explain how it can change. Topic: Demand 3-10 Chapter 03 - Demand, Supply, and Market Equilibrium (+ Appendix) 28. Refer to the above diagram, which shows three demand curves for coffee. Which of the following would cause a shift in coffee demand from D1 to D2? A. A decrease in the price of tea B. An increase in consumer incomes C. An increase in the prices of cream and sugar D. A decrease in the price of coffee AACSB: Analytic Bloom's: Level 3 Apply Difficulty: 2 Medium Learning Objective: 03-01 Describe demand and explain how it can change. Topic: Demand 3-11 Chapter 03 - Demand, Supply, and Market Equilibrium (+ Appendix) 29. Refer to the above diagram, which shows three demand curves for coffee. Which of the following would cause a shift in coffee demand from D1 to D3? A. A decrease in the price of tea B. A scientific report stating that coffee improves memory C. A decrease in the prices of cream and sugar D. A technological improvement in the production of coffee AACSB: Analytic Bloom's: Level 3 Apply Difficulty: 2 Medium Learning Objective: 03-01 Describe demand and explain how it can change. Topic: Demand 30. Suppose that goods A and B are close substitutes. If the price of good A falls, then we would expect an: A. Increase in the demand for A and an increase in the quantity of B demanded B. Increase in the demand for A and a decrease in the quantity of B demanded C. Increase in the quantity of A demanded and a decrease in the demand for B D. Increase in the demand for goods A and B AACSB: Analytic Bloom's: Level 2 Understand Difficulty: 2 Medium Learning Objective: 03-01 Describe demand and explain how it can change. Topic: Demand 31. Which factor will decrease the demand for a product? A. An expected increase in the future price of the product B. A decrease in the price of a substitute product C. A decrease in the price of a complementary product D. A decrease in buyers' incomes and the product is an inferior good AACSB: Analytic Bloom's: Level 1 Remember Difficulty: 2 Medium Learning Objective: 03-01 Describe demand and explain how it can change. Topic: Demand 3-12 Chapter 03 - Demand, Supply, and Market Equilibrium (+ Appendix) 32. Which would cause an increase in the demand for product A? A. A decrease in the price of product A B. A decrease in the price of a complementary product B C. A decrease in the cost of producing product A D. A decrease in the price of a substitute product B AACSB: Analytic Bloom's: Level 1 Remember Difficulty: 1 Easy Learning Objective: 03-01 Describe demand and explain how it can change. Topic: Demand 33. Which of the following pairs are not considered to be complementary goods? A. Steel and cars B. Digital cameras and memory cards C. Gasoline and motor oil D. Fertilizer and irrigation systems AACSB: Reflective Thinking Bloom's: Level 2 Understand Difficulty: 2 Medium Learning Objective: 03-01 Describe demand and explain how it can change. Topic: Demand 34. If the price of gasoline increases and car dealers suffer a decrease in demand for sport utility vehicles, then gasoline and sport utility vehicles are: A. Substitutes B. Complements C. Inferior goods D. Unrelated goods AACSB: Reflective Thinking Bloom's: Level 3 Apply Difficulty: 2 Medium Learning Objective: 03-01 Describe demand and explain how it can change. Topic: Demand 3-13 Chapter 03 - Demand, Supply, and Market Equilibrium (+ Appendix) 35. All of the following would affect the position of the demand curve for personal computers, except the: A. Price of computer software B. Size of the population C. Price of personal computers D. Expected future price of personal computers AACSB: Analytic Bloom's: Level 1 Remember Difficulty: 2 Medium Learning Objective: 03-01 Describe demand and explain how it can change. Topic: Demand 36. If the price of ground beef increases, the demand for hamburger buns is predicted to: A. Increase B. Decrease C. Remain constant D. Shift to the right AACSB: Reflective Thinking Bloom's: Level 2 Understand Difficulty: 1 Easy Learning Objective: 03-01 Describe demand and explain how it can change. Topic: Demand 37. An increase in the price of product B leads to an increase in the demand for product C. This indicates that products B and C are: A. Complementary goods B. Substitute goods C. Inferior goods D. Normal goods AACSB: Analytic Bloom's: Level 1 Remember Difficulty: 2 Medium Learning Objective: 03-01 Describe demand and explain how it can change. Topic: Demand 3-14 Chapter 03 - Demand, Supply, and Market Equilibrium (+ Appendix) 38. All of the following would cause an increase in the demand for private airplanes at a given price, except a(n): A. Decrease in interest rates B. Increase in consumer incomes C. Increase in plane fares D. Decrease in the costs of making private airplanes AACSB: Analytic Bloom's: Level 2 Understand Difficulty: 2 Medium Learning Objective: 03-01 Describe demand and explain how it can change. Topic: Demand 39. When economists say that the demand for a product has decreased, they mean that: A. The demand curve has shifted to the right B. The product has become particularly scarce for some reason C. The product has become more expensive and thus consumers are buying less of it D. Consumers are now willing and able to buy less of this product at each possible price AACSB: Analytic Bloom's: Level 1 Remember Difficulty: 1 Easy Learning Objective: 03-01 Describe demand and explain how it can change. Topic: Demand 40. Which would have no effect on the demand for motorcycles? A. A change in buyers' incomes B. A change in the prices of cars C. A change in the cost of steel D. A change in the price of gas AACSB: Analytic Bloom's: Level 1 Remember Difficulty: 1 Easy Learning Objective: 03-01 Describe demand and explain how it can change. Topic: Demand 3-15 Chapter 03 - Demand, Supply, and Market Equilibrium (+ Appendix) 41. An increase in the price of product G will result in a: A. Shift of the demand curve for G to the left B. Decrease in the demand for G C. Larger quantity of G demanded D. Movement up and to the left along the demand curve for G AACSB: Analytic Bloom's: Level 1 Remember Difficulty: 1 Easy Learning Objective: 03-01 Describe demand and explain how it can change. Topic: Demand 42. Refer to the above graph with three demand curves. An increase in quantity demanded would be illustrated by a change from: A. Point 4 to point 6 B. Point 2 to point 1 C. Point 4 to point 1 D. Point 2 to point 5 AACSB: Analytic Bloom's: Level 2 Understand Difficulty: 2 Medium Learning Objective: 03-01 Describe demand and explain how it can change. Topic: Demand 3-16 Chapter 03 - Demand, Supply, and Market Equilibrium (+ Appendix) 43. Refer to the above graph with three demand curves. A decrease in demand would be illustrated as a change from: A. Point 1 to point 4 B. Point 1 to point 3 C. Line C to B D. Line A to C AACSB: Analytic Bloom's: Level 2 Understand Difficulty: 2 Medium Learning Objective: 03-01 Describe demand and explain how it can change. Topic: Demand 44. Refer to the above graph with three demand curves. An increase in price, other factors constant, would cause a change from: A. Point 4 to point 5 B. Point 3 to point 6 C. Point 1 to point 5 D. Point 2 to point 4 AACSB: Analytic Bloom's: Level 2 Understand Difficulty: 2 Medium Learning Objective: 03-01 Describe demand and explain how it can change. Topic: Demand 45. An increase in demand is shown graphically by a: A. Shift of the demand curve to the left B. Movement up along the existing curve C. Shift of the demand curve to the right D. Movement down the existing curve AACSB: Analytic Bloom's: Level 1 Remember Difficulty: 1 Easy Learning Objective: 03-01 Describe demand and explain how it can change. Topic: Demand 3-17 Chapter 03 - Demand, Supply, and Market Equilibrium (+ Appendix) 46. A decrease in demand is shown graphically as a: A. Movement down along the demand curve B. Demand curve that slopes up C. Shift of the demand curve to the left D. Movement up along the demand curve AACSB: Analytic Bloom's: Level 1 Remember Difficulty: 1 Easy Learning Objective: 03-01 Describe demand and explain how it can change. Topic: Demand 47. Which statement is true about supply? A. There is an inverse relationship between product price and quantity supplied B. There is some price at which quantity supplied of a product is negative C. As product price decreases, producers are willing to put more of the good on the market for sale D. To entice producers to offer more of a product on the market for sale, product price must rise AACSB: Analytic Bloom's: Level 1 Remember Difficulty: 2 Medium Learning Objective: 03-02 Describe supply and explain how it can change. Topic: Supply 48. If the price of a product decreases, we would expect: A. Demand to increase B. Quantity supplied to decrease C. Supply to decrease D. Quantity demanded to decrease AACSB: Analytic Bloom's: Level 1 Remember Difficulty: 2 Medium Learning Objective: 03-02 Describe supply and explain how it can change. Topic: Supply 3-18 Chapter 03 - Demand, Supply, and Market Equilibrium (+ Appendix) 49. An "increase in the quantity supplied" suggests a: A. Rightward shift of the supply curve B. Movement down along the supply curve C. Movement up along the supply curve D. Leftward shift of the supply curve AACSB: Analytic Bloom's: Level 1 Remember Difficulty: 1 Easy Learning Objective: 03-02 Describe supply and explain how it can change. Topic: Supply 50. Suppose that a more efficient way to produce a good is discovered, thus lowering production costs for the good. This will cause a(n): A. Increase in supply, or a rightward shift of the supply curve B. Decrease in supply, or a leftward shift of the supply curve C. Increase in quantity supplied, or movement down the supply curve D. Decrease in quantity supplied, or movement up the supply curve AACSB: Analytic Bloom's: Level 1 Remember Difficulty: 2 Medium Learning Objective: 03-02 Describe supply and explain how it can change. Topic: Supply 51. Which of the following is a determinant of supply? A. Tastes and preferences B. Price of a complementary good C. Consumer income D. Technology AACSB: Analytic Bloom's: Level 1 Remember Difficulty: 1 Easy Learning Objective: 03-02 Describe supply and explain how it can change. Topic: Supply 3-19 Chapter 03 - Demand, Supply, and Market Equilibrium (+ Appendix) 52. If farmers withhold some of their current corn harvest from the market because they anticipate a higher price of corn in the future, then this would cause a(n): A. Rightward shift in the supply of corn B. Decrease in the supply of corn C. Leftward shift in the demand for corn D. Increase in the demand for corn AACSB: Analytic Bloom's: Level 2 Understand Difficulty: 2 Medium Learning Objective: 03-02 Describe supply and explain how it can change. Topic: Supply 53. Which of the following will not cause the supply curve to shift? A. A change in the costs of resources needed to produce the good B. A technological change in the production of the good C. A change in the price of the good D. A change in the prices of other goods that could be produced AACSB: Analytic Bloom's: Level 1 Remember Difficulty: 2 Medium Learning Objective: 03-02 Describe supply and explain how it can change. Topic: Supply 54. Which would cause a rightward shift in the supply curve for telephone service? A. A decrease in the wages of telephone workers B. An increase in the price of telephones C. An increase in the taxes paid by telephone companies D. A decrease in a subsidy given to telephone companies AACSB: Analytic Bloom's: Level 3 Apply Difficulty: 2 Medium Learning Objective: 03-02 Describe supply and explain how it can change. Topic: Supply 3-20 Chapter 03 - Demand, Supply, and Market Equilibrium (+ Appendix) 55. All of the following would affect the position of the supply curve for cranberries, except the: A. Popularity of cranberry drinks B. Price of agricultural land for cranberries C. Cost of fertilizers for cranberry production D. Development of a new pest control for cranberries AACSB: Analytic Bloom's: Level 2 Understand Difficulty: 1 Easy Learning Objective: 03-02 Describe supply and explain how it can change. Topic: Supply 56. A leftward shift of the supply curve for oil in the United States is most likely to result from: A. A decrease in the fees that oil companies must pay for drilling licenses B. An increase in the subsidy for oil exploration and drilling C. A decrease in the world price of oil D. An increase in the costs of exploration and drilling for oil AACSB: Analytic Bloom's: Level 3 Apply Difficulty: 2 Medium Learning Objective: 03-02 Describe supply and explain how it can change. Topic: Supply 57. All of the following are assumed to be constant when the supply curve for a product is drawn, except the: A. Price of the product B. State of technology C. Number of producers D. Price of inputs used to make the product AACSB: Analytic Bloom's: Level 1 Remember Difficulty: 1 Easy Learning Objective: 03-02 Describe supply and explain how it can change. Topic: Supply 3-21 Chapter 03 - Demand, Supply, and Market Equilibrium (+ Appendix) 58. Refer to the above diagram, which shows three supply curves for corn. Which of the following would cause the change in the supply of corn illustrated by the shift from S1 to S2? A. An increase in the price of fertilizer B. A change in consumer tastes away from cornbread C. A decrease in consumer incomes D. The development of a more effective insecticide for corn rootworm AACSB: Analytic Bloom's: Level 1 Remember Difficulty: 1 Easy Learning Objective: 03-02 Describe supply and explain how it can change. Topic: Supply 59. Refer to the above diagram, which shows three supply curves for corn. Which of the following would cause the change in the supply of corn illustrated by the shift from S1 to S3? A. A decrease in the cost of equipment used in corn farming B. An increase in the price of soybeans C. A decrease in the price of corn D. A change in consumer tastes in favor of cornbread AACSB: Analytic Bloom's: Level 2 Understand Difficulty: 2 Medium Learning Objective: 03-02 Describe supply and explain how it can change. Topic: Supply 3-22 Chapter 03 - Demand, Supply, and Market Equilibrium (+ Appendix) 60. Which would cause a leftward shift in the supply curve for car washes? A. An increase in the number of cars in the city B. A decrease in taxes on car washes C. An increase in the price of car washing equipment D. A decrease in the price of water AACSB: Analytic Bloom's: Level 2 Understand Difficulty: 2 Medium Learning Objective: 03-02 Describe supply and explain how it can change. Topic: Supply 61. A fall in the price of milk, used in the production of ice cream, will: A. Decrease the supply of ice cream, causing the supply curve of ice cream to shift to the left B. Increase the supply of ice cream, causing the supply curve of ice cream to shift to the right C. Cause a downward movement along the supply curve of ice cream D. Have no effect on the supply of ice cream AACSB: Analytic Bloom's: Level 1 Remember Difficulty: 2 Medium Learning Objective: 03-02 Describe supply and explain how it can change. Topic: Supply 62. A movement along a given supply curve for a product is caused by a change in the: A. Price of resources used to produce the product B. Number of sellers of the product C. Price of the product D. Technology of producing the product AACSB: Analytic Bloom's: Level 1 Remember Difficulty: 1 Easy Learning Objective: 03-02 Describe supply and explain how it can change. Topic: Supply 3-23 Chapter 03 - Demand, Supply, and Market Equilibrium (+ Appendix) 63. Which would cause an increase in quantity supplied of product A? A. An improvement in technology affecting the production of A B. An increase in the price of product B, an input in the production of A C. A decrease in the taxes paid by producers of A D. An increase in the price of A AACSB: Analytic Bloom's: Level 1 Remember Difficulty: 2 Medium Learning Objective: 03-02 Describe supply and explain how it can change. Topic: Supply 64. A plastics manufacturer can make either toys or containers. If the demand for toys increases, then the: A. Demand for containers will decrease B. Supply of containers will increase C. Demand for containers will increase D. Supply of containers will decrease AACSB: Analytic Bloom's: Level 2 Understand Difficulty: 3 Hard Learning Objective: 03-02 Describe supply and explain how it can change. Topic: Supply 3-24 Chapter 03 - Demand, Supply, and Market Equilibrium (+ Appendix) 65. Refer to the above graph. An increase in the quantity supplied, other factors constant, would best be reflected by a change from: A. Point 5 to point 1 B. Point 4 to point 5 C. Point 1 to point 6 D. Point 3 to point 4 AACSB: Analytic Bloom's: Level 1 Remember Difficulty: 1 Easy Learning Objective: 03-02 Describe supply and explain how it can change. Topic: Supply 66. Refer to the above graph. A decrease in supply would best be reflected by a change from: A. Point 2 to point 1 B. Point 5 to point 1 C. Point 5 to point 2 D. Point 3 to point 6 AACSB: Analytic Bloom's: Level 1 Remember Difficulty: 2 Medium Learning Objective: 03-02 Describe supply and explain how it can change. Topic: Supply 67. There is a shortage in a market for a product when: A. The current price is higher than the equilibrium price B. Supply is less than demand C. Quantity demanded is less than quantity supplied D. Quantity demanded is greater than quantity supplied AACSB: Analytic Bloom's: Level 2 Understand Difficulty: 2 Medium Learning Objective: 03-03 Relate how supply and demand interact to determine market equilibrium. Topic: Market Equilibrium 3-25 Chapter 03 - Demand, Supply, and Market Equilibrium (+ Appendix) 68. There is a surplus in a market for a product when: A. The price is set above the equilibrium level B. Competition is driving the price higher C. Supply is more than demand D. Quantity demanded is more than quantity supplied AACSB: Analytic Bloom's: Level 2 Understand Difficulty: 2 Medium Learning Objective: 03-03 Relate how supply and demand interact to determine market equilibrium. Topic: Market Equilibrium 69. A market for a product is in equilibrium when: A. Product price equals demand B. The supply curve remains fixed C. Quantity supplied equals quantity demanded D. Supply is equal to the price AACSB: Analytic Bloom's: Level 1 Remember Difficulty: 1 Easy Learning Objective: 03-03 Relate how supply and demand interact to determine market equilibrium. Topic: Market Equilibrium 3-26 Chapter 03 - Demand, Supply, and Market Equilibrium (+ Appendix) 70. Refer to the above diagram. The equilibrium price and quantity for milk in this market are: A. $1.50 and 28 million gallons B. $1.50 and 30 million gallons C. $2.00 and 20 million gallons D. $1.00 and 35 million gallons AACSB: Analytic Bloom's: Level 1 Remember Difficulty: 1 Easy Learning Objective: 03-03 Relate how supply and demand interact to determine market equilibrium. Topic: Market Equilibrium 71. Refer to the above diagram. If the price were $2 per gallon, there would be a: A. Shortage of 8 million gallons B. Shortage of 10 million gallons C. Surplus of 10 million gallons D. Surplus of 8 million gallons AACSB: Analytic Bloom's: Level 1 Remember Difficulty: 2 Medium Learning Objective: 03-03 Relate how supply and demand interact to determine market equilibrium. Topic: Market Equilibrium 72. Refer to the above diagram. If the price were $1 per gallon, there would be a: A. Shortage of 27 million gallons B. Shortage of 35 million gallons C. Shortage of 7 million gallons D. Shortage of 8 million gallons AACSB: Analytic Bloom's: Level 1 Remember Difficulty: 3 Hard Learning Objective: 03-03 Relate how supply and demand interact to determine market equilibrium. Topic: Market Equilibrium 3-27 Chapter 03 - Demand, Supply, and Market Equilibrium (+ Appendix) 73. Refer to the above diagram illustrating the market for corn. The equilibrium price and quantity in this market are: A. $4/bushel and 10,000 bushels B. $3/bushel and 8,000 bushels C. $2/bushel and 4,000 bushels D. $2/bushel and 11,000 bushels AACSB: Analytic Bloom's: Level 1 Remember Difficulty: 1 Easy Learning Objective: 03-03 Relate how supply and demand interact to determine market equilibrium. Topic: Market Equilibrium 3-28 Chapter 03 - Demand, Supply, and Market Equilibrium (+ Appendix) 74. Refer to the above diagram illustrating the market for corn. If the price in this market is at $4 per bushel, then there will be a: A. Surplus and the price will tend to rise B. Shortage and the price will tend to rise C. Surplus and the price will tend to fall D. Shortage and the price will tend to fall AACSB: Analytic Bloom's: Level 1 Remember Difficulty: 2 Medium Learning Objective: 03-03 Relate how supply and demand interact to determine market equilibrium. Topic: Market Equilibrium 75. Refer to the above diagram illustrating the market for corn. If the price in this market is fixed at $2 per bushel, then: A. Sellers will not be able to sell all the corn that they want to sell B. Sellers will quickly run out of corn that they bring to market C. Buyers will find too much corn in the market D. Buyers will be able to get as much corn as they wish to buy AACSB: Analytic Bloom's: Level 2 Understand Difficulty: 2 Medium Learning Objective: 03-03 Relate how supply and demand interact to determine market equilibrium. Topic: Market Equilibrium 76. If the market price is above the equilibrium price: A. A shortage will occur and producers will produce more and lower prices B. A surplus will occur and producers will produce less and lower prices C. A surplus will result and consumers will bid prices up D. Producers will make extremely high profits AACSB: Analytic Bloom's: Level 1 Remember Difficulty: 2 Medium Learning Objective: 03-03 Relate how supply and demand interact to determine market equilibrium. Topic: Market Equilibrium 3-29 Chapter 03 - Demand, Supply, and Market Equilibrium (+ Appendix) 77. Refer to the above table. At a price of $15 per unit, which of the following would exist? A. A shortage of 1,600 units B. A surplus of 1,000 units C. A shortage of 1,000 units D. A surplus of 600 units AACSB: Analytic Bloom's: Level 1 Remember Difficulty: 2 Medium Learning Objective: 03-03 Relate how supply and demand interact to determine market equilibrium. Topic: Market Equilibrium 78. Refer to the above table. In a free-market economy, the market price and quantity will adjust to: A. $10 and 2,000 units B. $15 and 1,600 units C. $20 and 900 units D. $25 and 1,200 units AACSB: Analytic Bloom's: Level 1 Remember Difficulty: 1 Easy Learning Objective: 03-03 Relate how supply and demand interact to determine market equilibrium. Topic: Market Equilibrium 3-30 Chapter 03 - Demand, Supply, and Market Equilibrium (+ Appendix) 79. Refer to the above table. A surplus exists when the price is: A. $15 per unit B. $20 per unit C. $25 per unit D. $30 per unit AACSB: Analytic Bloom's: Level 1 Remember Difficulty: 2 Medium Learning Objective: 03-03 Relate how supply and demand interact to determine market equilibrium. Topic: Market Equilibrium 80. Refer to the above table. A shortage of 1,500 units will occur when the price is: A. $10 per unit B. $25 per unit C. $20 per unit D. $30 per unit AACSB: Analytic Bloom's: Level 1 Remember Difficulty: 3 Hard Learning Objective: 03-03 Relate how supply and demand interact to determine market equilibrium. Topic: Market Equilibrium 81. When a shortage of a commodity occurs, we would expect to find that: A. The prevailing price of the good is above the equilibrium price B. Buyers will tend to bid its price up C. The quantity demanded of the good is less than the quantity supplied D. Competition in the market will drive price down AACSB: Analytic Bloom's: Level 1 Remember Difficulty: 3 Hard Learning Objective: 03-03 Relate how supply and demand interact to determine market equilibrium. Topic: Market Equilibrium 3-31 Chapter 03 - Demand, Supply, and Market Equilibrium (+ Appendix) 82. The market system automatically corrects a surplus condition in a competitive market by: A. Raising the price of the commodity in question while increasing the quantity demanded B. Raising the price of the commodity in question while decreasing the quantity demanded C. Reducing the price of the commodity in question while increasing the quantity demanded D. Reducing the price of the commodity in question while decreasing the quantity demanded AACSB: Analytic Bloom's: Level 1 Remember Difficulty: 2 Medium Learning Objective: 03-03 Relate how supply and demand interact to determine market equilibrium. Topic: Market Equilibrium 83. In competitive markets a surplus or shortage will: A. Never exist because the markets are always at equilibrium B. Cause buyer and seller reactions which tend to eliminate the surplus or shortage C. Cause shifts in the demand and supply curves D. Cause buyer and seller reactions which tend to intensify the surplus or shortage AACSB: Analytic Bloom's: Level 1 Remember Difficulty: 1 Easy Learning Objective: 03-03 Relate how supply and demand interact to determine market equilibrium. Topic: Market Equilibrium 84. In a competitive market, if the existing price is below the equilibrium price, market forces will drive the price: A. Up and quantity supplied up B. Up and quantity supplied down C. Up and supply up D. Down and demand down AACSB: Analytic Bloom's: Level 1 Remember Difficulty: 2 Medium Learning Objective: 03-03 Relate how supply and demand interact to determine market equilibrium. Topic: Market Equilibrium 3-32 Chapter 03 - Demand, Supply, and Market Equilibrium (+ Appendix) 85. A competitive market for a product must be in equilibrium when: A. Spending on the product is equal to the value of the quantity supplied B. The quantity of the product bought is less than the quantity of the product sold C. The number of consumers equals the number of producers D. There is no tendency for the price of the product to change AACSB: Analytic Bloom's: Level 1 Remember Difficulty: 2 Medium Learning Objective: 03-03 Relate how supply and demand interact to determine market equilibrium. Topic: Market Equilibrium 86. If an economy is being "productively efficient," then that means the economy is: A. Producing the products most wanted by society B. Fully employing all economic resources C. Maximizing the returns to factors of production D. Using the least costly production techniques AACSB: Analytic Bloom's: Level 1 Remember Difficulty: 3 Hard Learning Objective: 03-03 Relate how supply and demand interact to determine market equilibrium. Topic: Market Equilibrium 87. Allocative efficiency means that: A. The law of increasing opportunity costs has reached a maximum B. The least costly methods are being used to produce a product C. Resources are being devoted to the production of products most desired by society D. The amount of other products which must be sacrificed to obtain production of a given product is at a minimum AACSB: Analytic Bloom's: Level 1 Remember Difficulty: 3 Hard Learning Objective: 03-03 Relate how supply and demand interact to determine market equilibrium. Topic: Market Equilibrium 3-33 Chapter 03 - Demand, Supply, and Market Equilibrium (+ Appendix) 88. Refer to the above table. If a technological advance lowers production costs such that the quantity supplied increases by 60 units of this product at each price, the new equilibrium price would be: A. $11 B. $12 C. $13 D. $14 AACSB: Analytic Bloom's: Level 3 Apply Difficulty: 3 Hard Learning Objective: 03-04 Explain how changes in supply and demand affect equilibrium prices and quantities. Topic: Market Equilibrium 89. Refer to the above table. A technological advance lowers production costs such that the quantity supplied increases by 60 units of this product at each price. As a result of this technological change, equilibrium output in this market: A. Decreased by 60 units B. Increased by 60 units C. Increased by 30 units D. Decreased by 30 units AACSB: Analytic Bloom's: Level 3 Apply Difficulty: 3 Hard Learning Objective: 03-04 Explain how changes in supply and demand affect equilibrium prices and quantities. Topic: Market Equilibrium 3-34 Chapter 03 - Demand, Supply, and Market Equilibrium (+ Appendix) The following data show the supply and demand schedules for a product. 90. Refer to the above data. The government now introduces a subsidy payment to producers of $30 per unit. Assuming a purely competitive market for the product, the new equilibrium price will be between: A. $40-$50 B. $50-$60 C. $60-$70 D. $70-$80 AACSB: Analytic Bloom's: Level 3 Apply Difficulty: 3 Hard Learning Objective: 03-04 Explain how changes in supply and demand affect equilibrium prices and quantities. Topic: Market Equilibrium The following data show the supply and demand schedules for a product in a competitive market. 3-35 Chapter 03 - Demand, Supply, and Market Equilibrium (+ Appendix) 91. Refer to the above data. At the equilibrium price and quantity, consumer spending for all units of the product bought and sold will be: A. $120 per week B. $130 per week C. $4800 per week D. $5400 per week AACSB: Analytic Bloom's: Level 1 Remember Difficulty: 3 Hard Learning Objective: 03-03 Relate how supply and demand interact to determine market equilibrium. Topic: Market Equilibrium 92. Refer to the above data. If there is a change in market conditions so that demand increases by 20 units at each price, then: A. Equilibrium price increases by $20 per unit B. Consumer spending on the product increases by $1100 per week C. Quantity traded in the market increases by 20 units per week D. Equilibrium price increases by $5 per unit AACSB: Analytic Bloom's: Level 3 Apply Difficulty: 3 Hard Learning Objective: 03-04 Explain how changes in supply and demand affect equilibrium prices and quantities. Topic: Market Equilibrium 93. A decrease in supply, holding demand constant, will cause: A. Higher prices and a larger quantity sold B. Higher prices and a smaller quantity sold C. Lower prices and a smaller quantity sold D. Lower prices and a larger quantity sold AACSB: Analytic Bloom's: Level 2 Understand Difficulty: 1 Easy Learning Objective: 03-04 Explain how changes in supply and demand affect equilibrium prices and quantities. Topic: Market Equilibrium 3-36 Chapter 03 - Demand, Supply, and Market Equilibrium (+ Appendix) 94. Which of the following statements is true? A. If demand increases, then price will decrease B. If demand decreases, then price will decrease C. If price increases, then the demand curve will shift to the left D. If price decreases, then the demand curve will shift to the left AACSB: Analytic Bloom's: Level 1 Remember Difficulty: 2 Medium Learning Objective: 03-04 Explain how changes in supply and demand affect equilibrium prices and quantities. Topic: Market Equilibrium 95. An increase in the quantity of automobiles supplied would be caused by which of the following? A. An increase in the demand for automobiles B. A decrease in the demand for automobiles C. Higher prices for steel D. Higher prices for gasoline AACSB: Analytic Bloom's: Level 3 Apply Difficulty: 3 Hard Learning Objective: 03-04 Explain how changes in supply and demand affect equilibrium prices and quantities. Topic: Market Equilibrium 96. A television station reports that the price of coffee has increased but the quantity traded in the market has decreased. This situation would be caused by a(n): A. Increase in demand B. Increase in supply C. Decrease in demand D. Decrease in supply AACSB: Analytic Bloom's: Level 4 Analyze Difficulty: 2 Medium Learning Objective: 03-04 Explain how changes in supply and demand affect equilibrium prices and quantities. Topic: Market Equilibrium 3-37 Chapter 03 - Demand, Supply, and Market Equilibrium (+ Appendix) 97. A newspaper reports that the average price of new homes in a certain city had decreased, and the number of new homes sold had also decreased. This situation is probably caused by: A. Declining costs of construction materials and services in that city B. Declining incomes of people in that city C. Higher government subsidies to new homebuyers in that city D. A rising population in that city AACSB: Analytic Bloom's: Level 4 Analyze Difficulty: 3 Hard Learning Objective: 03-04 Explain how changes in supply and demand affect equilibrium prices and quantities. Topic: Market Equilibrium 98. A news story states that "CDs lose their appeal as consumers switch to iPods for music." In a competitive market for CDs, this situation would lead to a(n): A. Increase in the price and the quantity sold of CDs B. Decrease in the price and the quantity sold of CDs C. Increase in the price and a decrease in the quantity sold of CDs D. Decrease in the price and an increase in the quantity sold of CDs AACSB: Analytic Bloom's: Level 3 Apply Difficulty: 2 Medium Learning Objective: 03-04 Explain how changes in supply and demand affect equilibrium prices and quantities. Topic: Market Equilibrium 99. A decrease in the price of digital cameras would lead to a(n): A. Increase in the price and quantity sold of memory cards B. Decrease in the price and quantity sold of memory cards C. Increase in the price and a decrease in quantity sold of memory cards D. Decrease in the price and an increase in quantity sold of memory cards AACSB: Analytic Bloom's: Level 3 Apply Difficulty: 2 Medium Learning Objective: 03-04 Explain how changes in supply and demand affect equilibrium prices and quantities. Topic: Market Equilibrium 3-38 Chapter 03 - Demand, Supply, and Market Equilibrium (+ Appendix) 100. A headline reads "Lumber Prices Up Sharply." In a competitive market, this situation would lead to a(n): A. Increase in the price and quantity of new homes B. Decrease in the price and quantity of new homes C. Increase in the price of new homes and decrease in quantity D. Decrease in the price of new homes and increase in quantity AACSB: Analytic Bloom's: Level 3 Apply Difficulty: 2 Medium Learning Objective: 03-04 Explain how changes in supply and demand affect equilibrium prices and quantities. Topic: Market Equilibrium 101. An increase in demand for oil along with a simultaneous increase in supply of oil will: A. Decrease price and increase quantity B. Increase price and decrease quantity C. Increase quantity, but whether it increases price depends on how much each curve shifts D. Increase price, but whether it increases quantity depends on how much each curve shifts AACSB: Analytic Bloom's: Level 3 Apply Difficulty: 3 Hard Learning Objective: 03-04 Explain how changes in supply and demand affect equilibrium prices and quantities. Topic: Market Equilibrium 3-39 Chapter 03 - Demand, Supply, and Market Equilibrium (+ Appendix) 102. Refer to the above graph, which shows the market for a product. Which of the following could not explain the indicated increase in equilibrium price from P1 to P2? A. An increase in consumer incomes B. An increase in production costs C. A decrease in the price of a complementary product D. An increase in the price of a substitute product AACSB: Analytic Bloom's: Level 4 Analyze Difficulty: 2 Medium Learning Objective: 03-04 Explain how changes in supply and demand affect equilibrium prices and quantities. Topic: Market Equilibrium 103. Refer to the above graph, which shows the market for a product. Which of the following would best explain why the shift in demand from D1 to D2 would cause price to rise from P1 to P2? A. Because after the shift in the demand, there would be a surplus at price P2 B. Because after the shift in the demand, there would be a shortage at price P2 C. Because after the shift in the demand, there would be a shortage at price P1 D. Because after the shift in the demand, there would be a surplus at price P1 AACSB: Analytic Bloom's: Level 4 Analyze Difficulty: 2 Medium Learning Objective: 03-04 Explain how changes in supply and demand affect equilibrium prices and quantities. Topic: Market Equilibrium 104. A and B are substitute goods, but A and C are complementary goods. If the costs of producing A decrease, then the demand for: A. Both B and C will decrease B. Both B and C will increase C. B will increase and the demand for C will decrease D. B will decrease and the demand for C will increase AACSB: Analytic Bloom's: Level 4 Analyze Difficulty: 3 Hard Learning Objective: 03-04 Explain how changes in supply and demand affect equilibrium prices and quantities. Topic: Market Equilibrium 3-40 Chapter 03 - Demand, Supply, and Market Equilibrium (+ Appendix) 105. The price of pork may increase as a result of: A. A decrease in the cost of feed for pigs B. Decreased advertising of pork C. An increase in the cost of producing beef D. A subsidy to pork producers AACSB: Analytic Bloom's: Level 4 Analyze Difficulty: 3 Hard Learning Objective: 03-04 Explain how changes in supply and demand affect equilibrium prices and quantities. Topic: Market Equilibrium 106. Refer to the above graph, which shows the market for chicken where D1 and D2 represent different demand curves. A change from E1 to E2 is most likely to result from: A. A decrease in consumer incomes B. An increase in the wages of chicken workers C. An increase in the price of beef products D. Improved technology in the chicken industry AACSB: Analytic Bloom's: Level 3 Apply Difficulty: 1 Easy Learning Objective: 03-04 Explain how changes in supply and demand affect equilibrium prices and quantities. Topic: Market Equilibrium 3-41 Chapter 03 - Demand, Supply, and Market Equilibrium (+ Appendix) 107. Refer to the above graph, which shows the market for chicken where D1 and D2 represent different demand curves. A change from E1 to E2 is most likely to result from: A. An increase in expectations of higher future prices for chicken B. An increase in the cost of chicken feed to produce chickens C. A decrease in the price of beef products D. A decrease in the productivity of chicken farms AACSB: Analytic Bloom's: Level 3 Apply Difficulty: 2 Medium Learning Objective: 03-04 Explain how changes in supply and demand affect equilibrium prices and quantities. Topic: Market Equilibrium Assume that the graphs show a competitive market for the product stated in the question. 3-42 Chapter 03 - Demand, Supply, and Market Equilibrium (+ Appendix) 108. Select the graph above that best shows the change in the market specified in the following situation: In the market for leather coats, when leather coats become more fashionable among young consumers. A. A B. Graph Graph B C. Graph C D. Graph D AACSB: Analytic Bloom's: Level 3 Apply Difficulty: 1 Easy Learning Objective: 03-04 Explain how changes in supply and demand affect equilibrium prices and quantities. Topic: Market Equilibrium 109. Select the graph above that best shows the change in the market specified in the following situation: In the market for chicken, when the price of a substitute, such as beef, decreases. A. Graph A B. Graph B C. Graph C D. Graph D AACSB: Analytic Bloom's: Level 3 Apply Difficulty: 2 Medium Learning Objective: 03-04 Explain how changes in supply and demand affect equilibrium prices and quantities. Topic: Market Equilibrium 110. Select the graph above that best shows the change in the market specified in the following situation: In the market for digital cameras, when the productivity of workers in the digital camera industry increases. A. Graph A B. Graph B C. Graph C D. Graph D AACSB: Analytic Bloom's: Level 3 Apply Difficulty: 2 Medium Learning Objective: 03-04 Explain how changes in supply and demand affect equilibrium prices and quantities. Topic: Market Equilibrium 3-43 Chapter 03 - Demand, Supply, and Market Equilibrium (+ Appendix) 111. Select the graph above that best shows the change in the market specified in the following situation: In the market for houses, when consumers experience a substantial fall in income due to a serious economic recession. A. Graph A B. Graph B C. Graph C D. Graph D AACSB: Analytic Bloom's: Level 3 Apply Difficulty: 2 Medium Learning Objective: 03-04 Explain how changes in supply and demand affect equilibrium prices and quantities. Topic: Market Equilibrium 3-44 Chapter 03 - Demand, Supply, and Market Equilibrium (+ Appendix) 112. Refer to the above graph, which shows the market for bicycles. S1 and D1 are the original supply and demand curves. D2 and D3 and S2 and S3 are possible new demand and supply curves. Starting from the initial equilibrium (point 1), what point on the graph is most likely to result from the introduction of technological improvements in bicycle assembly, and successful publicity campaigns by the government on the virtues of bicycling to work? A. 3 B. 4 C. 5 D. 6 AACSB: Analytic Bloom's: Level 3 Apply Difficulty: 3 Hard Learning Objective: 03-04 Explain how changes in supply and demand affect equilibrium prices and quantities. Topic: Market Equilibrium 113. Refer to the above graph, which shows the market for bicycles. S1 and D1 are the original supply and demand curves. D2 and D3 and S2 and S3 are possible new demand and supply curves. Starting from the initial equilibrium (point 1), what point on the graph is most likely to result from an increase in wages of bicycle workers, and a significant increase in the price of gasoline? A. 2 B. 3 C. 4 D. 5 AACSB: Analytic Bloom's: Level 3 Apply Difficulty: 3 Hard Learning Objective: 03-04 Explain how changes in supply and demand affect equilibrium prices and quantities. Topic: Market Equilibrium 3-45 Chapter 03 - Demand, Supply, and Market Equilibrium (+ Appendix) 114. Refer to the above graph, which shows the market for bicycles. S1 and D1 are the original supply and demand curves. D2 and D3 and S2 and S3 are possible new demand and supply curves. Starting from the initial equilibrium (point 1), what point on the graph is most likely to result from reports of increased accidents on roads involving cyclists, and the payment of subsidies to bicycle producers? A. 3 B. 4 C. 5 D. 6 AACSB: Analytic Bloom's: Level 3 Apply Difficulty: 3 Hard Learning Objective: 03-04 Explain how changes in supply and demand affect equilibrium prices and quantities. Topic: Market Equilibrium 115. What is the likely effect on the market for wine of a simultaneous increase in both consumer incomes and producer taxes on wine? A. An increase in both price and quantity B. An increase in price and a decrease in output C. A decrease in price and an indeterminate effect on quantity D. An increase in price and an indeterminate effect on quantity AACSB: Analytic Bloom's: Level 3 Apply Difficulty: 2 Medium Learning Objective: 03-04 Explain how changes in supply and demand affect equilibrium prices and quantities. Topic: Market Equilibrium 116. Two months ago, the Marbury Shirt company sold 200 shirts at $30 per shirt. Last month the company raised its price to $35 per shirt and sold 300 shirts. Evidently the company experienced a(n): A. Decrease in demand B. Increase in demand C. Decrease in supply D. Increase in supply AACSB: Analytic Bloom's: Level 4 Analyze Difficulty: 2 Medium Learning Objective: 03-04 Explain how changes in supply and demand affect equilibrium prices and quantities. Topic: Market Equilibrium 3-46 Chapter 03 - Demand, Supply, and Market Equilibrium (+ Appendix) 117. If peanut butter and grape jelly are complementary products, which diagram above illustrates the effect in the peanut butter market of a decrease in the price of grape jelly? A. A B. B C. C D. D AACSB: Analytic Bloom's: Level 3 Apply Difficulty: 1 Easy Learning Objective: 03-04 Explain how changes in supply and demand affect equilibrium prices and quantities. Topic: Market Equilibrium 3-47 Chapter 03 - Demand, Supply, and Market Equilibrium (+ Appendix) 118. Which diagram above illustrates the effects on the peanut butter market of a higher wage rate for peanut workers? A. A B. B C. C D. D AACSB: Analytic Bloom's: Level 3 Apply Difficulty: 1 Easy Learning Objective: 03-04 Explain how changes in supply and demand affect equilibrium prices and quantities. Topic: Market Equilibrium 119. Which diagram above illustrates the effect on the peanut butter market of a technological advance which reduces the costs of harvesting peanuts? A. A B. B C. C D. D AACSB: Analytic Bloom's: Level 3 Apply Difficulty: 1 Easy Learning Objective: 03-04 Explain how changes in supply and demand affect equilibrium prices and quantities. Topic: Market Equilibrium 120. If peanut butter and cheese spread are substitute products, which diagram above illustrates the effect on the peanut butter market of a decrease in the price of cheese spread? A. A B. B C. C D. D AACSB: Analytic Bloom's: Level 3 Apply Difficulty: 3 Hard Learning Objective: 03-04 Explain how changes in supply and demand affect equilibrium prices and quantities. Topic: Market Equilibrium 3-48 Chapter 03 - Demand, Supply, and Market Equilibrium (+ Appendix) 121. Refer to the four graphs above. Select the graph that best shows the changes in demand and supply in the market specified in the following situation: In the market for beef, if newspapers report numerous stories of confirmed cases of mad cow disease, and cattle producers reduce their herds because of the high cost of cattle feed. A. Graph A B. Graph B C. Graph C D. Graph D AACSB: Analytic Bloom's: Level 3 Apply Difficulty: 3 Hard Learning Objective: 03-04 Explain how changes in supply and demand affect equilibrium prices and quantities. Topic: Market Equilibrium 3-49 Chapter 03 - Demand, Supply, and Market Equilibrium (+ Appendix) 122. Refer to the four graphs above. Select the graph that best shows the changes in demand and supply in the market specified in the following situation: In the market for home heating oil, if consumers experience a severely cold and long winter, and heating oil producers pay higher prices for crude oil. A. Graph A B. Graph B C. Graph C D. Graph D AACSB: Analytic Bloom's: Level 3 Apply Difficulty: 3 Hard Learning Objective: 03-04 Explain how changes in supply and demand affect equilibrium prices and quantities. Topic: Market Equilibrium 123. Refer to the four graphs above. Select the graph that best shows the changes in demand and supply in the market specified in the following situation: In the market for camera film, if consumers show greater interest in digital cameras that do not use film, and producers of film have a reduction in labor costs. A. Graph A B. Graph B C. Graph C D. Graph D AACSB: Analytic Bloom's: Level 3 Apply Difficulty: 3 Hard Learning Objective: 03-04 Explain how changes in supply and demand affect equ ilibrium prices and quantities. Topic: Market Equilibrium 3-50 Chapter 03 - Demand, Supply, and Market Equilibrium (+ Appendix) 124. Refer to the four graphs above. Select the graph above that best shows the changes in demand and supply in the market specified in the following situation: In the market for corn, if gasoline producers use more ethanol from corn, and good weather during the growing season increases the corn crop. A. Graph A B. Graph B C. Graph C D. Graph D AACSB: Analytic Bloom's: Level 3 Apply Difficulty: 3 Hard Learning Objective: 03-04 Explain how changes in supply and demand affect equilibrium prices and quantities. Topic: Market Equilibrium 125. Refer to the four graphs above. Select the graph above that best shows the changes in demand and supply in the market specified in the following situation: In the market for music CDs sold in stores, if more consumers switch to music-downloads from the Internet, and the cost of making music CDs decreases because of technological improvement in production. A. Graph A B. Graph B C. Graph C D. Graph D AACSB: Analytic Bloom's: Level 3 Apply Difficulty: 3 Hard Learning Objective: 03-04 Explain how changes in supply and demand affect equilibrium prices and quantities. Topic: Market Equilibrium 3-51 Chapter 03 - Demand, Supply, and Market Equilibrium (+ Appendix) 126. Refer to the four graphs above. Select the graph above that best shows changes in demand and supply in the market specified in the following situation: In the market for autos, if the economy experiences a deep recession, and there are lengthy strikes in the auto industry. A. Graph A B. Graph B C. Graph C D. Graph D AACSB: Analytic Bloom's: Level 3 Apply Difficulty: 3 Hard Learning Objective: 03-04 Explain how changes in supply and demand affect equilibrium prices and quantities. Topic: Market Equilibrium 127. Over a period of time, the price of a good or service increases and the quantity of the good or service sold decreases. All of the following could account for this situation, except: A. An increase in the costs of production B. The removal of a subsidy on the good or service C. The imposition of a sales tax on the good or service D. A decrease in the price of an alternative good or service that producers could also produce AACSB: Analytic Bloom's: Level 4 Analyze Difficulty: 2 Medium Learning Objective: 03-04 Explain how changes in supply and demand affect equilibrium prices and quantities. Topic: Market Equilibrium 128. Which would best explain a decrease in both the price and the quantity of a product over a period of time? A. A decrease in people's incomes, and the product is an inferior good B. A long strike by workers who make the product C. A decrease in the price of a substitute good D. A technological improvement in production methods AACSB: Analytic Bloom's: Level 4 Analyze Difficulty: 1 Easy Learning Objective: 03-04 Explain how changes in supply and demand affect equilibrium prices and quantities. Topic: Market Equilibrium 3-52 Chapter 03 - Demand, Supply, and Market Equilibrium (+ Appendix) 129. An increase in demand and a decrease in supply will: A. Affect price in an indeterminate way and decrease the equilibrium quantity B. Increase price and affect the equilibrium quantity in an indeterminate way C. Decrease price and affect the equilibrium quantity in an indeterminate way D. Increase price and increase the equilibrium quantity AACSB: Analytic Bloom's: Level 4 Analyze Difficulty: 1 Easy Learning Objective: 03-04 Explain how changes in supply and demand affect equilibrium prices and quantities. Topic: Market Equilibrium 130. A decrease in supply and a decrease in demand will: A. Increase price and affect the equilibrium quantity in an indeterminate way B. Decrease the equilibrium quantity and decrease price C. Increase the equilibrium quantity and affect price in an indeterminate way D. Decrease the equilibrium quantity and affect price in an indeterminate way AACSB: Analytic Bloom's: Level 4 Analyze Difficulty: 1 Easy Learning Objective: 03-04 Explain how changes in supply and demand affect equilibrium prices and quantities. Topic: Market Equilibrium 131. What combination of changes in supply and demand would most likely increase the equilibrium quantity? A. When supply increases and demand increases B. When supply decreases and demand decreases C. When supply decreases and demand increases D. When supply increases and demand decreases AACSB: Analytic Bloom's: Level 4 Analyze Difficulty: 1 Easy Learning Objective: 03-04 Explain how changes in supply and demand affect equilibrium prices and quantities. Topic: Market Equilibrium 3-53 Chapter 03 - Demand, Supply, and Market Equilibrium (+ Appendix) 132. What combination of changes would most likely decrease the equilibrium price? A. When supply decreases and demand increases B. When demand increases and supply increases C. When demand decreases and supply decreases D. When supply increases and demand decreases AACSB: Analytic Bloom's: Level 4 Analyze Difficulty: 2 Medium Learning Objective: 03-04 Explain how changes in supply and demand affect equilibrium prices and quantities. Topic: Market Equilibrium 133. An increase in the price of product A together with a decrease in the quantity of A demanded could be the result of a(n): A. Increase in consumer incomes B. Increase in the wages of workers making A C. Decrease in the price of a substitute product D. Increase in the price of a complementary product AACSB: Analytic Bloom's: Level 4 Analyze Difficulty: 2 Medium Learning Objective: 03-04 Explain how changes in supply and demand affect equilibrium prices and quantities. Topic: Market Equilibrium 134. An increase in the demand for corn is more than offset by an increase in its supply. As a result the equilibrium price will: A. Increase and the equilibrium quantity will decrease B. Increase and the equilibrium quantity will increase C. Decrease and the equilibrium quantity will decrease D. Decrease and the equilibrium quantity will increase AACSB: Analytic Bloom's: Level 4 Analyze Difficulty: 3 Hard Learning Objective: 03-04 Explain how changes in supply and demand affect equilibrium prices and quantities. Topic: Market Equilibrium 3-54 Chapter 03 - Demand, Supply, and Market Equilibrium (+ Appendix) 135. An increase in the supply of gasoline is more than offset by an increase in its demand. As a result the equilibrium price will: A. Increase and the equilibrium quantity will decrease B. Increase and the equilibrium quantity will increase C. Decrease and the equilibrium quantity will decrease D. Decrease and the equilibrium quantity will increase AACSB: Analytic Bloom's: Level 3 Apply Difficulty: 3 Hard Learning Objective: 03-04 Explain how changes in supply and demand affect equilibrium prices and quantities. Topic: Market Equilibrium 136. Refer to the above table. If demand decreased by 4 units at each price, what would the new equilibrium price and quantity be? A. $3 and 5 units B. $4 and 6 units C. $5 and 7 units D. $6 and 8 units AACSB: Analytic Bloom's: Level 3 Apply Difficulty: 2 Medium Learning Objective: 03-04 Explain how changes in supply and demand affect equilibrium prices and quantities. Topic: Market Equilibrium 3-55 Chapter 03 - Demand, Supply, and Market Equilibrium (+ Appendix) 137. Refer to the above table. If supply decreased by 2 units at each price, what would the new equilibrium price and quantity be? A. $3 and 5 units B. $4 and 4 units C. $5 and 5 units D. $6 and 6 units AACSB: Analytic Bloom's: Level 3 Apply Difficulty: 2 Medium Learning Objective: 03-04 Explain how changes in supply and demand affect equilibrium prices and quantities. Topic: Market Equilibrium 138. Refer to the above table. If demand decreased by 4 units at each price and supply decreased by 2 units at each price, what would the new equilibrium price and quantity be? A. $3 and 5 units B. $4 and 4 units C. $5 and 5 units D. $6 and 6 units AACSB: Analytic Bloom's: Level 3 Apply Difficulty: 3 Hard Learning Objective: 03-04 Explain how changes in supply and demand affect equilibrium prices and quantities. Topic: Market Equilibrium 3-56 Chapter 03 - Demand, Supply, and Market Equilibrium (+ Appendix) 139. In a competitive market illustrated by the diagram above, a price floor of $25 per unit will result in: A. A shortage of 200 units B. A surplus of 200 units C. A surplus of 250 units D. A shortage of 250 units AACSB: Analytic Bloom's: Level 2 Understand Difficulty: 2 Medium Learning Objective: 03-05 Identify what government-set prices are and how they can cause product surpluses and shortages. Topic: Application: Government-Set Prices 140. In a competitive market illustrated by the diagram above, a price ceiling of $10 per unit will result in: A. A shortage of 200 units B. A surplus of 200 units C. A surplus of 250 units D. A shortage of 250 units AACSB: Analytic Bloom's: Level 2 Understand Difficulty: 2 Medium Learning Objective: 03-05 Identify what government-set prices are and how they can cause product surpluses and shortag es. Topic: Application: Government-Set Prices 141. In a competitive market illustrated by the diagram above, a price ceiling of $25 per unit will result in: A. The market staying at an equilibrium price of $15 B. A surplus of 200 units C. A shortage of 200 units D. A shortage of 150 units AACSB: Reflective Thinking Bloom's: Level 2 Understand Difficulty: 3 Hard Learning Objective: 03-05 Identify what government-set prices are and how they can cause product surpluses and shortages. Topic: Application: Government-Set Prices 3-57 Chapter 03 - Demand, Supply, and Market Equilibrium (+ Appendix) 142. In a competitive market illustrated by the diagram above, for a price floor to be effective and alter the market situation, it must be set: A. At $15 B. Below $15 C. Above $15 D. At $10 AACSB: Reflective Thinking Bloom's: Level 2 Understand Difficulty: 3 Hard Learning Objective: 03-05 Identify what government-set prices are and how they can cause product surpluses and shortages. Topic: Application: Government-Set Prices 143. If a price ceiling is set below the equilibrium price in a market: A. Rationing will be unnecessary B. Surpluses of the commodity will develop C. The quantity demanded will exceed the quantity supplied D. The quantity supplied will exceed the quantity demanded AACSB: Analytic Bloom's: Level 1 Remember Difficulty: 2 Medium Learning Objective: 03-05 Identify what government-set prices are and how they can cause product surpluses and shortages. Topic: Application: Government-Set Prices 3-58 Chapter 03 - Demand, Supply, and Market Equilibrium (+ Appendix) 144. Consider the supply and demand curves depicted in the diagram above. If the market was initially at equilibrium, but the government then imposed a price ceiling of $15, then the total revenue received by suppliers would: A. Remain unchanged B. Fall by $30 C. Fall by $120 D. Fall by $240 AACSB: Analytic Bloom's: Level 3 Apply Difficulty: 3 Hard Learning Objective: 03-05 Identify what government-set prices are and how they can cause product surpluses and shortages. Topic: Application: Government-Set Prices 145. Consider the supply and demand curves depicted in the diagram above. If the government imposed a price ceiling of $15, then buyers will be able to legally buy: A. 24 units B. 30 units C. 36 units D. 50 units AACSB: Analytic Bloom's: Level 3 Apply Difficulty: 3 Hard Learning Objective: 03-05 Identify what government-set prices are and how they can cause product surpluses and shortages. Topic: Application: Government-Set Prices 146. Consider the supply and demand curves depicted in the diagram above. If the government imposed a price ceiling of $10, then sellers will be willing to sell: A. 24 units B. 36 units C. 50 units D. 0 units AACSB: Analytic Bloom's: Level 3 Apply Difficulty: 3 Hard Learning Objective: 03-05 Identify what government-set prices are and how they can cause product surpluses and shortages. Topic: Application: Government-Set Prices 3-59 Chapter 03 - Demand, Supply, and Market Equilibrium (+ Appendix) 147. In a market with supply and demand curves as shown above, a legal price ceiling of $2.50 will result in: A. A surplus of 10 units B. A shortage of 10 units C. No shortage or surplus D. A black market price greater than $2.50 AACSB: Analytic Bloom's: Level 3 Apply Difficulty: 2 Medium Learning Objective: 03-05 Identify what government-set prices are and how they can cause product surpluses and shortages. Topic: Application: Government-Set Prices 148. Government-set price floors and price ceilings: A. Do not affect the rationing function of price in a free market B. Interfere with the rationing function of price in a free market C. Result in surpluses of products in markets where they are used D. Result in shortages of products in markets where they are used AACSB: Reflective Thinking Bloom's: Level 2 Understand Difficulty: 2 Medium Learning Objective: 03-05 Identify what government-set prices are and how they can cause product surpluses and shortages. Topic: Application: Government-Set Prices 3-60 Chapter 03 - Demand, Supply, and Market Equilibrium (+ Appendix) 149. Which is most likely to be observed in a community where legal ceilings are imposed on residential rents? A. Poor people will be able to find adequate housing B. Tenants will reduce their use of housing space, making more available for others C. Those whose needs for housing are most urgent will be able to obtain the space they want D. People moving into the community will have difficulty locating residential space to rent AACSB: Reflective Thinking Bloom's: Level 2 Understand Difficulty: 3 Hard Learning Objective: 03-05 Identify what government-set prices are and how they can cause product surpluses and shortages. Topic: Application: Government-Set Prices Answer the next question(s) based on the following supply and demand schedules in units per week for a product. 150. Refer to the above table. If the government introduced a guaranteed price floor of $40 and agreed to purchase surplus output, then the government's total support payments to producers would be: A. $3,000 per week B. $3,500 per week C. $4,000 per week D. $2,500 per week AACSB: Analytic Bloom's: Level 3 Apply Difficulty: 3 Hard Learning Objective: 03-05 Identify what government-set prices are and how they can cause product surpluses and shortages. Topic: Application: Government-Set Prices 3-61 Chapter 03 - Demand, Supply, and Market Equilibrium (+ Appendix) 151. Refer to the above table. If demand increased by 100 units at each price level, and the government set a price ceiling of $40, then there will be: A. A shortage B. A surplus C. No shortage or surplus D. Decrease in supply AACSB: Analytic Bloom's: Level 3 Apply Difficulty: 3 Hard Learning Objective: 03-05 Identify what government-set prices are and how they can cause product surpluses and shortages. Topic: Application: Government-Set Prices 152. Which would be an example of a government price ceiling? A. Limits on interest rates charged by credit card companies B. Subsidies for apartment rent in major cities C. Minimum-wage laws for unskilled workers D. Price supports for agricultural products AACSB: Analytic Bloom's: Level 1 Remember Difficulty: 1 Easy Learning Objective: 03-05 Identify what government-set prices are and how they can cause product surpluses and shortages. Topic: Application: Government-Set Prices 153. A black market could arise as a result of: A. An increase in demand B. A decrease in supply C. The imposition of a legal price floor above the equilibrium price D. The imposition of a legal price ceiling below the equilibrium price AACSB: Analytic Bloom's: Level 1 Remember Difficulty: 1 Easy Learning Objective: 03-05 Identify what government-set prices are and how they can cause product surpluses and shortages. Topic: Application: Government-Set Prices 3-62 Chapter 03 - Demand, Supply, and Market Equilibrium (+ Appendix) 154. A government will create a surplus of a product when it: A. Sets a price ceiling for the product above the current equilibrium price B. Sets a price floor for the product above the current equilibrium price C. Sets a price floor for the product below the current equilibrium price D. Subsidizes a complementary product AACSB: Analytic Bloom's: Level 1 Remember Difficulty: 2 Medium Learning Objective: 03-05 Identify what government-set prices are and how they can cause product surpluses and shortages. Topic: Application: Government-Set Prices 155. The graph above represents a competitive market for a product where the government has set a price ceiling of OA. What quantity will buyers be able to buy after the imposition of the price ceiling? A. 0J B. 0L C. J L D. KL AACSB: Analytic Bloom's: Level 3 Apply Difficulty: 2 Medium Learning Objective: 03-05 Identify what government-set prices are and how they can cause product surpluses and shortages. Topic: Application: Government-Set Prices 3-63 Chapter 03 - Demand, Supply, and Market Equilibrium (+ Appendix) 156. The graph above represents a competitive market for a product where the government now has introduced a price floor of 0C. Which area in the graph represents the producers' sales revenue after the imposition of the price floor? A. 0CFL B. 0CEJ C. 0BGK D. 0BHL AACSB: Analytic Bloom's: Level 3 Apply Difficulty: 2 Medium Learning Objective: 03-05 Identify what government-set prices are and how they can cause product surpluses and shortages. Topic: Application: Government-Set Prices 157. Which of the following is a correct statement? A. Price ceilings increase demand B. Price ceilings create surpluses C. Price floors create surpluses D. Price floors increase supply AACSB: Analytic Bloom's: Level 1 Remember Difficulty: 1 Easy Learning Objective: 03-05 Identify what government-set prices are and how they can cause product surpluses and shortages. Topic: Application: Government-Set Prices 158. Last year the price of corn was $3 a bushel and the quantity of corn demanded was 10 million bushels. This year the price of corn was $4.00 a bushel and the quantity demanded was 9 million bushels. Is this evidence that the law of demand does not apply to corn? A. Yes, because there is a direct relationship between the price of corn and the quantity supplied B. Yes, because there is an inverse relationship between the price of corn and the quantity demanded C. No, because the other-things-equal assumption was violated over the two year period D. No, because the evidence indicates that there is a shortage of corn AACSB: Reflective Thinking Bloom's: Level 4 Analyze Difficulty: 3 Hard Learning Objective: 03-03 Relate how supply and demand interact to determine market equilibrium. Topic: Market Equilibrium 3-64 Chapter 03 - Demand, Supply, and Market Equilibrium (+ Appendix) 159. Why is there a shortage of human organs available for transplant? A. The supply curve for human organs is horizontal at the current zero price B. The demand curve for organs is vertical at the current zero price C. The quantity supplied is greater than the quantity demanded at the current zero price D. The quantity demanded is greater than the quantity supplied at the current zero price AACSB: Analytic Bloom's: Level 2 Understand Difficulty: 3 Hard Learning Objective: 03-05 Identify what government-set prices are and how they can cause product surpluses and shortages. Topic: Application: Government-Set Prices 160. If a competitive market developed for human organs, then the price for organs would: A. Increase and the quantity of organs available would decrease B. Decrease and the quantity of organs available would increase C. Increase and the quantity of organs available would increase D. Decrease and the quantity of organs available would decrease AACSB: Analytic Bloom's: Level 3 Apply Difficulty: 2 Medium Learning Objective: 03-05 Identify what government-set prices are and how they can cause product surpluses and shortages. Topic: Application: Government-Set Prices 161. Creating a competitive and legal market for human organs for transplant would make the: A. Supply curve vertical for such organs. B. Demand curve vertical for such organ. C. Supply curve slope upward to the right for such organs. D. Demand curve slope upward to the right for such organs. AACSB: Reflective Thinking Bloom's: Level 2 Understand Difficulty: 3 Hard Learning Objective: 03-05 Identify what government-set prices are and how they can cause product surpluses and shortages. Topic: Application: Government-Set Prices 3-65 Chapter 03 - Demand, Supply, and Market Equilibrium (+ Appendix) 162. One objection to a competitive and legal market for human organs for transplant is that it would: A. Decrease the cost of organs for transplant B. Increase the cost of organs for transplant C. Decrease the supply of organs for transplant D. Increase the demand for organs for transplant AACSB: Reflective Thinking Bloom's: Level 1 Remember Difficulty: 3 Hard Learning Objective: 03-05 Identify what government-set prices are and how they can cause product surpluses and shortages. Topic: Application: Government-Set Prices True / False Questions 163. The law of demand states that if price increases, other things being equal, the demand for the product will decrease. FALSE AACSB: Analytic Bloom's: Level 1 Remember Difficulty: 1 Easy Learning Objective: 03-01 Describe demand and explain how it can change. Topic: Demand 164. The Law of Demand states that the demand for a product will increase if buyers' incomes rise. FALSE AACSB: Analytic Bloom's: Level 1 Remember Difficulty: 2 Medium Learning Objective: 03-01 Describe demand and explain how it can change. Topic: Demand 3-66 Chapter 03 - Demand, Supply, and Market Equilibrium (+ Appendix) 165. If two goods are substitutes, a decline in the price of one will cause a decrease in the demand for the other. TRUE AACSB: Analytic Bloom's: Level 1 Remember Difficulty: 1 Easy Learning Objective: 03-01 Describe demand and explain how it can change. Topic: Demand 166. When a fruit or vegetable (such as strawberries or lentils) are in season, the demand for them increase as they become cheaper. FALSE AACSB: Analytic Bloom's: Level 2 Understand Difficulty: 2 Medium Learning Objective: 03-01 Describe demand and explain how it can change. Topic: Demand 167. An increase in consumer incomes will cause a decrease in the demand for an inferior good. TRUE AACSB: Analytic Bloom's: Level 1 Remember Difficulty: 2 Medium Learning Objective: 03-01 Describe demand and explain how it can change. Topic: Demand 168. If two goods are complements, a decline in the price of one will cause an increase in the demand for the other. TRUE AACSB: Analytic Bloom's: Level 1 Remember Difficulty: 1 Easy Learning Objective: 03-01 Describe demand and explain how it can change. Topic: Demand 3-67 Chapter 03 - Demand, Supply, and Market Equilibrium (+ Appendix) 169. The law of supply states that, ceteris paribus, if the price of a good rises then the quantity supplied of the good will decrease. FALSE AACSB: Analytic Bloom's: Level 1 Remember Difficulty: 1 Easy Learning Objective: 03-02 Describe supply and explain how it can change. Topic: Supply 170. A decrease in the prices of computer chips for PCs will increase the supply of PCs. TRUE AACSB: Analytic Bloom's: Level 3 Apply Difficulty: 1 Easy Learning Objective: 03-02 Describe supply and explain how it can change. Topic: Supply 171. The development of a new production technique that lowers the cost of producing product X will shift the supply curve of product X to the right. TRUE AACSB: Analytic Bloom's: Level 1 Remember Difficulty: 1 Easy Learning Objective: 03-02 Describe supply and explain how it can change. Topic: Supply 172. A surplus indicates that the quantity demanded is greater than the quantity supplied at that price. FALSE AACSB: Analytic Bloom's: Level 1 Remember Difficulty: 1 Easy Learning Objective: 03-03 Relate how supply and demand interact to determine market equilibrium. Topic: Market Equilibrium 3-68 Chapter 03 - Demand, Supply, and Market Equilibrium (+ Appendix) 173. If the newspapers report that there is a shortage of strawberries, it must mean that the current price of strawberries is below the equilibrium price. TRUE AACSB: Analytic Bloom's: Level 2 Understand Difficulty: 2 Medium Learning Objective: 03-03 Relate how supply and demand interact to determine market equilibrium. Topic: Market Equilibrium 174. If there is a surplus in a market, competition among the sellers will drive price down. TRUE AACSB: Analytic Bloom's: Level 2 Understand Difficulty: 1 Easy Learning Objective: 03-03 Relate how supply and demand interact to determine market equilibrium. Topic: Market Equilibrium 175. An increase in the supply of product X, with demand staying constant, will increase the price of product X. FALSE AACSB: Analytic Bloom's: Level 1 Remember Difficulty: 1 Easy Learning Objective: 03-04 Explain how changes in supply and demand affect equilibrium prices and quantities. Topic: Market Equilibrium 176. When the government requires ethanol from corn to be used as an additive to gasoline, the supply of corn decreases. FALSE AACSB: Analytic Bloom's: Level 1 Remember Difficulty: 2 Medium Learning Objective: 03-04 Explain how changes in supply and demand affect equilibrium prices and quantities. Topic: Market Equilibrium 3-69 Chapter 03 - Demand, Supply, and Market Equilibrium (+ Appendix) 177. When the government subsidizes the carmakers in the production of cars, the supply of steel increases. FALSE AACSB: Analytic Bloom's: Level 1 Remember Difficulty: 3 Hard Learning Objective: 03-04 Explain how changes in supply and demand affect equilibrium prices and quantities. Topic: Market Equilibrium 178. If the supply of a product decreases and demand increases, the equilibrium price and quantity will both definitely increase. FALSE AACSB: Analytic Bloom's: Level 3 Apply Difficulty: 2 Medium Learning Objective: 03-04 Explain how changes in supply and demand affect equilibrium prices and quantities. Topic: Market Equilibrium 179. An increase in both supply and demand will lead to an increase in the equilibrium price and an indeterminate change in the equilibrium quantity. FALSE AACSB: Analytic Bloom's: Level 3 Apply Difficulty: 2 Medium Learning Objective: 03-04 Explain how changes in supply and demand affect equilibrium prices and quantities. Topic: Market Equilibrium 180. A decrease in the supply of lettuce decreases its equilibrium price and increases its equilibrium quantity. FALSE AACSB: Analytic Bloom's: Level 3 Apply Difficulty: 1 Easy Learning Objective: 03-04 Explain how changes in supply and demand affect equilibrium prices and quantities. Topic: Market Equilibrium 3-70 Chapter 03 - Demand, Supply, and Market Equilibrium (+ Appendix) 181. A decrease in the price of digital cameras will cause the demand for memory cards to shift to the left. FALSE AACSB: Analytic Bloom's: Level 3 Apply Difficulty: 1 Easy Learning Objective: 03-04 Explain how changes in supply and demand affect equilibrium prices and quantities. Topic: Market Equilibrium 182. If the demand for personal computers increases, then supply will increase as price rises. FALSE AACSB: Analytic Bloom's: Level 2 Understand Difficulty: 2 Medium Learning Objective: 03-04 Explain how changes in supply and demand affect equilibrium prices and quantities. Topic: Market Equilibrium 183. If the increase in supply is less than the decrease in demand, then the equilibrium price will increase. FALSE AACSB: Analytic Bloom's: Level 3 Apply Difficulty: 2 Medium Learning Objective: 03-04 Explain how changes in supply and demand affect equilibrium prices and quantities. Topic: Market Equilibrium 184. A price fixed above the equilibrium price of a product will cause a shortage of that product. FALSE AACSB: Analytic Bloom's: Level 1 Remember Difficulty: 2 Medium Learning Objective: 03-05 Identify what government-set prices are and how they can cause product surpluses and shortages. Topic: Application: Government-Set Prices 3-71 Chapter 03 - Demand, Supply, and Market Equilibrium (+ Appendix) 185. An effective price ceiling will lower the equilibrium price and cause a surplus. FALSE AACSB: Analytic Bloom's: Level 1 Remember Difficulty: 1 Easy Learning Objective: 03-05 Identify what government-set prices are and how they can cause product surpluses and shortages. Topic: Application: Government-Set Prices 186. If the government sets a price floor below what would be the competitive market price of a product, a shortage of the product will develop. FALSE AACSB: Analytic Bloom's: Level 1 Remember Difficulty: 2 Medium Learning Objective: 03-05 Identify what government-set prices are and how they can cause product surpluses and shortages. Topic: Application: Government-Set Prices Multiple Choice Questions 187. A headline reads "Storms destroy half of the lettuce crop." This situation would lead to a(n): A. Increase in the price of lettuce and quantity purchased B. Decrease in the price of lettuce and quantity purchased C. Increase in the price of lettuce and decrease in quantity purchased D. Decrease in the price of lettuce and increase in quantity purchased AACSB: Analytic Bloom's: Level 3 Apply Difficulty: 2 Medium Learning Objective: 03-06 Illustrate how supply and demand analysis can provide insights on actual -economy situations. Topic: Changes in Supply and Demand 3-72 Chapter 03 - Demand, Supply, and Market Equilibrium (+ Appendix) 188. What will happen to the equilibrium quantity and price of sushi in a competitive market when there is an equal decrease in demand and supply? A. Equilibrium quantity and price will both increase B. Equilibrium quantity and price will both decrease C. Equilibrium quantity will decrease and equilibrium price will stay the same D. Equilibrium quantity will stay the same and equilibrium price will increase AACSB: Analytic Bloom's: Level 3 Apply Difficulty: 2 Medium Learning Objective: 03-04 Explain how changes in supply and demand affect equilibrium prices and quantities. Topic: Changes in Supply and Demand 189. A television station reports that the price of orange juice has declined but the quantity traded has increased. This situation could be caused by a(n): A. Increased preference for orange juice among buyers B. Significant decrease in the harvest of oranges in the nation's orchards C. Improvement in the technology of producing orange juice D. Decrease in income, and orange juice is a normal good AACSB: Analytic Bloom's: Level 4 Analyze Difficulty: 2 Medium Learning Objective: 03-06 Illustrate how supply and demand analysis can provide insights on actual -economy situations. Topic: Changes in Supply and Demand 190. If there's a huge increase in the number of Americans travelling to Europe (say, for the Olympics), then the effect on the foreign exchange market is that the: A. Demand for euros would increase B. Supply of euros would increase C. Demand for euros would decrease D. Supply of euros would decrease AACSB: Analytic Bloom's: Level 4 Analyze Difficulty: 2 Medium Learning Objective: 03-06 Illustrate how supply and demand analysis can provide insights on actual -economy situations. Topic: Changes in Supply and Demand 3-73 Chapter 03 - Demand, Supply, and Market Equilibrium (+ Appendix) 191. In the dollar-yen foreign exchange market, if Japanese companies sharply increase their importation of U.S. products, then the: A. Supply of yen will decrease and the yen will appreciate B. Supply of yen will increase and the yen will depreciate C. Demand for yen will increase and the yen will appreciate D. Demand yen will decrease and the yen will depreciate AACSB: Analytic Bloom's: Level 4 Analyze Difficulty: 3 Hard Learning Objective: 03-06 Illustrate how supply and demand analysis can provide insights on actu al-economy situations. Topic: Changes in Supply and Demand Assume that the graphs show a competitive market for the product stated in the question. 3-74 Chapter 03 - Demand, Supply, and Market Equilibrium (+ Appendix) 192. Select the graph above that best shows the change in the market specified in the following situation: In the market for gasoline, when the price of oil, which is used to produce gasoline, increases because of reduced production by major oil-producing nations. A. Graph A B. Graph B C. Graph C D. Graph D AACSB: Analytic Bloom's: Level 3 Apply Difficulty: 2 Medium Learning Objective: 03-06 Illustrate how supply and demand analysis can provide insights on actual -economy situations. Topic: Changes in Supply and Demand 193. Select the graph above that best shows the change in the market specified in the following situation: In the market for Florida oranges, when a major frost damages the orange crop in California. A. Graph A B. Graph B C. Graph C D. Graph D AACSB: Analytic Bloom's: Level 3 Apply Difficulty: 2 Medium Learning Objective: 03-06 Illustrate how supply and demand analysis can provide insights on actual -economy situations. Topic: Changes in Supply and Demand 194. Select the graph above that best shows the change in the market specified in the following situation: In the market for wheat, when the cost of fertilizer decreases. A. Graph A B. Graph B C. Graph C D. Graph D AACSB: Analytic Bloom's: Level 3 Apply Difficulty: 2 Medium Learning Objective: 03-06 Illustrate how supply and demand analysis can provide insights on actual -economy situations. Topic: Changes in Supply and Demand 3-75 Chapter 03 - Demand, Supply, and Market Equilibrium (+ Appendix) 195. What would best explain why the equilibrium price of pink salmon decreased and the equilibrium quantity increased? A. The increase in demand was greater than the decrease in supply B. The decrease in demand was greater than the decrease in supply C. The increase in supply was greater than the decrease in demand D. The decrease in supply was greater than the increase in demand AACSB: Analytic Bloom's: Level 4 Analyze Difficulty: 2 Medium Learning Objective: 03-06 Illustrate how supply and demand analysis can provide insights on actual -economy situations. Topic: Changes in Supply and Demand 196. If the price of oil increases significantly, buyers and sellers of gasoline will both expect the price of gasoline to also increase. If sellers of gasoline act on their expectations more than the buyers do, then: A. The equilibrium price of gasoline will increase while the equilibrium quantity will decrease B. The equilibrium price of gasoline will increase while the equilibrium quantity will increase C. The equilibrium price of gasoline will decrease while the equilibrium quantity will decrease D. The equilibrium price of gasoline will decrease while the equilibrium quantity will increase AACSB: Analytic Bloom's: Level 3 Apply Difficulty: 2 Medium Learning Objective: 03-06 Illustrate how supply and demand analysis can provide insights on actual -economy situations. Topic: Changes in Supply and Demand 3-76 Chapter 03 - Demand, Supply, and Market Equilibrium (+ Appendix) 197. Refer to the above graph. Given this market, if the government pre-sets the price at $20, then this action results in a: A. Shortage of 5,000 units B. Shortage of 55,000 units C. Surplus of 5,000 units D. Surplus of 50,000 units AACSB: Analytic Bloom's: Level 3 Apply Difficulty: 2 Medium Learning Objective: 03-06 Illustrate how supply and demand analysis can provide insights on actual -economy situations. Topic: Preset Prices 198. Refer to the above graph. Given this market, if the government pre-sets the price at $60, then this action results in a: A. Shortage of 5,000 units B. Surplus of 5,000 units C. Surplus of 50,000 units D. Shortage of 45,000 units AACSB: Analytic Bloom's: Level 3 Apply Difficulty: 2 Medium Learning Objective: 03-06 Illustrate how supply and demand analysis can provide insights on actual-economy situations. Topic: Preset Prices 3-77 Chapter 03 - Demand, Supply, and Market Equilibrium (+ Appendix) 199. Refer to the above graph. What price will eliminate a surplus or shortage in this market? A. $0 B. $20 C. $40 D. $60 AACSB: Analytic Bloom's: Level 3 Apply Difficulty: 1 Easy Learning Objective: 03-06 Illustrate how supply and demand analysis can provide insights on actual -economy situations. Topic: Preset Prices 200. When tickets are "scalped," then in this market transaction: A. The buyer benefits, but the seller does not B. The seller benefits, but the buyer does not C. Both the buyer and seller benefit D. Neither the buyer nor seller benefit because it is illegal AACSB: Reflective Thinking Bloom's: Level 2 Understand Difficulty: 1 Easy Learning Objective: 03-06 Illustrate how supply and demand analysis can provide insights on actual -economy situations. Topic: Preset Prices 201. The scalping of tickets for an event is a sign that at the stated price on the ticket, the: A. Supply of tickets has increased B. Quantity demanded equals the quantity supplied C. Quantity demanded is greater than quantity supplied D. Quantity supplied is greater than quantity demanded AACSB: Analytic Bloom's: Level 2 Understand Difficulty: 1 Easy Learning Objective: 03-06 Illustrate how supply and demand analysis can provide insights on actual-economy situations. Topic: Preset Prices 3-78 Chapter 03 - Demand, Supply, and Market Equilibrium (+ Appendix) 202. The scalping of tickets for an event is a sign that the stated price on the ticket is: A. Equal to the quantity demanded B. Equal to the market clearing price C. Below the market clearing price D. Above the market clearing price AACSB: Analytic Bloom's: Level 2 Understand Difficulty: 1 Easy Learning Objective: 03-06 Illustrate how supply and demand analysis can provide insights on actual -economy situations. Topic: Preset Prices 203. From an economic perspective, when a person purchases a ticket to a popular sports event from a ticket scalper, it results in a: A. Loss for the seller and a benefit for the buyer B. Loss for the buyer and a benefit for the seller C. Benefit for both the buyer and seller D. Loss for both the buyer and seller AACSB: Analytic Bloom's: Level 1 Remember Difficulty: 1 Easy Learning Objective: 03-06 Illustrate how supply and demand analysis can provide insights on actual -economy situations. Topic: Preset Prices True / False Questions 204. In the market for sushi, an equal increase in supply and demand will increase the equilibrium quantity, but have no effect on the equilibrium price. TRUE AACSB: Analytic Bloom's: Level 3 Apply Difficulty: 2 Medium Learning Objective: 03-06 Illustrate how supply and demand analysis can provide insights on actual -economy situations. Topic: Changes in Supply and Demand 3-79 Chapter 03 - Demand, Supply, and Market Equilibrium (+ Appendix) 205. In the market for sushi, an increase in the price of fish along with an increase in the preference for sushi among consumers will cause the equilibrium quantity to increase, but the effect on the equilibrium price is indeterminate. FALSE AACSB: Analytic Bloom's: Level 3 Apply Difficulty: 2 Medium Learning Objective: 03-06 Illustrate how supply and demand analysis can provide insights on actual -economy situations. Topic: Changes in Supply and Demand 206. In the market for gasoline, if the change in demand due to the start of the summer driving season is greater than the change in supply due to disruptions in the refinery operations in the Gulf, then the equilibrium quantity will increase. TRUE AACSB: Analytic Bloom's: Level 3 Apply Difficulty: 3 Hard Learning Objective: 03-06 Illustrate how supply and demand analysis can provide insights on actual-economy situations. Topic: Changes in Supply and Demand 207. In the market for gasoline, if the change in demand due to the start of the summer driving season is greater than the change in supply due to disruptions in the refinery operations in the Gulf, then the equilibrium quantity will increase. TRUE AACSB: Analytic Bloom's: Level 3 Apply Difficulty: 3 Hard Learning Objective: 03-06 Illustrate how supply and demand analysis can provide insights on actual-economy situations. Topic: Changes in Supply and Demand 3-80 Chapter 03 - Demand, Supply, and Market Equilibrium (+ Appendix) 208. In the foreign exchange market, if Canadian companies import more products from the U.S., then the demand for Canadian dollars will increase. FALSE AACSB: Analytic Bloom's: Level 3 Apply Difficulty: 2 Medium Learning Objective: 03-06 Illustrate how supply and demand analysis can provide insights on actual -economy situations. Topic: Changes in Supply and Demand 209. In the foreign exchange market, if Americans significantly increase their investments in securities in British financial markets, one effect is that the dollar will tend to depreciate against the pound. TRUE AACSB: Analytic Bloom's: Level 3 Apply Difficulty: 3 Hard Learning Objective: 03-06 Illustrate how supply and demand analysis can provide insights on actual-economy situations. Topic: Changes in Supply and Demand 210. If the organizers of a major sports event set the ticket price above the equilibrium level, then scalping will develop in a secondary market for tickets. FALSE AACSB: Analytic Bloom's: Level 1 Remember Difficulty: 2 Medium Learning Objective: 03-06 Illustrate how supply and demand analysis can provide insights on actual -economy situations. Topic: Preset Prices 211. The presence of ticket scalpers in popular events like concerts will hurt consumers who buy from the scalpers. FALSE AACSB: Analytic Bloom's: Level 1 Remember Difficulty: 1 Easy Learning Objective: 03-06 Illustrate how supply and demand analysis can provide insights on actual -economy situations. Topic: Preset Prices 3-81 Chapter 03 - Demand, Supply, and Market Equilibrium (+ Appendix) 212. If the government pre-sets a price that turns out to be above the actual equilibrium price, a surplus will develop in the market. TRUE AACSB: Analytic Bloom's: Level 1 Remember Difficulty: 1 Easy Learning Objective: 03-06 Illustrate how supply and demand analysis can provide insights on actual -economy situations. Topic: Preset Prices 3-82 ... View Full Document

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