Ch.4: The Market Forces of Supply Demand

Question 1

____ 2. A good is considered either a normal good or an inferior good based on…

Answer 1

personal preference toward the good

Question 2

____ 1. Which of the following would be an example of an oligopolistic market?

Answer 2

the air travel industry

Question 3

____ 3. You lose your job and as a result you buy fewer mystery books. This shows that you consider mystery books to be a/an

Answer 3

normal good.

Question 4

____ 4. An example of an inferior good might be

Answer 4

Ramen noodles.

Question 5

___ 5. Two goods are substitutes if a decrease in the price of one good

Answer 5

reduces the demand for the other good.

Question 6

____ 6. Economists in general

Answer 6

do not try to explain people’s tastes, but do try to explain what happens when tastes
change.

Question 7

____ 7. Suppose you like banana cream pie made with vanilla pudding. Assuming all other things are constant, you notice that the price of bananas is higher. How would your demand for vanilla pudding be affected by this?

Answer 7

It would decrease.

Question 8

____ 8. The law of demand says that when price

Answer 8

rises, quantity demanded falls.

Question 9

____ 9. Which of the following demonstrates the law of demand?

Answer 9

Dave buys more donuts at $0.25 each than at $0.50 each.

Question 10

____ 10. When referring to the variables, price and quantity demanded, price

Answer 10

is the independent variable and quantity demanded is the dependent variable.

Question 11

____ 11. The number of buyers in a market affects

Answer 11

a. the market demand for a good.

Question 12

____ 13. The market demand is

Answer 12

a. the sum of all individual demands.

Question 13

12. If the number of buyers in the market decreases, the

Answer 13

b. demand in the market will decrease.

Question 14

____ 14. To find the market demand for a product, individual demand curves are summed

Answer 14

c. horizontally.

Question 15

____ 15. Suppose that Carolyn receives a pay increase. We would expect

Answer 15

b. Carolyn’s demand for inferior goods to decrease.

Question 16

____ 16. If a study by the AMA found that brown sugar caused weight loss while white sugar caused weight gain we would see

Answer 16

a. an increase in demand for brown sugar and a decrease in demand for white sugar.

Question 17

____ 17. The downward-sloping demand curve reflects which of the following?

Answer 17

b. There is an inverse relationship between price and quantity demanded.

Question 18

____ 18. Refer to Figure 4-2. The movement from D to D1 could be caused by

Answer 18

d. a decrease in the price of a substitute.

Question 19

____ 19. If cigarettes and marijuana had been found to be substitutes, a tax placed on cigarettes would

Answer 19

b. increase the demand for marijuana.

Question 20

____ 20. For teens, a 10 percent increase in the price of cigarettes leads to a

Answer 20

b. 12 percent drop in teenage smoking.

Question 21

____ 21. If the price of a good is low

Answer 21

b. quantity supplied could be zero.

Question 22

____ 22. An increase in the price of oranges would lead to

Answer 22

d. a movement up the supply curve for oranges.

Question 23

____ 23. All else constant, an increase in the number of cattle delivered to an auction to be marketed would

Answer 23

a. represent an increase in the supply of cattle at the auction.

Question 24

____ 24. At the equilibrium price,

Answer 24

d. everyone in the market has been satisfied.

Question 25

____ 25. Refer to Figure 4-8. In this market, equilibrium price and quantity would be

Answer 25

c. $10.50.

Question 26

____ 26. Refer to Table 4-2. The equilibrium price and quantity would be

Answer 26

b. $6.30.

Question 27

____ 27. If a surplus exists in a market we know that the actual price is

Answer 27

a. above equilibrium price and quantity supplied is greater than quantity demanded.

Question 28

____ 28. Refer to Figure 4-10. Which of the four graphs represents the market for peanut butter after a major hurricane hits the peanut-growing south?

Answer 28

d. D

Question 29

____ 29. Refer to Figure 4-10. Which of the four graphs represents the market for pizza delivery in a college town in
September?

Answer 29

a. A

Question 30

____ 30. An early frost in the vineyards of Napa Valley would cause

Answer 30

d. a decrease in the supply of wine, increasing price.

Question 31

____ 31. Which of the following will definitely cause equilibrium quantity to fall?

Answer 31

b. demand and supply both decrease

Question 32

____ 32. Suppose that demand decreases AND supply decreases. What would you expect to occur in the market for the
good?

Answer 32

c. Equilibrium quantity would decrease, but the impact on equilibrium price would be ambiguous.

Question 33

____ 33. Suppose that demand increases AND supply decreases. What would happen in the market for the good?

Answer 33

b. an increase in supply and a decrease in demand

Question 34

____ 34. Which of the following would result in an increase in equilibrium price and an ambiguous change in
equilibrium quantity?

Answer 34

c. quantity may increase, decrease, or remain unchanged.

Question 35

____ 35. When supply and demand both increase, equilibrium

Answer 35

d. price may increase, decrease, or remain unchanged.

Question 36

____ 36. If there is a shortage of farm laborers, we would expect

Answer 36

a. the wages of farm laborers to increase.

Question 37

____ 37. Which of the following would unambiguously cause a decrease in the equilibrium price of cotton shirts?

Answer 37

b. a decrease in the price of wool shirts and a decrease in the price of raw cotton

Question 38

____ 38. Music compact discs are normal goods. What will happen to the equilibrium price and quantity of music compact discs if musicians accept lower royalties, compact disc players become cheaper, more firms start producing music compact discs and music lovers experience an increase in income?

Answer 38

d. Quantity will rise and the effect on price is ambiguous.

Question 39

____ 39. Which of the following would be most likely to increase the price of a new house?

Answer 39

a. Higher wages for carpenters, higher wood prices, increases in consumer incomes, higher
apartment rents, increases in population and expectations of higher house prices in the
future.

Question 40

____ 40. During the last few decades in the United States, health officials have argued that eating too much beef might be harmful to human health. As a result, there has been a significant decrease in the amount of beef produced. Which of the following best explains the decrease in production?

Answer 40

c. Individual consumers, concerned about their own health, decreased their demand for beef,
which lowered the relative price of beef, making it less attractive to produce.