Chapter 3: Demand, Supply, and Market Equilibrium (+ Appendix)

Question 1

When an economist says that the demand for a product has increased, this means that:

A)quantity demanded is greater at each possible price

B)firms make less of the product available for sale

C)consumers respond to a lower price by buying more

D)the demand curve becomes steeper

Answer 1

A) quantity demanded is greater at each possible price

Question 2

When movie ticket prices increase, families tend to spend less time watching movies and more time at home watching videos instead. This best reflects:

A)diminishing marginal utility

B)the income effect

C)the rationing function of markets

D)the substitution effect

Answer 2

D) the substitution effect

Question 3

If consumer incomes increase, the demand for product Y:

A)will necessarily remain unchanged

B)will shift to the right if Y is a complementary good

C)will shift to the right if Y is a normal good

D)will shift to the right if Y is an inferior good

Answer 3

C) will shift to the right if Y is a normal good

Question 4

When drawing demand and supply curves, economists are assuming that the primary influence on production and purchasing decisions is:

A)price

B)the cost of production

C)the overall state of the economy

D)consumer incomes

Answer 4

A) price

Question 5

Refer to the following diagrams:Which one of the above diagrams best illustrates the effect of an increase in crude oil prices on the market for gasoline?

A)A

B)B

C)C

D)D

Answer 5

D) D

Question 6

A decrease in the price of a product will increase the amount of quantity demanded because:

A)supply curves are upsloping

B)the lower price will decrease real incomes

C)the lower price induces consumers to use this product instead of other products

D)firms produce more at lower prices

Answer 6

C) the lower price induces consumers to use this product instead of other products

Question 7

“Because of unusually good growing conditions, the supply of strawberries has substantially increased.” This statement indicates that:

A)the demand for strawberries will necessarily rise

B)the equilibrium quantity of strawberries will fall

C)the amount of strawberries that will be available at various prices has increased

D)the price of strawberries will rise

Answer 7

C) the amount of strawberries that will be available at various prices has increased

Question 8

Goods X and Y are complements while goods X and Z are substitutes. If the supply of good X increases:

A) the demand for both Y and Z will increase

B)the demand for Y will increase while the demand for Z will decrease

C)the demand for Y will decrease while the demand for Z will increase

D)the demand for both Y and Z will decrease

Answer 8

B) the demand for Y will increase while the demand for Z will decrease

Question 9

The following data show the supply and demand schedule for a competitively produced good.Refer to the above data. At the equilibrium price, the quantity exchanged in this market will be:

A)190

B)220

C)245

D)250

Answer 9

B) 220

Question 10

An improvement in production technology for a specific good will cause a(n):

A)increase in demand and an increase in price

B)increase in demand and a drop in price

C)drop in price and increase in quantity demanded

D)increase in supply and an increase in price

Answer 10

C) drop in price and increase in quantity demanded