Chapter 3: Demand and Supply

1. Chapter 3: Demand and Supply

2. The law of demand includes the statement "other things being equal." These other things include all of the following EXCEPT • the price of that good in the law of demand. • consumers' income. • consumers' tastes and preferences. • the number of potential buyers.

3. Refer to the figure below. Which panel demonstrates the law of demand? • Panel A • Panel B • Panel C • Panel D

4. The law of demand implies that the demand curve • has a negative slope. • has a positive slope. • shifts to the right when the price of a good increases. • shifts to the left when the price of a good decreases.

5. A market demand schedule for a product indicates that • as the product's price falls, consumers buy less of the good. • there is a positive relationship between price and quantity demanded. • as a product's price rises, consumers buy more of the good. • there is a negative relationship between price and quantity demanded.

6. Suppose a concert by Lady Gaga and a basketball game played by the L.A. Lakers are substitutes, then which of the following is true? • If the price of a ticket to a Lakers game increases, then the demand for Lady Gaga tickets will fall. • If the price of a ticket to a Lakers game decreases, the quantity of Lakers tickets demanded will increase. • If the price of a ticket to a Lakers game increases, then the demand for Lady Gaga tickets will remain unchanged. • The price of a ticket to a Lakers game will always equal the price of a ticket to a Lady Gaga concert.

7. In the figure below, when the price of Good B increases, the result can be shown by • the movement from D1 to D2 in Graph A. • the movement from D2 to D1 in Graph A. • the movement along D0 from P1 to P2. • the movement along D0 from P2 to P1.

8. An increase in demand is represented by a • shift of the demand curve to the left. • shift of the demand curve to the right. • movement down the demand curve. • movement up the demand curve.

9. If the price of Pepsi increases, then there will be ________ of Pepsi. • a decrease in the supply • an increase in the supply • an increase in the quantity supplied • a decrease in the quantity supplied

10. If the price of oil rises, producers of oil will • increase the quantity of oil supplied. • supply less oil. • leave the amount of oil supplied unchanged. • cut the price.

11. The relationship between quantity supplied and the price of output is such that • an increase in quantity will automatically lead to a reduction in price. • an increase in price will lead to an increase in quantity supplied. • an increase in price will produce an inward shift in the supply curve. • quantity will decrease as the number of firms increases.

12. Which one of the following statements is FALSE? • There is an inverse (negative) relationship between product price and quantity supplied. • There is some price at which quantity supplied of a product is zero. • As product price increases, producers are willing to put more of the good on the market for sale. • In order to entice producers to offer more of a product on the market for sale, product price must rise.

13. Which of the following causes a movement along a supply curve? • a change in resource costs • a change in technology • a change in the price • all of the above

14. Refer to the table below. The market quantity supplied when the price is $6 is • 0 • 5 • 10 • 20

15. An improvement in technology in the production of computers would • increase the demand for computers. • increase the supply of computers. • decrease the demand for computers. • decrease the supply of computers.

16. Which of the following will shift today's supply curve to the right? • Input prices rise. • Sales taxes increase. • Prices are expected to be higher in the future. • Prices are expected to be lower in the future.

17. If the price of cotton used in making blue jeans increases, which of the following will occur? • There will be a movement along an unchanged supply curve for jeans. • The supply curve for jeans will shift rightward. • The supply curve for jeans will shift leftward. • There will be a rightward shift in the supply curve for jeans, followed by a movement along the supply curve.

18. According to the table below, at a price of $2 per unit, which of the following would exist? • a shortage of 800 units • a surplus of 800 units • a shortage of 200 units • a shortage of 400 units

19. According to the figure below, at a price of $1 per gallon, there would be • a shortage of 30 million gallons. • a surplus of 30 million gallons. • a shortage of 20 million gallons. • a surplus of 50 million gallons.

20. According to the table below, at a price of $8 per unit, other things constant, • consumers will continue to bid prices upward. • there will be no tendency for the market to approach an equilibrium. • a surplus of 100 units will exist. • a shortage of 80 units will exist.

21. Which of the following situations could generate a shortage? • Demand for a good increases, resulting in a new higher market clearing price. • Demand for a good decreases, resulting in a new lower market clearing price. • Demand for a good increases, but the price is not permitted to rise. • Demand for a good decreases, but the price is not permitted to fall.