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1

17) Which one of the following correctly describes how price adjustment eliminates a surplus?
A) As the price rises, the quantity demanded decreases and the quantity supplied increases.
B) As the price rises, the quantity demanded increases and the quantity supplied decreases.
C) As the price falls, the quantity demanded decreases and the quantity supplied increases.
D) As the price falls, the quantity demanded increases and the quantity supplied decreases.
E) As the price falls, the demand for substitutes decreases, which eliminates the surplus.

D

2

18) Which one of the following correctly describes how price adjustment eliminates a shortage?
A) As the price rises, the quantity demanded decreases and the quantity supplied increases.
B) As the price rises, the quantity demanded increases and the quantity supplied decreases.
C) As the price falls, the quantity demanded decreases and the quantity supplied increases.
D) As the price falls, the quantity demanded increases and the quantity supplied decreases.
E) As the price falls, the quantity demanded increases and the quantity supplied increases.

A

3

19) If the price is above the equilibrium price, then
A) none of the good will be sold.
B) the price must rise further to reach the new market equilibrium.
C) a surplus exists.
D) a shortage exists.
E) price will not change; producers will cut back production until the market is in equilibrium.

C

4

20) A shortage will exist if
A) the price is above the equilibrium price.
B) the price is below the equilibrium price.
C) there are not enough producers.
D) there are not enough consumers.
E) demand decreases.

B

5


21) The price of a good will tend to fall if
A) there is a surplus at the current price.
B) the current price is below the equilibrium price.
C) the quantity supplied exceeds the quantity demanded at the current price.
D) both A and C are true.
E) none of the above are true.

D

6

22) If the market for Twinkies is in equilibrium, then
A) Twinkies must be a normal good.
B) producers would like to sell more at the current price.
C) consumers would like to buy more at the current price.
D) there is a surplus.
E) the equilibrium quantity equals the quantity demanded.

E

7

25) When a shortage occurs, there is a tendency for the
A) price to fall.
B) price to remain unchanged.
C) price to rise.
D) quantity demanded to increase.
E) quantity supplied to decrease.

C

8

27) If the quantity of textbooks supplied is 10,000 per year and the quantity of textbooks demanded is 8,000 per year, there is a ________ in the market and the price will ________.
A) shortage; rise
B) shortage; fall
C) surplus; rise
D) surplus; fall
E) surplus; either rise or fall depending on whether supply increases to meet the surplus

D

9

28) If the market for Twinkies is in equilibrium, then
A) Twinkies must be a normal good.
B) producers would like to sell more at the current price.
C) consumers would like to buy more at the current price.
D) the quantity supplied equals the quantity demanded.
E) the supply of Twinkies will never increase and the demand for Twinkies will never decrease.

D

10


1) Since 1980, there has been a dramatic increase in the number of working mothers. Based on this information alone, we can predict that the market for child care services has experienced
A) an increase in demand.
B) a decrease in demand.
C) an increase in quantity demanded.
D) a decrease in quantity supplied.
E) an increase in supply.

A

11

5) The price of a good will rise if
A) demand for the good decreases.
B) supply of the good decreases.
C) there is a surplus of the good.
D) the price of a substitute for the good decreases.
E) the good is an inferior good and income increases.

B

12

6) The price of a good will fall if
A) there is a shortage of the good.
B) if demand for the good increases.
C) there is a surplus of the good.
D) if the supply of the good decreases.
E) if demand for the good does not change.

C

13

7) The price of a good will fall if
A) demand for the good increases.
B) supply of the good decreases.
C) supply of the good increases.
D) demand for the good remains constant.
E) supply of the good remains constant.

C

14

8) Suppose we observe a rise in the price of good A and an increase in the quantity of good A bought and sold. Which one of the following is a likely explanation?
A) The law of demand is violated.
B) The demand for A decreased.
C) The demand for A increased.
D) The supply of A increased.
E) The supply of A decreased.

C

15

9) Suppose we observe a rise in the price of good A and a decrease in the quantity of good A bought and sold. Which one of the following is a likely explanation?
A) The law of supply is violated.
B) The demand for A decreased.
C) The demand for A increased.
D) The supply of A increased.
E) The supply of A decreased.

E

16


10) Suppose we observe a fall in the price of good A and an increase in the quantity of good A bought and sold. Which one of the following is a likely explanation?
A) The law of supply is violated.
B) The demand for A decreased.
C) The demand for A increased.
D) The supply of A increased.
E) The supply of A decreased.

D

17

11) Suppose we observe a fall in the price of good A and a decrease in the quantity of good A bought and sold. Which one of the following is a likely explanation?
A) The law of demand is violated.
B) The demand for A decreased.
C) The demand for A increased.
D) The supply of A increased.
E) The supply of A decreased.

B

18

12) When the demand for good A increases,
A) the equilibrium price and equilibrium quantity will increase.
B) the equilibrium price will rise but the equilibrium quantity will decrease.
C) the equilibrium price and equilibrium quantity will decrease.
D) the equilibrium price will decrease but the equilibrium quantity will increase.
E) a surplus will result.

A

19

13) When the supply of good A decreases,
A) the equilibrium price and the equilibrium quantity will increase.
B) the equilibrium price will increase but the equilibrium quantity will decrease.
C) the equilibrium price and the equilibrium quantity will decrease.
D) the equilibrium price will decrease but the equilibrium quantity will increase.
E) a surplus will result.

B

20

14) If A is an inferior good and consumer income rises, the demand for A
A) increases and the equilibrium price and the equilibrium quantity increase.
B) increases and the equilibrium price rises but the equilibrium quantity decreases.
C) decreases and the equilibrium price and the equilibrium quantity decrease.
D) decreases and the equilibrium price falls but the equilibrium quantity increases.
E) decreases and the equilibrium price rises; as a result, the equilibrium quantity decreases.

C

21

15) If A and B are substitutes and the price of A rises, we will observe
A) an increase in the equilibrium price and the equilibrium quantity of B.
B) a decrease in the equilibrium price and the equilibrium quantity of B.
C) an increase in the equilibrium price but a decrease in the equilibrium quantity of B.
D) a decrease in equilibrium price but an increase in the equilibrium quantity of B.
E) none of the above.

A

22

16) If A and B are substitutes and the cost of a factor of production used in the production of A increases, then the price of
A) B falls but the price of A rises.
B) B rises but the price of A falls.
C) A falls, and the price of B will stay unchanged.
D) A and B fall.
E) A and B rise.

E

23


17) If A and B are substitutes in production and the price of A falls, the supply of B
A) increases and the price of B rises.
B) increases and the price of B falls.
C) decreases and the price of B falls.
D) decreases and the price of B rises.
E) does not change.

B

24

18) If A and B are complements in production and the price of A falls, the supply of B
A) increases and the price of B rises.
B) increases and the price of B falls.
C) decreases and the price of B falls.
D) decreases and the price of B rises.
E) does not change.

D

25

19) Crude oil is a very important factor of production used in the production of gasoline. If the price of crude oil rises, we would expect the
A) price of gasoline to rise due to an increase in demand.
B) price of gasoline to fall due to an increase in demand.
C) price of gasoline to rise due to a decrease in supply.
D) equilibrium quantity of gasoline to fall due to an increase in supply.
E) equilibrium quantity of gasoline to rise due to an increase in demand.

C

26

20) If demand increases and supply decreases, then the
A) equilibrium quantity increases but the effect on the equilibrium price is unknown.
B) equilibrium quantity decreases but the effect on the equilibrium price is unknown.
C) equilibrium price falls but the effect on the equilibrium quantity is unknown.
D) equilibrium price rises but the effect on the equilibrium quantity is unknown.
E) effect on both equilibrium price and quantity is unknown.

D

27

21) If demand decreases and supply increases, then the
A) equilibrium quantity increases but the effect on the equilibrium price is unknown.
B) equilibrium quantity decreases but the effect on the equilibrium price is unknown.
C) equilibrium price falls but the effect on equilibrium quantity is unknown.
D) equilibrium price rises but the effect on equilibrium quantity is unknown.
E) effect on both equilibrium price and quantity is unknown.

C

28

22) If we observe a rise in the equilibrium price of good A, we know that either the demand for A has
A) increased or the supply of A has decreased or both.
B) increased or the supply of A has increased or both.
C) decreased or the supply of A has increased or both.
D) decreased or the supply of A has decreased or both.
E) none of the above.

A

29

23) If we observe a fall in the equilibrium price of good A, we know that either the demand for A has
A) increased or the supply of A has decreased or both.
B) increased or the supply of A has increased or both.
C) decreased or the supply of A has increased or both.
D) decreased or the supply of A has decreased or both.
E) none of the above.

C

30

24) If we observe an increase in the equilibrium quantity of good A, we know that
A) either the demand for A has increased or the supply of A has decreased or both.
B) either the demand for A has increased or the supply of A has increased or both.
C) either the demand for A has decreased or the supply of A has increased or both.
D) either the demand for A has decreased or the supply of A has decreased or both.
E) none of the above.

B

31

25) If we observe a decrease in the equilibrium quantity of good A, we know that
A) either the demand for A has increased or the supply of A has decreased or both.
B) either the demand for A has increased or the supply of A has increased or both.
C) either the demand for A has decreased or the supply of A has increased or both.
D) either the demand for A has decreased or the supply of A has decreased or both.
E) none of the above.

D

32


26) Which of the following will definitely result in an increase in the equilibrium price?
A) an increase in both demand and supply
B) a decrease in both demand and supply
C) an increase in demand combined with a decrease in supply
D) a decrease in demand combined with an increase in supply
E) an increase in supply combined with a decrease in demand

C

33

27) Which one of the following will definitely lower the equilibrium price?
A) an increase in both demand and supply
B) a decrease in both demand and supply
C) an increase in demand combined with a decrease in supply
D) a decrease in demand combined with an increase in supply
E) a decrease in supply combined with an increase in demand

D

34

28) Which one of the following will definitely decrease the equilibrium quantity?
A) an increase in both demand and supply
B) a decrease in both demand and supply
C) an increase in demand combined with a decrease in supply
D) a decrease in demand combined with an increase in supply
E) none of the above

B

35

29) A technological improvement in the production of good A
A) decreases the supply of A.
B) increases the demand for A.
C) decreases the equilibrium price of A and decreases the equilibrium quantity.
D) decreases the quantity demanded of A.
E) increases the supply of A.

E

36

30) Which of the following events leads to a rise in the price of oranges?
A) a rise in the price of apples if apples and oranges are substitutes
B) a scientific discovery that oranges cause hair loss
C) a decrease in income if oranges are a normal good
D) good growing weather in Florida
E) a technological improvement in the production of oranges

A

37

31) If A and B are complements and the cost of a factor of production used in the production of A decreases, then the price of
A) both A and B will rise.
B) both A and B will fall.
C) A will fall and the price of B will rise.
D) A will rise and the price of B will fall.
E) A will fall and the price of B will remain unchanged.

C

38

32) If both demand and supply increase, then the equilibrium price
A) and equilibrium quantity increases.
B) falls but the equilibrium quantity increases.
C) could either rise or fall, but the equilibrium quantity increases.
D) rises and the equilibrium quantity could either increase or decrease.
E) falls and the equilibrium quantity could either increase or decrease.

C

39

33) There have been severe problems in the Atlantic fishing industry, with large falls in the fish stocks. As a result,
A) the price of fish will fall.
B) the quantity of fish sold will increase as fishermen will catch more to make up for the shortage.
C) the equilibrium price and the equilibrium quantity will fall or rise depending on how large the fall in fish stocks.
D) both the equilibrium price and the equilibrium quantity will rise, as consumers will desire even more fish, because they are scarce.
E) the fall in the fish stocks will lead to a shortage, and a rise in the equilibrium price and a decrease in the equilibrium quantity.

E

40

34) There have been severe falls in the fish stocks in the Atlantic fishing industry. As a result, we would expect
A) an increase in the demand for meat (e.g., beef), because meat is a complement of fish.
B) a fall in the price of fish, leading to a decrease in the demand for meat, because meat and fish are substitutes.
C) a fall in the price of fish, leading to an increase in the demand for meat, because meat and fish are substitutes.
D) an increase in the demand for meat, because meat is a substitute for fish.
E) a rise in the price of fish, leading to a decrease in the demand for meat, because meat and fish are complements.

D

41

35) If Canadians suddenly develop a strong urge to escape the cold winter by taking vacations in Hawaii, the
A) price of a vacation in Hawaii rises and the quantity demanded of Hawaiian vacations decreases.
B) price of a skiing vacation in the mountains rises.
C) initial result of the change is a surplus of vacations in Hawaii, leading to a price rise.
D) price of airline tickets falls as ticket agents make deals in response to this change.
E) price of luggage will rise, because luggage and vacations are complements.

E

42

36) The Genius Software Company has developed an amazing new software package to be used only with Einstein Computers. As a result, the equilibrium price of
A) all computers rises.
B) rival software packages falls leading to an overall increase in the equilibrium quantity of these packages.
C) all software packages rises.
D) Einstein computers rises, accompanied by an increase in the equilibrium quantity.
E) Einstein computers rises, leading to a decrease in the equilibrium quantity.

D

43

43) Farm land can be used to produce either cattle or corn. If the demand for cattle increases, then the
A) demand for corn increases.
B) supply of corn increases.
C) demand for corn decreases.
D) supply of corn decreases.
E) both B and C.

D

44

44) When the price of good A rises, the supply curve of good B shifts rightward. Which of the following statements are true?
A) A and B are substitutes.
B) A and B are complements.
C) A and B are substitutes in production.
D) A and B are complements in production.
E) A is a factor used in the production of B.

D

45

45) "As domestic car prices have increased, consumers have found foreign cars to be a better bargain. Consequently, domestic car sales have fallen and foreign car sales have risen." Based on this information alone, there has been a
A) shift in the demand curves for both domestic and foreign cars.
B) shift in the supply curves for both domestic and foreign cars.
C) movement along the demand curves for both domestic and foreign cars.
D) movement along the demand curve for domestic cars and a shift of the demand curve for foreign cars.
E) shift of the demand curve for domestic cars and a movement along the demand curve for foreign cars.

D

46

77) "As fewer people buy computers, the demand for Internet service will decrease and the price of Internet service will increase. The rise in the price of Internet service will increase the supply of Internet service." This statement is ________ because ________.
A) false; the decrease in the demand for Internet service creates a surplus and to eliminate the surplus, supply increases
B) true; when the demand for Internet service increases, the supply of Internet service increases so that the price of Internet service does not increase
C) true, when the demand for Internet service increases, the supply of Internet service increases too so that no surplus occurs
D) true; the increase in the price of Internet service increases the supply of Internet service to eliminate the shortage
E) false; a decrease in demand for Internet service does not increase the price of Internet service and an increase in the price of Internet service does not increase the supply of Internet service

E

47

78) The following events occur one at a time:

I. The price of crude oil rises.
II. The price of a car rises.
III. All speed limits on highways are abolished.
IV. Robots cut car production costs.

The quantity of gasoline supplied ________.
A) increases when all speed limits on highways are abolished
B) increases when the price of crude oil rises
C) decreases when robots cut car production costs
D) increases when the price of a car rises
E) decreases when the price of crude oil rises

A

48

79) What will happen to the equilibrium price and quantity of coffee if it is discovered to help prevent colds and, at the same time, Brazil and Vietnam emerge in the global market as massive producers of coffee?
A) The equilibrium price will fall and the effect on the equilibrium quantity is uncertain.
B) The equilibrium price will rise and the effect on the equilibrium quantity is uncertain.
C) The equilibrium quantity will decrease and the equilibrium price will rise.
D) The equilibrium quantity will increase and the equilibrium price will remain unchanged.
E) The equilibrium quantity will increase and the effect on the equilibrium price is uncertain.

E

49

80) All shredded wheat producers have decided to add a new ingredient, the "crunch enhancer" to shredded wheat. Crunch enhancer keeps cereals crisper longer in milk and, as a result, consumers decide they like shredded wheat more than before. What happens to the supply and demand curves for shredded wheat now that it costs more to produce and consumers like it better?
A) The supply and demand curves both shift rightward.
B) The supply curve shifts rightward and the demand curve remains unchanged.
C) The supply curve shifts leftward and the demand curve shifts rightward.
D) The supply curve shifts leftward and the demand curve remains unchanged.
E) Neither curve changes but a movement occurs up along the demand curve and a movement occurs up along the supply curve.

C

50

1) The demand curve for knobs is P = 75 - 6QD and the supply curve for knobs is P = 35 + 2QS. What is the equilibrium price of a knob?
A) $5
B) $10
C) $40
D) $45
E) None of the above.

D

51

2) The y- axis intercept of the supply curve is 40 and the slope is 6. The equation of the supply curve is ________.
A) P = 3 + 40QS
B) P = 40 + 6QS
C) P = 40 - 6QS
D) QS = 40 + 6P
E) QS = 40 - 6P

B

52

3) The y- axis intercept of the demand curve is 60 and the slope is - 8. The equation of the demand curve is ________.
A) P = 8 - 60QD
B) P = 60 - 8QD
C) QD = 60 - 8P
D) P = 60 + 8QD
E) QD = 60 + 8P

B

53

4) The demand curve is P = 700 - 10QD. The supply curve is P = 400 + 5QS. At market equilibrium, the equilibrium quantity is ________ and the equilibrium price is ________.
A) 20; 500
B) 5; 0.05
C) 0.05; 5
D) 500; 20
E) 300; 15

A

54

5) The demand curve is P = 700 - 20QD. The supply curve is P = 300 + 20QS. At market equilibrium, the equilibrium quantity is ________ and the equilibrium price is ________.
A) 10; 500
B) 500; 10
C) 0.10; 20
D) 20; 0.10
E) 400; 40

A

55

6) The demand curve is P = 800 - 25QD. The supply curve is P = 500 + 25QS. At market equilibrium, the equilibrium quantity is ________ and the equilibrium price is ________.
A) 25; 0.17
B) 650; 6.0
C) 0.17; 25
D) 6.0; 650
E) 1,300; zero

D