Both Ch03 Demand and Supply Sample Questions PDF

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Answers appear at the end. Chapter 3 Questions 1) You notice that the price of a digital camera decreases and that the quantity of digital cameras bought and sold increases. These observations are consistent with A) a decrease in the demand for digital cameras. B) an increase in the demand for digital cameras. C) a decrease in the supply of digital cameras. D) an increase in the supply of digital cameras. 2) Suppose that w represents the money wage, $30/hour of labor. Also suppose that P represents the money price of a CD, $10/CD. The ratio w/P tells us A) the relative price of CDs in terms of hours of labor. B) the inflation rate. C) the relative price of an hour of labor in terms of CDs. D) the unemployment rate. 3) Suppose that firms in the gadget industry find that the costs of the inputs that they hire (labor, raw materials, capital, utilities, etc.) have decreased in price, all else constant. This will cause A) the supply curve for gadgets to shift to the right. B) the supply curve for gadgets to shift to the left. C) the demand curve for gadgets to shift to the right. D) the demand curve for gadgets to shift to the left. 4) Suppose the market for VCRs starts out in equilibrium at a price of $150. Then the price of a DVD player, a substitute in consumption for a VCR, falls, all else constant. In the market for VCRs, if the price of a VCR were to remain at $150, A) the quantity demanded would exceed the quantity supplied and a shortage would result. B) the market would continue to remain in equilibrium. C) the quantity demanded would exceed the quantity supplied and a surplus would result. D) the quantity supplied would exceed the quantity demanded and a surplus would result. 5) What will happen to the equilibrium price of barbeque grills if, all else constant: (i) studies reveal that foods prepared on barbeque grills have adverse health effects and simultaneously (ii) the number of suppliers of barbeque grills increases? A) The equilibrium price of barbeque grills will rise. B) The equilibrium price of barbeque grills will remain unchanged. C) The equilibrium price of barbeque grills could rise, fall, or remain unchanged. D) The equilibrium price of barbeque grills will fall.

Price (Dollars Per Disc) 4 8 12 16 20 24 28 32 36

Quantity Demanded 36,000 32,000 28,000 24,000 20,000 16,000 12,000 8,000 4,000

Quantity Supplied 4,000 8,000 12,000 16,000 20,000 24,000 28,000 32,000 36,000

6) The above table gives the demand and supply schedules for compact discs. If the price of a compact disc is $8, there is a ________ and the price of a compact disc will ________. A) shortage; fall B) surplus; rise C) surplus; fall D) shortage; rise 7) Which of the following best reflects an increase in quantity supplied and not an increase in supply? A) The price of steel decreases and General Motors decides to manufacture a larger number of cars at each price level. B) The price of antique furniture increases prompting more people to offer their antiques for sale. C) A manufacturing technology improvement leads to more computers being offered for sale under $1,000. D) Homeowners expect housing prices to decline this summer and more houses are put on sale this spring. 8) A decrease in the demand for noodles brings A) a fall in the equilibrium price of noodles and a decrease in the equilibrium quantity of noodles supplied. B) a rise in the equilibrium price of noodles and a decrease in the equilibrium quantity of noodles supplied. C) a fall in the equilibrium price of noodles and a decrease in the supply of noodles. D) a rise in the equilibrium price of noodles and an increase in the supply of noodles.

9) The above figure shows the market for trinkets. One of the following statements is true. Which one? A) The minimum price at which some person was willing to sell the 100th trinket was $10. B) The minimum price at which some person was willing to sell the 200th trinket was $4. C) The maximum price at which some person was willing to sell the 200th trinket was $4. D) The maximum price at which some person was willing to sell the 200th trinket was $8. 10) If the expected future price of housing in Orange County rises, what will happen to the equilibrium quantity of a housing bought and sold today? A) The equilibrium quantity will fall. B) The equilibrium quantity will not change. C) The equilibrium quantity will rise. D) The equilibrium quantity could rise, fall, or not change. 11) If, as people's incomes increase, the demand for a good increases, the good is called A) an inferior good. B) a complement. C) a substitute. D) a normal good. Price (Dollars Per Ride) 2 4 6 8 10 12

Quantity Demanded (Rides Per Day) 100 90 80 70 60 50

Quantity Supplied (Rides Per Day) 40 50 60 70 80 90

12) The table above gives the demand and supply schedules for boat rides. If the quantity supplied of boat rides increases by 20 rides a day at each possible price, the equilibrium price will ________. A) remain unchanged B) fall to $6 a ride C) rise to $6 a ride D) rise to $10 a ride 13) Widgets and gadgets are substitutes in production. An increase in the price of a widget will cause A) an increase in the supply of gadgets. B) an increase in the quantity supply of gadgets. C) an increase in the demand for gadgets. D) a decrease in the supply of gadgets. 14)If the price of a candy bar is $1 and the price of a fast food meal is $5, then the A)relative price of a fast food meal is 5 candy bars. B)money price of a candy bar is 1/5 of a fast food meal. C)relative price of a candy bar is 5 fast food meals. D)money price of a fast food meal is 1/5 of a candy bar. 15)The opportunity cost of good A in terms of good B is equal to the A)ratio of the money price of good B to the money price of good A. B)ratio of the money price of good A to the money price of good B. C)money price of good A minus the money price of good B. D)money price of good B minus the money price of good A. 16)The law of demand states that, other things remaining the same, the higher the price of a good, the A)smaller is the quantity of the good demanded. B)larger is the quantity of the good demanded.. C)larger is the demand for the good. D)smaller is the demand for the good. 17)Which of the following influences people's buying plans and does not shift the demand curve? A)the price of the good B)preferences C)income D)the prices of related goods 18)The height of the demand curve above the quantity of 20 units reflects A) the highest price consumers are willing and able to pay for the 20th unit of the good. B) the lowest price consumers are willing and able to pay for each of the first 20 units of the good. C) the highest total price consumers are willing and able to pay for all 20 units of the good. D) the highest price consumers are willing and able to pay for each of the first 20 units of the good. 19)People buy more of good 1 when the price of good 2 rises. These goods are A)normal goods. B)inferior goods. C)substitutes. D)complements. 20)People come to expect that the price of a gallon of gasoline will rise next week. As a result, A)today's demand for gasoline increases. B)today's supply of gasoline increases. C) today's supply of gasoline decreases. D) both answers A and C are correct.

21)A consumer might consider in-line skates and elbow-pads to be A)substitutes. B)unrelated goods. C)products with upward sloping demand curves. D)complements. 22)Inferior goods are those for which demand increases as A)income decreases. B)the price of a substitute rises. C)income increases. D)the price of a substitute falls. 23)A change in the price of a good A)shifts the good's demand curve and also causes a movement along it. B)neither shifts the good's demand curve nor causes a movement along it. C)does not shift the good's demand curve but does cause a movement along it. D)shifts the good's demand curve but does not cause a movement along it. 24)When we say demand increases, we mean that there is a A)movement to the right along a demand curve. B)movement to the left along a demand curve. C)leftward shift of the demand curve. D)rightward shift of the demand curve. 25)The height of each point on a supply curve represents A) the highest price at which a supplier can profitably sell another unit. B) the highest price a buyer will pay for another unit of the good. C) the lowest price a buyer will pay for another unit of the good. D) the lowest price at which a supplier can profitably sell another unit. 26)Which of the following is NOT held constant while moving along a supply curve? A)expected future prices B)the number of sellers C)prices of resources used in production D)the price of the good itself 27)Which of the following shifts the supply curve for gasoline rightward? A)a decrease in the price of a resource used to produce gasoline, such as crude oil B)a situation in which the quantity demanded exceeds the quantity supplied C)an increase in the price of gasoline D)an increase in the demand for gas-guzzling, sport utility vehicles 28)Good A and good B are substitutes in production. The demand for good A increases so that the price of good A rises. The increase in the price of good A shifts the A)demand curve for good B leftward. B)supply curve of good B leftward. C)demand curve for good B rightward. D)supply curve of good B rightward. 29)Over the past decade technological improvements that have lowered the cost of producing an automobile have increased A)the demand but not the supply of automobiles. B)both the supply and the demand for automobiles. C)neither the supply nor the demand for automobiles. D)the supply but not the demand for automobiles.

30)To say that "supply increases" for any reason, means there is a A)shift leftward in the supply curve. B)shift rightward in the supply curve. C)movement rightward along a supply curve. D)movement leftward along a supply curve. 31)If a market is NOT in equilibrium, then which of the following is likely to occur? A)The supply curve will shift to bring the market to equilibrium. B)The price will adjust to bring the market to equilibrium. C)The demand curve will shift to bring the market to equilibrium. D)Both A and B are correct. 32)A shortage causes the A)price to rise. B)supply curve to shift rightward. C)price to fall. D)demand curve to shift leftward. 33)A surplus occurs when the price is A)less than the equilibrium price. B)greater than the equilibrium price. C)equal to the equilibrium price. D)None of the above because the existence of a surplus is independent of the price of the good. 34)If both demand and supply increase, what will be the effect on the equilibrium price and quantity? A)Both the price and the quantity will increase. B)The quantity will increase but the price could either rise, fall, or remain the same. C)The price will rise but the quantity could either increase, decrease, or remain the same. D)The price will fall but the quantity will increase. 35)Pizza and hamburgers are substitutes in consumption for consumers. A fall in the price of a pizza ________ the equilibrium price of a hamburger and ________ the equilibrium quantity of hamburgers. A)raises; increases B)lowers; decreases C)raises; decreases D)lowers; increases 36)The number of firms producing computer memory chips decreases. As a result, the price of a memory chip ________ and the quantity of memory chips ________. A)falls; decreases B)rises; decreases C)falls; increases D)rises; increases 37)How does an unusually warm winter affect the equilibrium price and quantity of gloves? A)It lowers both the price and the quantity. B)It lowers the price and increases the quantity. C)It raises the price and decreases the quantity. D)It raises both the price and the quantity. 38)A typewriter is an inferior good. As people's incomes increase and other things remain the same, you predict that the A)demand for typewriters will decrease and the price will rise. B)demand for typewriters will increase as the price of a typewriter falls. C)price of a typewriter will fall and the demand for typewriters will increase. D)price of a typewriter will fall.

Answers 1) D 2) C 3) A 4) D 5) D 6) D 7) B 8) A 9) B 10) D 11) D 12) B 13) D 14) A 15) B 16) A 17) A 18) A 19) C 20) D 21) D 22) A 23) C 24) D 25) D 26) D 27) A 28) B 29) D 30) B 31) B 32) A 33) B 34) B 35) B 36) B 37) A 38) D...