CH-4 Demand, Supply, and Markets – Macroeconomics: A Contemporary Introduction : Exam Guide

Chapter 4—Demand, Supply, and Markets 1. The demand for a product is the amount that A. buyers purchase in the market B. buyers are willing to purchase at a given price C. sellers are willing to sell at a particular price D. buyers are willing and able to purchase at alternative prices E. buyers are able to purchase at a specific price 2. A demand curve shows how quantity demanded changes as the price changes. It implies that A. only a change in price can shift a demand curve B. everything else that affects demand is assumed to be constant C. quantity demanded is unrelated to price D. economists are concerned only with money E. it is impossible to show how anything but price affects demand 3. The substitution effect of a price change describes what happens to the shift in demand for a good when its price changes. A. True B. False 4. The impact of a $200 increase in income on quantity demanded would be called an income effect. A. True B. False 5. The law of demand says that the lower the price of a good, other things constant, A. the smaller the demand for that good B. the larger the demand for that good C. the smaller the quantity demanded of that good D. the larger the quantity demanded of that good E. the smaller the real income of consumers and the lower the quantity demanded of that good 6. The law of demand states that A. there is a positive relationship between price and quantity demanded B. price is the only factor that influences the quantity that people are willing and able to buy C. price and quantity demanded are inversely related D. the demand curve shifts whenever the price of a good changes E. by producing a product, firms create a demand for it 7. The law of demand assumes that as the price of a good increases, A. people recognize that its price may be even higher in the future, so they buy now rather than later B. consumers tend to shift their purchases to relatively cheaper substitutes C. people will buy less of it in the hope that the good will be cheaper in the future D. the consumer’s money income increases, and he or she is less able to buy all goods, including the good whose price has increased E. the consumer’s money income decreases, and if the product is a normal good, more will be purchased 8. The law of demand says that as the price of a good rises, A. buyers recognize that price may be even higher in the future, and so they buy now B. buyers purchase less in hopes that the price will fall in the future C. buyers purchase less, in part because their real income has fallen D. buyers purchase more, in part because the price of a substitute has risen E. buyers purchase more, in part because it has higher status at a higher price 9. In what way is consumer demand different from consumer wants? A. Demand is only for necessities. B. Demand is only for luxuries. C. Demand takes into account the ability to pay. D. Consumer wants are only for luxuries. E. Consumer wants are only for necessities. 10. Movements along a demand curve are called changes in A. demand B. opportunity costs C. quantity demanded D. the substitution effect E. preferences 11. Which of the following statements about the substitution effect of a price change is true? A. It is caused by a change in relative prices. B. It affects the consumer's ability, rather than willingness, to purchase a good. C. It assumes that the consumer substitutes more expensive goods for cheaper ones when income increases. D. It is usually equal to the income effect. E. It may cause the consumer to buy less of the good when its price falls. 12. Suppose you drink more tea because the price of coffee has increased. Which of the following best explains your action? A. the law of supply B. tea and coffee are complements C. the substitution effect D. the income effect E. your nominal income has increased 13. The substitution effect of a change in the price of bananas refers to the way in which a change in the A. price of a substitute affects the demand for bananas B. price of bananas affects the ability to buy them C. relative price of bananas changes demand for them D. relative price of bananas changes the quantity demanded of bananas E. price of a substitute affects the quantity demanded of bananas 14. The law of demand is illustrated by a demand curve that is A. horizontal B. vertical C. upward sloping D. constant E. downward sloping 15. Suppose there are only two goods, apples and oranges. What happens if the price of each good increases by 15 percent? A. The consumer will substitute apples for oranges. B. The consumer will substitute oranges for apples. C. There is no substitution effect because relative prices have remained constant. D. Demand for both goods increases. E. Demand for both goods decreases. 16. For which of the following would the income effect of a price change be greatest? A. ballpoint pens B. air travel to Australia C. chewing gum D. haircuts E. college textbooks 17. The income effect refers to the impact of a change in A. income on the price of a good B. the general price level caused by a change in the price of another good C. the price of a good on real income D. the price of a substitute for the good under consideration E. demand when income changes 18. For a renter, the income effect of an increase in apartment rents will A. have a greater effect than the income effect of an increase in the price of chewing gum B. have no impact on the demand curve for apartments, because everything except price is assumed constant C. have less of an effect than the income effect of an increase in the price of chewing gum D. be almost negligible, because housing is a necessity E. occur only when income increases 19. If pretzels are a normal good, the income effect of a price change means that A. as income increases, the quantity demanded increases along the demand curve for pretzels B. as income increases, the demand curve for pretzels shifts rightward C. as income increases, the demand curve for pretzels shifts leftward D. as the price of pretzels increases, the real income of individuals who demand pretzels decreases, so the quantity demanded of pretzels decreases E. as the price of pretzels increases, income increases 20. The income effect of a decrease in the price of legal services (a normal good) is a(n) A. decrease in the demand for legal services B. decrease in the quantity demanded of legal services C. increase in the demand for legal services D. increase in the quantity demanded of legal services E. new demand curve because everything else is no longer constant 21. The income effect of an increase in the price of backpacks (a normal good) is a(n) A. decrease in the demand for backpacks B. decrease in the quantity demanded of backpacks C. increase in the demand for backpacks D. increase in the quantity demanded of backpacks E. new demand curve because everything else is no longer constant 22. The income effect of a decrease in the price of potatoes (an inferior good) is a(n) A. decrease in the demand for potatoes B. decrease in the quantity demanded of potatoes C. increase in the demand for potatoes D. increase in the quantity demanded of potatoes E. new demand curve because everything else is no longer constant 23. The income effect of an increase in the price of hominy grits (an inferior good) is a(n) A. decrease in the demand for hominy grits B. decrease in the quantity demanded of hominy grits C. increase in the demand for hominy grits D. increase in the quantity demanded of hominy grits E. new demand curve because everything else is no longer constant 24. Exhibit 4-1 Consider Exhibit 4-1. Which of the following best represents an increase in quantity demanded? A. the movement from A to D B. the movement from C to E C. the movement from A to B D. the movement from F to E E. the movement from B to D 25. Exhibit 4-1 Consider Exhibit 4-1. Which of the following best represents a decrease in quantity demanded? A. the movement from A to D B. the movement from C to E C. the movement from A to B D. the movement from F to E E. the movement from B to D 26. Exhibit 4-1 Consider Exhibit 4-1. Which of the following best represents a decrease in demand? A. the movement from A to D B. the movement from C to E C. the movement from A to B D. the movement from F to E E. the movement from D to B 27. Exhibit 4-1 Consider Exhibit 4-1. Which of the following best represents an decrease in demand? A. the movement from D to C B. the movement from C to E C. the movement from A to B D. the movement from F to E E. the movement from D to B 28. Exhibit 4-1 Consider Exhibit 4-1 which shows 3 demand curves for corn flakes. Which of the following would be most likely to shift the demand curve from D0 to D1? A. a report that eating corn flakes reduces the risk of cancer B. an increase in consumer incomes if corn flakes is an inferior good C. a decrease in the price of oatmeal which many consumers consider to be a substitute for corn flakes D. an increase in the price milk which many consumers consider to be complement for corn flakes E. a decrease in the number of consumers 29. Exhibit 4-1 Consider Exhibit 4-1 which shows 3 demand curves for corn flakes. Which of the following would be most likely to shift the demand curve from D0 to D1? A. a report that eating corn flakes increases the risk of cancer B. a decrease in consumer incomes if corn flakes is an inferior good C. a decrease in the price of oatmeal which many consumers consider to be a substitute for corn flakes D. an increase in the price milk which many consumers consider to be complement for corn flakes E. a widely anticipated recession 30. Exhibit 4-1 Consider Exhibit 4-1 which shows 3 demand curves for corn flakes. Which of the following would be most likely to shift the demand curve from D0 to D1? A. a report that eating corn flakes increases the risk of cancer B. a decrease in consumer incomes if corn flakes is a normal good C. an increase in the price of oatmeal which many consumers consider to be a substitute for corn flakes D. an increase in the price milk which many consumers consider to be complement for corn flakes E. a widely anticipated recession 31. Exhibit 4-1 Consider Exhibit 4-1 which shows 3 demand curves for corn flakes. Which of the following would be most likely to shift the demand curve from D0 to D1? A. a report that eating corn flakes increases the risk of cancer B. a decrease in consumer incomes if corn flakes is a normal good C. a decrease in the price of oatmeal which many consumers consider to be a substitute for corn flakes D. a decrease in the price milk which many consumers consider to be complement for corn flakes E. a widely anticipated recession 32. Exhibit 4-1 Consider Exhibit 4-1 which shows 3 demand curves for corn flakes. Which of the following would be most likely to shift the demand curve from D2 to D1? A. a report that eating corn flakes decrreases the risk of cancer B. an increase in consumer incomes if corn flakes is a normal good C. an increase in the price of oatmeal which many consumers consider to be a substitute for corn flakes D. an increase in the price milk which many consumers consider to be complement for corn flakes E. a widely anticipated recession 33. A demand curve usually has a A. negative slope because price and quantity demanded are inversely related B. negative slope because as price rises, demand falls C. positive slope because price and quantity demanded are positively related D. positive slope because price and quantity demanded are inversely related E. slope of zero because there is no change along a demand curve when everything else is held constant 34. Which of the following statements about demand is true? A. Since most college students want a Mercedes sports coupe, their demand for it is high. B. If price increases, the demand curve shifts to the right. C. The demand curve for bacon will not shift when the price of bacon changes. D. If a supply curve shifts, thereby changing the price, the demand curve will shift as well. E. If a demand curve shifts, the supply curve will shift as well, whether or not the price changes. 35. The demand curve for spinach shows the quantity demanded of spinach A. only at the equilibrium price of spinach B. at each possible price of spinach C. as income increases D. as income decreases E. at each possible price of a substitute good 36. Studies show that the demand curve for peas has shifted. Which of the following explanations would you reject first? A. The price of string beans has changed. B. The demand for corn has changed. C. The demand for string beans has changed. D. The income of consumers has changed. E. The price of peas has changed. 37. The effect of a decrease in the price of personal computers, other things constant, is likely to be best represented by which of the following? A. a leftward shift of the demand curve B. a movement leftward along the demand curve C. a rightward shift of the demand curve D. a movement rightward along the demand curve E. a rightward shift of the supply curve 38. Which of the following is not true regarding a change in quantity demanded? A. A change in quantity demanded is shown by a movement along a given demand curve. B. The demand curve shifts whenever the quantity demanded changes. C. A change in the price of a good, other things constant, will lead to a change in quantity demanded. D. The lower the price of a product, other things constant, the higher the quantity demanded. E. A shift of the supply curve might cause a change in quantity demanded. 39. There are three consumers in the market for playing cards: Don, John, and Ron. At a price of $2 per pack, the quantities demanded by each are 3, 2, and 1, respectively. At a price of $1.50 per pack, the quantities demanded by each are 4, 5, and 3, respectively. Which of the following is true? A. The market demand curve for playing cards does not obey the law of demand. B. The price decrease causes the quantity demanded in this market to increase by 6. C. The price decrease causes John's demand curve to shift the most. D. At a price of $1 per pack, the quantity demanded in this market must be 20. E. Don's behavior does not obey the law of demand. 40. Which of the following will not shift the demand curve for movie tickets? A. a change in the cost of babysitting services B. a change in the price of movie tickets C. a change in the quality of television programs D. a change in the income of movie-goers E. a change in the number of consumers 41. A rightward shift of a demand curve represents a decrease in demand. A. True B. False 42. The slope of the demand curve for a normal good must be positive. A. True B. False 43. If a decrease in the price of a good causes a rightward shift of the demand curve for that good, then it is an inferior good. A. True B. False 44. If income rises and a good is inferior, then demand for that good will decrease. A. True B. False 45. A decrease in the price of a good will cause a leftward shift of the demand curve, if it is a normal good. A. True B. False 46. If we say that demand has increased, we mean that there has been A. a leftward movement along the demand curve B. a rightward movement along the demand curve C. a leftward shift of the demand curve D. a rightward shift of the demand curve E. an increase in the slope of the demand curve 47. A decrease in demand for a good could mean that A. consumers are willing to pay a higher price for each quantity of the good B. consumers are willing to buy larger quantities of the good at each price C. the demand curve has undergone a parallel shift to the right D. the demand curve has undergone a nonparallel shift to the right E. the demand curve has shifted to the left 48. A change in income will A. affect the demand for candy through the income effect of a price change B. affect the quantity demanded of candy through the income effect of a price change C. shift the demand curve for candy D. have no effect on the demand for candy, because income is assumed constant along a demand curve E. affect quantity demanded only if candy is a normal good 49. Which of the following is most likely to be an inferior good? A. airline travel B. restaurant meals C. a subscription to the Wall Street Journal D. soft drinks E. used clothing 50. If demand for personal computers increases as a result of an increase in income, A. personal computers must be a normal good B. personal computers must be an inferior good C. personal computers must be a complement D. the substitutes for personal computers must be inferior goods E. the substitution effect is larger than the income effect 51. Which of the following is most likely to be a normal good? A. trips to the laundromat B. macaroni-and-cheese dinners C. tickets to major league baseball games D. bus rides E. used paperback books 52. If the price of a haircut (a normal good) increases, other things constant, the A. demand for haircuts increases B. demand for haircuts decreases C. quantity demanded of haircuts decreases D. quantity demanded of haircuts increases E. demand for haircuts, or quantity demanded of haircuts decreases; they are the same thing 53. If the price of gasoline (a normal good) decreases, other things constant, A. the demand for gasoline increases B. the demand for gasoline decreases C. the quantity demanded of gasoline increases D. the quantity demanded of gasoline decreases E. neither the demand for gasoline nor the quantity demanded of gasoline changes because everything is assumed constant along a demand curve 54. The difference between normal and inferior goods is that A. normal goods are of better quality than inferior goods B. an increase in price will shift the demand curve for a normal good rightward and the demand curve for an inferior good leftward C. if the price of a normal good increases, individuals who buy it are poorer; for inferior goods, the opposite is true D. an inferior good is something that will not be demanded until quantities of the normal good have been exhausted E. an increase in income will shift the demand curve for a normal good rightward and the demand curve for an inferior good leftward 55. In the case of a normal good, an increase in consumers' incomes would shift the A. demand curve inward B. supply curve inward C. supply curve outward D. supply and demand curves inward E. demand curve outward 56. Tax preparation services and IRS tax publications can be considered substitutes. A. True B. False 57. As the price of ballpoint pens increases, the demand for felt-tip pens can be expected to decrease. A. True B. False 58. If a decrease in the price of good A causes an increase in the demand for good B, then A and B must be complements. A. True B. False 59. Which of the following is the best example of substitutes? A. coffee and cream B. videotapes and VCRs C. money and biscuits D. tortillas and salsa E. hiking boots and athletic shoes 60. Which of the following might cause the demand for ice cream, a normal good, to increase? A. an increase in the price of ice cream B. an increase in the price of sherbet C. cooler weather D. a decrease in the number of consumers E. a decrease in consumer income 61. Which of the following will cause the demand curve for gasoline to shift leftward? A. a decrease in the price of gasoline B. an increase in the price of gasoline C. a leftward shift of the supply of gasoline D. a rightward shift of the supply of cars E. a decrease in the price of bicycles 62. Two goods are considered substitutes only if a(n) A. decrease in the demand for one leads to a decrease in the supply of the other B. increase in the demand for one leads to a decrease in the supply of the other C. increase in the price of one leads to an increase in the demand for the other D. decrease in the price of one leads to an increase in the demand for the other E. decrease in the supply of one leads producers to switch to production of the other 63. If the price of vanilla ice cream decreases, it is likely that A. demand for vanilla ice cream will increase B. demand for vanilla ice cream will decrease C. demand for chocolate ice cream will increase D. demand for chocolate ice cream will decrease E. the quantity demanded of vanilla ice cream will decrease 64. Which of the following will cause the demand curve for a normal good to shift to the right? A. a decrease in income B. an increase in the price of a complementary good C. a decrease in the price of the good D. an increase in the price of a substitute good E. an expectation of a future price decline 65. An increase in the price of butter, a substitute good, would be most likely to cause A. a rightward shift of the demand curve for margarine B. a leftward shift of the demand curve for margarine C. the quantity of margarine demanded to increase D. the quantity of margarine demanded to decrease E. a decrease in the price of margarine 66. Sugar and honey are viewed as substitutes for each other in many cooking applications. If the price of sugar rises, we would expect A. the demand for honey to increase B. the demand for honey to decrease C. the quantity demanded of honey to decrease D. the price of honey to decrease E. the quantity demanded of honey to increase 67. Which of the following is the best example of complements? A. milk and cheese B. coffee and tea C. CDs and DVDs D. hiking boots and athletic shoes E. film and film processing (developing) 68. If the price of potato chips increases, other things constant, demand for potato-chip dip will A. not change; only quantity demanded will change B. increase because the goods are substitutes C. decrease because the goods are substitutes D. decrease because the goods are complements E. increase because the goods are complements 69. If good B is a complement to good A, then a decrease in the price of B A. increases the quantity demanded of A B. decreases the demand for A C. increases the demand for A D. decreases the quantity demanded of A E. will cause the demand for B to increase 70. If good B is a complement to good A, then a rise in the price of B A. increases the quantity demanded of A B. decreases the demand for A C. increases the demand for A D. decreases the quantity demanded of A E. will cause the demand for B to increase 71. A decrease in the demand for peanut butter could be caused by a(n) A. increase in the supply of peanut butter B. increase in the price of peanut butter C. doubling of the price of bread D. drought in Georgia that destroyed 30 percent of the peanut crop E. increase in consumer income 72. An increase in the demand for peanut butter could be caused by a(n) A. decrease in consumer income B. increase in the supply of peanut butter C. decrease in the price of bread D. drought in Georgia that destroyed 30 percent of the peanut crop E. decrease in the price of bologna 73. Which of the following statements about gold jewelry and round-trip bus tickets to Bismarck, North Dakota, is most likely to be correct? A. They are both inferior goods. B. Their demand curves probably are quite similar. C. They are complements. D. They are substitutes. E. They are unrelated. 74. Assume that black beans and rice are staples in the diet of one particular family. How could you tell if these goods were complements, substitutes, or unrelated goods? A. If the price of black beans rose and the consumption of rice remained the same, they would be substitutes. B. If the price of black beans rose and the consumption of rice increased, they would be substitutes. C. If the price of black beans rose and the consumption of rice decreased, they would be substitutes. D. If the price of black beans rose and the consumption of both goods remained the same, they would be complements. E. There is no way to determine whether these goods are complements, substitutes, or unrelated goods. 75. Jennifer learns that the price of CDs will be going up 10 percent next week. She usually buys three CDs per week. What happens to Jennifer's demand for CDs this week? A. It does not change because only quantity demanded changes when price changes. B. It increases because the price will be lower next week. C. It decreases because the price will be higher next week. D. It increases because the price will be higher next week. E. It decreases because the price will be lower next week. 76. Which of the following will cause the demand curve for a good to shift to the left? A. an increase in the price of the good B. a decrease in the price of the good C. a decrease in the price of a complementary good D. an expectation of a future price decline E. an increase in the price of a substitute good 77. Which of the following could shift the demand for a good to the right? A. a decrease in income, if the good is a normal good B. an increase in the price of a complementary good C. a decrease in the good's price, if the good is normal D. an increase in the good's price, if the good is inferior E. an expectation of a future price increase 78. Which of the following would be most likely to increase the demand for downtown parking in a large city? A. improved bus service to the downtown area B. lower downtown parking fees C. more downtown parking lots D. more freeways leading to the downtown area E. a major employer moves to the suburbs 79. A change in the composition of the population will generally A. change demand only if there is a change in the size of the population B. change demand only if there is no change in the size of the population C. change demand even if there is no change in the size of the population D. have absolutely no effect on demand E. result in a movement along the demand curve 80. As the baby boom ended, fewer families had young children and, as a consequence, the A. demand curve for preschool services shifted outward B. demand curve for preschool services shifted inward C. supply curve for preschool services shifted outward D. supply curve for preschool services shifted inward E. supply and demand curves for preschool services remained constant 81. Which of the following would not cause the demand curve for peaches to shift? A. an increase in the price of apricots B. a decrease in the price of nectarines C. an increase in the price of peaches D. a change in preferences for peaches E. a decrease in the income of peach buyers 82. Which of the following would not shift the demand curve for pork? A. an increase in the price of beef B. an increase in the price of pork C. an increase in the incomes of pork consumers D. a widespread advertising campaign for pork E. a finding that consumption of beef increases the risk of heart attack 83. Which of the following events is likely to reduce the demand for on-campus student housing? A. a rise in rents for off-campus housing B. more students enrolling at the university C. it becomes less fashionable to live "on campus" D. a rise in dorm fees E. a rise in the incomes of students 84. If a certain type of clothing becomes more fashionable, we would expect that its price A. will decrease and quantity will remain constant B. and quantity will both decrease C. will increase and quantity will decrease D. will decrease and quantity will increase E. and quantity will both increase 85. If demand decreases, then quantity supplied will increase. A. True B. False 86. If supply increases, then quantity demanded decreases. A. True B. False 87. A leftward shift of a supply curve represents a decrease in supply. A. True B. False 88. A decrease in the price of peanut butter will cause a leftward shift of the supply curve of peanut butter. A. True B. False 89. Which of the following best defines supply? A. the amount of a good that producers want to sell at a particular price B. the amount of a good that consumers will buy C. the amount of a good that producers are willing and able to sell at each possible price, other things constant D. the amount of a good that producers are willing to sell at each possible price, other things constant E. the amount of a good that producers are willing and able to buy at each possible price, other things constant 90. Which of the following is true of an increase in quantity supplied of a given good? A. It is represented by a rightward shift in the supply curve. B. It could result from a technological improvement. C. The price of a key resource used to produce the good may have decreased. D. It is caused by an increase in the price of the good. E. The price of an alternative good has increased. 91. Which of the following is true of the relationship between price and quantity supplied? A. There is always an inverse relationship. B. More is supplied at lower prices. C. Producers work harder and sell more when the price decreases. D. There is a direct relationship between price and quantity supplied. E. It is always true that a higher price leads to a decrease in quantity supplied. 92. Exhibit 4-2 Consider Exhibit 4-2. Which of the following represents an increase in the quantity supplied? A. a movement from C to D B. a movement from C to B C. a movement from E to D D. a movement from F to E E. none of the above represents an increase in the quantity supplied 93. Exhibit 4-2 Consider Exhibit 4-2. Which of the following represents a decrease in the quantity supplied? A. a movement from C to D B. a movement from C to B C. a movement from E to D D. a movement from F to E E. none of the above represents an increase in the quantity supplied 94. Exhibit 4-2 Consider Exhibit 4-2. Which of the following represents an increase in supply? A. a movement from C to D B. a movement from D to B C. a movement from D to E D. a movement from F to E E. none of the above represents an increase in the quantity supplied 95. Exhibit 4-2 Consider Exhibit 4-2. Which of the following represents a decrease in supply? A. a movement from C to D B. a movement from D to B C. a movement from C to F D. a movement from F to E E. none of the above represents an increase in the quantity supplied 96. Exhibit 4-2 Consider Exhibit 4-2 which shows 3 supply curves for milk. Which of the following would shift the supply curve for milk from S1 to S2? A. an increase in the price cattle feed B. the expectation of a higher price in the near future C. an increase in the price of milk D. an increase in the price of beef E. a decrease in the number of dairy farmers 97. Exhibit 4-2 Consider Exhibit 4-2 which shows 3 supply curves for milk. Which of the following would shift the supply curve for milk from S1 to S2? A. a decrease in the price cattle feed B. the expectation of a lower price in the near future C. an increase in the price of milk D. an increase in the price of beef E. a decrease in the number of dairy farmers 98. Exhibit 4-2 Consider Exhibit 4-2 which shows 3 supply curves for milk. Which of the following would shift the supply curve for milk from S1 to S2? A. an increase in the price cattle feed B. the expectation of a lower price in the near future C. an increase in the price of milk D. a decrease in the price of beef E. a decrease in the number of dairy farmers 99. Exhibit 4-2 Consider Exhibit 4-2 which shows 3 supply curves for milk. Which of the following would shift the supply curve for milk from S1 to S2? A. an increase in the price cattle feed B. the expectation of a lower price in the near future C. an increase in the price of milk D. an increase in the price of beef E. a new and improved cattle food that increases the yield per dairy cow 100. Exhibit 4-2 Consider Exhibit 4-2 which shows 3 supply curves for milk. Which of the following would shift the supply curve for milk from S1 to S0? A. an increase in the price cattle feed B. the expectation of a higher price in the near future C. an increase in the price of milk D. a decrease in the price of beef E. a new and improved cattle food that increases the yield per dairy cow 101. Exhibit 4-2 Consider Exhibit 4-2 which shows 3 supply curves for milk. Which of the following would shift the supply curve for milk from S1 to S0? A. a decrease in the price cattle feed B. the expectation of a higher price in the near future C. an increase in the price of milk D. an increase in the price of beef E. a new and improved cattle food that increases the yield per dairy cow 102. The market supply curve of a particular product indicates the total quantities A. that are actually sold during a given time period B. that buyers are willing to purchase at alternative prices C. that sellers are willing and able to offer at alternative prices D. that sellers are willing to offer for sale E. of complements offered for sale 103. Supply curves generally slope upward because of all of the following reasons except one. Which is the exception? A. Producers are willing to offer more of a good at higher prices. B. A higher price attracts resources from less-valued uses. C. Producers must be compensated for the rising opportunity cost of additional output. D. Producers have a greater incentive to sell more as the price increases. E. The price of a good usually must fall to induce an increase in quantity supplied. 104. Which of the following is the reason supply curves typically slope upward? A. Opportunity cost of production increases as quantity supplied increases. B. Supply increases as opportunity cost decreases. C. Price increases as supply decreases. D. Quantity supplied is unrelated to price. E. The income and substitution effects of a price change. 105. Producers are willing and able to offer greater quantities for sale at higher prices because A. they have the incentive to pay the increasing opportunity cost of resources to attract them from alternative uses B. they will decrease their profits by expanding production at higher prices C. the government orders them to do so D. lower prices attract new firms, which have higher costs of production E. they hire superior quality, higher-priced resources as production expands 106. Which of the following explains the relationship between price and the quantity supplied? A. When expanding output, firms will incur greater total costs. B. As the price of a commodity falls, producers will find it more profitable to use higher-priced inputs in their production process. C. As a result of rising production costs, firms can increase profits by expanding output only if the price of output increases. D. To expand output, firms must hire more resources, which are always of poorer quality. E. Consumers want more at lower prices. 107. Larger quantities of any good will be supplied at higher prices because A. consumers will be more satisfied B. higher prices attract resources from other uses C. people are naturally lazy and have to be bribed to give up their leisure D. price and quantity supplied are inversely related E. of the law of decreasing opportunity cost 108. The basic reason that supply curves slope upward is that A. demand curves slope downward B. production is characterized by increasing costs C. profits decline as product prices rise D. greater output can only result from improved technology E. price and quantity supplied are inversely related 109. If the supply curves for the following goods were plotted, they all would slope upward except one. Which is the exception? A. red Corvettes B. yogurt C. diamond rings D. original copies of the Mona Lisa E. wine from Greece 110. Supply and demand curves both A. have negative slopes B. have positive slopes C. relate quantities to prices D. reflect the actions of producers E. reflect the actions of consumers 111. As the price of milk increases, producers are normally willing to supply greater quantities. This is known as the law of A. demand B. gravity C. variable proportions D. profitability E. supply 112. As the price of milk increases, producers are normally willing to supply greater quantities. This response is known as the law of A. supply B. demand C. averages D. variable proportions E. increasing costs 113. An improvement in technology shifts the supply curve rightward. A. True B. False 114. Which of the following would shift the supply curve for a product to the right? A. an increase in the price of a resource used in the good's production B. the expectation of a higher price in the near future C. an increase in the price of the product D. an increase in the price of an alternative good E. an improvement in the technology for producing the good 115. If the supply of a product increases, then A. more will be purchased at the same price B. the price of the product must have declined C. demand for the good must have increased D. producers are willing to accept a lower price for each unit sold E. producers offer less for sale at each possible price 116. Which of the following would most likely increase the supply of college textbooks? A. five major publishers go out of business B. paper costs double C. the wage rate of printers increases D. producers expect the price to rise in the future E. technology of book production improves 117. An improvement in technology would shift A. the demand curve leftward B. the demand curve rightward C. the supply curve leftward D. neither the supply nor the demand curve; instead, there is movement along both of them E. the supply curve rightward 118. A decrease in the price of peanuts will cause a leftward shift of the supply curve of peanut butter. A. True B. False 119. An increase in professors' salaries increases the supply of college education. A. True B. False 120. If the price of labor increases, employers will hire more labor because it is more valuable. A. True B. False 121. Recently it has been discovered that lobsters grown on lobster farms can feed on algae, which is a cheaper lobster food. As a result of this discovery, A. the supply curve for lobster will shift to the left B. the supply curve for lobster will shift to the right C. there will be an increase in the quantity of lobsters supplied D. there will be a decrease in the quantity of lobsters supplied E. both supply and demand curves will shift to the right 122. Which of the following causes the supply of leather jackets to decrease? A. an increase in the price of leather jackets B. an increase in the price of leather C. a decrease in the price of zippers D. an increase in the number of motorcycles E. a decrease in consumer income 123. Which of the following will increase the supply of vanilla ice cream? A. an increase in the price of vanilla beans (an ingredient in ice cream) B. a decrease in the sales tax on restaurant bills C. an increase in the price of chocolate ice cream D. a decrease in the price of milk (an ingredient in ice cream) E. an increase in the price of hot fudge 124. Which of the following would shift the supply curve for a good to the left? A. an increase in the price of that good B. a decrease in the price of an alternative good C. an improvement in technology for producing that good D. an increase in the cost of an important resource used to make that good E. an increase in the number of producers 125. Which of the following events would increase the supply of tomatoes? A. the introduction of mechanized tomato pickers, which raises the cost of production B. an increase in wages for the tomato pickers C. a decrease in the cost of fertilizer for the tomato plants D. unseasonably hot, dry weather in the tomato-growing regions of the nation E. a decrease in the price of pasta products 126. An increase in the price of a good normally increases the A. demand for its substitutes B. supply of complements for the good C. purchasing power of consumers’ dollar incomes D. money income of the consumer E. quantity demanded of all goods that are unrelated to the good in question 127. Assume that corn and soybeans are alternatives that could be grown by most farmers. An increase in the price of corn will A. increase the supply of corn B. increase the supply of soybeans C. decrease the supply of soybeans D. decrease the supply of corn E. have no effect on the supplies of corn and soybeans 128. Which of the following would cause an increase in the supply of wheat? A. an increase in fertilizer costs B. a decrease in the price of bread C. a decrease in the price of corn D. an increase in land prices E. an expectation that the price of wheat will be higher next period 129. As the use of DVDs becomes more widespread, we would expect all of the following except one. Which is the exception? A. The prices of CDs will decrease. B. The demand curve for CD players will shift leftward. C. The supply curve of CD players will shift rightward. D. The demand curve for CDs will shift leftward. E. Firms will move their resources away from CD production to DVD production. 130. If suppliers expect an increase in price, they will reduce the current supply of a good. A. True B. False 131. An increase in the number of producers of a good will A. increase the market supply because the price will rise B. increase the market supply only if market demand increases too C. increase the market supply because market supply is the sum of all individual supply curves D. increase the market supply only if all suppliers have an identical supply curves E. decrease the market supply because firms compete with each other and each firm will supply more 132. Which of the following will not shift the market supply curve for corn? A. a change in the price of corn B. a change in the price of soybeans C. a change in the price of herbicides and pesticides D. a change in storage technology E. a change in the number of acres planted in corn 133. Studies show that the supply curve for oranges has shifted. Which of the following could not explain the shift of the supply curve? A. Weather conditions have changed. B. The price of fertilizer has changed. C. The wage paid to orange pickers has changed. D. The price of oranges has changed. E. The demand for grapefruit has changed. 134. Which of the following is not likely to cause a change in the supply of wheat? A. a government subsidy to farmers who do not grow wheat B. an increase in the price of soybeans C. a decrease in the price of fertilizer D. a fall in the price of wheat E. producers expect product prices to rise 135. Other things equal, the supply of index cards is likely to be affected by all of the following except one. Which is the exception? A. the price of wood pulp used in the production of index cards B. the technology in the index card production process C. the price of index cards D. the price of packaging material (a substitute in production) E. the future price of index cards expected by producers 136. Which of the following statements about markets is not true? A. A market is an impersonal mechanism. B. Markets coordinate the independent decisions of buyers and sellers. C. Markets reduce the transaction costs of exchange. D. More specialized markets are generally found in urban areas. E. All markets provide the same amounts of information. 137. Markets reduce transactions costs A. by decreasing the time spent searching for information about goods and services B. only when they have a highly structured set of rules like the New York Stock Exchange C. because each market uses the same set of rules for buying and selling goods and services D. only when the government can coordinate the plans of many buyers and sellers E. when prices are set by the sellers and are not determined by negotiation between the buyers and the sellers 138. When quantity demanded of a good is less than the quantity supplied at the prevailing market price, A. the market is in equilibrium B. the price of the good tends to rise C. the price of the good tends to fall D. the demand curve shifts rightward until the surplus is eliminated E. the supply curve shifts leftward until the shortage is eliminated 139. A surplus occurs whenever A. current price is greater than equilibrium price B. quantity supplied exceeds quantity demanded at the equilibrium price C. quantity demanded is greater than quantity supplied D. the problem of scarcity of a good is solved E. some buyers would be willing and able to pay even more for it than they have to at equilibrium 140. A surplus of wheat A. is impossible if people are hungry B. is impossible if the price of wheat is below equilibrium C. will result in an increase the price of wheat D. is unlikely to result in any change in the price of wheat E. indicates that the problem of scarcity of wheat has been solved 141. A surplus of shoes will cause A. a decrease in the supply of shoes B. a decrease in the demand for shoes C. both a decrease in the supply of shoes and an increase in the demand for shoes D. a decrease in the price of shoes, through a shift of either the supply curve or the demand curve E. a decrease in the price of shoes 142. Suppliers recognize there is a shortage in the market for their product when they notice that A. the quantity supplied exceeds the quantity demanded B. the quantity demanded is falling C. inventories are falling D. production exceeds new orders for the product E. government economists announce a shortage exists 143. If a surplus exists in the market for swimwear, an economist would predict that A. the price of swimwear will rise B. producers will increase the production of swimwear C. the supply of swimwear will increase D. the price of swimwear at retail outlets will begin to fall E. buyers will react to the surplus by increasing their demand for swimwear 144. A shortage of textbooks will cause A. a decrease in the supply of textbooks B. a decrease in the demand for textbooks C. both an increase in the supply of textbooks and a decrease in the demand for textbooks D. an increase in the price of textbooks, caused by a shift of either the supply curve or the demand curve E. an increase in the price of textbooks 145. A shortage occurs whenever A. quantity demanded exceeds quantity supplied at the equilibrium price B. price is less than equilibrium price C. quantity demanded is less than quantity supplied D. goods are scarce E. some of the people who need the product are not willing and able to buy it at the equilibrium price 146. If there is a shortage in the market for athletic shoes, A. the price should rise to eliminate the shortage B. inventories of athletic shoes will grow C. demand will decrease to restore equilibrium D. firms will reduce production to restore equilibrium E. supply will increase to restore equilibrium 147. If there is a shortage in the market for automobiles, then A. producers' inventories will rise B. the price should begin to rise C. the demand curve will shift to restore equilibrium in the market D. the supply curve will shift to restore equilibrium in the market E. the price is expected to fall 148. If there is a shortage in the market for jeans, A. producers' inventories will increase B. the price should begin to rise C. the demand curve will shift to restore equilibrium in the market D. the supply curve will shift to restore equilibrium in the market E. producers expect government to impose a price ceiling 149. Exhibit 4-3 If the price of the good described in Exhibit 4-3 is $1.20, then there is a A. shortage of 30 units B. surplus of 30 units C. shortage of 60 units D. surplus of 60 units E. surplus of 20 units 150. Exhibit 4-3 If the price of the good described in Exhibit 4-3 is $1.40, then there is a A. shortage of 30 units B. surplus of 30 units C. shortage of 20 units D. surplus of 20 units E. surplus of 10 units 151. Exhibit 4-3 If the price of the good described in Exhibit 4-3 is $1.60, then there is a A. shortage of 30 units B. surplus of 30 units C. shortage of 20 units D. surplus of 20 units E. surplus of 10 units 152. Exhibit 4-3 If the price of the good described in Exhibit 4-3 is $1.50, then A. there is a shortage B. there is a surplus C. the market is in equilibrium D. the quantity supplied is 30 units E. the quantity demanded is 30 units 153. Exhibit 4-3 If the price of the good described in Exhibit 4-3 is $1.60, then an economist would expect the A. price to decrease to $1.40 B. price to decrease to $1.50 C. quantity supplied to increase to 50 units D. quantity demanded to increase to 80 units E. quantity demanded to increase to 90 units 154. The most important characteristic of the equilibrium price is that it A. guarantees that producers earn profit B. clears the market, leaving neither a surplus nor a shortage C. maximizes the quantity demanded D. minimizes the quantity demanded E. guarantees that all buyers who desire the product will get it 155. Economists emphasize the importance of equilibrium in markets because A. trading in markets can only occur at the equilibrium price and quantity B. the behavior of buyers and sellers will automatically guide the market toward the equilibrium price and quantity C. all buyers and sellers are better off at the equilibrium point than any other price and quantity combination D. it represents a compromise between sellers hoping for low prices and buyers searching for high prices E. it is the only price-quantity combination that guarantees that the poorest members of society can purchase the good or service 156. The equilibrium point represents the only price-quantity combination in a market that A. causes both buyers and sellers to agree to a price increase B. causes both buyers and sellers to agree to a price decrease C. exactly matches the independent plans of buyers and sellers D. allows buyers to purchase what they want E. allows sellers to earn a profit 157. When a market is in equilibrium, A. producers earn profits B. the minimum possible price is achieved C. there is no incentive for consumers or producers to change their current behavior D. excess demand is less than excess supply E. the maximum possible price is achieved 158. Saccharin and aspartame are both low-calorie substitutes for sugar. If saccharin is found to cause cancer, A. the price of aspartame will increase B. the price of sugar will decrease C. the price of saccharin will increase D. the demand curves for aspartame and sugar will shift leftward E. aspartame and sugar will be complements 159. The effect of an increase in consumer income on equilibrium price and quantity of Florida orange juice (a normal good) is A. to increase equilibrium price and quantity B. to decrease equilibrium price and quantity C. to increase equilibrium price and decrease equilibrium quantity D. to increase equilibrium quantity and decrease equilibrium price E. that equilibrium price and quantity remain constant 160. An increase in demand will cause a(n) A. increase in supply B. decrease in supply C. decrease in quantity supplied D. increase in quantity supplied E. decrease in equilibrium price 161. A decrease in demand will cause a(n) A. increase in supply B. decrease in supply C. increase in quantity supplied D. increase in equilibrium price E. decrease in equilibrium price 162. A decrease in demand will result in a(n) A. increase in equilibrium price and quantity B. decrease in equilibrium price and quantity C. decrease in equilibrium price and an increase in equilibrium quantity D. increase in equilibrium price and a decrease in equilibrium quantity E. change in equilibrium price and quantity only if supply changes too 163. An increase in demand for chocolate chips would usually result in a(n) A. higher equilibrium price and a lower equilibrium quantity B. lower equilibrium price and a lower equilibrium quantity C. lower equilibrium price and a higher equilibrium quantity D. higher equilibrium price and a higher equilibrium quantity E. increase in the supply of chocolate chips 164. Suppose that the price of compact disks (CDs) increases, other things equal. Which of the following in the most likely effect in the market for DVDs? A. a decrease in demand for DVDs B. an increase in demand for DVDs C. an increase in quantity demanded of DVDs D. a decrease in quantity demanded of DVDs E. a decrease in the quantity supplied of DVDs 165. Velcro is becoming more and more popular for a variety of uses, including as fasteners for shoes. What should happen to the equilibrium price and quantity for shoelaces as a result? A. Both price and quantity should increase. B. Both price and quantity should decrease. C. Price should increase and quantity decrease. D. Price should decrease and quantity increase. E. Nothing. 166. Which of the following would cause both the equilibrium price and equilibrium quantity of cookies to decrease? A. a rise in the price of milk (a complement) B. a rise in consumer incomes C. a rise in the price of cookie dough D. a drop in the price of cookie dough E. a rise in the price of crackers (a substitute) 167. Attempts are being made to develop a biodegradable plastic using agricultural produce such as potatoes. If these attempts are successful, what will happen to the equilibrium price and quantity of potatoes? A. Price will increase and quantity decrease. B. Price will increase and quantity increase. C. Price will decrease and quantity increase. D. Price will decrease and quantity decrease. E. No change in equilibrium price and quantity will occur. 168. If the demand for bicycles increases, A. the quantity demanded decreases B. equilibrium price increases and equilibrium quantity decreases C. equilibrium price decreases and equilibrium quantity increases D. quantity supplied increases E. quantity supplied decreases 169. What is the effect of a decrease in the price of potato chips on the market for pretzels? A. Both equilibrium price and equilibrium quantity rise. B. Both equilibrium price and equilibrium quantity fall. C. Equilibrium price rises and equilibrium quantity falls. D. Equilibrium price falls and equilibrium quantity rises. E. Equilibrium price and equilibrium quantity remain unchanged. 170. For a given supply curve, an increase in demand will typically A. increase price, but quantity could change in either direction B. increase quantity, but price could change in either direction C. increase price but leave quantity unchanged D. decrease both quantity and price E. increase both quantity and price 171. The market for chewing gum is competitive with a current price of 50 cents per pack and a quantity of 100,000 packs per day. Which of the following events would lead to a new equilibrium price of 75 cents and a new equilibrium quantity of 125,000? A. an increase in the price of other kinds of candy B. an increase in the price of the ingredients used to make chewing gum C. an agreement by workers in the chewing gum industry to work for lower wages D. a decrease in the number of young people in the population E. a decrease in income 172. If the tea harvest is bad in a particular year, what will happen in the market for coffee? A. increased price and decreased quantity B. increased price and increased quantity C. decreased price and increased quantity D. decreased price and decreased quantity E. no change in equilibrium price and quantity 173. The market for chewing gum is competitive with a current price of 50 cents per pack and quantity of 100,000 packs. Which of the following events would lead to a new equilibrium price of 40 cents and quantity of 80,000 packs? A. an increase in the price of other kinds of candy B. an increase in the price of the ingredients used to make chewing gum C. a decrease in the number of young people in the population D. an agreement by workers in the chewing gum industry to work for lower wages E. an improvement in chewing gum production technology 174. Exhibit 4-4 Refer to Exhibit 4-4. A shift from demand curve D to D' illustrates a(n) A. decrease in demand B. decrease in quantity demanded C. increase in quantity demanded D. increase in demand E. increase in supply 175. Exhibit 4-4 Refer to Exhibit 4-4. Which of the following would cause a shift of demand from D' to D? A. an increase in the price of a substitute good B. an increase in the number of consumers C. a decrease in the price of a complementary good D. a decline in consumers' incomes if it is a normal good E. an increase in consumers' incomes if it is a normal good 176. Exhibit 4-4 In Exhibit 4-4, which of the following could not cause the shift from D to D'? A. a decrease in the price of a complement B. an increase in the price of a substitute C. a decrease in the price of the good in question D. an increase in the number of consumers E. a decrease in income if the good in question is an inferior good 177. If the tea harvest is bad in a particular year, the supply of tea will A. decrease, its price will decrease, and the quantity demanded of coffee will increase B. decrease, its price will increase, and the quantity demanded of coffee will increase C. decrease, its price will increase, and the quantity demanded of coffee will decrease D. decrease, its price will decrease, and the quantity demanded of coffee will decrease E. increase, its price will increase, and the quantity demanded of coffee will increase 178. A rightward shift of a supply curve A. represents a decrease in supply B. might be caused by an increase in demand C. might be caused by a price ceiling D. would cause an excess quantity supplied at the previous equilibrium price E. might be caused by a decrease in demand 179. A decrease in supply will cause a(n) A. increase in demand B. decrease in demand C. increase in quantity demanded D. decrease in quantity demanded E. decrease in equilibrium price 180. An increase in supply will cause equilibrium price to __________ and equilibrium quantity to __________. A. increase; increase B. increase; decrease C. decrease; increase D. decrease; decrease E. remain constant; increase 181. An increase in supply will cause a(n) A. increase in demand B. decrease in demand C. increase in quantity demanded D. decrease in equilibrium quantity demanded E. increase in equilibrium price 182. A new hormone will increase the amount of milk each cow produces. If this hormone is adopted by many dairies, what will be the effect on the milk market? A. an increase in supply, higher equilibrium price, and lower equilibrium quantity B. a decrease in supply, lower equilibrium price, and lower equilibrium quantity C. an increase in supply, lower equilibrium price, and higher equilibrium quantity D. an increase in supply, higher equilibrium price, and higher equilibrium quantity E. a decrease in supply, lower equilibrium price, and higher equilibrium quantity 183. A decrease in the supply of chocolate chips would usually result in a A. higher equilibrium price and a lower equilibrium quantity B. lower equilibrium price and a lower equilibrium quantity C. lower equilibrium price and a higher equilibrium quantity D. higher equilibrium price and a higher equilibrium quantity E. decrease in the demand for chocolate chips 184. Which of the following would shift the supply curve for CDs to the right? A. a decrease in the price of materials used to make CDs B. a rise in the cost of labor used to make CDs C. an increase in the price of audio cassettes D. a decrease in the number of suppliers E. an increase in the price of CDs 185. What is the effect of a reduction in the price of steel on the equilibrium price and quantity of automobiles? A. Both equilibrium price and equilibrium quantity rise. B. Both equilibrium price and equilibrium quantity fall. C. Equilibrium price rises and equilibrium quantity falls. D. Equilibrium price falls and equilibrium quantity rises. E. Both equilibrium price and equilibrium quantity remain unchanged. 186. In the market for chewing gum, the current price is 50 cents per pack and 100,000 packs are sold. Which of the following events would lead to a new equilibrium price of 60 cents and quantity of 90,000 packs? A. an increase in the price of other kinds of candy B. an increase in the price of the ingredients used to make chewing gum C. a decrease in the number of young people in the population D. an agreement by workers in the chewing gum industry to work for lower wages E. an increase in income 187. Along a given demand curve, a decrease in supply will typically A. decrease price, but the change in quantity could be in either direction B. increase price and decrease the quantity C. decrease price but leave quantity unchanged D. decrease both quantity and price E. increase both quantity and price 188. If supply decreases along a given demand curve, A. an excess quantity demanded will be created, increasing the equilibrium price and causing equilibrium quantity to fall B. an excess quantity supplied will be created, lowering the equilibrium price and causing equilibrium quantity to rise C. an excess quantity demanded will be created, raising the equilibrium price and quantity D. an excess quantity supplied will be created, lowering the equilibrium price and quantity E. price will fall, shifting the demand curve outward, raising the equilibrium quantity 189. If the market for beef cattle was initially in equilibrium, an increase in the price of the feed grains used to fatten cattle would cause A. the demand for beef cattle to increase, driving the price of beef upward B. the supply of beef cattle to decline, driving the price of beef upward in the long run C. the supply of beef to increase, placing downward pressure on the price of beef in the long run D. both supply and demand to fall, leaving the price of beef virtually unchanged E. the supply of beef to increase, driving the price of beef down and increasing demand 190. If supply increases and demand decreases, then equilibrium price will fall. A. True B. False 191. If both supply and demand increase, then the change in equilibrium quantity is indeterminate. A. True B. False 192. If demand increases and supply decreases, A. equilibrium price will fall and equilibrium quantity will rise B. equilibrium price and quantity will both rise C. equilibrium quantity will rise; equilibrium price will either rise or fall D. equilibrium price will fall; equilibrium quantity will either rise or fall E. equilibrium price will rise; equilibrium quantity will either rise, fall, or remain unchanged 193. Suppose demand decreases and supply decreases. Which of the following will happen? A. equilibrium price will increase B. equilibrium price will decrease C. equilibrium quantity will increase D. equilibrium quantity will decrease E. neither the equilibrium price nor the quantity will change 194. Suppose demand increases and supply increases. Which of the following will happen? A. equilibrium price will increase B. equilibrium price will decrease C. equilibrium quantity will increase D. equilibrium quantity will decrease E. neither the equilibrium price nor the equilibrium quantity will change 195. Assume that supply increases slightly and demand increases greatly. Which of the following will happen? A. equilibrium price will fall and equilibrium quantity will rise B. equilibrium price will rise and equilibrium quantity will fall C. equilibrium price will rise and equilibrium quantity will rise D. equilibrium price will fall and equilibrium quantity will fall E. neither equilibrium price nor equilibrium quantity will change 196. If both demand and supply increase, price will A. always increase B. always decrease C. increase only if supply increases more than demand does D. increase only if demand increases more than supply does E. decrease only if supply increases less than demand does 197. If demand increases and supply decreases, quantity will A. always increase B. always decrease C. increase only if supply decreases more than demand increases D. increase only if supply decreases less than demand increases E. decrease only if supply decreases less than demand increases 198. If demand decreases and supply increases, price will A. always increase B. always decrease C. increase only if supply increases more than demand decreases D. increase only if supply increases less than demand decreases E. decrease only if supply increases more than demand decreases 199. Over the last few years, demand for DVDs has increased, and yet their equilibrium price has fallen. Which of the following best explains this situation? A. When the price falls, the quantity supplied increases. B. There has been a shortage of DVDs. C. The supply of DVDs must have decreased. D. The demand curve for DVDs slopes upward, so an increase in demand leads to a lower price. E. The supply of DVDs must have increased more than the demand for DVDs increased. 200. In which of the following situations will the equilibrium price of wheat increase and the change in the equilibrium quantity of wheat be indeterminate? A. if supply and demand both decline B. if supply and demand both rise C. if supply declines and demand rises D. if supply rises and demand declines E. if supply remains constant and demand rises 201. Exhibit 4-5 Consider Exhibit 4-5. Which of the following statements is most likely correct regarding the market for corn? A. In 2008 the quantity purchased exceeded the quantity sold. B. In 2008 the corn market was not in equilibrium. C. The weather for corn production was probably better in 2010 than in 2009. D. Between 2010 and 2011 both the supply and demand for corn must have increased. E. Between 2009 and 2010 the demand for corn decreased. 202. Two events occur simultaneously in the market for automobiles: (1) an improvement in assembly line technology and (2) the economy enters a recession (which decreases consumers' income). An economist would predict with certainty that A. equilibrium quantity will rise B. equilibrium quantity will fall C. equilibrium price will rise D. equilibrium price will fall E. the equilibrium price will remain the same 203. In which of the following situations will the effect upon the equilibrium price of wheat be indeterminate? A. supply decreases and demand increases B. demand decreases and supply increases C. demand remains constant and supply increases D. supply decreases and demand decreases E. supply remains constant and demand increases 204. A price floor set below the equilibrium price will result in a surplus. A. True B. False 205. Tickets to the Michigan-Notre Dame football game are usually sold out in advance of game day. This suggests that A. the price of the tickets must be very high or else people would not consider them valuable B. the price is set below the equilibrium level C. the football stadium is relatively small D. everyone who attends the game will enjoy it E. the price is determined primarily by the fixed supply of tickets 206. Many people argue against increasing the minimum wage because they believe the result would be increased unemployment. Which of the following best summarizes this argument? A higher minimum wage would A. increase the supply of labor while decreasing the demand for labor B. decrease the supply of labor while increasing the demand for labor C. increase the quantity supplied of labor while decreasing the quantity demanded of labor D. decrease the quantity supplied of labor while increasing the quantity demanded of labor E. increase the supply of labor while decreasing the quantity demanded of labor 207. Suppose a market is in equilibrium and then a price floor is established below the equilibrium price. Which of the following will happen? A. quantity demanded will increase B. a surplus will develop C. a shortage will develop D. the quantity sold will rise E. the market will remain in equilibrium 208. Exhibit 4-6 In Exhibit 4-6, suppose a price floor is established at $20.00. What is the result? A. a shortage of 10 units B. a surplus of 10 units C. a shortage of 20 units D. a surplus of 20 units E. there is no change from the situation that exists at the equilibrium price 209. Suppose the current equilibrium price of pizza is $5. If the government decides the price of pizza cannot rise above $4, the result of this policy would be A. a shortage B. a surplus C. that the market would remain in equilibrium but with a larger quantity bought and sold than at $5 D. at the $4 price, the quantity sold would be greater than the quantity bought E. a shift of demand to the right 210. Which of the following is correct when a price floor is set above the equilibrium price? A. quantity supplied is less than quantity demanded at the set price B. quantity supplied is equal to quantity demanded at the set price C. at the set price there will be a shortage D. The market price is greater than the price floor E. quantity supplied exceeds quantity demanded at the set price 211. A price ceiling set below the equilibrium price will result in a shortage. A. True B. False 212. If the government imposes a ceiling price on apartment rents, we would expect to observe all of the following except one. Which is the exception? A. an increase in the number of new apartment complexes being built B. long waiting lists for apartment seekers C. lower maintenance of existing apartments D. conversion of some apartment complexes to condos E. a shortage 213. Exhibit 4-7 Exhibit 4-7 depicts the milk market. The horizontal line, P, represents a price ceiling imposed by the government. Which of the following is true? A. In equilibrium, the quantity demanded is 800 gallons. B. At the ceiling price, there is a surplus. C. The quantity demanded at the price ceiling will equal the quantity supplied. D. The equilibrium price would be $1 per unit without the price ceiling. E. The quantity supplied at the price ceiling will equal the quantity sold. 214. Exhibit 4-7 In Exhibit 4-7, which of the following is true at the price ceiling, P? A. The excess quantity supplied equals 300 gallons. B. The excess quantity demanded equals 300 gallons. C. The excess quantity supplied equals 500 gallons. D. The excess quantity demanded equals 800 gallons. E. Sales will be equal to 800 gallons. 215. Suppose a market is in equilibrium and then a price ceiling is established below the equilibrium price. Which of the following will happen? A. quantity demanded will decrease B. a surplus will develop C. a shortage will develop D. the quantity sold will rise E. the market will remain in equilibrium 216. Which of the following is correct when a price is set below a market's equilibrium price? A. quantity demanded exceeds quantity supplied at the set price B. quantity demanded is less than quantity supplied at the set price C. quantity demanded is equal to quantity supplied at the set price D. at the set price there is a surplus E. the market price is less than the ceiling price 217. Exhibit 4-8 In a rental market like the one in Exhibit 4-8, a government-imposed rule that rent cannot exceed $750 per month would be called a A. surplus of supply B. quantity demanded C. price ceiling D. price floor E. market equilibrium 218. Exhibit 4-8 As shown in Exhibit 4-8, when a government sets a rent ceiling at $750 per month, the result is a(n) A. equilibrium B. increase in supply C. shortage D. price floor E. surplus 219. Exhibit 4-8 Based on Exhibit 4-8, a rent ceiling of $750 per month would result in a number of units rented of A. There is not enough information to determine the answer. B. 50,000 C. greater than 50,000 but less than 90,000 D. 90,000 E. 130,000 220. Rent controls mean that tenants end up with the best possible housing choices over the long run. A. True B. False 221. Rent controls can result in A. deteriorating or abandoned buildings B. strong incentives to oust protected tenants C. payments to motivate tenants to move out D. benefits to rich people who get a windfall from low rents E. All of the answers are correct. 222. The explanation for the law of demand begins with A. a small number of wants satisfied by scarce resources B. finite wants satisfied by infinite resources C. unlimited wants confronting scarce resources D. unlimited wants matching up with unlimited resources E. prices acting as signals to existing and potential suppliers 223. Exhibit 4-9 Exhibit 4-9 shows a demand curve for dog ownership. If your local government passes an anti-dog-litter law that raises the personal cost of owning a dog from C to C’, the quantity of dogs demanded will A. drop to zero B. stay the same C. decrease D. increase E. The answer can only be determined with numbers to analyze. 224. The sum of the individual demands of all consumers in the market is called A. individual demand B. market demand C. inferior good D. market supply E. quantity demanded 225. Exhibit 4-10 Refer to Exhibit 4-10. A shift from demand curve D to demand curve D’ would be caused by a(n) A. decrease in the price of the product under consideration B. significant decrease in population because of emigration C. increase in consumer income D. decrease in the number of producers of the product E. increase in the price of a relevant resource 226. Economists A. believe that tastes are the major influence on consumers’ income expectations B. have observed that tastes vary with changes in the number of consumers C. recognize that tastes have an important impact on demand D. can say a great deal about the origin of tastes E. suspect that tastes can cause a movement along the demand curve 227. Exhibit 4-11 Refer to the supply curve in Exhibit 4-11. If the price increases from P to P’, quantity supplied will A. increase B. The answer can only be determined with numbers to analyze. C. stay the same D. drop to zero E. decrease 228. Exhibit 4-12 Refer to Exhibit 4-12. A shift from supply curve S to supply curve S’ could be caused by a(n) A. decrease in consumer income B. increase in the current price of the product C. patent application that restricts the use of a particular production technology D. several competing producers going out of business E. supplier expecting higher product prices in the future 229. Exhibit 4-13 Refer to Exhibit 4-13. If the price increases from P to P’, the result will be a(n) A. shortage B. equilibrium C. clearing of the market D. surplus E. excess quantity demanded 230. Disequilibrium occurs when quantity demanded equals quantity supplied. A. True B. False 231. Exhibit 4-14 Refer to exhibit 4-14. An increase in the price of baby formula would cause which of the following to happen? A. demand shift from D1 to D2 B. move on demand curve D1 from a to b C. demand shift from D2 to D1 D. move on demand curve D2 from d to c E. move from b on demand curve D1 to c on demand curve D2 232. Exhibit 4-14 Refer to exhibit 4-14. A decrease in the price of baby formula would cause which of the following to happen? A. a movement from a to b on demand curve D1 B. demand shift from D1 to D2 C. movement from c to d on demand curve D2 D. demand shift from D2 to D1 E. either a or b 233. Exhibit 4-14 Refer to exhibit 4-14. The discovery that breast milk provides more protection against disease than baby formula will cause which of the following to happen? A. a movement from a to b on demand curve D1 B. a demand shift from D1 to D2 C. movement from c to d on demand curve D2 D. demand shift from D2 to D1 E. either a or b 234. Exhibit 4-14 Refer to exhibit 4-14. An increase in consumer income will cause which of the following to happen if baby formula is an inferior good? A. demand shift from D2 to D1 B. movement from b to a on demand curve D1 C. demand shift from D1 to D2 D. movement from d to c on demand curve D2 E. none of the above 235. Exhibit 4-14 Refer to exhibit 4-14. An increase in the birth rate would cause which of the following to happen? A. movement from b to a on demand curve D1 B. demand shift from D2 to D1 C. movement from d to c on demand curve D2 D. demand shift from D1 to D2 E. movement from d on demand curve D2 to a on demand curve D1 236. Exhibit 4-15 Refer to exhibit 4-15. An increase in the price of baby formula will cause which of the following to occur? A. a movement from a to b on supply curve S1 B. supply shift from S2 to S1 C. a movement from d to c on supply curve S2 D. supply shift from S1 to S2 E. a movement from b to a on supply curve S1 237. Exhibit 4-15 Refer to exhibit 4-15. A decrease in the price of baby formula will cause which of the following to happen? A. supply shift from S2 to S1 B. movement from c to d on supply curve S2 C. supply shift from S1 to S2 D. movement from b to a on supply curve S1 E. none of the above 238. Exhibit 4-15 Refer to exhibit 4-15. The discovery that breast milk offers greater health protection to babies than baby formula will cause which of the following to happen? A. supply shift from S2 to S1 B. movement from a to b on supply curve S1 C. supply shift from S1 to S2 D. movement from c to d on supply curve S2 E. movement from d to c on supply curve S2 239. Exhibit 4-15 Refer to exhibit 4-15. The development of more efficient production technologies for baby formula will cause which of the following to happen? A. supply shift from S1 to S2 B. movement from a to b on supply curve S1 C. supply shift from S2 to S1 D. movement from c to d on supply curve S2 E. movement from b to a on supply curve S1 240. Exhibit 4-15 Refer to exhibit 4-15. An increase in the number of firms producing baby formula will cause which of the following to happen? A. a movement from a to b along supply curve S1 B. supply shift from S1 to S2 C. movement from c to d along supply curve S2 D. supply shift from S2 to S1 E. movement from d to c along supply curve S2 241. Exhibit 4-16 Refer to exhibit 4-16. If the market for baby formula is given by the demand curve D1 and the supply curve S1, what is the equilibrium price and quantity? A. P1, Q2 B. P3, Q4 C. P4, Q3 D. P2, Q1 E. P1, Q1 242. Exhibit 4-16 Refer to exhibit 4-16. If the market demand for baby formula is given by demand curve D2 and the supply is given by supply curve S2, which of the following is the market equilibrium? A. P1, Q1 B. P3, Q4 C. P4, Q3 D. P2, Q1 E. P1, Q1 243. Exhibit 4-16 Refer to exhibit 4-16. The market demand curve is given by D1 and the supply by S1. Equilibrium price is P2 and equilibrium quantity is Q1. What will the new equilibrium price and quantity be if there is an increase in the birth rate? A. P2 and Q1 B. P1 and Q2 C. P3 and Q4 D. P2 and Q2 E. P4 and Q3 244. A simultaneous increase in supply and demand will always lead to an increase in the prices of a good. A. True B. False 245. If people believe that prices are going to be higher in the future then they are today, they will A. wait until the future to purchase the things they wand B. decrease their demand now C. increase their demand now D. increase their supply now E. save more today so they have the income to buy more in the future Test Bank for Macroeconomics: A Contemporary Introduction William A. McEachern 9781133188131, 9780538453776