Chapter 4 The Market Forces of Supply and Demand

Test B
1

A competitive market is one in which a. there are so many buyers and sellers that each has a negligible impact on price. b. each seller attempts to compete so consumers cannot freely interact with sellers. c. the government regulates each seller of the product. d. there is only one seller of the product. ANSWER: a. there are so many buyers and sellers that each has a negligible impact on price. TYPE: M KEY1: D SECTION: 1 OBJECTIVE: 1 RANDOM: Y
2

A monopolistically competitive market is one that consists of a. a single seller of the product. b. a large number of sellers all offering similar but different products. c. many buyers and sellers and an identical product. d. a few sellers that do not always compete aggressively. ANSWER: b. a large number of sellers all offering similar but different products. TYPE: M KEY1: D SECTION: 1 OBJECTIVE: 1 RANDOM: Y
3

All of the following are determinants of demand EXCEPT a. tastes. b. income. c. technology. d. the price of related goods. ANSWER: c. technology. TYPE: M KEY1: D SECTION: 2 OBJECTIVE: 2 RANDOM: Y
4

If goods X and Y are complements, an increase in the price of X will result in a. less of good Y sold. b. more of good Y sold. c. more of good X sold. d. no difference in the quantity sold of either good. ANSWER: a. less of good Y sold. TYPE: M KEY1: C SECTION: 2 OBJECTIVE: 2 RANDOM: Y
5

If Diane receives an increase in her pay, we would expect Dianes demand for a. each good she purchases to remain unchanged. b. for inferior goods to increase. c. for luxury goods to decrease. d. for normal goods to increase. ANSWER: d. for normal goods to increase. TYPE: M KEY1: D SECTION: 2 OBJECTIVE: 2 RANDOM: Y

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40 Chapter 4/The Market Forces of Supply and Demand

6

A demand curve illustrates the a. tradeoff between inflation and unemployment. b. positive relationship between price and quantity supplied. c. negative relationship between price and quantity demanded. d. maximum quantity of two goods an economy is capable of producing with available resources and technology. ANSWER: c. negative relationship between price and quantity demanded. TYPE: M KEY1: D SECTION: 2 OBJECTIVE: 2 RANDOM: Y
7

Emily tells you that the price of CDs at the music store will be going down next week. You will probably respond by a. decreasing your current demand for CDs. b. increasing your current demand for CDs. c. not currently changing your demand for CDs. d. refusing to ever buy anymore CDs at that store. ANSWER: a. decreasing your current demand for CDs. TYPE: M KEY1: D SECTION: 2 OBJECTIVE: 2 RANDOM: Y

If the demand curve shifts from D1 to D on the graph, this means that a. firms would be willing to supply less than before. b. people are less willing to buy the product at any price than before. c. people are now more willing to buy the product at any price than before. d. the price of the product has decreased, causing consumers to buy more of the product. ANSWER: c. people are now more willing to buy the product at any price than before. TYPE: M KEY1: D SECTION: 2 OBJECTIVE: 2 RANDOM: Y
9

A market demand curve represents the a. average demand of all consumers in the market. b. vertical sum of all the individual demands for a particular good or service. c. wishes of every supplier of a good or service in a particular market. d. horizontal sum of all the individual demands for a particular good or service. ANSWER: d. horizontal sum of all the individual demands for a particular good or service. TYPE: M KEY1: D SECTION: 2 OBJECTIVE: 2 RANDOM: Y

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Chapter 4/The Market Forces of Supply and Demand 41

10

The willingness and ability to produce and sell a good or service is called a. demand. b. supply. c. equilibrium. d. a competitive market. ANSWER: b. supply. TYPE: M KEY1: D SECTION: 3 OBJECTIVE: 3 RANDOM: Y
11

According to the law of supply, price and quantity supplied are a. directly related. b. inversely related. c. independent variables. d. the same as the relationship between price and quantity demanded. ANSWER: a. directly related. TYPE: M KEY1: D SECTION: 3 OBJECTIVE: 3 RANDOM: Y

12

The movement from point A to point B on the graph would be a. a decrease in quantity supplied. b. a decrease in supply. c. an increase in supply. d. an increase in quantity supplied. ANSWER: d. an increase in quantity supplied. TYPE: M KEY1: D SECTION: 3 OBJECTIVE: 3 RANDOM: Y NOTE: THE FOLLOWING QUESTION IS REPEATED FROM THE ON-LINE QUIZZES. YOUR STUDENTS MAY HAVE ALREADY SEEN THIS QUESTION AND ITS ANSWER.
13

A change in which of the following will cause a movement along the supply curve? a. a change in the state of technology b. a change in input prices c. a change in the price of the good or service d. a change in expectations about future prices ANSWER: c. a change in the price of the good or service TYPE: M KEY1: D SECTION: 2 OBJECTIVE: 2 RANDOM: Y

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42 Chapter 4/The Market Forces of Supply and Demand

14

Bauxite is an important input in the production of aluminum. If the price of bauxite decreases, all else equal, we would expect the supply of a. aluminum to be unaffected. b. aluminum to decrease. c. aluminum to increase. d. bauxite to increase. ANSWER: c. aluminum to increase. TYPE: M KEY1: C SECTION: 3 OBJECTIVE: 3 RANDOM: Y NOTE: THE FOLLOWING QUESTION IS REPEATED FROM THE ON-LINE QUIZZES. YOUR STUDENTS MAY HAVE ALREADY SEEN THIS QUESTION AND ITS ANSWER.
15

An improvement in the state of technology in production will result in a. an increase in equilibrium price and an increase in equilibrium quantity. b. a decrease in equilibrium price and a decrease in equilibrium quantity. c. an increase in equilibrium price and no change in equilibrium quantity. d. a decrease in equilibrium price and an increase in equilibrium quantity. ANSWER: d. a decrease in equilibrium price and an increase in equilibrium quantity. TYPE: M KEY1: C SECTION: 3 OBJECTIVE: 3 RANDOM: Y
16

The price where quantity supplied equals quantity demanded is called the a. equilibrium price. b. monopoly price. c. coordinating price. d. All of the above are correct. ANSWER: a. equilibrium price. TYPE: M KEY1: D SECTION: 4 OBJECTIVE: 4 RANDOM: Y
17

At the equilibrium price, a. everyone in the market has been satisfied. b. it is possible for there to be a shortage. c. firms have an incentive to increase production. d. buyers have an incentive to buy more. ANSWER: a. everyone in the market has been satisfied. TYPE: M KEY1: D SECTION: 4 OBJECTIVE: 4 RANDOM: Y

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Chapter 4/The Market Forces of Supply and Demand 43

18

Refer to the graph shown. In this market, equilibrium price and quantity would be a. $16, 50. b. $14, 30. c. $10, 50. d. $ 8, 60. ANSWER: c. $10, 50. TYPE: M KEY1: D SECTION: 4 OBJECTIVE: 4 RANDOM: Y
19

Refer to the graph shown. If price in this market is currently $16, there would be a a. shortage of 60 units and price would tend to rise. b. surplus of 30 units and price would tend to fall. c. shortage of 30 units and price would tend to rise. d. surplus of 60 units and price would tend to fall. ANSWER: d. surplus of 60 units and price would tend to fall. TYPE: M KEY1: D SECTION: 4 OBJECTIVE: 4 RANDOM: Y
20

Refer to the graph shown. If price in this market is currently $8, quantity supplied would be ______ and quantity demanded would be ______. a. 40, 60 b. 60, 40 c. 50, 50 d. 70, 30 ANSWER: a. 40, 60 TYPE: M KEY1: D SECTION: 4 OBJECTIVE: 4 RANDOM: Y

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44 Chapter 4/The Market Forces of Supply and Demand

21

If a market is currently experiencing a shortage at the current price, then a. the market must be in equilibrium. b. the price is below the equilibrium price. c. quantity demanded equals quantity supplied. d. sellers are producing more than buyers wish to buy because the price is too high. ANSWER: b. the price is below the equilibrium price. TYPE: M KEY1: D SECTION: 4 OBJECTIVE: 4 RANDOM: Y NOTE: THE FOLLOWING QUESTION IS REPEATED FROM THE ON-LINE QUIZZES. YOUR STUDENTS MAY HAVE ALREADY SEEN THIS QUESTION AND ITS ANSWER.
22

Suppose oranges are currently selling for $2.00 per pound. The equilibrium price of oranges is $1.56 per pound. We would expect a a. shortage to exist and the market price of oranges to increase. b. shortage to exist and the market price of oranges to decrease. c. surplus to exist and the market price of oranges to increase. d. surplus to exist and the market price of oranges to decrease. ANSWER: d. surplus to exist and the market price of oranges to decrease. TYPE: M KEY1: D SECTION: 4 OBJECTIVE: 4 RANDOM: Y
23

Suppose that the incomes of buyers in a particular market for a normal good declines and there is also a reduction in input prices. What would we expect to occur in this market? a. The equilibrium price would increase, but the impact on the amount sold in the market would be ambiguous. b. The equilibrium price would decrease, but the impact on the amount sold in the market would be ambiguous. c. Both equilibrium price and equilibrium quantity would increase. d. Equilibrium quantity would increase, but the impact on equilibrium price would be ambiguous. ANSWER: b. The equilibrium price would decrease, but the impact on the amount sold in the market would be ambiguous. TYPE: M KEY1: C SECTION: 4 OBJECTIVE: 4 RANDOM: Y
24

A stronger demand together with a weaker supply would necessarily result in a. a lower price. b. a higher price. c. an increase in equilibrium quantity. d. a decrease in equilibrium quantity. ANSWER: b. a higher price. TYPE: M KEY1: D SECTION: 4 OBJECTIVE: 4 RANDOM: Y
25

In a free market system, what coordinates the actions of millions of people with their varying abilities and desires? a. producers b. consumers c. prices d. the government ANSWER: c. prices TYPE: M KEY1: D SECTION: 5 OBJECTIVE: 5 RANDOM: Y

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ANSWER: a.there are so many buyers and sellers that each has a negligible impact on price. TYPE: M KEY1: D SECTION: 1 OBJECTIVE: 1 RANDOM: Y
2

ANSWER: b.a large number of sellers all offering similar but different products. TYPE: M KEY1: D SECTION: 1 OBJECTIVE: 1 RANDOM: Y
3

ANSWER: c. technology. TYPE: M KEY1: D SECTION: 2 OBJECTIVE: 2 RANDOM: Y

4

ANSWER: a.less of good Y sold. TYPE: M KEY1: C SECTION: 2 OBJECTIVE: 2 RANDOM: Y

5

ANSWER: d. for normal goods to increase. TYPE: M KEY1: D SECTION: 2 OBJECTIVE: 2 RANDOM: Y
6

ANSWER: c. negative relationship between price and quantity demanded. TYPE: M KEY1: D SECTION: 2 OBJECTIVE: 2 RANDOM: Y
7

ANSWER: a.decreasing your current demand for CDs. TYPE: M KEY1: D SECTION: 2 OBJECTIVE: 2 RANDOM: Y
8

ANSWER: c. people are now more willing to buy the product at any price than before. TYPE: M KEY1: D SECTION: 2 OBJECTIVE: 2 RANDOM: Y
9

ANSWER: d. horizontal sum of all the individual demands for a particular good or service. TYPE: M KEY1: D SECTION: 2 OBJECTIVE: 2 RANDOM: Y
10

ANSWER: b.supply. TYPE: M KEY1: D SECTION: 3 OBJECTIVE: 3 RANDOM: Y

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ANSWER: a.directly related. TYPE: M KEY1: D SECTION: 3 OBJECTIVE: 3 RANDOM: Y

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ANSWER: d. an increase in quantity supplied. TYPE: M KEY1: D SECTION: 3 OBJECTIVE: 3 RANDOM: Y

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ANSWER: c. a change in the price of the good or service TYPE: M KEY1: D SECTION: 2 OBJECTIVE: 2 RANDOM: Y

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ANSWER: c. aluminum to increase. TYPE: M KEY1: C SECTION: 3 OBJECTIVE: 3 RANDOM: Y

15

ANSWER: d. a decrease in equilibrium price and an increase in equilibrium quantity. TYPE: M KEY1: C SECTION: 3 OBJECTIVE: 3 RANDOM: Y
16

ANSWER: a.equilibrium price. TYPE: M KEY1: D SECTION: 4 OBJECTIVE: 4 RANDOM: Y

17

ANSWER: a.everyone in the market has been satisfied. TYPE: M KEY1: D SECTION: 4 OBJECTIVE: 4 RANDOM: Y
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ANSWER: c. $10, 50. TYPE: M KEY1: D SECTION: 4 OBJECTIVE: 4 RANDOM: Y

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ANSWER: d. surplus of 60 units and price would tend to fall. TYPE: M KEY1: D SECTION: 4 OBJECTIVE: 4 RANDOM: Y
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ANSWER: a.40, 60 TYPE: M KEY1: D SECTION: 4 OBJECTIVE: 4 RANDOM: Y

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ANSWER: b.the price is below the equilibrium price. TYPE: M KEY1: D SECTION: 4 OBJECTIVE: 4 RANDOM: Y
22

ANSWER: d. surplus to exist and the market price of oranges to decrease. TYPE: M KEY1: D SECTION: 4 OBJECTIVE: 4 RANDOM: Y
23

ANSWER: b. The equilibrium price would decrease, but the impact on the amount sold in the market would be ambiguous. TYPE: M KEY1: C SECTION: 4 OBJECTIVE: 4 RANDOM: Y
24

ANSWER: b.a higher price. TYPE: M KEY1: D SECTION: 4 OBJECTIVE: 4 RANDOM: Y

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ANSWER: c. prices TYPE: M KEY1: D SECTION: 5 OBJECTIVE: 5 RANDOM: Y