Chapter 4 The Market Forces of Supply and Demand

Test A
1

A market is a a. place where only buyers come together. b. place where only sellers meet. c. group of people with common desires. d. group of buyers and sellers of a particular good or service. ANSWER d. group of buyers and sellers of a particular good or service. !"#E $ %E"1 & SE'!()N 1 )*+E'!(,E 1 RAN&)$ "
-

A monopoly is a market a. with one seller. b. with few sellers. c. with one buyer. d. where the government sets the price. ANSWER a. with one seller. !"#E $ %E"1 & SE'!()N 1 )*+E'!(,E 1 RAN&)$ "
.

When we are studying the behavior of buyers/ we are studying a. supply. b. demand. c. an entire market. d. government regulation. ANSWER b. demand. !"#E $ %E"1 & SE'!()N - )*+E'!(,E - RAN&)$ "
0

A demand curve is the a. curve that relates income with 1uantity demanded. b. upward2sloping line relating price with 1uantity supplied. c. downward2sloping line relating the price of the good with the 1uantity demanded. d. None of the above answers is correct. ANSWER c. downward2sloping line relating the price of the good with the 1uantity demanded. !"#E $ %E"1 & SE'!()N - )*+E'!(,E - RAN&)$ "
3

(f a good is 4normal/5 then an increase in income will result in a. a lower market price. b. a decrease in the demand for the good. c. an increase in the demand for the good. d. no change in the demand for the good. ANSWER c. an increase in the demand for the good. !"#E $ %E"1 & SE'!()N - )*+E'!(,E - RAN&)$ "

Copyright Harcourt, Inc.

33

34 Chapter 4/The Market Forces of Supply an !e"an

6

(f the price of a substitute to good 7 increases/ then the a. demand for good 7 will decrease. b. demand for good 7 will increase. c. market price of good 7 will decrease. d. demand for good 7 will not change. ANSWER b. demand for good 7 will increase. !"#E $ %E"1 & SE'!()N - )*+E'!(,E - RAN&)$ "
8

What will happen in the rice market if buyers are e9pecting higher prices in the near future: a. !he supply of rice will increase. b. !he demand for rice will decrease. c. !he demand for rice will increase. d. !he demand for rice will be unaffected. ANSWER c. !he demand for rice will increase. !"#E $ %E"1 & SE'!()N - )*+E'!(,E - RAN&)$ "

!he movement from point A to point * on the graph would be caused by a. an increase in income. b. an increase in price. c. a decrease in price. d. a decrease in the price of a substitute good. ANSWER c. a decrease in price. !"#E $ %E"1 & SE'!()N - )*+E'!(,E - RAN&)$ "
<

Ceteris paribus is a =atin phrase that literally means a. 4after this therefore because of this.5 b. 4other things being e1ual.5 c. 4to respond slowly to a change in price.5 d. 4!here>s no such thing as a free lunch.5 ANSWER b. 4other things being e1ual.5 !"#E $ %E"1 & SE'!()N - )*+E'!(,E - RAN&)$ "
1?

Which of the following would N)! shift the demand curve for a good or service: a. a change in income b. a change in the price of a related good c. a change in the price of the good or service d. a change in e9pectations about the price of the good or service ANSWER c. a change in the price of the good or service !"#E $ %E"1 & SE'!()N - )*+E'!(,E - RAN&)$ "

Copyright Harcourt, Inc.

Chapter 4/The Market Forces of Supply an !e"an 3#

11

(f the number of buyers in the market decreases/ the a. demand in the market will decrease. b. supply in the market will increase. c. demand in the market will increase. d. supply in the market will decrease. ANSWER a. demand in the market will decrease. !"#E $ %E"1 & SE'!()N - )*+E'!(,E - RAN&)$ "
1-

When the price of a good or service changes/ a. supply shifts in the opposite direction. b. demand shifts in the opposite direction. c. demand shifts in the same direction. d. there is a movement along a stable demand curve. ANSWER d. there is a movement along a stable demand curve. !"#E $ %E"1 & SE'!()N - )*+E'!(,E - RAN&)$ "
1.

A supply curve slopes upward because a. a decrease in input prices decreases supply. b. an increase in input prices increases supply. c. as more is produced/ per2unit costs of production fall. d. an increase in price gives producers incentive to supply a larger 1uantity. ANSWER d. an increase in price gives producers incentive to supply a larger 1uantity. !"#E $ %E"1 & SE'!()N . )*+E'!(,E . RAN&)$ "

10

)n the graph/ the movement from S to S1 is called a. a decrease in 1uantity supplied. b. an increase in 1uantity supplied. c. a decrease in supply. d. an increase in supply. ANSWER d. an increase in supply. !"#E $ %E"1 & SE'!()N . )*+E'!(,E . RAN&)$ "
13

A technological advancement will shift the a. supply curve to the left. b. demand curve to the left. c. supply curve to the right. d. demand curve to the right. ANSWER c. supply curve to the right. !"#E $ %E"1 & SE'!()N . )*+E'!(,E . RAN&)$ "

Copyright Harcourt, Inc.

3$ Chapter 4/The Market Forces of Supply an !e"an

16

Suppose there is an increase in input prices. We would e9pect supply a. to increase. b. to decrease. c. to remain unchanged. d. to either increase or decrease. ANSWER b. to decrease. !"#E $ %E"1 & SE'!()N . )*+E'!(,E . RAN&)$ "
18

!he uni1ue point at which the supply and demand curves intersect is called a. cohesion. b. market unity. c. e1uilibrium. d. an agreement. ANSWER c. e1uilibrium. !"#E $ %E"1 & SE'!()N 0 )*+E'!(,E 0 RAN&)$ "

1;

According to the graph/ at the e1uilibrium price/ a. -? units would be supplied and demanded. b. 0? units would be supplied and demanded. c. 6? units would be supplied and demanded. d. 6? units would be supplied/ but only -? would be demanded. ANSWER b. 0? units would be supplied and demanded. !"#E $ %E"1 & SE'!()N 0 )*+E'!(,E 0 RAN&)$ "
1<

According to the graph/ at a price of @8/ a. a surplus would e9ist and the price would tend to rise. b. a surplus would e9ist and the price would tend to fall. c. the market would be in e1uilibrium. d. a shortage would e9ist and the price would tend to fall. ANSWER b. a surplus would e9ist and the price would tend to fall. !"#E $ %E"1 & SE'!()N 0 )*+E'!(,E 0 RAN&)$ "

Copyright Harcourt, Inc.

Chapter 4/The Market Forces of Supply an !e"an 3%

-?

(f there is a shortage of farm laborers/ we would e9pect a. the wages of farm laborers to increase. b. the wages of farm laborers to decrease. c. the prices of farm commodities to decrease. d. a decrease in the demand for substitutes of farm labor. ANSWER a. the wages of farm laborers to increase. !"#E $ %E"1 & SE'!()N 3 )*+E'!(,E 3 RAN&)$ "
-1

At the e1uilibrium price a. sellers would eventually re1uire a higher price. b. there will be no pressure on price to rise or fall. c. there can still be upward or downward pressure on price. d. buyers would not be willing to purchase the output sellers desire to sell. ANSWER b. there will be no pressure on price to rise or fall. !"#E $ %E"1 & SE'!()N 0 )*+E'!(,E 0 RAN&)$ "
--

When the price is higher than the e1uilibrium price/ a. a shortage will e9ist. b. 1uantity demanded e1uals 1uantity supplied. c. buyers desire to purchase more than is produced. d. sellers desire to produce and sell more than buyers wish to purchase. ANSWER d. sellers desire to produce and sell more than buyers wish to purchase. !"#E $ %E"1 & SE'!()N 0 )*+E'!(,E 0 RAN&)$ "
-.

Suppose that demand decreases AN& supply decreases. What would you e9pect to occur in the market for the good: a. *oth e1uilibrium price and e1uilibrium 1uantity would increase. b. E1uilibrium price would decrease/ but the impact on e1uilibrium 1uantity would be ambiguous. c. E1uilibrium 1uantity would decrease/ but the impact on e1uilibrium price would be ambiguous. d. E1uilibrium price would increase/ but the impact on e1uilibrium 1uantity would be ambiguous. ANSWER c. E1uilibrium 1uantity would decrease/ but the impact on e1uilibrium price would be ambiguous. !"#E $ %E"1 ' SE'!()N 0 )*+E'!(,E 0 RAN&)$ "
-0

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 e9pect to occur in this market: a. *oth the e1uilibrium price and 1uantity would increase. b. E1uilibrium price would increase/ but the impact on the amount sold in the market would be ambiguous. c. E1uilibrium price would decrease/ but the impact on the amount sold in the market would be ambiguous. d. E1uilibrium 1uantity would increase/ but the impact on e1uilibrium price would be ambiguous. ANSWER c. E1uilibrium price would decrease/ but the impact on the amount sold in the market would be ambiguous. !"#E $ %E"1 ' SE'!()N 0 )*+E'!(,E 0 RAN&)$ "
-3

(n a free market system/ what is the mechanism for rationing scarce resources: a. the government b. prices c. buyers d. sellers ANSWER b. prices !"#E $ %E"1 & SE'!()N 3 )*+E'!(,E 3 RAN&)$ "

Copyright Harcourt, Inc.

&

'(S)*+, .group of e"an ers an suppliers of a particular goo or ser-ice. T./*, M 0*.&, ! S*CTI1(, & 123*CTI4*, & +'(!1M, .
5

'(S)*+, a. 6ith one seller. T./*, M 0*.&, ! S*CTI1(, & 123*CTI4*, & +'(!1M, .
3

'(S)*+, 7. e"an . T./*, M 0*.&, ! S*CTI1(, 5 123*CTI4*, 5 +'(!1M, .

4

'(S)*+, c. o6n6ar 8sloping line relating the price of the goo 6ith the 9uantity e"an e . T./*, M 0*.&, ! S*CTI1(, 5 123*CTI4*, 5 +'(!1M, .
#

'(S)*+, c. an increase in the e"an for the goo . T./*, M 0*.&, ! S*CTI1(, 5 123*CTI4*, 5 +'(!1M, .
$

'(S)*+, 7.the e"an for goo : 6ill increase. T./*, M 0*.&, ! S*CTI1(, 5 123*CTI4*, 5 +'(!1M, .
%

'(S)*+, c. The e"an for rice 6ill increase. T./*, M 0*.&, ! S*CTI1(, 5 123*CTI4*, 5 +'(!1M, .
;

'(S)*+, c. a ecrease in price. T./*, M 0*.&, ! S*CTI1(, 5 123*CTI4*, 5 +'(!1M, .

<

'(S)*+, 7.=other things 7eing e9ual.> T./*, M 0*.&, ! S*CTI1(, 5 123*CTI4*, 5 +'(!1M, .
&?

'(S)*+, c. a change in the price of the goo or ser-ice T./*, M 0*.&, ! S*CTI1(, 5 123*CTI4*, 5 +'(!1M, .
&&

'(S)*+, a. the e"an in the "arket 6ill ecrease. T./*, M 0*.&, ! S*CTI1(, 5 123*CTI4*, 5 +'(!1M, .
&5

'(S)*+, .there is a "o-e"ent along a sta7le e"an cur-e. T./*, M 0*.&, ! S*CTI1(, 5 123*CTI4*, 5 +'(!1M, .
&3

'(S)*+, .an increase in price gi-es pro ucers incenti-e to supply a larger 9uantity. T./*, M 0*.&, ! S*CTI1(, 3 123*CTI4*, 3 +'(!1M, .
&4

'(S)*+, .an increase in supply. T./*, M 0*.&, ! S*CTI1(, 3 123*CTI4*, 3 +'(!1M, .

&#

'(S)*+, c. supply cur-e to the right. T./*, M 0*.&, ! S*CTI1(, 3 123*CTI4*, 3 +'(!1M, .
&$

'(S)*+, 7.to ecrease. T./*, M 0*.&, ! S*CTI1(, 3 123*CTI4*, 3 +'(!1M, .

&%

'(S)*+, c. e9uili7riu". T./*, M 0*.&, ! S*CTI1(, 4 123*CTI4*, 4 +'(!1M, .

&;

'(S)*+, 7.4? units 6oul 7e supplie an T./*, M 0*.&, ! S*CTI1(, 4 123*CTI4*, 4 +'(!1M, .
&<

e"an e .

'(S)*+, 7.a surplus 6oul e@ist an the price 6oul ten to fall. T./*, M 0*.&, ! S*CTI1(, 4 123*CTI4*, 4 +'(!1M, .
5?

'(S)*+, a. the 6ages of far" la7orers to increase. T./*, M 0*.&, ! S*CTI1(, # 123*CTI4*, # +'(!1M, .
5&

'(S)*+, 7.there 6ill 7e no pressure on price to rise or fall. T./*, M 0*.&, ! S*CTI1(, 4 123*CTI4*, 4 +'(!1M, .
55

'(S)*+, .sellers esire to pro uce an sell "ore than 7uyers 6ish to purchase. T./*, M 0*.&, ! S*CTI1(, 4 123*CTI4*, 4 +'(!1M, .
53

'(S)*+, c. *9uili7riu" 9uantity 6oul 6oul 7e a"7iguous. T./*, M 0*.&, C S*CTI1(, 4 123*CTI4*, 4 +'(!1M, .
54

ecrease, 7ut the i"pact on e9uili7riu" price

'(S)*+, c. *9uili7riu" price 6oul ecrease, 7ut the i"pact on the a"ount sol in the "arket 6oul 7e a"7iguous. T./*, M 0*.&, C S*CTI1(, 4 123*CTI4*, 4 +'(!1M, .
5#

'(S)*+, 7.prices T./*, M 0*.&, ! S*CTI1(, # 123*CTI4*, # +'(!1M, .