经济学原理 微观 第五版测试题库(04)

Chapter 4

The Market Forces of Supply and Demand

TRUE/FALSE

1. Prices allocate a market economy’s scarce resources.ANS: T DIF: 1 REF: 4-0 NAT: Analytic LOC: Markets, market failure, and externalities TOP: Market economies MSC: Definitional

2.

In a market economy, supply and demand determine both the quantity of each good produced and the price at

which it is sold.ANS: T DIF: 1 REF: 4-0 NAT: Analytic LOC: Markets, market failure, and externalities TOP: Market economies MSC: Definitional

3. A market is a group of buyers and sellers of a particular good or service.ANS: T DIF: 1 REF: 4-1 NAT: Analytic LOC: Markets, market failure, and externalities TOP: Markets MSC: Definitional

4.

Sellers as a group determine the demand for a product, and buyers as a group determine the supply of a

product.ANS: F DIF: 1 REF: 4-1 NAT: Analytic LOC: Supply and demand TOP: Demand | Supply MSC: Definitional

5. A yard sale is an example of a market.ANS: T DIF: 2 REF: 4-1 NAT: Analytic LOC: Markets, market failure, and externalities TOP: Markets MSC: Applicative

6. A newspaper’s classified ads are an example of a market.ANS: T DIF: 2 REF: 4-1 NAT: Analytic LOC: Markets, market failure, and externalities TOP: Markets MSC: Applicative

7. Most markets in the economy are highly competitive.ANS: T DIF: 1 REF: 4-1 NAT: Analytic LOC: Markets, market failure, and externalities TOP: Markets MSC: Definitional

8.

In a competitive market, the quantity of each good produced and the price at which it is sold are not

determined by any single buyer or seller.ANS: T DIF: 1 REF: 4-1 NAT: Analytic LOC: Markets, market failure, and externalities TOP: Competitive markets MSC: Definitional

9.

In a competitive market, there are so few buyers and so few sellers that each has a significant impact on the

market price.ANS: F DIF: 1 REF: 4-1 NAT: Analytic LOC: Markets, market failure, and externalities TOP: Competitive markets MSC: Definitional

10. In a perfectly competitive market, the goods offered for sale are all exactly the same.ANS: T DIF: 1 REF: 4-1 NAT: Analytic LOC: Perfect competition TOP: Perfect competition MSC: Definitional

202

Chapter 4 /The Market Forces of Supply and Demand ? 203

11. In a perfectly competitive market, buyers and sellers are price setters.

ANS: F DIF: 1 REF: 4-1 NAT: Analytic LOC: Perfect competition TOP: Perfect competition MSC: Definitional

12. All goods and services are sold in perfectly competitive markets.ANS: F DIF: 1 REF: 4-1 NAT: Analytic LOC: Perfect competition MSC: Definitional

TOP: Perfect competition

13. If a good or service has only one seller, then the seller is called a monopoly.ANS: T DIF: 1 REF: 4-1 NAT: Analytic LOC: Monopoly TOP: Monopoly MSC: Definitional

14. Monopolists are price takers.ANS: F DIF: 2 NAT: Analytic LOC: Monopoly

REF: 4-1

TOP: Monopoly

MSC: Interpretive

15. Local cable TV companies frequently are monopolists.ANS: T DIF: 1 REF: 4-1 NAT: Analytic LOC: Monopoly TOP: Monopoly

MSC: Definitional

16. The quantity demanded of a product is the amount that buyers are willing and able to purchase at a particular

price.ANS: T DIF: 1 REF: 4-2 NAT: Analytic LOC: Supply and demand TOP: Quantity demanded MSC: Definitional

17. The law of demand is true for most goods in the economy.ANS: T DIF: 1 REF: 4-2 NAT: Analytic LOC: Supply and demand MSC: Definitional

TOP: Law of demand

18. The law of demand states that, other things equal, when the price of a good rises, the quantity demanded of the

good rises, and when the price falls, the quantity demanded falls.ANS: F DIF: 1 REF: 4-2 NAT: Analytic LOC: Supply and demand TOP: Law of demand MSC: Definitional

19. The demand curve is the upward-sloping line relating price and quantity demanded.ANS: F DIF: 1 REF: 4-2 NAT: Analytic LOC: Supply and demand TOP: Demand curve MSC: Definitional

20. Individual demand curves are summed horizontally to obtain the market demand curve.ANS: T DIF: 1 REF: 4-2 NAT: Analytic LOC: Supply and demand TOP: Market demand curve MSC: Definitional

21. The market demand curve shows how the total quantity demanded of a good varies as the income of buyers

varies, while all the other factors that affect how much consumers want to buy are held constant.ANS: F DIF: 1 REF: 4-2 NAT: Analytic LOC: Supply and demand TOP: Market demand curve MSC: Definitional

22. If something happens to alter the quantity demanded at any given price, then the demand curve shifts.ANS: T DIF: 1 REF: 4-2 NAT: Analytic LOC: Supply and demand TOP: Demand curve MSC: Definitional

204 ? Chapter 4 /The Market Forces of Supply and Demand

23. A movement upward and to the left along a given demand curve is called a decrease in demand..ANS: F DIF: 2 REF: 4-2 NAT: Analytic LOC: Supply and demand TOP: Demand curve MSC: Interpretive

24. An increase in demand shifts the demand curve to the left.ANS: F DIF: 1 REF: 4-2 NAT: Analytic LOC: Supply and demand MSC: Definitional

TOP: Demand curve

25. If the demand for a good falls when income falls, then the good is called an inferior good.ANS: F DIF: 1 REF: 4-2 NAT: Analytic LOC: Supply and demand TOP: Normal goods MSC: Definitional

26. When Mario's income decreases, he buys more pasta. For Mario, pasta is a normal good.ANS: F DIF: 2 REF: 4-2 NAT: Analytic LOC: Supply and demand TOP: Inferior goods MSC: Applicative

27. A decrease in income will shift the demand curve for an inferior good to the right.ANS: T DIF: 2 REF: 4-2 NAT: Analytic LOC: Supply and demand TOP: Inferior goods MSC: Interpretive

28. An increase in the price of a substitute good will shift the demand curve for a good to the right.ANS: T DIF: 2 REF: 4-2 NAT: Analytic LOC: Supply and demand TOP: Substitutes MSC: Interpretive

29. Baseballs and baseball bats are substitute goods.ANS: F DIF: 2 REF: 4-2 NAT: Analytic LOC: Supply and demand MSC: Applicative

TOP: Complements

30. A decrease in the price of a complement will shift the demand curve for a good to the left.ANS: F DIF: 2 REF: 4-2 NAT: Analytic LOC: Supply and demand TOP: Complements MSC: Interpretive

31. When an increase in the price of one good lowers the demand for another good, the two goods are called

complements.ANS: T DIF: 1 REF: 4-2 NAT: Analytic LOC: Supply and demand TOP: Complements MSC: Definitional

32. Cocoa and marshmallows are complements, so a decrease in the price of cocoa will cause an increase in the

demand for marshmallows.ANS: T DIF: 2 REF: 4-2 NAT: Analytic LOC: Supply and demand TOP: Complements MSC: Applicative

33. If a person expects the price of socks to increase next month, then that person’s current demand for socks will

increase.ANS: T DIF: 2 REF: 4-2 NAT: Analytic LOC: Supply and demand TOP: Expectations MSC: Applicative

Chapter 4 /The Market Forces of Supply and Demand ? 205

34. A decrease in the price of a product and an increase in the number of buyers in the market affect the demand

curve in the same general way.ANS: F DIF: 2 REF: 4-2 NAT: Analytic LOC: Supply and demand TOP: Demand curve MSC: Interpretive

35. Whenever a determinant of demand other than price changes, the demand curve shifts.ANS: T DIF: 2 REF: 4-2 NAT: Analytic LOC: Supply and demand TOP: Demand curve MSC: Interpretive

36. An increase in the price of pizza will shift the demand curve for pizza to the left.ANS: F DIF: 2 REF: 4-2 NAT: Analytic LOC: Supply and demand TOP: Demand curve MSC: Applicative

37. Public service announcements, mandatory health warnings on cigarette packages, and the prohibition of

cigarette advertising on television are all policies aimed at shifting the demand curve for cigarettes to the right.ANS: F DIF: 2 REF: 4-2 NAT: Analytic LOC: Supply and demand TOP: Demand curve MSC: Applicative

38. Most studies have found that tobacco and marijuana are complements rather than substitutes.ANS: T DIF: 2 REF: 4-2 NAT: Analytic LOC: Supply and demand TOP: Complements MSC: Applicative

39. The quantity supplied of a good or service is the amount that sellers are willing and able to sell at a particular

price.ANS: T DIF: 1 REF: 4-3 NAT: Analytic LOC: Supply and demand TOP: Quantity supplied MSC: Definitional

40. When the price of a good is high, selling the good is profitable, and so the quantity supplied is large.ANS: T DIF: 1 REF: 4-3 NAT: Analytic LOC: Supply and demand TOP: Law of supply MSC: Definitional

41. When the price of a good is low, selling the good is profitable, and so the quantity supplied is large.ANS: F DIF: 1 REF: 4-3 NAT: Analytic LOC: Supply and demand TOP: Law of supply MSC: Definitional

42. Price cannot fall so low that some sellers choose to supply a quantity of zero.ANS: F DIF: 2 REF: 4-3 NAT: Analytic LOC: Supply and demand TOP: Quantity supplied MSC: Interpretive

43. The law of supply states that, other things equal, when the price of a good rises, the quantity supplied of the

good falls.ANS: F DIF: 1 REF: 4-3 NAT: Analytic LOC: Supply and demand TOP: Law of supply MSC: Definitional

44. The law of supply states that, other things equal, when the price of a good falls, the quantity supplied falls as

well.ANS: T DIF: 1 REF: 4-3 NAT: Analytic LOC: Supply and demand TOP: Law of supply MSC: Definitional

206 ? Chapter 4 /The Market Forces of Supply and Demand

45. If a higher price means a greater quantity supplied, then the supply curve slopes upward.ANS: T DIF: 1 REF: 4-3 NAT: Analytic LOC: Supply and demand TOP: Supply curve MSC: Definitional

46. Individual supply curves are summed vertically to obtain the market supply curve.ANS: F DIF: 1 REF: 4-3 NAT: Analytic LOC: Supply and demand TOP: Market supply curve MSC: Definitional

47. The market supply curve shows how the total quantity supplied of a good varies as input prices vary, holding

constant all the other factors that influence producers’ decisions about how much to sell.ANS: F DIF: 1 REF: 4-3 NAT: Analytic LOC: Supply and demand TOP: Market supply curve MSC: Definitional

48. If something happens to alter the quantity supplied at any given price, then we move along the fixed supply

curve to a new quantity supplied.ANS: F DIF: 2 REF: 4-3 NAT: Analytic LOC: Supply and demand TOP: Supply curve MSC: Interpretive

49. A movement along a supply curve is called a change in supply while a shift of the supply curve is called a

change in quantity supplied.ANS: F DIF: 2 REF: 4-3 NAT: Analytic LOC: Supply and demand TOP: Supply | Quantity supplied MSC: Interpretive

50. A decrease in supply shifts the supply curve to the left.ANS: T DIF: 1 REF: 4-3 NAT: Analytic LOC: Supply and demand MSC: Definitional

TOP: Supply curve

51. A reduction in an input price will cause a change in quantity supplied, but not a change in supply.ANS: F DIF: 2 REF: 4-3 NAT: Analytic LOC: Supply and demand TOP: Input prices MSC: Interpretive

52. An increase in the price of ink will shift the supply curve for pens to the left.ANS: T DIF: 2 REF: 4-3 NAT: Analytic LOC: Supply and demand TOP: Input prices MSC: Applicative

53. If there is an improvement in the technology used to produce a good, then the supply curve for that good will

shift to the left.ANS: F DIF: 2 REF: 4-3 NAT: Analytic LOC: Supply and demand TOP: Technology MSC: Interpretive

54. Advances in production technology typically reduce firms’ costs.ANS: T DIF: 2 REF: 4-3 NAT: Analytic LOC: Supply and demand TOP: Technology MSC: Interpretive

55. If a company making frozen orange juice expects the price of its product to be higher next month, it will

supply more to the market this month.ANS: F DIF: 2 REF: 4-3 NAT: Analytic LOC: Supply and demand TOP: Expectations MSC: Applicative

212 ? Chapter 4 /The Market Forces of Supply and Demand 3.

a. Given the table below, graph the demand and supply curves for flashlights. Make certain to

label the equilibrium price and equilibrium quantity. Quantity Demanded Per Month 6,000 8,000 10,000 12,000 14,000 Quantity Supplied Per Month 10,000 8,000 6,000 4,000 2,000 Price $5 $4 $3 $2 $1 b. What is the equilibrium price and the equilibrium quantity?

c. Suppose the price is currently $5. What problem would exist in the market? What would you

expect to happen to price? Show this on your graph.

d. Suppose the price is currently $2. What problem would exist in the market? What would you

expect to happen to price? Show this on your graph.

ANS:

a.

54.5priceSurplus of 4000SPe43.532.521.510.5100020003000400050006000700080009000100001100012000quantityShortage of 8000DQeb. The equilibrium price (Pe) is $4 and the equilibrium quantity (Qe) is 8,000.

c. A surplus of 4,000 flashlights would be the problem in the market, and we would expect the price

to fall.

d. A shortage of 8,000 flashlights would be the problem in the market, and we would expect the price

to rise.

DIF: 2 REF: 4-4 LOC: Supply and demand MSC: Applicative

NAT: Analytic

TOP: Equilibrium | Shortage | Surplus

Chapter 4 /The Market Forces of Supply and Demand ? 213

4.

Fill in the table below, showing whether equilibrium price and equilibrium quantity go up, go down, stay the

same, or change ambiguously.

No Change in Supply An Increase in Supply A Decrease in Supply No Change in Demand An Increase in Demand A Decrease in Demand No Change in Supply P same Q same P up Q up P down Q down An Increase in Supply P down Q up P ambiguous Q up P down Q ambiguous NAT: Analytic

TOP: Demand | Supply

A Decrease in Supply P up Q down P up Q ambiguous P ambiguous Q down ANS: No Change in Demand An Increase in Demand A Decrease in Demand DIF: 2 REF: 4-4 LOC: Supply and demand MSC: Interpretive

214 ? Chapter 4 /The Market Forces of Supply and Demand 5.

Suppose we are analyzing the market for hot chocolate. Graphically illustrate the impact each of the

following would have on demand or supply. Also show how equilibrium price and equilibrium quantity would change.

a. Winter starts and the weather turns sharply colder. b. The price of tea, a substitute for hot chocolate, falls. c. The price of cocoa beans decreases. d. The price of whipped cream falls.

e. A better method of harvesting cocoa beans is introduced.

f. The Surgeon General of the U.S. announces that hot chocolate cures acne.

g. Protesting farmers dump millions of gallons of milk, causing the price of milk to rise.

h. Consumer income falls because of a recession, and hot chocolate is considered a normal good. i. Producers expect the price of hot chocolate to increase next month. j. Currently, the price of hot chocolate is $0.50 per cup above equilibrium.

(a)

priceANS:

price (b)

SSPe'PePePe'DD'quantityD'DquantityQeQe'Qe'Qe

price (c)

price (d)

SS'SPe'PePe'DDquantityD'quantityPeQeQe'QeQe' (e) (f)

Chapter 4 /The Market Forces of Supply and Demand ? 215

pricepriceSS'SPe'PePe'DDquantityD'quantityPeQeQe'QeQe'

price (g)

price (h)

S'SSPePe'PeDD'quantityDquantityPe'Qe'QeQe'Qe

price (i)

price (j)

S'SSPe'PeDPe+$0.50PeSurplusDquantityQe'QeQdQeQsquantity

In (j), a price above equilibrium will affect both quantity demanded and quantity supplied and will cause a surplus in the market. It will not cause either demand or supply to shift.

DIF: 2 REF: 4-4 LOC: Supply and demand MSC: Applicative

NAT: Analytic

TOP: Demand | Supply

216 ? Chapter 4 /The Market Forces of Supply and Demand

Sec00 - The Market Forces of Supply and Demand

MULTIPLE CHOICE1.

The two words most often used by economists are

a. prices and quantities. b. resources and allocation. c. supply and demand. d. efficiency and equity.

DIF: 1 REF: 4-0

LOC: The study of economics and definitions of economics MSC: Definitional

ANS: C

NAT: Analytic TOP: Economists 2.

The forces that make market economies work are a. work and leisure. b. politics and religion. c. supply and demand.

d. taxes and government spending.

ANS: C DIF: 1 REF: 4-0 NAT: Analytic LOC: Markets, market failure, and externalities TOP: Market economies MSC: Definitional

3.

In a market economy, supply and demand determine

a. both the quantity of each good produced and the price at which it is sold. b. the quantity of each good produced, but not the price at which it is sold.

c. the price at which each good is sold, but not the quantity of each good produced. d. neither the quantity of each good produced nor the price at which it is sold.

ANS: A DIF: 1 REF: 4-0 NAT: Analytic LOC: Markets, market failure, and externalities TOP: Market economies MSC: Definitional

4.

In a market economy, supply and demand are important because they

a. play a critical role in the allocation of the economy’s scarce resources. b. determine how much of each good gets produced.

c. can be used to predict the impact on the economy of various events and policies. d. All of the above are correct.

ANS: D DIF: 1 REF: 4-0 NAT: Analytic LOC: Markets, market failure, and externalities TOP: Market economies MSC: Definitional

5.

In a market economy,

a. supply determines demand and demand, in turn, determines prices. b. demand determines supply and supply, in turn, determines prices.

c. the allocation of scarce resources determines prices and prices, in turn, determine supply and

demand.

d. supply and demand determine prices and prices, in turn, allocate the economy’s scarce resources.

ANS: D DIF: 1 REF: 4-0 NAT: Analytic LOC: Markets, market failure, and externalities TOP: Market economies MSC: Definitional

Chapter 4 /The Market Forces of Supply and Demand ? 217

Sec01 - The Market Forces of Supply and Demand - Markets and Competition

MULTIPLE CHOICE1.

A group of buyers and sellers of a particular good or service is called a(n)

a. coalition. b. economy. c. market. d. competition.

DIF: 1 REF: 4-1

LOC: Markets, market failure, and externalities MSC: Definitional

ANS: C

NAT: Analytic TOP: Markets 2.

Which of the following statements is correct?

a. Buyers determine supply and sellers determine demand. b. Buyers determine demand and sellers determine supply. c. Buyers determine both demand and supply. d. Sellers determine both demand and supply.

DIF: 1 REF: 4-1 LOC: Supply and demand

ANS: B

NAT: Analytic MSC: Definitional3.

TOP: Demand | Supply

The demand for a good or service is determined by a. those who buy the good or service. b. the government.

c. those who sell the good or service.

d. both those who buy and those who sell the good or service.

DIF: 1 REF: 4-1 LOC: Supply and demand

ANS: A

NAT: Analytic MSC: Definitional4.

TOP: Demand

The supply of a good or service is determined by a. those who buy the good or service. b. the government.

c. those who sell the good or service.

d. both those who buy and those who sell the good or service.

DIF: 1 REF: 4-1 LOC: Supply and demand

ANS: C

NAT: Analytic MSC: Definitional5.

TOP: Supply

For a market for a good or service to exist, a. there must be a group of buyers and sellers.

b. there must be a specific time and place at which the good or service is traded. c. there must be a high degree of organization present. d. All of the above are correct.

DIF: 1 REF: 4-1

LOC: Markets, market failure, and externalities MSC: Definitional

ANS: A

NAT: Analytic TOP: Markets 6.

Which of the following is an example of a market? a. a gas station b. a garage sale c. a barber shop

d. All of the above are examples of markets.

DIF: 2 REF: 4-1

LOC: Markets, market failure, and externalities MSC: Applicative

ANS: D

NAT: Analytic TOP: Markets

218 ? Chapter 4 /The Market Forces of Supply and Demand 7.

The market for ice cream is

a. a monopolistic market.

b. a highly competitive market. c. a highly organized market. d. both (b) and (c) are correct.

DIF: 1 REF: 4-1

LOC: Markets, market failure, and externalities MSC: Definitional

ANS: B

NAT: Analytic TOP: Markets 8.

Most markets in the economy are

a. markets in which sellers, rather than buyers, control the price of the product. b. markets in which buyers, rather than sellers, control the price of the product. c. perfectly competitive. d. highly competitive.

DIF: 1 REF: 4-1

LOC: Markets, market failure, and externalities MSC: Definitional

ANS: D

NAT: Analytic TOP: Markets 9.

In a competitive market, the price of a product

a. is determined by buyers and the quantity of the product produced is determined by sellers. b. is determined by sellers and the quantity of the product produced is determined by buyers. c. and the quantity of the product produced are both determined by sellers. d. None of the above is correct.

ANS: D DIF: 2 REF: 4-1 NAT: Analytic LOC: Markets, market failure, and externalities TOP: Competitive markets MSC: Interpretive

10. In a competitive market, the quantity of a product produced and the price of the product are determined by

a. buyers. b. sellers.

c. both buyers and sellers. d. None of the above is correct.

ANS: C DIF: 2 REF: 4-1 NAT: Analytic LOC: Markets, market failure, and externalities TOP: Competitive markets MSC: Interpretive

11. In a competitive market, the quantity of a product produced and the price of the product are determined by

a. a single buyer. b. a single seller.

c. one buyer and one seller working together. d. all buyers and all sellers.

ANS: D DIF: 2 REF: 4-1 NAT: Analytic LOC: Markets, market failure, and externalities TOP: Competitive markets MSC: Interpretive

12. A competitive market is a market in which

a. an auctioneer helps set prices and arrange sales. b. there are only a few sellers.

c. the forces of supply and demand do not apply.

d. no individual buyer or seller has any significant impact on the market price.

ANS: D DIF: 1 REF: 4-1 NAT: Analytic LOC: Markets, market failure, and externalities TOP: Competitive markets MSC: Definitional

Chapter 4 /The Market Forces of Supply and Demand ? 219

13. A competitive market is one in which

a. there is only one seller, but there are many buyers.

b. there are many sellers and each seller has the ability to set the price of his product.

c. there are many sellers and they compete with one another in such a way that some sellers are

always being forced out of the market.

d. there are so many buyers and so many sellers that each has a negligible impact on the price of the

product.

ANS: D DIF: 1 REF: 4-1 NAT: Analytic LOC: Markets, market failure, and externalities TOP: Competitive markets MSC: Definitional

14. Assume Tibana buys computers in a competitive market. It follows that

a. Tibana has a limited number of sellers to turn to when she buys a computer. b. Tibana will find herself negotiating with sellers whenever she buys a computer.

c. if Tibana buys a large number of computers, the price of computers will rise noticeably. d. None of the above is correct.

ANS: D DIF: 2 REF: 4-1 NAT: Analytic LOC: Markets, market failure, and externalities TOP: Competitive markets MSC: Applicative

15. In a competitive market, each seller has limited control over the price of his product because

a. other sellers are offering similar products.

b. buyers exert more control over the price than do sellers. c. these markets are highly regulated by the government.

d. sellers usually agree to set a common price that will allow each seller to earn a comfortable profit.

ANS: A DIF: 1 REF: 4-1 NAT: Analytic LOC: Markets, market failure, and externalities TOP: Competitive markets MSC: Definitional

16. For a competitive market, which of the following statements is correct?

a. A seller can always increase her profit by raising the price of her product.

b. If a seller charges more than the going price, buyers will go elsewhere to make their purchases. c. A seller often charges less than the going price to increase sales and profit.

d. A single buyer can influence the price of the product, but only when purchasing from several sellers

in a short period of time.

ANS: B DIF: 1 REF: 4-1 NAT: Analytic LOC: Markets, market failure, and externalities TOP: Competitive markets MSC: Definitional

17. If a seller in a competitive market chooses to charge more than the going price, then

a. the sellers’ profits definitely would increase.

b. the owners of the raw materials used in production would raise the prices for the raw materials. c. other sellers would also raise their prices. d. buyers will make purchases from other sellers.

ANS: D DIF: 1 REF: 4-1 NAT: Analytic LOC: Markets, market failure, and externalities TOP: Competitive markets MSC: Definitional

18. The highest form of competition is called

a. absolute competition. b. cutthroat competition. c. perfect competition. d. market competition.

ANS: C

NAT: Analytic MSC: Definitional

DIF: 1 REF: 4-1 LOC: Perfect competition

TOP: Perfect competition

220 ? Chapter 4 /The Market Forces of Supply and Demand

19. Which of the following is not a characteristic of a perfectly competitive market?

a. Different sellers sell identical products. b. There are many sellers.

c. Sellers must accept the price the market determines.

d. All of the above are characteristics of a perfectly competitive market.

ANS: D

NAT: Analytic MSC: Interpretive

DIF: 2 REF: 4-1 LOC: Perfect competition

TOP: Perfect competition

20. Which of the following is not a characteristic of a perfectly competitive market?

a. Sellers set the price of the product. b. There are many sellers.

c. Buyers must accept the price the market determines.

d. All of the above are characteristics of a perfectly competitive market.

ANS: A

NAT: Analytic MSC: Interpretive

DIF: 2 REF: 4-1 LOC: Perfect competition

TOP: Perfect competition

21. The term price takers refers to buyers and sellers in

a. perfectly competitive markets. b. monopolistic markets.

c. markets that are regulated by the government.

d. markets in which buyers cannot buy all they want and/or sellers cannot sell all they want.

ANS: A

NAT: Analytic MSC: Interpretive

DIF: 2 REF: 4-1 LOC: Perfect competition

TOP: Perfect competition

22. Buyers and sellers who have no influence on market price are referred to as

a. market pawns. b. monopolists. c. price takers. d. price makers.

ANS: C

NAT: Analytic MSC: Definitional

DIF: 1 REF: 4-1 LOC: Perfect competition

TOP: Perfect competition

23. All market participants are price takers that have no influence over prices in markets that feature

a. only a few buyers and a few sellers. b. numerous sellers but only a few buyers. c. numerous buyers but only a few sellers. d. numerous buyers and numerous sellers.

ANS: D

NAT: Analytic MSC: Interpretive

DIF: 2 REF: 4-1 LOC: Perfect competition

TOP: Perfect competition

24. If buyers and sellers in a certain market are price takers, then individually

a. they have no influence on market price.

b. they have some influence on market price, but that influence is limited. c. buyers will be able to find prices lower than those determined in the market. d. sellers will find it difficult to sell all they want to sell at the market price.

ANS: A

NAT: Analytic MSC: Interpretive

DIF: 2 REF: 4-1 LOC: Perfect competition

TOP: Perfect competition

Chapter 4 /The Market Forces of Supply and Demand ? 221

25. In a perfectly competitive market, at the market price,

a. buyers cannot buy all they want and sellers cannot sell all they want. b. buyers cannot buy all they want, but sellers can sell all they want. c. buyers can buy all they want, but sellers cannot sell all they want. d. buyers can buy all they want and sellers can sell all they want.

ANS: D

NAT: Analytic MSC: Definitional

DIF: 1 REF: 4-1 LOC: Perfect competition

TOP: Perfect competition

26. An example of a perfectly competitive market would be the

a. cable TV market. b. soybean market.

c. breakfast cereal market. d. shampoo market.

ANS: B

NAT: Analytic MSC: Applicative

DIF: 2 REF: 4-1 LOC: Perfect competition

TOP: Perfect competition

27. Assume the market for tennis balls is perfectly competitive. When one tennis ball producer exits the market,

a. the price of tennis balls increases. b. the price of tennis balls decreases.

c. the price of tennis balls does not change. d. there is no longer a market for tennis balls.

ANS: C

NAT: Analytic MSC: Applicative

DIF: 2 REF: 4-1 LOC: Perfect competition

TOP: Perfect competition

28. Assume the market for pork is perfectly competitive. When one pork buyer exits the market,

a. the price of pork increases. b. the price of pork decreases.

c. the price of pork does not change. d. there is no longer a market for pork.

ANS: C

NAT: Analytic MSC: Applicative

DIF: 2 REF: 4-1 LOC: Perfect competition

TOP: Perfect competition

29. A monopoly is a market

a. with one seller, and that seller is a price taker. b. with one seller, and that seller sets the price. c. with one buyer, and that buyer is a price taker. d. with one buyer, and that buyer sets the price.

ANS: B

NAT: Analytic DIF: 1

LOC: Monopoly REF: 4-1

TOP: Monopoly

MSC: Definitional

30. Which of the following would most likely serve as an example of a monopoly?

a. a bakery in a large city b. a bank in a large city

c. a local cable television company d. a small group of corn farmers

ANS: C

NAT: Analytic DIF: 2

LOC: Monopoly REF: 4-1

TOP: Monopoly

MSC: Applicative

222 ? Chapter 4 /The Market Forces of Supply and Demand

31. Which of the following is not a reason perfect competition is a useful simplification, despite the diversity of

market types we find in the world?

a. Perfectly competitive markets are the easiest to analyze because everyone participating in the

market takes the price as given by market conditions. b. Some degree of competition is present in most markets.

c. There are many buyers and many sellers in all types of markets.

d. Many of the lessons that we learn by studying supply and demand under perfect competition apply

in more complicated markets as well.

ANS: C

NAT: Analytic MSC: Definitional

DIF: 1 REF: 4-1 LOC: Perfect competition

TOP: Perfect competition

Sec02 - The Market Forces of Supply and Demand - Demand

MULTIPLE CHOICE1.

The quantity demanded of a good is the amount that buyers

a. are willing to purchase.

b. are willing and able to purchase.

c. are willing and able and need to purchase. d. are able to purchase.

DIF: 1 REF: 4-2 LOC: Supply and demand

ANS: B

NAT: Analytic MSC: Definitional2.

TOP: Quantity demanded

“Other things equal, when the price of a good rises, the quantity demanded of the good falls, and when the price falls, the quantity demanded rises.” This relationship between price and quantity demanded a. applies to most goods in the economy.

b. is represented by a downward-sloping demand curve. c. is referred to as the law of demand. d. All of the above are correct.

DIF: 1 REF: 4-2 LOC: Supply and demand

ANS: D

NAT: Analytic MSC: Definitional3.

TOP: Law of demand

The law of demand states that, other things equal,

a. when the price of a good falls, the demand for the good rises.

b. when the price of a good rises, the quantity demanded of the good rises. c. when the price of a good rises, the demand for the good falls.

d. when the price of a good falls, the quantity demanded of the good rises.

DIF: 1 REF: 4-2 LOC: Supply and demand

ANS: D

NAT: Analytic MSC: Definitional4.

TOP: Law of demand

The law of demand states that, other things equal,

a. an increase in price causes quantity demanded to increase. b. an increase in price causes quantity demanded to decrease. c. an increase in quantity demanded causes price to increase. d. an increase in quantity demanded causes price to decrease.

DIF: 2 REF: 4-2 LOC: Supply and demand

ANS: B

NAT: Analytic MSC: Interpretive

TOP: Law of demand

Chapter 4 /The Market Forces of Supply and Demand ? 223

5.

Which of these statements best represents the law of demand?

a. When buyers’ tastes for a good increase, they purchase more of the good. b. When income levels increase, buyers purchase more of most goods. c. When the price of a good decreases, buyers purchase more of the good. d. When buyers’ demands for a good increase, the price of the good increases.

DIF: 2 REF: 4-2 LOC: Supply and demand

ANS: C

NAT: Analytic MSC: Interpretive6.

TOP: Law of demand

A downward-sloping demand curve illustrates a. that demand decreases over time. b. that prices fall over time.

c. the relationship between income and quantity demanded. d. the law of demand.

DIF: 2 REF: 4-2 LOC: Supply and demand

ANS: D

NAT: Analytic MSC: Interpretive7.

TOP: Law of demand

Benny rents 5 movies per month when the price is $3.00 per rental and 7 movies per month when the price is $2.50 per rental. Benny’s demand demonstrates the law of a. price. b. supply. c. demand. d. income.

DIF: 2 REF: 4-2 LOC: Supply and demand

ANS: C

NAT: Analytic MSC: Applicative8.

TOP: Law of demand

Which of the following demonstrates the law of demand?

a. After Jon got a raise at work, he bought more pretzels at $1.50 per pretzel than he did before his

raise.

b. Melissa buys fewer muffins at $0.75 per muffin than at $1 per muffin, other things equal. c. Dave buys more donuts at $0.25 per donut than at $0.50 per donut, other things equal.

d. Kendra buys fewer Snickers at $0.60 per Snickers since the price of Milky Ways fell to $0.50 per

Milky Way.

DIF: 2 REF: 4-2 LOC: Supply and demand

ANS: C

NAT: Analytic MSC: Applicative9.

TOP: Law of demand

The following table contains a demand schedule for a good.

Price $10 $20 Quantity Demanded 100 ?

If the law of demand applies to this good, then “?” could be

a. 0. b. 100. c. 200. d. 400.

ANS: A

NAT: Analytic MSC: Applicative

DIF: 2 REF: 4-2 LOC: Supply and demand

TOP: Law of demand

224 ? Chapter 4 /The Market Forces of Supply and Demand

10. A table that shows the relationship between the price of a good and the quantity demanded of that good is

called a

a. price-quantity schedule. b. buyer schedule. c. demand schedule. d. demand curve.

ANS: C

NAT: Analytic MSC: Definitional

DIF: 1 REF: 4-2 LOC: Supply and demand

TOP: Demand schedule

11. A demand schedule is a table that shows the relationship between

a. quantity demanded and quantity supplied. b. income and quantity demanded. c. price and quantity demanded. d. price and income.

ANS: C

NAT: Analytic MSC: Definitional

DIF: 1 REF: 4-2 LOC: Supply and demand

TOP: Demand schedule

12. Which of the following is not held constant in a demand schedule?

a. income b. tastes c. price

d. expectations

ANS: C

NAT: Analytic MSC: Interpretive

DIF: 2 REF: 4-2 LOC: Supply and demand

TOP: Demand schedule

13. The demand curve for a good is

a. a line that relates price and quantity demanded. b. a line that relates income and quantity demanded.

c. a line that relates quantity demanded and quantity supplied. d. a line that relates price and income.

ANS: A

NAT: Analytic MSC: Definitional

DIF: 1 REF: 4-2 LOC: Supply and demand

TOP: Demand curve

14. The line that relates the price of a good and the quantity demanded of that good is called the

a. demand schedule, and it usually slopes upward. b. demand schedule, and it usually slopes downward. c. demand curve, and it usually slopes upward. d. demand curve, and it usually slopes downward.

ANS: D

NAT: Analytic MSC: Definitional

DIF: 1 REF: 4-2 LOC: Supply and demand

TOP: Demand curve

15. When drawing a demand curve,

a. demand is on the vertical axis and price is on the horizontal axis.

b. quantity demanded is on the vertical axis and price is on the horizontal axis. c. price is on the vertical axis and demand is on the horizontal axis.

d. price is on the vertical axis and quantity demanded is on the horizontal axis.

ANS: D

NAT: Analytic MSC: Definitional

DIF: 1 REF: 4-2 LOC: Supply and demand

TOP: Demand curve

Chapter 4 /The Market Forces of Supply and Demand ? 225

16. The sum of all the individual demand curves for a product is called

a. total demand. b. consumer demand. c. aggregate demand. d. market demand.

ANS: D

NAT: Analytic MSC: Definitional

DIF: 1 REF: 4-2 LOC: Supply and demand

TOP: Market demand

17. The market demand curve

a. is found by vertically adding the individual demand curves. b. slopes upward.

c. represents the sum of the prices that all the buyers are willing to pay for a given quantity of the

good.

d. represents the sum of the quantities demanded by all the buyers at each price of the good.

ANS: D

NAT: Analytic MSC: Interpretive

DIF: 2 REF: 4-2 LOC: Supply and demand

TOP: Market demand

18. The market demand curve

a. is the sum of all individual demand curves.

b. is the demand curve for every product in an industry.

c. shows the average quantity demanded by individual demanders at each price. d. is always flatter than an individual demand curve.

ANS: A

NAT: Analytic MSC: Definitional

DIF: 1 REF: 4-2 LOC: Supply and demand

TOP: Market demand

19. To obtain the market demand curve for a product, sum the individual demand curves

a. vertically. b. diagonally. c. horizontally.

d. and then average them.

ANS: C

NAT: Analytic MSC: Interpretive

DIF: 2 REF: 4-2 LOC: Supply and demand

TOP: Market demand

20. A market demand curve shows

a. the relationship between price and the number of buyers in a market. b. how quantity demanded changes when the number of buyers changes.

c. the sum of all prices that individual buyers are willing and able to pay for each possible quantity of

the good.

d. how much of a good all buyers are willing and able to buy at each possible price.

ANS: D

NAT: Analytic MSC: Interpretive

DIF: 2 REF: 4-2 LOC: Supply and demand

TOP: Market demand

21. A market demand curve shows how the total quantity demanded of a good varies as

a. income varies. b. price varies.

c. the number of buyers varies. d. supply varies.

ANS: B

NAT: Analytic MSC: Interpretive

DIF: 2 REF: 4-2 LOC: Supply and demand

TOP: Market demand

226 ? Chapter 4 /The Market Forces of Supply and Demand

22. Suppose Spencer and Kate are the only two demanders of lemonade. Each month, Spencer buys six glasses

of lemonade when the price is $1.00 per glass, and he buys four glasses when the price is $1.50 per glass. Each month, Kate buys four glasses of lemonade when the price is $1.00 per glass, and she buys two glasses when the price is $1.50 per glass. Which of the following points is on the market demand curve? a. (quantity demanded = 2, price = $1.50) b. (quantity demanded = 4, price = $2.50) c. (quantity demanded = 10, price = $1.00) d. (quantity demanded = 16, price = $2.50)

ANS: C

NAT: Analytic MSC: ApplicativeTable 4-1

DIF: 2 REF: 4-2 LOC: Supply and demand

TOP: Market demand

Price $0.00 $0.50 $1.00 $1.50 $2.00 $2.50 Aaron’s Quantity Demanded 20 18 14 12 6 0 Angela’s Quantity Demanded 16 12 10 8 6 4 Austin’s Quantity Demanded 4 6 2 0 0 0 Alyssa’s Quantity Demanded 8 6 5 4 2 0 23. Refer to Table 4-1. Whose demand does not obey the law of demand?

a. Aaron’s b. Angela’s c. Austin’s d. Alyssa’s

ANS: C

NAT: Analytic MSC: Applicative

DIF: 2 REF: 4-2 LOC: Supply and demand

TOP: Law of demand

24. Refer to Table 4-1. If these are the only four buyers in the market, then the market quantity demanded at a

price of $1 is a. 4 units. b. 7.75 units. c. 14 units. d. 31 units.

ANS: D

NAT: Analytic MSC: Applicative

DIF: 2 REF: 4-2 LOC: Supply and demand

TOP: Market demand

25. Refer to Table 4-1. If these are the only four buyers in the market, then the market quantity demanded at a

price of $2 is a. 0 units. b. 3.5 units. c. 6 units. d. 14 units.

ANS: D

NAT: Analytic MSC: Applicative

DIF: 2 REF: 4-2 LOC: Supply and demand

TOP: Market demand

Chapter 4 /The Market Forces of Supply and Demand ? 227

26. Refer to Table 4-1. If these are the only four buyers in the market, then when the price increases from $1.00

to $1.50, the market quantity demanded a. decreases by 1.75 units. b. increases by 2 units. c. decreases by 7 units. d. decreases by 24 units.

ANS: C

NAT: Analytic MSC: Applicative

DIF: 2 REF: 4-2 LOC: Supply and demand

TOP: Market demand

27. Refer to Table 4-1. For whom is the good a normal good?

a. Aaron b. Austin

c. all of the four demanders

d. This cannot be determined from the table.

ANS: D

NAT: Analytic MSC: ApplicativeTable 4-2

DIF: 2 REF: 4-2 LOC: Supply and demand

TOP: Normal goods

Price $12 $10 $8 $6 $4 $2 Audrey’s Quantity Demanded 2 4 6 8 10 12 Bob’s Quantity Demanded 1 4 7 8 9 10 Chuck’s Quantity Demanded 3 4 5 4 3 2 Dottie’s Quantity Demanded 4 5 6 7 8 9 28. Refer to Table 4-2. Whose demand does not obey the law of demand?

a. Audrey’s b. Bob’s c. Chuck’s d. Dottie’s

ANS: C

NAT: Analytic MSC: Applicative

DIF: 2 REF: 4-2 LOC: Supply and demand

TOP: Law of demand

29. Refer to Table 4-2. If these are the only four buyers in the market, then the market quantity demanded at a

price of $8 is a. 4 units. b. 6 units. c. 24 units. d. 32 units.

ANS: C

NAT: Analytic MSC: Applicative

DIF: 2 REF: 4-2 LOC: Supply and demand

TOP: Market demand

30. Refer to Table 4-2. If these are the only four buyers in the market, then when the price decreases from $6 to

$4, the market quantity demanded a. increases by 0.75 units. b. increases by 3 units. c. increases by 8 units. d. decreases by 27 units.

ANS: B

NAT: Analytic MSC: Applicative

DIF: 2 REF: 4-2 LOC: Supply and demand

TOP: Market demand

228 ? Chapter 4 /The Market Forces of Supply and Demand Figure 4-1

2018161412108642D246810121416quantity5101520 priceConsumer 1

30272421181512963 Consumer 2 priceD25303540quantity

31. Refer to Figure 4-1. If these are the only two consumers in the market, then the market quantity demanded

at a price of $6 is a. 12 units. b. 14 units. c. 19 units. d. 21 units.

ANS: C

NAT: Analytic MSC: Applicative

DIF: 2 REF: 4-2 LOC: Supply and demand

TOP: Market demand

32. When we move along a given demand curve,

a. only price is held constant.

b. income and price are held constant.

c. all nonprice determinants of demand are held constant. d. all determinants of quantity demanded are held constant.

ANS: C

NAT: Analytic MSC: Interpretive

DIF: 2 REF: 4-2 LOC: Supply and demand

TOP: Demand curve

33. Once the demand curve for a product or service is drawn, it

a. remains stable over time.

b. can shift either rightward or leftward.

c. is possible to move along the curve, but the curve will not shift. d. tends to become steeper over time.

ANS: B

NAT: Analytic MSC: Interpretive

DIF: 2 REF: 4-2 LOC: Supply and demand

TOP: Demand curve

34. If something happens to alter the quantity demanded at any given price, then

a. the demand curve becomes steeper. b. the demand curve becomes flatter. c. the demand curve shifts.

d. we move along the demand curve.

ANS: C

NAT: Analytic MSC: Definitional

DIF: 1 REF: 4-2 LOC: Supply and demand

TOP: Demand curve

Chapter 4 /The Market Forces of Supply and Demand ? 229

35. When quantity demanded decreases at every possible price, we know that the demand curve has

a. shifted to the left. b. shifted to the right.

c. not shifted; rather, we have moved along the demand curve to a new point on the same curve. d. not shifted; rather, the demand curve has become flatter.

ANS: A

NAT: Analytic MSC: Interpretive

DIF: 2 REF: 4-2 LOC: Supply and demand

TOP: Demand curve

36. When quantity demanded increases at every possible price, we know that the demand curve has

a. shifted to the left. b. shifted to the right.

c. not shifted; rather, we have moved along the demand curve to a new point on the same curve. d. not shifted; rather, the demand curve has become steeper.

ANS: B

NAT: Analytic MSC: Interpretive

DIF: 2 REF: 4-2 LOC: Supply and demand

TOP: Demand curve

37. An increase in demand is represented by

a. a movement downward and to the right along a demand curve. b. a movement upward and to the left along a demand curve. c. a rightward shift of a demand curve. d. a leftward shift of a demand curve.

ANS: C

NAT: Analytic MSC: Interpretive

DIF: 2 REF: 4-2 LOC: Supply and demand

TOP: Demand curve

38. A decrease in demand is represented by

a. a movement downward and to the right along a demand curve. b. a movement upward and to the left along a demand curve. c. a rightward shift of a demand curve. d. a leftward shift of a demand curve.

ANS: D

NAT: Analytic MSC: Interpretive

DIF: 2 REF: 4-2 LOC: Supply and demand

TOP: Demand curve

39. An increase in quantity demanded

a. results in a movement downward and to the right along a fixed demand curve. b. results in a movement upward and to the left along a fixed demand curve. c. shifts the demand curve to the left. d. shifts the demand curve to the right.

ANS: A

NAT: Analytic MSC: Interpretive

DIF: 2 REF: 4-2 LOC: Supply and demand

TOP: Demand curve

40. A decrease in quantity demanded

a. results in a movement downward and to the right along a fixed demand curve. b. results in a movement upward and to the left along a fixed demand curve. c. shifts the demand curve to the left. d. shifts the demand curve to the right.

ANS: B

NAT: Analytic MSC: Interpretive

DIF: 2 REF: 4-2 LOC: Supply and demand

TOP: Demand curve

230 ? Chapter 4 /The Market Forces of Supply and Demand 41. A leftward shift of a demand curve is called

a. an increase in demand. b. a decrease in demand.

c. a decrease in quantity demanded. d. an increase in quantity demanded.

ANS: B

NAT: Analytic DIF: 2 REF: 4-2 LOC: Supply and demand

TOP: Demand curve

MSC: Interpretive

42. A rightward shift of a demand curve is called

a. an increase in demand. b.a decrease in demand.

c. a decrease in quantity demanded. d.an increase in quantity demanded.

ANS: A

DIF: 2 REF: 4-2 NAT: Analytic LOC: Supply and demand

TOP: MSC: Interpretive

43. A movement upward and to the left along a demand curve is called

a. an increase in demand. b. a decrease in demand.

c. a decrease in quantity demanded. d. an increase in quantity demanded.

ANS: C

DIF: 2 REF: 4-2 NAT: Analytic LOC: Supply and demand

TOP: MSC: Interpretive

44. A movement downward and to the right along a demand curve is called

a. an increase in demand. b. a decrease in demand.

c. a decrease in quantity demanded. d.an increase in quantity demanded.

ANS: D

DIF: 2 REF: 4-2 NAT: Analytic LOC: Supply and demand

TOP: MSC: Interpretive

45. An increase in the price of a good will

a. increase demand. b.decrease demand.

c. increase quantity demanded. d. decrease quantity demanded.

ANS: D

DIF: 2 REF: 4-2 NAT: Analytic LOC: Supply and demand

TOP: MSC: Interpretive

46. A decrease in the price of a good will

a. increase demand. b. decrease demand.

c.increase quantity demanded. d. decrease quantity demanded.

ANS: C

DIF: 2 REF: 4-2 NAT: Analytic LOC: Supply and demand

TOP: MSC: Interpretive

Demand curve

Demand curve

Demand curve

Demand curve

Demand curve

Chapter 4 /The Market Forces of Supply and Demand ? 231

47. When the price of a good or service changes,

a. the supply curve shifts in the opposite direction. b. the demand curve shifts in the opposite direction. c. the demand curve shifts in the same direction. d. there is a movement along a given demand curve.

ANS: D

NAT: Analytic MSC: Interpretive

DIF: 2 REF: 4-2 LOC: Supply and demand

TOP: Demand curve

48. The demand curve for hot dogs

a. shifts when the price of hot dogs changes because the price of hot dogs is measured on the vertical

axis of the graph.

b. shifts when the price of hot dogs changes because the quantity demanded of hot dogs is measured

on the horizontal axis of the graph.

c. does not shift when the price of hot dogs changes because the price of hot dogs is measured on the

vertical axis of the graph.

d. does not shift when the price of hot dogs changes because the quantity demanded of hot dogs is

measured on the horizontal axis of the graph.

ANS: C

NAT: Analytic MSC: Applicative

DIF: 2 REF: 4-2 LOC: Supply and demand

TOP: Demand curve

49. Which of the following changes would not shift the demand curve for a good or service?

a. a change in income

b. a change in the price of the good or service

c. a change in expectations about the future price of the good or service d. a change in the price of a related good or service

ANS: B

NAT: Analytic MSC: Interpretive

DIF: 2 REF: 4-2 LOC: Supply and demand

TOP: Demand curve

50. Which of the following would not shift the demand curve for mp3 players?

a. a decrease in the price of mp3 players

b. a fad that makes mp3 players more popular among 12-25 year olds c. an increase in the price of CDs, a complement for mp3 players

d. a decrease in the price of satellite radio, a substitute for mp3 players

ANS: A

NAT: Analytic MSC: Applicative

DIF: 2 REF: 4-2 LOC: Supply and demand

TOP: Demand curve

51. Which of the following events would cause a movement upward and to the left along the demand curve for

olives?

a. The number of buyers of olives decreases.

b. Consumer income decreases, and olives are a normal good.

c. The price of pickles decreases, and pickles are a substitute for olives. d. The price of olives rises.

ANS: D

NAT: Analytic MSC: Applicative

DIF: 2 REF: 4-2 LOC: Supply and demand

TOP: Demand curve

52. A movement along the demand curve might be caused by a change in

a. income.

b. the prices of substitutes or complements. c. expectations about future prices.

d. the price of the good or service that is being demanded.

ANS: D

NAT: Analytic MSC: Interpretive

DIF: 2 REF: 4-2 LOC: Supply and demand

TOP: Demand curve

232 ? Chapter 4 /The Market Forces of Supply and Demand

53. Holding the nonprice determinants of demand constant, a change in price would

a. result in either a decrease in demand or an increase in demand. b. result in a movement along a stationary demand curve. c. result in a shift of supply.

d. have no effect on the quantity demanded.

ANS: B

NAT: Analytic MSC: Interpretive

DIF: 2 REF: 4-2 LOC: Supply and demand

TOP: Demand curve

54. A decrease in the price of a good would

a. increase the supply of the good.

b. increase the quantity demanded of the good.

c. give producers an incentive to produce more to keep profits from falling. d. shift the supply curve for the good to the left.

ANS: B

NAT: Analytic MSC: Interpretive

DIF: 2 REF: 4-2 LOC: Supply and demand

TOP: Demand curve

55. The demand curve for textbooks shifts

a. when a determinant of the demand for textbooks other than income changes.

b. when a determinant of the demand for textbooks other than the price of textbooks changes. c. when any determinant of the demand for textbooks changes. d. only when the number of textbook-buyers changes.

ANS: B

NAT: Analytic MSC: Applicative

DIF: 2 REF: 4-2 LOC: Supply and demand

TOP: Determinants of demand

56. Which of the following is not a determinant of the demand for a particular good?

a. the prices of related goods b. income c. tastes

d. the prices of the inputs used to produce the good

ANS: D

NAT: Analytic MSC: Interpretive

DIF: 2 REF: 4-2 LOC: Supply and demand

TOP: Determinants of demand

57. Each of the following is a determinant of demand except

a. tastes.

b. technology. c. expectations.

d. the prices of related goods.

ANS: B

NAT: Analytic MSC: Interpretive

DIF: 2 REF: 4-2 LOC: Supply and demand

TOP: Determinants of demand

58. Which of the following is not a determinant of demand?

a. the price of a resource that is used to produce the good b. the price of a complementary good c. the price of the good next month d. the price of a substitute good

ANS: A

NAT: Analytic MSC: Interpretive

DIF: 2 REF: 4-2 LOC: Supply and demand

TOP: Determinants of demand

Chapter 4 /The Market Forces of Supply and Demand ? 233

59. If the demand for a good falls when income falls, then the good is called

a. a normal good. b. a regular good. c. a luxury good. d. an inferior good.

ANS: A

NAT: Analytic MSC: Definitional

DIF: 1 REF: 4-2 LOC: Supply and demand

TOP: Normal goods

60. If a good is normal, then an increase in income will result in

a. an increase in the demand for the good. b. a decrease in the demand for the good.

c. a movement down and to the right along the demand curve for the good. d. a movement up and to the left along the demand curve for the good.

ANS: A

NAT: Analytic MSC: Interpretive

DIF: 2 REF: 4-2 LOC: Supply and demand

TOP: Normal goods

61. If Francis experiences a decrease in his income, then we would expect Francis’s demand for

a. each good he purchases to remain unchanged. b. normal goods to decrease. c. luxury goods to increase. d. inferior goods to decrease.

ANS: B

NAT: Analytic MSC: Applicative

DIF: 2 REF: 4-2 LOC: Supply and demand

TOP: Normal goods

62. You lose your job and, as a result, you buy fewer romance novels. This shows that you consider romance

novels to be a(n) a. luxury good. b. inferior good. c. normal good.

d. complementary good.

ANS: C

NAT: Analytic MSC: Applicative

DIF: 2 REF: 4-2 LOC: Supply and demand

TOP: Normal goods

63. Pizza is a normal good if

a. the demand for pizza rises when income rises.

b. the demand for pizza rises when the price of pizza falls. c. the demand curve for pizza slopes downward.

d. the demand curve for pizza shifts to the right when the price of burritos rises, assuming pizza and

burritos are substitutes.

ANS: A

NAT: Analytic MSC: Applicative

DIF: 2 REF: 4-2 LOC: Supply and demand

TOP: Normal goods

64. Suppose that when income rises, the demand curve for computers shifts to the right. In this case, we know

computers are a. inferior goods. b. normal goods.

c. perfectly competitive goods. d. durable goods.

ANS: B

NAT: Analytic MSC: Applicative

DIF: 2 REF: 4-2 LOC: Supply and demand

TOP: Normal goods

234 ? Chapter 4 /The Market Forces of Supply and Demand

65. Which of the following would shift the demand curve for gasoline to the right?

a. a decrease in the price of gasoline

b. an increase in consumer income, assuming gasoline is a normal good c. an increase in the price of cars, a complement for gasoline d. a decrease in the expected future price of gasoline

ANS: B

NAT: Analytic MSC: Applicative

DIF: 2 REF: 4-2 LOC: Supply and demand

TOP: Normal goods

66. If a decrease in income increases the demand for a good, then the good is

a. a substitute good.

b. a complementary good. c. a normal good. d. an inferior good.

ANS: D

NAT: Analytic MSC: Definitional

DIF: 1 REF: 4-2 LOC: Supply and demand

TOP: Inferior goods

67. If a good is inferior, then an increase in income will result in

a. an increase in the demand for the good. b. a decrease in the demand for the good.

c. a movement down and to the right along the demand curve for the good. d. a movement up and to the left along the demand curve for the good.

ANS: B

NAT: Analytic MSC: Interpretive

DIF: 2 REF: 4-2 LOC: Supply and demand

TOP: Inferior goods

68. Currently you purchase 6 packages of hot dogs a month. You will graduate from college in December, and

you will start a new job in January. You have no plans to purchase hot dogs in January. For you, hot dogs are

a. a substitute good. b. a normal good. c. an inferior good.

d. a complementary good.

ANS: C

NAT: Analytic MSC: Applicative

DIF: 2 REF: 4-2 LOC: Supply and demand

TOP: Inferior goods

69. Soup is an inferior good if

a. the demand for soup falls when the price of a substitute for soup rises. b. the demand for soup rises when the price of soup falls. c. the demand curve for soup slopes upward. d. the demand for soup falls when income rises.

ANS: D

NAT: Analytic MSC: Applicative

DIF: 2 REF: 4-2 LOC: Supply and demand

TOP: Inferior goods

70. Suppose that Carolyn receives a pay increase. We would expect

a. to observe Carolyn moving down and to the right along her given demand curve. b. Carolyn's demand for inferior goods to decrease.

c. Carolyn's demand for each of two goods that are complements to increase. d. Carolyn's demand for normal goods to decrease.

ANS: B

NAT: Analytic MSC: Applicative

DIF: 2 REF: 4-2 LOC: Supply and demand

TOP: Inferior goods

Chapter 4 /The Market Forces of Supply and Demand ? 235

71. Two goods are substitutes when a decrease in the price of one good

a. decreases the demand for the other good.

b. decreases the quantity demanded of the other good. c. increases the demand for the other good.

d. increases the quantity demanded of the other good.

ANS: A

NAT: Analytic MSC: Definitional

DIF: 1 REF: 4-2 LOC: Supply and demand

TOP: Substitutes

72. Suppose that a decrease in the price of good X results in fewer units of good Y being sold. This implies that

X and Y are

a. complementary goods. b. normal goods. c. inferior goods. d. substitute goods.

ANS: D

NAT: Analytic MSC: Interpretive

DIF: 2 REF: 4-2 LOC: Supply and demand

TOP: Substitutes

73. Good X and good Y are substitutes. If the price of good Y increases, then the

a. demand for good X will decrease.

b. quantity demanded of good X will decrease. c. demand for good X will increase.

d. quantity demanded of good X will increase.

ANS: C

NAT: Analytic MSC: Interpretive

DIF: 2 REF: 4-2 LOC: Supply and demand

TOP: Substitutes

74. A likely example of substitute goods for most people would be

a. peanut butter and jelly.

b. tennis balls and tennis rackets.

c. televisions and subscriptions to cable television services. d. pencils and pens.

ANS: D

NAT: Analytic MSC: Applicative

DIF: 2 REF: 4-2 LOC: Supply and demand

TOP: Substitutes

75. A higher price for bagels would result in a(n)

a. increase in the demand for bagels. b. decrease in the demand for bagels. c. increase in the demand for muffins. d. decrease in the demand for muffins.

ANS: C

NAT: Analytic MSC: Applicative

DIF: 2 REF: 4-2 LOC: Supply and demand

TOP: Substitutes

76. You wear either shorts or sweatpants every day. You notice that sweatpants have gone on sale, so your

demand for

a. sweatpants will increase. b. sweatpants will decrease. c. shorts will increase. d. shorts will decrease.

ANS: D

NAT: Analytic MSC: Applicative

DIF: 2 REF: 4-2 LOC: Supply and demand

TOP: Substitutes

236 ? Chapter 4 /The Market Forces of Supply and Demand

77. Two goods are complements when a decrease in the price of one good

a. decreases the quantity demanded of the other good. b. decreases the demand for the other good.

c. increases the quantity demanded of the other good. d. increases the demand for the other good.

ANS: D

NAT: Analytic MSC: Definitional

DIF: 1 REF: 4-2 LOC: Supply and demand

TOP: Complements

78. If goods A and B are complements, then an increase in the price of good A will result in

a. more of good A being sold. b. more of good B being sold. c. less of good B being sold.

d. no difference in the quantity sold of either good.

ANS: C

NAT: Analytic MSC: Interpretive

DIF: 2 REF: 4-2 LOC: Supply and demand

TOP: Complements

79. A likely example of complementary goods for most people would be

a. butter and margarine.

b. lawnmowers and automobiles. c. chips and salsa. d. cola and lemonade.

ANS: C

NAT: Analytic MSC: Applicative

DIF: 2 REF: 4-2 LOC: Supply and demand

TOP: Complements

80. A higher price for batteries would result in a(n)

a. increase in the demand for flashlights. b. decrease in the demand for flashlights. c. increase in the demand for batteries. d. decrease in the demand for batteries.

ANS: B

NAT: Analytic MSC: Applicative

DIF: 2 REF: 4-2 LOC: Supply and demand

TOP: Complements

81. Suppose you like to make, from scratch, pies filled with banana cream and vanilla pudding. You notice that

the price of bananas has increased. How would this price increase affect your demand for vanilla pudding? a. It would decrease. b. It would increase. c. It would be unaffected.

d. There is insufficient information given to answer the question.

ANS: A

NAT: Analytic MSC: Applicative

DIF: 2 REF: 4-2 LOC: Supply and demand

TOP: Complements

82. Holding all other things constant, a higher price for ski lift tickets would

a. increase the number of skiers. b. increase the price of skis.

c. decrease the number of skis sold.

d. decrease the demand for other winter recreational activities.

ANS: C

NAT: Analytic MSC: Applicative

DIF: 2 REF: 4-2 LOC: Supply and demand

TOP: Complements

Chapter 4 /The Market Forces of Supply and Demand ? 237

83. When quantity demanded has increased at every price, it might be because

a. the number of buyers in the market has decreased. b. income has increased and the good is an inferior good.

c. the costs incurred by sellers producing the good have decreased. d. the price of a complementary good has decreased.

ANS: D

NAT: Analytic MSC: Interpretive

DIF: 2 REF: 4-2 LOC: Supply and demand

TOP: Complements

84. Which of the following might cause the demand curve for an inferior good to shift to the left?

a. a decrease in income

b. an increase in the price of a substitute c. an increase in the price of a complement d. None of the above is correct.

ANS: C

NAT: Analytic MSC: Analytical

DIF: 3 REF: 4-2 LOC: Supply and demand

TOP: Complements

85. When it comes to people's tastes, economists generally believe that

a. tastes are based on forces that are well within the realm of economics.

b. tastes are based on historical and psychological forces that are beyond the realm of economics. c. tastes can only be studied through well-constructed, real-life models.

d. since tastes do not directly affect demand, there is little need to explain people's tastes.

ANS: B

NAT: Analytic MSC: Definitional

DIF: 1 REF: 4-2 LOC: Supply and demand

TOP: Tastes

86. Economists normally

a. do not try to explain people's tastes, but they do try to explain what happens when tastes change. b. believe that they must be able to explain people's tastes in order to explain what happens when

tastes change.

c. do not believe that people's tastes determine demand and therefore they ignore the subject of tastes. d. incorporate tastes into economic models only to the extent that tastes determine whether pairs of

goods are substitutes or complements.

ANS: A

NAT: Analytic MSC: Interpretive

DIF: 2 REF: 4-2 LOC: Supply and demand

TOP: Tastes

87. Suppose the American Medical Association announces that men who shave their heads are less likely to die of

heart failure. We could expect the current demand for a. hair gel to increase. b. razors to increase. c. combs to increase. d. shampoo to increase.

ANS: B

NAT: Analytic MSC: Applicative

DIF: 2 REF: 4-2 LOC: Supply and demand

TOP: Tastes

88. Suppose scientists provide evidence that chocolate pudding increases the bad cholesterol levels of those who

eat it. We would expect to see

a. no change in the demand for chocolate pudding. b. a decrease in the demand for chocolate pudding. c. an increase in the demand for chocolate pudding. d. a decrease in the supply of chocolate pudding.

ANS: B

NAT: Analytic MSC: Applicative

DIF: 2 REF: 4-2 LOC: Supply and demand

TOP: Tastes

238 ? Chapter 4 /The Market Forces of Supply and Demand

89. If buyers today become more willing and able than before to purchase larger quantities of Vanilla Coke at

each price of Vanilla Coke, then

a. we will observe a movement downward and to the right along the demand curve for Vanilla Coke. b. we will observe a movement upward and to the left along the demand curve for Vanilla Coke. c. the demand curve for Vanilla Coke will shift to the right. d. the demand curve for Vanilla Coke will shift to the left.

ANS: C

NAT: Analytic MSC: Applicative

DIF: 2 REF: 4-2 LOC: Supply and demand

TOP: Tastes

90. A very hot summer in Atlanta will cause

a. the demand curve for lemonade to shift to the left. b. the demand for air conditioners to decrease. c. the demand for jackets to decrease.

d. a movement downward and to the right along the demand curve for tank tops.

ANS: C

NAT: Analytic MSC: Applicative

DIF: 2 REF: 4-2 LOC: Supply and demand

TOP: Tastes

91. If a study by medical researchers found that brown sugar caused weight loss while white sugar caused weight

gain, then we likely would see

a. an increase in demand for brown sugar and a decrease in demand for white sugar. b. a decrease in demand for brown sugar and an increase in demand for white sugar. c. an increase in demand for both brown sugar and white sugar.

d. no change in demand for either type of sugar because weight loss is not a determinant of demand.

ANS: A

NAT: Analytic MSC: Applicative

DIF: 2 REF: 4-2 LOC: Supply and demand

TOP: Tastes

92. Which of the following events could shift the demand curve for gasoline to the left?

a. The income of gasoline buyers rises, and gasoline is a normal good. b. The income of gasoline buyers falls, and gasoline is an inferior good.

c. Public service announcements run on television encourage people to walk or ride bicycles instead

of driving cars.

d. The price of gasoline rises.

ANS: C

NAT: Analytic MSC: Applicative

DIF: 2 REF: 4-2 LOC: Supply and demand

TOP: Tastes

93. An increase in the number of college scholarships issued by private foundations would

a. increase the supply of education. b. decrease the supply of education. c. increase the demand for education. d. decrease the demand for education.

ANS: C

NAT: Analytic MSC: Applicative

DIF: 2 REF: 4-2 LOC: Supply and demand

TOP: Tastes

94. Today, people changed their expectations about the future. This change

a. can cause a movement along a demand curve. b. can affect future demand, but not today’s demand. c. can affect today’s demand.

d. cannot affect either today’s demand or future demand.

ANS: C

NAT: Analytic MSC: Interpretive

DIF: 2 REF: 4-2 LOC: Supply and demand

TOP: Expectations

Chapter 4 /The Market Forces of Supply and Demand ? 239

95. If Juan expects to earn a higher income next month, he may choose to

a. save more now and spend less of his current income on goods and services. b. save less now and spend more of his current income on goods and services. c. decrease his current demand for goods and services.

d. move along his current demand curves for goods and services.

ANS: B

NAT: Analytic MSC: Applicative

DIF: 2 REF: 4-2 LOC: Supply and demand

TOP: Expectations

96. You love peanut butter. You hear on the news that 50 percent of the peanut crop in the South has been wiped

out by drought, and that this will cause the price of peanuts to double by the end of the year. As a result, a. your demand for peanut butter will increase, but not until the end of the year. b. your demand for peanut butter increases today.

c. your demand for peanut butter decreases as you look for a substitute good. d. your demand for peanut butter shifts left today.

ANS: B

NAT: Analytic MSC: Applicative

DIF: 2 REF: 4-2 LOC: Supply and demand

TOP: Expectations

97. Ford Motor Company announces that next month it will offer $3,000 rebates on new Mustangs. As a result

of this information, today’s demand curve for Mustangs a. shifts to the right. b. shifts to the left.

c. shifts either to the right or to the left, but we cannot determine the direction of the shift from the

given information.

d. will not shift; rather, the demand curve for Mustangs will shift to the right next month.

ANS: B

NAT: Analytic MSC: Applicative

DIF: 2 REF: 4-2 LOC: Supply and demand

TOP: Expectations

98. What will happen in the rice market now if buyers expect higher rice prices in the near future?

a. The demand for rice will increase. b. The demand for rice will decrease. c. The demand for rice will be unaffected. d. The supply of rice will increase.

ANS: A

NAT: Analytic MSC: Applicative

DIF: 2 REF: 4-2 LOC: Supply and demand

TOP: Expectations

99. Today's demand curve for gasoline could shift in response to

a. a change in today's price of gasoline.

b. a change in the expected future price of gasoline. c. a change in the number of sellers of gasoline. d. All of the above are correct.

ANS: B

NAT: Analytic MSC: Applicative

DIF: 2 REF: 4-2 LOC: Supply and demand

TOP: Expectations

100. If the number of buyers in a market decreases, then

a. demand will increase. b. demand will decrease. c. supply will increase. d. supply will decrease.

ANS: B

NAT: Analytic MSC: Interpretive

DIF: 2 REF: 4-2 LOC: Supply and demand

TOP: Number of buyers

240 ? Chapter 4 /The Market Forces of Supply and Demand

101. Which of the following does not affect an individual's demand curve?

a. expectations b. income

c. prices of related goods d. the number of buyers

ANS: D

NAT: Analytic MSC: Interpretive

DIF: 2 REF: 4-2 LOC: Supply and demand

TOP: Number of buyers

102. Warrensburg is a small college town in Missouri. At the end of August each year, the market demand for

fast food in Warrensburg a. increases. b. decreases.

c. remains constant, but we observe a movement downward and to the right along the demand curve. d. remains constant, but we observe a movement upward and to the left along the demand curve.

ANS: A

NAT: Analytic MSC: ApplicativeFigure 4-2

priceDIF: 2 REF: 4-2 LOC: Supply and demand

TOP: Number of buyers

PP'ABDQQ'quantity103. Refer to Figure 4-2. The movement from point A to point B on the graph shows

a. a decrease in demand. b. an increase in demand.

c. a decrease in quantity demanded. d. an increase in quantity demanded.

ANS: D

NAT: Analytic MSC: Interpretive

DIF: 2 REF: 4-2 LOC: Supply and demand

TOP: Demand curve

104. Refer to Figure 4-2. The movement from point A to point B on the graph is caused by

a. an increase in price. b. a decrease in price.

c. a decrease in the price of a substitute good. d. an increase in income.

ANS: B

NAT: Analytic MSC: Interpretive

DIF: 2 REF: 4-2 LOC: Supply and demand

TOP: Demand curve

Chapter 4 /The Market Forces of Supply and Demand ? 241

105. Refer to Figure 4-2. It is apparent from the figure that

a. the good is inferior.

b. the demand for the good decreases as income increases. c. the demand for the good conforms to the law of demand. d. All of the above are correct.

ANS: C

NAT: Analytic DIF: 2 REF: 4-2 LOC: Supply and demand

TOP: Law of demand

MSC: InterpretiveFigure 4-3

priceD'Dquantity106. Refer to Figure 4-3. The shift from D to D’ is called

a. an increase in demand. b. a decrease in demand.

c. a decrease in quantity demanded. d. an increase in quantity demanded.

ANS: B

DIF: 2 REF: 4-2 NAT: Analytic LOC: Supply and demand

TOP: MSC: Interpretive

107. Refer to Figure 4-3. The movement from D to D’ could be caused by

a. an increase in price.

b. a decrease in the price of a complement. c. a technological advance.

d. a decrease in the price of a substitute.

ANS: D

DIF: 2 REF: 4-2 NAT: Analytic LOC: Supply and demand

TOP: MSC: Interpretive

108. Refer to Figure 4-3. The movement from D’ to D could be caused by

a. a decrease in price.

b. a decrease in income, assuming the good is inferior.

c. buyers expecting the price of the good to fall in the near future. d. an increase in the price of a complement.

ANS: B

DIF: 2 REF: 4-2 NAT: Analytic LOC: Supply and demand

TOP: MSC: Interpretive

Demand curve

Substitutes

Inferior goods

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