142 ? Chapter 4/The Market Forces of Supply and Demand
164. An increase in the price of a good would
a. increase the supply of the good.
b. increase the amount purchased by buyers. c. give producers an incentive to produce more.
d. decrease both the quantity demanded of the good and the quantity supplied of the good. ANS: C PTS: 1 DIF: 2 REF: 4-3 TOP: Price | Supply MSC: Interpretive 165. 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 PTS: 1 DIF: 2 REF: 4-3 TOP: Price | Supply | Quantity demanded MSC: Interpretive
166. Wheat is the main input in the production of flour. If the price of wheat decreases, all else equal, we would expect the
a. demand for flour to increase. b. demand for flour to decrease. c. supply of flour to increase. d. supply of flour to decrease. ANS: C PTS: 1 DIF: 2 REF: 4-3 TOP: Supply | Inputs MSC: Interpretive 167. An increase in the price of oranges would lead to
a. an increased supply of oranges.
b. a reduction in the prices of inputs used in orange production. c. an increased demand for oranges.
d. a movement up and to the right along the supply curve for oranges. ANS: D PTS: 1 DIF: 2 REF: 4-3 TOP: Price | Quantity supplied MSC: Interpretive
Figure 4-6 168. Refer to Figure 4-6. The movement from S to S1 is called
a. a decrease in supply.
b. a decrease in quantity supplied. c. an increase in supply.
d. an increase in quantity supplied. ANS: C PTS: 1 DIF: 1 REF: 4-3 TOP: Supply MSC: Definitional
Chapter 4/The Market Forces of Supply and Demand ? 143
169. Refer to Figure 4-6. The movement from S to S1 could be caused by
a. a decrease in the price of the good. b. an improvement in technology. c. an increase in income. d. an increase in input prices. ANS: B PTS: 1 DIF: 2 REF: 4-3 TOP: Supply curve | Technology MSC: Interpretive
170. Refer to Figure 4-6. Suppose the supply curves that are drawn represent supply curves for single-family residential
houses. Then the movement from S to S1 could be caused by
a. an increase in the price of apartments (a substitute for single-family houses for many people looking for a place to
live).
b. a newly-formed expectation by house-builders that prices of houses will increase significantly in the next six
months.
c. a decrease in the price of lumber. d. All of the above are correct. ANS: C PTS: 1 DIF: 3 REF: 4-3 TOP: Supply curve | Expectations | Inputs MSC: Applicative
1. The unique point at which the supply and demand curves intersect is called
a. market harmony. b. coincidence. c. cohesion. d. equilibrium. ANS: D PTS: 1 DIF: 1 REF: 4-4 TOP: Equilibrium MSC: Definitional
2. The dictionary defines equilibrium as a situation in which forces
a. balance. b. are the same. c. clash.
d. remain constant. ANS: A PTS: 1 DIF: 1 REF: 4-4 TOP: Equilibrium MSC: Definitional
3. The price at which quantity supplied equals quantity demanded is called the
a. coordinating price. b. monopoly price. c. equilibrium price.
d. All of the above are correct. ANS: C PTS: 1 DIF: 1 REF: 4-4 TOP: Equilibrium price MSC: Definitional
4. Another term for equilibrium price is
a. dynamic price.
b. market-clearing price. c. quantity-defining price. d. satisfactory price. ANS: B PTS: 1 DIF: 1 REF: 4-4 TOP: Equilibrium price MSC: Definitional
5. If, at the current price, there is a shortage of a good,
a. sellers are producing more than buyers wish to buy. b. the market must be in equilibrium.
c. the price is below the equilibrium price. d. quantity demanded equals quantity supplied. ANS: C PTS: 1 DIF: 2 REF: 4-4 TOP: Shortages MSC: Interpretive
144 ? Chapter 4/The Market Forces of Supply and Demand
6. A decrease in input costs to firms in a market will result in
a. a decrease 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. an increase in equilibrium price and an increase in equilibrium quantity. ANS: A PTS: 1 DIF: 2 REF: 4-4 TOP: Equilibrium | Inputs MSC: Applicative
Figure 4-7
7. Refer to Figure 4-7. Equilibrium price and quantity are, respectively,
a. $35 and 200. b. $35 and 600. c. $25 and 400. d. $15 and 200. ANS: C PTS: 1 DIF: 1 REF: 4-4 TOP: Equilibrium MSC: Interpretive
8. Refer to Figure 4-7. At a price of $35,
a. there would be a shortage of 400 units. b. there would be a surplus of 200 units. c. there would be a surplus of 400 units.
d. there would be an excess supply of 200 units. ANS: C PTS: 1 DIF: 2 REF: 4-4 TOP: Surpluses MSC: Interpretive
9. Refer to Figure 4-7. At a price of $15, a. there would be a shortage of 400 units. b. there would be a surplus of 400 units. c. there would be a shortage of 200 units.
d. there would be an excess demand of 200 units. ANS: A PTS: 1 DIF: 2 REF: 4-4 TOP: Shortages MSC: Interpretive
10. Refer to Figure 4-7. At the equilibrium price,
a. 200 units would be supplied and demanded. b. 400 units would be supplied and demanded. c. 600 units would be supplied and demanded.
d. 600 units would be supplied, but only 200 would be demanded. ANS: B PTS: 1 DIF: 1 REF: 4-4 TOP: Equilibrium MSC: Interpretive
Chapter 4/The Market Forces of Supply and Demand ? 145
11. Refer to Figure 4-7. At a price of $35,
a. a shortage would exist and the price would tend to fall from $35 to a lower price. b. a surplus would exist and the price would tend to rise from $35 to a higher price. c. a surplus would exist and the price would tend to fall from $35 to a lower price.
d. an excess demand would exist and the price would tend to fall from $35 to a lower price. ANS: C PTS: 1 DIF: 2 REF: 4-4 TOP: Shortages MSC: Applicative
12. Refer to Figure 4-7. At what price would there be an excess demand amounting to 200 units of the good?
a. $15 b. $20 c. $30 d. $35 ANS: B PTS: 1 DIF: 2 REF: 4-4 TOP: Shortages MSC: Applicative
13. Refer to Figure 4-7. At a price of $27.50,
a. there is an excess supply of 50 units of the good and the law of supply and demand predicts that the price will rise
from $27.50 to a higher price.
b. there is an excess supply of 100 units of the good and the law of supply and demand predicts that the price will
fall from $27.50 to a lower price.
c. there is an excess demand of 100 units of the good and the law of supply and demand predicts that the price will
fall from $27.50 to a lower price.
d. there is a surplus of 75 units of the good and the law of supply predicts that the price will fall from $27.50 to a
lower price.
ANS: B PTS: 1 DIF: 3 REF: 4-4 TOP: Surpluses | Law of supply and demand MSC: Applicative
Figure 4-8
14. Refer to Figure 4-8. In this market, equilibrium price and quantity, respectively, are
a. $14 and 70. b. $12 and 40. c. $10 and 50. d. $8 and 50. ANS: C PTS: 1 DIF: 1 REF: 4-4 TOP: Equilibrium MSC: Interpretive
146 ? Chapter 4/The Market Forces of Supply and Demand
15. Refer to Figure 4-8. If price in this market is currently $14, there would be a
a. shortage of 20 units and the law of demand predicts that the price will rise from $14 to a higher price.
b. excess supply of 20 units and the law of supply and demand predicts that the price will fall from $14 to a lower
price.
c. shortage of 40 units and the law of supply predicts that the price will fall from $14 to a lower price.
d. surplus of 40 units and the law of supply and demand predicts that the price will fall from $14 to a lower price. ANS: D PTS: 1 DIF: 3 REF: 4-4 TOP: Surpluses | Law of supply and demand MSC: Applicative 16. Refer to Figure 4-8. If there is currently a shortage of 30 units of the good, then
a. the law of demand predicts that the price will rise by $5 to eliminate the shortage. b. the law of supply predicts that the price will rise by $5 to eliminate the shortage.
c. the law of supply and demand predicts that the price will rise by $3 to eliminate the shortage.
d. the law of supply and demand predicts that the price will fall from its current level by an indeterminate amount,
exacerbating the shortage.
ANS: C PTS: 1 DIF: 3 REF: 4-4 TOP: Shortages | Law of supply and demand MSC: Applicative
Table 4-2 PRICE $10 $ 8 $ 6 $ 4 $ 2 QUANTITY DEMANDED 10 20 30 40 50 QUANTITY SUPPLIED 60 45 30 15 0 17. Refer to Table 4-2. The equilibrium price and quantity, respectively, are
a. $4 and 40. b. $6 and 30. c. $8 and 30. d. $10 and 35. ANS: B PTS: 1 DIF: 1 REF: 4-4 TOP: Equilibrium MSC: Interpretive 18. Refer to Table 4-2. If the price were $8, a
a. surplus of 50 units would exist and price would tend to fall. b. surplus of 10 units would exist and price would tend to fall. c. surplus of 25 units would exist and price would tend to fall. d. shortage of 25 units would exist and price would tend to rise. ANS: C PTS: 1 DIF: 2 REF: 4-4 TOP: Surpluses MSC: Interpretive
19. Refer to Table 4-2. If the price were $2, a
a. shortage of 25 units would exist and price would tend to fall. b. surplus of 50 units would exist and price would tend to rise. c. surplus of 25 units would exist and price would tend to fall. d. shortage of 50 units would exist and price would tend to rise. ANS: D PTS: 1 DIF: 2 REF: 4-4 TOP: Shortages MSC: Interpretive