Chapter 4/The Market Forces of Supply and Demand ? 147
Figure 4-9
20. Refer to Figure 4-9. In this market, equilibrium price and quantity, respectively, are
a. $15 and 400. b. $20 and 600. c. $25 and 500. d. $25 and 800. ANS: B PTS: 1 DIF: 1 REF: 4-4 TOP: Equilibrium MSC: Interpretive
21. Refer to Figure 4-9. If price is $25, quantity demanded and quantity supplied, respectively, are
a. 400 and 600. b. 500 and 800. c. 600 and 600 d. 800 and 500. ANS: B PTS: 1 DIF: 2 REF: 4-4 TOP: Surpluses MSC: Interpretive
22. Refer to Figure 4-9. If the price is $25, there would be an
a. excess supply of 300 and price would fall. b. excess supply of 200 and price would fall. c. shortage of 200 and price would rise. d. shortage of 300 and price would fall. ANS: A PTS: 1 DIF: 2 REF: 4-4 TOP: Surpluses MSC: Applicative
23. Refer to Figure 4-9. If the price is $10, there would be a
a. shortage of 200 and price would rise. b. surplus of 200 and price would fall. c. shortage of 600 and price would rise. d. surplus of 600 and price would fall. ANS: C PTS: 1 DIF: 2 REF: 4-4 TOP: Shortages MSC: Applicative
24. Refer to Figure 4-9. At a price of $15,
a. quantity demanded exceeds quantity supplied. b. there is a shortage.
c. there is an excess demand. d. All of the above are correct. ANS: D PTS: 1 DIF: 2 REF: 4-4 TOP: Shortages MSC: Interpretive
148 ? Chapter 4/The Market Forces of Supply and Demand
25. Refer to Figure 4-9. At a price of $20, which of the following statements is not correct?
a. The market is in equilibrium.
b. Equilibrium price is equal to equilibrium quantity. c. There is no pressure for price to change.
d. The quantity of the good that is bought and sold is 600. ANS: B PTS: 1 DIF: 2 REF: 4-4 TOP: Equilibrium MSC: Interpretive 26. In markets, prices move toward equilibrium because of
a. the actions of buyers and sellers.
b. government regulations placed on market participants. c. increased competition among sellers. d. buyers' ability to affect market outcomes. ANS: A PTS: 1 DIF: 2 REF: 4-4 TOP: Equilibrium price MSC: Interpretive
27. When the price of a good is higher than the equilibrium price,
a. a shortage will exist.
b. buyers desire to purchase more than is produced.
c. sellers desire to produce and sell more than buyers wish to purchase. d. quantity demanded exceeds quantity supplied. ANS: C PTS: 1 DIF: 2 REF: 4-4 TOP: Surpluses MSC: Interpretive
28. Suppose roses are currently selling for $40.00 per dozen, while the equilibrium price of roses is $30.00 per dozen.
We would expect a
a. shortage to exist and the market price of roses to increase. b. shortage to exist and the market price of roses to decrease. c. surplus to exist and the market price of roses to increase. d. surplus to exist and the market price of roses to decrease. ANS: D PTS: 1 DIF: 2 REF: 4-4 TOP: Surpluses MSC: Applicative
29. When there is a shortage of 100 units of a particular good,
a. the law of supply predicts upward pressure on the price of the good from its current level. b. the law of demand predicts downward pressure on the price of the good from its current level. c. we say that there is a scarcity of 100 units of the good. d. None of the above is correct. ANS: D PTS: 1 DIF: 3 REF: 4-4 TOP: Shortages MSC: Interpretive
30. A surplus exists in a market if
a. there is an excess demand for the good.
b. the situation is such that the law of supply and demand would predict an increase in the price of the good from its
current level.
c. the current price is above its equilibrium price. d. None of the above is correct. ANS: C PTS: 1 DIF: 2 REF: 4-4 TOP: Surpluses MSC: Interpretive
31. If a surplus exists in a market we know that the actual price is
a. above equilibrium price and quantity supplied is greater than quantity demanded. b. above equilibrium price and quantity demanded is greater than quantity supplied. c. below equilibrium price and quantity demanded is greater than quantity supplied. d. below equilibrium price and quantity supplied is greater than quantity demanded. ANS: A PTS: 1 DIF: 2 REF: 4-4 TOP: Surpluses | Equilibrium price MSC: Applicative
Chapter 4/The Market Forces of Supply and Demand ? 149
32. If excess demand exists in a market we know that the actual price is
a. below equilibrium price and quantity demanded is greater than quantity supplied. b. above equilibrium price and quantity demanded is greater than quantity supplied. c. above equilibrium price and quantity supplied is greater than quantity demanded. d. below equilibrium price and quantity supplied is greater than quantity demanded. ANS: A PTS: 1 DIF: 2 REF: 4-4 TOP: Shortages | Equilibrium price MSC: Applicative
33. Step one in the Three-Step program for analyzing changes in equilibrium is as follows:
a. Decide which direction the curve shifts.
b. Decide whether the event shifts the supply or demand curve.
c. Use the supply-and-demand diagram to see how the shift changes the equilibrium. d. Any of these could be used first. ANS: B PTS: 1 DIF: 1 REF: 4-4 TOP: Equilibrium MSC: Interpretive
34. You have been asked by your economics professor to graph the market for lumber and then to analyze the change that
would occur in equilibrium price as a result of recent forest fires in the west. Your first step would be to a. decide which direction to shift the curve.
b. decide whether the fires affected demand or supply. c. graph the shift to see the affect on equilibrium. d. None of the above are correct. ANS: B PTS: 1 DIF: 2 REF: 4-4 TOP: Equilibrium MSC: Interpretive
150 ? Chapter 4/The Market Forces of Supply and Demand
Figure 4-10
35. Refer to Figure 4-10. Which of the four graphs represents the market for peanut butter after a major hurricane hits
the peanut-growing south? a. A b. B c. C d. D ANS: D PTS: 1 DIF: 2 REF: 4-4 TOP: Equilibrium | Shifts of curves MSC: Applicative
36. Refer to Figure 4-10. Which of the four graphs represents the market for winter coats as we progress from winter to
spring? a. A b. B c. C d. D ANS: B PTS: 1 DIF: 2 REF: 4-4 TOP: Equilibrium | Shifts of curves MSC: Applicative
37. Refer to Figure 4-10. Which of the four graphs represents the market for pizza delivery in a college town as we go
from summer to the beginning of the fall semester? a. A b. B c. C d. D ANS: A PTS: 1 DIF: 2 REF: 4-4 TOP: Equilibrium | Shifts of curves MSC: Applicative
Chapter 4/The Market Forces of Supply and Demand ? 151
38. Refer to Figure 4-10. Which of the four graphs represents the market for cars as a result of the adoption of new
technology on assembly lines? a. A b. B c. C d. D ANS: C PTS: 1 DIF: 2 REF: 4-4 TOP: Equilibrium | Shifts of curves MSC: Applicative
39. Refer to Figure 4-10. Graph A shows which of the following?
a. an increase in demand and an increase in quantity supplied b. an increase in demand and an increase in supply
c. an increase in quantity demanded and an increase in quantity supplied d. an increase in supply and an increase in quantity demanded ANS: A PTS: 1 DIF: 2 REF: 4-4 TOP: Demand | Quantity supplied MSC: Applicative
40. Refer to Figure 4-10. Graph C shows which of the following?
a. an increase in demand and an increase in quantity supplied b. an increase in demand and an increase in supply
c. an increase in quantity demanded and an increase in quantity supplied d. an increase in supply and an increase in quantity demanded ANS: D PTS: 1 DIF: 2 REF: 4-4 TOP: Supply | Quantity demanded MSC: Applicative
41. Refer to Figure 4-10. Which of the four graphs illustrates an increase in quantity supplied?
a. A. b. B. c. C. d. D. ANS: A PTS: 1 DIF: 2 REF: 4-4 TOP: Quantity supplied MSC: Applicative 42. Refer to Figure 4-10. Which of the four graphs illustrates a decrease in quantity demanded?
a. A. b. B. c. C. d. D. ANS: D PTS: 1 DIF: 2 REF: 4-4 TOP: Quantity demanded MSC: Applicative
43. Refer to Figure 4-10. Suppose the events depicted in graphs A and C were illustrated together on a single graph. A
definitive result of the two events would be a. an increase in the equilibrium quantity. b. an increase in the equilibrium price.
c. an instance in which the law of demand fails to hold. d. All of the above are correct. ANS: A PTS: 1 DIF: 2 REF: 4-4 TOP: Equilibrium | Demand | Supply MSC: Applicative 44. Suppose there is an earthquake that destroys several corn canneries. Which of the following would not be a direct
result of this event?
a. Sellers would decrease their ability to produce and sell as much as before at each relevant price. b. The supply would decrease.
c. Buyers would not be willing to buy as much as before at each relevant price. d. The equilibrium price would rise. ANS: C PTS: 1 DIF: 2 REF: 4-4 TOP: Equilibrium | Supply MSC: Applicative