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