Exam

Name___________________________________

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

1) The relative price of a good is

A) a household's income divided by the number of goods purchased.
B) the ratio of one price to another and an opportunity cost.
C) the cost of its factors of production.
D) the ratio of the price of a good to the income of the purchaser.
E) the same as the money price of a good.
Answer: B

2) How many sides does a market have?

A) two sides - domestic and foreign
B) one side - buyers
C) two sides - buyers and sellers
D) one side - sellers
E) three sides - buyers, sellers, and the government
Answer: C

3) Which market is an example of a market for goods?

A) apple market
B) factor market
C) haircut market
D) labour market
E) energy market
Answer: A

4) Which market is an example of a market for services?

A) stock market
B) factor market
C) foreign exchange market
D) orange market
E) tennis lessons market
Answer: E

5) Which market is an example of a market for factors of production?

A) apple market
B) foreign exchange market
C) furniture market
D) computer programmer market
E) automobile market
Answer: D

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 6) The demand and supply model determines
A) money prices.
B) absolute prices.
C) demand prices but not supply prices.
D) relative prices.
E) supply prices but not demand prices.
Answer: D

Use the table below to answer the following questions.

Table 3.1.1

Price per Price per Price per

Year cup of coffee cup of tea can of cola
2018 $2.25 $2.10 $1.80
2019 $2.50 $2.00 $2.00
2020 $2.25 $2.20 $2.00

7) Refer to Table 3.1.1. In 2018, the relative price of a cup of coffee in terms of cups of tea is
A) 1.07. B) 2.25. C) 1.00. D) 0.93. E) 2.10.
Answer: A

8) Refer to Table 3.1.1. In 2019, the relative price of a cup of coffee in terms of can of cola is
A) 2.00. B) 1.25. C) 1.00. D) 2.50. E) 0.80.
Answer: B

9) Refer to Table 3.1.1. In 2020, the relative price of a can of cola in terms of cups of tea is
A) 1.10. B) 1.00. C) 2.20. D) 0.91. E) 2.00.
Answer: D

10) Refer to Table 3.1.1. Between 2018 and 2019, the price of a cup of coffee relative to the price of a cup of tea ________
while the price of a cup of coffee relative to the price of a can of cola ________.
A) fell; did not change
B) rose; did not change
C) rose; fell
D) fell; rose
E) fell; fell
Answer: B

11) Refer to Table 3.1.1. Between 2019 and 2020, the price of a cup of coffee relative to the price of a cup of tea
________, while the price of a cup of coffee relative to the price of a can of cola ________.
A) fell; did not change
B) rose; rose
C) rose; fell
D) fell; fell
E) fell; rose
Answer: D

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12) A market where no single buyer or seller can influence the price is
A) a competitive market.
B) a factor market.
C) a seller's market.
D) a government-controlled market.
E) a buyer's market.
Answer: A

13) William Gregg owned a mill in South Carolina. In December 1862, he placed a notice in the Edgehill Advertiser
announcing his willingness to exchange cloth for food and other items. Here is an extract:

1 yard of cloth for 1 pound of bacon

2 yards of cloth for 1 pound of butter
4 yards of cloth for 1 pound of wool
8 yards of cloth for 1 bushel of salt

If the money price of bacon was 20¢ a pound and the money price of salt was $2.00 a bushel, people would
A) buy bacon and trade it for cloth because they could buy 8 yards of cloth for only $1.60, and use that cloth to
obtain a bushel of salt.
B) buy bacon and trade it for cloth because cloth is more expensive than bacon.
C) not buy bacon and trade it for cloth because they would have to buy 8 yards of cloth for $1.60 and then give
Mr. Gregg an extra $0.40 to buy a bushel of salt.
D) not buy bacon and trade it for cloth because the relative price of 1 bushel of salt is only 1/8 yard of cloth.
E) buy bacon and trade it for cloth and then trade the cloth for salt because salt is more important for life than
either cloth or bacon.
Answer: A

14) The opportunity cost of good A in terms of good B is equal to the

A) ratio of the money price of good A to the money price of good B.
B) money price of good B minus the money price of good A.
C) money price of good A minus the money price of good B.
D) money price of good A plus the money price of good B.
E) ratio of the money price of good B to the money price of good A.
Answer: A

15) Suppose the price of a football is $40.00 and the price of a basketball is $20.00. The ________ of a football is
________.
A) opportunity cost; $2.00
B) relative price; $10
C) opportunity cost; $20.00
D) relative price; 1/2 basketball per football
E) relative price; 2 basketballs per football
Answer: E

16) The opportunity cost of a hot dog in terms of hamburgers is

A) smaller in the winter than in the summer.
B) the ratio of the money price of a hot dog to the money price of a hamburger.
C) the ratio of the slope of the supply curve of hot dogs to the slope of the supply curve of hamburgers.
D) the money price of a hot dog minus the money price of a hamburger.
E) the ratio of the slope of the demand curve for hot dogs to the slope of the demand curve for hamburgers.
Answer: B

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17) The money price of a litre of milk is $3.33 and the money price of a litre of gasoline is $1.11. The relative price of a
litre of gasoline in terms of milk is
A) 1/3 litre of milk.
B) $1.11.
C) $3.33.
D) $2.22.
E) 3 litres of milk.
Answer: A

18) What is the relative price of a litre of gasoline in terms of a kilogram of apples?
A) the money price of a kilogram of apples
B) the quantity of gasoline you can buy with the money you would use to buy a kilogram of apples
C) the inverse of the opportunity cost of a litre of gasoline
D) the money price of a kilogram of apples divided by the money price of a litre of gasoline
E) the money price of a litre of gasoline divided by the money price of a kilogram of apples
Answer: E

19) Why is a relative price an opportunity cost?

A relative price is an opportunity cost because it
A) is given in dollars and cents.
B) is constant.
C) tells us how much of one good we must give up to get another good.
D) increases as we buy more of a good.
E) is determined by supply and demand.
Answer: C

20) The law of demand states that, other things remaining the same,
A) the higher the price of a good, the greater is the quantity demanded.
B) as income increases, willingness to pay for the last unit purchased increases.
C) the higher the price of a good, the smaller is demand.
D) the higher the price of a good, the smaller is the quantity demanded.
E) price and quantity demanded are positively related.
Answer: D

21) Which one of the following events shifts the demand curve for grape jelly to the right?
A) a decrease in the price of grape jelly
B) an increase in income if grape jelly is a normal good
C) a decrease in the population
D) a decrease in the price of strawberry preserves, a substitute for grape jelly
E) an increase in the price of peanut butter, a complement of grape jelly
Answer: B

22) The demand curve slopes downward to the right because

A) of comparative advantage.
B) when expected future prices rise, the quantity demanded increases.
C) of the substitution effect and the income effect.
D) an increase in income leads to increased consumption.
E) as income rises, the quantity demanded increases.
Answer: C

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23) An increase in the price of ground beef
A) decreases the demand for ground beef.
B) increases the demand for ground beef.
C) increases the demand for hamburger buns, a complement of ground beef.
D) increases the quantity demanded of ground beef.
E) increases the demand for chicken, a substitute for ground beef.
Answer: E

24) An increase in income

A) increases the supply of turnips.
B) decreases the demand for turnips if turnips have a very low price.
C) increases the demand for turnips if a turnip is an inferior good.
D) decreases the supply of turnips.
E) increases the demand for turnips if a turnip is a normal good.
Answer: E

25) A turnip is an inferior good if

A) an increase in income increases the demand for turnips.
B) an increase in the price of a turnip decreases the quantity of turnips that consumers want to buy.
C) an increase in income decreases the demand for turnips.
D) turnips violate the law of demand.
E) turnips are a low quality good.
Answer: C

26) If a turnip is an inferior good, then, ceteris paribus, an increase in the price of a turnip will
A) decrease the demand for turnips.
B) increase the quantity of turnips demanded.
C) increase the supply of turnips.
D) increase the demand for turnips.
E) decrease the quantity of turnips demanded.
Answer: E

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Use the figure below to answer the following questions.

Figure 3.2.1

27) Point A in Figure 3.2.1 indicates that

A) consumers will only pay $1 for any apple.
B) if the price is more than $1, consumers will buy 9,000 apples.
C) if the price is $1, consumers will plan to buy 4,000 apples.
D) $1 is the least that consumers are willing to pay for the 4,000th apple.
E) the apple market will not be in equilibrium if the price of an apple is $1.
Answer: C

28) Which one of the following statements best characterizes point B in Figure 3.2.1?
A) Producers would be unwilling to sell the 9,000th apple for less than $0.50.
B) At a price of $0.50, consumers will be unwilling to buy any apples.
C) The most that consumers would be willing to pay for the 9,000th apple is $0.50.
D) At a price of $0.50, there will be an apple shortage.
E) At point B, the market is in equilibrium.
Answer: C

29) What does a movement along the demand curve in Figure 3.2.1 from point A to point B show?
A) an increase in the demand for apples
B) a movement from a point of efficiency to a point of inefficiency
C) an increase in the quantity of apples demanded
D) a decrease in the quantity of apples demanded
E) a decrease in the demand for apples
Answer: C

30) Given Figure 3.2.1, under what condition are consumers willing to buy more than 9,000 apples per week?
A) if the price of an apple is between $1 and $1.50
B) if the price of an apple is between $1 and $0.50
C) if the price of an apple is above $1
D) if the price of an apple is $0.75
E) if the price of an apple is below $0.50
Answer: E

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 31) Which one of the following would result in a movement from point A to point B in Figure 3.2.1?
A) a fall in the price of apples
B) a rise in the price of bananas
C) a rise in the price of oranges
D) public concern about chemicals sprayed on apples
E) an increase in population
Answer: A

Use the figure below to answer the following questions.

Figure 3.2.2

32) Which one of the following would result in the demand curve shifting from D1 to D2 in Figure 3.2.2?
A) a fall in the price of pizza
B) an increase in the supply of pizza
C) a rise in the price of pizza
D) a rise in the price of spaghetti, a substitute for pizza
E) a rise in the price of Coke, a complement of pizza
Answer: D

33) Refer to Figure 3.2.2. Which one of the following represents a decrease in quantity demanded?
A) a shift from D1 to D2
B) a movement from B to A
C) a movement from the origin to any point on D1
D) a movement from A to B
E) a shift from D2 to D1
Answer: B

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34) Refer to Figure 3.2.2. If consumers' income increases,
A) the supply of pizzas increases.
B) the quantity of pizzas supplied decreases.
C) a movement from point A to point B on D1 occurs.
D) the demand curve for pizzas shifts from D1 to D2 if a pizza is a normal good.
E) the quantity of pizzas demanded increases.
Answer: D

35) The price of good A rises, and the demand curve for good B shifts leftward. We can conclude that
A) B is an inferior good.
B) A and B are substitutes.
C) A and B are complements.
D) B is a normal good.
E) A and B are complements in production.
Answer: C

36) The price of good X falls and the demand for good Y decreases. We can conclude that
A) X is a normal good.
B) X and Y are substitutes in production.
C) X is an inferior good.
D) X and Y are substitutes.
E) X and Y are complements.
Answer: D

37) Which one of the following would lead to an increase in the demand for hamburgers?
A) a rise in the price of French fries, a complement of hamburgers
B) a decrease in population
C) a new fad hamburger diet
D) a decrease in consumer income if hamburgers are a normal good
E) a news report that hamburgers can cause skin diseases
Answer: C

38) Which of the following "other things" are not held constant along a demand curve?
A) preferences
B) the price of the good itself
C) expected future income and credit
D) income
E) prices of related goods
Answer: B

39) Good A is a normal good if

A) the demand for A increases when income rises.
B) good A satisfies the law of demand.
C) a rise in the price of a complement causes the demand for A to decrease.
D) income and the demand for A are negatively related.
E) a rise in the price of a substitute causes the demand for A to increase.
Answer: A

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40) A decrease in quantity demanded is represented by a
A) leftward shift of the demand curve.
B) movement downward and to the right along the demand curve.
C) movement upward and to the left along the demand curve.
D) rightward shift of the supply curve.
E) rightward shift of the demand curve.
Answer: C

41) Some sales managers are talking shop. Which of the following quotations refers to a movement along the demand
curve?
A) "More firms are producing biodegradable products."
B) "The Green movement has sparked an increase in our sales of biodegradable products."
C) "Since our competitors raised their prices, our sales have doubled."
D) "It has been an unusually mild winter; our sales of wool scarves are down from last year."
E) "We decided to cut our prices, and the increase in our sales has been remarkable."
Answer: E

42) Some sales managers are talking shop. Which one of the following quotations does not refer to a rightward shift of
the demand curve?
A) "The Green movement has sparked an increase in our sales of biodegradable products."
B) "Since our competitors raised their prices, our sales have doubled."
C) "We decided to cut our prices, and the increase in our sales has been remarkable."
D) "People are expecting a harsh winter next year, so the sales of our winter coats have increased."
E) "It has been an unusually harsh winter; our sales of wool scarves are up from last year."
Answer: C

43) Some sales managers are talking shop. Which one of the following quotations refers to a leftward shift of the
demand curve?
A) "More firms are producing biodegradable products."
B) "The Green movement has sparked an increase in our sales of biodegradable products."
C) "It has been an unusually mild winter; our sales of wool scarves are down from last year."
D) "Since our competitors raised their prices, our sales have doubled."
E) "We decided to cut our prices, and the increase in our sales has been remarkable."
Answer: C

44) If Hamburger Helper is an inferior good, then, ceteris paribus, a decrease in income will lead to
A) a rightward shift of the demand curve for Hamburger Helper.
B) a movement up along the demand curve for Hamburger Helper.
C) a rightward shift of the supply curve of Hamburger Helper.
D) a movement down along the demand curve for Hamburger Helper.
E) a leftward shift of the demand curve for Hamburger Helper.
Answer: A

45) Consider the market for smartphones. Suppose the price of a smartphone falls. Explain the effect of this event on
the quantity of smartphones demanded and on the demand for smartphones.
A) The quantity of smartphones demanded is unchanged and the demand for smartphones decreases.
B) The quantity of smartphones demanded decreases and the demand for smartphones is unchanged.
C) The quantity of smartphones demanded is unchanged and the demand for smartphones increases.
D) The quantity of smartphones demanded increases and the demand for smartphones is unchanged.
E) The quantity of smartphones demanded increases and the demand for smartphones also increases.
Answer: D

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46) People buy more of good 1 when the price of good 2 rises. Good 1 and good 2 are
A) normal goods.
B) substitutes.
C) inferior goods.
D) complements.
E) substitutes in production.
Answer: B

47) Oatmeal is a normal good and cold cereal is a substitute for oatmeal. Raisins are a complement of oatmeal. Which
of the following increases the demand for oatmeal?
A) a decrease in population
B) an increase in the price of cold cereal
C) an increase in the price of raisins
D) a decrease in income
E) an increase in the supply of oatmeal
Answer: B

48) The law of demand applies to university education because when the price of tuition rises, there is
A) a substitution effect but no income effect.
B) a substitution effect that offsets the income effect.
C) a substitution effect and a complement effect.
D) an income effect but no substitution effect.
E) both a substitution effect and an income effect.
Answer: E

49) What is the quantity demanded of a good or service?

The quantity demanded of a good or service is
A) the same as the demand for a good or service.
B) the amount that consumers plan to buy during a given time period at a particular price.
C) the quantity that people want to buy at a given price but might not be able to afford.
D) the quantity bought in a given time period at a particular price.
E) equal to the quantity supplied.
Answer: B

50) When the price of a latte is $3, Eric buys 5 lattes a week. When the price of a latte is $5, Eric buys 3 lattes a week
and starts to drink tea. What is his substitution effect and his income effect?
A) Eric's substitution effect and income effect are both shown by the leftward shift of his demand curve for
lattes.
B) Eric's substitution effect is shown by a movement up along his demand curve for lattes and his income effect
is the leftward shift of his demand curve for lattes.
C) Eric's substitution effect is that he buys more tea and fewer lattes. And faced with a tighter budget he buys
even fewer lattes, which is his income effect.
D) Eric's substitution effect is that he buys more tea and fewer lattes. He doesn't have face an income effect
because his income hasn't changed.
E) Eric has neither a substitution effect nor an income effect. He just doesn't like to pay $5 for a latte so he drinks
fewer lattes.
Answer: C

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51) S'mores are made with marshmallows, chocolate, and graham crackers. Suppose the price of chocolate rises. What
happens to the demand for s'mores?
A) The demand for s'mores doesn't change.
B) The demand for s'mores increases if the price of a s'more rises.
C) The demand for s'mores decreases because people substitute other desserts for s'mores.
D) The demand for s'mores decreases because people buy less chocolate.
E) The demand for s'mores decreases if the price of a s'more rises.
Answer: A

52) The law of supply tells us that other things remaining the same, as the
A) price of chocolate rises, the quantity of chocolate supplied decreases.
B) cost of producing chocolate increases, the price of chocolate rises.
C) supply of chocolate increases, the price of chocolate falls.
D) price of chocolate falls, the quantity of chocolate supplied decreases.
E) cost of producing chocolate falls, the supply of chocolate will increase.
Answer: D

53) The supply curve of a good slopes upward to the right because of
A) increasing marginal cost as production increases.
B) the law of demand.
C) the fact that prices tend to rise over time.
D) the existence of substitutes in production.
E) technological improvements over time.
Answer: A

54) An increase in supply is shown by

A) a rightward shift of the supply curve.
B) a movement down along the supply curve.
C) a movement up along the supply curve.
D) a movement from the supply curve toward the origin.
E) a leftward shift of the supply curve.
Answer: A

55) If goods X and Y are substitutes in production, then a rise in the price of good X
A) increases the supply of good Y.
B) increases the demand for good Y.
C) decreases the demand for good Y.
D) decreases the supply of good Y.
E) might change the supply of Y; it depends on whether X and Y are also substitutes.
Answer: D

56) If a producer can use its factors of production to produce either good A or good B, then a rise in the price of A
A) increases the supply of A.
B) decreases the supply of B.
C) increases the supply of B.
D) decreases the supply of A.
E) increases the demand for A.
Answer: B

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57) The fact that a fall in the price of a good results in a decrease in the quantity of the good supplied illustrates
A) the nature of an inferior good.
B) the law of demand.
C) technological improvement.
D) the law of supply.
E) a change in supply.
Answer: D

58) Which one of the following would not shift the supply curve of good X to the right?
A) an increase in the price of Y, a complement in production of X
B) a rise in the price of X
C) a technological change that increases production of X
D) a fall in the price of the factors of production used in producing X
E) a fall in the price of Y, a substitute in production of X
Answer: B

59) A decrease in the quantity supplied is shown by a

A) leftward shift of the supply curve.
B) movement up along the supply curve.
C) rightward shift of the supply curve.
D) rightward shift of the demand curve.
E) movement down along the supply curve.
Answer: E

60) Which one of the following will shift the supply curve of good X leftward?
A) a technological change that increases production of X
B) a decrease in the wages of workers employed to produce X
C) a decrease in the cost of capital used to produce X
D) a situation where the quantity of X demanded exceeds the quantity of X supplied
E) an increase in the cost of machinery used to produce X
Answer: E

61) Which of the following will shift the supply curve of good X rightward?
A) an increase in the cost of capital used to produce good X
B) a decrease in the number of suppliers of good X
C) the price of Y, a substitute in production for good X, rises
D) a decrease in the wages of workers employed to produce good X
E) an increase in the price of energy
Answer: D

62) If a factor of production can be used to produce either good A or good B, then A and B are
A) complements in production.
B) substitutes.
C) substitutes in production.
D) normal goods.
E) complements.
Answer: C

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63) A rise in the price of a good
A) decreases the supply of the good.
B) increases the supply of the good.
C) creates a movement down along the demand curve.
D) creates a movement up along the supply curve.
E) makes the supply curve steeper.
Answer: D

64) If the number of suppliers of good Y increases, then

A) a movement up along the supply curve of good Y will occur.
B) a movement down along the supply curve of good Y will occur.
C) the supply curve of good Y shifts leftward.
D) the supply curve of good Y becomes steeper.
E) the supply curve of good Y shifts rightward.
Answer: E

65) A shift of the supply curve of pumpkins occurs if

A) there is a flood that destroys pumpkin farms.
B) there is a change in the price of pumpkins.
C) there is a change in the price of squash, which is a substitute for pumpkins.
D) people start to prefer pumpkin pie over apple pie.
E) there is a change in income.
Answer: A

66) Some producers are chatting. Which one of the following quotations refers to a movement along the supply curve?
A) "Raw material prices have sky-rocketed; we will have to pass the cost on to our customers."
B) "We anticipate a big increase in demand. Our product price should rise, so we are planning for an increase in
output."
C) "Our new, sophisticated equipment will enable us to undercut our competitors."
D) "Wage increases have forced us to raise our prices."
E) "New competitors in the industry are causing prices to fall."
Answer: B

67) Some producers are chatting. Which one of the following quotations refers to a rightward shift of the supply
curve?
A) "Competitors are leaving the industry."
B) "We anticipate a big increase in demand. Our product price should rise, so we are planning for an increase in
output."
C) "Raw material prices have sky-rocketed; we will have to pass the cost on to our customers."
D) "Wage increases have forced us to raise our prices."
E) "Our new, sophisticated equipment will enable us to undercut our competitors."
Answer: E

68) Some producers are chatting. Which one of the following quotations refers to a leftward shift of the supply curve?
A) "Wage increases have forced us to raise our prices."
B) "We anticipate a big increase in demand. Our product price should rise, so we are planning for an increase in
output."
C) "Raw material prices have sky-rocketed; we will have to pass the cost on to our customers."
D) "Our new, sophisticated equipment will enable us to undercut our competitors."
E) Both A and C
Answer: E

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69) A decrease in the quantity supplied of a good is shown by
A) a movement up along the supply curve.
B) a movement from the supply curve to the origin.
C) a rightward shift of the supply curve.
D) a movement down along the supply curve.
E) a leftward shift of the supply curve.
Answer: D

70) Which of the following decreases the supply of popcorn?

A) a decrease in the number of popcorn producers
B) a technological advance in the production of popcorn
C) a decrease in the demand for popcorn
D) a decrease in the price of popcorn
E) an increase in the price of popcorn
Answer: A

71) Which of the following shifts the supply curve for good X leftward?
A) an increase in the cost of the machinery used to produce X
B) a situation in which the quantity supplied of X exceeds the quantity demanded of X
C) a decrease in the wages of workers employed to produce X
D) a situation in which the quantity demanded of X exceeds the quantity supplied of X
E) a technological advance in the production of X
Answer: A

72) French fries and baked potatoes are

A) normal goods for consumers and complements for producers.
B) substitutes for consumers and substitutes in production for producers.
C) complements for consumers and complements in production for producers.
D) complements for consumers and substitutes in production for producers.
E) substitutes in production for consumers and inferior goods for producers.
Answer: B

73) A new technology for tapping maple trees ________ the supply of maple syrup and ________ the quantity
supplied of maple syrup.
A) increases; does not change
B) does not change; decreases
C) increases; increases
D) does not change; increases
E) does not change; does not change
Answer: A

74) What is an example of the law of supply in action?

A) The price of hand sanitizer falls, so people buy more hand sanitizer.
B) A shortage of hand sanitizer occurred during the pandemic.
C) The price of hand sanitizer rises so firms produce more hand sanitizer.
D) During the pandemic, distilleries start to produce hand sanitizer.
E) People are willing to pay a higher price for hand sanitizer during a pandemic.
Answer: C

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 75) What happens in the market for laptops if the expected future price of a laptop rises?
A) The supply of laptops doesn't change today.
B) The quantity of laptops supplied today decreases.
C) The supply of laptops today increases.
D) The quantity of laptops supplied today increases.
E) The supply of laptops today decreases.
Answer: E

76) What happens in the market for laptops if the expected future price of a laptop rises?
A) A movement down along the supply curve of laptops occurs.
B) A shortage of laptops occurs and the supply curve of laptops shifts rightward to eliminate the shortage.
C) A movement up along the supply curve of laptops occurs.
D) The supply curve of laptops shifts leftward.
E) The supply curve of laptops shifts rightward.
Answer: D

Use the table below to answer the following questions.

Table 3.4.1

Price Quantity Quantity

(dollars per Demanded Supplied
unit) (units) (units)
1 1,100 50
2 800 200
3 600 420
4 500 500
5 420 580
6 350 640
7 320 680
8 300 700

77) Refer to Table 3.4.1. At a price of $3 a unit

A) there is a 180-unit shortage and a tendency for the price to fall.
B) there is a 180-unit shortage and a tendency for the price to rise.
C) there is a 420-unit shortage and a tendency for the price to rise.
D) there is a 180-unit surplus and a tendency for the price to fall.
E) the market is in equilibrium.
Answer: B

78) In Table 3.4.1, the equilibrium price is

A) $3 a unit. B) $4 a unit. C) $5 a unit. D) $7 a unit. E) $1 a unit.
Answer: B

79) In Table 3.4.1, the equilibrium quantity is

A) 500 units. B) 200 units. C) 420 units. D) 1,100 units. E) 320 units.
Answer: A

15
80) Refer to Table 3.4.1. A shortage occurs if
A) the price is below $4 a unit.
B) the price is $5 a unit.
C) the price is $6 a unit.
D) the price is $7 a unit.
E) the price is $4 a unit.
Answer: A

81) Refer to Table 3.4.1. A surplus occurs if

A) the price is $4 a unit.
B) the price is $1 a unit.
C) the price is $3 a unit.
D) the price is above $4 a unit.
E) the price is $2 a unit.
Answer: D

82) Refer to Table 3.4.1. If the price is $7, then the surplus is
A) 400 units. B) 290 units. C) zero units. D) 160 units. E) 360 units.
Answer: E

83) Refer to Table 3.4.1. If the price is $3, then the shortage is
A) 1,050 units. B) zero units. C) 160 units. D) 600 units. E) 180 units.
Answer: E

16
Use the figure below to answer the following questions.

Figure 3.4.1

84) At price P3 in Figure 3.4.1,

A) there is a shortage in the amount of Q5 - Q1 .
B) equilibrium quantity is Q5 .
C) this market is in equilibrium.
D) there is a tendency for the price to rise.
E) there is a surplus in the amount of Q5 - Q1 .
Answer: E

85) At price P2 in Figure 3.4.1, which one of the following is not true?
A) There is no surplus.
B) The quantity supplied is Q3 .
C) The quantity demanded is equal to the quantity supplied.
D) This market is in equilibrium.
E) The quantity demanded is Q1.
Answer: E

86) At price P1 in Figure 3.4.1,

A) there is a surplus in the amount of Q4 - Q2 .
B) the equilibrium quantity is Q4 .
C) the equilibrium quantity is Q2 .
D) there is a shortage in the amount of Q4 - Q2 .
E) there is a tendency for the price to fall.
Answer: D

17
 87) At price P1 in Figure 3.4.1,
A) consumers can buy all they want.
B) producers are unwilling to sell any goods.
C) both sides of the market are able to carry out their desired transactions.
D) producers can sell all they plan to sell.
E) a surplus exists.
Answer: D

Use the figure below to answer the following questions.

Figure 3.4.2

88) The equilibrium price in the market illustrated by Figure 3.4.2 is

A) $2 a unit. B) $8 a unit. C) $6 a unit. D) $4 a unit. E) $10 a unit.
Answer: C

89) Refer to Figure 3.4.2. When the price is $10 a unit,

A) consumers will buy 500 units of output.
B) the surplus is zero.
C) consumers will buy nothing.
D) a shortage occurs.
E) consumers will buy 100 units of output.
Answer: E

90) At a price of $10 a unit in Figure 3.4.2,

A) there is a shortage of 400 units.
B) there is a shortage of 200 units.
C) there is a surplus of 200 units.
D) there is a surplus of 400 units.
E) supply exceeds demand.
Answer: D

18
91) At a price of $4 a unit in Figure 3.4.2,
A) the equilibrium quantity is 400 units.
B) there is a shortage of 200 units.
C) the quantity demanded is 200 units.
D) the quantity supplied is 400 units.
E) there is a surplus of 200 units.
Answer: B

92) Which one of the following correctly describes how price adjustment eliminates a surplus?
A) As the price falls, the quantity demanded increases and the quantity supplied decreases.
B) As the price falls, the demand for substitutes decreases, which eliminates the surplus.
C) As the price rises, the quantity demanded increases and the quantity supplied decreases.
D) As the price rises, the quantity demanded decreases and the quantity supplied increases.
E) As the price falls, the quantity demanded decreases and the quantity supplied increases.
Answer: A

93) Which one of the following correctly describes how price adjustment eliminates a shortage?
A) As the price falls, the quantity demanded increases and the quantity supplied increases.
B) As the price falls, the quantity demanded increases and the quantity supplied decreases.
C) As the price rises, the quantity demanded decreases and the quantity supplied increases.
D) As the price falls, the quantity demanded decreases and the quantity supplied increases.
E) As the price rises, the quantity demanded increases and the quantity supplied decreases.
Answer: C

94) If the price is above the equilibrium price, then

A) a surplus exists.
B) none of the good will be sold.
C) a shortage exists.
D) the price must rise further to reach the new market equilibrium.
E) price will not change; producers will cut back production until the market is in equilibrium.
Answer: A

95) A shortage will exist if

A) the price is above the equilibrium price.
B) there are not enough consumers.
C) there are not enough producers.
D) the price is below the equilibrium price.
E) demand decreases.
Answer: D

96) The price of a good will tend to fall if

A) there is a surplus at the current price.
B) the current price is below the equilibrium price.
C) the quantity supplied exceeds the quantity demanded at the current price.
D) Both A and C are true.
E) None of the above are true.
Answer: D

19
 97) If the market for Twinkies is in equilibrium, then
A) Twinkies must be a normal good.
B) consumers would like to buy more at the current price.
C) producers would like to sell more at the current price.
D) there is a surplus.
E) the equilibrium quantity equals the quantity demanded.
Answer: E

98) A shortage is the amount by which quantity

A) supplied exceeds the equilibrium quantity.
B) demanded exceeds the equilibrium quantity.
C) supplied exceeds quantity demanded.
D) demanded increases when the price rises.
E) demanded exceeds quantity supplied.
Answer: E

99) A surplus
A) is the amount by which the quantity supplied exceeds the equilibrium quantity.
B) is the amount by which the quantity demanded exceeds the equilibrium quantity.
C) is the amount by which the quantity demanded exceeds the quantity supplied.
D) will lead to rising prices.
E) exists if the price is above the equilibrium price.
Answer: E

100) When a shortage occurs, there is a tendency for the

A) price to remain unchanged.
B) quantity demanded to increase.
C) quantity supplied to decrease.
D) price to fall.
E) price to rise.
Answer: E

Refer to the table below for the following question.

Table 3.4.2

Price Quantity demanded Quantity supplied

(dollars per bottle) (bottles per week) (bottles per week)
2 180 60
6 140 100
10 100 140
14 60 180
18 20 220

101) Refer to Table 3.4.2. The table shows the demand and supply schedules for shampoo. Choose the correct statement.
A) There is no equilibrium in this market.
B) The equilibrium quantity is 100 bottles a week.
C) The equilibrium price is an unknown amount between $6 and $10 a bottle.
D) The equilibrium price is $8 a bottle.
E) The equilibrium quantity is 140 bottles a week.
Answer: D

20
102) If the quantity of textbooks supplied is 10,000 per year and the quantity of textbooks demanded is 8,000 per year,
there is a ________ in the market and the price will ________.
A) surplus; fall
B) surplus; rise
C) shortage; fall
D) shortage; rise
E) surplus; either rise or fall depending on whether supply increases to meet the surplus
Answer: A

103) If the market for earbuds is in equilibrium, then

A) producers would like to sell less at the current price.
B) consumers would like to buy less at the current price.
C) the quantity supplied equals the quantity demanded.
D) earbuds must be a normal good.
E) the supply of earbuds will never increase and the demand for earbuds will never decrease.
Answer: C

104) Consider a graph that shows an upward-sloping supply curve and a downward-sloping demand curve. The
equilibrium price and equilibrium quantity are found at the
A) lowest possible price.
B) point at which demand equals supply.
C) horizontal intercept of the demand curve.
D) point at which the quantity demanded equals the quantity supplied.
E) vertical intercept of the supply curve.
Answer: D

105) When a market is in equilibrium,

A) the quantity supplied is greater than or equal to the quantity demanded.
B) the number of buyers equals the number of sellers.
C) firms are producing the maximum quantity possible given the existing technology.
D) there is neither a surplus nor a shortage.
E) supply equals demand.
Answer: D

106) On a hot summer day, there is a shortage of ice cream. How does the ice cream market move to equilibrium?
A) As the price rises, the quantity demanded decreases and the quantity supplied increases.
B) As the price rises, the quantity demanded increases and the quantity supplied decreases.
C) The supply of ice cream increases.
D) The demand for ice cream decreases.
E) It doesn't. The market will not be in equilibrium until the temperature falls.
Answer: A

107) When a market is in equilibrium, who has an incentive to change the price?
A) buyers
B) buyers and sellers
C) the government
D) sellers
E) neither buyers nor sellers
Answer: E

21
 108) What is the equilibrium price?
The equilibrium price is the price at which
A) the quantity demanded equals the quantity supplied.
B) the quantity supplied exceeds the quantity demanded but consumer wants are satisfied.
C) the government collects the maximum amount of sales tax.
D) the quantity demanded exceeds the quantity supplied but producers are able to sell all they produce.
E) supply equals demand.
Answer: A

109) When the number of working mothers increases, the market for child care services experiences
A) a decrease in quantity supplied, and the price of child care services rises.
B) a decrease in demand, and the price of child care services falls.
C) an increase in supply, and the price of child care services rises.
D) an increase in quantity demanded, and the price of child care services rises.
E) an increase in demand, and the price of child care services rises.
Answer: E

Use the figure below to answer the following questions.

Figure 3.5.1

110) If the demand curve is D2 in Figure 3.5.1,

A) a rise in price will shift the demand curve to D3 .
B) the equilibrium price is P2 and the equilibrium quantity is Q2 .
C) the price will rise.
D) there is a shortage in the amount of Q2 - Q0 .
E) the equilibrium price is P2 and the equilibrium quantity is Q0 .
Answer: B

22
111) Initially, the demand curve for good A is D2 in Figure 3.5.1. Suppose good B is a substitute for good A. If the price
of B falls,
A) the price of A will rise.
B) there will be a surplus of good A at P2 .
C) there will be a shortage of good A at P2 .
D) the demand curve for good A will shift from D2 to D3 .
E) the equilibrium quantity of good A will increase.
Answer: B

112) Initially, the demand curve for good A is D2 in Figure 3.5.1. If income increases and A is a normal good, we would
expect to see a movement from point A to point
A) E. B) C. C) D. D) B. E) E or point D.
Answer: B

113) The price of a good will rise if

A) there is a surplus of the good.
B) supply of the good decreases.
C) the price of a substitute for the good decreases.
D) demand for the good decreases.
E) the good is an inferior good and income increases.
Answer: B

114) The price of a good will fall if

A) demand for the good increases.
B) the supply of the good decreases.
C) there is a surplus of the good.
D) there is a shortage of the good.
E) demand for the good does not change.
Answer: C

115) The price of a good will fall if

A) supply of the good increases.
B) demand for the good remains constant.
C) demand for the good increases.
D) supply of the good decreases.
E) supply of the good remains constant.
Answer: A

116) Suppose we observe a rise in the price of good A and an increase in the quantity of good A bought and sold. Which
one of the following is a likely explanation?
A) The supply of A increased.
B) The law of demand is violated.
C) The demand for A decreased.
D) The supply of A decreased.
E) The demand for A increased.
Answer: E

23
117) Suppose we observe a rise in the price of good A and a decrease in the quantity of good A bought and sold. Which
one of the following is a likely explanation?
A) The supply of A decreased.
B) The supply of A increased.
C) The demand for A increased.
D) The demand for A decreased.
E) The law of supply is violated.
Answer: A

118) Suppose we observe a fall in the price of good A and an increase in the quantity of good A bought and sold. Which
one of the following is a likely explanation?
A) The supply of A increased.
B) The law of supply is violated.
C) The demand for A increased.
D) The demand for A decreased.
E) The supply of A decreased.
Answer: A

119) Suppose we observe a fall in the price of good A and a decrease in the quantity of good A bought and sold. Which
one of the following is a likely explanation?
A) The demand for A decreased.
B) The supply of A increased.
C) The demand for A increased.
D) The supply of A decreased.
E) The law of demand is violated.
Answer: A

120) When the demand for good A increases,

A) the equilibrium price and equilibrium quantity increase.
B) a surplus occurs at the original price.
C) the equilibrium price rises, and the equilibrium quantity decreases.
D) the equilibrium price falls, and the equilibrium quantity increases.
E) the equilibrium price and equilibrium quantity decrease.
Answer: A

121) When the supply of good A decreases,

A) the equilibrium price rises, and the equilibrium quantity decreases.
B) the equilibrium price and the equilibrium quantity decrease.
C) the equilibrium price falls, and the equilibrium quantity increases.
D) a surplus occurs at the original price.
E) the equilibrium price and the equilibrium quantity increase.
Answer: A

122) If A is an inferior good and consumer income rises, the demand for A
A) decreases and the equilibrium price falls, but the equilibrium quantity increases.
B) decreases, the equilibrium price rises, and the equilibrium quantity decreases.
C) decreases, and the equilibrium price and the equilibrium quantity decrease.
D) increases and the equilibrium price rises, but the equilibrium quantity decreases.
E) increases, and the equilibrium price and the equilibrium quantity increase.
Answer: C

24
123) If A and B are substitutes and the price of A rises, we will observe
A) a decrease in the demand for A.
B) an increase in the equilibrium price but a decrease in the equilibrium quantity of B.
C) a decrease in equilibrium price but an increase in the equilibrium quantity of B.
D) an increase in the equilibrium price and the equilibrium quantity of B.
E) a decrease in the equilibrium price and the equilibrium quantity of B.
Answer: D

124) If A and B are substitutes and the cost of a factor of production used in the production of A increases, then the price
of
A) A and B fall.
B) A falls, and the price of B will stay unchanged.
C) A and B rise.
D) B rises, but the price of A falls.
E) B falls, but the price of A rises.
Answer: C

125) If A and B are substitutes in production and the price of A falls, the supply of B
A) decreases, and the price of B rises.
B) decreases, and the price of B falls.
C) increases, and the price of B rises.
D) increases, and the price of B falls.
E) does not change.
Answer: D

126) If A and B are complements in production and the price of A falls, the supply of B
A) decreases, and the price of B falls.
B) increases, and the price of B rises.
C) decreases, and the price of B rises.
D) increases, and the price of B falls.
E) does not change.
Answer: C

127) Crude oil is a factor of production used in the production of gasoline. If the price of crude oil rises, we expect the
A) equilibrium quantity of gasoline to decrease because the supply of gasoline increases.
B) price of gasoline to rise because the demand gasoline increases.
C) price of gasoline to rise because the supply of gasoline decreases.
D) equilibrium quantity of gasoline to increase because demand for gasoline increases.
E) price of gasoline to fall because the demand for gasoline increases.
Answer: C

128) If demand increases and supply decreases, then the

A) equilibrium quantity increases, but the effect on the equilibrium price is unknown.
B) effect on both equilibrium price and quantity is unknown.
C) equilibrium price rises, but the effect on the equilibrium quantity is unknown.
D) equilibrium price falls, but the effect on the equilibrium quantity is unknown.
E) equilibrium quantity decreases, but the effect on the equilibrium price is unknown.
Answer: C

25
129) If demand decreases and supply increases, then the
A) equilibrium price rises, but the effect on the equilibrium quantity is unknown.
B) equilibrium quantity decreases, but the effect on the equilibrium price is unknown.
C) equilibrium quantity increases, but the effect on the equilibrium price is unknown.
D) equilibrium price falls, but the effect on the equilibrium quantity is unknown.
E) effect on both equilibrium price and quantity is unknown.
Answer: D

130) If we observe a rise in the equilibrium price of good A, we know that the demand for A has
A) decreased or the supply of A has increased or both.
B) increased or the supply of A has decreased or both.
C) decreased or the supply of A has decreased or both.
D) increased or the supply of A has increased or both.
E) not changed.
Answer: B

131) If we observe a fall in the equilibrium price of good A, we know that the demand for A has
A) increased or the supply of A has decreased or both.
B) decreased or the supply of A has decreased or both.
C) decreased or the supply of A has increased or both.
D) increased or the supply of A has increased or both.
E) not changed.
Answer: C

132) If we observe an increase in the equilibrium quantity of good A, we know that

A) either the demand for A has decreased or the supply of A has decreased or both.
B) either the demand for A has decreased or the supply of A has increased or both.
C) either the demand for A has increased or the supply of A has increased or both.
D) either the demand for A has increased or the supply of A has decreased or both.
E) the price of A has risen.
Answer: C

133) If we observe a decrease in the equilibrium quantity of good A, we know that

A) either the demand for A has decreased or the supply of A has decreased or both.
B) either the demand for A has increased or the supply of A has increased or both.
C) either the demand for A has decreased or the supply of A has increased or both.
D) either the demand for A has increased or the supply of A has decreased or both.
E) the price of A has fallen.
Answer: A

134) Which of the following will definitely result in an increase in the equilibrium price?
A) a surplus of the good
B) a decrease in demand combined with an increase in supply
C) a decrease in both demand and supply
D) an increase in demand combined with a decrease in supply
E) an increase in both demand and supply
Answer: D

26
135) Which one of the following will definitely lower the equilibrium price?
A) a decrease in demand combined with an increase in supply
B) a shortage of the good
C) an increase in both demand and supply
D) an increase in demand combined with a decrease in supply
E) a decrease in both demand and supply
Answer: A

136) Which one of the following will definitely decrease the equilibrium quantity?
A) an increase in price
B) a decrease in both demand and supply
C) a decrease in demand combined with an increase in supply
D) an increase in both demand and supply
E) an increase in demand combined with a decrease in supply
Answer: B

137) A technological improvement in the production of good A

A) increases the demand for A.
B) decreases the equilibrium price of A and decreases the equilibrium quantity.
C) decreases the supply of A.
D) increases the supply of A.
E) decreases the quantity demanded of A.
Answer: D

138) Which of the following events leads to a rise in the price of oranges?
A) a rise in the price of apples if apples and oranges are substitutes
B) good growing weather in Florida
C) a scientific discovery that oranges cause hair loss
D) a decrease in income if oranges are a normal good
E) a technological improvement in the production of oranges
Answer: A

139) If A and B are complements and the cost of a factor of production used in the production of A decreases, then the
price of
A) A will fall and the price of B will rise.
B) both A and B will fall.
C) A will rise and the price of B will fall.
D) A will fall and the price of B will remain unchanged.
E) both A and B will rise.
Answer: A

140) If both demand and supply increase, then the equilibrium price
A) rises, falls, or remains unchanged, and the equilibrium quantity increases.
B) and equilibrium quantity increase.
C) rises, and the equilibrium quantity increases, decreases, or remains unchanged.
D) falls, and the equilibrium quantity increases.
E) falls, and the equilibrium quantity increases, decreases, or remains unchanged.
Answer: A

27
 141) The Genius Software Company develops an amazing new software package that is used only with Einstein
Computers. As a result, the equilibrium price of
A) all software packages rises.
B) Einstein computers rises, and the equilibrium quantity of Einstein computers decreases.
C) rival software packages falls and the equilibrium quantity of rival software packages increases.
D) all computers rises.
E) Einstein computers rises, and the equilibrium quantity of Einstein computers increases.
Answer: E

Use the information below to answer the following questions.

Fact 3.5.1

The market for coffee is initially in equilibrium. Pepsi is a substitute for coffee; cream is a complement of coffee. Consider the
market for coffee. Assume that all ceteris paribus assumptions continue to hold except for the event listed.

142) Refer to Fact 3.5.1. If coffee is a normal good, then a decrease in income
A) lowers the price and decreases the quantity of coffee supplied.
B) raises the price and increases the quantity of coffee supplied.
C) raises the price and increases the quantity of coffee demanded.
D) has no effect on the coffee market.
E) lowers the price and decreases the quantity of coffee demanded.
Answer: A

143) Refer to Fact 3.5.1. An increase in the price of Pepsi, a substitute for coffee,
A) lowers the price and decreases the quantity of coffee demanded.
B) increases the supply of coffee.
C) raises the price and increases the quantity of coffee supplied.
D) raises the price and increases the quantity of coffee demanded.
E) lowers the price and decreases the quantity of coffee supplied.
Answer: C

144) Refer to Fact 3.5.1. A technological improvement lowers the cost of producing coffee. At the same time, preferences
for coffee decrease. The equilibrium quantity of coffee
A) increases.
B) decreases.
C) remains the same.
D) increases or decreases depending on whether the price of coffee falls or rises.
E) increases, decreases, or remains the same depending on the relative shifts of the demand and supply curves.
Answer: E

145) Refer to Fact 3.5.1. If there is an increase in the wages of farm workers who harvest coffee beans, the equilibrium
quantity of coffee
A) increases.
B) decreases.
C) remains the same.
D) increases or decreases depending on the slope of the supply and demand curves.
E) increases or decreases depending on the relative shifts of the supply and demand curves.
Answer: B

28
146) Refer to Fact 3.5.1. The price of cream falls. Simultaneously, there is an increase in the wages of farm workers who
harvest coffee beans. The equilibrium quantity of coffee
A) increases.
B) decreases.
C) remains the same.
D) increases or decreases depending on whether the price of coffee rises or falls.
E) increases, decreases, or remains the same depending on the relative shifts of the supply and demand curves.
Answer: E

147) Farm land can be used to produce either cattle or corn. If the demand for cattle increases, then the
A) demand for corn increases.
B) supply of corn increases.
C) price of corn falls.
D) supply of corn decreases.
E) demand for corn decreases.
Answer: D

148) When the price of good A rises, the supply curve of good B shifts rightward. Which of the following statements are
true?
A) A is a factor used in the production of B.
B) A and B are complements in production.
C) A and B are substitutes.
D) A and B are substitutes in production.
E) A and B are complements.
Answer: B

149) "As domestic car prices have increased, consumers have found foreign cars to be a better bargain. Consequently,
domestic car sales have fallen and foreign car sales have risen." Based on this information alone, there has been a
A) movement along the demand curves for both domestic and foreign cars.
B) shift in the demand curves for both domestic and foreign cars.
C) shift of the demand curve for domestic cars and a movement along the demand curve for foreign cars.
D) shift in the supply curves for both domestic and foreign cars.
E) movement along the demand curve for domestic cars and a shift of the demand curve for foreign cars.
Answer: E

29
Use the figure below to answer the following questions.

Figure 3.5.2

Original equilibrium at 1.

150) Refer to Figure 3.5.2, which represents the market for beans. If the price of peas, a substitute for beans, rises, what
is the new beans equilibrium, ceteris paribus?
A) 8 B) 3 C) 9 D) 5 E) 6
Answer: A

151) Refer to Figure 3.5.2, which represents the market for beer. If the price of pizza, a complement of beer, rises, what
is the new beer equilibrium, ceteris paribus?
A) 8 B) 3 C) 9 D) 5 E) 6
Answer: B

152) Refer to Figure 3.5.2, which represents the market for beans. If the price of peas, a substitute in production for
beans, rises, what is the new beans equilibrium, ceteris paribus?
A) 8 B) 3 C) 9 D) 5 E) 6
Answer: D

153) Refer to Figure 3.5.2, which represents the market for cow manure. If the price of milk, a complement in
production of manure, rises, what is the new manure equilibrium, ceteris paribus?
A) 8 B) 3 C) 9 D) 5 E) 6
Answer: E

154) Refer to Figure 3.5.2, which represents the market for beans. If the price of peas, a substitute for beans and a
substitute in production, rises, what is the new beans equilibrium, ceteris paribus?
A) 2 B) 3 C) 9 D) 4 E) 7
Answer: E

155) Refer to Figure 3.5.2, which represents the market for beans. If the price of peas, a substitute for beans, rises, and
the cost of producing beans decreases, what is the new beans equilibrium, ceteris paribus?
A) 2 B) 3 C) 9 D) 4 E) 7
Answer: C

30
 156) Refer to Figure 3.5.2, which represents the market for tacos. A new scientific study reveals that tacos cause bad
breath. Simultaneously, the cost of producing tacos decreases. What is the new equilibrium, ceteris paribus?
A) 2 B) 3 C) 9 D) 4 E) 7
Answer: D

157) Refer to Figure 3.5.2, which represents the market for tacos. A new scientific study reveals that tacos cause bad
breath. Simultaneously, the cost of producing tacos increases. What is the new equilibrium, ceteris paribus?
A) 2 B) 3 C) 9 D) 4 E) 7
Answer: A

Use the table below to answer the following questions.

Table 3.5.1
The Market for Car-Seat Heaters

Price Quantity Demanded Quantity Supplied

(dollars per heater) (heaters per month) (heaters per month)
40 500 300
50 450 350
60 400 400
70 350 450
80 300 500
90 250 550
100 200 600

158) Refer to Table 3.5.1. The equilibrium price is $________ and the equilibrium quantity is ________ heaters per
month.
A) 80; 500 B) 60; 400 C) 50; 450 D) 80; 300 E) 50; 350
Answer: B

159) Refer to Table 3.5.1. If the price is set at $80, there will be a
A) shortage of 200 units and price will rise.
B) surplus of 200 units and supply will fall.
C) surplus of 200 units and demand will rise.
D) shortage of 200 units and demand will fall.
E) surplus of 200 units and price will fall.
Answer: E

160) Refer to Table 3.5.1. Suppose the cost of production rises and supply decreases by 100 units at each price. The new
equilibrium price is $________ and equilibrium quantity is ________ units.
A) 70; 350 B) 70; 450 C) 50; 450 D) 60; 400 E) 50; 350
Answer: A

161) Refer to Table 3.5.1. Suppose a problem develops with car-seat heaters they malfunction and occasionally cause
serious burns. As a result, demand decreases by 100 heaters at each price. The new equilibrium price is $________
and the new equilibrium quantity is ________ heaters per month.
A) 50; 450 B) 50; 350 C) 70; 350 D) 60; 400 E) 70; 450
Answer: B

31
 162) Refer to Table 3.5.1. Suppose a problem develops with car-seat heaters they malfunction and occasionally cause
serious burns. As a result, demand decreases by 100 heaters at each price. Simultaneously, the cost of production
rises, and supply decreases by 100 heaters at each price. The new equilibrium price is $________ and the new
equilibrium quantity is ________ heaters per month.
A) 50; 350 B) 60; 300 C) 70; 450 D) 70; 350 E) 50; 450
Answer: B

Use the figure below to answer the following questions.

Table 3.5.2
Demand and Supply Schedules for Cups of Coffee each day at CoolU

Price Quantity Demanded Quantity Supplied

(dollars per cup) (cups of coffee per day) (cups of coffee per day)
0.70 1,200 0
0.80 1,100 200
0.90 1,000 400
1.00 900 600
1.10 800 800
1.20 700 1,000
1.30 600 1,200
1.40 500 1,400
1.50 400 1,600

163) Refer to Table 3.5.2. The equilibrium price is $________ and the equilibrium quantity is ________ cups a day.
A) 1.00; 800 B) 1.10; 900 C) 0.90; 1000 D) 1.30; 1200 E) 1.10; 800
Answer: E

164) Refer to Table 3.5.2. If the price is set at $0.80 per cup, there is ________ leading to a price ________.
A) a shortage; fall
B) a surplus; fall
C) an equilibrium; rise
D) a shortage; rise
E) a surplus; rise
Answer: D

165) Refer to Table 3.5.2. If the price is set at $1.30 per cup, there is ________ leading to a price ________.
A) a surplus; rise
B) an equilibrium; rise
C) a shortage; fall
D) a shortage; rise
E) a surplus; fall
Answer: E

166) Refer to Table 3.5.2. A premature frost destroys half the coffee trees. This change would be represented as a
A) leftward shift of the supply curve.
B) rightward shift of the supply curve.
C) movement down along the supply curve.
D) rightward shift of the demand curve.
E) leftward shift of the demand curve.
Answer: A

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 167) Refer to Table 3.5.2. A premature frost destroys half the coffee trees and the supply of coffee is cut in half. The new
equilibrium price is $________ and the new equilibrium quantity is ________ cups a day.
A) 1.30; 600 B) 1.50; 400 C) 1.20; 700 D) 0.90; 400 E) 1.30; 500
Answer: A

168) Refer to Table 3.5.2. Professor Hyper publishes a new study, showing that coffee raises the test performance of
students. Students double their demand for coffee. This change would be represented as a
A) rightward shift of the supply curve.
B) movement up along the demand curve.
C) leftward shift of the demand curve.
D) leftward shift of the supply curve.
E) rightward shift of the demand curve.
Answer: E

169) Refer to Table 3.5.2. Professor Hyper publishes a new study, showing that coffee raises the test performance of
students. Students double their demand for coffee and the quantity of coffee demanded at each price doubles. The
new equilibrium price is $________, and the new equilibrium quantity is ________ cups a day.
A) 1.40; 1,400 B) 1.20; 1,000 C) 1.50; 1,600 D) 1.30; 1,200 E) 2.20; 800
Answer: D

170) Refer to Table 3.5.2. Professor Hyper publishes a new study, showing that coffee raises the test performance of
students. Students double their demand for coffee and the quantity of coffee demanded at each price doubles. In
addition, a premature frost destroys half the coffee trees and the supply of coffee is cut in half. The new
equilibrium price is $________ and the new equilibrium quantity is ________ cups a day.
A) 1.10; 400 B) 1.10; 800 C) 1.50; 800 D) 1.10; 1,600 E) 1.50; 400.
Answer: C

Use the table below to answer the following questions.

Table 3.5.3
Demand and supply schedules for designer sport t-shirts

Price Quantity Supplied Quantity Demanded

(dollars per t-shirt) (t-shirts per month) (t-shirts per month)
3 150 300
4 160 280
5 170 260
6 180 240
7 190 220
8 200 200
9 210 180
10 220 160
11 230 140
12 240 120

171) Refer to Table 3.5.3. The equilibrium price is $________ and the equilibrium quantity is ________ t-shirts per
month.
A) 8; 200 B) 8; 180 C) 6; 200 D) 8; 220 E) 7; 220
Answer: A

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172) Refer to Table 3.5.3. Suppose that the price of a designer sport t-shirt is $6. The market has ________ leading to
________.
A) a surplus; a fall in the price
B) a shortage; a fall in the price
C) a surplus; a rise in the price
D) a shortage; a rise in the price
E) an equilibrium; no change in the price
Answer: D

173) Refer to Table 3.5.3. Suppose that the price of a designer sport t-shirt is $10. The market has ________ leading to
________.
A) an equilibrium; no change in the price
B) a surplus; a fall in the price
C) a shortage; a fall in the price
D) a surplus; a rise in the price
E) a shortage; a rise in the price
Answer: B

174) Refer to Table 3.5.3. In a YouTube interview, Joe Cool shows off his designer sport t-shirt, setting off a new craze
that doubles business on sportswear websites. This is shown as a
A) movement up along the demand curve.
B) leftward shift of the demand curve.
C) rightward shift of the demand curve.
D) rightward shift of the supply curve.
E) leftward shift of the supply curve.
Answer: C

175) Refer to Table 3.5.3. In a YouTube interview, Joe Cool shows off his designer sport t-shirt, setting off a new craze
that doubles business on sportswear websites. The quantity of t-shirts demanded doubles at each price. The new
equilibrium price is $________ and the new equilibrium quantity is ________ t-shirts per month.
A) 12; 240 B) 12; 120 C) 16; 400 D) 8; 400 E) 16; 200
Answer: A

176) Refer to Table 3.5.3. A website launches, which has the capacity to do as much business as all the existing
sportswear websites. The quantity of t-shirts supplied doubles at each price. This is shown as a
A) leftward shift of the supply curve.
B) leftward shift of the demand curve.
C) rightward shift of the demand curve.
D) movement up along the supply curve.
E) rightward shift of the supply curve.
Answer: E

177) Refer to Table 3.5.3. A website launches, which has the capacity to do as much business as all the existing
sportswear websites. The quantity of t-shirts supplied doubles at each price. The new equilibrium price is
$________ and the new equilibrium quantity is ________ t-shirts per month.
A) 4; 400 B) 0; 400 C) 3; 300 D) 16; 200 E) 8; 400
Answer: C

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 178) Refer to Table 3.5.3. A website launches, which has the capacity to do as much business as all the existing
sportswear websites. The quantity of t-shirts supplied doubles at each price. In addition, in a YouTube interview,
Joe Cool shows off his designer sport t-shirt, setting off a new craze that doubles business on sportswear websites.
The quantity of t-shirts demanded doubles at each price. The new equilibrium price is $________ and the new
equilibrium quantity is ________ t-shirts per month.
A) 12; 240 B) 8; 400 C) 8; 200 D) 16; 400 E) 3; 400
Answer: B

Use the table below to answer the following questions.

Table 3.5.4
Quantities demanded and supplied in equilibrium
before and after a drought strikes potato farms

Potatoes Potatoes Hamburgers Hamburgers Rice Rice

before after before after before after
Region 1 100 30 50 20 3 50
Region 2 10 5 4 50 50 60

179) Refer to Table 3.5.4. In Region 1, potatoes and hamburgers are

A) inferior goods.
B) unrelated goods.
C) complements.
D) substitutes.
E) normal goods.
Answer: C

180) In Table 3.5.4 potatoes and rice are

A) substitutes in Region 1 and complements in Region 2.
B) substitutes in Region 2 and complements in Region 1.
C) substitutes in both regions.
D) unrelated goods in both regions.
E) complements in both regions.
Answer: C

181) "As fewer people buy computers, the demand for Internet service will decrease and the price of Internet service
will increase. The rise in the price of Internet service will increase the supply of Internet service." This statement is
________ because ________.
A) false; a decrease in demand for Internet service does not increase the price of Internet service and an increase
in the price of Internet service does not increase the supply of Internet service
B) false; the decrease in the demand for Internet service creates a surplus and to eliminate the surplus, supply
increases
C) true; when the demand for Internet service increases, the supply of Internet service increases so that the price
of Internet service does not increase
D) true; the increase in the price of Internet service increases the supply of Internet service to eliminate the
shortage
E) true, when the demand for Internet service increases, the supply of Internet service increases too so that no
surplus occurs
Answer: A

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182) The quantity of gasoline supplied
A) decreases when robots cut car production costs.
B) increases when all speed limits on highways are abolished.
C) increases when the price of crude oil rises.
D) increases when the price of a car rises.
E) decreases when the price of crude oil rises.
Answer: B

183) What will happen to the equilibrium price and quantity of coffee if it is discovered to help prevent colds and, at the
same time, Brazil and Vietnam emerge in the global market as massive producers of coffee?
A) The equilibrium quantity will increase and the equilibrium price will remain unchanged.
B) The equilibrium price will rise and the effect on the equilibrium quantity is uncertain.
C) The equilibrium price will fall and the effect on the equilibrium quantity is uncertain.
D) The equilibrium quantity will increase and the effect on the equilibrium price is uncertain.
E) The equilibrium quantity will decrease and the equilibrium price will rise.
Answer: D

184) All cereal producers have decided to add a new ingredient, the "crunch enhancer," to cereals. Crunch enhancer
keeps cereals crisper longer in milk and, as a result, consumers decide they like cereal more than before. What
happens to the supply and demand curves for cereal now that it costs more to produce and consumers like it
better?
A) The supply curve shifts leftward and the demand curve remains unchanged.
B) The supply and demand curves both shift rightward.
C) The supply curve shifts rightward and the demand curve remains unchanged.
D) The supply curve shifts leftward and the demand curve shifts rightward.
E) Neither curve changes but a movement occurs up along the demand curve and a movement occurs up along
the supply curve.
Answer: D

185) All grapefruit juice producers have decided to blend tangerine juice with grapefruit juice. This blend results in a
higher cost of production, but studies show that consumers prefer the taste of the blend to straight grapefruit juice.
What will happen to the equilibrium price and quantity of grapefruit juice?
A) The equilibrium price rises and the equilibrium quantity remains unchanged.
B) The equilibrium price rises but the effect on the equilibrium quantity is uncertain.
C) The equilibrium quantity increases but the effect on the equilibrium price is uncertain.
D) The equilibrium price falls and the equilibrium quantity increases.
E) The equilibrium price rises and the equilibrium quantity increases.
Answer: B

186) Today, the price of peanuts increases. Peanut butter producers and peanut butter consumers expect that the price
of peanut butter will rise in the future. In the current market for peanut butter, the equilibrium price rises and the
equilibrium quantity increases. It must be the case that
A) the supply of peanut butter decreased by more than the demand for peanut butter increased.
B) the demand for peanut butter increased by more than the supply of peanut butter increased.
C) the demand for peanut butter increased by more than the supply of peanut butter decreased.
D) the supply of peanut butter decreased by more than the demand for peanut butter decreased.
E) peanut butter producers and peanut butter consumers have incorrect expectations.
Answer: C

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187) The cost of producing aspirin increases at the same time as doctors discover that taking one aspirin per day
reduces the risk of heart attacks. As a result, the
A) supply of aspirin decreases and the demand for aspirin increases.
B) equilibrium quantity of aspirin increases and the equilibrium price of aspirin rises.
C) equilibrium quantity of aspirin decreases and the equilibrium price of aspirin rises.
D) supply of aspirin decreases by more than the demand for aspirin increases.
E) supply of aspirin increases and the demand for aspirin decreases.
Answer: A

188) Suppose income increases. Choose the correct statement.

A) The equilibrium quantity of turnips increases if a turnip is an inferior good.
B) The equilibrium price of a turnip rises if a turnip is an inferior good.
C) The equilibrium price of a turnip falls if a turnip is an inferior good.
D) The supply of turnips decreases if a turnip is a normal good.
E) The supply of turnips decreases if a turnip is an inferior good.
Answer: C

189) The demand curve for knobs is P = 75 - 6QD and the supply curve for knobs is P = 35 + 2QS. What is the
equilibrium price of a knob?
A) $45 B) $10 C) $5 D) $40 E) $75
Answer: A

190) The y- axis intercept of the supply curve is 40 and the slope is 6. The equation of the supply curve is
A) P = 40 - 6QS. B) QS = 40 - 6P. C) P = 3 + 40QS. D) QS = 40 + 6P. E) P = 40 + 6QS.
Answer: E

191) The y- axis intercept of the demand curve is 60 and the slope is -8. The equation of the demand curve is
A) QD = 60 - 8P.
B) QD = 60 + 8P.
C) P = 60 + 8QD.
D) P = 8 - 60QD.
E) P = 60 - 8QD.
Answer: E

192) The demand curve is P = 700 - 10QD. The supply curve is P = 400 + 5QS. At market equilibrium, the equilibrium
quantity is ________ and the equilibrium price is ________.
A) 20; 500 B) 300; 15 C) 0.05; 5 D) 5; 0.05 E) 500; 20
Answer: A

193) The demand curve is P = 700 - 20QD. The supply curve is P = 300 + 20QS. At market equilibrium, the equilibrium
quantity is ________ and the equilibrium price is ________.
A) 10; 500 B) 400; 40 C) 500; 10 D) 0.10; 20 E) 20; 0.10
Answer: A

194) The demand curve is P = 800 - 25QD. The supply curve is P = 500 + 25QS. At market equilibrium, the equilibrium
quantity is ________ and the equilibrium price is ________.
A) 650; 6.0 B) 6.0; 650 C) 25; 0.17 D) 1,300; zero E) 0.17; 25
Answer: B

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195) The price at which sellers are not willing to supply a good is $700 per unit. If the supply curve passes through the
point (3,718), what is the equation of the supply curve?
A) QS = 718 + 3P
B) QS = 700 - 6P
C) P = 700 + 6QS
D) QS = 718 - 6P
E) P = 718 + 3QS
Answer: C

196) The price at which sellers are not willing to supply a good is $70 a unit. As the quantity supplied of the good
increases by one unit, the minimum price at which someone is willing to sell that unit increased by $5. What is the
equation of this supply curve?
A) P = 5 + 70QS B) P = 70 - 5QS C) QS = 5 + 70P D) QS = 70 - 5P E) P = 70 + 5QS
Answer: E

197) The price at which buyers are not willing to buy a good is $80 a unit. As the quantity demanded of the good
increases by one unit, the maximum price at which someone is willing to buy that unit decreases by $5. What is the
equation of the demand curve?
A) QD = 80 - 5P B) P = 80 - 5QD C) P = 80 + 5QD D) QD = 5 + 80P E) P = 5 + 80QD
Answer: B

198) If a demand curve has a y-axis intercept of 100 and passes through the point (5,20), what is the equation of the
demand curve?
A) P = 100 + 16QD
B) QD = 5 - 20P
C) QD = 100 + 16P
D) P = 100 - 16QD
E) QD = 100 - 16P
Answer: D

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