The demand for a product is the amount that

1. buyers purchase in the market
2. buyers are willing to purchase at a given price
3. sellers are willing to sell at a particular price
4. buyers are willing and able to purchase at alternative prices
5. buyers are able to purchase at a specific price

Answer: D

The demand curve shows how quantity demanded changes as the price changes. It implies that

1. only a change in price can shift a demand curve
2. everything else that affects demand is assumed to be constant
3. quantity demanded is unrelated to price
4. economists are concerned only with money
5. it is impossible to show how anything but price affects demand

Answer: B

The law of demand says that the lower the price of a good, other things constant

1. the smaller the demand for that good
2. the larger the demand for that good
3. the smaller the quantity demanded of that good
4. the larger the quantity demanded of that good

Answer: D

The law of demand states that

1. there is a positive relationship between price and quantity demanded
2. price is the only factor that influences the quantity that people are wiling and able to buy
3. price and quantity demanded are inversely related
4. the demand curve shifts whenever the price of a good changes

Answer: C

Movements along a demand curve are called changes in

1. demand
2. opportunity costs
3. quantity demanded
4. the substitution effect
5. preferences

Answer:C

Suppose you drink more tea because the price of coffee has increased. Which of the following best explains your action?

1. the law of supply
2. tea and coffee are complements
3. the substitution effect
4. the income effect
5. your normal income has increased

Answer: C

The law of demand is illustrated by a demand curve that is

1. horizontal
2. vertical
3. upward sloping
4. constant
5. downward sloping

Answer: E

The income effect refers to the impact of a change in

1. income on the price of a good
2. the general price level caused by a change in the price of another good
3. the price of a good on real income
4. the price of a substitute for the good under consideration
5. demand when income changes

Answer: C

A demand curve usually has a

1. negative slope because price and quantity demanded are inversely related
2. negative slope because as price rises, demand falls
3. positive slope because price and quantity demanded are positively related
4. positive slope because price and quantity demanded are inversely related
5. slope of zero because there is no change along a demand curve when everything else is held constant

Answer: A

Studies show that the demand curve for peas has shifted. Which of the following explanations would reject first?

1. The price of string beans has change.
2. The demand for corn has changed.
3. The demand for string beans has changed.
4. The income of consumers has changed.
5. The price of peas has changed.

Answer: E

The effect of a decrease in the price of personal computers, other things constant, is likely to be best represented by which of the following?

1. a leftward shift of the demand curve
2. a movement leftward along the demand curve
3. a rightward shift of the demand curve
4. a movement rightward along the demand curve
5. a rightward shift of the supply curve

Answer: D

Which of the following will not shift the demand curve for movie tickets?

1. a change in the cost of babysitting services
2. a change in the price of movie tickets
3. a change in the quality of television programs
4. a change in the income of movie-goers
5. a change in the number of consumers

Answer: B

If we say that demand has increased, we mean that there has been

1. a leftward movement along the demand curve
2. a rightward movement along the demand curve
3. a leftward shift of the demand curve
4. a rightward shift of the demand curve
5. an increase in the slope of the demand curve

Answer: D

Which of the following is most likely to be an inferior good?

1. airline travel
2. restaurant meals
3. a subscription to the Wall Street Journal
4. soft drinks
5. used clothing

Answer: E

If demand for personal computers increases as a result of an increase in income

1. a personal computer must be a normal good
2. personal computers must be an inferior good
3. personal computers must be a complement
4. the substituents for personal computers must be inferior good
5. the substitution effect is larger than the income effect

Answer: D

If the price of gasoline (a normal good) decreases, other things constant,

1. the demand for gasoline increases
2. the demand for gasoline decrease
3. the quantity demanded of gasoline increases
4. the quantity demanded of gasoline decreases
5. neither the demand for gasoline nor the quantity demanded of gasoline changes because everything is assumed constant along a demand curve

Answer: C

Two goods are considered substitutes only if a(n)

1. decrease in the demand for one leads to a decrease in the supply of the other
2. increase in the demand for one leads to a decrease in the supply of the other
3. increase in the price of one leads to an increase in the demand for the other
4. decrease in the price of one leads to an increase in the demand for the other
5. decrease in the supply of one leads producers to switch to production of the other

Answer: C

An increase in the price of butter, a substitute good, would be most likely to cause

1. a rightward shift of the demand curve for margarine
2. a leftward shift of the demand curve for margarine
3. the quantity of margarine demanded to increase
4. the quantity of margarine demanded to decrease
5. a decrease in the price of margarine

Answer: A

If the price of potato chips increases, other things constant, demand for potato-chip dip will

1. not change; only quantity demanded will change
2. increase because the goods are substitutes
3. decrease because the goods are substitutes
4. decrease because the goods are complements
5. increase because the goods are complements

Answer: D

If good B is a complement to good A, then a decrease in the price of B

1. increases the quantity demanded of A
2. decreases the demand for A
3. increases the demand for A
4. decreases the quantity demanded of A
5. will cause the demand for B to increase

Answer: C

Which of the following will cause the demand curve for a good to shift to the left?

1. an increase in the price of the good
2. a decrease in the price of the good
3. a decrease in the price of a complementary good
4. an expectation of a future price decline
5. an increase in the price of a substitute good

Answer: D

Which of the following would be most likely to increase the demand for downtown parking in a large city

1. improved bus service to the downtown area
2. lower downtown parking fees
3. more downtown parking lots
4. more freeways leading to the downtown area
5. a major employer moves to the suburbs

Answer: D

Which of the following is true of an increase in quantity supplied of a given good?

1. It is represented by a rightward shift in the supply curve
2. It could result from a technological improvement
3. The price of a key resource used to produce the good may have decreased
4. It is caused by an increase in the price of the good
5. The price of an alternating good has increased

Answer: D

Which of the following is true of the relationship between price and quantity supplied?

1. There is always an inverse relationship
2. More is supplied at lower prices
3. Producers work harder and sell more when the price decreases
4. There is a direct relationship between price and quantity supplied
5. It is always true that a higher price leads to a decrease in quantity supplied

Answer: D

The basic reason that supply curves slope upwards is that

1. demand curves slope downward
2. production is characterized by increasing costs
3. profits decline as product prices rise
4. greater output can only result from improved technology
5. price and quantity supplied are inversely related

Answer: B

Which of the following would shift the supply curve for a product to the right?

1. an increase in the price of a resource used in the good's production
2. the expectation of a higher price in the near future
3. an increase in the price of the product
4. an increase in the price of an alternative good
5. an improvement in the technology for producing the good

Answer: E

Which of the following will increase the supply of vanilla ice cream?

1. an increase in the price of vanilla beans (an ingredient in ice cream)
2. a decrease in the sales tax on restaurant bills
3. an increase in the price of chocolate ice cream
4. a decrease in the price of milk (an ingredient in ice cream)
5. an increase in the price of hot fudge

Answer: D

Which of the following events would increase the supply of tomatoes?

1. the introduction of mechanized tomato pickers, which raises the cost of production
2. an increase in wages for the tomato pickers
3. a decrease in the cost of fertilizer for the tomato plants
4. unreasonably hot, dry weather in the tomato-growing regions of the nation
5. a decrease in the price of pasta products

Answer: C

Assume that corn and soybeans are alternative that could be grown by most farmers. An increase in the price of corn will

1. increase the supply of corn
2. increase the supply of soybeans
3. decrease the supply of soybeans
4. decrease the supply of corn
5. have no effect on the supplies of corn and soybeans

Answer: C

An increase in the number of producers of a good will

1. increase the market supply because the price will rise
2. increase the market supply only if market demand increases too
3. increase the market supply because market supply is the sum of all individual supply curves
4. increase the market supply only if all suppliers have an identical supply curves
5. decrease the market supply because firms compete with each other and each firm supply more

Answer: C

When quantity demanded of a good is less than the quantity supplied at the prevailing market price,

1. the market is in equilibrium
2. the price of the good tends to rise
3. the price of the good tends to fall
4. the demand curve shifts rightward until the surplus is eliminated
5. the supply curve shifts leftward until the shortage is eliminated

Answer: C

A surplus occurs whenever

1. current price is greater than equilibrium price
2. quantity supplied exceeds quantity demanded at the equilibrium price
3. quantity demanded is greater than quantity supplied
4. the problem of scarcity of a good is solved
5. some buyers would be willing and able to pay even more for it than they have to at equilibrium

Answer: A

A surplus of shoes will cause

1. a decrease in the supply of shoes
2. a decrease in the demand of shoes
3. both a decrease in the supply of shoes and an increase in the demand for shoes
4. a decrease in the price of shoes, through a shift of either the supply curve or the demand curve
5. a decrease in the price of shoes

Answer: E

A shortage of textbooks will cause

1. a decrease in the supply of textbooks
2. a decrease in the demand for textbooks
3. both an increase in the supply of textbooks and a decrease in the demand for textbooks
4. an increase in the price of textbooks, cause by a shift of either the supply curve or the demand curve
5. an increase in the price of textbooks

Answer: E

A shortage occurs whenever

1. quantity demanded exceeds quantity supplied at the equilibrium price
2. price is less than equilibrium price
3. quantity demanded is less than quantity supplied
4. goods are scarce
5. some of the people who need the product are not willing and able to buy it at the equilibrium price

Answer: B

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The most important characteristic of the equilibrium price is that is

1. guarantees that producers earn profit
2. clears the market, leaving neither a surplus nor a shortage
3. maximizes the quantity demanded
4. minimizes the quantity demanded
5. guarantees that all buyers who desire the product will get it

Answer: B

When a market is in equilibrium,

1. producer earn profits
2. the minimum possible price is achieved
3. there is no incentive for consumers or producers to change their current behavior
4. excess demand is less than excess supply
5. the maximum possible price is achieved

Answer: C

An increase in demand will cause a(n)

1. increase in supply
2. decrease in supply
3. decrease in quantity supplied
4. increase in quantity supplied
5. decrease in equilibrium price

Answer: D

A decrease in demand will cause a(n)

1. increase in supply
2. decrease in supply
3. increase in quantity supplied
4. increase in equilibrium price
5. decrease in equilibrium price

Answer: E

A decrease in demand will result in a(n)

1. increase in equilibrium price and quantity
2. decrease in equilibrium price and quantity
3. decrease in equilibrium price and an increase in equilibrium quantity
4. increase in equilibrium price and a decrease in equilibrium quantity
5. change in equilibrium price and quantity only if supply changes too

Answer: B

What is the effect of a decrease in the price of potato chips on the market for pretzels?

1. Both equilibrium price and equilibrium quantity rise.
2. Both equilibrium price and equilibrium quantity fall.
3. Equilibrium price rises and equilibrium quantity falls.
4. Equilibrium price falls and equilibrium quantity rises.
5. Equilibrium price and equilibrium quantity remain unchanged.

Answer: B

If the tea harvest is bad in a particular year, the supply of tea will

1. decrease, its price will decrease, and the quantity demanded of coffee will increase
2. decrease, its price will increase, and the quantity demanded of coffee will increase
3. decrease, its price will increase, and the quantity demanded of coffee will decrease
4. decrease, its price will decrease, and the quantity demanded of coffee will decrease
5. increase, its price will increase, and the quantity demanded of coffee will increase

Answer: C

An increase in supply will cause equilibrium price to __________ and equilibrium quantity to __________.

1. increase; increase
2. increase; decrease
3. decrease; increase
4. decrease; decrease
5. remain constant; increase

Answer: C

A decrease in the supply of chocolate chips would usually result in a

1. higher equilibrium price and a lower equilibrium quantity
2. lower equilibrium price and a lower equilibrium quantity
3. lower equilibrium price and a higher equilibrium quantity
4. higher equilibrium price and a higher equilibrium quantity
5. decrease in the demand for chocolate chips

Answer: A

What is the effect of a reduction in the price of steel on the equilibrium price and quantity of automobiles?

1. Both equilibrium price and equilibrium quantity rise.
2. Both equilibrium price and equilibrium quantity fall.
3. Equilibrium price rises and equilibrium quantity falls.
4. Equilibrium price falls and equilibrium quantity rises.
5. Both equilibrium price and equilibrium quantity remain unchanged.

Answer: D

If demand increases and supply decreases,

1. equilibrium price will fall and equilibrium quantity will rise
2. equilibrium price and quantity will both rise
3. equilibrium quantity will rise; equilibrium price will either rise or fall
4. equilibrium price will fall; equilibrium quantity will either rise or fall
5. equilibrium price will rise; equilibrium quantity will either rise, fall, or remain unchanged

Answer: E

Suppose demand decreases and supply decreases. Which of the following will happen?

1. equilibrium price will increase
2. equilibrium price will decrease
3. equilibrium quantity will increase
4. equilibrium quantity will decrease
5. neither the equilibrium price nor the quantity will change

Answer: D

Suppose demand increases and supply increases. Which of the following will happen?

1. equilibrium price will increase
2. equilibrium price will decrease
3. equilibrium quantity will increase
4. equilibrium quantity will decrease
5. neither the equilibrium price nor the equilibrium quantity will change

Answer: C

Assume that supply increases slightly and demand increases greatly. Which of the following will happen?

1. equilibrium price will fall and equilibrium quantity will rise
2. equilibrium price will rise and equilibrium quantity will fall
3. equilibrium price will rise and equilibrium quantity will rise
4. equilibrium price will fall and equilibrium quantity will fall
5. neither equilibrium price nor equilibrium quantity will change

Answer: C

Over the last few years, demand for DVDs has increased, and yet their equilibrium price has fallen. Which of the following best explains this situation?

1. When the price falls, the quantity supplied increases.
2. There has been a shortage of DVDs.
3. The supply of DVDs must have decreased.
4. The demand curve for DVDs slopes upward, so an increase in demand leads to a lower price.
5. The supply of DVDs must have increased more than the demand for DVDs increased.

Answer: E

Two events occur simultaneously in the market for automobiles: (1) an improvement in assembly line technology and (2) the economy enters a recession (which decreases consumers' income). An economist would predict with certainty that

1. equilibrium quantity will rise
2. equilibrium quantity will fall
3. equilibrium price will rise
4. equilibrium price will fall
5. the equilibrium price will remain the same

Answer: D

Suppose a market is in equilibrium and then a price floor is established below the equilibrium price. Which of the following will happen?

1. quantity demanded will increase
2. a surplus will develop
3. a shortage will develop
4. the quantity sold will rise
5. the market will remain in equilibrium

Answer: E

Which of the following is correct when a price floor is set above the equilibrium price?

1. quantity supplied is less than quantity demanded at the set price
2. quantity supplied is equal to quantity demanded at the set price
3. at the set price there will be a shortage
4. The market price is greater than the price floor
5. quantity supplied exceeds quantity demanded at the set price

Answer: E

Suppose a market is in equilibrium and then a price ceiling is established below the equilibrium price. Which of the following will happen?

1. quantity demanded will decrease
2. a surplus will develop
3. a shortage will develop
4. the quantity sold will rise
5. the market will remain in equilibrium

Answer: C