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Demand and Supply MCQ
Demand and Supply MCQ
1. A buyer has purchased three units of good X. The marginal benefit of the fourth unit of
X exceeds the marginal cost of the fourth unit of good X. Which of the following reasons
explains why the buyer should purchase the fourth unit?
a) I only
b) I and II only
c) II only
d) I, II, III
The following TWO questions refer to an individual’s demand curve diagram, illustrated
below.
3. If the price of this good is $1 per unit, what will be the quantity demanded?
a) 5.
b) 10.
c) 15.
d) 20.
4. What are the TOTAL benefits to this individual if she consumes 10 units of the good?
a) $5.
b) $10.
c) $20.
d) $30.
a) III only.
b) I and II only.
c) I and III only.
d) I only.
a) 5 units.
b) 10 units.
c) 15 units.
d) 20 units.
8. If the price of this good is $20, what quantity will be demanded?
a) 5 units.
b) 10 units.
c) 15 units.
d) 20 units.
9. If the price of this good is $20, what will consumer surplus equal?
a) $100.
b) $200.
c) $300
d) $400.
10. If the price of this good falls from $30 to $20, but the consumer is prohibited from
buying more than 5 units of the good, by how much will consumer surplus increase?
a) $100.
b) $75.
c) $50
d) $25.
Exercises 3.3
3. Which of the following will result in a DECREASE in demand (i.e., a leftward shift of
the demand curve)?
4. Suppose that my daily marginal benefit from drinking coffee increases by $2 per cup.
Which of the following represents the effect of this on my coffee demand curve?
6. Which of the following IS a determinant of the demand for good X?
9. If cookies are a normal good and incomes increase, we would expect:
11. The diagram below illustrates 3 possible demand curves for coconuts.
Suppose that coconuts and pineapples are substitutes. If the price of pineapples increases,
which of the following movements will represent the effect of this in the market for
coconuts?
a) A to C.
b) A to B.
c) B to A.
d) B to E.
12. If the price of this good is $20, what will be the quantity demanded?
a) 10.
b) 20.
c) 30.
d) 40.
13. If the price of this good is $60, what will consumer surplus equal?
a) $50.
b) $100.
c) $150.
d) $200.
14. The following question refers to the diagram below, which illustrates an individual’s
demand curve for a good.
If the price of this good falls from P1 to P2, then consumer surplus will _____ by areas
_____.
a) increase; B+D.
b) decrease; B+D.
c) increase; A+B+D.
d) decrease; A.
15. Consider the diagram below.
16. Which of the following CANNOT result in a shift of the demand curve for a good?
17. Suppose the price of good X increases. If X and Y are substitutes, then, in the market
for good Y, we would expect:
18. If coffee and milk are complements, then which of the following will occur if the
price of coffee increases?
19. Consumer surplus is equal to:
Suppose that (i) coconuts are an inferior good and (ii) consumer incomes decrease.
Which of the following movements could represent the effect of this in the market for
coconuts?
a) A to C.
b) B to A.
c) C to A.
d) B to E.
Exercises 3.4
The following TWO questions refer to the supply curve diagram below.
a) 10.
b) 20.
c) 30.
d) 40.
3. If quantity supplied increases from 10 to 20 units, the producer’s total costs will
increase by:
a) $20.
b) $30.
c) $40.
d) $80.
a) The “law of supply” states that as price rises, quantity supplied also rises.
b) If the marginal cost of producing a good is higher at high levels of output than at low
levels of output, then the supply curve for that good is upward sloping.
c) Both a) and b) are true.
d) Neither a) nor b) are true.
a) Keep producing more units until the total benefits equal the total costs.
b) Always produce an additional unit if price is greater than marginal cost.
c) Never produce an additional unit if its marginal cost is higher than the marginal cost of
previously produced units.
d) Always produce at additional unit if price is greater than zero.
The following TWO questions refer to the diagram below, which illustrates a supply
curve.
6. In order for quantity supplied to equal 6 units, the price per unit must be:
a) $1.
b) $2.
c) $3.
d) $4.
7. If the price of this good is $4 per unit, then what does producer surplus equal?
a) $32.
b) $24.
c) $16.
d) $12.
If the price of this good is $2 per unit, then what will be the quantity supplied?
a) 0.
b) 1.
c) 2.
d) 3.
9. Sarah is selling her used truck. The minimum amount she needs to be paid for the truck
is $5,000. She advertises the truck on usedvictoria.com for $8,000, and eventually sells
the truck for $6,000. Her producer surplus is equal to _____.
a) $1,000.
b) $2,000.
c) $3,000.
d) $6,000.
Exercises 3.5
1. Which of the following will NOT shift the market supply curve of good X?
The following TWO questions refer to the diagram below.
a) $1.
b) $2.
c) $3.
d) $4.
a) $1.
b) $2.
c) $3.
d) $4.
7. Which of the following is NOT a determinant of the supply of good X?
8. Martin is selling his viola. The minimum amount he needs to be paid for the viola is
$15,500. He find a buyer for who is willing to pay $22,400, but this buyer insists that
Martin pays for delivery of the viola. The cost of delivery is $700. Martin’s producer
surplus from selling his viola is equal to _____.
a) $14,800.
b) $7,600.
c) $6,900.
d) $6,200.
I. Inferior goods are those that we will never buy, no matter how cheap they are.
II. Inferior goods are those that we buy more of, if we become poorer.
III. Inferior goods are those that we buy more of, if we become richer.
a) I only
b) III only.
c) I and III only.
d) I, II, and III.
Exercises 3.6
1. Suppose that – at a given level of some economic activity – marginal benefit is greater
than marginal cost. The economic agent in question (the decision-maker) can increase net
benefits by increasing the level of the activity, for which of the following reasons?
2. Which of the following statements is TRUE?
The following TWO questions refer to the supply and demand curve diagram below.
a) $6 per unit.
b) $5 per unit.
c) $4 per unit.
d) $3 per unit.
5. Which of the following statements about consumer surplus and producer surplus is
TRUE?
a) Keep buying more units until the total benefits equal the total costs.
b) Always buy at additional unit if its marginal net benefit is positive.
c) Keep buying more units if marginal cost is greater than marginal benefit.
d) Always buy at additional unit if its marginal benefit is positive.
8. Refer to the supply and demand diagram below.
At the equilibrium price in this market, consumer surplus is equal to area ___ and
producer surplus is equal to area ____
a) a + b; c.
b) a; b + c.
c) a + b; b + c.
d) a + b + c; d + f.
9. Which of the following statements about consumer and producer surplus is TRUE?
a) Consumer surplus is equal to the maximum amount a consumer is willing to pay for a
good, minus what the consumer has to pay for the good.
b) Producer surplus is equal to the amount received from selling a good, minus the
minimum amount the seller needed to receive, in order to be willing to sell the good.
c) Both a) and b) are true.
d) Neither a) nor b) are true.
The following TWO questions refer to the supply and demand diagram below.
10. Which of the following COULD explain the shift in supply from S1 to S2.
a) a
b) a + b.
c) a + b + e.
d) We need to know price in order to determine market surplus.
Suppose that demand is initially D1, but, following a change in consumer preferences,
demand shifts to D2. Note that the two demand curves are parallel. Which of the
following statements is TRUE?
13. Suppose the equilibrium price of good X is $10 and the equilibrium quantity is 60
units. If the price of good X is $4:
14. All else equal, a decrease in the marginal cost of producing a good will result in:
a) $5; 30.
b) $7; 30.
c) $7; 40.
d) $8; 40.
16. If the marginal cost of producing this good rises by $3 at every output level, then the
new equilibrium price will be _____.
17. Consider the supply and demand diagram drawn below.
a) $8.
b) $15.
c) $30.
d) $45.
19. Consider the market for oranges. Suppose that both of the following occur
simultaneously: (i) the price of apples (a substitute for oranges) decreases; and (ii) world-
wide droughts reduce the harvest of oranges by 30%. Then, in the market for oranges we
would expect:
a) The equilibrium price of oranges could either increase or decrease, but equilibrium
quantity will definitely decrease.
b) The equilibrium quantity of oranges could either increase or decrease, but equilibrium
price will definitely decrease.
c) The equilibrium price of oranges could either increase or decrease, but equilibrium
quantity will definitely increase.
d) The equilibrium quantity of oranges could either increase or decrease, but equilibrium
price will definitely increase.
20. Suppose that, following a decrease in the supply of good X, we observe that the price
of good Y decreases. If no other curves have shifted, which of the following can we
infer?
21. In recent years there have been a couple of high profile cases of contamination of
baby formula produced in China. As a result, many Chinese parents buy baby formula
that is produced outside China. Which of the following accurately describes the likely
effect of this on baby formula prices?
a) An increase in the price of baby formula produced in China and a decrease in the price
of baby formula produced outside China.
b) A decrease in the price of baby formula produced in China and an increase in the price
of baby formula produced outside China.
c) A decrease in the price of both baby formula produced in China and baby formula
produced outside China.
d) An increase in the price of both baby formula produced in China and baby formula
produced outside China.
22. Refer to the supply and demand diagram below.
a) a
b) a + b.
c) a + b + e.
d) We need to know price in order to determine market surplus.
23. Suppose that in the market for good X (a normal good), the following occur
simultaneously: (i) consumer incomes increase and (ii) the price of oil (an input to the
production of X) increases. Which of the following statements is TRUE?
a) The equilibrium price of X could either increase or decrease, but equilibrium quantity
will definitely decrease.
b) The equilibrium quantity of X could either increase or decrease, but equilibrium price
will definitely decrease.
c) The equilibrium price of X could either increase or decrease, but equilibrium quantity
will definitely increase.
d) The equilibrium quantity of X could either increase or decrease, but equilibrium price
will definitely increase.
24. Consider the supply and demand diagram below.
If supply decreases from S1 to S2, which area represents the change in PRODUCER
surplus?
a) b + c – f.
b) a + b + c.
c) b – f – e.
d) c + f + g + e.
25. A recent news story reported that OPEC is expected to decrease the supply of oil next
summer. Summer is traditionally a time of increased demand for oil because of the many
families driving and flying to vacation sites. What would be the combined effect of these
two activities on the summer market for gasoline?
26. Consider the supply and demand curves drawn below.
a) X + Y + Z.
b) X + Y.
c) X.
d) There is no market surplus.
a) An increase in income.
b) A decrease in the price of a complement to this good.
c) An increase in the price of a substitute for this good.
d) A decrease in the wages paid to workers who produce this good.
28. Consider the supply and demand curves illustrated below.
31. A recent Health Canada report argued that there is a strong link between the
consumption of steak and heart disease. At the same time, Canadian consumers’ incomes
rose. If steak is a normal good, what are the combined effects in the market for steak?
32. Given the equilibrium quantity of 300 units, which areas represent MARKET
SURPLUS?
a) a+b+c+d.
b) a+b+c.
c) a+c.
d) a+b.
33. Given the equilibrium quantity of 300 units, which areas represent PRODUCER
SURPLUS?
a) c+d.
b) a+b.
c) a+c.
d) b+d.
34. Given the equilibrium quantity of 300 units, which areas represent CONSUMER
SURPLUS?
a) c+d.
b) a+b.
c) a+c.
d) b+d.
Topic 3 Solutions
1.B
2.C
3.C
4.B
5.B
6.C
7.A
8.B
9.A
10. C
1.A
2.B
3.D
4.D
5.A
6.A
7.C
8.C
9.D
10. A
11. A
12. C
13. B
14. A
15. D
16. B
17. A
18. D
19. D
20. A
1.D
2.D
3.D
4.C
5.A
6.C
7.B
8.D
9.C
1.B
2.C
3.A
4.D
5.D
6.B
7.B
8.B
9.C
10. D
11. C
12. A
13. C
14. D
15. C
16. C
17. C
18. B
19. A
20. B
21. B
22. A
23. D
24. C
25. B
26. C
27. D
28. A
29. A
30. D
31. C
32. A
33. D
34. C