Chapter 3

Demand, Supply And Market

Equilibrium
1) The "law of demand" states that changes in:

 A) demand are related directly to changes in supply.

 B) the quantity demanded of a good are not related to
changes in the quantity supplied.
 C) the quantity demanded of a good are inversely related to
changes in its price.
 D) demand are inversely related to changes in supply.
C) The quantity demanded of a good are inversely related to
changes in its price.
2)The "law of demand" refers to the fact that, all other
things remaining the same, when the price of a good rises

 A) the demand curve shifts rightward.

 B) the demand curve shifts leftward.
 C) there is a movement down along the demand curve to
a larger quantity demanded.
 D) there is a movement up along the demand curve to a
smaller quantity demanded
D) there is a movement up along the demand
curve to a smaller quantity demanded
 3) In the market for magazines, the "income effect" means that:

 A) magazines are usually purchased by people with higher than

average incomes.
 B) a decrease in the price of a substitute product like books will
make magazine readers feel a little poorer than they were before.
 C) an increase in the price of magazines will reduce the total
purchasing power of magazine readers, making them able to afford
fewer magazines.
 D) an increase in the price of magazines will raise the relative price
of magazines to books, causing magazine readers to read more books
and fewer magazines.
C) an increase in the price of magazines will reduce the
total purchasing power of magazine readers, making
them able to afford fewer magazines.
4) If the price of an apple increases from 50¢ to 60¢, the quantity demanded will decrease
because of:

 A) the substitution effect only.

 B) the income effect only.
 C) a change in income.
 D) the substitution and income effects.
D) the substitution and income effects.
5) Which of the following influences people's buying plans
and does not shift the demand curve?

 A) the price of the good

 B) the prices of related goods
 C) income
 D) preferences
A) the price of the good
6) What happens to the demand for DVDs if the price of a
DVD player falls?

 A) The demand for DVDs decreases because the price

of a substitute falls.
 B) The demand for DVDs increases because the price
of a complement falls.
 C) The demand for DVDs decreases because the price
of a complement falls.
 D) The demand for DVDs remains unchanged.
B) The demand for DVDs increases
because the price of a complement falls.
7) The demand curve for a normal good shifts leftward if
income ________ or the expected future price ________.

 A) decreases; falls
 B) decreases; rises
 C) increases; falls
 D) increases; rises
A) decreases; falls
8) An increase in the number of consumers:

 A) results only in a movement along the demand

curve.
 B) shifts the supply curve leftward
 C) shifts the demand curve rightward.
 D) Both answers B and C are correct.
C) shifts the demand curve rightward.
9) In the above figure, an increase in the quantity
demanded is represented by a movement from point d to:

 A) point b only.
 B) point c only.
 C) point a.
 D) both points b and c.
C) Point a.
10) In the figure above, which movement reflects an increase in
demand?

 A) from point a to point e

 B) from point a to point b
 C) from point a to point c
 D) from point a to point d
D) from point a to point d
11) Which of the following is NOT one of the factors
that influences the supply of a product?

 A) technology
 B) income
 C) number of suppliers
 D) expected future prices
B) income
 12) The "law of supply" states that, other things remaining
the same, firms produce:

 A) more of a good the less it costs to produce it.

 B) less of a good the more it costs to produce it.
 C) more of a good the higher its price.
 D) less of a good as the required resources become
scarcer.
C) more of a good the higher its
price.
13) Consider the figure above showing supply curves for
soft drinks. Suppose the economy is at point a. A movement
to point c could be the result of

A) a decrease in technology.
B) a decrease in the relative price of
a soft drink.
C) an increase in the relative price
of a soft drink.
D) an increase in the money price
of a soft drink.
B) a decrease in the relative price of a soft
drink.
14) The above table shows the demand schedule
and supply schedule for chocolate chip cookies.
What is the equilibrium quantity and equilibrium
price for chocolate chip cookies?
 A) 7 pounds, $3.00 per pound
 B) 2 pounds, $3.00 per pound
 C) 2 pounds, $6.00 per pound
 D) 4 pounds, $5.00 per pound
D) 4 pounds, $5.00 per pound
 15) The equilibrium price in the above figure is:

 A) $2.
 B) $4.
 C) $6.
 D) $8.
C) $6.
16) The equilibrium quantity in the above
figure is:

 A) 200 units.
 B) 300 units.
 C) 400 units.
 D) 600 units.
B) 300 units.
 17) At a price of $10 in the above figure, there is:

 A) a surplus of 200 units.

 B) a shortage of 200 units.
 C) a surplus of 400 units.
 D) a shortage of 400 units
C) a Surplus of 400 units.
 18) At a price of $4 in the above figure,

 A) the equilibrium quantity is 400 units.

 B) there is a surplus of 200 units.
 C) the quantity supplied is 400 units.
 D) there is a shortage of 200 units.
D) there is a shortage of 200 units.
The END