Quiz
Supply, Demand, and Price
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1. According to the law of demand, ceteris paribus,

a. as the price of a good rises, the quantity supplied tends to rise as well.
b. as the price of a good falls, the quantity supplied tends to fall as well.
c. as the price of a good rises, the quantity demanded tends to fall.
d. as the price of a good falls, the quantity demanded tends to rise.
e. both (c) and (d) hold.

2. A demand schedule is best described as

a. a numerical tabulation of the quantity demanded of a good at different prices, ceteris paribus.
b. a graphical representation of the law of demand.
c. a systematic listing of all the variables that might conceivably bring about a change in demand.
d. a symbolic representation of the law of demand: P,Q and P, Q.
e. any of the above.

3. Which of the following is not among the variables considered constant when drawing a given market demand curve?

a. Income.
b. The price of the good in question.
c. The prices of related goods.
d. Preferences.
e. The good's expected future price.

4. An increase in the demand for a good might be traced to

a. a rise in consumer income, in the case of an inferior good.
b. a fall in consumer income, in the case of a normal good.
c. either (a) or (b).
d. a rise in the price of a substitute.
e. a rise in the price of a complement.

5. Complementary goods are defined as

a. goods for which demand rises as income rises and demand falls as income falls.
b. goods for which demand falls as income rises and demand rises as income falls.
c. goods that satisfy similar needs or desires; hence the demand for one rises as the price of the other rises and the demand for one falls as the price of the other falls.
d. goods that are used jointly in consumption; hence the demand for one rises as the price of the other falls and the demand for one falls as the price of the other rises.
e. goods that are given out free of charge, usually for advertising purposes.

6. Inferior goods are likely to include

a. airline travel and fresh fruit.
b. airline travel and rental car services.
c. inter-city bus rides and second-hand clothes.
d. hamburgers and ketchup.
e. apples and pears.

7. A 10 million pound decrease in the quantity of peaches demanded might be attributable to

a. a decrease in the price of oranges (hence people buy more of this peach substitute and fewer peaches).
b. a decrease in consumer income.
c. an increase in consumer income.
d. an increase in the price of pie crust (hence people buy less of this peach complement and bake fewer peach pies).
e. an increase in the price of peaches.

8. A change in the demand for peaches during this period cannot possibly be the result of a change in

a. the price of peaches.
b. consumer income.
c. consumer preferences.
d. the prices of peach substitutes or complements.
e. the expected future price of peaches.

9. Which of the following is the law of supply?

a. The willingness and ability of sellers to produce and offer to sell different quantities of a good at different prices during a specified time period.
b. As the price of a good rises, the supply of the good rises; as the price of a good falls, the supply of the good falls, ceteris paribus.
c. The numerical tabulation of the quantity supplied of a good at different prices.
d. The numerical tabulation of the relationship between alternative quantities supplied of one good and the quantities of alternative outputs forgone, ceteris paribus.
e. None of the above.

10. A decrease in the current supply of a good might be traced to

a. a decrease in the good's price.
b. a decrease in the prices of resources needed to make the good.
c. a decrease in the good's expected future price.
d. the imposition on producers of a tax per unit produced.
e. the elimination of an import quota with respect to the good.

11. When a surplus exists in the market for a good, we can expect

a. a fall in price, a fall in quantity supplied, and a rise in quantity demanded.
b. a fall in price, a fall in supply, and a rise in demand.
c. an imminent fall in the equilibrium price.
d. both (a) and (c).
e. none of the above.

12. Consider Figure 3.1. Which of the following is true?

a. The equilibrium price, corresponding to intersection E, equals ID and the equilibrium quantity is IL.
b. A simultaneous increase in demand and supply would raise the equilibrium price as well as the equilibrium quantity.
c. A simultaneous increase in demand and decrease in supply would raise the equilibrium price as well as the equilibrium quantity.
d. A leftward shift of supply to intersect demand at B might be caused by a fall in the prices of wheat-growing resources.
e. All of the preceding statements are true.

13. Consider Figure 3.1. If demand rose to intersect supply at C, the following would occur:

a. The equilibrium price would rise from ID to IA.
b. The equilibrium quantity would rise from IL to IM.
c. The quantity supplied would increase.
d. The quantity demanded would decrease.
e. All of the above.

14. Consider Figure 3.1. If the government established a minimum wheat price or price floor of IF,

a. the quantity demanded would rise along EH from IL to IM.
b. the quantity demanded would remain unchanged.
c. the quantity supplied would fall along EG from IL to IJ.
d. a shortage of GH would occur.
e. all but (b) would occur.

15. Consider Figure 3.1. If the government established a minimum wheat price or price floor of IA,

a. demand would fall along EB.
b. a surplus of BC=KM would occur.
c. supply would rise along EC.
d. the quantity of wheat sold would rise from IL to IM.
e. all of the above would occur.

16. Consider Figure 3.1. If the government established a minimum wheat price or price floor of IA and also promised to buy up any surplus,

a. it would have to buy quantity IK.
b. it would have to spend $BCMK of taxpayers' money.
c. wheat production would instantly fall to IJ.
d. wheat production would rise to IL.
e. a shortage of JM would arise.

17. Consider Figure 3.1. If the government established a minimum wheat price or price floor of IA, private consumers would end up buying wheat valued at

a. $IDEL.
b. $IABK.
c. $IACM.
d. $IFHM.
e. $IFGJ.

18. Consider Figure 3.1. If the government established a maximum wheat price or price ceiling of IF (in order to help buyers rather than sellers),

a. the quantity demanded would rise along EH from IL to IM.
b. the quantity supplied would fall along EG from IL to IJ.
c. both (a) and (b) would occur.
d. demand would rise from E to H, supply would fall from E to G, and a shortage of GH would occur.
e. buyers would end up getting the same quantity as before and at the same price.

19. A minimum wage law

a. lowers the legal wage to some government-sanctioned minimum.
b. raises the legal wage to some government-sanctioned maximum.
c. is, in effect, a law that establishes a price floor in the labor market.
d. is, in effect, a law that establishes a price ceiling in the labor market.
e. is likely to create a shortage in the labor market.

20. If the supply of labor were represented by a vertical line, while demand was downward-sloping,

a. the imposition of a minimum wage could not cause unemployment.
b. the imposition of a minimum wage could not raise actual wages paid.
c. the imposition of a minimum wage would cause less unemployment than in the case of an upward-sloping labor supply.
d. the imposition of a minimum wage would actually increase employment.
e. both (a) and (b) are true.





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