Chapter 04 – Supply and Demand Assessment
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Multiple Choice Questions
1. The law of demand states that the quantity demanded of a good is inversely related to the price of
that good. Therefore, as the price of a good goes:
A. up, the quantity demanded also goes up.
B. up, the quantity demanded goes down.
C. down, the quantity demanded goes down.
D. down, the quantity demanded stays the same.
2. According to the law of demand, an increase in the price of baseball trading cards causes:
A. people to buy fewer trading cards.
B. people to buy more trading cards.
C. the scarcity of baseball trading cards to increase.
D. baseball trading cards to grow in abundance.
3.
Refer to the graphs shown. The curve that best demonstrates the law of demand is:
A. I.
B. II.
C. III.
D. IV.
4. If the price of movies on DVD rises while the price of movies purchased on demand through the
Internet remains the same, the law of demand predicts that consumers will:
A. substitute movies on DVD for movies on the Internet.
B. substitute movies on the Internet for movies on DVD.
C. buy only movies on DVD.
D. buy only movies on the Internet.
5. According to the law of demand an increase in the price of gasoline will:
A. increase the quantity demanded of gasoline, other things constant.
B. decrease the quantity demanded of gasoline, other things constant.
C. increase the demand for gasoline.
D. decrease the demand for gasoline.
6. The distinction between demand and the quantity demanded is best made by saying that:
A. demand is represented graphically by a curve and quantity demanded as a point on that curve.
B. the quantity demanded is represented graphically by a curve and demand as a point on that
curve.
C. the quantity demanded is in a direct relation with prices, whereas demand is in an inverse
relation.
D. the quantity demanded is in an inverse relation with prices, whereas demand is in a direct
relation.
7. Tuition and fees for four year colleges in the United States have risen over five percent per year
in the recent past. One cause for the increase in price has been an increase in demand for
college education. In the standard model, what could be a possible explanation for the increase in
the demand for college education?
A. More colleges have been established
B. The cost of two-year colleges has declined over the same period
C. Income in the United States has risen
D. The price of all other goods in the economy has risen 3 percent over the same period
8. The effect of higher gasoline prices is most likely to:
A. increase the demand for hybrid cars and increase the demand for the gas guzzler Hummer.
B. decrease the demand for hybrid cars and decrease the demand for the gas guzzler Hummer.
C. increase the demand for hybrid cars and decrease the demand for the gas guzzler Hummer.
D. decrease the demand for hybrid cars and increase the demand for the gas guzzler Hummer.
9. Which of the following would cause quantity demanded to change without changing the demand
curve?
A. A change in income
B. A change in the price of the good
C. A change in tastes and preferences
D. A change in the price of a substitute good
10.
Refer to the graphs shown. The effect of an increase in price is best shown by which arrow?
A. A
B. B
C. C
D. D
11.
Refer to the graphs shown. What arrow shows the effect of an increase in the number of
consumers in the market on the demand for CDs?
A. A
B. B
C. C
D. D
12.
Refer to the graph shown. The quantity demanded when price is $16.00 per week is:
A. 2 CDs per week.
B. 4 CDs per week.
C. 6 CDs per week.
D. 8 CDs per week.
13.
Refer to the graph shown. If the price is changed from $12.00 to $4.00, the quantity demanded
increases by:
A. 2 CDs per week.
B. 4 CDs per week.
C. 6 CDs per week.
D. 8 CDs per week.
14.
Refer to the graph shown. A movement from point E to point D is caused by:
A. an increase in the price of CDs from $12.00 to $16.00.
B. a decrease in the price of CDs from $16.00 to $12.00.
C. an increase in consumer income.
D. an increase in the price of DVDs.
15. Consider the following demand table and the graph.
Which of the demand curves best reflects the demand table?
A. A
B. B
C. C
D. D
16.
Assume the graph shown reflects demand in the automobile market. Which arrow best captures
the impact of increased consumer income on the automobile market?
A. A
B. B
C. C
D. D
17. To derive a market demand curve from individual demand curves, it would be necessary to:
A. take the maximum quantity of each demand curve as the market quantity demanded at each
price.
B. sum the curves horizontally, adding quantities demanded at each price.
C. take the demand curve that is the furthest to the right as the market demand curve.
D. multiply the quantities demanded on each demand curve at each price to find the market
quantity demanded at each price.
18. Refer to the following graphs,
Which curve depicts the market demand from the following individual demand tables?
A. I
B. II
C. III
D. IV
19. The law of supply states that, other things equal, as the price of a good goes:
A. up, the quantity supplied goes up.
B. up, the supply goes down.
C. down, the quantity supplied goes up.
D. down, the supply goes down.
20. According to the law of supply:
A. supply curves slope upward.
B. supply curves slope downward.
C. price and quantity supplied are negatively related.
D. price and quantity supplied are inversely related.
21. The law of supply states that, other things constant, there is:
A. an inverse relation between price and the quantity supplied.
B. an inverse relation between price and supply.
C. a direct relation between price and the quantity supplied.
D. a direct relation between price and supply.
22.
Refer to the graphs shown. The curve that best illustrates the law of supply is:
A. I.
B. II.
C. III.
D. IV.
23. If the price of steel rises, the law of supply predicts that, other things constant, the:
A. supply of steel will increase.
B. supply of steel will decrease.
C. quantity supplied of steel will increase.
D. quantity supplied of steel will decrease.
24. Suppose when you are offered $7.00 per hour to work in the campus library, you choose not to
work, but when you are offered $10.00 per hour, you accept a part-time position. Your behavior
can best be explained by the fact that your supply of labor curve is:
A. horizontal.
B. vertical.
C. downward-sloping.
D. upward-sloping.
25. The distinction between supply and the quantity supplied is best made by saying that:
A. the quantity supplied is represented graphically by a curve and supply as a point on that curve.
B. supply is represented graphically by a curve and quantity supplied as a point on that curve.
C. the quantity supplied is in a direct relation with prices, whereas supply is in an inverse relation.
D. the quantity supplied is in an inverse relation with prices, whereas supply is in a direct relation.
26.
Refer to the graphs shown. The arrow that best shows an increase in supply is:
A. W
B. X
C. Y
D. Z
27.
Refer to the graphs shown. The arrow that best captures the impact of a decline in price on
quantity supplied is:
A. W
B. X
C. Y
D. Z
28. Graphically, a change in price causes:
A. both supply and demand to shift.
B. the demand curve to shift.
C. a movement along a given supply curve, not a shift.
D. the supply curve to shift.
29. Which of the following would be expected to cause the quantity of wool supplied to decrease?
A. A decrease in the price of wool
B. A decrease in the number of wool producers
C. An increase in the cost of raising sheep
D. An increase in wages paid to workers in the wool industry
30.
Refer to the graph shown. If the quantity supplied increases from 2 to 4 when the price of CDs
increases from $2.00 to $5.00, the response by producers would be shown by:
A. a shift from S0 to S1.
B. a shift from S1 to S0.
C. a movement upward and to the right along S0.
D. a movement upward and to the right along S1.
31. Which of the following is not likely to change the supply of personal computers?
A. An increase in consumers' incomes
B. A technological breakthrough that makes it much less costly to produce computer chips
C. A decrease in the wage paid to electrical engineers
D. An increase in taxes on computer chips paid by producers
32. Given the following supply table, an increase in the price of pants from $30 to $50 per pair will
increase the:
A. supply of pants by 200 pairs.
B. quantity of pants supplied by 200 pairs.
C. supply of pants by 700 pairs.
D. quantity supplied by 500 pairs.
33. Which curve shown below represents the market supply given the following individual supply
tables?
A. A
B. B
C. C
D. D
34. The more the current price exceeds the equilibrium price, the:
A. greater the resulting shortage will be.
B. smaller the resulting shortage will be.
C. greater the resulting surplus will be.
D. smaller the resulting surplus will be.
35. Suppose a market has an excess demand and price starts to rise. What will the rise in price
cause?
A. A fall in both quantity supplied and quantity demanded.
B. A rise in both quantity supplied and quantity demanded.
C. A rise in quantity supplied and a fall in quantity demanded.
D. A fall in quantity supplied and a rise in quantity demanded.
36. If the price in a market is above its equilibrium level, there will be a:
A. surplus and downward pressure on price.
B. surplus and upward pressure on price.
C. shortage and downward pressure on price.
D. shortage and upward pressure on price.
37. If quantity supplied exceeds quantity demanded, there is a tendency for:
A. price to fall to restore equilibrium.
B. price to rise to restore equilibrium.
C. the demand curve to shift to the left to restore equilibrium.
D. the demand curve to shift to the right to restore equilibrium.
38.
Refer to the graph shown. At a price of $0.60 per dozen:
A. there is a surplus of 2,000 dozen eggs per week.
B. the market is in equilibrium.
C. there is a shortage of 3,000 dozen eggs per week.
D. there is a shortage of 2,000 dozen eggs per week.
39.
Suppose the above supply and demand tables reflect the supply and demand for milk per week.
At a price of $1, there is a:
A. surplus of 500 gallons per week.
B. surplus of 1,000 gallons per week.
C. shortage of 2,500 gallons per week.
D. shortage of 1,000 gallons per week.
40.
Suppose the supply and demand tables shown reflect the supply and demand for milk per week.
At a price of $4, there is a:
A. surplus of 1,000 gallons per week.
B. surplus of 2,000 gallons per week.
C. shortage of 1,000 gallons per week.
D. shortage of 2,000 gallons per week.
41. The point at which the supply curve and the demand curve intersect is called:
A. equilibrium, because quantity demanded equals quantity supplied so there is no tendency for
price to change.
B. equilibrium, because quantity demanded exceeds quantity supplied so there is a shortage.
C. equilibrium, because quantity supplied exceeds quantity demanded so there is a surplus.
D. irrelevant, because real-world prices never reach this point.
42.
Refer to the graph shown. The figure shows the demand and supply curves for eggs and shows
two equilibrium points, E1 and E2. Suppose the prevailing price of a dozen eggs is $1.25 and the
demand curve is given by D1. Which of the following would result?
A. A surplus of 2,000 dozen eggs per week
B. A shortage of 2,000 dozen eggs per week
C. A surplus of 3,000 dozen eggs per week
D. A tendency for the price of eggs to increase
43.
Refer to the graphs shown. The market is computers. Which graph best represents the impact of
cheaper memory chips on the computer market?
A. a
B. b
C. c
D. d
44. If supply and demand both shift to the right, equilibrium quantity:
A. rises, but the equilibrium price may rise, fall, or stay the same.
B. falls, but the equilibrium price may rise, fall, or stay the same.
C. may rise, fall, or stay the same, but equilibrium price will rise.
D. may rise, fall, or stay the same, but equilibrium price will fall.
45. When workers are paid higher wages, production costs:
A. rise, supply shifts leftward, and product prices fall.
B. fall, supply shifts rightward, and product prices fall.
C. rise, supply shifts leftward, and product prices rise.
D. rise, supply shifts rightward, and product prices rise.