1.Assume Q_s represents the quantity supplied at a given price and Q_d represents the quantity demanded at the same given price. Which of the following market conditions produce a downward movement of the price?

a.

Q_s = 1,000, Q_d = 750.

b.

Q_s = 750, Q_d = 750.

c.

Q_s = 750, Q_d = 1,000.

d.

Q_s = 1,000, Q_d = 1,000.

2.Which of the following will cause the demand curve for a good to shift to the right?

a.

Decrease in income for a normal good.

b.

Increase in the price of a complementary good.

c.

Decrease in the price of the good.

d.

Increase in the price of a substitute good.

3.The law of demand states that:

a.

as the price of a good increases, more units are demanded.

b.

there is a direct relationship between the price of a good and the quantity of the good produced.

c.

there is a negative relationship between the price of a good and the quantity of the good demanded.

d.

there is an increase in the need for a good as the price of the good increases.

Exhibit 3-5 Supply for Tucker's Cola Data

Quantity supplied per week

(millions of gallons)

Price per

gallon

6

( $3.00)

5

(2.50)

4

(2.00)

3

(1.50)

2

(1.00)

1

(.50)

4.Exhibit 3-5 shows the supply schedule for Tucker's Cola. If Tucker's Cola and Refresh Cola are the only two suppliers in the cola market and Refresh Cola is willing to sell 5 million gallons when the price is $3.00, 4 million gallons when the price is $2.50, 3 million gallons when the price is $2.00, 2 million gallons when the price is $1.50, 1 million gallons when the price is $1.00, and 0 gallons when the price is $0.50 or less,

a.

the market quantity supplied of cola will be 7 million gallons when the price is $2.00.

b.

Tucker's Cola follows the law of supply, but Refresh Cola does not.

c.

the market quantity supplied of cola is decreasing as price increases.

d.

the market supply curve is horizontal.

5.Which of the following corresponds to the definition of the supply curve?

a.

It depicts a positive relationship between income and quantity supplied.

b.

It depicts a positive relationship between technology and prices.

c.

It depicts a positive relationship between prices and quantity supplied.

d.

It depicts a negative relationship between prices and quantity supplied.

6.Supply curves slope upward because:

a.

the quality is assumed to vary with price.

b.

technology improves over time, increasing the ability of firms to produce more at each possible price.

c.

increases in the price of a good lead to rightward shifts of the supply curve.

d.

rising prides provide producers with the incentives needed to increase the quantity supplied.

7.The law of supply states that:

a.

there is a negative relationship between the price of a good and the quantity of it purchased by suppliers.

b.

there is a positive relationship between the price of a good and the quantity that buyers choose to purchase.

c.

there is a positive relationship between the price of a good and the quantity of it offered for sale by suppliers.

d.

at a lower price, a greater quantity will be supplied.

8.Assume that oranges and peaches can both be grown on the same type of land, a decrease in the price of peaches, other things being equal, will cause a(n):

a.

upward movement along the supply curve for oranges.

b.

downward movement along the supply curve for oranges.

c.

rightward shift of the supply curve for oranges.

d.

leftward shift of the supply curve for oranges.

9.If there is a surplus in the oil market, then the price of oil will:

a.

rise.

b.

fall.

c.

remain unchanged.

d.

react unpredictably.

10.A rightward shift of a demand curve is called a(n):

a.

increase in demand.

b.

decrease in demand.

c.

increase in quantity demanded.

d.

decrease in quantity demanded.

11.According to the law of supply:

a.

producers are willing to supply larger amounts of a good as its price increases.

b.

a direct relationship exists between the price of a good and the amount buyers choose to buy.

c.

an inverse relationship exists between the price of a good and the amount buyers wish to buy.

d.

an inverse relationship exists between the price of a good and the amount producers supply.

12.If a decrease in the price of good Y causes the demand for good Z to decrease, this indicates that:

a.

Y and Z are complements.

b.

Y and Z are substitutes.

c.

Y and Z are unrelated.

d.

Y is a normal good and Z is an inferior good.

13.A movement along the demand curve for automobiles is caused by a change in:

a.

the price of automobiles.

b.

the price of gasoline.

c.

the price of steel.

d.

consumers' incomes.

14.When the price of a good is above its equilibrium price, a:

a.

surplus puts upward pressure on the price.

b.

surplus puts downward pressure on the price.

c.

shortage puts upward pressure on the price.

d.

shortage puts downward pressure on the price.

15.Assuming that travel from New York to Los Angeles is a normal good, a decrease in consumer income, other things being equal, will:

a.

decrease the quantity demanded of travel to Los Angeles.

b.

increase the demand for travel to Los Angeles.

c.

decrease the demand for travel to Los Angeles.

d.

increase the quantity of travel to Los Angeles demanded.

16.The most plausible reason why changes in the price of cotton can cause shifts in the supply curve for tobacco is:

a.

cigarette smokers often wear cotton shirts.

b.

when incomes rise, people consume more cotton and tobacco.

c.

firms can switch from growing tobacco to cotton and vice versa.

d.

tobacco is an input in the production of cotton.

17.An increase in the number of producers will:

a.

increase the market supply, because the price will rise.

b.

increase the market supply only when market demand increases too.

c.

increase the market supply, because market supply is the sum of all individual supply curves.

d.

increase the market supply only if each supplier has an identical supply curve.

18.A supply schedule shows the relationship between:

a.

demand and supply.

b.

supply and income.

c.

price and income.

d.

quantity supplied and price.

19.A decrease in supply means that:

a.

the supply curve will shift to the right.

b.

there is a movement upward and to the right along the supply curve.

c.

there is a movement down and to the left along the supply curve.

d.

the quantity supplied at every price will decrease.

20.Which of the following is the least likely to result from an advance in technology?

a.

suppliers offering a larger quantity than before at each given price.

b.

suppliers offering the same quantity as before at a lower price.

c.

a leftward shift of the supply curve.

d.

an increase in supply.

21.Suppose all of the major computer manufacturers announced that beginning next month there would be major price reductions on their computers. This would cause the current demand for computers to:

a.

increase.

b.

decrease.

c.

remain unchanged.

d.

increase and then decrease.

22.If the United Auto Workers union can obtain a substantial wage increase for auto workers, there will be a(n):

a.

decrease in the supply of automobiles, which is a shift to the right of the supply curve.

b.

decrease in the supply of automobiles, which is a shift to the left of the supply curve.

c.

increase in the supply of automobiles, which is a shift to the right of the supply curve.

d.

increase in the supply of automobiles, which is a shift to the left of the supply curve.

23.A surplus of wheat:

a.

is impossible if people are hungry.

b.

is impossible if the price of wheat is below equilibrium.

c.

will result when the quantity demanded exceeds the quantity supplied at the current price.

d.

is unlikely to cause any change in the price of wheat.

24.An increase in the supply of the product implies:

a.

producers will now charge a higher price for a given quantity of output.

b.

the supply curve will shift to the left.

c.

the price of this product has increased.

d.

producers will now charge a lower price for a given quantity of output.

25.If consumer tastes are changing more in favor of the consumption of a particular good the:

a.

market demand curve will shift to the left.

b.

consumer will move up a given demand curve, decreasing the quantity demanded.

c.

maket demand curve would shift to the right.

d.

consumer would move down a given demand curve, increasing the quantity demanded.