Supply and Demand Multiple Choice

1. When we know the quantity of product buyers wish to purchase at each possible price, we know

A. demand
B. supply
C. excess demand
D. excess supply

2. The equilibrium price clears the market; it is the price at which

A. everything is sold
B. buyers spend all of their money
C. quantity demanded equals quantity supplied
D. excess demand is zero
E. both ‘c’ and ‘d’

3. When a market is in equilibrium

A. quantity demanded equals quantity supplied

B. excess demand and excess supply are zero
C. the market is cleared by the equilibrium price
D. all of the above

4. _______ and _______ do not directly affect the demand curve

A. the price of related goods; consumer incomes

B. consumer incomes; tastes
C. the costs of production; bank opening hours
D. the price of related goods; preferences

5. A demand curve can shift because of changing

A. incomes
B. price of related goods
C. tastes
D. all of the above

6. A supply curve is directly affected by

A. technology
B. input costs
C. government regulation
D. all of the above

7. If a price increase of Good A increases the quantity demanded of Good B, then Good B is

A. a substitute good
B. a complementary good
C. a bargain
D. an inferior product
 Supply and Demand Multiple Choice

8. An increase in consumer income will increase demand for a ____, but decrease demand for a ____

A. substitute good; inferior good

B. normal good; inferior good
C. inferior good; normal good
D. normal good; complementary good

9. Supply is the quantity of a good sellers wish to sell each time the market opens

A. True
B. False

10. An increase in price will cause a supply curve to shift to the left

A. True
B. False

11. Price ceilings are imposed above the free market equilibrium price

A. True
B. False

12. Which of the following can lead to an increase in the supply for Good X?

A. a decrease in the number of sellers of Good X

B. an increase in the price of inputs used to make Good X
C. an improvement in technology used in the production of Good X
D. none of the above

13. An increase in the price of electricity will

A. increase the demand for kerosene heaters

B. increase the demand for lightbulbs
C. increase the demand for stereos
D. increase the demand for TVs

14. Which of the following events will cause an increase in the market demand for Guinness?

A. a decrease in the price of Guinness

B. an increase in the price of Heineken
C. an increase in the price of pizza
D. an increase in income, if Guinness is an inferior good

15. The Supply Curve is upward-sloping because:

A. as the price increases, so do costs.

B. as the price increases, consumers demand less.
C. as the price increases, suppliers can earn higher levels of profit or justify higher marginal costs to
produce more.
D. none of the above
 Supply and Demand Multiple Choice

16. Part of the reason that Michael Jordan earns millions of dollars each year while school teachers
may earn $100,000 is because

A. the supply of superstar basketball players is very low, while the supply of competent teachers is much larger.
B. demand for Michael Jordan's talents is very high since he can generate so much revenue for a firm.
C. consumers enjoy basketball to the point that they are willing to spend lots of money and time attending
games and watching commercials.
D. all of the above

17. When college students leave town for the summer, the demand for meals at the local restaurants
declines. This results in

A. a decrease in equilibrium price and an increase in quantity.

B. an increase in equilibrium price and quantity.
C. a decrease in equilibrium price and quantity.
D. an increase in equilibrium price, and a decrease in quantity.

18. All the following shift the demand curve for automobiles to the right except:

A. the local factory gives a big raise to its employees.

B. a brand new automobile dealership opens in town.
C. the price of gasoline falls.
D. none of the above

19. If the cost of computer components falls, then

A. the demand curve for computers shifts to the right.

B. the demand curve for computers shifts to the left.
C. the supply curve for computers shifts to the right
D. the supply curve for computers shifts to the left

20. What happens in the market for airline travel when the price of traveling by rail decreases?

A. the demand curve shifts left.

B. the demand curve shifts right.
C. the supply curve shifts left.
D. the supply curve shifts right.

21. If a tax is placed on sales of alcohol

A. the demand curve shifts to the left.

B. the demand curve shifts to the right.
C. the supply curve shifts to the left.
D. the supply curve shifts to the right.

22. When a price ceiling is imposed above the equilibrium price

A. a shortage results.
B. a surplus results.
C. the equilibrium outcome prevails.
D. there is not enough information to determine the outcome.
 Supply and Demand Multiple Choice

23. If the demand curve shifts right, we move up and to the right along the supply curve.
A. True
B. False

24. If the cost of making bicycles falls, the price goes down, causing the demand curve to shift to the
right.
A. True
B. False

25. An increase in the price of a product will reduce the amount of it purchased because:

A. supply curves are upsloping

B. the higher price means that real incomes have risen
C. consumers will substitute other products for the one whose price has risen
D. consumers substitute relatively high-priced for relatively low-priced products.

26. Which of the following will not cause the demand for product K to change?

A. a change in the price of close substitute product J

B. an increase in consumer incomes
C. a change in the price of K
D. a change in consumer tastes

27. Which of the following would not shift the demand curve for beef?

A. a widely publicised study which indicates beef increases one’s cholesterol

B. a reduction in the price of cattle beef
C. an effective advertising campaign by pork producers
D. a change in the incomes of beef producers

28. If the price of K declines, the demand curve for the complementary product J will

A. shift to the left

B. decrease
C. shift to the right
D. remain unchanged

29. A firm’s supply curve is upsloping because:

A. the expansion of production necessitates the use of qualitatively inferior products

B. mass production economies are associated with larger levels of output
C. consumers envision a positive relationship between price and quality
D. beyond some point, the production costs of additional units of output will rise
 Supply and Demand Multiple Choice

30. Refer to the diagram below:

The equilibrium price and quantity in this market is

A. $1.00 and 200

B. $1.60 and 130
C. $0.50 and 130
D. $1.60 and 290

31. Refer to the diagram below:

A price of $20 in this market will result in:

equilibrium.
A.

a shortage of 50 units.
B.

a surplus of 50 units.
C.

a surplus of 100 units.

D.

a shortage of 100 units.

E.
 Supply and Demand Multiple Choice

32. Refer to the diagrams below:

Which of the diagrams illustrates the effect of a decrease in incomes upon the market for second-hand
clothing?

A. A and C
B. A only
C. B only
D. C only

33. Refer to the diagrams below:

Which of the diagrams illustrate the effect of a government subsidy on the market for AIDS research?

A. A only
 Supply and Demand Multiple Choice

B. B only
C. C only
D. D only

34. At a price of $299.95, the manufacturer of a portable gas-powered generator is willing to produce
19,000 units per quarter. At a price of $349.95, it is likely that the manufacturer will be willing to

A. produce more than 19,000 units per quarter.

B. keep producing 19,000 units per quarter.
C. produce less than 19,000 units per quarter.
D. It is impossible to predict the effect of this scenario

35. If a computer software company introduces a new program and finds that orders from wholesalers
far exceed the number of units that are being produced

A. there is an excess supply and price can be expected to decrease.

B. there is an excess supply and price can be expected to increase.

C. there is an excess demand and price can be expected to decrease.

D. there is an excess demand and price can be expected to increase.

36. An increase in the demand for a good will cause

A. a decrease in equilibrium price and quantity.

B. an increase in equilibrium price and quantity.

C. an increase in equilibrium price and a decrease in equilibrium quantity.

D. a decrease in equilibrium price and an increase in equilibrium quantity.

37. An increase in the supply of a good will cause

A. an increase in equilibrium price and quantity.

B. a decrease in equilibrium price and quantity

C. a decrease in equilibrium price and an increase in equilibrium quantity

D. an increase in equilibrium price and a decrease in equilibrium quantity.

38. If the price of a good decreases while the quantity of the good exchanged on markets decreases,
then the most likely explanation is that there has been

A. an increase in demand.
B. a decrease in supply.
C. an increase in supply.
D. a decrease in demand.

39. If the price of a good increases while the quantity of the good exchanged on markets decreases,
then the most likely explanation is that there has been
 Supply and Demand Multiple Choice

A. an increase in demand.

B. a decrease in supply.

C. an increase in supply.

D. a decrease in demand.

40. Assume that firms in an industry observe a 10% increase in the productivity of labor, but to get
there they had to increase the cost of labor by 5%. What should be expected to happen in the
output market as a result of this development?

A. The supply should increase

B. The supply should decrease

C. The demand should increase

D. The demand should decrease