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Chapter 3: Demand and Supply
Parkin
Macroeconomics, Ninth Edition
© 2010 Pearson Addison-Wesley. All rights reserved.
All of the following statements are true
EXCEPT:
A. Relative prices are determined in markets.
B. A relative price is an opportunity cost.
C. The relative price of a good can be
calculated by multiplying its money price by a
price index.
D. The theory of demand and supply is
concerned with adjustments in relative
prices.
Parkin
Macroeconomics, Ninth Edition
© 2010 Pearson Addison-Wesley. All rights reserved.
An ice cream cone costs $1.50. A can of soda
costs $0.75. The relative price of an ice cream
cone is
A. 1/2 can of soda, the opportunity cost of an
ice cream cone.
B. $1.50, the opportunity cost of a can of soda.
C. 2 cans of soda, the opportunity cost of an ice
cream cone.
D. $0.75, the opportunity cost of a can of soda.
Parkin
Macroeconomics, Ninth Edition
© 2010 Pearson Addison-Wesley. All rights reserved.
The “law of demand” is illustrated by a
A.
B.
C.
D.
rightward shift of the demand curve.
leftward shift of the demand curve.
movement along the demand curve.
Both answers A and B are correct.
Parkin
Macroeconomics, Ninth Edition
© 2010 Pearson Addison-Wesley. All rights reserved.
In 2007 Nike reduced the price of its running
shoes by 20 percent. As a result, the
substitution effect caused
A. the demand for Nike shoes to increase.
B. people to switch from Adidas shoes and buy
more Nikes.
C. the relative price of Nikes to increase.
D. the demand curve for Nikes to shift
rightward.
Parkin
Macroeconomics, Ninth Edition
© 2010 Pearson Addison-Wesley. All rights reserved.
The “law of supply” refers to the fact that, all
other things remaining the same, when the
price of a good rises
A. the supply curve shifts leftward.
B. the supply curve shifts rightward.
C. there is a movement up along the supply
curve to a larger quantity supplied.
D. there is a movement down along the supply
curve to a smaller quantity supplied.
Parkin
Macroeconomics, Ninth Edition
© 2010 Pearson Addison-Wesley. All rights reserved.
The Miami Dolphins play football in Joe Robbie
Stadium which holds 76,500 seats. In 2007,
attendance averaged about 70,000 fans per
game. This means that the quantity supplied of
seats is
A.
B.
C.
D.
76,500.
70,000.
6,500.
126,500.
Parkin
Macroeconomics, Ninth Edition
© 2010 Pearson Addison-Wesley. All rights reserved.
When a market is in equilibrium,
A. everyone has all they want of the commodity
in question.
B. there is no shortage and no surplus at the
equilibrium price.
C. the number of buyers is exactly equal to the
number of sellers.
D. the supply curve has the same slope as the
demand curve.
Parkin
Macroeconomics, Ninth Edition
© 2010 Pearson Addison-Wesley. All rights reserved.
Suppose a market begins in equilibrium. If
supply increases, then at the original
equilibrium price the quantity demanded is
A. is less than the quantity supplied and a
surplus results.
B. is less than the quantity supplied and a
shortage results.
C. exceeds the quantity supplied and a surplus
results.
D. exceeds the quantity supplied and a
shortage results.
Parkin
Macroeconomics, Ninth Edition
© 2010 Pearson Addison-Wesley. All rights reserved.
Assume that beef and pork are substitutes for
consumers. There is a drought in the cattle
grazing areas. The drought will shift the
A.
B.
C.
D.
supply curve of pork rightward.
supply curve of pork leftward.
demand curve for pork rightward.
demand curve for pork leftward.
Parkin
Macroeconomics, Ninth Edition
© 2010 Pearson Addison-Wesley. All rights reserved.
In the market for oranges, the demand and
supply of oranges decrease by the same
amount. The equilibrium quantity will ________
and the equilibrium price will ________.
A.
B.
C.
D.
decrease; not change
decrease; fall
remain the same; either rise or fall
remain the same; rise
Parkin
Macroeconomics, Ninth Edition
© 2010 Pearson Addison-Wesley. All rights reserved.