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Foundations of Economics, 3e (Bade/Parkin) - Testbank 1
Chapter 4 Demand and Supply
1) A market is defined as
3) Which of the following statements is true about a competitive market? A competitive market
4) The "law of demand" refers to the fact that, other things remaining the same, when the price of a good rises,
6) Gasoline prices increase by 50 percent and other things remain the same. As a result, there is
10) The "quantity demanded" of any good or service is ____ during a specified time period and at a specified
price.
11) An increase in the quantity demanded is shown as a
13) Your college requires that starting this year, every business student must bring a laptop to school. This
requirement
20) The market demand curve
21) The market demand curve for mangos is
28) Car insurance and cars are complements. If the price of car insurance increases, the
29) Soda and hot dogs are complements for one another. If a shortage of carbonated water leads to an increase in
the price of soda, then the
33) Water bottlers announce that next month the price of bottled water will rise by 25 percent. Which of the
following occurs immediately?
34) Consider the market for cellular phones. Which of the following shifts the demand curve leftward?
45) A student at New York University used to take the Redhound bus when she visited her grandmother in
Boston. After graduating, although the bus fare and the plane fare were the same as they were when she was
a student, with a well paid job on Wall Street she now takes the plane to Boston to visit her grandmother. For
this student, travel by Redhound bus is
46) If the demand for digital cameras increases when consumers' incomes rise, then digital cameras are
47) The law of supply states that, other things remaining the same,
49) The quantity supplied of a good or service is the
54) A supply curve
If the number of companies producing computer memory chips increases, then the
61)
67) Which of the following shifts the supply curve for oranges?
70) In the above figure, the movement from point a to point b reflects
71) In the above figure, the shift in the supply curve from S to S1 reflects
72) In the above figure, the shift in the supply curve from S to S2 reflects
73) In the above figure, the shift in the supply curve from S to S2 might reflect
74) In the above figure, an increase in cost of the cheese used to produce pizza
75) In the above figure, an increase in productivity
82) Market equilibrium occurs when
A) all markets become equal.
110) A construction boom occurs and many of the new buildings need plywood for their framing. Which of the
figures above best illustrates this change?
111) Contractors can use plywood or brick to construct walls. Suppose the price of bricks increases. Which of the
figures above best illustrates the effect of this change on the market for plywood?
112) The number of logging firms increases. Which of the figures above best illustrates this change?
113) New technology for producing plywood is developed. Which of the figures above best illustrates this
change?
114) In an effort to protect endangered species from the effects of logging in America's national forests, the federal
government passes a law prohibiting logging in most of the state of Washington. Which of the figures above
best illustrates the effect of this new law?
115) Kiwis and strawberries are substitutes for consumers. An increase in the price of a kiwi coupled with an
increase in the number of strawberry growers ____ the equilibrium price of a pound of strawberries and ____
the equilibrium quantity of strawberries.
A) raises increases
B) probably changes, but more information is needed to determine if it rises or falls; increases
C) raises; probably changes, but more information is needed to determine if it increases or decreases
D) lowers; probably changes, but more information is needed to determine if it increases or decreases
E) lowers; increases
Answer: B
Topic: Effects of an increase in demand and an increase in supply
Skill: Level 3: Using models
Objective: Checkpoint 4.3
Author: JC
116) Both the demand for and supply of cars changes in France. You observe that the quantity of cars does not
change but the price rises. Thus, which of the following occurred?
A) Demand and supply increased by an equal amount.
B) Demand and supply decreased by an equal amount.
C) Demand increased and supply decreased by an equal amount.
D) Demand decreased and supply increased by an equal amount.
E) Demand increased by a larger magnitude than supply decreased.
Answer: C
Topic: Effects of an increase in demand and a decrease in supply
Skill: Level 3: Using models
Objective: Checkpoint 4.3
Author: JC
117) Suppose that the demand curve for desktop computers shifts rightward and at the same time the supply
curve shifts leftward. Which of the following could have caused these shifts?
A) Desktop computers are a normal good and incomes increased, while more firms entered the market.
B) The price of a laptop computer, a substitute for desktop computers, fell and the cost of producing
desktop computers decreased.
C) Consumers purchased more computers because of the Christmas season and the labor costs of
producing desktop computers decreased.
D) Desktop computers are a normal good and incomes increased, while the labor costs of producing
personal computers increased.
E) Desktop computers are a normal good and incomes decreased, while the labor costs of producing
personal computers increased.
Answer: D
Topic: Effects of an increase in demand and a decrease in supply
Skill: Level 4: Applying models
Objective: Checkpoint 4.3
Author: SA
118) If the demand curve for desktop computers shifts rightward and at the same time the supply curve shifts
leftward, then
A) the equilibrium price definitely rises.
B) the equilibrium price definitely falls.
C) the equilibrium price definitely remains the same.
D) More information is needed to determine the effect on the equilibrium price.
E) the equilibrium quantity definitely increases.
Answer: A
Topic: Effects of an increase in demand and a decrease in supply
Skill: Level 4: Applying models
Objective: Checkpoint 4.3
Author: SA
119) If the demand curve for desktop computers shifts rightward and at the same time the supply curve shifts
leftward, then
A) the equilibrium quantity definitely increases.
B) the equilibrium quantity definitely decreases.
C) the equilibrium quantity definitely remains the same.
D) More information is needed to determine the effect on the equilibrium quantity.
E) the equilibrium price definitely falls.
Answer: D
Topic: Effects of an increase in demand and a decrease in supply
Skill: Level 4: Applying models
Objective: Checkpoint 4.3
Author: SA
120) Consider the market for bread. If there is an increase in the price of wheat, the
A) demand curve for bread will shift leftward.
B) supply curve of bread will shift leftward.
C) price of bread will decrease.
D) equilibrium quantity of bread will increase.
E) demand curve for bread will shift rightward.
Answer: B
Topic: Integrative
Skill: Level 3: Using models
Objective: Integrative
Author: CD
121) Consider the market for turkeys. In the United States, because of Thanksgiving in the month of November,
A) there is a downward movement along the demand curve for turkeys.
B) there is an upward movement along the supply curve for turkeys.
C) the supply curve of turkeys shifts rightward.
D) the demand curve for turkeys shifts leftward.
E) neither the demand curve nor the supply curve; instead there is a movement along both curves.
Answer: B
Topic: Integrative
Skill: Level 3: Using models
Objective: Integrative
Author: CD
122) Consider the market for feather pillows. If there is an increase in the price of feather dusters, a substitute in
production for feather pillows, then
A) the price of feather pillows decreases.
B) the demand curve for feather pillows shifts leftward.
C) the supply curve for feather pillows shifts leftward.
D) there is a downward movement along the demand curve for feather pillows.
E) the demand curve for feather pillows shifts rightward.
Answer: C
Topic: Integrative
Skill: Level 3: Using models
Objective: Integrative
Author: CD
123) Consider the market for peanut butter. If there is an increase in the price of peanuts,
A) there will be an upward movement along the supply curve for peanut butter.
B) the supply curve for peanuts will shift rightward.
C) there will be a decrease in the supply of peanuts.
D) there will be a decrease in the supply of peanut butter.
E) there will be a decrease in the demand for peanut butter.
Answer: D
Topic: Integrative
Skill: Level 3: Using models
Objective: Integrative
Author: CD
124) Peanut butter and jelly are complements for many consumers. Consider the market for peanut butter. If there
is an increase in the price of jelly,
A) there will be a movement along the supply curve of peanut butter.
B) the price of peanut butter will rise.
C) the quantity of peanut butter will increase.
D) there will be a shift in the supply curve for jelly.
E) the demand curve for peanut butter does not shift; instead there is only a movement along it.
Answer: A
Topic: Integrative
Skill: Level 3: Using models
Objective: Integrative
Author: CD
125) Consider the market for wheat. If there is an improvement in harvesting technology,
A) the supply curve for wheat shifts rightward.
B) the demand curve for wheat shifts rightward.
C) there is a movement up along the demand curve.
D) the equilibrium price rises.
E) the demand curve for wheat shifts leftward.
Answer: A
Topic: Integrative
Skill: Level 3: Using models
Objective: Integrative
Author: CD
126) Consider the market for camera film. If more people start using digital cameras, which do not require film,
A) the supply curve of film shifts rightward.
B) the demand curve for film shifts leftward.
C) there is a movement up along the demand curve for film.
D) there is a movement down along the demand curve for film.
E) neither the demand curve nor the supply curve for film shifts; instead there is a movement along both.
Answer: B
Topic: Integrative
Skill: Level 3: Using models
Objective: Integrative
Author: CD
127) Consider the market for leather shoes. If producers believe the price of leather shoes will increase next
month, today
A) the supply curve for leather shoes will shift rightward.
B) the supply curve for leather shoes will shift leftward.
C) there will be a movement along the supply curve for leather shoes.
D) the equilibrium price of leather shoes will fall.
E) the equilibrium quantity of leather shoes will increase.
Answer: B
Topic: Integrative
Skill: Level 3: Using models
Objective: Integrative
Author: CD
128) Consider the market for peanut butter. If there is an increase in the price of bread (a complement for peanut
butter) along with a drought in peanut growing areas,
A) the equilibrium quantity of bread will increase.
B) the equilibrium quantity of peanut butter will definitely decrease.
C) the equilibrium quantity of peanut butter might increase or might decrease.
D) the equilibrium price of peanut butter will definitely rise.
E) the equilibrium price of peanut butter will definitely fall.
Answer: B
Topic: Integrative
Skill: Level 3: Using models
Objective: Integrative
Author: CD
129) Consider the market for peanut butter. If there is a decrease in the price of deli turkey slices (a substitute in
consumption for peanut butter) along with a decrease in the price of peanut brittle (a substitute in
production for peanut butter), the
A) equilibrium price of peanut butter will definitely fall.
B) equilibrium quantity of peanut will definitely decrease.
C) equilibrium price of peanut butter might rise or fall.
D) equilibrium quantity of peanut butter will definitely increase.
E) equilibrium price of peanut butter will definitely rise.
Answer: A
Topic: Integrative
Skill: Level 3: Using models
Objective: Integrative
Author: CD