Bringing Supply and Demand Together

Bringing Supply and Demand Together Chapter 4 Practice Questions Answer Key 1.b 2.b 3.a 4.c 5.c 6.a 7.a 8.a 9.d 10.a 11.c 12.a 13.d 14.b 15.a 16.d 17.d 18.b 19.a 20.d 21.c 22.a 23.d 24.b 25.a Bringing Supply and Demand Together Chapter 4 Practice Questions 26.c 27.c 28.b 29.a 30.c 31.c 32.d 33.d 34.b 35.a 36.b 37.d 38.d 39.a 40.b 41.c 42.c 43.a 44.b 45.a 46.b 47.b 48.d 49.b 50.d Bringing Supply and Demand Together Chapter 4 Practice Questions 51.c 52.d 53.c 54.d 55.c 56.b 57.d Bringing Supply and Demand Together Practice Questions Indicate the answer choice that best completes the statement or answers the question. 1.Ceteris paribus,ifthemarketsupplyofaproductincreases,whatwillhappentotheequilibriumquantityandpriceof theproduct? a. Thequantitywilldecreaseandthepricewillincrease. b. Thequantitywillincreaseandthepricewilldecrease. c. Thequantitywilldecreaseandthepricewillbeindeterminate. d. Thequantitywillincreaseandthepricewillincrease. 2.Aremarketsalwaysinequilibrium? a. Yes,theyarealwaysinequilibriumbecauseveryfewthingstendtoaltersupplyanddemand. b. No,butifthereisNOoutsideinterference,theytendtomovetowardequilibrium. c. No,theyareNOTalwaysinequilibriumbecausetheyNEVER“settledown”toastablepriceand quantity. d. Yes,theyarealwaysattheequilibriumpoint,orveryclosetoit. 3.Whichofthefollowingstatementsbestdescribesequilibriuminamarket? a. Atequilibrium,quantitydemandedequalsquantitysupplied. b. Equilibriumisatendencyforpricetochange,astateofperpetual motion. c. Atequilibrium,therewillalwaysbeasurplusforconsumerstopurchase. d. Atequilibrium,marketforcesNOlongerapply. FIGURE 4-1 The diagram below represents the market for butter. 4.RefertoFigure4-1.Whatistheperkilogramequilibriumpriceofbutter? a. $1 b. $2 c. $3 d. $5 5.RefertoFigure4-1.Whatistheshortageorsurplusofbutteratamarketpriceof$5perkilogram? a. ashortageequalto4000kilogramsofbutter b. asurplusequalto4000kilogramsofbutter c. asurplusequalto7000kilogramsofbutter d. ashortageequalto7000kilogramsofbutter 6.RefertoFigure4-1.Ifapriceceilingof$1perkilogramisimposed,howmanyunitsofbutterwillbesold? a. 1000 b. 3000 c. 8000 d. 12000 7.RefertoFigure4-1.Ifapricefloorof$4perkilogramisimposed,howmanyunitsofbutterwillbesold? a. 3000 b. 4000 c. 5000 d. 7000 8.Whatwilloccurinthemarketwhenthereisanexcessquantitydemandedofaproductatthecurrentprice? a. Thepricewilltendtorise. b. Thepricewilltendtofall. c. Producerswillreduceoutputandsaleswill fall. d. Thepricemustbeabovetheequilibriumprice. TABLE 4-2 Price $16 $14 $12 $10 $8 $6 D1 7 10 13 15 18 20 D2 12 15 18 21 24 27 S1 17 15 13 11 9 7 S2 30 27 24 21 18 15 9.RefertoTable4-2.SupposeD2andS2representthedemandandsupplyschedulesinaparticularmarket.Whatarethe market’sequilibriumpriceandquantity? a. apriceof$16andaquantityof12units b. apriceof$14andaquantityof15units c. apriceof$12andaquantityof6units d. apriceof$10andaquantityof21units 10.Whichofthefollowinggovernmentactionswillalwaysresultinashortage? a. Thegovernmentimposesapriceceilingbelowtheequilibriumprice. b. Thegovernmentimposesapriceceilingabovetheequilibriumprice. c. Thegovernmentimposesapricefloorbelowtheequilibriumprice. d. Thegovernmentimposesapricefloorabovetheequilibriumprice. 11.Themostprominentnewsstoryisthatmedicalresearchhasfoundthateatingapplesleadstogreaterhealthbenefits thanwerepreviouslyknown.Howwouldapplegrowersmostlikelyreacttothisnews? a. Theywoulddecreasethesupplyofapples. b. Theywoulddecreasethequantityofapples supplied. c. Theywouldincreasethequantityofapplessupplied. d. Theywouldincreasethesupplyofapples. 12.Ifaneffectiverentceilingisimplemented,whatwouldhappeninthemarketforapartmentrentals? a. ThedemandcurvewouldNOTshift,resultinginashortageofaccommodations. b. Thedemandcurvewouldshifttotheleft,leadingtoadecreaseinprice. c. ThedemandcurvewouldNOTshift,resultinginasurplusofaccommodations. d. Thedemandcurvewouldshifttotheright,leadingtoanincreaseinprice. FIGURE 4-2 13.RefertoFigure4-2.Whichmovementofequilibriumillustratesanincreaseinthequantitysupplied,butNOTan increaseinsupply? a. fromPointBtoPointD b. fromPointDtoPointC c. fromPointDtoPointB d. fromPointCtoPointD 14.RefertoFigure4-2.Whichmovementofequilibriumillustratesadecreaseinthequantitydemanded,butNOTa decreaseindemand? a. fromPointDtoPointC b. fromPointDtoPointB c. fromPointCtoPointD d. fromPointBtoPointD 15.Recently,heavyrainfallinManitobacausedflooddamagetomanyhomesintheprovince.Shortlythereafter,theprice ofplywoodrosesignificantly.Whatdotheseeventssuggestaboutthemarketforplywood? a. Anincreaseinthedemandforplywoodcausedthepriceofplywoodtorise. b. Adecreaseinthesupplyofplywoodcausedthepriceofplywoodtorise. c. Adecreaseinthedemandforplywoodcausedthepriceofplywoodtorise. d. Anincreaseinthesupplyofplywoodcausedthepriceofplywoodtorise. 16.Ceteris paribus,ifthemarketdemandforaproductincreases,whatwillhappentotheequilibriumquantityandprice oftheproduct? a. Thequantitywillincrease,andthepricewillbeindeterminate. b. Thequantitywillbeindeterminate,andthepricewilldecrease. c. Thequantitywilldecrease,andthepricewilldecrease. d. Thequantitywillincrease,andthepricewillincrease. FIGURE 4-4 17.RefertoFigure4-4.StartingwithinitialcurvesD0andS0,whichmovementisconsistentwithanincreaseinboth demandandsupply? a. amovementfromPointAtoPointE b. amovementfromPointAtoPointF c. amovementfromPointAtoPoint C d. amovementfromPointAtoPointI 18.Ifthegovernmentwantstoincreasetheminimumwageforworkers,whattypeofpolicyshoulditimplement? a. apriceceiling b. apricefloor c. apricesurplus d. apricequota 19.Whatactionbythegovernmentwillalwayscauseasurplus? a. settingapricefloorabovetheequilibriumprice b. settingapriceceilingbelowtheequilibriumprice c. settingapricefloorbelowtheequilibriumprice d. setttingapriceceilingabovetheequilibrium price 20.OnJune1,2014,theGovernmentofOntarioincreasedtheprovincialminimumwagefrom$10.25to$11.Whichof thefollowingisNOTlikelytooccur? a. Thehigherwagewillincreasethesupplyoflabour. b. Therewillbeasurplusoflabouratthenewminimumwage rate. c. Thenumberofunemployedwillincrease. d. Morepeoplewillbehiredatthehigherwagerate. FIGURE 4-1 The diagram below represents the market for butter. 21.RefertoFigure4-1.Ifapriceceilingof$4perkilogramisimposed,howmanyunitsofbutterwillbesold? a. 3000 b. 4000 c. 5000 d. 7000 TABLE 4-1 PRICEper QUANTITYDEMANDED largepepperonipizza oflargepepperonipizzas $20 1000units 18 2000units 16 3000units 14 4000units 12 5000units 10 6000units 8 7000units 6 8000units 4 9000units 2 10000units 22.RefertoTable4-1.Whatistheequilibriumprice? a. $12 b. $14 c. $16 d. $18 QUANTITYSUPPLIED oflargepepperonipizzas 7000units 6500units 6000units 5500units 5000units 4500units 4000units 3500units 3000units 2500units 23.RefertoTable4-1.Atapriceof$18,whatistheresultinthemarket? a. ashortageof6500pizzas b. asurplusof6500pizzas c. ashortageof4500pizzas d. asurplusof4500pizzas 24.Whichofthefollowingisoccurringinthemarketwhenanexcessquantityofagoodissuppliedatthecurrentprice? a. Themarketpricemustbetheequilibriumprice. b. Themarketpricemustbeaboveequilibriumprice. c. Themarketpricemustbebelowequilibrium price. d. Themarketpricewilltendtorise. TABLE 4-2 Price D1 D2 S1 S2 $16 7 12 17 30 $14 10 15 15 27 $12 13 18 13 24 $10 15 21 11 21 $8 18 24 9 18 $6 20 27 7 15 25.RefertoTable4-2.SupposeD2andS1representthedemandandsupplyschedulesinaparticularmarket.Whatarethe market’sequilibriumpriceandquantity? a. apriceof$14andaquantityof15units b. apriceof$12andaquantityof5units c. apriceof$10andaquantityof21units d. apriceof$8andaquantityof15units 26.RefertoTable4-2.SupposethatD1andS1aretheprevailingdemandandsupplycurvesforaproduct.Whichofthe followingwillhappeninthemarketifthedemandschedulechangesfromD1toD2? a. Theequilibriumpricedecreasesfrom$12to$10. b. Theequilibriumquantityincreasesfrom13to18. c. Theequilibriumpriceincreasesfrom$12to$14. d. Theequilibriumquantitydecreasesfrom15to13. 27.RefertoTable4-2.SupposethatD2andS1aretheprevailingdemandandsupplycurvesforaproduct.Whichofthe followingwillhappeninthemarketifthedemandschedulechangesfromD2toD1? a. Theequilibriumquantityincreasesfrom13to18. b. Theequilibriumpricedecreasesfrom$14to$8. c. Theequilibriumquantitydecreasesfrom15to13. d. Theequilibriumpriceincreasesfrom$12to$14. 28.RefertoTable4-2.SupposethedemandscheduleforGoodAchangesfromD1toD2becausethepriceofarelated good,GoodB,increases.Basedonthisinformation,whatcanweconclude? a. GoodBisNOTrelatedtoGoodA. b. GoodBislikelyasubstituteforGoodA. c. GoodBislikelyinferiortoGoodA. d. GoodBislikelyacomplementtoGoodA. 29.RefertoTable4-2.SupposethedemandscheduleforGoodAchangesfromD1toD2becausethepriceofarelated good,GoodB,decreases.Basedonthisinformation,whatcanweconclude? a. GoodBislikelyacomplementtoGoodA. b. GoodBisNOTrelatedtoGoodA. c. GoodBislikelyasubstituteforGoodA. d. GoodBislikelyinferiortoGoodA. 30.RefertoTable4-2.SupposethesupplyscheduleforGoodAchangesfromS1toS2becausethepriceofGoodB increases.Basedonthisinformation,whatcanweconclude? a. GoodsAandBarelikelycomplementsinconsumption. b. GoodBisNOTrelatedtoGoodA. c. GoodsAandBarelikelysubstitutesinproduction. d. GoodsAandBarelikelysubstitutesinconsumption. 31.RefertoTable4-2.SupposethatD1andS2arethedemandandsupplyschedulesforProductA.Whatwillresultifthe governmentimposesapriceceilingof$6? a. a10-unitsurplus b. a5-unitsurplus c. a5-unitshortage d. a10-unitshortage 32.RefertoTable4-2.SupposethatD1andS2arethedemandandsupplyschedulesforProductA.Whatwillbethe resultifthegovernmentimposesapriceceilingof$8? a. Theceilingwillresultinasurplusof18units. b. Theceilingwillresultinashortageof3units. c. Theceilingwillresultinasurplusof3units. d. TheceilingwillhaveNOimpactonthequantityofProductAtraded. 33.RefertoTable4-2.SupposethatD1andS2arethedemandandsupplyschedulesforProductA.Whatistheresultif thegovernmentimposesapricefloorof$12? a. ashortageof11units b. ashortageof5units c. asurplusof5units d. asurplusof11units 34.RefertoTable4-2.SupposethatD1andS2arethedemandandsupplyschedulesforProductA.Whatistheresultif thegovernmentimposesapricefloorof$10? a. Producerswillhaveproducedasurplusof21units. b. Consumerswillbeabletopurchaseasmanyunitsasdesiredatthat price. c. Consumerswillfaceashortageof6units. d. Producerswillbeabletosellalltheunitsthattheydesiretoatthatprice. 35.Whenashortageoccursataparticularprice,whatquantitywillbesoldatthatprice? a. thequantitysuppliedatthatprice b. theaverageofquantitysuppliedandquantitydemanded c. thequantitydemandedatthatprice d. thequantitysuppliedminusthequantitydemanded 36.Whenasurplusoccursataparticularprice,whatquantitywillbesoldatthatprice? a. theaverageofquantitysuppliedandquantitydemanded b. thequantitydemandedatthatprice c. thequantitysuppliedatthatprice d. thequantitysuppliedminusthequantitydemanded TABLE 4-3 Price (perlitre ofgasoline) $1.60 $1.50 $1.40 $1.30 $1.20 $1.10 $1.00 $0.90 $0.80 Quantity Demanded (thousandsoflitres) 600 700 800 950 1200 1500 1800 2100 2400 Quantity Supplied (thousandsoflitres) 1000 900 800 700 600 500 400 300 200 37.RefertoTable4-3.Whatistheequilibriumpriceofgasoline? a. $1.10 b. $1.20 c. $1.30 d. $1.40 38.RefertoTable4-3.Whatwillresultifthegovernmentimposesapriceceilingof$1.20perlitreongasoline? a. a600000litresurplus b. a250000litresurplus c. a250000litreshortage d. a600000litreshortage 39.AsurplusexistsinthemarketforBarbiedollsattheprevailingprice.Whatwilleliminatethesurplus? a. Apricedecrease,decreasingthequantitysuppliedandincreasingthequantity demanded. b. Apricedecrease,decreasingthesupplyandincreasingthedemand. c. Apriceincrease,decreasingthesupplyandincreasingthedemand. Bringing Supply and Demand Together Chapter 4 Practice Questions d. Apricedecrease,increasingthequantitysuppliedandincreasingthequantitydemanded. 40.Ashortageexistsinthemarketforpopsiclesattheprevailingprice.Whatwilleliminatetheshortage? a. Apricedecrease,increasingthequantitysuppliedanddecreasingthequantity demanded. b. Apriceincrease,increasingthequantitysuppliedanddecreasingthequantitydemanded. c. Apricedecrease,increasingthesupplyanddecreasingthedemand. d. Apriceincrease,increasingthesupplyanddecreasingthedemand. 41.Assumethatcoffeeandteaaresubstitutesforeachother.Ifweatherconditionscauseasubstantialportionofthe availablecoffeecroptobedestroyed,whatwillbetheresult? a. Thepriceofteawilldecrease. b. Thesupplyofteawillincrease. c. Thedemandforteawillincrease. d. Thepriceofcoffeewilldecrease. FIGURE 4-2 42.RefertoFigure4-2.UnderwhatcircumstanceswouldamovementfromD1toD2occur? a. whenthereisadecreaseintheincomeofconsumersandsubmarinesandwichesareinferiorgoods b. whenthepriceofbreadusedtomakesubmarinesandwichesincreases c. whenthereisanincreaseintheincomeofconsumersandsubmarinesandwichesareinferior goods d. whenthewagesofsubmarinesandwichmakersdecrease 43.IfCanadianconsumersdecidedtoboycottcoffeetoprotesttheworkingconditionsoffarmworkers,everythingelse beingequal,whatcanweexpect? a. Thequantityofcoffeesuppliedwillfall. b. Thedemandcurveforcoffeeshiftstothe right. c. Thesupplyofcoffeewillfall. d. Thepriceofcoffeewillrise. Bringing Supply and Demand Together Chapter 4 Practice Questions 44.Whichofthefollowingeventswillcausethequantityofnewspaperssoldtodecline? a. Newspaperpricesarereduced. b. Newsprintbecomesmoreexpensive. c. Magazinepricesrise. d. Theprinters’unionmakeswageconcessions. 45.Whenthedemandandsupplyofgrapesbothincreaseatthesametime,whichofthefollowingwilllikelyresult? a. Thequantityofgrapesboughtandsoldwill rise. b. Thepriceofgrapeswillfall. c. Thequantityofgrapesboughtandsoldwillfall. d. Thepriceofgrapeswillrise. 46.Ifboththesupplyanddemandcurvesshifttotheright,whatequilibriumchangecanweexpect? a. adecreaseintheequilibriumquantitysold b. anincreaseintheequilibriumquantity sold c. anincreaseintheequilibriumprice d. adecreaseintheequilibriumprice 47.Ifboththesupplyanddemandforcomputergamesdecrease,whatwillhappentotheequilibriumpriceandquantityof computergames? a. Thepricewillbeindeterminateandthequantitywillrise. b. Thepricewillbeindeterminateandthequantitywillfall. c. Thepricewillfallandthequantitywillalsofall. d. Thepricewillfallandthechangeinquantitywillbe indeterminate. 48.Thereisanincreaseindemandforpersonalcomputersatthesametimetheirinputcostsfall.Whatcanweexpect? a. Pricewillfall,buttheeffectonquantitysoldisuncertain. b. Thequantitysoldwilldecline,buttheeffectonpriceisuncertain. c. Pricewillrise,buttheeffectonquantitysoldisuncertain. d. Thequantitysoldwillincrease,buttheeffectonpriceis uncertain. 49.Ifbothmarketdemandandsupplyincreasesimultaneously,whatwillhappentoequilibriumquantityandequilibrium price? a. Quantityandpricewillbothincrease. b. Quantitywillincreaseandpricewillbeindeterminate. c. Quantitywillbeindeterminateandpricewill decrease. d. Quantityandpricewillbothdecrease. 50.Ifmarketdemanddecreasesandmarketsupplyincreases,whatwillhappentotheequilibriumquantityand equilibriumprice? Bringing Supply and Demand Together Chapter 4 Practice Questions a. Quantitywillbeindeterminateandpricewillincrease. b. Quantitywilldecreaseandpricewillbe indeterminate. c. Quantitywillincreaseandpricewillbeindeterminate. d. Quantitywillbeindeterminateandpricewill decrease. 51.Supposetheequilibriumpriceofbreadis$3.00perloaf.Ifthegovernmentsetsapriceceilingof$2.50perloaf,which ofthefollowingwillresult? a. Thequantityofwheatsuppliedwillincrease. b. Theequilibriumpriceofwheatwillfallandashortageofwheatwillbe created. c. Therewillbeashortageofbread. d. Thequantityofwheatdemandedwilldecrease. 52.Whichofthefollowingisoftentheresultoftheimpositionofapriceceilingonamarket? a. anincreaseininvestmentintheindustry b. asurplus c. adecreaseindiscriminationonthepartof sellers d. ashortage FIGURE 4-5 53.RefertoFigure4-5.AtpricePR,whichofthefollowingwilloccur? a. asurplusequalto0QDminus0QS b. asurplusequalto0QSminus0QD c. ashortageequalto0QDminus0QS d. ashortageequalto0QSminus0QD 54.RefertoFigure4-5.Whatisoccurringinthemarketforgasoline? a. Apriceceilinghasbeenimposedresultinginasurplusofgasoline. b. Apricefloorhasbeenimposedresultinginashortageofgasoline. c. Apricefloorhasbeenimposedresultinginasurplusofgasoline. d. Apriceceilinghasbeenimposedresultinginashortageof Bringing Supply and Demand Together Chapter 4 Practice Questions gasoline. 55.Whatoccurswheneverapricefloorisimposedaboveequilibriumprice? a. Thesupplywillincreaseduetoahigherpriceuntilitjustequalsthequantitydemanded. b. Thedemandwillincreaseduetoahigherpriceandashortagewillresult. c. Thequantitysuppliedwillexceedthequantitydemanded. d. Thesupplywillincreaseduetoahigherpriceandasurpluswillresult. TABLE 4-5 PRICE(perDVD) $21 20 19 18 17 16 15 14 13 12 QUANTITYDEMANDED ofDVDs 1000000units 2000000units 3000000units 4000000units 5000000units 6000000units 7000000units 8000000units 9000000units 10000000units QUANTITYSUPPLIED ofDVDs 5500000units 5000000units 4500000units 4000000units 3500000units 3000000units 2500000units 2000000units 1500000units 1000000units 56.RefertoTable4-5.Whatistheequilibriumprice? a. $17 b. $18 c. $19 d. $20 57.RefertoTable4-5.At$13,whatisoccurringinthemarketforDVDs? a. Thereisasurplusof7500000DVDs. b. Thereisasurplusof10500000DVDs. c. Thereisashortageof10500000DVDs. d. Thereisashortageof7500000DVDs.