ECON 201 Answers
The figure below shows three demand curves for coffee.
An increase in the price of coffee,other factors constant,would cause a
shift from D1 to D3.
shift from D1 to D2.
movement from point a to point b.
D. movement from point b to point a.
AACSB: Knowledge Application
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-02 Describedemand and explain how it can change.
Test Bank: II Topic: Demand
Suppose that goods A and B areclose substitutes. If the price ofgood A falls, then we would expect an
increase in the demand for A and anincrease in thequantity of B demanded.
increase in the demand for A and a decrease in thequantity of B demanded.
C. increase in the quantity of A demanded and a decrease in the demandforB.
D. increase in the demand for good A as well as for good B.
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-02 Describedemand and explain how it can change.
Test Bank: II Topic: Demand
Which of the following factors will decrease the currentdemand for a product?
A. an expected increase in the future price ofthe product
B. a decrease in the current price of a substitute product
a decrease in the current price ofa complementary product
an increase in the current price ofa substitute product
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-02 Describedemand and explain how it can change.
Test Bank: II Topic: Demand
Which of the following pairs are not considered to be complementary goods?
A. steel and cars
digital cameras and memory cards
gasoline and motor oil
fertilizer and irrigation systems
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-02 Describedemand and explain how it can change.
Test Bank: II Topic: Demand
If the price of gasoline increasessignificantly, then we'd expect the demand curve for largetrucks and SUVs to
A. shift to the right.
B. shift to the left.
become upward-sloping.
not shift, but there will be a movement along that demandcurve.
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-02 Describedemand and explain how it can change.
Test Bank: II Topic: Demand
An increase in the price of product B leads to an increasein the demandforproduct C. This indicatesthat products B and C are
A. complementary goods.
B. substitute goods.
inferior goods.
normal goods.
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-02 Describedemand and explain how it can change.
Test Bank: II Topic: Demand
Which of the following would best be classified as a complementfor new houses/homes?
lumber or steel
construction equipment
C. mortgage loans
D. rental apartments
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-02 Describedemand and explain how it can change.
Test Bank: II Topic: Demand
If the price of Pepsi decreases, other factors constant,then we'd expect to see a consequent shift of the demand curvefor
A. Coke to the left.
Coke to the right.
Pepsi to the left.
Pepsi to the right.
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-02 Describedemand and explain how it can change.
Test Bank: II Topic: Demand
Which statement is true about supply?
There is an inverse relationship between price and quantitysupplied.
Supply refers to the amount of inventory that sellers have in their warehouses.
As price decreases, producers are willing to put more of the good onthe market for sale.
D. To entice producers to offer more of a good on the market for sale, price must rise.
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-03 Describesupply and explain how it can change.
Test Bank: II Topic: Supply
If the price of a productdecreases, we would expect
A. demand to increase.
B. quantity supplied to decrease.
supply to decrease.
quantity supplied to increase.
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-03 Describesupply and explain how it can change.
Test Bank: II Topic: Supply
"Price" in thestatement of the Law of Supply refersto
A. the dollar amount necessary to induce a change in the quantityof a good supplied tothemarket.
the cost of producing each unit of the product.
the total revenues that sellers receive for selling a given quantityof the product.
the total amount that buyers pay in order to acquire a given quantityof the product.
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-03 Describesupply and explain how it can change.
Test Bank: II Topic: Supply
An "increaseinthe quantity supplied" suggests a
rightward shift of the supply curve.
movement down along the supplycurve.
C. movement upalong the supply curve.
D. leftward shift of the supplycurve.
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-03 Describesupply and explain how it can change.
Test Bank: II Topic: Supply
All of the following areassumed to be constant when thesupply curve for a product is drawn, except the
A. price of the product.
production technology used by the firm.
number of producers.
price of inputs used to make the product.
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-03 Describesupply and explain how it can change.
Test Bank: II Topic: Supply
In order to derive themarket supply curvefromindividual supply curves, we add up the
A. various prices that individual sellers are charging for the product.
B. various quantities that individual sellers want to sell at specific price levels.
total number of sellers in the market at a given time.
costs that all individual sellers incur in producing the product.
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-03 Describesupply and explain how it can change.
Test Bank: II Topic: Supply
Which of the following is a determinant of supply?
tastes and preferences of buyers
price of a complementary good
consumer income
D. product taxes and subsidies
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-03 Describesupply and explain how it can change.
Test Bank: II Topic: Supply
Suppose that a more efficient way to produce a good is discovered, thus lowering production costs for thegood. This will cause a(n)
A. increase in supply.
decrease in supply.
increase in quantity supplied.
decrease in quantity supplied.
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-03 Describesupply and explain how it can change.
Test Bank: II Topic: Supply
If farmers withhold some of their currentcorn harvest from the market becausetheyanticipate a higher price ofcorn in the near future, then this would cause a(n)
rightward shift in the current supply of corn.
movement up along the current supply curveofcorn.
C. leftward shift in the current supply of corn.
D. movement down along the currentsupply curve of corn.
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-03 Describesupply and explain how it can change.
Test Bank: II Topic: Supply
Which of the following will not cause the supplycurve to shift?
a change in thecosts of resources needed to producethe good
a technological change in the production of the good
C. a change in the price of the good
D. a change in the prices of other goods that producerscould be producing
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-03 Describesupply and explain how it can change.
Test Bank: II Topic: Supply
Which would cause anincrease in thesupply curve of cell-phone services?
A. a decrease in thewages of cell-phone company workers
an increase in the price of cell-phone services
an increase in the taxes paid by cell-phone service providers
a decrease in a subsidy given to cell-phone service providers
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-03 Describesupply and explain how it can change.
Test Bank: II Topic: Supply
All of the following would affect the positionof the supply curveforcranberries, except the
A. popularity of cranberry drinks.
price of agricultural land for cranberries.
cost of fertilizers for cranberry production.
development of a new pest control for cranberries.
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-03 Describesupply and explain how it can change.
Test Bank: II Topic: Supply
A leftward shift of the supply curve for oil in the United States is most likely to resultfrom
a decrease in the fees that oil companiesmust pay for drilling licenses.
an increase in the subsidyfor oil exploration anddrilling.
a decrease in the world price ofoil.
D. an increase in the costs of exploration and drillingfor oil.
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-03 Describesupply and explain how it can change.
Test Bank: II Topic: Supply
280.
Refer to the figure above, which shows three supplycurves for corn. Which of the following wouldcause the supplyof corn to shift from S1 to
S2?
an increase in the price of fertilizer
a change in consumer tastes away from cornbread
a decrease in consumer incomes,assuming corn is a normal good
D. the development of a more effective insecticide against corn rootworm
AACSB: Knowledge Application
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-03 Describesupply and explain how it can change.
Test Bank: II Topic: Supply
281.
Refer to the diagram above, whichshows three supply curves for corn. Which of the following would cause the supplyof corn to shift from S1
to S3?
A. a decrease in the cost of equipment usedincorn farming
B. an increase in the price of soybeans
a decrease in the price of corn
an increase in the number of acres of farmland allocated to corn
AACSB: Knowledge Application
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-03 Describesupply and explain how it can change.
Test Bank: II Topic: Supply
282.
Refer to the diagram above, whichshows three supply curves for corn. A movementfrom point a to point b is causedbya change in the
price of resourcesused to producecorn.
number of corn farmers.
C. price of corn in the market.
D. technology of corn farming.
AACSB: Knowledge Application
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-03 Describesupply and explain how it can change.
Test Bank: II Topic: Supply
Which of the following would cause a leftward shift in thesupply curve for car washes?
an increase in the number of cars in the city
a decrease in taxes on car washes
C. an increase in the price ofcar washing equipment
D. a decrease in the price ofwater
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-03 Describesupply and explain how it can change.
Test Bank: II Topic: Supply
A fall in theprice of milk, used in the production of ice cream, will
A. decrease the supply of ice cream.
B. increase the supply of ice cream.
cause a movement along the supply curve of ice cream.
have no effecton the supply of ice cream.
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-03 Describesupply and explain how it can change.
Test Bank: II Topic: Supply
Plastics manufacturers can make either toys or plasticcontainers. If the prices and profitability of plastic toys increase,thenthe
demand for plasticcontainers will decrease.
supply of plastic containers will increase.
demand for plastic containers will increase.
D. supply of plasticcontainers will decrease.
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-03 Describesupply and explain how it can change.
Test Bank: II Topic: Supply
286.
Refer to the above graph. An increase in price, other factors constant,would cause a change from
point 5 to point 1.
point 4 to point 5.
point 1 to point 6.
D. point 3 to point 4.
AACSB: Knowledge Application
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-03 Describesupply and explain how it can change.
Test Bank: II Topic: Supply
287.
Refer to the above graph. A decrease in supply would best be reflected by a change from
A. point 2 to point 1.
point 5 to point 1.
point 5 to point 2.
point 3 to point 6.
AACSB: Knowledge Application
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-03 Describesupply and explain how it can change.
Test Bank: II Topic: Supply
There is a shortage in a market for a productwhen
the current price is higher than the equilibrium price.
supply is less than demand.
quantity demanded is less than quantitysupplied.
D. quantity demanded is greater than quantity supplied.
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-04 Relate how supply and demand interactto determine market equilibrium.
Test Bank: II Topic: Market Equilibrium
There is a surplus of tomatoesin the market. This implies that
A. the current price is set above the equilibrium level.
the price will be rising, as a result.
supply of tomatoes is more than the demand.
quantity demanded is more than quantity supplied.
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-04 Relate how supply and demand interactto determine market equilibrium.
Test Bank: II Topic: Market Equilibrium
A market for a product reaches equilibrium when
the actual quantity bought by buyers equals actual quantity sold by sellers.
the price rises further after there is a surplus.
C. buyers intend to buy a quantityequal to the quantitythat sellers intend to sell.
D. price falls further after there is a shortage.
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-04 Relate how supply and demand interactto determine market equilibrium.
Test Bank: II Topic: Market Equilibrium
If there was initially a shortagein the market for a product,then
sellers will drive the price down.
sellers will drive the price up.
buyers will drive the price down.
D. buyers will drive the price up.
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-04 Relate how supply and demand interactto determine market equilibrium.
Test Bank: II Topic: Market Equilibrium
In competitive markets, a surplus or shortage will
A. never exist because the markets are always at equilibrium.
B. cause changes in the quantities demanded and suppliedthat tend to eliminatethesurplus or shortage.
cause shifts in thedemand and supplycurves that tend to eliminatethesurplus or shortage.
cause changes in the quantities demanded and supplied that tend tointensify the surplus or shortage.
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-04 Relate how supply and demand interactto determine market equilibrium.
Test Bank: II Topic: Market Equilibrium
If the market price is above the equilibrium price,
A. a shortage will occur and producers will produce more and lower prices.
B. a surplus will occur and producers will produce less and lower prices.
a surplus will result and consumers will bid prices up.
producers will make extremely high profits.
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-04 Relate how supply and demand interactto determine market equilibrium.
Test Bank: II Topic: Market Equilibrium
The "dynamic pricing" model used by the ride-sharing firm Uber, along with a few other firms, illustrates which of the following?
A. When there is shortage in a market, the equilibrium price will rise.
Once the equilibriumprice is reached, it will remain there for at least severaldays.
Since actual quantity bought always equals actual quantitysold, the market is always at equilibrium.
When there is surplus in a market,theequilibrium price will rise.
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-04 Relate how supply and demand interactto determine market equilibrium.
Test Bank: II Topic: Market Equilibrium
295.
Refer to the above diagram for the milk market. In this market, the equilibrium price is and equilibrium quantity is .
A. $1.50 per gallon; 28 million gallons
$1.50 per gallon; 30 milliongallons
$28 per gallon;150 million gallons
$1.00 per gallon;35 million gallons
AACSB: Knowledge Application
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-04 Relate how supply and demand interactto determine market equilibrium.
Test Bank: II Topic: Market Equilibrium
296.
Refer to the above diagram for the milk market. If the price were $2 per gallon,thenthere would be a
shortage of 20 million gallons.
shortage of 10 million gallons.
C. surplus of 10 million gallons.
D. surplus of 30 million gallons.
AACSB: Knowledge Application
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-04 Relate how supply and demand interactto determine market equilibrium.
Test Bank: II Topic: Market Equilibrium
297.
Refer to the above diagram for the milk market. There would be a shortageof milk wheneverthe price is
higher than $1.50 per gallon.
higher than $2.00 per gallon.
C. lower than $1.50 per gallon.
D. lower than $2.00 per gallon.
AACSB: Knowledge Application
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-04 Relate how supply and demand interactto determine market equilibrium.
Test Bank: II Topic: Market Equilibrium
298.
Refer to the above diagram of the market for corn.Ifthe price in this market is at $4 per bushel,then there will be a
surplus and the price will tend to rise.
shortage and the price will tend to rise.
C. surplus and the price will tend to fall.
D. shortage and the price will tend to fall.
AACSB: Knowledge Application
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-04 Relate how supply and demand interactto determine market equilibrium.
Test Bank: II Topic: Market Equilibrium
299.
Refer to the above diagram illustrating the market for corn.Ifthe price in this market is fixed at $2 per bushel, then
A. sellers will not be able tosellall the corn that they intended to sell.
B. sellers will quickly run out of corn that they bring to market.
buyers will find too much corn in the market.
buyers will be able to get as much corn as they wish to buy.
AACSB: Knowledge Application
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-04 Relate how supply and demand interactto determine market equilibrium.
Test Bank: II Topic: Market Equilibrium
300.
Refer to the above diagram of the market for corn.There will be a surplus of 8 thousand bushels at the price of
A. $4/bushel.
$3/bushel.
$2/bushel.
$5/bushel.
AACSB: Knowledge Application
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-04 Relate how supply and demand interactto determine market equilibrium.
Test Bank: II Topic: Market Equilibrium
Price Per UnitQuantity Demanded Per YearQuantity Supplied Per Year$ 52,0000101,800300151,600600201,400900251,2001,200301,0001,500 301.
Refer to the above table. In this competitive market, the price and quantity will settle at
$10 and 2,000 units.
$15 and 1,600 units.
$20 and 900 units.
D. $25 and 1,200 units.
AACSB: Knowledge Application
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-04 Relate how supply and demand interactto determine market equilibrium.
Test Bank: II Topic: Market Equilibrium
Price Per UnitQuantity Demanded Per YearQuantity Supplied Per Year$ 52,0000101,800300151,600600201,400900251,2001,200301,0001,500 302.