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An "increase in the quantity supplied" suggests a


A) rightward shift of the supply curve.
B) movement down along the supply curve.
C) movement up along the supply curve.
D) leftward shift of the supply curve.

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A firm's supply curve is upsloping because


A) the expansion of production necessitates the use of qualitatively inferior inputs.
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.

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A large increase in the supply of HD-TV sets occurs simultaneously with a smaller decrease in its demand.As a result, the equilibrium price will


A) increase and the equilibrium quantity will decrease.
B) increase and the equilibrium quantity will increase.
C) decrease and the equilibrium quantity will decrease.
D) decrease and the equilibrium quantity will increase.

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Which of the following statements is true about productive and allocative efficiency?


A) Realizing allocative efficiency implies that productive efficiency has been realized.
B) Productive efficiency can only occur if there is also allocative efficiency.
C) Society can achieve either productive efficiency or allocative efficiency, but not both simultaneously.
D) Productive efficiency and allocative efficiency can only occur together; neither can occur without the other.

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(Consider This) Surge prices


A) create shortages of rides during peak demand times.
B) increase both the demand for and supply of rides.
C) result in surpluses in the ride market by generating too much supply.
D) reflect greater anticipated demand and elicit greater quantity supplied of drivers.

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In the foreign exchange market, if Canadian companies import more products from the U.S., then the demand for Canadian dollars will increase.

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A price ceiling means that


A) there is currently a surplus of the relevant product.
B) government is imposing a legal price that is typically below the equilibrium price.
C) government wants to stop a deflationary spiral.
D) government is imposing a legal price that is typically above the equilibrium price.

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The rationing function of prices refers to the fact that government must distribute any surplus goods that may be left in a competitive market.

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If we observe the price of a good in a competitive market rising, then we can conclude that there had been a shortage in the market.

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In the following question you are asked to determine, other things equal, the effects of a given change in a determinant of demand or supply for product X upon (1) the demand (D) for, or supply (S) of, X; (2) the equilibrium price (P) of X; and (3) the equilibrium quantity (Q) of X.Consumer expectations that the price of X will rise sharply in the future will


A) increase S, increase P, and increase Q.
B) increase D, increase P, and increase Q.
C) decrease S, increase P, and increase Q.
D) increase D, decrease P, and increase Q.

Correct Answer

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Which of the following statements about ticket scalping is correct?


A) Scalping tends to be prevalent when there is a surplus of tickets.
B) Scalping tends to be prevalent when there is a shortage of tickets.
C) Scalping benefits only one party-the sellers-but not the buyers.
D) Scalping benefits only one party-the buyers-but not the sellers.

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An effective price floor on wheat will


A) force otherwise profitable farmers out of business.
B) result in a shortage of wheat.
C) result in a surplus of wheat.
D) clear the market for wheat.

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(Advanced analysis) The demand for commodity X is represented by the equation P = 10 - 0.2Q and supply by the equation P = 2 + 0.2Q.If demand changes from P = 10 - .2Q to P = 7 - .3Q, the new equilibrium price is


A) $2.
B) $4.
C) $6.
D) $7.

Correct Answer

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(Advanced analysis) The demand for commodity X is represented by the equation P = 100 - 2Q and supply by the equation P = 10 + 4Q.The equilibrium quantity is


A) 10.
B) 20.
C) 15.
D) 30.

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Markets, viewed from the perspective of the supply and demand model,


A) assume many buyers and many sellers of a standardized product.
B) assume market power so that buyers and sellers bargain with one another.
C) do not exist in the real-world economy.
D) are approximated by markets in which a single seller determines price.

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Which of the following will cause a decrease in market equilibrium price and an increase in equilibrium quantity?


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

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Which of the following will not cause a change in the demand for product A?


A) a change in the number of buyers
B) a change in the price of A
C) a decline in consumer incomes
D) a decrease in the price of close-substitute product B

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Last year the price of corn was $3 a bushel and the quantity of corn demanded was 10 million bushels.This year the price of corn was $4.00 a bushel and the quantity demanded was 9 million bushels.Is this evidence that the law of demand does not apply to corn?


A) Yes, because there is a direct relationship between the price of corn and the quantity supplied.
B) Yes, because there is an inverse relationship between the price of corn and the quantity demanded.
C) No, because the other-things-equal assumption was violated over the two-year period.
D) No, because the evidence indicates that there is a shortage of corn.

Correct Answer

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Suppose that tacos and pizza are substitutes, and that soda and pizza are complements.We would expect an increase in the price of pizza to


A) reduce the demand for tacos and increase the demand for soda.
B) reduce the demand for soda and increase the demand for tacos.
C) increase the demand for both soda and tacos.
D) reduce the demand for both soda and tacos.

Correct Answer

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The law of demand states that if price increases, other things being equal, the demand for the product will decrease.

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