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D. All other answers are correct
The theory of demand and supply is a theory of how the price of a commodity is determined. It assumes that the market in which the commodity is traded is perfectly competitive. This is the assumption that:
A. there are many buyers of the commodity
B. there are many sellers of the commodity
C. all sellers of the commodity sell exactly the same product
D. all other answers are correct
C. If a seller charges more than the market price (which is the price being charged by all other sellers), buyers will go elsewhere to make their purchases
For a perfectly competitive market, which of the following statements is correct?
A. a seller often charges less than the market price to increase sales and profit
B. a seller can always increase her profit by charging a higher price for her product
C. If a seller charges more than the market price (which is the price being charged by all other sellers), buyers will go elsewhere to make their purchases
D. a buyer can control the price of the product, but only when he/she purchases from several sellers in a short period of time
D. soybean market
An example of a perfectly competitive market would be the:
A. cable TV market
B. new car market
C. blue jean market
D. soybean market
B. the quantity that Ben is able and willing to sell. So, Ben’s quantity supplied increases when the prevailing market price of ice cream increases (assuming all other factors that affect Ben’s production costs are unchanged)
Ben produces and sells ice cream in a perfectly competitive market. Ben’s quantity supplied is:
A. a full description of how the quantity that Ben is able and willing to sell changes when the prevailing market price of ice cream changes
B. the quantity that Ben is able and willing to sell. So, Ben’s quantity supplied increases when the prevailing market price of ice cream increases (assuming all other factors that affect Ben’s production costs are unchanged)
C. the quantity that Ben is able and willing to sell. When ice cream is cheaper, ice cream buyers want to buy more. So, Ben’s quantity supplied increases when the prevailing market price of ice cream decreases
D. the quantity that Ben is able and willing to sell. So, Ben’s quantity supplied increases when the prevailing market price of ice cream increases
C. quantity supplied of the good increases
As long as all other factors that affect buyers’ and sellers’ decisions are unchanged, when the price of a good rises, then the:
A. quantity demanded of the good increases
B. supply curve shifts to the right
C. quantity supplied of the good increases
D. demand curve shifts to the left
B. the price that all other ice-cream sellers are charging (i.e., the market price). Ben tends to produce more when this prevailing market price is higher
Ben sells ice cream in a perfectly competitive market. His quantity supplied depends on:
A. the general health of the overall economy. Ben tends to sell more ice-cream when his customers are in better economic health
B. the price that all other ice-cream sellers are charging (i.e., the market price). Ben tends to produce more when this prevailing market price is higher
C. the price of the raw materials that Ben needs to make ice-cream and the wage that Ben has to pay his employees. When these prices rise, the quantity of ice-cream supplied by Ben tends to increase
D. the weather. When it is hotter, there are more buyers and, consequently, Ben sells more ice-cream
A. prices of the raw materials and labor used to make the good
The quantity supplied of a good is negatively (that is, inversely) related to the:
A. prices of the raw materials and labor used to make the good
B. demand for the good from consumers
C. price of the good itself
D. amount of profit a firm can expect to receive from selling the good
D. the quantity that Catherine is able and willing to buy. So, Catherine’s quantity demanded increases when the prevailing market price of ice cream decreases (assuming all other factors that affect Catherine’s buying decisions are unchanged)
Catherine buys ice cream in a perfectly competitive market. Catherine’s quantity demanded is:
A. a full description of how the quantity that Catherine is able and willing to buy changes when the prevailing market price of ice cream changes (assuming all other factors that affect Catherine’s buying decisions are unchanged)
B. the quantity that Catherine is able and willing to buy. So, Catherine’s quantity demanded increases when the prevailing market price of ice cream decreases
C. the quantity that Catherine is able and willing to buy. When the prevailing market price of ice cream decreases, ice cream sellers reduce the amount they sell. So, Catherine’s quantity demanded decreases when the prevailing market price of ice cream decreases
D. the quantity that Catherine is able and willing to buy. So, Catherine’s quantity demanded increases when the prevailing market price of ice cream decreases (assuming all other factors that affect Catherine’s buying decisions are unchanged)
B. increases when the price of ice cream decreases, assuming all the other factors that affect Catherine’s consumption decisions remain unchanged
Suppose the quantity of ice cream demanded by Catherine depends upon
i. the weather,
ii. Catherine’s income,
iii. the price of ice cream
iv. the price of frozen yogurt (which Catherine tends to buy more of when ice cream becomes more expensive)
v. the price of bananas (which Catherine tends to consume with ice cream), and
iv. Catherine’s optimism about her future
The Law of Demand is the assumption that Catherine’s quantity demanded:
A. decreases when the price of ice cream increases
B. increases when the price of ice cream decreases, assuming all the other factors that affect Catherine’s consumption decisions remain unchanged
C. increases when Catherine’s income increases
D. increases when Catherine becomes more optimistic about her future
E. all other answers are correct
A. all factors except iii
Suppose the quantity of ice cream demanded by Catherine depends upon
i. the weather,
ii. Catherine’s income,
iii. the price of ice cream
iv. the price of frozen yogurt (which Catherine tends to buy more of when ice cream becomes more expensive)
v. the price of bananas (which Catherine tends to consume with ice cream), and
iv. Catherine’s optimism about her future
Changes in which of these factors will cause Catherine’s demand curve to shift (either to the left or right)?
A. all factors except iii
B. all the factors i — vi
C. factor iii only
D. none of the factors i — vi
C. an inferior good; a decrease in the demand for the good; D. a normal good; an increase in the demand for the good
If a good is _______, then an increase in income will result in _______. (Show all correct answers)
A. a normal good; a decrease in the demand for the good
B. an inferior good; an increase in the demand for the good
C. an inferior good; a decrease in the demand for the good
D. a normal good; an increase in the demand for the good
A. substitutes; decreases, B. complements; increases
Two goods are _____ if a decrease in the price of one good ________ the demand for the other good
A. substitutes; decreases
B. complements; increases
C. complements; decreases
D. substitutes; increases
C. equilibrium
The point at which the supply and demand curves intersect is called:
A. cohesion
B. market harmony
C. equilibrium
D. coincidence
B. the price must be below the equilibrium price
If, at the prevailing price, there is a shortage of a good (also called excess demand), then
A. sellers must be producing more than buyers wish to buy
B. the price must be below the equilibrium price
C. the market must be in equilibrium
D. quantity demanded must equal quantity supplied
C. $25 and 400
Equilibrium price and quantity are, respectively:
A. $35 and 200
B. $35 and 600
C. $25 and 400
D. $15 and 200
B. there would be a surplus of 400 units
At a price of $35:
A. there would be an excess supply of 200 units
B. there would be a surplus of 400 units
C. there would be a surplus of 200 units
D. there would be a shortage of 400 units
D. there would be a shortage of 400 units
At a price of $15,
A. there would be an excess demand of 200 units
B. there would be a shortage of 200 units
C. there would be a surplus of 400 units
D. there would be a shortage of 400 units
C. supply; left; increase; decrease
Gold is used in the production of gold jewelry. If the price of gold increases, the _____ curve of gold jewelry will shift ______. Therefore the equilibrium price of gold jewelry will _______ and the equilibrium quantity will ________.
A. supply; right; increase; decrease
B. demand; right; increase; increase
C. supply; left; increase; decrease
D. supply; right; decrease; increase
E. demand; left; decrease; decrease
D. Demand; right; increase; increase
Suppose gold jewelry and platinum jewelry are substitutes. An increase in the price of platinum jewelry will shift the _______ curve of gold jewelry to the ________. Therefore, the equilibrium price of gold jewelry will _______ and the equilibrium quantity will ______.
A. demand; left; decrease; decrease
B. demand; right; increase; decrease
C. supply; right; decrease; increase
D. demand; right; increase; increase
E. supply; left; increase; decrease
C. the market demand for ice-cream will shift right and the market supply of ice-cream will shift right. As a result, the price of ice-cream may increase or decrease, and the quantity of ice-cream bought and sold will increase
Assume that the following changes occur in the market for ice-cream:
i. the price of frozen yogurt (which consumers tend to buy more of when ice-cream gets more expensive) increases,
ii. the price of the milk that is needed to make ice-cream decreases
iii. the weather gets hotter because of global warming
iv. the technology used to make ice-cream becomes more efficient and less wasteful
Which of the following predictions follow from the theory of supply and demand?
A. the market demand for ice cream will shift right and the market supply of ice-cream will shift left. As a result, the price of ice-cream will increase, and the quantity of ice-cream bought and sold may increase or decrease.
B. the market demand for ice-cream will shift right and the market supply of ice cream will shift right. As a result, the price of ice-cream will increase, and the quantity of ice-cream bought and sold will increase
C. the market demand for ice-cream will shift right and the market supply of ice-cream will shift right. As a result, the price of ice-cream may increase or decrease, and the quantity of ice-cream bought and sold will increase
D. the market demand for ice-cream will shift left and the market supply of ice-cream will shift right. As a result, the price of ice-cream will decrease, and the quantity of ice-cream bought and sold may increase or decrease
