True/False
Indicate whether the
sentence or statement is true or false.
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1.
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A perfectly competitive market consists of products
that are all slightly different from one another.
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2.
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An oligopolistic market has only a few
sellers.
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3.
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The law of demand states that an increase in the
price of a good decreases the demand for that good.
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4.
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If apples and oranges are substitutes, an increase
in the price of apples will decrease the demand for oranges.
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5.
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If golf clubs and golf balls are complements, an
increase in the price of golf clubs will decrease the demand for golf balls.
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6.
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If consumers expect the price of shoes to rise,
there will be an increase in the demand for shoes today.
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7.
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The law of supply states that an increase in the
price of a good increases the quantity supplied of that good.
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8.
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An increase in the price of steel will shift the
supply of cars to the right.
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9.
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When the price of a good is below the equilibrium
price, it causes a surplus.
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10.
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The market supply curve is the horizontal summation
of the individual supply curves.
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11.
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If there is a shortage of a good, then the price of
that good tends to fall.
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12.
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If pencils and paper are complements, an increase
in the price of pencils causes the demand for paper to decrease or shift to the left.
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13.
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If Coke and Pepsi are substitutes, an increase in
the price of Coke will cause an increase in the equilibrium price and quantity in the market for
Pepsi.
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14.
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An advance in the technology employed to
manufacture roller blades will result in a decrease in the equilibrium price and an increase in the
equilibrium quantity in the market for roller blades.
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15.
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If there is an increase in supply accompanied by a
decrease in demand for coffee, then there will be a decrease in both the equilibrium price and
quantity in the market for coffee.
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Multiple Choice
Identify the
letter of the choice that best completes the statement or answers the question.
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16.
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A perfectly competitive market has
a. | firms that set their own
prices. | b. | only one seller. | c. | at least a few sellers. | d. | many buyers and
sellers. | e. | none of these
answers. |
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17.
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If an increase in the price of blue jeans leads to
an increase in the demand for
tennis shoes, then blue jeans and tennis shoes are
a. | complements. | b. | inferior goods. | c. | normal
goods. | d. | none of these answers. | e. | substitutes. |
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18.
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The law of demand states that an increase in the
price of a good
a. | increases the supply of that
good. | b. | decreases the quantity demanded for that
good. | c. | decreases the demand for that
good. | d. | increases the quantity supplied of that
good. | e. | none of these
answers. |
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19.
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The law of supply states that an increase in the
price of a good
a. | none of these answers. | b. | increases the quantity supplied of that good. | c. | increases the supply of that good. | d. | decreases the demand for that good. | e. | decreases the quantity demanded for that
good. |
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20.
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If an increase in consumer incomes leads to a
decrease in the demand for camping equipment, then camping equipment is
a. | a normal good. | b. | none of these answers. | c. | an inferior
good. | d. | a substitute good. | e. | a complementary good. |
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21.
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A monopolistic market has
a. | many buyers and sellers. | b. | none of these answers. | c. | firms that are
price takers. | d. | only one
seller. | e. | at least a few
sellers. |
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22.
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Which of the following shifts the demand for
watches to the right?
a. | an increase in the price of
watches | b. | none of these answers | c. | a decrease in the price of watch batteries if watch batteries and watches are
complements | d. | a decrease in
consumer incomes if watches are a normal good | e. | a decrease in the
price of watches |
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23.
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All of the following shift the supply of watches to
the right except
a. | an advance in the technology used to manufacture
watches. | b. | an increase in the price of
watches. | c. | All of these answers cause an increase in the supply of
watches. | d. | a decrease in the wage of workers employed to
manufacture watches. | e. | manufacturers' expectation of lower watch prices in the
future. |
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24.
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If the price of a good is above the equilibrium
price,
a. | there is a surplus and the price will
rise. | b. | there is a shortage and the price will
fall. | c. | there is a shortage and the price will
rise. | d. | the quantity demanded is equal to the quantity supplied
and the price remains unchanged. | e. | there is a surplus
and the price will fall. |
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25.
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If the price of a good is below the equilibrium
price,
a. | there is a shortage and the price will
rise. | b. | the quantity demanded is equal to the quantity supplied
and the price remains unchanged. | c. | there is a
shortage and the price will fall. | d. | there is a surplus
and the price will rise. | e. | there is a surplus
and the price will fall. |
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26.
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If the price of a good is equal to the equilibrium
price,
a. | there is a shortage and the price will
fall. | b. | the quantity demanded is equal to the quantity supplied
and the price remains unchanged. | c. | there is a surplus
and the price will rise. | d. | there is a
shortage and the price will rise. | e. | there is a surplus
and the price will fall. |
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27.
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An increase (rightward shift) in the demand for a
good will tend to cause
a. | an increase in the equilibrium price and
quantity. | b. | none of these answers. | c. | an increase in the equilibrium price and a decrease in the equilibrium
quantity. | d. | a decrease in the equilibrium price and an increase in
the equilibrium quantity. | e. | a decrease in the
equilibrium price and quantity. |
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28.
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A decrease (leftward shift) in the supply for a
good will tend to cause
a. | an increase in the equilibrium price and
quantity. | b. | a decrease in the equilibrium price and an increase in
the equilibrium quantity. | c. | none of these
answers. | d. | a decrease in the equilibrium price and
quantity. | e. | an increase in the equilibrium price and a decrease in
the equilibrium quantity. |
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29.
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Suppose there is an increase in both the supply and
demand for personal computers. In the market for personal computers, we would expect
a. | the equilibrium quantity to rise and the equilibrium
price to rise. | b. | the equilibrium
quantity to rise and the equilibrium price to fall. | c. | the equilibrium quantity to rise and the equilibrium price to remain
constant. | d. | the change in the equilibrium quantity to be ambiguous
and the equilibrium price to rise. | e. | the equilibrium
quantity to rise and the change in the equilibrium price to be
ambiguous. |
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30.
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Suppose there is an increase in both the supply and
demand for personal computers. Further, suppose the supply of personal computers increases more than
demand for personal computers. In the market for personal computers, we would expect
a. | the change in the equilibrium quantity to be ambiguous
and the equilibrium price to fall. | b. | the equilibrium
quantity to rise and the equilibrium price to rise. | c. | the equilibrium quantity to rise and the change in the equilibrium price to be
ambiguous. | d. | the equilibrium
quantity to rise and the equilibrium price to fall. | e. | the equilibrium quantity to rise and the equilibrium price to remain
constant. |
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31.
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Which of the following statements is true about the
impact of an increase in the price of lettuce?
a. | Both the demand for lettuce will decrease and the
equilibrium price and quantity of salad dressing will fall. | b. | The supply of lettuce will decrease. | c. | The demand for lettuce will decrease. | d. | The equilibrium price and quantity of salad dressing will
fall. | e. | The equilibrium price and quantity of salad dressing
will rise. |
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32.
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Suppose a frost destroys much of the Florida orange
crop. At the same time, suppose consumer tastes shift toward orange juice. What would we expect to
happen to the equilibrium price and quantity in the market for orange juice?
a. | Price will decrease; quantity is
ambiguous. | b. | The impact on both
price and quantity is ambiguous. | c. | Price will
increase; quantity will increase. | d. | Price will
increase; quantity will decrease. | e. | Price will
increase; quantity is ambiguous. |
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33.
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Suppose consumer tastes shift toward the
consumption of apples. Which of the following statements is an accurate description of the impact of
this event on the market for apples?
a. | There is an increase in the quantity demanded of apples
and in the supply for apples. | b. | There is an
increase in the demand and supply of apples. | c. | There is an
increase in the demand for apples and a decrease in the supply of apples. | d. | There is a decrease in the quantity demanded of apples and an increase in the
supply for apples. | e. | There is an
increase in the demand for apples and an increase in the quantity supplied of
apples. |
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34.
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Suppose both buyers and sellers of wheat expect the
price of wheat to rise in the near future. What would we expect to happen to the equilibrium price
and quantity in the market for wheat today?
a. | The impact on both price and quantity is
ambiguous. | b. | Price will
decrease; quantity is ambiguous. | c. | Price will
increase; quantity will decrease. | d. | Price will
increase; quantity is ambiguous. | e. | Price will
increase; quantity will increase. |
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35.
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An inferior good is one for which an increase in
income causes a(n)
a. | decrease in supply. | b. | increase in demand. | c. | increase in
supply. | d. | decrease in
demand. |
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