True/False
Indicate whether the
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 is dominated by 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 bought and sold 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 bought and sold 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
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. | a few dominant
sellers |
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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
board shorts, then blue jeans and board shorts are likely to be
a. | complements. | b. | inferior goods. | c. | normal
goods. | d. | negatively related | 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. | is caused by a shift in demand |
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19.
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The law of supply states that an increase in the price of a good
a. | is negatively related to a shift in supply | b. | decreases the
quantity demanded for that good. | c. | increases the supply of that
good. | d. | decreases the demand for that good. | e. | increases the quantity supplied of 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. | a Giffen good | c. | an inferior
good. | d. | a substitute good. | e. | a complementary
good. |
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21.
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A monopoly market has
a. | many buyers and sellers. | b. | one buyer and one seller | 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. | a change in the cost of producing
watches | 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. | a fall in the cost of metals used in watch
production | 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. | a fall in quantity
supplied | 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. | a shift in the
demand curve to the left | 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. | c. | increase in supply. | b. | increase in demand. | d. | decrease in
demand. |
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