Chapter 3

Name___________________________________

MULTIPLE CHOICE. Choose the one alternative that best completes the
statement or answers the question.
29) The quantity supplied of a good or service is the quantity that a producer
________ at a particular price during a given time period.

A) is willing to sell B) should sell C) needs to sell D) actually sells

30) A supply curve shows the relation between the quantity of a good supplied
and
A) income. Usually a supply curve has positive slope.
B) the price of the good. Usually a supply curve has negative slope.
C) income. Usually a supply curve has negative slope.
D) the price of the good. Usually a supply curve has positive slope.

31) Changes in which of the following shifts the supply curve of hamburgers?
A) an increase in the price of meat used to produce hamburgers
B) an economy-wide decrease in income because of a long recession
C) new research that establishes a link between hamburgers and heart problems
D) a rise in the price of soda, a complement for hamburgers

32) If a producer can use resources to produce either good A or good B, then A
and B are
A) substitutes in production. B) substitutes in consumption.
C) complements in consumption. D) complements in production.

33) A bakery can produce either cakes or cookies. If the price of cookies rises,
then
A) the supply curve of cake shifts leftward.
B) there is a movement upward along the supply curve of cakes.
C) there is a movement downward along the supply curve of cakes.
D) the supply curve of cake shifts rightward.

34) An increase in the number of fast-food restaurants

A) raises the price of fast-food meals.
B) increases the demand for fast-food meals.
C) increases the demand for substitutes for fast-food meals.
D) increases the supply of fast-food meals.

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35) The figure above shows supply curves for soft drinks. Suppose the economy
is at point a. A movement to point c could be the result of

A) an increase in the money price of a soft drink.

B) a decrease in the relative price of a soft drink.
C) an increase in the relative price of a soft drink.
D) a decrease in technology.

36) The figure above shows supply curves for soft drinks. Suppose the economy
is at point a. An increase in the price of a soft drink is shown as a movement
from point a to

A) none of the points that are illustrated. B) point b.

C) point c. D) point d.

37) An increase in the number of producers of gruel ________ the supply of gruel
and shifts the supply curve of gruel ________.
A) decreases; rightward B) increases; rightward
C) decreases; leftward D) increases; leftward

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38) The figure illustrates the market for pens. The equilibrium quantity is
A) 5 pens a month.
B) 2 pens a month.
C) between 400 and 600 pens, but it is impossible to be precise.
D) 500 pens a month.

39) If the price of a video rental is below its equilibrium price, there will be a
________ of video rentals and the price will ________ .

A) shortage; rise B) surplus; fall C) surplus; rise D) shortage; fall

40) The price of a good will fall if

A) there is a surplus at the current price.
B) the price of a complement in consumption falls.
C) the quantity demanded exceeds the quantity supplied.
D) the current price is less than the equilibrium price.

Price
Quantity Quantity
(dollars per
supplied demanded
cellular
(thousands) (thousands)
phone)
100 50 100
80 55 80
60 60 50
40 100 20

41) Using the data in the above table, the equilibrium quantity and equilibrium
price for a cellular telephone is

A) 80 thousand and $80. B) 40 thousand and $20.

C) 50 thousand and $100. D) 60 thousand and $50.

42) Using the data in the above table, at the price of $80 a phone, a
A) surplus of 25 thousand cellular telephones occurs.
B) surplus of 80 thousand cellular telephones occurs.
C) shortage of 55 thousand cellular telephones occurs.
D) shortage of 25 thousand cellular telephones occurs.

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43) When the demand for a good decreases, its equilibrium price ________ and
equilibrium quantity ________.

A) rises; decreases B) falls; increases C) falls; decreases D) rises;

increases

44) An increase in demand combined with no change in supply

A) decreases demand because the supply curve does not shift.
B) raises the equilibrium price.
C) results in only a movement rightward along the demand curve.
D) lowers the equilibrium price.

45) Which of the following statements is correct?

A) When both demand and supply increase, the quantity decreases and the price
might rise, fall, or remain the same.
B) When both demand and supply increase, the price rises and the quantity
might increase, decrease, or remain the same.
C) When both demand and supply decrease, the quantity decreases and the price
might rise, fall, or remain the same.
D) When both demand and supply decrease, the quantity increases and the price
might rise, fall, or remain the same.

ESSAY. Write your answer in the space provided or on a separate sheet

of paper.

46) In the figure above, if the price is $8 a unit, is there a shortage or surplus
and what is the amount of any shortage or surplus? What is the equilibrium price
and quantity?

TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is
false.
47) When both the demand for a good increases and the supply of the good
increases, the equilibrium quantity definitely increases.

48) An increase in price results in increase in supply but not an increase in the
quantity supplied.
ESSAY. Write your answer in the space provided or on a separate sheet
of paper.

Quantity Quantity Price

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 supplied
demanded
(thousands of (cents per
(thousands of
gallons per gallon)
gallons per week)
week)
20 80 2.90
30 70 3.00
40 60 3.10
50 50 3.20
60 40 3.30
70 30 3.40
80 20 3.50

49) A market research team has come up with the demand and supply schedules
for gasoline in Motorville in the table above. Use these data to analyze the
situation in the market for gas in Motorville.
a) Draw a figure showing the demand curve for gasoline and the supply curve of
gasoline. What are the equilibrium price and quantity?
b) Suppose the price is $3.30. Describe the situation in the market and explain
how the market adjusts. Now suppose the price is $3.00. Describe the situation
in the market and explain how the market adjusts.

c) The market research report also predicts that a rise in the price of crude oil
will decrease the quantity of gas supplied by 20,000 gallons a week at each
price. Suppose the price of crude oil does rise. Use your figure to show how this
will affect the market for gas. How will the market adjust? What will be the new
equilibrium price and quantity?

MULTIPLE CHOICE. Choose the one alternative that best completes the
statement or answers the question.

50) The figure above shows supply curves for soft drinks. Suppose the economy
is at point a. A movement to point d would be the result of

A) an increase in the relative price of a soft drink.

B) a decrease in the relative price of a soft drink.
C) an increase in technology.
D) an increase in the number of soft drink suppliers.

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51) The figure above shows supply curves for soft drinks. Suppose the economy
is at point a. A decrease in the price of sugar used to make soft drinks is shown
as a movement from point a to a point such as

A) none of the points that are illustrated.

B) point b.
C) point c.
D) point d.

52) The figure above shows supply curves for soft drinks. Suppose the economy
is at point a. An increase in the number of suppliers would be shown as a
movement from point a to a point such as

A) none of the points that are illustrated.

B) point b.
C) point c.
D) point d.

53) The figure above shows supply curves for soft drinks. Suppose the economy
is at point a. A movement to point b could be the result of

A) an increase in the money price of a soft drink.

B) an increase in the relative price of a soft drink.
C) an increase in technology.
D) a decrease in the relative price of a soft drink.

54) Given the following data:

P = 80 - Qd
P = 20 + 2 Qs

Given the above demand and supply equations for widgets,

find the equilibrium price and quantity.

1) In a supply and demand figure, the equilibrium price and quantity are found at the

A) point where quantity supplied equals quantity demanded.

B) horizontal intercept of the demand curve.

C) vertical intercept of the supply curve.

D) horizontal intercept of the supply and the demand curves.

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Answer: A

2) The equilibrium price is the price at which the quantity

A) sold equals the quantity bought.

B) demanded equals the quantity sold.

C) demanded equals the quantity supplied.

D) supplied equals the quantity bought.

Answer: C

3) A price below the equilibrium price results in

A) a surplus.

B) a shortage.

C) excess supply.

D) a further price fall.

Answer: B

4) If the quantity of textbooks supplied is 10,000 per year and the quantity of textbooks
demanded is 12,000 per year, there is a ________ in the market and the price will
________.

A) shortage; rise

B) shortage; fall

C) surplus; rise

D) surplus; fall

Answer: A

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5) The above table shows the demand schedule and supply schedule for chocolate chip
cookies. What is the equilibrium quantity and equilibrium price for chocolate chip cookies?

A) 7 pounds, $3.00 per pound

B) 2 pounds, $3.00 per pound

C) 2 pounds, $6.00 per pound

D) 4 pounds, $5.00 per pound

Answer: D

6) The above table shows the demand schedule and supply schedule for chocolate chip
cookies. If the price is $4.00 per pound, there is a

A) shortage of 2 pounds of chocolate chip cookies.

B) shortage of 3 pounds of chocolate chip cookies.

C) shortage of 5 pounds of chocolate chip cookies.

D) surplus of 3 pounds of chocolate chip cookies.

Answer: B

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7) At a price of $10 in the above figure, there is

A) a surplus of 200 units.

B) a shortage of 200 units.

C) a surplus of 400 units.

D) a shortage of 400 units.

Answer: C

8) At a price of $4 in the above figure

A) the equilibrium quantity is 400 units.

B) there is a surplus of 200 units.

C) the quantity supplied is 400 units.

D) there is a shortage of 200 units.

Answer: D

9) If the good in the above figure is a normal good and income rises, then the new
equilibrium quantity

A) is less than 300 units.

B) is 300 units.

C) is more than 300 units.

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D) could be less than, equal to, or more than 300 units.

Answer: C

10) If there is a rise in the price of a factor of production used to produce the good, then
the new equilibrium price

A) is less than $6.

B) is $6.

C) is more than $6.

D) could be less than, equal to, or more than $6.

Answer: C

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Changes in Price and Quantity

1) Suppose the equilibrium price of bottled water has risen from $1.00 per bottle to $2.00
per bottle and the equilibrium quantity has increased. These changes are a result of a
________ shift of the ________ curve for bottled water.

A) rightward; demand

B) rightward; supply

C) leftward; supply

D) leftward; demand

Answer: A

2) An increase in demand combined with no change in supply

A) raises the equilibrium price.

B) lowers the equilibrium price.

C) results in only a movement rightward along the demand curve.

D) decreases demand because the supply curve does not shift.

Answer: A

3) If the demand for hamburgers decreases, the equilibrium price

A) rises and the equilibrium quantity increases.

B) falls and the equilibrium quantity increases.

C) rises and the equilibrium quantity decreases.

D) falls and the equilibrium quantity decreases.

Answer: D

4) Doctors find that one aspirin per day reduces the risk of heart attacks. Demand for
aspirin will

A) increase, so that equilibrium price and equilibrium quantity will increase.

B) decrease, so that equilibrium price and equilibrium quantity will increase.

C) increase, so that equilibrium price will decrease and equilibrium quantity will increase.

D) increase, but the new equilibrium price and quantity are indeterminate.

Answer: A

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5) If the demand curve for bottled water shifts leftward and the supply curve of bottled
water shifts leftward, the equilibrium

A) price of bottled water definitely increases.

B) price of bottled water definitely decreases.

C) quantity of bottled water definitely increases.

D) quantity of bottled water definitely decreases.

Answer: D

6) An increase in the demand for computers and a decrease in the number of sellers of
computers will definitely

A) increase the number of computers bought.

B) increase the price of a computer.

C) increase the price of a computer and the number of computers bought.

D) not change the price of a computer and increase the number of computers bought.

Answer: B

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7) The figure illustrates the market for chairs. If the supply of chairs increases, the price of
a chair ________ $40 and the quantity ________.

A) will rise above; demanded will decrease

B) will rise above; supplied will increase

C) will fall below; demanded will increase

D) will fall below; demanded will decrease

Answer: C

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29) A

30) D

31) A

32) A

33) A

34) D

35) B

36) D

37) B

38) D

39) A

40) A

41) D

42) A

43) C

44) B

45) C

46) At a price of $8 there is a surplus because the quantity supplied exceeds the quantity
demanded. The amount of the surplus is 4 units per month. The equilibrium price is $4 a unit
and the equilibrium quantity is 3 units per month.

47) TRUE

48) FALSE

49)

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a) See the figure above. The equilibrium price is $3.20 and the equilibrium quantity is
50,000 gallons per week.

b) If the price is $3.30, there is a surplus of 20,000 gallons. The surplus leads to a fall in
the price. The lower price increases the quantity demanded and decreases the quantity
supplied bringing the market to equilibrium at $3.20. If the price is $3.00, there is a shortage
of 40,000 gallons. The shortage leads to a rise in the price. The higher price decreases the
quantity demanded and increases the quantity supplied bringing the market to equilibrium
at $3.20.

Quantity
Quantity
supplied Price
demanded
(thousands of (cents per
(thousands of
gallons per gallon)
gallons per week)
week)
20 80 2.90
30 70 3.00
40 60 3.10
50 50 3.20
60 40 3.30
70 30 3.40
80 20 3.50

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c) The market research report also predicts that a rise in the price of crude oil will
decrease the quantity of gas supplied by 20,000 gallons a week at each price. Suppose the
price of crude oil does rise. Use your figure to show how this will affect the market for gas.
How will the market adjust? What will be the new equilibrium price and quantity?

c) The figure above shows the effect of the rise in crude oil prices. This rise decreases
the supply and the supply curve shifts leftward by 20,000 gallons at each price from S0 to S1.
As a result, at the old price, $3.20, there is a shortage of 20,000 gallons of gasoline.
Therefore the price rises, bringing the market to equilibrium at $3.30 with 40,000 gallons of
gas sold.

50) A

51) B

52) B

53) C

54) To find the equilibrium quantity, simply set both of these equations equal to each other.

80 - Q = 20 + 2Q

60 = 3Q

Q = 20

Thus our equilibrium quantity is 20. To find the equilibrium price, simply substitute Q = 20
into one of the equations. We will substitute it into the demand equation:

P = 80 - Q

P = 80 – 20

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P=60

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