1 Assigned: 2/16/15 Supply & Demand Practice Honors Economics B-Day: 1 20, due 2/18; 21 45, due 2/20 A-Day: All problems, 2/19/15 Due Dates Multiple Choice Identify the choice that best completes the statement or answers the question. These questions will be part of the Homework Problems section of the SRP. Please make sure to write the full root question and the full answer choice. Write the letter answer choice to the left of the question. Example: (B) 1.) Raclette is a popular wintertime dish in Switzerland. It is essentially melted Raclette cheese over boiled new potatoes. If the price of this cheese decreased, we would expect: an increase in demand for new potatoes. _ 1. Raclette is a popular wintertime dish in Switzerland. It is essentially melted Raclette cheese over boiled new potatoes. If the price of this cheese decreased, we would expect: A. an increase in demand for the cheese. B. an increase in demand for new potatoes. C. there to be no effect on the demand for either the cheese or the new potatoes. D. an increase in demand both for the cheese and for the new potatoes. E. a decrease in the demand for new potatoes 2. When the economy suffers a downturn, vacationers are more likely to take car trips than to fly. Which of the following provides the most reasonable explanation for this phenomenon? A. Air travel and vacation travel by car are complementary goods. B. Air travel and vacation travel by car are both normal goods. C. Air travel is a normal good and vacation travel by car is an inferior good. D. Air travel is an inferior good and vacation travel by car is a normal good. E. Air travel and vacation travel by car are both inferior goods. 3. If goods A and Z are complements, an increase in the price of good Z will: A. increase the demand for good A. B. increase the quantity of good Z demanded and decrease the demand for good A. C. decrease the demand for good Z. D. decrease the demand for good A and decrease the demand for good Z. E. decrease the demand for good A. 4. When the price of gas goes up and the demand for tires goes down, this means tires and gas are: A. substitutes. B. complements. C. both expensive. D. both inexpensive. E. inferior goods. 5. An increase in the demand for gasoline today caused by concerns that gasoline prices will be higher tomorrow is most likely attributable to which of the following?
2 A. income B. consumer expectations C. consumer preferences D. prices of other goods E. producer expectations. 6. Which of the following would shift the demand curve for new textbooks to the right? A. a decrease in the price of paper B. a fall in the price of used textbooks C. an increase in college tuition rates D. a fall in the price of new textbooks E. an increase in college enrollments 7. Which of the following best describes the law of demand? A. As income taxes rise, fewer new cars are purchased. B. As the price of corn rises, more acres of corn are planted. C. As the price of a DVD rental rises, fewer DVDs are rented. D. As the population rises, more electricity is consumed. E. As the price of gasoline rises, fewer large SUVs are purchased. 8. Which of the following describe two goods that are most likely substitutes in consumption? A. loaves of bread and sticks of butter B. loaves of bread and toasters C. loaves of bread and hamburger buns D. loaves of bread and peanut butter E. loaves of bread and textbooks. 9. The demand for meals at a local Applebee's will fall if: A. the Olive Garden offers a 10% discount coupon in the local newspaper. B. the price of a meal at Applebee's rises. C. local incomes increase and Applebee's is a normal good. D. the price of gasoline falls in the local area. E. local incomes decrease and Applebee s is an inferior good. 10. The law of demand is illustrated by a demand curve that is: A. horizontal. B. downward-sloping. C. vertical. D. upward-sloping. E. a U-shaped curve. 11. A decrease in the price of a good will result in: A. an increase in demand (a rightward shift in the demand curve). B. an increase in supply (a rightward shift in the supply curve). C. an increase in the quantity demanded along a given demand curve. D. An increase in the quantity supplied along a given supply curve. E. a decrease in supply (a leftward shift in the supply curve). 12. Markets that are characterized by many buyers and many sellers are referred to as: A. inefficient. B. competitive. C. foreign. D. monopolies.
3 E. corrupt. 13. Good X and Good Y are related goods. If the price of Good X increases, and the demand for Good Y shifts left, then these goods are: A. complements. B. substitutes. C. inferior. D. normal. E. luxuries. 14. Suppose oranges and clementines are considered to be substitutes. Holding everything else constant, if the price of oranges increases, then the: A. demand for clementines will increase. B. demand for clementines will decrease. C. demand for oranges will increase. D. demand for oranges will decrease. E. demand for both oranges and clementines will decrease. 15. The demand for a good will increase if: A. there is a decrease in the price of the good. B. the price of inputs needed in the production of the good decrease. C. there is an increase in the number of sellers in this market. D. the price of a complementary good increases. E. there is an increase in the number of consumers in this market. 16. Economists use the term equilibrium to describe: A. when individuals are equal. B. when no individual would be better off taking a different action. C. when no individual has an incentive to change his or her behavior. D. when no individual would be better off taking a different action and when no individual has an incentive to change his or her behavior. E. when individuals earn the same income. 17. The provision of disabled-parking passes to those with disabilities often requires that more than enough spaces are available for those with disabilities. As a result, many of these spaces are vacant quite often when they could be used by able-bodied individuals. Such a situation illustrates the: A. trade-off between efficiency and equity. B. trade-off between efficiency and specialization. C. ability of markets to provide efficient and equitable outcomes. D. power of the market to provide for equilibrium outcomes. E. gains from specialization and trade. 18. A decrease in the price of eggs will result in a(n): A. increase in the demand for eggs. B. increase in the supply of eggs. C. decrease in the supply of eggs. D. downward movement along the supply curve of eggs. E. decrease in the demand for eggs. 19. Consider the supply curve for cotton shirts. An increase in the price of cotton will: A. increase the supply of cotton shirts. B. decrease the supply of cotton shirts. C. not shift the supply of cotton shirts.
4 D. decrease the demand for cotton shirts. E. increase the quantity supplied of cotton shirts. 20. A decrease in supply is caused by: A. an increase in prices of goods that are substitutes in production. B. suppliers' expectations of lower prices in the future. C. an advancement in the technology for producing the good. D. an increase in the number of producers. E. a decrease in input prices. 21. An increase in supply is caused by: A. an increase in resource prices. B. a decrease in the number of sellers in the market. C. suppliers' expectations of higher prices in the future. D. an advancement in the technology for producing the good. E. a decrease in the number of producers. Figure 6-3: Demand and Supply of Gasoline 22. Use the Demand and Supply of Gasoline Figure. Given the initial equilibrium of S 1 and D, any price lower than will create pressure for the price to. A. $2.00; fall B. $2.50; rise C. $3.00; rise D. $2.50; fall E. $1.00; fall Price (per bag) $ Quantity Demanded (bags per month) Quantity Supplied (bags per month)
5 Table 6-2: The Market for Chocolate-Covered Peanuts 23. Use Table 6-2. The equilibrium quantity and the equilibrium price are bags and. A. 140; $0.40 B. 175; $0.60 C. 175; $0.80 D. 210; $0.50 E. 350; $ Use Table 6-2. A shortage of 210 bags of chocolate-covered peanuts exists if the price is per bag. A. $0.80 B. $0.60 C. $0.40 D. $0.30 E. $0.50 Price Quantity Demanded Quantity Supplied Table 6-4: Competitive Market for Good Z 25. Use Table 6-4. A surplus of the good will occur at a price of. A.$0 B.$5 C.$10 A. $2.50 B. $ Use Table 6-4. The equilibrium price and quantity in this market are, respectively: A. $5 and 40 units. B. $20 and 60 units. C. $10 and 30 units. D. $15 and 20 units. E. $10 and 60 units. Figure 7-1: Demand and Supply of Gasoline
6 27. Use the Demand and Supply of Gasoline Figure 7-1. When the supply curve shifted from S 1 to S 2, the new intersection of supply and demand has a price of and quantity of 400. This could have resulted from. A. $1.50; an increase in consumers' income if gasoline is a normal good B. $1.50; an increase in refining technology C. $2.00; an increase in the number of buyers D. $2.00; an increase in consumers' income E. $1.50; an increase in the price of crude oil Figure 7-2: Demand and Supply of Wheat 28. Use the Demand and Supply of Wheat Figure 7-2. If there were a decrease in supply of 2,000 bushels at each price, the equilibrium price and quantity would be and units, respectively. A. $5; 5,000 B. $7; 5,000 C. $6; 4,000 D. $8; 6,000
7 E. $10; 2, The market for gasoline is in equilibrium. You have heard that the price of crude oil is falling because of new oil discoveries. You are also aware that the number of car and truck drivers is steadily rising. Knowing this, you predict that the price of gasoline will and the quantity of gasoline bought and sold will. A. rise; rise if the demand increase is larger than the supply increase B. rise if the demand decrease is larger than the supply decrease; fall C. fall if the supply increase is larger than the demand increase; rise D. rise; rise E. rise if the demand increase is larger than the supply increase; fall 30. The price of microchips used to produce computers falls. As a result, the equilibrium price of computers and the equilibrium quantity. A. rises; increases B. rises; decreases C. falls; decreases D. falls; increases E. stays the same; decreases 31. The United States increases tariffs on imports of lumber from Canada, which causes the price of lumber to increase in the United States. The equilibrium price of new homes in the United States will and the equilibrium quantity of new homes in the United States will. A. increase; increase B. increase; decrease C. decrease; increase D. decrease; decrease E. stay the same; stay the same 32. Many public utilities burn oil to generate electricity. If the price of oil increases, we would expect there to be: A. a shift to the right in the supply curve of electricity and a lower price for electricity. B. a shift to the left in the supply curve of electricity and a higher price for electricity. C. a shift to the right in the demand curve for oil and a higher price for electricity. D. a shift to the left in the demand curve for oil and a lower price for electricity. E. a shift to the left in the supply curve of electricity and a lower price for electricity. 33. An increase in price and an ambiguous change in quantity is most likely caused by: A. a shift to the left in demand and no shift in supply. B. a shift to the left in supply and no shift in demand. C. a shift to the right in supply and a shift to the left in demand. D. a shift to the right in supply and a shift to the right in demand. E. a shift to the left in supply and a shift to the right in demand. 34. An increase in demand, with no change in supply, will lead to in equilibrium quantity and in equilibrium price. A. an increase; an increase B. an increase; a decrease C. a decrease; an increase D. a decrease; a decrease E. no change; no change 35. A decrease in demand and a decrease in supply will lead to a(n) in equilibrium quantity and a(n) in equilibrium price.
8 A. decrease; uncertain change B. uncertain change; increase C. uncertain change; decrease D. increase; uncertain change E. decrease; decrease 36. It is certain that the equilibrium price will fall when: A. the supply curve and the demand curve both shift to the right. B. the supply curve shifts to the right and the demand curve shifts to the left. C. supply and demand both shift to the left. D. supply shifts to the left and demand stays the same. E. supply shifts to the left and demand shifts to the right 37. A binding price ceiling is designed to: A. keep prices high. B. increase the quality of the good. C. prevent shortages. D. increase efficiency. E. keep prices low. Figure 8-1: Rent Controls 38. Use the Rent Controls Figure 8-1. If rent controls are set at Rent 0 : A. the shortage of rental units is the distance Q 1 Q 3. B. some renters would be willing to pay a price as high as Rent 4 for Q 0 units. C. no one would have to pay a higher actual price than Rent 0, nor would anyone be willing to do so. D. there would be a surplus of rental units. E. the shortage of rental units is the distance Q 4 Q Use the Rent Controls Figure 8-1. If rent controls are set at Rent 1 : A. rental apartments may be of inefficiently low quality. B. there will be an efficient allocation of rentals. C. some landlords may break the law by renting below the mandated price. D. new apartments will be constructed.
9 E. rental apartments may be of inefficiently high quality. Figure 8-6: Supply and Demand 40. Use the Supply and Demand Figure 8-6. In the market shown in the figure, a price ceiling of P 1 causes: A. a shortage equal to the distance AB. B. a surplus equal to the distance AB. C. a shortage equal to the distance DE. D. no change to the market. E. a surplus equal to the distance BC. 41. Use the Supply and Demand Figure 8-6. In the market shown in the figure, a binding price ceiling is represented by: A. the price P 1. B. the price P 2. C. the price P 3. D. point C. E. the quantity Q 3. Figure 8-16: Market I 42. Use the Market I Figure A surplus of the good would result if the price was equal to: A. $3. B. $9. C. $6. D. $0. E. $ The quota rent refers to:
10 A. the difference between the demand price and the supply price at the quota limit. B. the rent received by landlords who own rent-controlled apartments. C. the opportunity cost of using a quota-controlled service, or of buying a good that is subject to an import quota. D. the minimum rent that the owner of a building must receive before he or she is willing to rent out the building. E. the difference between the demand price at the quota limit and the market equilibrium price. 44. If a quota is set above the equilibrium quantity, there will be: A. incentives for illegal activities. B. missed opportunities in the form of mutually beneficial transactions that don't occur. C. a supply price for the quantity transacted that will exceed the demand price of the quantity transacted. D. no effect from the quota. E. a lower price than the market equilibrium price. Figure 9-4: Market for Hotel Rooms 45. Use the Market for Hotel Rooms Figure 9-4. If the quota rent per room is equal to $45, we know the quota limit is equal to: A B C D E. 300.