a. decreases, causing the equilibrium price to rise.
b. decreases, causing the equilibrium price to fall.
c. increases, causing the equilibrium price to fall.
d. increases, causing the equilibrium price to rise.
e. increases, causing the equilibrium price to rise and the equilibrium quantity to fall.
ANS: A DIF: Medium REF: Supply, Demand, and Equilibrium
TOP: IV.D.4. MSC: Remembering
91. Oil is a main component in the manufacture of plastic bags. If the price of oil were to increase, the price of plastics bags would:
a. increase and the quantity would increase.
b. increase and the quantity would decrease.
c. decrease and the quantity would increase.
d. decrease and the quantity would decrease.
e. increase and the quantity would stay the same.
ANS: B DIF: Easy REF: Supply, Demand, and Equilibrium
TOP: IV.D.4. MSC: Applying
92. Leading economic indicators suggest that incomes will be going up next year. In response to these reports, companies are forecasting increased prices for future sales of their goods. As a result of these increases, the supply curve will:
a. shift to the right, causing the equilibrium price to decrease.
b. remain the same, but the equilibrium price will increase.
c. remain the same, but the equilibrium price will decrease.
d. shift to the right, causing the equilibrium price to increase.
e. shift to the left, causing the equilibrium price to increase.
ANS: E DIF: Difficult REF: Supply, Demand, and Equilibrium
TOP: IV.D.4. MSC: Applying
93. With no barriers to entry or exit and when firms in a market are operating at a loss, you can expect other firms to exit, causing the _________ curve to shift to the _________ and making the equilibrium price _________ and the equilibrium quantity _________.
a. demand; right; increase; increase
b. demand; left; decrease; decrease
c. supply; right; decrease; increase
d. supply; left; increase; increase
e. supply; left; increase; decrease
ANS: E DIF: Difficult REF: Supply, Demand, and Equilibrium
TOP: IV.D.4. MSC: Applying
94. Which of the following scenarios best describes the change in the equilibrium shown in the accompanying graph?
a. firms entering the market
b. firms leaving the market
c. buyers entering the market
d. buyers leaving the market
e. an input cost decreasing
ANS: B DIF: Easy REF: Supply, Demand, and Equilibrium
TOP: IV.D.4. MSC: Analyzing
95. A “twofold” change is when:
a. income goes up and then it goes down.
b. the equilibrium price of both a complement and a substitute changes.
c. supply and demand both shift.
d. equilibrium price and equilibrium quantity both change.
e. some input costs go up and some go down.
ANS: C DIF: Medium REF: Changes in Both Demand and Supply
TOP: IV.D. MSC: Remembering
96. If the price and quantity for a normal good, Good X, is $8 and 6 units at the original equilibrium, what is one possibility for the new equilibrium of Good X if we see income increase and all other factors stay constant?
a. $10 and 4 units
b. $10 and 8 units
c. $6 and 4 units
d. $6 and 8 units
e. $10 and 2 units
ANS: B DIF: Difficult REF: Changes in Both Demand and Supply
TOP: IV.D.1. MSC: Analyzing
97. During the winter months, many elderly persons leave their homes in northern New York and travel south to Florida or Arizona. What would you expect to happen to the equilibrium price and quantity of items most used by the elderly in northern New York?
a. They would both increase.
b. They would both decrease.
c. One would increase and one would decrease, but we don’t know which would do what.
d. The price would increase and the quantity would decrease.
e. The price would decrease and the quantity would increase.
ANS: B DIF: Medium REF: Changes in Both Demand and Supply
TOP: IV.D.2. MSC: Applying
98. If the price and quantity for an inferior good, Good X, is $8 and 6 units at the original equilibrium, what is one possibility for the new equilibrium of Good X if we see income increase and all other factors stay constant?
a. $10 and 4 units
b. $10 and 8 units
c. $6 and 4 units
d. $6 and 8 units
e. $10 and 2 units
ANS: C DIF: Difficult REF: Changes in Both Demand and Supply
TOP: IV.D.2. MSC: Analyzing
99. When both supply and demand shift to the left, the:
a. equilibrium price always rises.
b. equilibrium price always falls.
c. equilibrium quantity always falls.
d. equilibrium quantity always rises.
e. equilibrium quantity is indeterminate.
ANS: C DIF: Medium REF: Changes in Both Demand and Supply
TOP: IV.D.5. MSC: Remembering
100. When both curves shift:
a. equilibrium price is always indeterminate.
b. equilibrium quantity is always indeterminate.
c. equilibrium price and equilibrium quantity are indeterminate.
d. equilibrium price OR equilibrium quantity is indeterminate, but we can’t predict which one.
e. neither equilibrium price nor equilibrium quantity is indeterminate.
ANS: D DIF: Medium REF: Changes in Both Demand and Supply
TOP: IV.D.5. MSC: Remembering
101. When both supply and demand shift to the right:
a. equilibrium price always rises.
b. equilibrium price always falls.
c. equilibrium quantity always falls.
d. equilibrium quantity always rises.
e. equilibrium quantity is indeterminate.
ANS: D DIF: Medium REF: Changes in Both Demand and Supply
TOP: IV.D.5. MSC: Understanding
102. Spam is considered an inferior good. What would happen to the equilibrium price and quantity of Spam if income decreased and more firms started producing Spam?
a. Equilibrium price will go up and equilibrium quantity will go down.
b. Equilibrium price will go up and equilibrium quantity will go up.
c. Equilibrium price will go down and equilibrium quantity will be indeterminate.
d. Equilibrium price will be indeterminate and equilibrium quantity will go up.
e. Equilibrium price will go up and equilibrium quantity will be indeterminate.
ANS: D DIF: Difficult REF: Changes in Both Demand and Supply
TOP: IV.D.5. MSC: Applying
103. In one year, 15 bowling alleys opened in California. During that same year, ESPN started broadcasting professional bowling on TV, which sparked more interest in the sport. What would we expect to happen to the price and quantity of a game of bowling in California during that year?
a. Equilibrium price will be indeterminate and equilibrium quantity will go down.
b. Equilibrium price will go up and equilibrium quantity will go up.
c. Equilibrium price will go down and equilibrium quantity will be indeterminate.
d. Equilibrium price will be indeterminate and equilibrium quantity will go up.
e. Equilibrium price will go up and equilibrium quantity will be indeterminate.
ANS: D DIF: Difficult REF: Changes in Both Demand and Supply
TOP: IV.D.5. MSC: Applying
104. The government offers numerous educational subsidies through grants and low-cost equipment to schools. They also provide a lot of incentives to go to school. Because of this, we expect that:
a. the equilibrium price of education will be indeterminate and the equilibrium quantity of students will go up.
b. the equilibrium price of education will go up and the equilibrium quantity of students will go up.
c. the equilibrium price of education will go down and the equilibrium quantity of students will be indeterminate.
d. the equilibrium price of education will be indeterminate and the equilibrium quantity of students will go down.
e. the equilibrium price of education will go up and the equilibrium quantity of students will be indeterminate.
ANS: A DIF: Difficult REF: Changes in Both Demand and Supply
TOP: IV.D.5. MSC: Applying
105. What would you expect to happen to the price of bagels if the price of flour decreased and the price of cream cheese decreased?
a. The equilibrium price of bagels will be indeterminate and the equilibrium quantity will go up.
b. The equilibrium price will go up and the equilibrium quantity will go up.
c. The equilibrium price will go down and the equilibrium quantity will be indeterminate.
d. The equilibrium price will be indeterminate and the equilibrium quantity will go down.
e. The equilibrium price will go up and the equilibrium quantity will be indeterminate.
ANS: A DIF: Difficult REF: Changes in Both Demand and Supply
TOP: IV.D.5. MSC: Applying
106. What would you expect to happen to the price and quantity of Pepsi if the price of Coke increases and Pepsi develops a new technology that makes its production process more efficient?
a. The equilibrium price will go up and the equilibrium quantity will go up.
b. The equilibrium price will be indeterminate and the equilibrium quantity will go up.
c. The equilibrium price will go down and the equilibrium quantity will be indeterminate.
d. The equilibrium price will be indeterminate and the equilibrium quantity will go down.
e. The equilibrium price will go up and the equilibrium quantity will be indeterminate.
ANS: B DIF: Difficult REF: Changes in Both Demand and Supply
TOP: IV.D.5. MSC: Applying
107. When people move to an area of the world that was previously unpopulated, we expect more consumers and more producers to spring up in that area. What would we expect to happen to the price and quantity in the markets where this happens?
a. The equilibrium price will go up and the equilibrium quantity will go up.
b. The equilibrium price will go down and equilibrium quantity will be indeterminate.
c. The equilibrium price will be indeterminate and equilibrium quantity will go up.
d. The equilibrium price will go up and equilibrium quantity will be indeterminate.
e. The equilibrium price will be indeterminate and equilibrium quantity will go down.
ANS: C DIF: Difficult REF: Changes in Both Demand and Supply
TOP: IV.D.5. MSC: Applying
108. When both supply and demand decrease, the equilibrium price:
a. increases and equilibrium quantity increases.
b. is indeterminate and equilibrium quantity increases.
c. decreases and equilibrium quantity is indeterminate.
d. increases and equilibrium quantity is indeterminate.
e. is indeterminate and equilibrium quantity decreases.
ANS: E DIF: Medium REF: Changes in Both Demand and Supply
TOP: IV.D.6. MSC: Remembering
109. What would happen to the equilibrium price and quantity for the market for cigarettes if the government increased the tax and a scientific study came out confirming that smoking cigarettes increased the rate of heart disease?
a. Equilibrium price will be indeterminate and equilibrium quantity will go down.
b. Equilibrium price will go up and equilibrium quantity will go up.
c. Equilibrium price will go down and equilibrium quantity will be indeterminate.
d. Equilibrium price will be indeterminate and equilibrium quantity will go up.
e. Equilibrium price will go up and equilibrium quantity will be indeterminate.
ANS: A DIF: Difficult REF: Changes in Both Demand and Supply
TOP: IV.D.6. MSC: Applying
110. According to a supply and demand model for apples, if the average household income decreases at the same time ten apple orchards go out of business, one would expect the:
a. equilibrium price of apples to increase and the equilibrium quantity of apples in the market to decrease.
b. equilibrium price of apples to be indeterminate and the equilibrium quantity of apples in the market to increase.
c. equilibrium quantity of apples in the market to be indeterminate and the equilibrium price of apples to increase.
d. equilibrium quantity of apples in the market to decrease and the equilibrium price of apples to stay the same.
e. equilibrium quantity of apples in the market to decrease and the equilibrium price of apples to be indeterminate.
ANS: E DIF: Difficult REF: Changes in Both Demand and Supply
TOP: IV.D.6. MSC: Applying
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