If the number of buyers in a market increases from 50 to 100, you would expect the equilibrium price to _________ and the equilibrium quantity to _________, holding all else constant.

If the number of buyers in a market increases from 50 to 100, you would expect the equilibrium price to _________ and the equilibrium quantity to _________, holding all else constant.

a.    increase; increase.
b.    increase; decrease.
c.    decrease; decrease.
d.    decrease; increase.
e.    remain the same; remain the same.


ANS:    A    DIF:    Medium    REF:    Supply, Demand, and Equilibrium
TOP:    IV.D.1.    MSC:    Analyzing

    72.    Refer to the accompanying diagram. Which of the following scenarios would explain this change in equilibrium?



a.    A number of firms left the market.
b.    A number of buyers entered the market, and a number of firms entered the market.
c.    The price of a complement of this good increased.
d.    The price of a substitute of this good increased.
e.    The price of this good decreased.


ANS:    D    DIF:    Medium    REF:    Supply, Demand, and Equilibrium
TOP:    IV.D.1.    MSC:    Analyzing

    73.    A decrease in demand is represented by a:
a.    shift of the demand curve to the right.
b.    movement along the demand curve to the right.
c.    shift of the demand curve to the left.
d.    movement along the demand curve to the left.
e.    shift in the supply curve.


ANS:    C    DIF:    Easy    REF:    Supply, Demand, and Equilibrium
TOP:    IV.D.2.    MSC:    Remembering       

    74.    When the demand curve shifts to the left and all else is held constant, the
a.    equilibrium price falls and the equilibrium quantity rises.
b.    equilibrium price rises and the equilibrium quantity falls.
c.    equilibrium price falls and the equilibrium quantity falls.
d.    equilibrium price rises and the equilibrium quantity rises.
e.    equilibrium price falls and the equilibrium quantity remains constant.


ANS:    C    DIF:    Easy    REF:    Supply, Demand, and Equilibrium
TOP:    IV.D.2.    MSC:    Remembering       

    75.    Which of the following scenarios would explain the change in equilibrium shown in the accompanying figure?


a.    an increase in an input price
b.    a decrease in the number of buyers in a market
c.    an increase in the price of a substitute good
d.    an increase in the expected future price
e.    a negative technological change


ANS:    B    DIF:    Medium    REF:    Supply, Demand, and Equilibrium
TOP:    IV.D.2.    MSC:    Understanding       

    76.    The equilibrium price of teddy bears is $5. A study comes out that says owning a teddy bear causes you to earn a lower salary. If all other factors are held constant, which of the following scenarios could happen?
a.    The price of teddy bears increases to $7 because of a supply shift.
b.    The price of teddy bears decreases to $4 because of a supply shift.
c.    The price of teddy bears decreases to $4 because of a demand shift.
d.    The price of teddy bears increases to $7 because of a demand shift.
e.    The price of teddy bears increases to $7 because of both a demand shift and a supply shift.


ANS:    C    DIF:    Medium    REF:    Supply, Demand, and Equilibrium
TOP:    IV.D.2.    MSC:    Applying

    77.    If all else is held constant, what would happen to the equilibrium price and quantity of iPhones if the price of an Android phone decreased?
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:    Supply, Demand, and Equilibrium
TOP:    IV.D.2.    MSC:    Applying

    78.    Assume that the market for baseballs is in equilibrium. There is a sudden decrease in income throughout the economy. If all else is held constant, we would expect that:
a.    if baseballs are an inferior good, then the demand curve will shift to the left, causing the equilibrium price and quantity to fall.
b.    if baseballs are a normal good, then the demand curve will shift to the right, causing the equilibrium price and quantity to rise.
c.    if baseballs are an inferior good, then the demand curve will shift to the right, causing the equilibrium price and quantity to fall.
d.    if baseballs are a normal good, then the demand curve will shift to the left, causing the equilibrium price and quantity to fall.
e.    if baseballs are a normal good, then the demand curve will shift to the left, causing the equilibrium price and quantity to rise.


ANS:    D    DIF:    Difficult    REF:    Supply, Demand, and Equilibrium
TOP:    IV.D.2.    MSC:    Applying

    79.    Wine and cheese are complement goods because they are consumed together. What would you expect to happen to the equilibrium quantity of cheese if the price of wine increased and all else is held constant?
a.    It would increase because of a supply shift.
b.    It would increase because of a demand shift.
c.    It would stay the same because of both a demand and a supply shift.
d.    It would decrease because of a supply shift.
e.    It would decrease because of a demand shift.


ANS:    E    DIF:    Difficult    REF:    Supply, Demand, and Equilibrium
TOP:    IV.D.2.    MSC:    Applying

    80.    When supply shifts to the right and demand stays constant, the equilibrium price:
a.    increases and the equilibrium quantity decreases.
b.    increases and the equilibrium quantity increases.
c.    decreases and the equilibrium quantity decreases.
d.    decreases and the equilibrium quantity increases.
e.    stays the same and the equilibrium quantity increases.


ANS:    D    DIF:    Easy    REF:    Supply, Demand, and Equilibrium
TOP:    IV.D.3.    MSC:    Remembering       

    81.    A technological advancement for Good A will shift the _________ curve of Good A to the _________, making the equilibrium price _________.
a.    demand; left; decrease.
b.    supply; right; increase.
c.    demand; right; increase.
d.    supply; left; increase.
e.    supply; right; decrease.


ANS:    E    DIF:    Medium    REF:    Supply, Demand, and Equilibrium
TOP:    IV.D.3.    MSC:    Understanding       

    82.    The difference between a tax and a subsidy is that when the government places a tax on a good, it _________ the equilibrium price and _________ the equilibrium quantity, whereas when the government places a subsidy on a good, it _________ the equilibrium price and _________ the equilibrium quantity.
a.    increases; decreases; decreases; increases
b.    increases; increases; decreases; decreases
c.    decreases; decreases; increases; increases
d.    decreases; increases; increases; decreases
e.    increases; does not change; does not change; increases


ANS:    A    DIF:    Difficult    REF:    Supply, Demand, and Equilibrium
TOP:    IV.D.3.    MSC:    Understanding       

    83.    When a hurricane rips through Florida, the price of oranges rises because the:
a.    demand curve shifts to the left.
b.    supply curve shifts to the right.
c.    demand curve shifts to the right.
d.    supply curve shifts to the left.
e.    supply and demand curves both shift to the left.


ANS:    D    DIF:    Easy    REF:    Supply, Demand, and Equilibrium
TOP:    IV.D.3.    MSC:    Applying

    84.    Susie decided to start selling lemonade on her street. The other kids in the neighborhood noticed that Susie was making a lot of money selling lemonade. These kids decided to open their own lemonade stand. When they opened their own lemonade stand, the equilibrium price:
a.    increased and the equilibrium quantity decreased.
b.    decreased and the equilibrium quantity increased.
c.    increased and the equilibrium quantity increased.
d.    decreased and the equilibrium quantity decreased.
e.    stayed the same and the equilibrium quantity stayed the same.


ANS:    B    DIF:    Medium    REF:    Supply, Demand, and Equilibrium
TOP:    IV.D.3.    MSC:    Applying

    85.    What would happen to the equilibrium price and quantity of shirts if the price of cotton decreases and all else is held constant?
a.    The price falls and the quantity rises.
b.    The price rises and the quantity falls.
c.    The price falls and the quantity falls.
d.    The price rises and the quantity rises.
e.    The price falls and the quantity remains constant.


ANS:    A    DIF:    Medium    REF:    Supply, Demand, and Equilibrium
TOP:    IV.D.3.    MSC:    Applying

    86.    The market for footballs is perfectly competitive. If all else is held constant and the price of leather decreases, we would expect that the equilibrium quantity of footballs would:
a.    fall and the equilibrium price would rise.
b.    rise and the equilibrium price would fall.
c.    fall and the equilibrium price would fall.
d.    rise and the equilibrium price would rise.
e.    fall and the equilibrium price would remain constant.


ANS:    B    DIF:    Difficult    REF:    Supply, Demand, and Equilibrium
TOP:    IV.D.3.    MSC:    Applying

    87.    According to the supply and demand model, when the cotton gin was invented and if all else was held constant, we would expect the equilibrium price of cotton to _________ and the equilibrium quantity of cotton to _________.
a.    increase; increase.
b.    increase; decrease.
c.    decrease; increase.
d.    decrease; decrease.
e.    remain the same; increase.


ANS:    C    DIF:    Difficult    REF:    Supply, Demand, and Equilibrium
TOP:    IV.D.3.    MSC:    Applying

    88.    Refer to the accompanying figure. What event would cause the supply curve to shift out?


a.    Consumers earn higher incomes.
b.    Consumers earn lower incomes.
c.    The price of an input increased.
d.    Firms entered the market.
e.    Firms expected the price to rise in the future.


ANS:    D    DIF:    Easy    REF:    Supply, Demand, and Equilibrium
TOP:    IV.D.3.    MSC:    Evaluating

    89.    Taxes cause the equilibrium price of a good to:
a.    increase.
b.    decrease.
c.    remain the same.
d.    go up only for producers.
e.    go down only for consumers.


ANS:    A    DIF:    Easy    REF:    Supply, Demand, and Equilibrium
TOP:    IV.D.4.    MSC:    Remembering