Chapter 3, Multiple choice:
Use the following to answer question 1:
1. Refer to the above data. If price was initially $10, we would expect:
A) The surplus would cause the price to rise.
B) The shortage would cause the price to rise.
C) The surplus would cause the price to fall.
D) The shortage would cause the price to fall.
2. A and B are substitute goods, but A and C are complementary goods (in consumption).
If the costs of production of A decrease, then the demand for:
A) both B and C will decrease.
B) both B and C will increase.
C) B will increase and the demand for C will decrease.
D) B will decrease and the demand for C will increase.
Page 1 3. If the supply schedule for a product has an upward slope and the price of that product
declines from $100 to $75, the:
A) supply of the product will shift to the left.
B) supply of the product will shift to the right.
C) quantity supplied of the product will decline.
D) quantity supplied of the product will increase.
4. The demand curve shows the relationship between:
A) money income and quantity demanded.
B) price and production costs.
C) price and quantity demanded.
D) consumer tastes and the quantity demanded.
5. Price floors and ceiling prices:
A) both cause shortages.
B) both cause surpluses.
C) cause the supply and demand curves to shift until equilibrium is established.
D) interfere with the rationing function of prices.
6. The market system corrects a shortage by:
A) lowering product price to decrease production.
B) raising product price to increase production.
C) lowering product price to increase production.
D) raising product price to decrease production. 7. Assume in a competitive market that price is initially above the equilibrium level. We
can predict that price will:
A) decrease, quantity demanded will decrease, and quantity supplied will increase.
B) decrease and quantity demanded and quantity supplied will both decrease.
C) decrease, quantity demanded will increase, and quantity supplied will decrease.
D) increase, quantity demanded will decrease, and quantity supplied will increase.
8. What is the likely effect on the market for wine of a simultaneous increase in both
consumer incomes and producer taxes on wine?
A) an increase in both price and quantity
B) an increase in price and a decrease in output
C) a decrease in price and an indeterminate effect on quantity
D) an increase in price and an indeterminate effect on quantity
9. A television station reports that the price of orange juice has declined but the quantity
sold has increased. This situation would be caused by a(n):
A) increase in demand.
B) increase in supply.
C) decrease in demand.
D) decrease in supply
10. With a downward sloping demand curve and an upward sloping supply curve for a
product, a decrease in an input or resource price will:
A) increase equilibrium price and quantity.
B) decrease equilibrium price and quantity.
C) decrease equilibrium price and increase equilibrium quantity.
D) increase equilibrium price and decrease equilibrium quantity.
Page 3 11. The law of supply:
A) reflects the amounts which producers will want to offer at each price in a series of
B) is reflected in an upward