Chapter 4

The Market Forces of Supply and Demand

MULTIPLE CHOICE

1. . A market is
a. a place where only buyers come together.
b. a place where only sellers meet.
c. a group of demanders and suppliers of a particular good or service.
d. a group of people with common desires.

2. . A competitive market is
a. a market in which there are many buyers and many sellers so that each has a negligible impact
on price.
b. a market where consumers cannot freely interact with sellers.
c. a market where suppliers are under no government restrictions.
d. a market with many buyers but few sellers.

3. . Firms that sell their products in a competitive market have limited pricing power because
a. sellers have reason to charge more than their competitors.
b. each buyer has a significant influence on the price of the product.
c. other sellers are offering very similar products.
d. None of the above are correct.

4. . Which of the following would NOT be a determinant of demand?

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2 Chapter 4/The Market Forces of Supply and Demand

a. the price of related goods

b. income
c. tastes
d. the prices of the inputs used to produce the good

5. . If a good is “normal,” then an increase in income will result in

a. no change in the demand for the good.
b. a decrease in the demand for the good.
c. an increase in the demand for the good.
d. a lower market price.

6. . If the price of a substitute to good X increases, then

a. the demand for good X will increase.
b. the market price of good X will decrease.
c. the demand for good X will decrease.
d. the demand for good X will not change.

7. . What will happen in the rice market if buyers are expecting higher prices in the near future?
a. The demand for rice will increase.
b. The demand for rice will decrease.
c. The demand for rice will be unaffected.
d. The supply of rice will increase.

8. . A demand curve is
a. the downward-sloping line relating the price of the good with the quantity demanded.
b. the upward-sloping line relating price with quantity supplied.
c. the curve that relates income with quantity demanded.
d. None of the above answers is correct.

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 Chapter 4/The Market Forces of Supply and Demand 3

9. . Sally tells you that she thinks the price of her favorite stationery will increase in the near
future. She will probably respond by
a. decreasing her current demand for the stationery.
b. increasing her current demand for the stationery.
c. not changing her demand for stationery currently.
d. currently refusing to buy anymore stationery.

10. . A dress manufacturer is expecting higher prices for dresses in the near future. We would
expect
a. the dress manufacturer to supply more dresses now.
b. the demand for this manufacturer’s dresses to fall.
c. the dress manufacturer to supply fewer dresses now.
d. the demand for this manufacturer’s dresses to rise.

11. . If, at the current price, there is a shortage of a good,

a. the price is below the equilibrium price.
b. the market can be in equilibrium.
c. sellers are producing more than buyers wish to buy.
d. All of the above answers are correct.

12. . Suppose there is an earthquake that destroys several corn canneries. Which of the following
would NOT occur as a direct result of this event?

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4 Chapter 4/The Market Forces of Supply and Demand

a. Sellers would not be willing to produce and sell as much as before at each relevant price.
b. The supply would decrease.
c. Buyers would not be willing to buy as much as before at each relevant price.
d. The equilibrium price would rise.

13. . Suppose that the number of buyers in a market increases and a technological advancement
occurs also. What would we expect to happen in the market?
a. The equilibrium price would increase, but the impact on the amount sold in the market would
be ambiguous.
b. The equilibrium price would decrease, but the impact on the amount sold in the market would
be ambiguous.
c. Both equilibrium price and equilibrium quantity would increase.
d. Equilibrium quantity would increase, but the impact on equilibrium price would be
ambiguous.

14. . In market economies,

a. prices guide economic decisions and thereby allocate scarce resources.
b. prices ensure that quantity supplied and quantity demanded are in balance.
c. prices influence how much of a good buyers choose to purchase and how much sellers choose
to produce.
d. All of the above answers are correct.

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 Chapter 4/The Market Forces of Supply and Demand 5

Chapter 4
The Market Forces of Supply and Demand

MULTIPLE CHOICE

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6 Chapter 4/The Market Forces of Supply and Demand

1. . A market is
a. a place where only buyers come together.
b. a place where only sellers meet.
c. a group of demanders and suppliers of a particular good or service.
d. a group of people with common desires.

2. . A competitive market is
a. a market in which there are many buyers and many sellers so that each has a negligible impact
on price.
b. a market where consumers cannot freely interact with sellers.
c. a market where suppliers are under no government restrictions.
d. a market with many buyers but few sellers.

3. . Firms that sell their products in a competitive market have limited pricing power because
a. sellers have reason to charge more than their competitors.
b. each buyer has a significant influence on the price of the product.
c. other sellers are offering very similar products.
d. None of the above are correct.

4. . Which of the following would NOT be a determinant of demand?

a. the price of related goods
b. income
c. tastes
d. the prices of the inputs used to produce the good

5. . If a good is “normal,” then an increase in income will result in

a. no change in the demand for the good.
b. a decrease in the demand for the good.
c. an increase in the demand for the good.
d. a lower market price.

6. . If the price of a substitute to good X increases, then

a. the demand for good X will increase.
b. the market price of good X will decrease.
c. the demand for good X will decrease.
d. the demand for good X will not change.

7. . What will happen in the rice market if buyers are expecting higher prices in the near future?
a. The demand for rice will increase.
b. The demand for rice will decrease.
c. The demand for rice will be unaffected.
d. The supply of rice will increase.

8. . A demand curve is
a. the downward-sloping line relating the price of the good with the quantity demanded.
b. the upward-sloping line relating price with quantity supplied.
c. the curve that relates income with quantity demanded.
d. None of the above answers is correct.

Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc.
 Chapter 4/The Market Forces of Supply and Demand 7

Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc.
8 Chapter 4/The Market Forces of Supply and Demand

9. . Sally tells you that she thinks the price of her favorite stationery will increase in the near
future. She will probably respond by
a. decreasing her current demand for the stationery.
b. increasing her current demand for the stationery.
c. not changing her demand for stationery currently.
d. currently refusing to buy anymore stationery.

10. . A dress manufacturer is expecting higher prices for dresses in the near future. We would
expect
a. the dress manufacturer to supply more dresses now.
b. the demand for this manufacturer’s dresses to fall.
c. the dress manufacturer to supply fewer dresses now.
d. the demand for this manufacturer’s dresses to rise.

11. . If, at the current price, there is a shortage of a good,

a. the price is below the equilibrium price.
b. the market can be in equilibrium.
c. sellers are producing more than buyers wish to buy.
d. All of the above answers are correct.

12. . Suppose there is an earthquake that destroys several corn canneries. Which of the following
would NOT occur as a direct result of this event?
a. Sellers would not be willing to produce and sell as much as before at each relevant price.
b. The supply would decrease.
c. Buyers would not be willing to buy as much as before at each relevant price.
d. The equilibrium price would rise.

13. . Suppose that the number of buyers in a market increases and a technological advancement
occurs also. What would we expect to happen in the market?
a. The equilibrium price would increase, but the impact on the amount sold in the market would
be ambiguous.
b. The equilibrium price would decrease, but the impact on the amount sold in the market would
be ambiguous.

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 Chapter 4/The Market Forces of Supply and Demand 9

c. Both equilibrium price and equilibrium quantity would increase.

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10 Chapter 4/The Market Forces of Supply and Demand

d. Equilibrium quantity would increase, but the impact on equilibrium price would be
ambiguous.

14. . In market economies,

a. prices guide economic decisions and thereby allocate scarce resources.
b. prices ensure that quantity supplied and quantity demanded are in balance.
c. prices influence how much of a good buyers choose to purchase and how much sellers choose
to produce.
d. All of the above answers are correct.

Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc.
 Chapter 4/The Market Forces of Supply and Demand 11

Chapter 4
The Market Forces of Supply and Demand

MULTIPLE CHOICE

Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc.
12 Chapter 4/The Market Forces of Supply and Demand

1. . A market is
a. a place where only buyers come together.
b. a place where only sellers meet.
c. a group of demanders and suppliers of a particular good or service.
d. a group of people with common desires.

Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc.
 Chapter 4/The Market Forces of Supply and Demand 13

2. . A competitive market is
a. a market in which there are many buyers and many sellers so that each has a negligible impact
on price.
b. a market where consumers cannot freely interact with sellers.
c. a market where suppliers are under no government restrictions.
d. a market with many buyers but few sellers.

3. . Firms that sell their products in a competitive market have limited pricing power because
a. sellers have reason to charge more than their competitors.
b. each buyer has a significant influence on the price of the product.
c. other sellers are offering very similar products.
d. None of the above are correct.

4. . Which of the following would NOT be a determinant of demand?

a. the price of related goods
b. income
c. tastes
d. the prices of the inputs used to produce the good

5. . If a good is “normal,” then an increase in income will result in

a. no change in the demand for the good.
b. a decrease in the demand for the good.
c. an increase in the demand for the good.
d. a lower market price.

6. . If the price of a substitute to good X increases, then

a. the demand for good X will increase.
b. the market price of good X will decrease.
c. the demand for good X will decrease.
d. the demand for good X will not change.

7. . What will happen in the rice market if buyers are expecting higher prices in the near future?
a. The demand for rice will increase.
b. The demand for rice will decrease.
c. The demand for rice will be unaffected.
d. The supply of rice will increase.

8. . A demand curve is
a. the downward-sloping line relating the price of the good with the quantity demanded.
b. the upward-sloping line relating price with quantity supplied.
c. the curve that relates income with quantity demanded.
d. None of the above answers is correct.

Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc.
14 Chapter 4/The Market Forces of Supply and Demand

9. . Sally tells you that she thinks the price of her favorite stationery will increase in the near
future. She will probably respond by
a. decreasing her current demand for the stationery.
b. increasing her current demand for the stationery.

Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc.
 Chapter 4/The Market Forces of Supply and Demand 15

c. not changing her demand for stationery currently.

d. currently refusing to buy anymore stationery.

10. . A dress manufacturer is expecting higher prices for dresses in the near future. We would
expect
a. the dress manufacturer to supply more dresses now.
b. the demand for this manufacturer’s dresses to fall.
c. the dress manufacturer to supply fewer dresses now.
d. the demand for this manufacturer’s dresses to rise.

11. . If, at the current price, there is a shortage of a good,

a. the price is below the equilibrium price.
b. the market can be in equilibrium.
c. sellers are producing more than buyers wish to buy.
d. All of the above answers are correct.

12. . Suppose there is an earthquake that destroys several corn canneries. Which of the following
would NOT occur as a direct result of this event?
a. Sellers would not be willing to produce and sell as much as before at each relevant price.
b. The supply would decrease.
c. Buyers would not be willing to buy as much as before at each relevant price.
d. The equilibrium price would rise.

13. . Suppose that the number of buyers in a market increases and a technological advancement
occurs also. What would we expect to happen in the market?
a. The equilibrium price would increase, but the impact on the amount sold in the market would
be ambiguous.
b. The equilibrium price would decrease, but the impact on the amount sold in the market would
be ambiguous.
c. Both equilibrium price and equilibrium quantity would increase.

Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc.
16 Chapter 4/The Market Forces of Supply and Demand

d. Equilibrium quantity would increase, but the impact on equilibrium price would be
ambiguous.

14. . In market economies,

a. prices guide economic decisions and thereby allocate scarce resources.
b. prices ensure that quantity supplied and quantity demanded are in balance.
c. prices influence how much of a good buyers choose to purchase and how much sellers choose
to produce.
d. All of the above answers are correct.

Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc.
 Chapter 4/The Market Forces of Supply and Demand 17

Chapter 4
The Market Forces of Supply and Demand

MULTIPLE CHOICE

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18 Chapter 4/The Market Forces of Supply and Demand

1. . A market is
a. a place where only buyers come together.
b. a place where only sellers meet.
c. a group of demanders and suppliers of a particular good or service.
d. a group of people with common desires.

2. . A competitive market is
a. a market in which there are many buyers and many sellers so that each has a negligible impact
on price.

Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc.
 Chapter 4/The Market Forces of Supply and Demand 19

b. a market where consumers cannot freely interact with sellers.

c. a market where suppliers are under no government restrictions.
d. a market with many buyers but few sellers.

3. . Firms that sell their products in a competitive market have limited pricing power because
a. sellers have reason to charge more than their competitors.
b. each buyer has a significant influence on the price of the product.
c. other sellers are offering very similar products.
d. None of the above are correct.

4. . Which of the following would NOT be a determinant of demand?

a. the price of related goods
b. income
c. tastes
d. the prices of the inputs used to produce the good

5. . If a good is “normal,” then an increase in income will result in

a. no change in the demand for the good.
b. a decrease in the demand for the good.
c. an increase in the demand for the good.
d. a lower market price.

6. . If the price of a substitute to good X increases, then

a. the demand for good X will increase.
b. the market price of good X will decrease.
c. the demand for good X will decrease.
d. the demand for good X will not change.

7. . What will happen in the rice market if buyers are expecting higher prices in the near future?
a. The demand for rice will increase.
b. The demand for rice will decrease.
c. The demand for rice will be unaffected.
d. The supply of rice will increase.

8. . A demand curve is
a. the downward-sloping line relating the price of the good with the quantity demanded.
b. the upward-sloping line relating price with quantity supplied.
c. the curve that relates income with quantity demanded.
d. None of the above answers is correct.

Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc.
20 Chapter 4/The Market Forces of Supply and Demand

9. . Sally tells you that she thinks the price of her favorite stationery will increase in the near
future. She will probably respond by
a. decreasing her current demand for the stationery.
b. increasing her current demand for the stationery.
c. not changing her demand for stationery currently.
d. currently refusing to buy anymore stationery.

10. . A dress manufacturer is expecting higher prices for dresses in the near future. We would
expect
a. the dress manufacturer to supply more dresses now.

Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc.
 Chapter 4/The Market Forces of Supply and Demand 21

b. the demand for this manufacturer’s dresses to fall.

c. the dress manufacturer to supply fewer dresses now.
d. the demand for this manufacturer’s dresses to rise.

11. . If, at the current price, there is a shortage of a good,

a. the price is below the equilibrium price.
b. the market can be in equilibrium.
c. sellers are producing more than buyers wish to buy.
d. All of the above answers are correct.

12. . Suppose there is an earthquake that destroys several corn canneries. Which of the following
would NOT occur as a direct result of this event?
a. Sellers would not be willing to produce and sell as much as before at each relevant price.
b. The supply would decrease.
c. Buyers would not be willing to buy as much as before at each relevant price.
d. The equilibrium price would rise.

13. . Suppose that the number of buyers in a market increases and a technological advancement
occurs also. What would we expect to happen in the market?
a. The equilibrium price would increase, but the impact on the amount sold in the market would
be ambiguous.
b. The equilibrium price would decrease, but the impact on the amount sold in the market would
be ambiguous.
c. Both equilibrium price and equilibrium quantity would increase.
d. Equilibrium quantity would increase, but the impact on equilibrium price would be
ambiguous.

14. . In market economies,

a. prices guide economic decisions and thereby allocate scarce resources.
b. prices ensure that quantity supplied and quantity demanded are in balance.
c. prices influence how much of a good buyers choose to purchase and how much sellers choose
to produce.
d. All of the above answers are correct.

Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc.