IB Economics 2.1 Markets: Demand and Supply quiz

Name _____________________

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. Mark your answer on the answer sheet. 1 point each.

5) Demand curves slope ________ because as the price increases and other things remain the same, the quantity demanded ________. A) downward; decreases B) downward; increases C) downward; does not change D) upward; increases E) upward; decreases

1) Which of the following statements is true about a competitive market? A competitive market A) has a handful of sellers but always has many buyers. B) includes markets for goods and services but not for inputs. C) must have a physical location. D) has one seller competing to sell his or her product. E) has so many buyers and sellers that no one can influence the price. 2) A demand curve is a representation of the relationship, ceteris paribus, between quantity demanded and A) supply. B) preferences. C) income. D) wealth. E) price. 3) The "law of demand" describes A) any relationship between quantity demanded and demand for a good. B) a direct relationship between the price of a good and the quantity of the good demanded per unit of time, ceteris paribus. C) a direct relationship between the price of a good and the demand for the good. D) an inverse relationship between the price of a good and the quantity of the good demanded per unit of time, other things being equal. E) an inverse relationship between the price of a good and the demand for the good.

FIGURE 3-1

6) Refer to Figure 3-1. If demand is given by the curve D, the ________ energy-efficient light bulbs is 200,000 at a price of $9. A) quantity demanded of B) demand for C) quantity sold of D) quantity purchased of E) demand schedule for

4) The American Dairy Association starts a highly successful advertising campaign that makes most people want to drink more milk. As a result, A) the quantity demanded of milk increases. B) the demand for milk decreases because the price of milk rises. C) the demand for milk is not affected. D) the demand for milk increases. E) the price of milk falls to encourage people to drink more milk.

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7) Refer to Figure 3-1. The movement along the demand curve, D, from point v to point x, could be caused by A) an increase in household income, which allows consumers to purchase more light bulbs. B) a change in preferences away from ordinary light bulbs to energy-efficient light bulbs. C) an expectation that new, government regulations will require the use of energy-efficient light bulbs only. D) a change in the price of energy-efficient light bulbs. E) a change in the price of ordinary light bulbs. 8) Car insurance and cars are complements. If the price of car insurance increases, the A) quantity of cars demanded decreases. B) demand for cars decreases. C) quantity of cars demanded increases. D) demand for cars increases. E) More information is needed to determine if the demand increases or decreases.

FIGURE 3-2

9) Refer to Figure 3-2. A shift of the supply curve from S to S1 could be caused by A) a change in consumers' preferences away from ordinary light bulbs toward energy-efficient light bulbs. B) an increase in the price of energy-efficient light bulbs. C) a decrease in the price of glass, a major input in the production of energy-efficient light bulbs. D) a decrease in the price of energy-efficient light bulbs. E) an expectation that new government regulations will ban the use of energy-efficient light bulbs. 10) If macaroni and cheese is an inferior good, then a decrease in income results in A) an increase in the demand for macaroni and cheese. B) an increase in the supply of macaroni and cheese. C) a decrease in the demand for macaroni and cheese. D) a decrease in the supply of macaroni and cheese. E) Both answers A and D are correct.

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12) Scooters are a normal good and buyers' incomes decrease. Which of the figures above best illustrates how this change affects the demand curve for scooters? A) Figure A B) Figure B C) Figure C D) Figure D E) None of the above answers is correct because the decrease in income will affect the supply curve not the demand curve.

13) In the above figure, the movement from point a to point b reflects A) a decrease in the number of firms producing pizza. B) a decrease in the price of pizza. C) an increase in the price of the tomato sauce used to produce pizza. D) an increase in the demand for pizza. E) an increase in the number of people who eat pizza.

11) Scooters and bicycles are substitutes. Suppose that the price of a bicycle falls. Which of the figures above best illustrates how this fall in price affects the demand curve for scooters? A) Figure A B) Figure B C) Figure C D) Figure D E) None of the above answers is correct because the change in the price of a bicycle will affect the supply curve not the demand curve.

14) In the above figure, the shift in the demand curve from D to D1 can be the result of A) an increase in the price of a sub sandwich, a substitute for pizza. B) a decrease in income if pizza is a normal good. C) an increase in the price of soda, a complement to pizza. D) a change in quantity demanded. E) an increase in the price of pizza.

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15) Pizza is a normal good. In the above figure, the shift in the demand curve from D to D2 can be the result of A) a decrease in income. B) a decrease in the price of soda, a complement to pizza. C) an increase in the cost of producing pizza. D) a study that shows that pizza is a very healthy food. E) an increase in the price of hamburgers, a substitute for pizza.

18) In the above figure, the shift in the supply curve from S to S2 might reflect A) a decrease in the cost of the tomato sauce used to produce pizza. B) an increase in the price of a pizza. C) a decrease in the number of pizza producers. D) an increase in income if pizza is a normal good. E) an increase in the price of a good that is a substitute for consumers.

16) The law of supply states that, other things remaining the same, A) if the price of a good increases, the quantity supplied increases. B) if the price of a good increases, the supply increases. C) as people's income increase, the supply of goods increases. D) if the price of a good increases, firms buy less of it. E) demand increases when supply increases.

19) The above figure illustrates the market for corn. If point "a" represents the original equilibrium and point "b" the new equilibrium, which of the following could have caused the change? A) an improvement in the technology of producing corn B) an increase in labor costs of producing corn C) an increase in consumers' income if corn is a normal good D) an increase in consumers' preferences for corn E) an increase in consumers' income if corn is an inferior good

17) In the above figure, the movement from point a to point b reflects A) an increase in the number of producers of pizza. B) a decrease in the cost of the tomato sauce used to produce pizza. C) an increase in the supply of pizza. D) a decrease in income if pizza is a normal good. E) an increase in the price of pizza.

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20) The above figure illustrates the market for corn. If point "a" represents the original equilibrium and point "b" the new equilibrium, which of the following could have caused the change? A) a decrease the price of wheat, a substitute in production for corn B) an increased belief among buyers that corn is healthy. C) an decrease in buyers' incomes if corn is an inferior good D) a decrease in the number of corn growers E) an increase in the cost of the seed used to grow the corn

Price Quantity demanded Quantity supplied (dollars per gallon) (gallons of gasoline) (gallons of gasoline) 3.73 337,982 441,074 3.68 396,398 428,008 3.65 412,031 412,031 3.62 417,899 391,665

23) The table above shows the situation in the gasoline market in Tulsa, Oklahoma. If the price of a gallon of gasoline is $3.65, then A) the gasoline market in Tulsa is in equilibrium. B) there is a surplus of gasoline in Tulsa. C) there is a shortage of gasoline in Tulsa. D) without more information we cannot determine if there is a surplus, a shortage, or an equilibrium in the gasoline market in Tulsa. E) there is neither a surplus nor a shortage but the market is NOT in equilibrium.

21) In the figure above, if point "a" represents the original equilibrium and point "b" the new equilibrium, then A) there has been a change in the quantity supplied and no change in supply. B) there has been an increase in demand. C) there has been an increase in supply. D) Both answers B and C are correct. E) Both answers A and B are correct.

24) If good weather conditions results in a larger than normal crop of peaches, then the A) equilibrium price of peaches rises and the equilibrium quantity of peaches increases. B) equilibrium price of peaches falls and the equilibrium quantity of peaches decreases. C) increase in the supply of peaches induces a greater demand for peaches, so that the equilibrium price rises and the equilibrium quantity increases. D) demand curve for peaches shifts leftward. E) equilibrium price of peaches falls and the equilibrium quantity of peaches increases.

22) Market equilibrium occurs when A) demand and supply change so that are equal at all possible prices. B) the quantity demanded equals the quantity supplied. C) demand and supply move in opposite direction. D) opposing forces pull demand and supply apart. E) all markets become equal.

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26) In an effort to protect endangered species from the effects of logging in America's national forests, the federal government passes a law prohibiting logging in most of the state of Washington. Which of the figures above best illustrates the effect of this new law? A) Figure A B) Figure B C) Figure C D) Figure D E) None of the above because a prohibition cannot be illustrated using demand and supply figures.

25) A construction boom occurs and many of the new buildings need plywood for their framing. Which of the figures above best illustrates this change? A) Figure A B) Figure B C) Figure C D) Figure D E) Figure A or Figure C

27) In the figure above, suppose that the government imposes a tax of $4 per pizza. Then, the A) shaded area is the deadweight loss from the tax. B) buyers and sellers equally share the incidence of the tax. C) shaded area is the tax revenue from the tax. D) Both answers A and B are correct. E) Both answers A and C are correct.

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Open ended question should include: 1. written explanation of the key economics terms 2. a diagram illustrating the theory 3. explanation of the diagram 4. an example supporting your response (ie. bicycles, pizza)

28) Distinguish between a shift of the supply curve for a product and a movement along the product's supply curve.

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