Multiple Choice Questions on Demand and Supply

This is where the quantity demanded and the quantity supplied are equal. The corresponding price is the equilibrium price and the quantity is the equilibrium quantity.

Assuming that state funding for the universities is held constant; describe the conditions that will prevail if tuition is held below equilibrium price. Provide one (1) example to support your response.

#5. Other things equal, what effects would each of the following have on aggregate demand or aggregate supply? In each case use a diagram to show the expected effects on the equilibrium price level and the level of real output.

a. This particular industry has a constantly increasing cost. There will be an increase in the demand for input factors for one key reason. Every day, new companies will be introduced into this market of remodeling, economic profits being the encouraging factor. Because of this, there will be a bid up on input prices for the companies in the industry of remodeling. “When a market is characterized by a large number of small producers, the demand curve facing the manager of each individual firm is horizontal at the price determined by the

2. Total revenue falls as the price of a good is raised, if the demand for the good is ( )

Law of Supply: Price and quantity has a direct relation, when price increases, quantity also increases. When the price of oranges increases, farmers

C) there are many buyers and sellers, and each is large relative to the total market.

d. Calculate the price elasticity of demand in each market and discuss these in relation to the prices to be charged in each market.

____ 16. If two goods are ____, then an increase in the price of one leads to ____ in the quantity demanded of the

What is the effect on the equilibrium price and equilibrium quantity of orange juice if the price of apple juice decreases and the wage rate paid to orange grove workers increases?

What happens to the equilibrium price and quantity after these changes are put into effect? Do they go up, down or stay the same?P:_____down_____________Q:_____down__________________

8. Compared to a perfectly competitive industry with the same demand and cost curves, a monopoly’s price and output will be which of the following?

c. Suppose the price is currently $2. Will this price result in a shortage or a surplus? How much is the shortage or

B) no government regulations exist. C) demand curves are perfectly horizontal. D) suppliers will supply any amount that buyers wish to buy. Answer: A 19) Once an equilibrium is achieved, it can persist indefinitely because A) shocks that shift the demand curve or the supply curve cannot occur. B) shocks to the demand curve are always exactly offset by shocks to the supply curve. C) the government never intervenes in markets at equilibrium. D) in the absence of supply/demand shocks no one applies pressure to change the price. Answer: D 20) If price is initially above the equilibrium level, A) the supply curve will shift rightward. B) the supply curve will shift leftward. C) excess supply exists. D) all firms can sell as much as they want. Answer: C 21) An equilibrium in a market is described by A) a price only. B) a quantity only. C) the excess supply minus the excess demand. D) a price and a quantity. Answer: D 3

These shifts in supply and demand would influence price, quantity, and market equilibrium because of the natural disasters, shift in prices or speculation the supply of coffee decreases, which would cause a significant product shortage for consumers. Due to a shortage, consumers would to pay higher prices in order to purchase coffee and all coffee producers would then demand a higher price in order to produce more products. Higher prices are beneficial to the producers of the product, but consumer would purchase fewer products. Lower product pricing would discourage coffee production, but would benefit consumers. Both supply and demand would balance consumption, which is demand and production, which is supply.