Supply and Demand Quiz

If supply AND demand decrease at the same time, which statement will DEFINITELY be true?

• The equilibrium price of the good will be lower

• The equilibrium price of the good will be higher

• The equilibrium quantity of the good will be higher

• The equilibrium quantity of the good will be lower

Jim says “as the price of something increases, the quantity demanded decreases.” Jim is

• Correct, that is the law of demand

• Correct, that is the law of supply

• Incorrect, he means supply instead of quantity demanded

• Incorrect, he means demand instead of quantity demanded

Which is NOT a potential reason for the shift seen above?

• Substitutes for gadgets have increased in price

• Complements to gadgets have increased in price

• Consumer preferences for gadgets have increased

• People who buy gadgets experienced an increase in income

Which headline BEST describes the graph above?

• “Suppliers produce more gadgets at all price levels!”

• "Consumers change buying habits because of price changes”

• “Government taxing gadget makers at higher rates”

• “Producers of gadgets producing more in response to increased demand”

Assuming a shift from D1 to D 2, how is the law of supply represented in the graph?

• As price increases from P1 to P2, quantity supplied increased from Q1 to Q2.

• As quantity supplied increased from Q1 to Q2, price increased from P1 to P2.

• The law of supply is not represented in the graph because it is a demand shift.

• The increase from D1 to D2 caused supply to increase from Q1 to Q2.

What do sellers do if they expect the price of goods they have for sale to increase dramatically in the near future?

• sell the goods now and try to invest the money instead of resupplying

• sell the goods now but try to get the higher price for them

• store the goods until the price rises

• store the goods indefinitely regardless of when the price rises

What serves as an incentive for entrepreneurs?

• The love of their job

• Raising the economy

• Profit

• Market Structures

Technological progress has reduced the cost of manufacturing MP3 players. If demand is unchanged,

• more MP3 players will be sold at higher prices

• fewer MP3 players will be sold at higher prices

• more MP3 players will be sold at a lower price.

• fewer MP3 players will be sold at a higher price.

Which of the following is an attempt by a

firm to increase the demand for its

product?

• the imposition of a price ceiling on the

  product

• an advertising strategy designed to

  change consumer tastes and preferences

• Make the good

  scarce and therefore more expensive

• a production strategy to flood the

  market with the good or service

Of the following, which situation would

cause the shift of the supply curve from

S1 to S2?

• The government reduces subsidies to

  wheat farmers.

• New fertilizers increase wheat crop

  yields.

• Firms exit the wheat industry.

• Drought reduces industry output by

  25%.