A Microeconomics Quiz On Supply And Demand

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A Microeconomics Quiz On Supply And Demand - Quiz

In the study of business and microeconomics, you’ll come across the terms “supply and demand” fairly often. It’s the concept by which we judge how much of a particular good or service the market can provide in relation to how much of the product is desired by the buyers. Naturally, the rate at which the supply increase directly correlates to how high demand is. Want to know more? Take the quiz!


Questions and Answers
  • 1. 

    A perfectly competitive market consists of products that are all slightly different from one another

    • A.

      True

    • B.

      False

    Correct Answer
    B. False
    Explanation
    A perfectly competitive market consists of products that are identical to one another, not slightly different. In a perfectly competitive market, there are many buyers and sellers, and no individual buyer or seller has the power to influence the market price. Therefore, all products in a perfectly competitive market are considered to be perfect substitutes for one another, meaning they are identical in terms of quality, features, and price. This ensures that no firm has a competitive advantage over others, leading to a situation of perfect competition.

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  • 2. 

    A monopolistic market has only one seller.

    • A.

      True

    • B.

      False

    Correct Answer
    B. False
    Explanation
    A monopolistic market does not have only one seller; it has only one dominant seller, but there may be other sellers in the market as well. In a monopolistic market, one company or entity has significant control over the production and pricing of a particular product or service, often to the extent that it effectively operates as a monopoly. However, this does not mean that there cannot be any other sellers or competitors in the market; they typically have a much smaller market share and may not have a significant impact on prices or competition.

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  • 3. 

    The law of demand states that an increase in the price of a good decreases the demand for that good.

    • A.

      True

    • B.

      False

    Correct Answer
    A. True
    Explanation
    The law of demand states that all else being equal, an increase in the price of a good or service will lead to a decrease in the quantity demanded for that good or service. In other words, when the price goes up, consumers tend to buy less of that particular good because it becomes less attractive compared to other alternatives. This inverse relationship between price and quantity demanded is one of the fundamental principles in economics.

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  • 4. 

    If apples and oranges are substitutes, an increase in the price of apples will decrease the demand for oranges.

    • A.

      True

    • B.

      False

    Correct Answer
    B. False
    Explanation
    If apples and oranges are substitutes, it means that they can be used interchangeably to satisfy a consumer's needs. In this case, an increase in the price of apples would actually increase the demand for oranges, as consumers would switch to buying more oranges instead of the now more expensive apples. Therefore, the statement is false.

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  • 5. 

    If golf clubs and golf balls are complements, an increase in the price of gold clubs will decrease the demand for golf balls.

    • A.

      True

    • B.

      False

    Correct Answer
    A. True
    Explanation
    When two goods are complements, an increase in the price of one good will lead to a decrease in the demand for the other good. In this case, if the price of golf clubs increases, people would be less likely to buy them. As a result, the demand for golf balls, which are typically used together with golf clubs, would also decrease. Therefore, an increase in the price of golf clubs would indeed decrease the demand for golf balls, making the statement true.

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  • 6. 

    If consumers expect the price of shoes to rise, there will be an increase in the demand for shoes today.

    • A.

      True

    • B.

      False

    Correct Answer
    A. True
    Explanation
    When consumers expect the price of shoes to rise in the future, they are more likely to buy shoes today to avoid paying a higher price later. This increased demand for shoes today is driven by the anticipation of higher prices in the future, making the statement true.

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  • 7. 

    The law of supply states that an increase in the price of a good increases the quantity supplied of that good

    • A.

      True

    • B.

      False

    Correct Answer
    A. True
    Explanation
    The law of supply states that there is a direct relationship between the price of a good and the quantity supplied. When the price of a good increases, suppliers are motivated to produce and sell more of that good in order to maximize their profits. This is because higher prices provide an incentive for suppliers to allocate more resources and invest in the production of the good. Therefore, the statement that an increase in the price of a good increases the quantity supplied is true according to the law of supply.

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  • 8. 

    An increase in the price of steel will shift the supply of automobiles of the right

    • A.

      True

    • B.

      False

    Correct Answer
    B. False
    Explanation
    An increase in the price of steel will not shift the supply of automobiles to the right. This is because the price of steel is a factor that affects the cost of production for automobiles, and not the quantity supplied. A shift in supply to the right would indicate an increase in the quantity supplied at every price level, which is not directly influenced by the price of steel.

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  • 9. 

    When the price of a good is below the equillibrium price, it causes a surplus.

    • A.

      True

    • B.

      False

    Correct Answer
    B. False
    Explanation
    When the price of a good is below the equilibrium price, it causes a shortage, not a surplus. This is because at a price below equilibrium, the quantity demanded exceeds the quantity supplied, leading to a situation where there is not enough of the good available to meet the demand.

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  • 10. 

    The market supply curve is the horizontal summation of the individual supply curves.

    • A.

      True

    • B.

      False

    Correct Answer
    A. True
    Explanation
    The market supply curve represents the total quantity of a good or service that all suppliers are willing and able to produce at various prices in a given market. It is derived by adding up the quantities supplied by each individual supplier at each price level. This is because in a competitive market, each supplier's decision to supply a certain quantity is influenced by the prevailing market price. Therefore, the market supply curve is the horizontal summation of the individual supply curves.

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  • 11. 

    If there is a shortage of a good, then the price of the good tends to fall.

    • A.

      True

    • B.

      False

    Correct Answer
    B. False
    Explanation
    This statement is false. According to the law of supply and demand, when there is a shortage of a good, the price of the good tends to rise, not fall. This is because the scarcity of the good increases its value, leading to higher prices in the market.

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  • 12. 

    If pencils and paper are complements, an increase in the price of pencils causes the demand for paper to decrease or shift to the left.

    • A.

      True

    • B.

      False

    Correct Answer
    A. True
    Explanation
    When two goods are complements, they are consumed together, meaning that an increase in the price of one good will lead to a decrease in the demand for the other good. In this case, if the price of pencils increases, people would be less willing to buy pencils, resulting in a decrease in the demand for paper as well since pencils and paper are complements. Therefore, an increase in the price of pencils would cause the demand for paper to decrease or shift to the left.

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  • 13. 

    If Coca-Cola and Pepsi are substitutes, an increase in the price of Coca-Cola will cause an incrase in the equilibrium price and quanitity in the market for Pepsi

    • A.

      True

    • B.

      False

    Correct Answer
    A. True
    Explanation
    If Coca-Cola and Pepsi are substitutes, it means that they can be used as alternatives for each other. When the price of Coca-Cola increases, consumers will likely switch to Pepsi as it becomes relatively cheaper. This will increase the demand for Pepsi, causing the equilibrium price and quantity in the market for Pepsi to increase. Therefore, the statement is true.

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  • 14. 

    An advance in the technology employed to manufacture Rollerblades will result in a decrease in the equilibrium price and an increase in the equilibrium quantity in the market for Rollerblades.

    • A.

      True

    • B.

      False

    Correct Answer
    A. True
    Explanation
    An advance in technology employed to manufacture Rollerblades will result in a decrease in the equilibrium price and an increase in the equilibrium quantity in the market for Rollerblades. This is because with technological advancements, the cost of production decreases, allowing manufacturers to produce more Rollerblades at a lower cost. As a result, the supply of Rollerblades increases, leading to a decrease in the equilibrium price. Additionally, consumers will be able to purchase Rollerblades at a lower price, which will increase the demand and ultimately increase the equilibrium quantity in the market.

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  • 15. 

    If there is an increase in supply accompanied by a decrease in demand for coffee, then there will be a decrease in both the equilibrium price and quantity in the market for coffee.

    • A.

      True

    • B.

      False

    Correct Answer
    B. False
    Explanation
    If there is an increase in supply accompanied by a decrease in demand for coffee, the equilibrium price and quantity in the market for coffee will not necessarily decrease. The decrease in demand may offset the increase in supply, resulting in no change in the equilibrium price and quantity. It is also possible that the decrease in demand is greater than the increase in supply, leading to a decrease in both the equilibrium price and quantity. Therefore, the statement is false as it does not always hold true.

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  • 16. 

    A perfectly competitive market has

    • A.

      Only one seller

    • B.

      At least a few sellers

    • C.

      Many buyers and sellers

    • D.

      Firms that set their own prices

    • E.

      None of the above

    Correct Answer
    C. Many buyers and sellers
    Explanation
    A perfectly competitive market is characterized by the presence of many buyers and sellers. In this type of market, there is a large number of buyers and sellers who are all small and insignificant compared to the overall market. No single buyer or seller has the power to influence the market price. Instead, the price is determined by the forces of supply and demand. This ensures that no individual buyer or seller can manipulate the market and that prices are determined purely by market forces. Therefore, the presence of many buyers and sellers is a key characteristic of a perfectly competitive market.

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  • 17. 

    If an increase in the price of blue jeans leads to an increase in the demand for tennis shoes, then blue jeans and tennis shoes are

    • A.

      Substitutes

    • B.

      Complements

    • C.

      Normal goods

    • D.

      Inferior goods

    • E.

      None of the above

    Correct Answer
    A. Substitutes
    Explanation
    If an increase in the price of blue jeans leads to an increase in the demand for tennis shoes, it suggests that these two goods are substitutes. This means that consumers view blue jeans and tennis shoes as interchangeable or similar products. When the price of blue jeans goes up, consumers are more likely to switch to buying tennis shoes instead, resulting in an increase in the demand for tennis shoes.

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  • 18. 

    The law of demand states that an increase in the price of a good

    • A.

      Decreases the demand for the good

    • B.

      Decreases the quantity demanded for that good

    • C.

      Increases the supply of the good

    • D.

      Increases the quantity supplied of that good

    • E.

      Does none of the above

    Correct Answer
    B. Decreases the quantity demanded for that good
    Explanation
    The law of demand states that as the price of a good increases, the quantity demanded for that good decreases. This is because consumers are less willing to purchase a good at a higher price, leading to a decrease in demand. As a result, the quantity demanded for the good also decreases. Therefore, the correct answer is "decreases the quantity demanded for that good."

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  • 19. 

    The law of supply states that an increase in the price of a good

    • A.

      Decreases the demand for that good

    • B.

      Decreases the quantity demanded for that good

    • C.

      Increases the supply of that good

    • D.

      Increases the quantity supplied of that good

    • E.

      Does none of the above

    Correct Answer
    D. Increases the quantity supplied of that good
    Explanation
    An increase in the price of a good leads to an increase in the quantity supplied of that good. This is because producers are motivated to supply more of a good when they can sell it at a higher price, as it allows them to earn more profits. As a result, the supply curve shifts to the right, indicating an increase in the quantity supplied.

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  • 20. 

    If an increase in consumer incomes leads to a decrease in the demand for camping equipment, then camping equipment is

    • A.

      A complementary good

    • B.

      A substitute good

    • C.

      A normal good

    • D.

      An inferior good

    • E.

      None of the above

    Correct Answer
    D. An inferior good
    Explanation
    If an increase in consumer incomes leads to a decrease in the demand for camping equipment, it suggests that camping equipment is an inferior good. This means that as consumers' incomes increase, they prefer to purchase higher-quality or more luxurious goods instead of camping equipment.

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  • 21. 

    A monopolistic market has

    • A.

      Only one seller

    • B.

      At least a few sellers

    • C.

      Many buyers and sellers

    • D.

      Firms that are price takers

    • E.

      None of the above

    Correct Answer
    A. Only one seller
    Explanation
    A monopolistic market is a market structure where there is only one seller or producer of a particular product or service. In this market, the seller has complete control over the supply and price of the product, and there are no close substitutes available. This lack of competition allows the seller to set prices at a level that maximizes their profits. Therefore, the correct answer is "only one seller."

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  • 22. 

    Which of the following shifts the demand for watches to the right?

    • A.

      A decrease in the price of watches

    • B.

      A decrease in consumer incomes if watches are a normal good

    • C.

      A decrease in the price of watch batteries if watch batteries and watches are complements

    • D.

      An increase in the price of watches

    • E.

      None of the above

    Correct Answer
    C. A decrease in the price of watch batteries if watch batteries and watches are complements
    Explanation
    A decrease in the price of watch batteries would shift the demand for watches to the right because watch batteries and watches are complements. When the price of watch batteries decreases, it becomes cheaper for consumers to replace their batteries, which in turn increases the demand for watches. This is because lower battery prices make owning and using watches more affordable and attractive to consumers, leading to a higher demand for watches.

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  • 23. 

    All of the following shift the supply of watches to the right except

    • A.

      An increase in the price of watches

    • B.

      An advance in the technology used to manufacture watches

    • C.

      A decrease in the wage of workers employed to manufacture watches

    • D.

      Manufactures' expectations of lower watch prices in the future

    • E.

      All of the above cause an increase in the supply of watches

    Correct Answer
    A. An increase in the price of watches
    Explanation
    An increase in the price of watches would not shift the supply of watches to the right. When the price of watches increases, it becomes more profitable for manufacturers to produce and sell watches. This would incentivize them to increase their production and supply of watches, shifting the supply curve to the right. Therefore, an increase in the price of watches would actually shift the supply of watches to the left, not to the right.

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  • 24. 

    If the price of a good is above the equilibrium price,

    • A.

      There is a surplus and the price will rise

    • B.

      There is a surplus and the price will fall

    • C.

      There is a shortage and the price will rise

    • D.

      There is a shortage and the price will fall

    • E.

      The quantity demanded is equal to the quantity supplied and the price remains unchanged

    Correct Answer
    B. There is a surplus and the price will fall
    Explanation
    If the price of a good is above the equilibrium price, it means that the current price is higher than the price at which the quantity demanded and the quantity supplied are equal. This creates a surplus, as the quantity supplied exceeds the quantity demanded. In order to eliminate the surplus, sellers will have to lower the price, which will lead to a decrease in price. Therefore, the correct answer is "there is a surplus and the price will fall."

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  • 25. 

    If the price of a good is below the equilibrium price,

    • A.

      There is a surplus and the price will rise

    • B.

      There is a surplus and the price will fall

    • C.

      There is a shortage and the price will rise

    • D.

      There is a shortage and the price will fall

    • E.

      The quantity demanded is equal to the quantity supplied and the price remains unchanged

    Correct Answer
    C. There is a shortage and the price will rise
    Explanation
    When the price of a good is below the equilibrium price, it means that the price is lower than what the market is willing to pay for the good. This creates a situation where the quantity demanded exceeds the quantity supplied, resulting in a shortage. In order to alleviate the shortage, suppliers will increase the price of the good to match the market demand, causing the price to rise.

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  • 26. 

    If the price of a good is equal to the equilibrium price,

    • A.

      There is a surplus and the price will rise

    • B.

      There is a surplus and the price will fall

    • C.

      There is a shortage and the price will rise

    • D.

      There is a shortage and the price will fall

    • E.

      The quantity demanded is equal to the quantity supplied and the price remains unchanged

    Correct Answer
    E. The quantity demanded is equal to the quantity supplied and the price remains unchanged
    Explanation
    When the price of a good is equal to the equilibrium price, it means that the quantity demanded by consumers is exactly equal to the quantity supplied by producers. This indicates that the market is in a state of balance, with no surplus or shortage of the good. As a result, there is no pressure for the price to either rise or fall. Therefore, the price remains unchanged.

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  • 27. 

    An increase (rightward shift) in the demand for a good will tend to cause

    • A.

      An increase in the equilibrium price and quantity

    • B.

      A decrease in the equilibrium price and quantity

    • C.

      An increase in the equilibrium price and a decrease in the equilibrium quantity

    • D.

      A decrease in the equilibrium price and an increase in the equilibrium quantity

    • E.

      None of the above

    Correct Answer
    A. An increase in the equilibrium price and quantity
    Explanation
    An increase in the demand for a good will cause an increase in the equilibrium price and quantity. This is because as demand increases, consumers are willing to pay higher prices for the good, leading to an increase in price. Additionally, suppliers will increase their production to meet the higher demand, resulting in an increase in quantity supplied. The equilibrium price and quantity will both increase to balance the increased demand and supply.

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  • 28. 

    A decrease (leftward shift) in the supply for a good will tend to cause

    • A.

      An increase in the equilibrium price and quantity

    • B.

      A decrease in the equilibrium price and quantity

    • C.

      An increase in the equilibrium price and a decrease in the equilibrium quantity

    • D.

      A decrease in the equilibrium price and an increase in the equilibrium quantity

    • E.

      None of the above

    Correct Answer
    C. An increase in the equilibrium price and a decrease in the equilibrium quantity
    Explanation
    When there is a decrease in the supply of a good, it means that there is less of the good available in the market. This scarcity of the good leads to an increase in its equilibrium price. As the price increases, the quantity demanded by consumers decreases, resulting in a decrease in the equilibrium quantity. Therefore, a decrease in the supply of a good will tend to cause an increase in the equilibrium price and a decrease in the equilibrium quantity.

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  • 29. 

    Suppose there is an increase in both the supply and demand for personal computers.  In the market for personal computers, we would expect the

    • A.

      Equilibrium quantity to rise and the equilibrium price to rise

    • B.

      Equilibrium quantity to rise and the equilibrium price to fall

    • C.

      Equilibrium quantity to rise and the equilibrium price to remain constant

    • D.

      Equilibrium quantity to rise and the change in the equilibrium price to be ambiguous

    • E.

      Change in the equilibrium quantity to be ambiguous and the equilibrium price to rise

    Correct Answer
    D. Equilibrium quantity to rise and the change in the equilibrium price to be ambiguous
    Explanation
    When there is an increase in both supply and demand for personal computers, it will lead to an increase in the equilibrium quantity. This is because both supply and demand are increasing, so more computers will be produced and consumed. However, the change in the equilibrium price is ambiguous. It could either rise, fall, or remain constant depending on the magnitude of the increase in supply and demand. Without more information about the specific changes in supply and demand, we cannot determine the exact direction of the change in the equilibrium price.

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  • 30. 

    Suppose there is an increase in both the supply and demand for personal computers.  Furthermore, suppose the supply of personal computers increases more than demand for personal computers.  In the market for personal computers, we would expect the

    • A.

      Equilibrium quantity to rise and the equilibrium price to rise

    • B.

      Equilibrium quantity to rise and the equilibrium price to fall

    • C.

      Equilibrium quantity to rise and the equilibrium price to remain constant

    • D.

      Equilibrium quantity to rise and the change in the equilibrium price to be ambiguous

    • E.

      Change in the equilibrium quantity to be ambiguous and the equilibrium price to fall

    Correct Answer
    B. Equilibrium quantity to rise and the equilibrium price to fall
    Explanation
    When there is an increase in both supply and demand for personal computers, but the increase in supply is greater than the increase in demand, it suggests that there is a surplus of personal computers in the market. This surplus will lead to a decrease in the equilibrium price as sellers try to compete with each other to sell their excess supply. At the same time, the equilibrium quantity will rise as there are more personal computers available for consumers to purchase. Therefore, the correct answer is "equilibrium quantity to rise and the equilibrium price to fall".

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  • 31. 

    Which of the following statements is true about the impact of an increase in the price of lettuce?

    • A.

      The demand for lettuce will decrease

    • B.

      The supply of lettuce will decrease

    • C.

      The equilibrium price and quantity of salad dressing will rise

    • D.

      The equilibrium price and quantity of salad dressing will fall

    • E.

      Both a and d are true

    Correct Answer
    D. The equilibrium price and quantity of salad dressing will fall
    Explanation
    An increase in the price of lettuce will lead to a decrease in the demand for lettuce. As a result, the demand for salad dressing, which is commonly paired with lettuce, will also decrease. This decrease in demand for salad dressing will cause the equilibrium price and quantity of salad dressing to fall. Therefore, the given answer "The equilibrium price and quantity of salad dressing will fall" is true.

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  • 32. 

    Suppose a frost destroys much of the Florida orange crop.  At the same time, suppose consumer tastes shift toward orange juice.  What would we expect to happen to the equilibrium price and quantity in the market for orange juice?

    • A.

      Price will increase; quantity is ambiguous

    • B.

      Price will increase; quantity will increase

    • C.

      Price will increase; quantity will decrease

    • D.

      Price will decrease; quantity is ambiguous

    • E.

      The impact on both price and quantity is amibuous

    Correct Answer
    A. Price will increase; quantity is ambiguous
    Explanation
    If a frost destroys much of the Florida orange crop and consumer tastes shift towards orange juice, we can expect the equilibrium price of orange juice to increase. This is because the decrease in the orange crop will lead to a decrease in the supply of oranges, resulting in higher production costs for orange juice. As a result, the price of orange juice will increase to reflect the increased production costs. However, the impact on quantity is ambiguous because it depends on the extent of the increase in consumer demand for orange juice. If the increase in demand is significant, it may offset the decrease in supply and result in an increase in quantity. However, if the increase in demand is not significant, the quantity may remain unchanged or even decrease.

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  • 33. 

    Suppose consumer tastes shift toward the consumption of apples.  Which of the following statements is an accurate description of the impact of this event on the market for apples?

    • A.

      There is an increase in the demand for apples and in crease in the quantity supplied for apples.

    • B.

      There is an increase in the demand and supply of apples

    • C.

      There is an increase in the quantity demanded of apples and in the supply for apples

    • D.

      There is an increase in the demand for apples and a decrease in the supply of apples

    • E.

      There is a decrease in the quantity demanded of apples and an increase in the supply for apples

    Correct Answer
    A. There is an increase in the demand for apples and in crease in the quantity supplied for apples.
    Explanation
    If consumer tastes shift towards the consumption of apples, it means that more consumers are interested in buying apples. This will result in an increase in the demand for apples. Additionally, to meet the increased demand, producers will need to supply a larger quantity of apples, leading to an increase in the quantity supplied for apples. Therefore, the statement "There is an increase in the demand for apples and an increase in the quantity supplied for apples" accurately describes the impact of this event on the market for apples.

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  • 34. 

    Suppose both buyers and sellers of wheat expect the prie of wheat to rise in the near future.  What would we expect to happen to the equilibrium price and quantity in the market for wheat today?

    • A.

      The impact on both price and quantity is ambiguous

    • B.

      Price will increase; quantity is ambiguous

    • C.

      Price will increase; quantity will increase

    • D.

      Price will increase; quantity will decrease

    • E.

      Price will decrease; quantity is ambiguous

    Correct Answer
    B. Price will increase; quantity is ambiguous
    Explanation
    If both buyers and sellers of wheat expect the price of wheat to rise in the near future, it means that there is an increase in demand and anticipation of higher profits. As a result, the equilibrium price is expected to increase as buyers are willing to pay more for the wheat. However, the impact on quantity is ambiguous because it depends on various factors such as the availability of wheat supply, the ability of sellers to meet the increased demand, and any potential constraints on production or distribution. Therefore, it is uncertain whether the quantity will increase or decrease in the market for wheat today.

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  • 35. 

    An inferior good is one for which an increase in income causes a(n)

    • A.

      Increase in supply

    • B.

      Decrease in supply

    • C.

      Increase in demand

    • D.

      Decrease in demand

    Correct Answer
    D. Decrease in demand
    Explanation
    An inferior good is a type of product or service that people tend to buy less of as their income increases. This is because as people's income rises, they are more likely to switch to higher-quality goods or services. Therefore, an increase in income would lead to a decrease in demand for an inferior good.

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  • Current Version
  • Dec 12, 2023
    Quiz Edited by
    ProProfs Editorial Team
  • Apr 04, 2011
    Quiz Created by
    Emy_2
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