Multiple Choice Self Test for Markets in Action: Demand and Supply


Choose the best answer for each of the following:

1. Which one of the following is consistent with resource markets?
A. prices in resource markets are NOT based on demand and supply
B. firms supply resources
C. households demand resources
D. firms demand resources

2. Which of the following is NOT a role of households?
A. supply labour
B. demand resources
C. supply entrepreneurship
D. demand services

3. When the price of Product A increases
A. quantity demanded of Product A will also increase.
B. demand for Product A will also increase.
C. demand for Product A will decrease.
D. quantity demanded of Product A will decrease.

4. According to the Law of Supply
A. the quantity supplied of Product A is inversely related to the Price of A.
B. when the price of Product A increases, this causes an increase in the supply of Product A.
C. the quantity supplied of Product A is directly related to the Price of A.
D. if the price of inputs decreases, this will cause a decrease in the supply of Product A.

5. If, during recessions, when average consumer income declines, the demand for fast food burgers increases, we would class fast food burgers as a(n)
A. inferior good.
B. normal good.
C. substitute good.
D. complement good.

6. When the price of Product B decreases, the demand curve for Product A shifts to the right. In this case we can infer that Product B is a(n)
A. inferior good.
B. normal good.
C. substitute good to Product A.
D. complement good to Product A.

7. When the price of Product B decreases, the demand curve for Product A shifts to the left. In this case we can infer that Product B is a(n)
A. inferior good.
B. normal good.
C. substitute good to Product A.
D. complement good to Product A.

8. Suppose that Cleartone Ltd. manufactures (supplies) 600 TV remote control units per day when the price is $15 per unit. Assuming that there are a total of 20 firms identical to Cleartone Ltd., what would the daily market supply be, at a price of $15 per unit?
A. 300 units per day
B. 6000 units per day
C. 600 units per day
D. not enough information provided

9. If the government provides a $0.20 per bushel subsidy to Canadian wheat producers, this would cause
A. an increase in demand for Canadian wheat.
B. a decrease in demand for Canadian wheat.
C. an increase in supply of Canadian wheat.
D. a decrease in supply of Canadian wheat.

Figure 1: Market for One-Bedroom Apartment Units in A Small Canadian City

10. Refer to Figure 1 above to answer the following. The equilibrium monthly rent for the one bedroom apartment units in the small Canadian city is
A. $150.
B. $200.
C. $250.
D. $300.

11. Refer to Figure 1 above to answer the following. If the monthly rent was initially set at $400 per rental unit,
A. the market would clear.
B. there would be a surplus of 12 000 units per month.
C. there would be a surplus of 4 000 units per month.
D. there would be a shortage of 12 000 units per month.

12. Refer to Figure 1 above to answer the following. If the monthly rent was initially set at $100 per rental unit
A. the market would clear.
B. there would be a surplus of 12 000 units per month.
C. there would be a surplus of 4 000 units per month.
D. there would be a shortage of 12 000 units per month.

13. Suppose that two factors affecting the apartment rental market in a small Canadian city were happening at the same time.
Factor 1: The provincial government is providing new subsidies to construction companies who decide to construct new one bedroom apartments.
Factor 2: The population of renters in this small city significantly declines. Predict what will happen to the apartment rental market in this city.
A. Equilibrium rental prices will increase, but equilibrium quantities will be uncertain.
B. Equilibrium rental prices will decrease, but equilibrium quantities will be uncertain.
C. Equilibrium rental prices will be uncertain, but equilibrium quantities will fall.
D. Equilibrium rental prices will be uncertain, but equilibrium quantities will rise.

14. In general, if the cost of manufacturing cars in Canada declines, we can expect
A. an increase in supply of Canadian cars and a decrease in equilibrium price of Canadian cars.
B. an increase in supply of Canadian cars and an increase in equilibrium price of Canadian cars.
C. an increase in demand for Canadian cars and an increase in equilibrium price of Canadian cars.
D. a decrease in demand for Canadian cars and a decrease in equilibrium price of Canadian cars.

15. Assume that the price of gasoline is a complement product to brand new large sport utility vehicles (SUVs). If the price of gasoline significantly decreases, in the long-run this will result in
A. an increase in supply of SUVs, and a decrease in equilibrium price of SUVs.
B. a decrease in supply of SUVs, and an increase in equilibrium price of SUVs.
C. an increase in demand for SUVs, and a increase in equilibrium price of SUVs.
D. a decrease in demand for SUVs, and a decrease in equilibrium price of SUVs.