Macroeconomics/Microeconomics
Machine-graded Assessment Items
Module: Supply and Demand
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2 Analyze how buyers and sellers interact in a free and competitive market to determine prices and quantities of
goods
Short Title: Supply and Demand
2.1 Define a free market and a competitive market
Short Title: The Free Market
Which of the following statements describe(s) a competitive market?
1. There are a large number of buyers and sellers.*
2. Government does not intervene in any way.
3. The number of sellers is limited to a select few.
// Content Page – Reading: Defining a Free Market
Which of the following statements describe(s) a free market?
1. Government does not intervene in any way.*
2. There are price controls.
3. The number of sellers is limited to a select few.
// Content Page – Reading: Defining a Free Market
Which of the following statements describe(s) a free market?
1. The government does not intervene in any way.*
2. Inputs are free to sellers.
3. The price of outputs is controlled by the government.
// Content Page – Reading: Defining a Free Market
2.2 Explain the determinants of demand
Short Title: Demand
Economists refer to the relationship that a higher price leads to a lower quantity demanded as the:
1. market equilibrium.
2. law of demand. *
3. price and demand model.
// Content Page – Reading: What Is Demand
In economics, the “ceteris paribus” assumption means:
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1. all other things that may influence a market outcome are variable.
2. all variables except those specified are kept constant.*
3. no one knows which variables will change and which will remain constant.
// Content Page – Reading: Factors Affecting Demand
// Updated 10/18/2015 Question and answer choices edited
Which of the following events can shift the level of demand (Demand is the relationship between price and
quantity demanded)?
1. Price of the good changes.
2. Population grows in a particular market area.*
3. Supply increases or decreases.
// Content Page – Reading: Factors Affecting Demand
// Updated 10/18/2015 question and answer choices edited
According to the law of demand, assuming other factors are held constant:
1. As the price of bread increases, the quantity of bread demanded will increase.
2. As the price of bread increases, the quantity of bread demanded will decrease.*
3. As the demand for bread increases, the price of bread will also increase.
// Content Page – Reading: Factors Affecting Demand
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Complete the following sentence: If people think that the price of electronics will increase in the near future, that
belief may cause a(n):
1. increase in the supply of electronics today.
2. increase in the demand for electronics today.*
3. decrease in the price of electronics today.
// Content Page – Reading: Factors Affecting Demand
// Updated 10/18/2015 question edited
If a drop in the price of MP3 players shifts the demand for CD players down, this means that:
1. MP3 players and CD players are inferior goods.
2. MP3 players and CD players are substitutes.*
3. MP3 players and CD players are normal goods.
// Content Page – Reading: Factors Affecting Demand
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2.2.a Graphically illustrate a demand curve
Short Title: Graphing the Demand Curve
A demand curve shows the graphical relationship between price and _______.
1. quantity demanded*
2. quantity produced
3. costs
// Content Page – Reading: What Is Demand
The law of demand states that as the price of a good increases:
1. more of it is produced
2. suppliers wish to sell less of it
3. buyers desire to purchase less of it*
// Content Page – Reading: What Is Demand
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The downward slope of a demand curve illustrates the pattern that as _________ rises, ________ decreases.
1. quantity demanded : price
2. quantity supplied : quantity demanded
3. price : quantity demanded*
// Content Page – Reading: What Is Demand
2.2.b Describe the differences between changes in demand and changes in the quantity demanded
Short Title: Demand vs. Quantity Demanded
When quantity demanded decreases in response to a change in price:
1. the demand curve shifts to the right.
2. the demand curve shifts to the left.
3. there is a movement from one point to another along the demand curve. *
// Content Page – Reading: Factors That Change Demand
// Updated 10/18/2015 answer choices edited
After widespread press reports about the dangers of contracting “mad cow disease” by consuming beef from
Canada, the likely economic effect on the demand curve for beef from Canada is:
1. a shift to the left. *
2. a movement down along the demand curve to the right.
3. a shift to the right.
// Content Page – Reading: Factors That Change Demand
// Updated 10/18/2015 question edited
The difference between a change in demand and a change in the quantity demanded is the following:
1. A change in demand is shown by a shift in the demand curve.
2. A change in quantity demanded is shown by a movement along a given demand curve. *
3. A change in quantity demanded is shown by a shift in the supply curve. *
// Content Page – Reading: Factors That Change Demand
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There are two common ways to discourage tobacco use: taxes on tobacco and information campaigns on the
hazards of tobacco use. Which cause(s) a decrease in demand for smoking?
1. Information campaign on hazards of tobacco*
2. Tax on tobacco products that drives up its price
3. Both information campaign on hazards of tobacco and tax on tobacco products that drives up its price.
// Content Page – Reading: Factors That Change Demand
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There are two common ways to discourage tobacco use: taxes on tobacco and information campaigns on the
hazards of tobacco use. Which cause(s) a movement from one point to another along an existing demand curve?
1. Information campaign on hazards of tobacco
2. Tax on tobacco products that drives up its price*
3. Both information campaign on hazards of tobacco and tax on tobacco products that drives up its price.
// Content Page – Reading: Factors That Change Demand
// New 10/18/2015
There are two common ways to discourage tobacco use: taxes on tobacco and information campaigns on the
hazards of tobacco use. Which cause(s) a decrease in the quantity demanded?
1. Information campaign on hazards of tobacco
2. Tax on tobacco products that drives up its price
3. Both information campaign on hazards of tobacco and tax on tobacco products that drives up its price.*
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// Content Page – Reading: What Is Demand; Reading: Factors That Change Demand
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2.3 Explain the determinants of supply
Short Title: Supply
All of the following will shift the supply curve to the left except:
1. a change in consumer tastes and preferences*
2. an increase in the price of inputs to production
3. government regulation of production
// Content Page – Reading: Factors Affecting Supply
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A change in technology that reduces the costs of production will:
1. increase consumer demand.
2. decrease consumer demand.
3. shift the supply curve to the right.*
// Content Page – Reading: Factors Affecting Supply
An increase in the number of producers will:
1. reduce competition
2. shift the supply curve to the right*
3. cause an increase in the quantity consumed
// Content Pages – Readings: Factors Affecting Supply; Reading: Factors Changing Supply
// Removed 10/18/2015
Increased competition due to a greater number of producers will cause:
1. lower prices due to an increase in the quantity supplied at every price.*
2. lower prices due to increased supply.*
3. higher demand in that market.
// Content Pages – Readings: Factors Affecting Supply; Reading: Factors Changing Supply
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All of the following will cause the supply curve to shift to the right EXCEPT:
1. higher product taxes.*
2. improved technology.
3. a fall in input prices.
// Content Page – Reading: Factors Changing Supply
2.3.a Graphically illustrate a supply curve
Short Title: Graphing the Supply Curve
A supply curve is a graphical illustration of the relationship between price (shown on the vertical axis) and
____________ (shown on the horizontal axis).
1. demand
2. quantity supplied *
3. quantity demanded
// Content Page – Reading: Factors Affecting Supply
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When economists talk about supply, they are referring to a relationship between the price in a market and the
_________________.
1. equilibrium quantity
2. amount that producers collectively make available for sale *
3. amount that buyers wish to purchase
// Content Page – Reading: Factors Affecting Supply
// Updated 10/18/2015 question and answer choices edited
Nearly all supply curves share a basic similarity: they slope _______________.
1. down from left to right
2. up from left to right*
3. up from right to left
// Content Page – Reading: Factors Affecting Supply
2.3.b Describe the differences between changes in supply and changes in quantity supplied
Short Title: Supply vs. Quantity Supplied
A change in quantity supplied results from a change in ________, and leads to ________.
1. price; a movement along the supply curve*
1. a supply shifter; a shift of the supply curve to the right or left
1. quantity demanded; a shift of the supply curve to the right or left
// Content Page – Reading: Factors Affecting Supply
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An increase in the quantity supplied can result from:
1. an increase in price.*
2. an increase in supply.*
3. lower demand.
// Content Page – Reading: Factors Affecting Supply
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When __________________, business firms will collectively supply a higher quantity of output at any given price,
and the supply curve will shift to the right.
1. prices rise
2. costs of production fall *
3. there is a population increase
// Content Page – Reading: Factors Affecting Supply
// Updated 10/18/2015 question edited
Which of the following would cause the supply curve to shift to the right?
1. An increase in the price of the product.
2. An improvement in technology. *
3. A decrease in production costs. *
// Content Page – Reading: Factors Affecting Supply
A severe freeze has once again damaged the Florida orange crop. The impact on the market for orange juice will be
a leftward shift of:
1. the supply curve. *
2. the demand curve.
3. both the supply and demand curves.
// Content Page – Reading: Factors Affecting Supply
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A drought decreases the supply of agricultural products, which means that at any given price a lower quantity will
be supplied; conversely, especially good weather would shift the _________________.
1. demand curve to the right
2. supply curve to the left
3. supply curve to the right *
// Content Page – Reading: Factors Affecting Supply
2.4 Define and graphically illustrate equilibrium price and quantity
Short Title: Equilibrium
When the actual price in some market is above the equilibrium price, the resulting market condition is known as
________.
1. excess demand
2. excess supply*
3. a price ceiling
// Content Page – Reading: Equilibrium
// Updated 10/18/2015 question edited and 10/30/2015 scoring corrected
The ____________ is where quantity demanded and quantity supplied are equal at a certain price.
 quantity demanded
 equilibrium *
 supply schedule
// Content Page – Reading: Equilibrium
Refer to the figure below. The equilibrium quantity and price are:
1. Qe = 31, Pe =$14*
2. Qe = 2, Pe = $16
3. Qe = 14, Pe = $31
// Content Page – Reading: Equilibrium
// Updated 10/30/2015 answer choice corrected
The conditions of demand and supply are given in the table below. What is the equilibrium price?
Price
Qd
Qs
$1.60
9,000
5,000
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$2.00
8,500
5,500
$2.40
8,000
6,400
$2.80
7,500
7,500
$3.20
7,000
9,000
$3.60
6,500
11,000
$4.00
6,000
15,000
1. $2.80*
2. $2.40
3. $3.20
// Content Page – Reading: Equilibrium
// Updated 10/18/2015 question edited
2.4.a Explain how markets eliminate shortages and surpluses
Short Title: Surpluses and Shortages
When there is an excess supply of a goods:
1. suppliers lower prices, which encourages demanders to demand more.*
2. demanders demand more, causing the price to increase.
3. the market increases its costs of production.
// Content Pages: Equilibrium; Surpluses and Shortages // Content Page – Reading: Equilibrium
When there is an excess demand for a good:
1. demanders demand less, causing the price to increase.
2. suppliers increase prices, causing demanders to demand less.*
3. the market decreases its costs of production.
// Content Pages: Equilibrium; Surpluses and Shortages
In a market with an upward sloping supply curve and a downward sloping demand curve, when there is an excess
supply,:
1. the actual price must be higher than the equilibrium price.*
2. the quantity demanded is lower than the equilibrium quantity.*
3. the actual price must be lower than the equilibrium price.
// Content Page: Surpluses and Shortages
// Updated 10/18/2015 question and answer choices edited
In a market with an upward sloping supply curve and a downward sloping demand curve, when there is an excess
demand in the market, the:
1. price is lower than the equilibrium price.*
2. quantity supplied is lower than the equilibrium quantity.*
3. equilibrium is the same as the price.
// Content Page: Surpluses and Shortages
// Updated 10/18/2015 question and answer choices edited
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2.5 Apply the theories of supply & demand to explain how disturbances to markets affect equilibrium prices and
quantities.
Short Title: Changes in Equilibrium
Suppose that a new advertising campaign extolling the virtues of apple juice is successful and a major freeze
destroys half of the country’s apple crop. What happens to the price and quantity of apple juice?
1. The equilibrium price of apple juice might rise or fall and the equilibrium quantity of apple juice falls.
2. The equilibrium price of apple juice rises and the equilibrium quantity of apple juice might rise or fall.*
3. The equilibrium price of apple juice might rise or fall and the equilibrium quantity of apple juice rises.
// Content Pages: Changes in Equilibrium; a Worked Example: Supply and Demand
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Imagine that new research is released indicating that potato chips contribute to halitosis. At the same moment, an
insect infestation destroys ¼ of the nation’s potato crop. What happens in the market for potatoes?
1. The equilibrium price increases and the equilibrium quantity falls
2. The equilibrium price falls and the equilibrium quantity might rise or fall.
3. The equilibrium price might rise or fall, and the equilibrium quantity falls.*
// Content Pages: Changes in Equilibrium; a Worked Example: Supply and Demand
// Removed 10/18/2015
Potato chips and corn chips are substitute goods. Imagine that an insect infestation destroys ¼ of the nation’s
potato crop. What happens?
1. The price of potato chips falls and the price of corn chips increases.
2. The price of potato chips rises and the quantity of corn chips bought and sold increases.*
3. The price of potato chips stays the same, and the price of corn chips falls.
// Content Page: Changes in Equilibrium
// Removed 10/18/2015
To reduce carbon emissions, electricity producers are converting to natural gas (instead of coal) and fleets of
vehicles are being converted to burn natural gas (instead of gasoline). At the same time, hydraulic fracturing of
bedrock to obtain trapped natural gas deposits (“fracking”) has become a breakthrough in the natural gas industry,
allowing a cheaper way of obtaining greater access to natural reserves.
Assess the market impact of these two trends in terms of shifts in demand and/or supply and the resulting change
in equilibrium price and equilibrium quantity.
1. The equilibrium quantity may not change, but the equilibrium price will rise.
2. The equilibrium price may not change at all, but the equilibrium quantity will rise.*
3. The equilibrium price and quantity will both surely rise.
// Content Page: Changes in Equilibrium
// New 10/18/2015
Due to the advantage of providing lightweight, easily re-chargeable power, lithium batteries are becoming more
popular. Suppose that, at the same time, many nations impose restrictions on the export of lithium to world
markets.
Assess the market impact of these two trends in terms of shifts in demand and/or supply and the resulting change
in equilibrium price and equilibrium quantity.
1. The equilibrium quantity may not change, but the equilibrium price will rise.*
2. The equilibrium price may not change at all, but the equilibrium quantity will rise.
3. The market may see no change because these impacts could offset each other.
// Content Page: Changes in Equilibrium
// New 10/18/2015
Virgin Gallactic has opened up a market for commercial space travel. From a spaceport in New Mexico, passengers
will first fly, then rocket, up to low earth orbit. Test flights establish the safety of the system, and this evidence is
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promoted. At the same time, a company opens in Arizona that offers balloon rides to nearly the same altitude.
Assess the impact in the market for Virgin Gallactic’s rocket travel as the result of these two trends. Think in terms
of shifts in demand and/or supply and the resulting change in equilibrium price and equilibrium quantity.
1. The equilibrium quantity may not change, but the equilibrium price will rise.
2. The equilibrium price may not change at all, but the equilibrium quantity will rise.
3. The market may see no change because these impacts could offset each other.*
// Content Page: Changes in Equilibrium
// New 10/18/2015
2.5.a Apply the theories of supply & demand to explain how a change in one of the determinants of demand:
tastes & preferences, the number of buyers, consumer expectations on future prices, income, the price of
substitutes or the price of complements affects equilibrium price and equilibrium quantity
Short Title: Impact of Changes in Demand
When the price of a particular good increases:
1. demand for complementary goods falls.*
2. demand for substitute goods rises.*
3. demand for normal goods rises.
// Content Page: Changes in Equilibrium
// New 10/18/2015
If Pepsi goes on sale, what will happen to the demand for Coca-Cola?
1. Demand for Coca-Cola will decrease.*
2. Demand for Coca-Cola will increase.
3. Demand for Coca-Cola will stay the same.
// Content Page: Changes in Equilibrium
Suppose that a new study is released stating that consumption of orange juice (a substitute for apple juice)
reduces the risk of cancer, and a major freeze destroys half of the country’s apple crop. What happens to the price
and quantity of apple juice once the market has completely adjusted to its new equilibrium?
1. The price of apple juice might rise or fall and the quantity of apple juice falls.*
2. The price of apple juice might rise or fall and the quantity of apple juice rises.
3. The quantity of apple juice might rise or fall, and the price of apple juice rises.
// Content Pages: Changes in Equilibrium; a Worked Example: Supply and Demand
// Updated 10/18/2015 question edited
Government subsidies for corn production have just been eliminated. This can be expected to:
1. increase the demand for products made from corn oil.
2. decrease the demand for corn oil substitutes.
3. increase the demand for corn oil substitutes.*
// Content Pages: Changes in Equilibrium; a Worked Example: Supply and Demand
If demand increases and supply remains constant, what happens to the market equilibrium?
1. Quantity and price both rise.*
2. Quantity rises and price falls.
3. Quantity and price both fall.
// Content Page – Reading: Changes in Equilibrium
2.5.b Apply the theories of supply & demand to explain how a change in one of the determinants of supply: cost
of production, or a change in technology affects equilibrium price and equilibrium quantity, taxes and subsidies,
and producer expectations on future prices
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Short Title: Impact of Changes in Supply
A severe freeze has once again damaged the Florida orange crop. The impact on the market for orange juice will be
a leftward shift of:
1. the supply curve, as fewer oranges are available to produce orange juice.*
2. the demand curve, as consumers try to economize because of the shortage.
3. both the supply and demand curves, resulting in a higher equilibrium price.
// Content Pages: Changes in Equilibrium; a Worked Example: Supply and Demand
If supply falls and demand remains constant, once the market has adjusted to its new equilibrium there will be:
1. fewer transactions, and they will take place at a higher price.*
2. more transactions, and they will take place at a lower price.
3. fewer transactions, and they will take place at a lower price.
// Content Pages: Changes in Equilibrium; a Worked Example: Supply and Demand
// Updated 10/18/2015 question and answer choices edited
The city of Portland aims to increase tourism. A recent study showing the high popularity of doughnuts causes the
city to subsidize its doughnut shops. What happens in the market for doughnuts in Portland?
1. The quantity supplied and the quantity demanded both rise.*
2. Doughnut prices fall.*
3. The equilibrium quantity falls.
// Content Pages: Changes in Equilibrium; a Worked Example: Supply and Demand
// Updated 10/18/2015 answer choices edited
Almost all public mass transit systems in the world are subsidized. Compared to what would happen in an
unsubsidized situation:
1. ridership will fall and fares will rise.
2. ridership will rise and fares will fall.*
3. neither of the above.
// Content Page: Changes in Equilibrium
// New 10/18/2015
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