## Chapter Three: Module Quiz -- Supply and Demand

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1. The supply curve is upward-sloping because:

As the price increases, so do costs.
As the price increases, consumers demand less.
As the price increases, suppliers can earn higher levels of profit or justify higher marginal costs to produce more.
None of the Above

2. Part of the reason that Michael Jordan earns millions of dollars each year while school teachers may earn \$30,000 is because

The supply of superstar basketball players is very low, while the supply of competent teachers is much larger.
Demand for Michael Jordan's talents is very high since he can generate so much revenue for a firm.
Consumers enjoy basketball to the point that they are willing to spend lots of money and time attending games and watching commercials.
All of the Above

3. When college students leave town for the summer, the demand for meals at the local restaurants declines. This results in

a decrease in equilibrium price and an increase in quantity.
an increase in equilibrium price and quantity.
a decrease in equilibrium price and quantity.
an increase in equilibrium price, and a decrease in quantity.
None of the Above

4. All the following shift the demand curve for automobiles to the right except:

the local factory gives a big raise to its employees.
a brand new automobile dealership opens in town.
the price of gasoline falls.
None of the Above

5. If the cost of computer components falls, then

the demand curve for computers shifts to the right.
the demand curve for computers shifts to the left.
the supply curve for computers shifts to the right
the supply curve for computers shifts to the left

6. What happens in the market for airline travel when the price of traveling by rail decreases?

The demand curve shifts left.
The demand curve shifts right.
The supply curve shifts left.
The supply curve shifts right.
We move along the supply curve.

7. If a sin tax is placed on sales of alcohol,

the demand curve shifts to the left.
the demand curve shifts to the right.
the supply curve shifts to the left.
the supply curve shifts to the right.

8. When a price ceiling is imposed above the equilibrium price,

a shortage results.
a surplus results.
the equilibrium outcome prevails.
there is not enough information to determine the outcome.

9. If the demand curve shifts to the right, then we move up and to the right along our supply curve.

True
False

10. If the cost of making bicycles falls, the price goes down, causing the demand curve to shift to the right.

True
False