1.

FIGURE 3-5 Equilibrium price and quantity. The intersection of the downsloping demand curve D and the upsloping supply curve S indicates the equilibrium price and quantity, here $3 and 7000 bushels of corn. The shortages of corn at below-equilibrium prices, for example, 7000 bushels at $2, drive up price. These higher prices increase the quantity supplied and reduce the quantity demanded until equilibrium is achieved. The surpluses caused by above-equilibrium prices, for example, 6000 bushels at $4, push price down. As price drops, the quantity demanded rises and the quantity supplied falls until equilibrium is established. At the equilibrium price and quantity, there are neither shortages nor surpluses of corn.
R-1 3-5

Demand curve D is downsloping because:

A. producers offer less of a product for sale as the price of the product falls.
B. lower prices of a product create income and substitution effects which lead consumers to purchase more of it.
C. the larger the number of buyers in a market, the lower the product price.
D. price and quantity demanded are directly (positively) related.



2.

FIGURE 3-5 Equilibrium price and quantity. The intersection of the downsloping demand curve D and the upsloping supply curve S indicates the equilibrium price and quantity, here $3 and 7000 bushels of corn. The shortages of corn at below-equilibrium prices, for example, 7000 bushels at $2, drive up price. These higher prices increase the quantity supplied and reduce the quantity demanded until equilibrium is achieved. The surpluses caused by above-equilibrium prices, for example, 6000 bushels at $4, push price down. As price drops, the quantity demanded rises and the quantity supplied falls until equilibrium is established. At the equilibrium price and quantity, there are neither shortages nor surpluses of corn.
R-1 3-5

Supply curve S:

A. reflects an inverse (negative) relationship between price and quantity supplied.
B. reflects a direct (positive) relationship between price and quantity supplied.
C. depicts the collective behavior of buyers in this market.
D. shows that producers will offer more of a product for sale at a low product price than at a high product price.



3.

FIGURE 3-5 Equilibrium price and quantity. The intersection of the downsloping demand curve D and the upsloping supply curve S indicates the equilibrium price and quantity, here $3 and 7000 bushels of corn. The shortages of corn at below-equilibrium prices, for example, 7000 bushels at $2, drive up price. These higher prices increase the quantity supplied and reduce the quantity demanded until equilibrium is achieved. The surpluses caused by above-equilibrium prices, for example, 6000 bushels at $4, push price down. As price drops, the quantity demanded rises and the quantity supplied falls until equilibrium is established. At the equilibrium price and quantity, there are neither shortages nor surpluses of corn.
R-1 3-5

At the $3 price:

A. quantity supplied exceeds quantity demanded.
B. quantity demanded exceeds quantity supplied.
C. the product is abundant and a surplus exists.
D. there is no pressure on price to rise or fall.



4.

FIGURE 3-5 Equilibrium price and quantity. The intersection of the downsloping demand curve D and the upsloping supply curve S indicates the equilibrium price and quantity, here $3 and 7000 bushels of corn. The shortages of corn at below-equilibrium prices, for example, 7000 bushels at $2, drive up price. These higher prices increase the quantity supplied and reduce the quantity demanded until equilibrium is achieved. The surpluses caused by above-equilibrium prices, for example, 6000 bushels at $4, push price down. As price drops, the quantity demanded rises and the quantity supplied falls until equilibrium is established. At the equilibrium price and quantity, there are neither shortages nor surpluses of corn.
R-1 3-5

At price $5 in this market:

A. there will be a shortage of 10,000 units.
B. there will be a surplus of 10,000 units.
C. quantity demanded will be 12,000 units.
D. quantity demanded will equal quantity supplied.




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