Exam
Name___________________________________
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
1)
Refer to the above table. There is an excess quantity supplied of 2,000 units at a price of
1)
A)
$450.
B)
$500.
C)
$600.
D)
$700.
2)
Refer to the above figure. Which panel demonstrates the law of supply?
2)
A)
Panel A.
B)
Panel B.
C)
Panel C.
D)
Panel D.
3)
Adding the quantities demanded by all consumers at every price will yield
3)
A)
the total substitution effect from a price change.
B)
the market demand curve.
C)
the number of consumers.
D)
the market–clearing price.
4)
Pam graduates from law school and gets a position in a law firm. At the same time the price of
hamburger falls while other food prices have stayed the same. She notices that she buys less
hamburger than she did before. Is she violating the law of demand?
4)
A)
No, since the law of demand refers to relative price changes and the price of hamburger
falling is an absolute price change.
B)
Yes, since she is buying less hamburger at a lower price.
C)
Yes, since she is buying less hamburger in a relatively short period of time and we wouldn’t
expect her tastes to have changed.
D)
No, since other things are not held constant, such as her income.
5)
If the demand of a good is inversely related to income, it must be
5)
A)
an everyday product.
B)
an inferior good.
C)
a normal good.
D)
a bad good.
6)
If the price of apples goes down, then the demand for pears will
6)
A)
decrease, assuming apples and pears are complements.
B)
decrease, assuming apples and pears are substitutes.
C)
remain constant, assuming apples and pears are related goods.
D)
increase, assuming apples and pears are substitutes.
7)
According to the above figure, an increase in the price from $2 to $4 will result in
7)
A)
an increase in demand of 20 million gallons.
B)
a shortage of 30 million gallons.
C)
an increase in quantity demanded of 10 million gallons.
D)
an increase in quantity supplied of 20 million gallons.
8)
Refer to the above figure. Suppose that Cheerios and Apple Jacks are substitutes. Which diagram
shows the effect on the demand for Cheerios when the price of Apple Jacks cereal has decreased?
8)
A)
A
B)
B
C)
neither graph
D)
both graphs
B
D
9)
When the price of a complement (cream) decreases, the demand for the related good (coffee)
9)
A)
will shift outward.
B)
will fall.
C)
remains constant.
D)
will shift inward.
10)
Refer to the above figure. The rightward shift of the curve indicates
10)
A)
an increase in supply.
B)
a change in quantity demanded.
C)
a change in quantity supplied.
D)
an increase in demand.
11)
Mary increases her consumption of Good X after the price of Good Y decreased. For Mary
11)
A)
Good X and Good Y are complements.
B)
Good X is an inferior good.
C)
Good X and Good Y are substitutes.
D)
Good Y is an inferior good.
12)
In the above figure, an increase in income is best demonstrated by a
12)
A)
shift of D2 to D1 in Graph A, if good A is a normal good.
B)
movement along D0 from P2 to P1 in Graph B.
C)
shift of D1 to D2 in Graph A, if good A is a normal good.
D)
movement along D0 from P1 to P2 in Graph B.
13)
Which one of the following statements is FALSE?
13)
A)
The relative price of a good is its price measured relative to the price of other goods.
B)
The nominal price of a good is its price measured in current dollars.
C)
Generally, what matters most to consumers is what a good costs in dollars.
D)
When the price of beer goes up by the same proportion as the prices of all other goods, the
relative price of beer does not change.
14)
Which of the following will cause an outward (rightward) shift in the supply curve?
14)
A)
An increase in the number of consumers
B)
A reduction in the price of the good
C)
Technological progress
D)
An increase in the price of labor input
15)
Refer to the above figure. At a price of four cents, a(n) ________ of bubble gum will exist in the
market.
15)
A)
excess quantity demanded
B)
surplus
C)
shortage
D)
equilibrium quantity
16)
Suppose we observe that the demand for eggs increases when people buy more potatoes. We can
conclude that eggs and potatoes are
16)
A)
complements.
B)
substitutes.
C)
inferior goods.
D)
normal goods.
17)
Which of the following is a likely result of the dramatic decrease in the price of microprocessor
chips to computer manufacturers in the last two decades?
17)
A)
A decrease in the supply of diskettes.
B)
An increase in the demand for computers.
C)
An increase in the quantity supplied of computers.
D)
An increase in the supply of computers.
18)
Refer to the above figure for a particular good. The rightward shift of the curve could have been
caused by
18)
A)
an increase in the price of a complementary good.
B)
an increase in the price of a substitute good.
C)
a decrease in the price of an input.
D)
a decrease in the price of that good.
19)
Which of the following is an example of the law of demand?
19)
A)
A decrease in the price of milk has no effect on the amount of milk consumed.
B)
An increase in the price of gasoline is followed by a reduction in the amount of gasoline
consumed.
C)
The amount of candy sold increases while the price of candy is constant.
D)
An increase in the price of eggs is followed by an increase in the sale of eggs.
20)
In the above figure, the demand curve for Good A shifts from D1 to D2 in Graph A when the price
of Good B changes from P1 to P2 in Graph B. We can conclude that
20)
A)
Good A and Good B are substitutes.
B)
Good A and Good B are unrelated.
C)
Good A is a normal good but Good B is an inferior good.
D)
Good A and Good B are complements.
21)
An excess quantity supplied can be corrected by
21)
A)
an increase in supply.
B)
a fall in price.
C)
legally fixing the price at its present level.
D)
a decrease in demand.
22)
When the current price of an item is greater than the item’s market clearing price,
22)
A)
quantity supplied is less than quantity demanded.
B)
quantity supplied is greater than quantity demanded.
C)
demand is greater than supply.
D)
supply is greater than demand.
23)
When economists talk about a demand schedule for a product, they mean
23)
A)
the amount of a good that producers are willing to make available for sale at a particular
price in a given time period.
B)
the amount of a good that consumers are able to purchase (though they might not be willing
to) at different prices in a given period of time.
C)
the amount of a good that consumers intend to purchase at each price in a set of possible
prices in a given time period.
D)
the amount of a good that consumers intend to purchase at only one particular price in a
given period of time.
24)
According to the above figure, what happens when the price per gallon of gasoline jumps from $1
to $4?
24)
A)
A surplus of 40 million gallons/day results.
B)
The market moves from a shortage of 40 million gallons/day to a surplus of 50 million
gallons/day.
C)
A gasoline surplus is replaces by a gas shortage.
D)
The market shortage is replaced by market equilibrium.
25)
Which of the following causes a decrease in demand for a normal good?
25)
A)
Increase in price of a complement
B)
Increase in price
C)
Increase in income
D)
Increase in price of a substitute
26)
Which of the following causes a movement along a supply curve?
26)
A)
a change in technology
B)
a change in the price
C)
a change in resource costs
D)
all of the above
27)
Which of the following statements about a supply curve is FALSE?
27)
A)
It has a positive slope.
B)
It shows the quantity supplied at each specific price.
C)
It typically slopes downward to the right.
D)
It shows a direct (positive) relationship between price and quantity supplied.
28)
Which of the following will cause a rightward shift of the demand curve?
28)
A)
an increase in the expected future price of the good
B)
a decrease in the cost of production
C)
a decrease in the price of the good
D)
all of the above
29)
Suppose that the price of cornflakes is $3 per box and the price of oatmeal is $4.50 per box. Both
boxes contain the same number of ounces of cereal. The relative price of cornflakes in terms of
oatmeal is
29)
A)
0.67.
B)
1.50.
C)
0.75.
D)
1.0.
30)
When the price of personal computers decreased in the 2000s, there was an increase in the demand
for flash memory drives because personal computers and flash memory drives are
30)
A)
substitute goods.
B)
complementary goods.
C)
capital goods.
D)
inferior goods.
31)
How does a change in quantity supplied differ from a change in supply?
31)
A)
A change in the price affects quantity supplied, not supply.
B)
There is no difference.
C)
A change in one of the ceteris paribus conditions affects quantity supplied, not supply.
D)
A change in quantity supplied shifts the supply curve; a change in supply is a movement
along the curve.
32)
For a demand schedule, which of the following is held constant?
32)
A)
relative prices
B)
nominal prices
C)
quantity demanded
D)
quality of the good
33)
More cattle are found to have mad cow disease. As a result, consumer confidence in the safety of
beef is shaken. What would an economist predict will happen in the beef market?
33)
A)
Absolutely no change in either the quantity demand or the demand for beef.
B)
The demand curve will shift to the left.
C)
The demand curve does not shift but consumers move to a point lower down the curve.
D)
As consumer preferences move away from beef, there is an upward movement along the beef
demand curve.
34)
The law of demand shows that there is
34)
A)
an inverse relationship between price and profit.
B)
an inverse relationship between price and quantity demanded.
C)
a direct relationship between price and quantity demanded.
D)
an inverse relationship between price and resource cost.
35)
Suppose an individual experiences a permanent increase in income. As a result of this increased
income, further assume that the individual eats dinner at restaurants more frequently each month.
This information suggests that dinners at restaurants for this individual are
35)
A)
an inferior good.
B)
a normal good.
C)
a substitute good.
D)
both complimentary and inferior.
36)
Demand is defined as
36)
A)
a schedule of how much of a good or service people will purchase at any particular price of a
different item during the specified time period, other things being constant.
B)
a specific quantity of a good or service that people will purchase at one particular price of
another item during a specified time period, other things being constant.
C)
a schedule of how much of an item people will purchase at any particular price of that item
during a specified time period, other things being constant.
D)
a specific quantity of an item that people want at a particular price of that item during a
specified time period, other things being constant.
37)
Assuming coffee and cola are substitutes, if the price of coffee rises,
37)
A)
the demand curve for cola will shift to the right.
B)
there is a movement along the demand curve for cola.
C)
the demand curve for coffee will shift to the right.
D)
the demand curve for coffee will shift to the left.
38)
Which of the following illustrates the law of demand?
38)
A)
The prevailing wage rate in an industry determines how many people choose to work in the
industry.
B)
More people watch college basketball in March than in November.
C)
The number of long distance calls in the United States is greater on Christmas than on
Valentine’s Day.
D)
College enrollment increases when federal tuition grants are readily available to students.
39)
Suppose a concert by Lady Gaga and a basketball game played by the L.A. Lakers are substitutes,
then which of the following is true?
39)
A)
If the price of a ticket to a Lakers game decreases, the quantity of Lakers tickets demanded
will increase.
B)
If the price of a ticket to a Lakers game increases, then the demand for Lady Gaga tickets will
remain unchanged.
C)
If the price of a ticket to a Lakers game increases, then the demand for Lady Gaga tickets will
fall.
D)
The price of a ticket to a Lakers game will always equal the price of a ticket to a Lady Gaga
concert.
40)
Refer to the above figure. Other things being equal, if price is at P2 , then we would expect
40)
A)
consumers to bid against each other for goods and force the price still higher.
B)
consumers to reduce their offering price for the good.
C)
an excess quantity demanded to occur.
D)
price to decline until an equilibrium is achieved at P0.
41)
We observe that people buy less steak and more potatoes when the price of steak relative to
potatoes increases. This indicates that steak and potatoes are
41)
A)
complements.
B)
unrelated goods.
C)
inferior goods.
D)
substitutes.
42)
A shift in the demand curve to the right represents
42)
A)
a decrease in quantity demanded.
B)
an increase in quantity demanded.
C)
an increase in demand.
D)
a decrease in demand.
43)
The law of demand is based on the observation that
43)
A)
people buy more of a product when the price falls.
B)
stores go out of business if they lower prices.
C)
people buy less of a product when the product becomes less fashionable.
D)
people are indifferent to price changes.
44)
When there is an excess quantity supplied,
44)
A)
the market is in equilibrium.
B)
prices will remain stable.
C)
quantity demanded is greater than quantity supplied.
D)
quantity demanded is less than quantity supplied.
45)
The law of demand states that
45)
A)
a higher price will lead to increased sales.
B)
consumers have unlimited demands for a good.
C)
the price can never be too high for some consumers.
D)
quantity demanded will vary inversely with the price of the good.
46)
All of the following will cause a shift in the supply of jeans EXCEPT
46)
A)
a decrease in the number of jean manufacturers.
B)
a decrease in the prices of jeans.
C)
a per–unit government subsidy on the production of jeans.
D)
an increase in the cost of producing jeans.
47)
We are given the individual demand curves for all of the people that consume Good Y. Which
statement is true about the market demand curve for Good Y?
47)
A)
The market demand curve is obtained by horizontally summing the individual demand
curves.
B)
The market demand curve is obtained by vertically summing the individual demand curves.
C)
The market demand curve cannot be obtained from individual demand curves.
D)
The market demand curve cannot be obtained because information on prices is missing.
48)
In any given market, prices are determined by
48)
A)
specialization of labor.
B)
comparative advantage.
C)
supply and demand.
D)
transactions costs.
49)
According to the above table, at a price of $2 per unit, which of the following would exist?
49)
A)
A shortage of 800 units
B)
A shortage of 400 units
C)
A surplus of 800 units
D)
A shortage of 200 units
50)
The price of a phone call at a pay phone was 5 cents in 1950 and the price of a first–class stamp was
3 cents. In 2010, the pay phone costs 50 cents for a call and a first–class stamp costs 44 cents. We
know that
50)
A)
both the nominal prices of phone calls and first–class stamps increased from 1950 to 2010, but
we can’t tell if the relative prices increased or decreased without more information.
B)
both the nominal prices of phone calls and first–class stamps increased from 1950 to 2010, but
the relative price of stamps increased and the relative price of phone calls decreased from
1950 to 2010.
C)
both the nominal and the relative price of phone calls increased from 1950 to 2010.
D)
all prices increased from 1950 to 2010: Nominal prices of phone calls, first–class stamps, and
the relative prices of phone calls and first–class stamps.
51)
The law of demand states that
51)
A)
people demand less at lower prices.
B)
changes in price and changes in quantity demanded move in the same direction.
C)
the quantity demanded is directly related to price.
D)
the quantity demanded is inversely related to price.
52)
A change in the price of a good causes
52)
A)
an increase in supply.
B)
a change in quantity supplied.
C)
a decrease in supply.
D)
an increase in demand and a decrease in supply.
53)
If Apple’s iTunes Music Store increases its “fee” for its music downloads, the law of demand predicts
that
53)
A)
iTunes music supply would change but demand would not.
B)
there would be no change in the demand for iTunes music downloads.
C)
the number of iTunes music downloads would decrease.
D)
the number of iTunes music downloads would increase.
54)
Refer to the above table. Suppose Buyer 2 leaves the market. What is the new market quantity of
DVDs demanded at a price of $10?
54)
A)
33
B)
22
C)
25
D)
8
C
55)
When a rise in the price of one item results in a decrease in the demand for another good, then the
two goods are
55)
A)
complementary goods.
B)
inferior goods.
C)
satisfying the law of supply.
D)
substitute goods.
A
56)
The statement “other things being equal” in the law of demand means all of the following remain
constant EXCEPT
56)
A)
consumer income.
B)
the prices of substitutes.
C)
tastes and preferences.
D)
the price of the good concerned in the law of demand.
D
57)
Which of the following products are likely to be complementary goods?
57)
A)
Domino’s pizza and Papa John’s pizza
B)
portable MP3 players and batteries
C)
Coke and Pepsi
D)
HD–DVDs and Blu–Ray DVDs
B
58)
If the price of personal computers were to rise, then the demand for printers would decrease
because personal computers and printers are
58)
A)
consumer goods.
B)
substitute goods.
C)
complementary goods.
D)
inferior goods.
59)
The market supply curve is found by
59)
A)
plotting the supply curves of individual firms.
B)
taking the supply curve of the representative firm.
C)
plotting the supply curves of individual consumers.
D)
plotting and summing up the supply curves of individual firms.
60)
If the price of airline travel in Europe falls and the demand for train travel in Europe also falls, then
the two goods are
60)
A)
normal goods.
B)
complements.
C)
substitutes.
D)
inferior goods.
61)
What happens as the result of a shortage?
61)
A)
Supply of the good decreases.
B)
There is upward pressure on prices.
C)
There is downward pressure on prices.
D)
Consumers begin to view the good as an inferior good because they have a hard time finding
it.
62)
Which of the following will NOT cause market supply to increase?
62)
A)
an increase in the number of firms supplying the product in the market
B)
a decrease in labor costs
C)
a change in technology which allows a larger level of production at every price
D)
an increase in the costs of resources used to produce the product
63)
According to the above figure, at a price of $1 per gallon, there would be
63)
A)
a surplus of 30 million gallons.
B)
a shortage of 20 million gallons.
C)
a surplus of 50 million gallons.
D)
a shortage of 30 million gallons.
B
D