Exam
Name___________________________________
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
1)
According to the above figure for a gasoline market, at a price of $1 per gallon of gasoline, there
would be
1)
A)
a shortage of 20 million gallons.
B)
a shortage of 30 million gallons.
C)
a surplus of 50 million gallons.
D)
a surplus of 30 million gallons.
2)
A given supply curve illustrates
2)
A)
the relationship between expected future prices and quantity supplied.
B)
the effect of a change in resource costs on quantity supplied.
C)
the relationship between price and quantity supplied.
D)
the effect of a change in technology on quantity supplied.
C
3)
The market supply curve can be derived by
3)
A)
multiplying the price and quantity supplied at each price level.
B)
looking at the capacity utilization in the largest firms in the industry.
C)
horizontally adding the individual supplies at each price level.
D)
vertically adding the individual supplies at each quantity level.
C
A
4)
According to the law of demand
4)
A)
ceteris paribus does not apply.
B)
price and quantity demanded move in the same direction.
C)
price and quantity demanded move in opposite directions.
D)
price and quantity demanded are unrelated.
5)
If the price of a product increases
5)
A)
there is an increase in quantity supplied and a decrease in demand.
B)
there is an increase in supply and a decrease in quantity demanded.
C)
there is an increase in quantity supplied and a decrease in quantity demanded.
D)
there is an increase in supply and a decrease in demand.
C
6)
Which of the following is NOT a determinant of demand?
6)
A)
production technology
B)
consumers’ incomes
C)
consumers’ tastes
D)
prices of other goods
A
7)
Suppose that goods X and Y are substitutes and the price of good Y falls. We would then expect
7)
A)
an increase in the quantity demanded of good Y and a decrease in the demand for good X.
B)
an increase in the demand for both good X and good Y.
C)
the quantity of good Y demanded to increase and the demand for good X to increase also.
D)
an increase in the demand for good X and a decrease in the quantity of good Y demanded.
A
8)
If the price of flash memory cards increases, then there will be ________ of flash memory cards.
8)
A)
a decrease in the quantity supplied
B)
a decrease in the supply
C)
an increase in the quantity supplied
D)
an increase in the supply
C
C
9)
A shortage creates a situation that forces prices to ________ while a surplus creates a situation that
forces prices to ________.
9)
A)
decrease; increase
B)
increase; decrease
C)
decrease; decrease
D)
increase; increase
10)
Which of the following statements about a supply curve is FALSE?
10)
A)
It has a positive slope.
B)
It shows a direct (positive) relationship between price and quantity supplied.
C)
It typically slopes downward to the right.
D)
It shows the quantity supplied at each specific price.
11)
Which of the following would likely cause an increase in the supply of single–serve coffee makers?
11)
A)
a widespread expectation that the price of single–serve coffee makers will rise in the future
B)
a decrease in the cost of manufacturing single–serve coffee makers
C)
a decrease in the number of consumers demanding single–serve coffee makers
D)
an increase in the price of single–serve coffee makers
12)
If the market price falls from P0 to P1 in the above figure, then
12)
A)
a new equilibrium quantity is established.
B)
there is a surplus of goods on the market equal to the distance Q1, Q2.
C)
there is a shortage equal to the distance EF.
D)
there will be a further tendency for price to fall.
13)
Using the above figure, at which price is there neither excess quantity demanded nor excess
quantity supplied?
13)
A)
P1
B)
P2
C)
P3
D)
none of these
14)
Which of the following factors will lead to a shift in the demand curve?
14)
A)
changes in the price of the good
B)
changes in technology
C)
changes in the costs of inputs
D)
changes in consumers’ tastes and preferences
15)
The market clearing price of a good is
15)
A)
the price at which there is no surplus and no shortage.
B)
the price that producers prefer.
C)
the price that consumers prefer.
D)
the price at which there is at least some of the good available for everyone.
16)
An increase in demand for a good can be caused by
16)
A)
a reduction in income if the good is a normal good.
B)
an increase in price of a complementary good.
C)
a decrease in the price of a substitute good.
D)
a decrease in the price of a complementary good.
Quantity of Quantity of
Price DVDs DVDs
per CD Demanded Supplied
per Month per Month
$20 500 9000
18 1000 6000
16 1500 4500
14 2000 3500
12 2500 2500
10 3000 1500
83500 800
64000 100
17)
According to the above table, there is an excess quantity demanded of 1500 DVDs at the price
17)
A)
$14.
B)
$8.
C)
$12.
D)
$10.
18)
Which of the following are complementary goods?
18)
A)
DVDs and videocassettes
B)
beer and wine
C)
sport utility vehicles and gasoline
D)
butter and margarine
C
19)
If the government imposes a per–unit tax on sales of an industry’s product, then we would expect
19)
A)
the demand curve for that industry would shift to the right.
B)
the demand curve for that industry would shift to the left.
C)
the supply curve in that industry would shift to the right.
D)
the supply curve in that industry would shift to the left.
D
D
20)
When the price of a good falls, there will be
20)
A)
both an outward shift in the good’s demand curve and a movement along the good’s demand
curve.
B)
no change in quantity demanded.
C)
a movement along the good’s demand curve.
D)
an outward shift in the good’s demand curve.
21)
The market demand curve for a particular good
21)
A)
may or may not show a direct relationship between price and quantity demanded.
B)
will not be affected by any of the determinants of individual demand.
C)
may be less than an individual demand curve for the good.
D)
is the horizontal sum of all individual demand curves for the good.
Price per Quantity Demanded Quantity Supplied
Constant–of Constant–Quality of Constant–Quality
Quality Unit Units per Year Units per Year
$1.00 1,000 200
2.00 800 400
3.00 600 600
4.00 400 800
5.00 200 1,000
22)
According to the above table, at a price of $2 per unit, which of the following would exist?
22)
A)
a surplus of 800 units
B)
a shortage of 800 units
C)
a shortage of 200 units
D)
a shortage of 400 units
23)
The law of demand states that
23)
A)
the price can never be too high for some consumers.
B)
quantity demanded will vary inversely with the price of the good.
C)
consumers have unlimited demands for a good.
D)
a higher price will lead to increased sales.
24)
The law of supply states that there is
24)
A)
a direct relationship between price and quantity supplied, ceteris paribus.
B)
no relationship between price of resources and number of suppliers, ceteris paribus.
C)
an inverse relationship between price and technology, ceteris paribus.
D)
a direct relationship between profit and quantity supplied, ceteris paribus.
25)
When the price of a complement (cream) decreases, the demand for the related good (coffee)
25)
A)
remains constant.
B)
will fall.
C)
will shift outward.
D)
will shift inward.
C
26)
A market demand curve is found by
26)
A)
adding the prices and the quantities demanded by a consumer.
B)
adding the prices each consumer would pay for each quantity.
C)
adding the quantities demanded for each individual consumer at each price.
D)
taking the demand curve of the “representative” consumer.
C
27)
The demand curve is downward sloping because
27)
A)
a reduction in the price of a good causes individuals to increase their purchase of that good.
B)
the price must rise to induce firms to increase quantity supplied.
C)
an increase in the price will cause a leftward shift in the demand curve.
D)
all of the above.
A
A
28)
Which of the following is an example of the law of supply?
28)
A)
The price of gum has increased so producers are making more gum.
B)
The amount of a good purchased increases when the price decreases.
C)
The price of labor has increased and producers decrease supply.
D)
Producers provide less of a good when the price increases.
29)
Which of the following will NOT lead to a decrease in demand for a normal good?
29)
A)
an increase in the number of consumers
B)
an increase in income
C)
an increase in the price of an input
D)
a decrease in the price of a complement good
30)
If there is a surplus
30)
A)
consumers will drive up the price further.
B)
firms will drive up the price to enhance profits.
C)
the price will decline to the equilibrium level.
D)
fewer producers want to sell the product because it is too scarce.
31)
An excess quantity supplied can be corrected by
31)
A)
an increase in supply.
B)
a fall in price.
C)
a decrease in demand.
D)
legally fixing the price at its present level.
32)
The price of a new textbook increases from $75 to $90 while the price of used copies of the textbook
increases from $50 to $65. Other things equal, we would expect to observe
32)
A)
the quantity demanded of both to fall.
B)
the quantity demanded of the used textbook to decrease and the quantity demanded of the
new textbook to increase.
C)
the quantity demanded of the used textbook to increase while the quantity demanded of the
new textbook to fall.
D)
the demand for the new textbook to increase while the demand for the used textbook to
decrease.
33)
Which one of the following is NOT a determinant of demand?
33)
A)
income
B)
prices of related goods
C)
cost of inputs in production
D)
future price expectations
34)
There will be an increase in supply when
34)
A)
a consumer’s income increases.
B)
there is an improvement in technology.
C)
the market price rises from $3 to $4.
D)
the demand curve shifts.
35)
Suppose that, at an official ticket price of $480, there are 6,000 Justin Timberlake fans wanting to
attend his concert, but only 4,000 ticketed seats are available. Which one of the following statements
is then TRUE?
35)
A)
There will be a surplus of tickets.
B)
The market clearing price of the tickets is more than $480.
C)
The market clearing price of the tickets is less than $480.
D)
There will be scalpers outside the arena selling tickets for $480.
36)
The fact that when the price of a good goes up, people buy less of it is known as the
36)
A)
law of demand.
B)
need for inferior goods.
C)
law of supply.
D)
concept of market equilibrium.
37)
If one day a terrible disease were to wipe out over one–half of the world’s lime trees, which of the
following would likely result?
37)
A)
The supply curve of lime juice would shift upward and to the left.
B)
The supply curve of lime juice would shift downward and to the right.
C)
The demand curve for lime juice would shift to the left.
D)
The demand curve for lime juice would shift to the right.
38)
Which of the following will NOT affect the position of the market supply curve for a good?
38)
A)
The government grants a subsidy to the producers for each unit of a good that they produce.
B)
There is an increase in the prices of the inputs used in production.
C)
The number of sellers in the market increases.
D)
The price of the good increases.
39)
The price of bread in terms of gallons of milk per loaf is 0.6 and the price a gallon of milk in terms
of pounds of butter per gallon is 1.2. What is the relative price of bread to butter?
39)
A)
1.39
B)
0.72
C)
0.50
D)
0.6
40)
Which of the following represents the law of supply?
40)
A)
An increase in the price of a good causes an increase in the quantity supplied of that good.
B)
An increase in the price of a good causes an increase in the supply of that good.
C)
An increase in the price of a good causes a rightward shift of the supply curve for that good.
D)
all of the above
41)
For typical goods, supply curves are
41)
A)
downward sloping.
B)
vertical.
C)
upward sloping.
D)
horizontal.
42)
The only variable that can affect a movement along the demand curve is
42)
A)
the number of substitutes.
B)
the number of buyers.
C)
the price of the good itself.
D)
income levels.
43)
If the price of hot dogs increases, the demand for hot dog buns will
43)
A)
remain constant.
B)
shift to the right.
C)
increase.
D)
decrease.
Quantity of Quantity of
Price DVDs DVDs
per CD Demanded Supplied
per Month per Month
$20 500 9000
18 1000 6000
16 1500 4500
14 2000 3500
12 2500 2500
10 3000 1500
83500 800
64000 100
44)
According to the above table, the equilibrium price of DVDs is
44)
A)
$16.
B)
$12.
C)
$14.
D)
$10.
45)
Consider the following:
Item Price/Last Year Price/This Year
Hamburgers $3.00 $4.00
Movies $5.00 $6.00
The relative price of hamburgers this year has
45)
A)
increased.
B)
decreased.
C)
stayed the same.
D)
Not enough information has been given to calculate an answer.
46)
The price of a smartphone increased from $350 to $400 while the price of a smartphone app
increased from $1 to $2. The relative price of smartphones in terms of smartphone apps
46)
A)
decreased from 350 to 200.
B)
decreased from 0.35 to 0.2.
C)
increased from 200 to 350.
D)
increased from 0.003 to 0.05.
47)
Refer to the above figure. Excess quantity demanded will exist when
47)
A)
the price equals $10.
B)
quantity demanded equals 3.
C)
the price equals $6.
D)
the price is between $0 and $6.
48)
The relationship between quantity supplied and the price of output is such that
48)
A)
an increase in quantity will automatically lead to a reduction in price.
B)
an increase in price will produce an inward shift in the supply curve.
C)
quantity will decrease as the number of firms increases.
D)
an increase in price will lead to an increase in quantity supplied.
49)
An increase in quantity demanded is caused by
49)
A)
a decrease in the price of the good.
B)
a change in expectations about price in the future.
C)
a decrease in the price of a complement.
D)
an increase in income.
50)
Which of the following will cause a movement along the demand curve instead of a shift of the
demand curve?
50)
A)
income
B)
Expectations e the future price of a good
C)
tastes and preferences
D)
none of the above
51)
Which of the following illustrates the law of demand?
51)
A)
The prevailing wage rate in an industry determines how many people choose to work in the
industry.
B)
The number of long distance calls in the United States is greater on Christmas than on
Valentine’s Day.
C)
College enrollment increases when federal tuition grants are readily available to students.
D)
More people watch college basketball in March than in November.
52)
If the price of an item can freely adjust, a market will
52)
A)
never move towards equilibrium because prices are always increasing.
B)
always move towards equilibrium.
C)
always have an excess quantity supplied.
D)
always have an excess quantity demanded.
53)
Which of the following will NOT cause market supply to increase?
53)
A)
a decrease in labor costs
B)
an increase in the costs of resources used to produce the product
C)
a change in technology which allows a larger level of production at every price
D)
an increase in the number of firms supplying the product in the market
B
54)
A market demand schedule for a product indicates that
54)
A)
as a product’s price rises, consumers buy more of the good.
B)
there is a negative relationship between price and quantity demanded.
C)
as the product’s price falls, consumers buy less of the good.
D)
there is a positive relationship between price and quantity demanded.
B
55)
Which of the following will cause the demand curve for cable TV services to shift to the left?
55)
A)
an increase in population
B)
a decrease in average incomes of cable TV subscribers
C)
the creation of several hit TV series
D)
a rise in the price of cable TV services
B
B
56)
According to the law of supply
56)
A)
people buy less of a good when the price decreases.
B)
producers provide more of a good when the price decreases.
C)
people buy more of a good when the price increases.
D)
producers provide less of a good when the price decreases.
57)
A shift of the demand curve to the left represents
57)
A)
a decrease in quantity demanded.
B)
an increase in demand.
C)
an increase in quantity demanded.
D)
a decrease in demand.
D
58)
Demand applies to which of the following?
58)
A)
criminal activity
B)
labor market
C)
fast food
D)
all of the above
D
59)
The supply curve will shift to the left when
59)
A)
some producers leave the industry.
B)
the product becomes fashionable.
C)
the supply of the product increases.
D)
the demand for the product decreases.
A
60)
The supply curve shows the relationship between the
60)
A)
quantity demanded and the quantity supplied.
B)
price of the product and quantity supplied.
C)
cost of production and the price of the product.
D)
cost of resources and cost of production.
B
D
61)
Which of the following will cause an outward (rightward) shift in the supply curve?
61)
A)
a reduction in the price of the good
B)
an increase in the number of consumers
C)
technological progress
D)
an increase in the price of labor input
62)
Which of the following does NOT cause a shift in demand?
62)
A)
change in the price of the good
B)
change in the price of a related good
C)
change in income
D)
change in tastes
Price Quantity Demanded
Per DVD Buyer 1 Buyer 2 Buyer 3 Buyer 4
$20 0 0 1 0
18 0 1 3 0
16 1 2 5 1
14 2 4 7 3
12 3 6 9 6
10 4 8 11 10
8 5 11 13 15
63)
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?
63)
A)
8
B)
25
C)
33
D)
22
64)
Which of the following will shift today’s supply curve to the right?
64)
A)
Prices are expected to be lower in the future.
B)
Prices are expected to be higher in the future.
C)
Sales taxes increase.
D)
Input prices rise.
65)
Which of the following pairs of goods is LEAST likely to be a pair of complements?
65)
A)
beer and wine
B)
coffee and sugar
C)
razors and razor blades
D)
gasoline and vehicles
66)
If the price of personal computers were to rise, then the demand for printers would decrease
because personal computers and printers are
66)
A)
inferior goods.
B)
complementary goods.
C)
consumer goods.
D)
substitute goods.
67)
Refer to the above figure. Which of the following statements is TRUE?
67)
A)
Panel A shows a change in quantity supplied and Panel B shows a change in supply.
B)
Panel A shows an increase in supply and Panel B shows a decrease in supply.
C)
Both Panels A and B show an increase in supply.
D)
Panel A shows a change in supply and Panel B shows a change in quantity supplied.
68)
The law of demand states that
68)
A)
people demand less at lower prices.
B)
the quantity demanded is directly related to price.
C)
changes in price and changes in quantity demanded move in the same direction.
D)
the quantity demanded is inversely related to price.
69)
According to the above figure, equilibrium is at point
69)
A)
B.
B)
E.
C)
C.
D)
D.
Price per Quantity Demanded Quantity Supplied
Constant–of Constant–Quality of Constant–Quality
Quality Unit Units per Year Units per Year
$1.00 1,000 200
2.00 800 400
3.00 600 600
4.00 400 800
5.00 200 1,000
70)
According to the above table, a surplus exists when
70)
A)
the price is $2 per unit.
B)
the price is greater than $3 per unit.
C)
the price is $1 per unit.
D)
the price is $3 per unit.
B
C
71)
If a good is a normal good, an increase in income will
71)
A)
cause a movement down along the demand curve.
B)
decrease the quantity demanded of the good.
C)
cause the demand curve for the good to shift to the left.
D)
increase the demand for the good.
72)
Which of the following occurs when a market is in equilibrium?
72)
A)
the price of the good will tend to rise, all else held constant.
B)
supply is equal to demand.
C)
the price of the good will tend to fall, all else held constant.
D)
quantity supplied is equal to quantity demanded
Quantity Quantity
Price Demanded Supplied
$5 525
$4 10 20
$3 15 15
$2 20 10
$1 25 5
73)
Using the above table, at a price of $5 there will be a
73)
A)
shortage of 20 units.
B)
surplus of 10 units.
C)
surplus of 20 units.
D)
shortage of 10 units.
74)
Which of the following is NOT true about the equilibrium price?
74)
A)
the price where quantity demanded equals quantity supplied
B)
the price where there is neither excess quantity demanded or excess quantity supplied
C)
the price where a change in quantity supplied occurs
D)
the price where the demand curve intersects the supply curve