Exam
Name___________________________________
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
1)
In January, buyers of gold expect that the price of gold will fall in February. What happens in the
gold market in January, holding everything else constant?
1)
A)
The quantity demanded increases.
B)
The demand curve shifts to the right.
C)
The quantity demanded decreases
D)
The demand curve shifts to the left.
2)
Assume that the hourly price for the services of personal trainers has risen and sales of these
services have also risen. One can conclude that
2)
A)
personal trainers are deliberately charging high prices because they provide services for
wealthy clients.
B)
the law of demand has been violated.
C)
the demand for personal trainers has increased.
D)
the number of personal trainers has increased.
C
3)
Assume that both the demand curve and the supply curve for MP3 players shift to the right but the
demand curve shifts more than the supply curve. As a result
3)
A)
both the equilibrium price and quantity of MP3 players will increase.
B)
the equilibrium price of MP3 players will increase; the equilibrium quantity may increase or
decrease.
C)
the equilibrium price of MP3 players will decrease; the equilibrium quantity may increase or
decrease.
D)
the equilibrium price of MP3 players may increase or decrease; the equilibrium quantity will
increase.
A
D
4)
One would speak of a movement along a supply curve for a good, rather than a change in supply,
if
4)
A)
the cost of producing the good changes.
B)
prices of substitutes in production change.
C)
the price of the good changes
D)
supplier expectations about future prices change.
5)
A change in which variable will change the market demand for a product?
5)
A)
the price of the product
B)
the quantity supplied of the product
C)
expected future prices
D)
the number of firms in the market
6)
Refer to Figure 3–2. At a price of $25, how many units will be sold?
6)
A)
800
B)
500
C)
400
D)
600
7)
Suppose that when the price of hamburgers increases, the Ruiz family increases their purchases of
hot dogs. To the Ruiz family,
7)
A)
hamburgers and hot dogs are complements.
B)
hamburgers and hot dogs are substitutes.
C)
hamburgers and hot dogs are inferior goods.
D)
hamburgers and hot dogs are normal goods.
8)
If the price of grapefruit rises, the substitution effect due to the price change will cause
8)
A)
a decrease in the demand for grapefruit.
B)
a decrease in the quantity supplied of grapefruit.
C)
a decrease in the demand for oranges, a substitute for grapefruit.
D)
a decrease in the quantity demanded of grapefruit.
D
9)
Which of the following is the correct way to describe equilibrium in a market?
9)
A)
At equilibrium, scarcity is eliminated.
B)
At equilibrium, quantity demanded equals quantity supplied.
C)
At equilibrium, market forces no longer apply.
D)
At equilibrium, demand equals supply.
B
10)
A demand curve shows the relationship between
10)
A)
the price of a product and the quantity of the product demanded.
B)
the quantity that consumers are willing and able to buy and the quantity that sellers are
willing and able to offer.
C)
the amount of a product sellers are willing to sell at a particular price and the amount
consumers are willing to buy at that price.
D)
the price of a product and the demand for the product.
A
B
11)
New technology developed in 1999 resulted in a reduction in the cost of manufacturing flat–screen
televisions that used liquid crystal displays (LCD). How did this change in technology affect the
market for flat–screen televisions?
11)
A)
The new technology caused an increase in the supply of flat–screen televisions and an
increase in price of flat–screen televisions.
B)
The new technology caused an increase in the demand for flat–screen televisions.
C)
The new technology caused an increase in the quantity of flat–screen televisions supplied.
D)
The new technology caused an increase in the supply of flat–screen televisions and a decrease
in price of flat–screen televisions.
12)
Refer to Figure 3–4. The figure represents the market for canvas tote bags. Assume that the price of
tote bags is $15. At this price:
12)
A)
the quantity demanded exceeds the quantity supplied of tote bags by 75. The price will
eventually rise to $25 where quantity demanded will equal quantity supplied.
B)
there is a shortage, equal to 55 tote bags, that will be eliminated when the price rises to $25.
C)
there is a shortage, equal to 55 tote bags; the price of tote bags will rise until demand is equal
to supply.
D)
the demand exceeds the supply of tote bags by 55. Some consumers will have an incentive to
offer to buy tote bags at a higher price.
B
D
13)
In recent years the cost of producing wines in the U.S. has increased largely due to rising rents for
vineyards. At the same time, more and more Americans prefer wine over beer. Which of the
following best explains the effect of these events in the wine market?
13)
A)
The supply curve has shifted to the left and the demand curve has shifted to the right. As a
result, there has been an increase in the equilibrium price and an uncertain effect on the
equilibrium quantity.
B)
Both the supply and demand curves have shifted to the right. As a result, there has been an
increase in the equilibrium price and an uncertain effect on the equilibrium quantity.
C)
The supply curve has shifted to the left and the demand curve has shifted to the right. As a
result there has been an increase in the equilibrium quantity and an uncertain effect on the
equilibrium price.
D)
Both the supply and demand curves have shifted to the right. As a result, there has been an
increase in both the equilibrium price and the equilibrium quantity.
14)
Tom Searchinger, a senior attorney at the Environmental Defense Fund, observed that generous
farm subsidies have encouraged farmers to produce more corn and more wheat. How does this
affect the market for fertilizer?
14)
A)
The supply of fertilizer decreases.
B)
The demand for fertilizer decreases.
C)
The supply of fertilizer increases.
D)
The demand for fertilizer increases.
15)
An increase in the price of MP3 players will result in
15)
A)
a smaller quantity of MP3 players supplied.
B)
an increase in the supply of MP3 players.
C)
a decrease in the demand for MP3 players.
D)
a larger quantity of MP3 players supplied.
16)
An increase in the equilibrium price for a product will result
16)
A)
when there is a decrease in supply and an increase in demand for the product.
B)
when the quantity demanded for the product exceeds the quantity supplied.
C)
when there is a decrease in supply and a decrease in demand for the product.
D)
when there is an increase in demand and an increase in the number of firms producing the
product.
Figure 3–1
17)
Refer to Figure 3–1. The figure shows the supply and demand curves for two markets: the market
for original Picasso paintings, and the market for designer jeans. Which graph most likely
represents which market?
17)
A)
Graph B represents both the market for original Picasso paintings and designer jeans.
B)
Graph A represents the market for original Picasso paintings and Graph B represents the
market for designer jeans.
C)
Graph B represents the market for original Picasso paintings and Graph A represents the
market for designer jeans.
D)
Graph A represents both the market for original Picasso paintings and designer jeans.
18)
In 2002 Apple decided not to develop and sell a “tablet PC” – a laptop with a special screen that can
convert handwriting into text. Which of the following is one reason why Apple chose not to
develop a tablet PC?
18)
A)
The technology was considered too complex for the average computer user.
B)
Microsoft had a patent on the technology used to make tablet PCs and was not willing to sell
the rights to this technology to Apple.
C)
Apple would not be able to produce enough tablet PC units to meet the demand for them.
D)
The price of the tablet PC would have been too high to sell many units.
19)
Research by Christopher Tang suggests that supermarkets should consider which of the following
when deciding whether to remove slow–selling goods from their shelves?
19)
A)
whether the goods removed have high profit margins
B)
whether the goods removed are popular with affluent consumers
C)
whether the goods removed are likely to be subject to shortages in the future
D)
whether the goods removed are substitutes or complements with the remaining goods
20)
The popularity of digital cameras has enticed large discount stores like Wal–Mart and Costco to
offer digital photo printing services. How does this affect the digital photo printing market?
20)
A)
The supply curve for digital photo printing services shifts to the left.
B)
The demand curve for digital photo printing services shifts to the right.
C)
The supply curve for digital photo printing services shifts to the right.
D)
The demand curve for digital photo printing services shifts to the left.
21)
By drawing a demand curve with price on the vertical axis and quantity on the horizontal axis,
economists assume that the most important determinant of the demand for a good is
21)
A)
the price of the good.
B)
the quality of the good.
C)
consumer tastes and preferences.
D)
consumer income.
Figure 3-5
22)
Refer to Figure 3–5. Assume that the graphs in this figure represent the demand and supply curves
for rice. What happens in this market if buyers expect the price of rice to fall?
22)
A)
Panel (a)
B)
Panel (b)
C)
Panel (c)
D)
Panel (d)
23)
Refer to Figure 3–5. Assume that the graphs in this figure represent the demand and supply curves
for Fruitopia, a soft drink. Which panel describes what happens in the market for Fruitopia when
the price of Snapple, a substitute product, decreases?
23)
A)
Panel (a)
B)
Panel (b)
C)
Panel (c)
D)
Panel (d)
24)
Refer to Figure 3–5. Assume that the graphs in this figure represent the demand and supply curves
for used clothing, an inferior good. Which panel describes what happens in this market as a result
of a decrease in income?
24)
A)
Panel (a)
B)
Panel (b)
C)
Panel (c)
D)
Panel (d)
25)
In October 2005, the U.S. Fish and Wildlife Service banned the importation of beluga caviar, the
most prized of caviars, from the Caspian Sea. What happened in the market for caviar in the U. S.?
25)
A)
The supply curve shifted to the right.
B)
The demand curve shifted to the right.
C)
The demand curve shifted to the left.
D)
The supply curve shifted to the left.
26)
Technological advances have resulted in lower prices for digital cameras. What is the impact of
this on the market for traditional (non–digital) cameras?
26)
A)
The demand curve for traditional cameras shifts to the left.
B)
The supply curve for traditional cameras shifts to the right.
C)
The supply curve for traditional cameras shifts to the left.
D)
The demand curve for traditional cameras shifts to the right.
Figure 3–4
27)
Refer to Figure 3–4. The figure represents the market for canvas tote bags. Compare the conditions
in the market when the price is $50 and when the price is $35. Which of the following describes
how the market differs at these prices?
27)
A)
The difference between quantity supplied and quantity demanded is greater at $50 than at
$35.
B)
At each price there is a surplus; firms will lower the equilibrium price in order to eliminate
the surplus.
C)
At each price the supply of tote bags exceeds that demand for tote bags.
D)
At each price there is a surplus; the surplus is greater at $35 than at $50.
28)
In January, buyers of gold expect that the price of gold will rise in February. What happens in the
gold market in January, holding everything else constant?
28)
A)
The demand curve shifts to the left.
B)
The demand curve shifts to the right.
C)
The quantity demanded increases.
D)
The supply curve shifts to the right.
Figure 3-5
29)
Refer to Figure 3–5. Assume that the graphs in this figure represent the demand and supply curves
for almonds. Which panel best describes what happens in this market when there is an increase in
the productivity of almond harvesters?
29)
A)
Panel (a)
B)
Panel (b)
C)
Panel (c)
D)
Panel (d)
30)
Which of the following would cause the equilibrium price of white bread to decrease and the
equilibrium quantity of white bread to increase?
30)
A)
a decrease in the price of flour
B)
an increase in the price of rye bread, a substitute for white bread
C)
an increase in the price of flour
D)
an increase in the price of butter, a complement for white bread
31)
Which of the following describes a characteristic of a perfectly competitive market?
31)
A)
There are many buyers and sellers.
B)
There are many sellers but few buyers.
C)
There are many buyers but few sellers.
D)
Equilibrium is achieved when demand for the product sold in the market equals the supply.
32)
Which of the following is evidence of a surplus of bananas?
32)
A)
The price of bananas is lowered in order to increase sales.
B)
The equilibrium price of bananas rises due to an increase in demand.
C)
Firms raise the price of bananas.
D)
The quantity demanded of bananas is greater than the quantity supplied.
A
33)
Refer to Figure 3–6. The graph in this figure illustrates an initial competitive equilibrium in the
market for apples at the intersection of D1 and S1 (point A). If there is a shortage of apples how will
the equilibrium point change?
33)
A)
The equilibrium point will move from A to B.
B)
The equilibrium point will move from A to C.
C)
The equilibrium point will move from A to E.
D)
There will be no change in the equilibrium point.
D
A
34)
Refer to Figure 3–6. The graph in this figure illustrates an initial competitive equilibrium in the
market for apples at the intersection of D1 and S1 (point A). If the price of oranges, a substitute for
apples, decreases and the wages of apple workers increase how will the equilibrium point change?
34)
A)
The equilibrium point will move from A to E.
B)
The equilibrium point will move from A to C.
C)
The equilibrium point will move from A to B.
D)
The equilibrium will first move from A to B, then return to A.
35)
During the 1990s positive technological change in the production of chicken caused the price of
chicken to fall. Holding everything else constant, how would this affect the market for pork (a
substitute for chicken)?
35)
A)
The demand for pork would increase because consumers could afford to buy more chicken
and pork.
B)
The demand for pork would decrease and the equilibrium price of pork would decrease.
C)
The supply of pork would increase and the equilibrium price of pork would decrease.
D)
The demand for pork would decrease and the equilibrium price of pork would increase.
36)
Olive oil producers want to sell more olive oil at a higher price. Which of the following events
would have this effect?
36)
A)
research finds that consumption of olive oil reduces the risk of heart disease
B)
a decrease in the cost of transporting olive oil to markets
C)
an increase in the price of olive oil presses
D)
an increase in the price of land used to plant olive trees
37)
The supply curve for watches
37)
A)
is downward sloping.
B)
shows the relationship between the quantity of watches firms are willing and able to supply
and the quantity of watches consumers are willing and able to purchase.
C)
shows the relationship between the price of watches and the quantity supplied of watches.
D)
shows the supply of watches consumers are willing and able to buy at any given price.
38)
Let D= demand, S = supply P = equilibrium price, Q= equilibrium quantity. What happens in the
market for tropical hardwood trees if the governments restrict the amount of forest lands that can
be logged?
38)
A)
S decreases, D no change, P increases, Q decreases
B)
D and S decrease, P and Q increase
C)
D decreases, S no change, P and Q decrease
D)
D no change, S decreases, P increases, Q increases
39)
The following appeared in a Florida newspaper a week after a hurricane hit the state. “Floridians
are relieved that the storm produced no fatalities but homeowners face weeks, if not months, of
rebuilding. Matters are made worse by the soaring prices of plywood and other building materials
that always follow in a hurricane‘s path. Complaints of profiteering and price gouging have not
deterred firms from raising their prices by over 100 percent.” Which of the following offers the best
explanation for the price increases referred to in the article?
39)
A)
The hurricane created an artificial shortage of building materials.
B)
The hurricane caused an increase in the demand for building materials.
C)
There was a reduction in supply as firms shipped plywood and other materials to locations
not affected by the storm.
D)
The hurricane reduced the number of suppliers of building materials.
40)
If the quantity demanded for a product exceeds the quantity supplied, the market price will rise
until
40)
A)
quantity demanded equals quantity supplied. The market price will then equal the
equilibrium price.
B)
only wealthy consumers will be able to afford the product.
C)
the quantity demanded equals the quantity supplied. The product will then no longer be
scarce.
D)
quantity demanded equals quantity supplied. The equilibrium price will then be greater than
the market price.
41)
Last month, the Tecumseh Corporation supplied 400 units of three–ring binders at $6 per unit. This
month, the company supplied the same quantity of binders at $4 per unit. Based on this evidence,
Tecumseh has experienced
41)
A)
an increase in supply.
B)
a decrease in the quantity supplied.
C)
an increase in the quantity supplied.
D)
a decrease in supply.
42)
The income effect of a price change results in a
42)
A)
movement along the demand curve due to a change in relative prices.
B)
movement along the demand curve due to a change in purchasing power brought about by
the price change.
C)
shift of the demand curve when income changes.
D)
shift of the demand curve due to a change in purchasing power brought about by the price
change.
B
43)
“The price of digital cameras fell because of improvements in production technology. As a result,
the demand for non–digital cameras decreased. This caused the price of non–digital cameras to
fall; as the price of non–digital cameras fell the demand for non–digital cameras decreased even
further.” Evaluate this statement.
43)
A)
The statement is false because digital camera producers would not reduce their prices as a
result of improvements in technology; doing so would reduce their profits.
B)
The statement is false because it confuses the law of demand with the law of supply.
C)
The statement is false because the demand for non–digital cameras would increase as the
price of digital cameras fell.
D)
The statement is false. A decrease in the price of digital cameras would decrease the demand
for non–digital cameras, but a decrease in the price of non–digital cameras would not cause
the demand for non–digital cameras to decrease.
D
A
44)
According to a recent study, “Stricter college alcohol policies, such as raising the price of alcohol, or
banning alcohol on campus, decrease the number of students who use marijuana.” On the basis of
this information, how would you describe alcohol and marijuana?
44)
A)
There is no relationship between the two goods.
B)
The two goods are complements in consumption.
C)
The two goods are substitutes in consumption.
D)
They are both luxury goods.
Figure 3–6
45)
Refer to Figure 3–6. The graph in this figure illustrates an initial competitive equilibrium in the
market for apples at the intersection of D1 and S1 (point A). If there is an increase in the wages of
apple workers and an increase in the price of oranges, a substitute for apples, the equilibrium could
move to which point?
45)
A)
E
B)
C
C)
B
D)
none of the points shown
46)
The price of lobster is typically lower in the summer than in the spring. Which of the following
explanations for this difference is given in the textbook?
46)
A)
The supply of lobster is greater in the summer than in the spring.
B)
Import restrictions are eased in the summer; as more lobsters are imported the price of lobster
falls.
C)
Hot, humid weather usually reduces the demand for lobster.
D)
People who usually eat lobster in other seasons substitute less expensive fish when they go on
vacation; this drives down the demand for lobster.
47)
Which of the following will not shift the demand curve for a good?
47)
A)
an increase in population
B)
a decrease in the price of a substitute good
C)
an increase in consumer incomes
D)
an increase in the price of the good
48)
Technological advancements have led to lower prices and an increase in the sale of digital cameras.
How does this affect the digital photo printing paper market?
48)
A)
The supply curve for digital photo printing paper shifts to the left.
B)
The supply curve for digital photo printing paper shifts to the right.
C)
The demand curve for digital photo printing paper shifts to the left.
D)
The demand curve for digital photo printing paper shifts to the right.
49)
George Gnat subscribes to a monthly pest control service for his home. Last week the owner of the
service informed George that he will have to raise his monthly service fee because of increases in
the price of gasoline used by his workers on their service trips. How is the market for pest control
services affected by this?
49)
A)
There is a decrease in the demand for pest control services.
B)
There is a decrease in the quantity supplied of pest control services.
C)
There is a decrease in the supply of pest control services.
D)
There is an increase in the supply of pest control services.
50)
In 2007 Apple announced it would sell a 90–minute video of Super Bowl highlights through its
iTunes store. Apple also announced that it would make available a special version of the
highlights. Which of the following describes this special version?
50)
A)
The special version was made to appeal to Europeans. The NFL is trying to build a greater
audience for American football in Europe.
B)
The special version was made available in Spanish.
C)
The special version was made for fans of the teams that played in the Super Bowl, since these
fans are most likely to buy the highlights.
D)
A special High Definition version was made available.
51)
Which of the following would cause an increase in the equilibrium price and decrease in the
equilibrium quantity of watermelon?
51)
A)
an increase in demand and an increase in supply greater than the increase in demand
B)
an increase in demand and an increase in supply
C)
a decrease in demand and an increase in supply
D)
a decrease in supply
52)
An article in the Wall Street Journal in early 2001 noted two developments in the market for laser
eye surgery. The first development concerned side effects from the surgery, including blurred
vision. The second development was that the companies renting eye–surgery machinery to doctors
had reduced their charges. In the market for laser eye surgeries, these two developments
52)
A)
decreased demand and increased supply, resulting in a decrease in both the equilibrium price
and the equilibrium quantity of laser eye surgeries.
B)
decreased demand and increased supply, resulting in a decrease in the equilibrium price and
an uncertain effect on the equilibrium quantity of laser eye surgeries.
C)
decreased demand and decreased supply, resulting in a decrease in the equilibrium quantity
and an increase in the equilibrium price of laser eye surgeries.
D)
decreased demand and increased supply resulting in an increase in both the equilibrium
quantity and the equilibrium price of laser eye surgeries.
53)
Suppose that when the price of hamburgers decreases, the Ruiz family increase their purchases of
ketchup. From this information we can conclude that
53)
A)
hamburgers are normal goods and hot dogs are inferior goods.
B)
hamburgers and ketchup are normal goods.
C)
hamburgers and ketchup are complements.
D)
hamburgers and ketchup and substitutes.
54)
Holding everything else constant, an increase in the price of MP3 players will result in
54)
A)
an increase in the supply of MP3 players.
B)
a decrease in the quantity of MP3 players supplied.
C)
a decrease in the quantity of MP3 players demanded.
D)
a decrease in the demand for MP3 players.
Figure 3-2
55)
Refer to Figure 3–2. If the current market price is $25, the market will achieve equilibrium by
55)
A)
a price decrease, decreasing the supply and increasing the demand.
B)
a price decrease, decreasing the quantity supplied and increasing the quantity demanded.
C)
a price increase, increasing the supply and decreasing the demand.
D)
a price increase, increasing the quantity supplied and decreasing the quantity demanded.
56)
A supply schedule
56)
A)
is a table that shows the relationship between the price of a product and the quantity of the
product that producers and consumers are willing to exchange.
B)
is a curve that shows the relationship between the price of a product and the quantity of the
product supplied.
C)
is the relationship between the supply of a good and the cost of producing the good.
D)
is a table that shows the relationship between the price of a product and the quantity of the
product supplied.
57)
The substitution effect of a price change refers to
57)
A)
the change in quantity demanded that results from a change in price making a good more or
less expensive relative to other goods that are substitutes.
B)
the shift in the demand curve due to a change in purchasing power brought about by the
price change.
C)
the shift of a demand curve when the price of a substitute good changes.
D)
the movement along the demand curve due to a change in purchasing power brought about
by the price change.
58)
Christopher Tang has argued that supermarkets should not necessarily remove goods from their
shelves even if they are not selling well. Which of the following explains Tang’s reasoning?
58)
A)
If a slow–selling product is a new product it may become a best–seller in the future.
B)
Removing slow–selling products will force consumers to buy these products at other stores.
C)
If a slow–selling product is a complement of another product, removing the slow–seller
would reduce sales of both products.
D)
A profit can be made from a slow–selling good if it sells at a high price.