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True / False
1. When the price of Toyota Corollas rises, ceteris paribus, the demand for Corollas falls.
a.
True
b.
False
2. A surplus will occur in a market when the price of the product is above the equilibrium price.
a.
True
b.
False
3. Supply curves are usually upward sloping.
a.
True
b.
False
4. If the government increased licensing requirements for beauty salons, the supply curve for salon services would shift to
the left.
a.
True
b.
False
5. Economists use the terms neutral good and normal good interchangeably.
a.
True
b.
False
6. To an economist, an increase in demand means the same thing as an increase in quantity demanded.
a.
True
b.
False
7. In moving along a demand curve, everything is held constant except buyers' income.
a.
True
b.
False
8. A demand curve is the graphical representation of the law of demand.
a.
True
b.
False
9. A shortage in the bread market can cause the price of bread to rise.
a.
True
b.
False
10. The law of diminishing marginal utility helps to explain the direct relationship between price and quantity supplied.
a.
True
b.
False
11. Another term for excess supply is shortage.
a.
True
b.
False
12. A simultaneous decrease in the demand and the supply of good X always leads to a decrease in the price of good X.
a.
True
b.
False
13. The sum of consumers' surplus and producers' surplus is maximized at equilibrium.
a.
True
b.
False
14. If hot dogs are an inferior good, a decrease in income will cause the equilibrium price of hot dogs to rise.
a.
True
b.
False
15. The terms scarcity and shortage are synonyms.
a.
True
b.
False
16. Consumers’ surplus is the difference between the maximum price the buyer is willing and able to pay for a good and
the actual price paid.
a.
True
b.
False
17. The market demand curve for a given product may be downward sloping even if no person in that market has a
downward sloping demand curve.
a.
True
b.
False
18. Mutually beneficial trade between buyers and sellers drives a market to equilibrium.
a.
True
b.
False
19. The law of diminishing marginal utility helps to explain why supply curves are generally upward sloping.
a.
True
b.
False
20. As long as the maximum buying price of a good is less than the minimum selling price of that good, an exchange will
occur.
a.
True
b.
False
21. In general, all markets equilibrate at the same speed.
a.
True
b.
False
22. An increase in supply is graphically represented by a leftward shift of the supply curve.
a.
True
b.
False
23. Demand takes into account goods, but not services.
a.
True
b.
False
24. If the quantity demanded of good X is greater than the quantity supplied of good X, then the market for good X is in
disequilibrium.
a.
True
b.
False
25. When a market is in disequilibrium, such as when the quantity supplied of a good is greater than the quantity
demanded of that good, the price of the good will rise, ceteris paribus.
a.
True
b.
False
26. On the basis of the law of demand, it is more likely that a person will lose his temper when the price of losing his
temper is low than when it is high.
a.
True
b.
False
Multiple Choice
27. The law of demand states that price and quantity demanded are
a.
directly related, ceteris paribus.
b.
inversely related, ceteris paribus.
c.
independent.
d.
positively related, ceteris paribus.
28. Which of the following illustrates the law of demand?
a.
Jorge buys fewer pencils at $2 per pencil than at $1 per pencil, ceteris paribus.
b.
Chen buys more ice cream at $4 per half-gallon than at $3 per half gallon, ceteris paribus.
c.
Karissa buys fewer sweaters at $50 each than at $35 each, ceteris paribus.
d.
a, b, and c
e.
a and c
29. At a price of $15 each, Marta buys 4 books per month. When the price increases to $20, Marta buys 3 books per
month. Luz says that Marta's demand for books has decreased. Is Luz correct?
a.
Yes, Luz is correct.
b.
No, Luz is incorrect. Marta's demand has increased.
c.
No, Luz is incorrect. Marta's quantity demanded has decreased, but her demand has stayed the same.
d.
No, Luz is incorrect. Marta's quantity demanded has increased, but her demand has stayed the same.
e.
No, Luz is incorrect. Marta's quantity demanded has decreased and her demand has increased.
30. One major reason for the law of demand is that
a.
one price changing requires at least one other price to change in the opposite direction.
b.
people substitute relatively lower-priced goods for relatively higher-priced goods.
c.
a higher price never reduces quantity demanded by enough to lower total revenue.
d.
people are willing to produce more units at a higher price.
31. A demand schedule is a numerical tabulation of the ___________________ of a good at different
____________________.
a.
quantity supplied; prices
b.
quantity demanded; incomes
c.
quantity demanded; prices
d.
quantity supplied; incomes
32. If Max's demand for hot dogs falls as his income rises, then for Max hot dogs are
a.
a bad good.
b.
an inferior good.
c.
a preferential good.
d.
a normal good.
e.
a neutral good.
33. An increase in the number of buyers in a particular market for a good will result in a ___________________ for that
good.
a.
movement up along the demand curve
b.
movement down along the demand curve
c.
leftward shift in the demand curve
d.
rightward shift in the demand curve
34. If the demand curve for a good shifts leftward,
a.
quantity demanded is less at each price.
b.
quantity demanded remains constant at each price.
c.
quantity demanded is greater at each price.
d.
demand is greater at each price.
35. If people begin to favor science fiction novels to a greater degree than previously, the demand curve for science fiction
novels
a.
shifts rightward.
b.
shifts leftward.
c.
stays constant.
d.
can shift either rightward or leftward.
36. As the price of good X rises, the demand for good Y falls. Therefore, goods X and Y are
a.
substitutes.
b.
normal goods.
c.
complements.
d.
inferior goods.
e.
none of the above
37. As the price of good A rises, the demand for good B rises. Therefore, goods A and B are
a.
normal goods.
b.
inferior goods.
c.
substitutes.
d.
complements.
e.
none of the above
38. "As the price of apples goes up, the demand for apples goes down." The author of this statement
a.
implies that price and demand are unrelated.
b.
uses the word "demand" when he should use the word "supply."
c.
uses the word "demand" when he should use the words "quantity demanded."
d.
implies that demand and price have a direct relationship.
39. The law of supply states that price and quantity supplied are
a.
inversely related, ceteris paribus.
b.
directly related, ceteris paribus.
c.
not related.
d.
fixed.
40. Which of the following is true about the relationship between price and quantity supplied?
a.
There is always a direct relationship between price and quantity supplied.
b.
There is always an inverse relationship between price and quantity supplied.
c.
There is usually a direct relationship between price and quantity supplied.
d.
There is usually an inverse relationship between price and quantity supplied.
41. Resource X is necessary to the production of good Y. If the price of resource X rises,
a.
the supply curve of Y shifts leftward.
b.
the supply curve of Y shifts rightward.
c.
the supply curve of Y is unaffected.
d.
there is a movement down the supply curve of Y.
e.
there is a movement up the supply curve of Y.
42. If the workers of a firm successfully negotiate an increase in wages, which of the following is most likely to happen?
a.
The demand curve for the product the firm produces shifts rightward.
b.
The demand curve for the product the firm produces shifts leftward.
c.
The supply curve of the product the firm produces shifts rightward.
d.
The supply curve of the product the firm produces shifts leftward.
43. An advance in technology in the production of good X causes
a.
a rightward shift in the supply curve for good X.
b.
a leftward shift in the supply curve for good X.
c.
the supply curve for good X to change from upward sloping to vertical.
d.
the supply curve for good X to change from vertical to upward sloping.
44. The fundamental reason why most supply curves are upward sloping is that
a.
consumers substitute lower-priced goods for higher-priced goods.
b.
the quantity supplied increases as more firms enter the market.
c.
a higher price never reduces quantity supplied by enough to lower total revenue and so higher production is
motivated.
d.
higher production raises the opportunity costs of production and so price must rise to induce more output.
45. Tobacco production is one of the more heavily subsidized industries in the United States. Suppose that as a result of
intense lobbying from health-related concerns, Congress repeals the tobacco firms' subsidies. Which of the following
scenarios would likely occur?
a.
The tobacco firms' supply curve would shift rightward, as it would now be cheaper to produce each level of
output.
b.
The tobacco firms' supply curve would shift leftward, since it would now cost more to produce each level of
output.
c.
The tobacco firms would not experience any shift in their supply curves; subsidies don't affect output.
d.
There would be a movement along the supply curve for tobacco, but the supply curve would not shift.
46. Suppose the government decides that every family should own its own home. To bring this about, the government
decides to subsidize the home-construction industry by giving the home-construction companies $10,000 for every house
that they build. As a result of this,
a.
the supply curve of new houses would shift leftward, since it now costs $10,000 more for builders to produce a
house.
b.
the demand curve for new houses would shift rightward, since now every family would want to buy a house.
c.
the demand curve for new houses would shift leftward.
d.
the supply curve of new houses would shift rightward, since builders would be willing to produce and sell
more houses at each given price.
e.
c and d
47. Oil producers expect that oil prices next year will be lower than oil prices this year. As a result, oil producers are most
likely to
a.
place more oil on the market this year, thus shifting the present supply curve of oil rightward.
b.
hold some oil off the market this year, thus shifting the present supply curve of oil leftward.
c.
place more oil on the market this year, thus increasing the quantity supplied of oil at lower but not higher
prices.
d.
hold some oil off the market this year, thus decreasing the quantity supplied of oil at lower but not higher
prices.
48. Oil producers expect that oil prices next year will be higher than oil prices this year. As a result, oil producers are most
likely to
a.
place more oil on the market this year, thus shifting the present supply curve of oil rightward.
b.
hold some oil off the market this year, thus shifting the present supply curve of oil leftward.
c.
place more oil on the market this year, thus increasing the quantity supplied of oil at lower but not higher
prices.
d.
hold some oil off the market this year, thus decreasing the quantity supplied of oil at lower but not higher
prices.
49. Which of the following will not shift a supply curve?
a.
a change in the price of relevant resources
b.
a change in the good's own price
c.
a change in the number of sellers
d.
a change in per-unit costs brought about by a change in taxes
50. At a price above the equilibrium price, there is
a.
a shortage.
b.
a surplus.
c.
excess demand.
d.
super-equilibrium.
e.
none of the above
51. At a price below the equilibrium price, there is
a.
a surplus.
b.
a shortage.
c.
excess supply.
d.
sub-equilibrium.
e.
none of the above
52. On a supply-and-demand diagram, equilibrium is found
a.
where the supply curve intercepts the vertical axis.
b.
where the demand curve intercepts the horizontal axis.
c.
where the demand and supply curves intersect.
d.
at every point on either curve
53. On a supply-and-demand diagram, quantity demanded equals quantity supplied
a.
only at the single equilibrium price.
b.
at every price at or above the equilibrium price.
c.
at every price at or below the equilibrium price.
d.
at every price.
54. At a price for which quantity demanded exceeds quantity supplied, a __________ is experienced, which pushes the
price __________ toward its equilibrium value.
a.
surplus; downward
b.
surplus; upward
c.
shortage; downward
d.
shortage; upward
55. On a supply-and-demand diagram, consider a price for which the horizontal distance to the supply curve exceeds the
horizontal distance to the demand curve. There is a __________ at that price and the current price must be __________
the equilibrium price.
a.
shortage; above
b.
shortage; below
c.
surplus; above
d.
surplus; below
56. On a supply-and-demand diagram, consider a price for which the horizontal distance to the supply curve is shorter
than the horizontal distance to the demand curve. There is a __________ at that price and the current price must be
__________ the equilibrium price.
a.
shortage; above
b.
shortage; below
c.
surplus; above
d.
surplus; below
57. If the supply curve and the demand curve for lettuce both shift to the left by an equal amount, what can we say about
the resulting changes in equilibrium price and quantity?
a.
The price will increase, but the quantity may increase or decrease.
b.
The price will increase, and the quantity will increase.
c.
The price will decrease, and the quantity will increase.
d.
The price will stay the same, but the quantity will increase.
e.
The price will stay the same, but the quantity will decrease.
58. Suppose that for a given good demand increases and supply decreases at the same time. If demand increases by a
lesser amount than supply decreases, then equilibrium price __________ and equilibrium quantity __________ for that
good.
a.
rises; falls
b.
falls; falls
c.
rises; rises
d.
falls; rises
59. Suppose that for a given good demand increases and supply increases at the same time. If demand increases by a
lesser amount than supply increases, then equilibrium price __________ and equilibrium quantity __________ for that
good.
a.
rises; falls
b.
falls; falls
c.
rises; rises
d.
falls; rises
60. Suppose that for a given good, demand decreases and supply decreases at the same time. If demand decreases by a
greater amount than supply decreases, then equilibrium price __________ and equilibrium quantity __________ for that
good.
a.
rises; rises
b.
rises; falls
c.
falls; rises
d.
falls; falls
61. Suppose that for a given good demand decreases and supply increases at the same time. If demand decreases by a
greater amount than supply increases, then equilibrium price __________ and equilibrium quantity __________ for that
good.
a.
rises; rises
b.
rises; falls
c.
falls; rises
d.
falls; falls
Exhibit 3-1
62. Refer to Exhibit 3-1. Equilibrium price and quantity are ____________________, respectively.
a.
$2 and 250 units
b.
$4 and 250 units
c.
$2 and 150 units
d.
$6 and 250 units
e.
none of the above
63. Refer to Exhibit 3-1. At a price of $2 there is a
a.
shortage of 100 units.
b.
shortage of 200 units.
c.
shortage of 150 units.
d.
surplus of 200 units..
e.
surplus of 150 units.
64. Refer to Exhibit 3-1. At a price of $6 there is a
a.
surplus of 100 units.
b.
surplus of 150 units.
c.
surplus of 200 units.
d.
shortage of 150 units.
e.
shortage of 200 units.
Exhibit 3-2
Good X
65. Refer to Exhibit 3-2. Which of the following would result in a movement from point A on D1 to point B on D2?
a.
There was a decrease in the price of a substitute for good X.
b.
There was an increase in the price of a complement to good X.
c.
There was a decline in technology in the production of good X.
d.
There was an increase in the price of a substitute for good X.
66. Refer to Exhibit 3-2. Which of the following would result in a movement from point B on D2 to point A on D1?
a.
There was an increase in income (assuming that good X is an inferior good) and technology remained
constant.
b.
There was an increase in income (assuming that good X is a normal good) and technology remained constant
c.
There was an increase in income (assuming that good X is an inferior good) and technology improved.
d.
There was an increase in income (assuming that good X is a normal good) and technology declined.
67. Refer to Exhibit 3-2. Suppose equilibrium is at point B. Something then changes and equilibrium becomes point C.
Which of the following is consistent with the change in equilibrium from point B to C (assuming that good X is a normal
good)?
a.
There was an increase in resource prices and income stayed constant.
b.
There was a decrease in resource prices and income stayed constant.
c.
There was an increase in resource prices and income decreased.
d.
There was an increase in resource prices and income increased.
68. Refer to Exhibit 3-2. Suppose equilibrium is at point A. Something then changes and equilibrium becomes point C.
Which of the following is consistent with the change in equilibrium from point A to C (assuming that good X is a normal
good)?
a.
There was an increase in income and production technology advanced.
b.
There was a decrease in income and production technology advanced.
c.
There was an increase in the price of a substitute and an increase in wages.
d.
There was a decrease in the price of a complement and an increase in wages.
69. Refer to Exhibit 3-2. Suppose equilibrium is at point A. Something then changes and equilibrium becomes point C.
Which of the following is consistent with the change in equilibrium from point A to C (assuming that good X is a normal
good)?
a.
There was a decrease in the number of buyers and business taxes increased.
b.
There was an increase in the number of buyers and business taxes decreased.
c.
There was an increase in the number of buyers and business taxes increased.
d.
There was a decrease in the number of buyers and business taxes decreased.
70. Refer to Exhibit 3-2. Suppose equilibrium is at point C. Something then changes and equilibrium becomes point B.
Which of the following is consistent with the change in equilibrium from point C to B (assuming that good X is a normal
good)?
a.
There was an increase in resource prices and income stayed constant.
b.
There was a decrease in resource prices and income stayed constant.
c.
There was an increase in resource prices and income decreased.
d.
There was a decrease in resource prices and income increased.
71. A rightward shift in the demand curve for tennis balls could be caused by
a.
a fall in the price of tennis balls.
b.
a fall in the price of tennis rackets.
c.
a rise in the price of tennis lessons.
d.
a fall in income, assuming tennis balls are a normal good.
72. An increase in the price of good B caused an increase in the demand for good C. This indicates that goods B and C are
a.
complements.
b.
substitutes.
c.
neither substitutes nor complements.
d.
normal goods.
Exhibit 3-3
