question
1) Let D = demand, S = supply, P = equilibrium price, Q = equilibrium quantity.ȱȱWhat happens in
the market for solar panels if the government offers tax breaks to encourage manufacturers to
produce more solar panels?
A) D increases, S no change, P and Q increase
B) S increases, D no change, P decreases, Q increases
C) D and S increase, P and Q decrease
D) D no change, S increases, P decreases, Q decreases
the market for solar panels if the government offers tax breaks to encourage manufacturers to
produce more solar panels?
A) D increases, S no change, P and Q increase
B) S increases, D no change, P decreases, Q increases
C) D and S increase, P and Q decrease
D) D no change, S increases, P decreases, Q decreases
answer
B
question
2) Let D = demand, S = supply, P = equilibrium price, Q = equilibrium quantity.ȱȱWhat happens in
the market for sushi if the Surgeon General announces that a majority of the raw fish that is
imported to make sushi contains high levels of toxic mercury?
A) D decreases, S no change, P and Q decrease
B) S decreases, D no change, P increases, Q decreases
C) D and S decrease, P and Q decrease
D) D no change, S increases, P decreases, Q decreases
the market for sushi if the Surgeon General announces that a majority of the raw fish that is
imported to make sushi contains high levels of toxic mercury?
A) D decreases, S no change, P and Q decrease
B) S decreases, D no change, P increases, Q decreases
C) D and S decrease, P and Q decrease
D) D no change, S increases, P decreases, Q decreases
answer
A
question
3) Hurricane Katrina damaged a large portion of oil refining and pipeline capacity in the Gulf
coast states. In the market for gasoline,
A) the supply curve shifted to the left resulting in an increase in the equilibrium price.
B) the supply curve shifted to the right resulting in an increase in the equilibrium price.
C) the demand curve shifted to the left resulting in a decrease in the equilibrium price.
D) the demand curve shifted to the right resulting in an increase in the equilibrium price.
coast states. In the market for gasoline,
A) the supply curve shifted to the left resulting in an increase in the equilibrium price.
B) the supply curve shifted to the right resulting in an increase in the equilibrium price.
C) the demand curve shifted to the left resulting in a decrease in the equilibrium price.
D) the demand curve shifted to the right resulting in an increase in the equilibrium price.
answer
A
question
4) Electric car enthusiasts want to buy more electric cars at a lower price. All of the following
events would have this effect except
A) technological advancement in the production of electric car batteries.
B) an increase in the number of manufacturers of electric cars.
C) a decrease in the price of lithium, which is used in the electric car batteries.
D) an increase in the price of gasoline.
events would have this effect except
A) technological advancement in the production of electric car batteries.
B) an increase in the number of manufacturers of electric cars.
C) a decrease in the price of lithium, which is used in the electric car batteries.
D) an increase in the price of gasoline.
answer
D
question
5) Electric car manufacturers want to sell more electric cars at a higher price. Which of the
following events would have this effect?
A) technological advancement in the production of electric car batteries.
B) an increase in the number of manufacturers of electric cars.
C) a decrease in the price of lithium, which is used in the electric car batteries.
D) an increase in the price of gasoline.
following events would have this effect?
A) technological advancement in the production of electric car batteries.
B) an increase in the number of manufacturers of electric cars.
C) a decrease in the price of lithium, which is used in the electric car batteries.
D) an increase in the price of gasoline.
answer
D
question
6) Which of the following would cause both the equilibrium price and equilibrium quantity of
barley (assume that barley is an inferior good) to increase?
A) an increase in consumer income
B) a drought that sharply reduces barley output
C) a decrease in consumer income
D) unusually good weather that results in a bumper crop of barley
barley (assume that barley is an inferior good) to increase?
A) an increase in consumer income
B) a drought that sharply reduces barley output
C) a decrease in consumer income
D) unusually good weather that results in a bumper crop of barley
answer
C
question
7) Which of the following would cause both the equilibrium price and equilibrium quantity of
oysters (assume that oysters are a normal good) to decrease?
A) an increase in consumer income
B) an oil spill that sharply reduces oyster output
C) a decrease in consumer income
D) a technological advancement in the production of oysters
oysters (assume that oysters are a normal good) to decrease?
A) an increase in consumer income
B) an oil spill that sharply reduces oyster output
C) a decrease in consumer income
D) a technological advancement in the production of oysters
answer
C
question
8) Which of the following would cause the equilibrium price of ketchup to increase and the
equilibrium quantity of ketchup to decrease?
A) a decrease in the price of tomatoes
B) an increase in the price of tomatoes
C) an increase in the price of mustard, a substitute for ketchup
D) an increase in the price of french fries, a complement for ketchup
equilibrium quantity of ketchup to decrease?
A) a decrease in the price of tomatoes
B) an increase in the price of tomatoes
C) an increase in the price of mustard, a substitute for ketchup
D) an increase in the price of french fries, a complement for ketchup
answer
B
question
9) Which of the following would cause the equilibrium price of apple juice to decrease and the
equilibrium quantity of apple juice to increase?
A) a decrease in the price of apples
B) an increase in the price of apples
C) an increase in the price of orange juice, a substitute for apple juice
D) a decrease in the price of granola bars, a complement for apple juice
equilibrium quantity of apple juice to increase?
A) a decrease in the price of apples
B) an increase in the price of apples
C) an increase in the price of orange juice, a substitute for apple juice
D) a decrease in the price of granola bars, a complement for apple juice
answer
A
question
10) Assume that the hourly price for the services of personal trainers has risen and sales of these
services have also risen.ȱȱOne can conclude that
A) the law of demand has been violated.
B) the number of personal trainers has increased.
C) the demand for personal trainers has increased.
D) personal trainers are deliberately charging high prices because they provide services for
wealthy clients.
services have also risen.ȱȱOne can conclude that
A) the law of demand has been violated.
B) the number of personal trainers has increased.
C) the demand for personal trainers has increased.
D) personal trainers are deliberately charging high prices because they provide services for
wealthy clients.
answer
C
question
11) Assume that the price for lawn care has fallen and sales of lawn care services have also fallen.
One can conclude that
A) the law of supply has been violated.
B) the number of lawn care service companies has increased.
C) the demand for lawn care service has decreased.
D) lawn care services are deliberately charging low prices because they want to discourage
people from maintaining their own lawns.
One can conclude that
A) the law of supply has been violated.
B) the number of lawn care service companies has increased.
C) the demand for lawn care service has decreased.
D) lawn care services are deliberately charging low prices because they want to discourage
people from maintaining their own lawns.
answer
C
question
12) Prices of commercial airline tickets (assume that this is a normal good) have fallen in recent
months. Over this same period, the price of jet fuel has risen and consumer incomes have fallen.
Which of the following best explains the falling prices of airline tickets?
A) The supply curve for airline tickets has shifted to the left while the demand curve for
airline tickets has shifted to the left.
B) The demand curve for airline tickets has shifted to the left more than the supply curve has
shifted to the left.
C) The demand curve and the supply curve for airline tickets have both shifted to the right.
D) The supply curve for airline tickets has shifted to the left more than the demand curve has
shifted to the left.
months. Over this same period, the price of jet fuel has risen and consumer incomes have fallen.
Which of the following best explains the falling prices of airline tickets?
A) The supply curve for airline tickets has shifted to the left while the demand curve for
airline tickets has shifted to the left.
B) The demand curve for airline tickets has shifted to the left more than the supply curve has
shifted to the left.
C) The demand curve and the supply curve for airline tickets have both shifted to the right.
D) The supply curve for airline tickets has shifted to the left more than the demand curve has
shifted to the left.
answer
B
question
13) Prices of smartphones (assume that this is a normal good) have fallen in recent years. Over this
same period, the price of the components used to produce smartphones has also fallen and
consumer incomes have risen. Which of the following best explains the falling prices of
smartphones?
A) The supply curve for smartphones has shifted to the right while the demand curve for
smartphones has shifted to the left.
B) The demand curve for smartphones has shifted to the right more than the supply curve
has shifted to the right.
C) The demand curve and the supply curve for smartphones have both shifted to the left.
D) The supply curve for smartphones has shifted to the right more than the demand curve
has shifted to the right.`
same period, the price of the components used to produce smartphones has also fallen and
consumer incomes have risen. Which of the following best explains the falling prices of
smartphones?
A) The supply curve for smartphones has shifted to the right while the demand curve for
smartphones has shifted to the left.
B) The demand curve for smartphones has shifted to the right more than the supply curve
has shifted to the right.
C) The demand curve and the supply curve for smartphones have both shifted to the left.
D) The supply curve for smartphones has shifted to the right more than the demand curve
has shifted to the right.`
answer
D
question
14) 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.ȱȱWhich of the
following best explains the effect of these events in the wine market?
A) The supply curve has shifted to the left and the demand curve has shifted to the right.ȱȱAs
a result there has been an increase in the equilibrium quantity and an uncertain effect on
the equilibrium price.
B) Both the supply and demand curves have shifted to the right.ȱȱAs a result, there has been
an increase in the equilibrium price and an uncertain effect on the equilibrium quantity.
C) Both the supply and demand curves have shifted to the right.ȱȱAs a result, there has been
an increase in both the equilibrium price and the equilibrium quantity.
D) The supply curve has shifted to the left and the demand curve has shifted to the right.ȱȱAs
a result, there has been an increase in the equilibrium price and an uncertain effect on the
equilibrium quantity.
for vineyards. At the same time, more and more Americans prefer wine over beer.ȱȱWhich of the
following best explains the effect of these events in the wine market?
A) The supply curve has shifted to the left and the demand curve has shifted to the right.ȱȱAs
a result there has been an increase in the equilibrium quantity and an uncertain effect on
the equilibrium price.
B) Both the supply and demand curves have shifted to the right.ȱȱAs a result, there has been
an increase in the equilibrium price and an uncertain effect on the equilibrium quantity.
C) Both the supply and demand curves have shifted to the right.ȱȱAs a result, there has been
an increase in both the equilibrium price and the equilibrium quantity.
D) The supply curve has shifted to the left and the demand curve has shifted to the right.ȱȱAs
a result, there has been an increase in the equilibrium price and an uncertain effect on the
equilibrium quantity.
answer
D
question
15) Assume that in recent years the cost of producing microbrew beer in the U.S. has decreased
largely due to technological improvements. At the same time, more and more Americans prefer
microbrew beer over wine.ȱȱWhich of the following best explains the effect of these events in the
microbrew beer market?
A) The supply curve has shifted to the right and the demand curve has shifted to the left.ȱȱAs
a result there has been a decrease in the equilibrium quantity and an uncertain effect on
the equilibrium price.
B) Both the supply and demand curves have shifted to the right.ȱȱAs a result, there has been
an increase in the equilibrium quantity and an uncertain effect on the equilibrium price.
C) Both the supply and demand curves have shifted to the right.ȱȱAs a result, there has been
an increase in both the equilibrium price and the equilibrium quantity.
D) The supply curve has shifted to the left and the demand curve has shifted to the right.ȱȱAs
a result, there has been an increase in the equilibrium price and an uncertain effect on the
equilibrium quantity.
largely due to technological improvements. At the same time, more and more Americans prefer
microbrew beer over wine.ȱȱWhich of the following best explains the effect of these events in the
microbrew beer market?
A) The supply curve has shifted to the right and the demand curve has shifted to the left.ȱȱAs
a result there has been a decrease in the equilibrium quantity and an uncertain effect on
the equilibrium price.
B) Both the supply and demand curves have shifted to the right.ȱȱAs a result, there has been
an increase in the equilibrium quantity and an uncertain effect on the equilibrium price.
C) Both the supply and demand curves have shifted to the right.ȱȱAs a result, there has been
an increase in both the equilibrium price and the equilibrium quantity.
D) The supply curve has shifted to the left and the demand curve has shifted to the right.ȱȱAs
a result, there has been an increase in the equilibrium price and an uncertain effect on the
equilibrium quantity.
answer
B
question
16) Studies have shown that drinking one glass of red wine per day may help prevent heart disease.
Assume this is true, and a fungal disease destroys a large portion of the grape harvest of
California vineyards. In the market for red wine, these two developments would
A) increase demand and increase supply, resulting in an increase in the equilibrium quantity
and a decrease in the equilibrium price of red wine.
B) increase demand and decrease supply resulting in a decrease in both the equilibrium
quantity and the equilibrium price of red wine.
C) increase demand and decrease supply, resulting in an increase in the equilibrium price
and an uncertain effect on the equilibrium quantity of red wine.
D) increase demand and decrease supply, resulting in an increase in both the equilibrium
price and the equilibrium quantity of red wine.
Assume this is true, and a fungal disease destroys a large portion of the grape harvest of
California vineyards. In the market for red wine, these two developments would
A) increase demand and increase supply, resulting in an increase in the equilibrium quantity
and a decrease in the equilibrium price of red wine.
B) increase demand and decrease supply resulting in a decrease in both the equilibrium
quantity and the equilibrium price of red wine.
C) increase demand and decrease supply, resulting in an increase in the equilibrium price
and an uncertain effect on the equilibrium quantity of red wine.
D) increase demand and decrease supply, resulting in an increase in both the equilibrium
price and the equilibrium quantity of red wine.
answer
C
question
17) A decrease in the demand for eggs due to changes in consumer tastes, accompanied by a
decrease in the supply of eggs as a result of an outbreak of Avian flu, will result in
A) a decrease in the equilibrium quantity of eggs and no change in the equilibrium price.
B) a decrease in the equilibrium price of eggs and no change in the equilibrium quantity.
C) a decrease in the equilibrium price of eggs; the equilibrium quantity may increase or
decrease.
D) a decrease in the equilibrium quantity of eggs; the equilibrium price may increase or
decrease.
decrease in the supply of eggs as a result of an outbreak of Avian flu, will result in
A) a decrease in the equilibrium quantity of eggs and no change in the equilibrium price.
B) a decrease in the equilibrium price of eggs and no change in the equilibrium quantity.
C) a decrease in the equilibrium price of eggs; the equilibrium quantity may increase or
decrease.
D) a decrease in the equilibrium quantity of eggs; the equilibrium price may increase or
decrease.
answer
D
question
18) An increase in the demand for peanuts due to changes in consumer tastes, accompanied by an
increase in the supply of peanuts as a result of favorable growing conditions, will result in
A) an increase in the equilibrium quantity of peanuts and no change in the equilibrium price.
B) an increase in the equilibrium price of peanuts and no change in the equilibrium quantity.
C) an increase in the equilibrium price of peanuts; the equilibrium quantity may increase or
decrease.
D) an increase in the equilibrium quantity of peanuts; the equilibrium price may increase or
decrease
increase in the supply of peanuts as a result of favorable growing conditions, will result in
A) an increase in the equilibrium quantity of peanuts and no change in the equilibrium price.
B) an increase in the equilibrium price of peanuts and no change in the equilibrium quantity.
C) an increase in the equilibrium price of peanuts; the equilibrium quantity may increase or
decrease.
D) an increase in the equilibrium quantity of peanuts; the equilibrium price may increase or
decrease
answer
D
question
26) During the 1990s positive technological change in the production of chicken caused the price of
chicken to fall.ȱȱHolding everything else constant, how would this affect the market for pork (a
substitute for chicken)?
A) The supply of pork would increase and the equilibrium price of pork would decrease.
B) The demand for pork would decrease and the equilibrium price of pork would decrease.
C) The demand for pork would increase because consumers could afford to buy more chicken
and pork.
D) The demand for pork would decrease and the equilibrium price of pork would increase
chicken to fall.ȱȱHolding everything else constant, how would this affect the market for pork (a
substitute for chicken)?
A) The supply of pork would increase and the equilibrium price of pork would decrease.
B) The demand for pork would decrease and the equilibrium price of pork would decrease.
C) The demand for pork would increase because consumers could afford to buy more chicken
and pork.
D) The demand for pork would decrease and the equilibrium price of pork would increase
answer
B
question
27) A decrease in input costs in the production of LCD televisions caused the price of LCD
televisions to decrease. Holding everything else constant, how would this affect the market for
video game consoles (a complement to LCD televisions)?
A) The supply of video game consoles would increase and the equilibrium price of video
game consoles would decrease.
B) The demand for video game consoles would decrease and the equilibrium price of video
game consoles would decrease.
C) The demand for video game consoles would decrease because consumers could afford to
buy fewer LCD televisions and video game consoles.
D) The demand for video game consoles would increase and the equilibrium price of video
game consoles would increase.
televisions to decrease. Holding everything else constant, how would this affect the market for
video game consoles (a complement to LCD televisions)?
A) The supply of video game consoles would increase and the equilibrium price of video
game consoles would decrease.
B) The demand for video game consoles would decrease and the equilibrium price of video
game consoles would decrease.
C) The demand for video game consoles would decrease because consumers could afford to
buy fewer LCD televisions and video game consoles.
D) The demand for video game consoles would increase and the equilibrium price of video
game consoles would increase.
answer
D
question
28) Assume that both the demand curve and the supply curve for DVD players shift to the left but
the demand curve shifts more than the supply curve.ȱȱȱAs a result
A) both the equilibrium price and quantity of DVD players will decrease.
B) the equilibrium price of DVD players will decrease; the equilibrium quantity may increase
or decrease.
C) the equilibrium price of DVD players may increase or decrease; the equilibrium quantity
will decrease.
D) the equilibrium price of DVD players will increase; the equilibrium quantity may increase
or decrease.
the demand curve shifts more than the supply curve.ȱȱȱAs a result
A) both the equilibrium price and quantity of DVD players will decrease.
B) the equilibrium price of DVD players will decrease; the equilibrium quantity may increase
or decrease.
C) the equilibrium price of DVD players may increase or decrease; the equilibrium quantity
will decrease.
D) the equilibrium price of DVD players will increase; the equilibrium quantity may increase
or decrease.
answer
A
question
29) Assume that both the demand curve and the supply curve for DVD players shift to the left but
the supply curve shifts more than the demand curve.ȱȱȱAs a result
A) both the equilibrium price and quantity of DVD players will decrease.
B) the equilibrium price of DVD players will decrease; the equilibrium quantity may increase
or decrease.
C) the equilibrium price of DVD players may increase or decrease; the equilibrium quantity
will increase.
D) the equilibrium price of DVD players will increase; the equilibrium quantity will decrease
the supply curve shifts more than the demand curve.ȱȱȱAs a result
A) both the equilibrium price and quantity of DVD players will decrease.
B) the equilibrium price of DVD players will decrease; the equilibrium quantity may increase
or decrease.
C) the equilibrium price of DVD players may increase or decrease; the equilibrium quantity
will increase.
D) the equilibrium price of DVD players will increase; the equilibrium quantity will decrease
answer
D
question
30) Assume that the demand curve for DVD players shifts to the left and the supply curve for DVD
players shifts to the right, but the supply curve shifts more than the demand curve.ȱȱȱAs a result
A) both the equilibrium price and quantity of DVD players will decrease.
B) the equilibrium price of DVD players will decrease; the equilibrium quantity may increase
or decrease.
C) the equilibrium price of DVD players may increase or decrease; the equilibrium quantity
will increase.
D) the equilibrium price of DVD players will decrease; the equilibrium quantity will increase.
players shifts to the right, but the supply curve shifts more than the demand curve.ȱȱȱAs a result
A) both the equilibrium price and quantity of DVD players will decrease.
B) the equilibrium price of DVD players will decrease; the equilibrium quantity may increase
or decrease.
C) the equilibrium price of DVD players may increase or decrease; the equilibrium quantity
will increase.
D) the equilibrium price of DVD players will decrease; the equilibrium quantity will increase.
answer
D
question
31) Assume that the demand curve for DVD players shifts to the left and the supply curve for DVD
players shifts to the right, but the supply curve shifts less than the demand curve.ȱȱAs a result
A) both the equilibrium price and quantity of DVD players will decrease.
B) the equilibrium price of DVD players will decrease; the equilibrium quantity may increase
or decrease.
C) the equilibrium price of DVD players may increase or decrease; the equilibrium quantity
will increase.
D) the equilibrium price of DVD players will decrease; the equilibrium quantity will increase.
players shifts to the right, but the supply curve shifts less than the demand curve.ȱȱAs a result
A) both the equilibrium price and quantity of DVD players will decrease.
B) the equilibrium price of DVD players will decrease; the equilibrium quantity may increase
or decrease.
C) the equilibrium price of DVD players may increase or decrease; the equilibrium quantity
will increase.
D) the equilibrium price of DVD players will decrease; the equilibrium quantity will increase.
answer
A
question
32) ȈThe price of digital cameras fell because of improvements in production technology.ȱȱAs a
result, the demand for non-digital cameras decreased.ȱȱThis 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.ȈȱȱEvaluate this statement.
A) The statement is false because the demand for non-digital cameras would increase as the
price of digital cameras fell.
B) The statement is false.ȱȱA 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.
C) The statement is false because it confuses the law of demand with the law of supply.
D) 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.
result, the demand for non-digital cameras decreased.ȱȱThis 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.ȈȱȱEvaluate this statement.
A) The statement is false because the demand for non-digital cameras would increase as the
price of digital cameras fell.
B) The statement is false.ȱȱA 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.
C) The statement is false because it confuses the law of demand with the law of supply.
D) 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.
answer
B
question
40) Which of the following statements is true?
A) An increase in demand causes an increase in equilibrium price; the increase in price causes
supply to increase.
B) A decrease in supply causes equilibrium price to rise; the increase in price then results in a
decrease in quantity demanded.
C) If both demand and supply decrease, there must be a decrease in equilibrium price;
equilibrium quantity may either increase or decrease.
D) If demand increases and supply decreases one cannot determine if equilibrium price will
increase or decrease without knowing which change is greater.
A) An increase in demand causes an increase in equilibrium price; the increase in price causes
supply to increase.
B) A decrease in supply causes equilibrium price to rise; the increase in price then results in a
decrease in quantity demanded.
C) If both demand and supply decrease, there must be a decrease in equilibrium price;
equilibrium quantity may either increase or decrease.
D) If demand increases and supply decreases one cannot determine if equilibrium price will
increase or decrease without knowing which change is greater.
answer
B
question
41) Which of the following statements is true?
A) A decrease in demand causes a decrease in equilibrium price; the decrease in price causes
supply to decrease.
B) A decrease in demand causes equilibrium price to fall; the decrease in price then results in
a decrease in quantity supplied.
C) If both demand and supply increase, there must be an increase in equilibrium price;
equilibrium quantity may either increase or decrease.
D) If demand decreases and supply increases one cannot determine if equilibrium price will
increase or decrease without knowing which change is greater.
A) A decrease in demand causes a decrease in equilibrium price; the decrease in price causes
supply to decrease.
B) A decrease in demand causes equilibrium price to fall; the decrease in price then results in
a decrease in quantity supplied.
C) If both demand and supply increase, there must be an increase in equilibrium price;
equilibrium quantity may either increase or decrease.
D) If demand decreases and supply increases one cannot determine if equilibrium price will
increase or decrease without knowing which change is greater.
answer
B
question
42) An increase in the equilibrium price for a product will result
A) when the quantity demanded for the product exceeds the quantity supplied.
B) when there is a decrease in supply and an increase in demand for the product.
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.
A) when the quantity demanded for the product exceeds the quantity supplied.
B) when there is a decrease in supply and an increase in demand for the product.
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.
answer
B
question
43) An increase in the equilibrium quantity of a product will result
A) when the quantity supplied of the product exceeds the quantity demanded.
B) when there is an increase in supply and an increase in demand for the product.
C) when there is an increase in supply and a decrease in demand for the product.
D) when there is an decrease in demand and a decrease in the cost of inputs used to make the
product.
A) when the quantity supplied of the product exceeds the quantity demanded.
B) when there is an increase in supply and an increase in demand for the product.
C) when there is an increase in supply and a decrease in demand for the product.
D) when there is an decrease in demand and a decrease in the cost of inputs used to make the
product.
answer
B
question
44) When Toyota introduced its 2010 Prius, it announced that the average retail price of the 2010
model would be lower than the average retail price was for the equivalent 2009 model. Which of
the following would explain the price differential?
A) The demand for the Prius had increased, and the supply of the Prius remained unchanged.
B) The supply of the Prius had decreased, and the demand for the Prius remained
unchanged.
C) The demand for the Prius had decreased, and the supply of the Prius had increased.
D) The demand for the Prius had increased, and the supply of the Prius had decreased.
model would be lower than the average retail price was for the equivalent 2009 model. Which of
the following would explain the price differential?
A) The demand for the Prius had increased, and the supply of the Prius remained unchanged.
B) The supply of the Prius had decreased, and the demand for the Prius remained
unchanged.
C) The demand for the Prius had decreased, and the supply of the Prius had increased.
D) The demand for the Prius had increased, and the supply of the Prius had decreased.
answer
C
question
45) Which of the following would cause an increase in the equilibrium price and decrease in the
equilibrium quantity of watermelon?
A) a decrease in demand and an increase in supply
B) a decrease in supply
C) an increase in demand and an increase in supply greater than the increase in demand
D) an increase in demand and an increase in supply
equilibrium quantity of watermelon?
A) a decrease in demand and an increase in supply
B) a decrease in supply
C) an increase in demand and an increase in supply greater than the increase in demand
D) an increase in demand and an increase in supply
answer
B
question
46) Which of the following would cause a decrease in the equilibrium price and decrease in the
equilibrium quantity of papayas?
A) a decrease in supply and an increase in demand
B) a decrease in demand
C) an increase in supply and an increase in demand greater than the increase in demand
D) a decrease in supply and a decrease in demand
equilibrium quantity of papayas?
A) a decrease in supply and an increase in demand
B) a decrease in demand
C) an increase in supply and an increase in demand greater than the increase in demand
D) a decrease in supply and a decrease in demand
answer
B
question
47) Select the phrase that correctly completes the following statement.ȱȱȈA decrease in the number of
manufacturers caused a decrease in the supply of sailboats. As a result,
A) the price of sailboats increased and the demand for sailboats decreased.Ȉ
B) the equilibrium quantity of sailboats increased.Ȉ
C) the price of sailboats increased and the quantity demanded of sailboats decreased.Ȉ
D) the price of sailboats increased.ȱȱThe higher price caused the supply of sailboats to
increase.Ȉ
manufacturers caused a decrease in the supply of sailboats. As a result,
A) the price of sailboats increased and the demand for sailboats decreased.Ȉ
B) the equilibrium quantity of sailboats increased.Ȉ
C) the price of sailboats increased and the quantity demanded of sailboats decreased.Ȉ
D) the price of sailboats increased.ȱȱThe higher price caused the supply of sailboats to
increase.Ȉ
answer
C
question
48) Select the phrase that correctly completes the following statement.ȱȱȈA decrease in the expected
future price caused an increase in the supply of smartphones. As a result,
A) the price of smartphones decreased and the demand for smartphones increased.Ȉ
B) the equilibrium quantity of smartphones decreased.Ȉ
C) the price of smartphones decreased and the quantity demanded of smartphones
increased.Ȉ
D) the price of smartphones decreased.ȱȱThe lower price caused the supply of smartphones to
decrease.Ȉ
future price caused an increase in the supply of smartphones. As a result,
A) the price of smartphones decreased and the demand for smartphones increased.Ȉ
B) the equilibrium quantity of smartphones decreased.Ȉ
C) the price of smartphones decreased and the quantity demanded of smartphones
increased.Ȉ
D) the price of smartphones decreased.ȱȱThe lower price caused the supply of smartphones to
decrease.Ȉ
answer
C
question
49) What would happen in the market for knee replacement surgery if insurance companies started
to cover a smaller portion of the cost of the surgery?
A) Demand will decrease, but this will not shift the supply curve.
B) Supply will decrease, but this will not shift the demand curve.
C) Demand and supply will both decrease.
D) Demand will decrease and supply will increase.
to cover a smaller portion of the cost of the surgery?
A) Demand will decrease, but this will not shift the supply curve.
B) Supply will decrease, but this will not shift the demand curve.
C) Demand and supply will both decrease.
D) Demand will decrease and supply will increase.
answer
A
question
50) What would happen in the market for knee replacement surgery if insurance companies started
to cover a smaller portion of the cost of the surgery, and fewer doctors decide to enter the field
of joint replacement surgery?
A) Demand will decrease, but this will not shift the supply curve.
B) Supply will decrease, but this will not shift the demand curve.
C) Demand and supply will both decrease.
D) Demand will decrease and supply will increase.
to cover a smaller portion of the cost of the surgery, and fewer doctors decide to enter the field
of joint replacement surgery?
A) Demand will decrease, but this will not shift the supply curve.
B) Supply will decrease, but this will not shift the demand curve.
C) Demand and supply will both decrease.
D) Demand will decrease and supply will increase.
answer
C
question
51) Digital video recorders (DVRs) were introduced to the market in 1999, and new technology has
allowed for the cost of manufacturing the recorders to decline significantly since the initial
introduction. How did this change in technology affect the market for DVRs?
A) The new technology caused an increase in the supply of DVRs and a decrease in price of
DVRs.
B) The new technology caused an increase in the supply of DVRs and an increase in price of
DVRs.
C) The new technology caused an decrease in the demand for DVRs.
D) The new technology caused an increase in the quantity of DVRs supplied.
allowed for the cost of manufacturing the recorders to decline significantly since the initial
introduction. How did this change in technology affect the market for DVRs?
A) The new technology caused an increase in the supply of DVRs and a decrease in price of
DVRs.
B) The new technology caused an increase in the supply of DVRs and an increase in price of
DVRs.
C) The new technology caused an decrease in the demand for DVRs.
D) The new technology caused an increase in the quantity of DVRs supplied.
answer
A
question
52) Suppose consumer preference for beef starts to rise while the cost of raising beef continues to
rise. In the market for beef, this would be represented by the equilibrium price ________ and the
equilibrium quantity ________.
A) increasing; increasing or decreasing B) decreasing; increasing or decreasing
C) increasing or decreasing; increasing D) increasing or decreasing; decreasing
rise. In the market for beef, this would be represented by the equilibrium price ________ and the
equilibrium quantity ________.
A) increasing; increasing or decreasing B) decreasing; increasing or decreasing
C) increasing or decreasing; increasing D) increasing or decreasing; decreasing
answer
A
question
53) ȈBecause Coke and Pepsi are substitutes, a decrease in the price of Pepsi will cause the demand
for Coke to decrease.ȱȱThis initial shift in demand for Coke results in a lower price for Coke; this
lower price will cause the demand curve for Coke to shift to the left.ȈȱȱWhich of the following
correctly comments on this statement?
A) The statement will be true if consumer tastes for Coke and Pepsi do not change.
B) The statement is false because a change in the price of Coke would not change the demand
for Coke.
C) The statement is false because Pepsi is an inferior good; Coke is a normal good.
D) The statement is false because one cannot assume that Coke and Pepsi are substitutes for
all consumers.
for Coke to decrease.ȱȱThis initial shift in demand for Coke results in a lower price for Coke; this
lower price will cause the demand curve for Coke to shift to the left.ȈȱȱWhich of the following
correctly comments on this statement?
A) The statement will be true if consumer tastes for Coke and Pepsi do not change.
B) The statement is false because a change in the price of Coke would not change the demand
for Coke.
C) The statement is false because Pepsi is an inferior good; Coke is a normal good.
D) The statement is false because one cannot assume that Coke and Pepsi are substitutes for
all consumers.
answer
B
question
54) All else equal, the desired increase in the supply of smart phones for Google would cause the
equilibrium price of the smart phones to ________ and the equilibrium quantity of the smart
phones to ________.
A) increase; increase B) increase; decrease
C) decrease; increase D) decrease; decrease
equilibrium price of the smart phones to ________ and the equilibrium quantity of the smart
phones to ________.
A) increase; increase B) increase; decrease
C) decrease; increase D) decrease; decrease
answer
C
question
55) Suppose a drought resulted in a major reduction in the California lettuce crop. In the market for
lettuce,
A) the supply curve shifted to the left resulting in an increase in the equilibrium price.
B) the supply curve shifted to the left resulting in a decrease in the equilibrium price.
C) the demand curve shifted to the right resulting in an increase in the equilibrium price.
D) the demand curve shifted to the left resulting in a decrease in the equilibrium price.
lettuce,
A) the supply curve shifted to the left resulting in an increase in the equilibrium price.
B) the supply curve shifted to the left resulting in a decrease in the equilibrium price.
C) the demand curve shifted to the right resulting in an increase in the equilibrium price.
D) the demand curve shifted to the left resulting in a decrease in the equilibrium price.
answer
A
question
56) Studies have shown that smoking cigarettes can cause heart disease. Assume this is true, and
favorable weather has increased the tobacco harvest in North Carolina. In the market for
cigarettes, these two developments would
A) decrease demand and decrease supply, resulting in an increase in the equilibrium quantity
and a decrease in the equilibrium price of cigarettes.
B) increase demand and increase supply resulting in an increase in the equilibrium quantity
and an uncertain effect on the equilibrium price of cigarettes.
C) decrease demand and increase supply, resulting in a decrease in the equilibrium price and
an uncertain effect on the equilibrium quantity of cigarettes.
D) decrease demand and increase supply, resulting in an increase in both the equilibrium
price and the equilibrium quantity of cigarettes.
favorable weather has increased the tobacco harvest in North Carolina. In the market for
cigarettes, these two developments would
A) decrease demand and decrease supply, resulting in an increase in the equilibrium quantity
and a decrease in the equilibrium price of cigarettes.
B) increase demand and increase supply resulting in an increase in the equilibrium quantity
and an uncertain effect on the equilibrium price of cigarettes.
C) decrease demand and increase supply, resulting in a decrease in the equilibrium price and
an uncertain effect on the equilibrium quantity of cigarettes.
D) decrease demand and increase supply, resulting in an increase in both the equilibrium
price and the equilibrium quantity of cigarettes.
answer
C
question
57) An increase in the demand for LED light bulbs due to changes in consumer tastes, accompanied
by an increase in the supply of LED light bulbs as a result of government subsidies, will result in
A) an increase in the equilibrium quantity of LED light bulbs and no change in the
equilibrium price.
B) an increase in the equilibrium price of LED light bulbs and no change in the equilibrium
quantity.
C) an increase in the equilibrium price of LED light bulbs; the equilibrium quantity may
increase or decrease.
D) an increase in the equilibrium quantity of LED light bulbs; the equilibrium price may
increase or decrease.
by an increase in the supply of LED light bulbs as a result of government subsidies, will result in
A) an increase in the equilibrium quantity of LED light bulbs and no change in the
equilibrium price.
B) an increase in the equilibrium price of LED light bulbs and no change in the equilibrium
quantity.
C) an increase in the equilibrium price of LED light bulbs; the equilibrium quantity may
increase or decrease.
D) an increase in the equilibrium quantity of LED light bulbs; the equilibrium price may
increase or decrease.
answer
D
question
58) Suppose a positive technological change in the production of disease-resistant corn caused the
price of corn to fall.ȱȱHolding everything else constant, how would this affect the market for
wheat (a substitute for corn)?
A) The supply of wheat would increase and the equilibrium price of wheat would decrease.
B) The demand for wheat would decrease and the equilibrium price of wheat would
decrease.
C) The demand for wheat would increase because consumers could afford to buy more wheat
and corn.
D) The demand for wheat would decrease and the equilibrium price of wheat would increase.
price of corn to fall.ȱȱHolding everything else constant, how would this affect the market for
wheat (a substitute for corn)?
A) The supply of wheat would increase and the equilibrium price of wheat would decrease.
B) The demand for wheat would decrease and the equilibrium price of wheat would
decrease.
C) The demand for wheat would increase because consumers could afford to buy more wheat
and corn.
D) The demand for wheat would decrease and the equilibrium price of wheat would increase.
answer
B
question
Article Summary
A growing number of U.S. citizens are going to other countries for elective surgery procedures. Improved
quality and significant cost savings abroad have attracted an increasing number of what are being
referred to as American medical tourists, especially those who either do not have insurance or whose
insurance does not cover the desired procedure. As few as five years ago, Americans tended to travel to
countries such as Thailand or Mexico for the procedures, but many are now choosing to go to Europe,
where governments and hospitals are now publicizing these services. Many of the procedures being done
overseas are joint replacement, and partly in response to the number of patients going abroad for these
procedures, programs are being developed to reduce the cost of these surgeries in the United States.
Source: Elizabeth Rosenthal,ȱȈThe Growing Popularity of Having Surgery Overseas,Ȉȱ New York Times,
August 6, 2013.
59) Refer to the Article Summary. If European governments and hospitals continue to publicize
their existing services to American medical tourists and more Americans consider
joint-replacement surgery to improve their quality of life, what will happen in the market for
joint-replacement surgery as a result of these two factors?
A) Demand will increase, but these two factors will not shift the supply curve.
B) Supply will increase, but these two factors will not shift the demand curve.
C) Demand and supply will both increase.
D) Demand will increase and supply will decrease.
A growing number of U.S. citizens are going to other countries for elective surgery procedures. Improved
quality and significant cost savings abroad have attracted an increasing number of what are being
referred to as American medical tourists, especially those who either do not have insurance or whose
insurance does not cover the desired procedure. As few as five years ago, Americans tended to travel to
countries such as Thailand or Mexico for the procedures, but many are now choosing to go to Europe,
where governments and hospitals are now publicizing these services. Many of the procedures being done
overseas are joint replacement, and partly in response to the number of patients going abroad for these
procedures, programs are being developed to reduce the cost of these surgeries in the United States.
Source: Elizabeth Rosenthal,ȱȈThe Growing Popularity of Having Surgery Overseas,Ȉȱ New York Times,
August 6, 2013.
59) Refer to the Article Summary. If European governments and hospitals continue to publicize
their existing services to American medical tourists and more Americans consider
joint-replacement surgery to improve their quality of life, what will happen in the market for
joint-replacement surgery as a result of these two factors?
A) Demand will increase, but these two factors will not shift the supply curve.
B) Supply will increase, but these two factors will not shift the demand curve.
C) Demand and supply will both increase.
D) Demand will increase and supply will decrease.
answer
A
question
60) If the demand for a product increases and the supply of the same product decreases, the
equilibrium price will increase.
equilibrium price will increase.
answer
TRUE
question
61) If the demand for a product decreases and the supply of the same product increases, the
equilibrium quantity will increase.
equilibrium quantity will increase.
answer
FALSE
question
62) As the number of firms in a market increases, the supply curve will shift to the left and the
equilibrium price will rise.
equilibrium price will rise.
answer
FALSE
question
63) As the number of firms in a market decreases, the supply curve will shift to the left and the
equilibrium price will fall.
equilibrium price will fall.
answer
FALSE
question
64) If the population increases and input prices increase, the equilibrium price of a product will
definitely increase.
definitely increase.
answer
TRUE
question
65) If the number of firms producing electric cars increases and consumer preference for electric cars
increases, the equilibrium quantity of electric cars will definitely increase.
increases, the equilibrium quantity of electric cars will definitely increase.
answer
TRUE
question
66) If the demand for a product decreases and the supply of the product does not change,
equilibrium price and equilibrium quantity will both increase.
equilibrium price and equilibrium quantity will both increase.
answer
FALSE
question
67) If the demand curve for a product shifts to the right and the supply curve for the product shifts
to the left, equilibrium price and equilibrium quantity will both increase.
to the left, equilibrium price and equilibrium quantity will both increase.
answer
FALSE
question
69) If pilots and flight attendants agree to wage and benefit reductions in the wake of the financial
difficulties in the airline industry, what impact would this have on the supply and demand in
the market for airline service, assuming no other changes take place in this market?
difficulties in the airline industry, what impact would this have on the supply and demand in
the market for airline service, assuming no other changes take place in this market?
answer
Answer: A reduction of wages and benefits will shift the supply curve to the right, but will not
shift the demand curve. This will decrease the equilibrium price and increase the
equilibrium quantity in the market for airline service
shift the demand curve. This will decrease the equilibrium price and increase the
equilibrium quantity in the market for airline service
question
70) In most countries in South America, the legal driving age is 18. If the legal driving age in the
United States was raised from 16 to 18, how would this affect the market for new and used
automobiles? What would happen to the equilibrium price and quantity of new and used
automobiles?
United States was raised from 16 to 18, how would this affect the market for new and used
automobiles? What would happen to the equilibrium price and quantity of new and used
automobiles?
answer
Answer: The demand for new and used automobiles would decrease, which would decrease the
equilibrium price and quantity
equilibrium price and quantity
question
71) Shrimp is an increasingly popular part of the American diet. Louisiana shrimpers who represent
the bulk of the U.S. industry were almost all put out of business by Hurricane Katrina.ȱȱHow did
this affect the equilibrium price and quantity of shrimp?
the bulk of the U.S. industry were almost all put out of business by Hurricane Katrina.ȱȱHow did
this affect the equilibrium price and quantity of shrimp?
answer
Answer: The supply curve for shrimp shifted to the left resulting in a higher equilibrium price and
lower equilibrium quantity.
lower equilibrium quantity.
question
72) In each of the following situations, list what will happen to the equilibrium price and the
equilibrium quantity for a particular product, which is an inferior good.
a. The population decreases and productivity increases
b. The income increases and the price of inputs increase
c. The number of firms in the market decreases and income decreases
d. Consumer preference decreases and the price of a complement increases
e. The price of a substitute in consumption increases and the price of a substitute in
production increases
equilibrium quantity for a particular product, which is an inferior good.
a. The population decreases and productivity increases
b. The income increases and the price of inputs increase
c. The number of firms in the market decreases and income decreases
d. Consumer preference decreases and the price of a complement increases
e. The price of a substitute in consumption increases and the price of a substitute in
production increases
answer
Answer: a. Price decreases; Quantity may increase or decrease
b. Quantity decreases; Price may increase or decrease
c. Price increases; Quantity may increase or decrease
d. Price decreases; Quantity decreases
e. Price increases; Quantity may increase or decrease
b. Quantity decreases; Price may increase or decrease
c. Price increases; Quantity may increase or decrease
d. Price decreases; Quantity decreases
e. Price increases; Quantity may increase or decrease
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