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Law of Demand
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Change in Quantity Demand
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Normal Good
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Law of Supply
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Change in Quantity Supplied
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Surplus
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Equilibrium
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Price System
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Inferior Good
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Substitute Good
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Law of Supply
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Market
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Complementary Good
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Shortage
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Which of the following is true for the law of demand?
a. Sellers increase the quantity of a good available as the price of the good increases.
b. An increase in price results from false needs.
c. There is an inverse relationship between the price of a good and the quantity of the
good demanded.
d. Prices increase as more units of a product are demanded.
a. Sellers increase the quantity of a good available as the price of the good increases.
b. An increase in price results from false needs.
c. There is an inverse relationship between the price of a good and the quantity of the
good demanded.
d. Prices increase as more units of a product are demanded.
answer
C
question
A demand curve for The Steel Porcupines concert tickets would show the:
a. quality of service that customers demand when they buy a ticket.
b. number of people who like to attend the concert.
c. number of tickets the promoters are willing to sell at each price.
d. number of concert tickets that will be purchased at each price.
a. quality of service that customers demand when they buy a ticket.
b. number of people who like to attend the concert.
c. number of tickets the promoters are willing to sell at each price.
d. number of concert tickets that will be purchased at each price.
answer
D
question
Other things being equal, the effects of an increase in the price of computers would best be represented by which of the following?
a. A movement up along the demand curve for computers.
b. A movement down along the demand curve for computers.
c. A leftward shift in the demand curve for computers.
d. A rightward shift in the demand curve for computers.
a. A movement up along the demand curve for computers.
b. A movement down along the demand curve for computers.
c. A leftward shift in the demand curve for computers.
d. A rightward shift in the demand curve for computers.
answer
A
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Which of the following best represents the effects of a decrease in the price of tomato juice, other things being equal?
a. An upward movement along the demand curve for tomato juice.
b. A downward movement along the demand curve for tomato juice.
c. A rightward shift in the demand curve for tomato juice.
d. A leftward shift in the demand curve for tomato juice.
a. An upward movement along the demand curve for tomato juice.
b. A downward movement along the demand curve for tomato juice.
c. A rightward shift in the demand curve for tomato juice.
d. A leftward shift in the demand curve for tomato juice.
answer
B
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The "ceteris paribus" clause in the law of demand does not allow which of the following factors to change?
a. Consumer tastes and preferences.
b. The prices of other goods.
c. Expectations.
d. All of the answers above are correct.
a. Consumer tastes and preferences.
b. The prices of other goods.
c. Expectations.
d. All of the answers above are correct.
answer
D
question
Assume that Coca-Cola and Pepsi-Cola are substitutes. A rise in the price of Coca-Cola will have which of the following effects on the market for Pepsi?
a. A movement down along the Pepsi demand curve.
b. A rightward shift in the Pepsi demand curve.
c. A movement up along the Pepsi demand curve.
d. A leftward shift in the Pepsi demand curve.
a. A movement down along the Pepsi demand curve.
b. A rightward shift in the Pepsi demand curve.
c. A movement up along the Pepsi demand curve.
d. A leftward shift in the Pepsi demand curve.
answer
B
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Assume that crackers and soup are complementary goods. The effect on the soup market of an increase in the price of crackers (other things being equal) would best be described as a (an):
a. decrease in the quantity of soup demanded.
b. decrease in the demand for soup.
c. increase in the quantity of soup demanded.
d. increase in the demand for soup.
a. decrease in the quantity of soup demanded.
b. decrease in the demand for soup.
c. increase in the quantity of soup demanded.
d. increase in the demand for soup.
answer
B
question
Assume that a computer is a normal good. An increase in consumer income, other things being equal, would:
a. cause an upward movement along the demand curve for computers.
b. cause a downward movement along the demand curve for computers.
c. shift the demand curve for computers to the left.
d. shift the demand curve for computers to the right.
a. cause an upward movement along the demand curve for computers.
b. cause a downward movement along the demand curve for computers.
c. shift the demand curve for computers to the left.
d. shift the demand curve for computers to the right.
answer
D
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Which of the following will increase the demand for large automobiles?
a. A fall in the price of small automobiles
b. A rise in insurance rates for large automobiles
c. A fall in the price of large automobiles
d. An increase in buyers' incomes (assuming large automobiles to be a normal good)
a. A fall in the price of small automobiles
b. A rise in insurance rates for large automobiles
c. A fall in the price of large automobiles
d. An increase in buyers' incomes (assuming large automobiles to be a normal good)
answer
D
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Assume that brand X is an inferior good and name brand Y is a normal good. An increase in consumer income, other things being equal, will cause a (an):
a. upward movement along the demand curve for name brand Y.
b. downward movement along the demand curve for brand X.
c. rightward shift in the demand curve for brand X.
d. leftward shift in the demand curve for brand X.
a. upward movement along the demand curve for name brand Y.
b. downward movement along the demand curve for brand X.
c. rightward shift in the demand curve for brand X.
d. leftward shift in the demand curve for brand X.
answer
D
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There is news that the price of Tucker's Root Beer will increase significantly next week. If the demand for Tucker's Root Beer reacts only to this factor and shifts to the right, the position of this demand curve has reacted to a change in:
a. tastes.
b. income levels.
c. the price of other goods.
d. the number of buyers.
e. expectations.
a. tastes.
b. income levels.
c. the price of other goods.
d. the number of buyers.
e. expectations.
answer
E
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The theory of supply states that:
a. there is a negative relationship between the price of a good and the quantity of it
purchased by suppliers.
b. there is a positive relationship between the price of a good and the quantity that buyers
choose to purchase.
c. there is a positive relationship between the price of a good and the quantity of it
offered for sale by suppliers.
d. at a lower price, a greater quantity will be supplied.
a. there is a negative relationship between the price of a good and the quantity of it
purchased by suppliers.
b. there is a positive relationship between the price of a good and the quantity that buyers
choose to purchase.
c. there is a positive relationship between the price of a good and the quantity of it
offered for sale by suppliers.
d. at a lower price, a greater quantity will be supplied.
answer
C
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Which of the following will not cause a movement along the supply curve? a. Changes in the sellers' expectations.
b. Increases in taxes per unit of output.
c. Advances in technology.
d. All of the answers above are correct.
b. Increases in taxes per unit of output.
c. Advances in technology.
d. All of the answers above are correct.
answer
D
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Assume that both oranges and peaches can be grown on the same type of land. A decrease in the price of peaches, other things being equal, will cause a (an):
a. upward movement along the supply curve for oranges.
b. downward movement along the supply curve for oranges.
c. rightward shift of the supply curve for oranges.
d. leftward shift of the supply curve for oranges.
a. upward movement along the supply curve for oranges.
b. downward movement along the supply curve for oranges.
c. rightward shift of the supply curve for oranges.
d. leftward shift of the supply curve for oranges.
answer
C
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An advance in technology results in:
a. suppliers offering a larger quantity than before at each given price.
b. suppliers offering the same quantity as before at a lower price.
c. a rightward shift of the supply curve.
d. an increase in supply.
e. All of the answers above are correct.
a. suppliers offering a larger quantity than before at each given price.
b. suppliers offering the same quantity as before at a lower price.
c. a rightward shift of the supply curve.
d. an increase in supply.
e. All of the answers above are correct.
answer
E
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As shown in Exhibit 1, the price and quantity supplied by sellers of Tucker's Cola have a (an) relationship.
a. direct.
b. inverse.
c. negative.
d. zero.
a. direct.
b. inverse.
c. negative.
d. zero.
answer
A
question
In reference to Exhibit 1, assume the price of Tucker's Cola is $1.00 per gallon. If the price were to rise to $3.00 per gallon, and all other factors, such as taxes, etc. remained constant, the result would be a (an):
a. decrease in supply.
b. increase in supply.
c. decrease in quantity supplied.
d. increase in quantity supplied.
a. decrease in supply.
b. increase in supply.
c. decrease in quantity supplied.
d. increase in quantity supplied.
answer
D
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Assume Congress passes a new tax of $2.00 per pack on cigarettes. The effect on the supply curve is a (an):
a. decrease in supply.
b. increase in supply.
c. decrease in quantity supplied.
d. increase in quantity supplied
a. decrease in supply.
b. increase in supply.
c. decrease in quantity supplied.
d. increase in quantity supplied
answer
A
question
Market equilibrium is defined as:
a. the condition in which there is neither a shortage or surplus.
b. the condition under which the separately formulated plans of buyers and sellers
exactly mesh when tested in the market.
c. represented graphically by the intersection of the supply and demand curves.
d. All of the answers above are correct.
a. the condition in which there is neither a shortage or surplus.
b. the condition under which the separately formulated plans of buyers and sellers
exactly mesh when tested in the market.
c. represented graphically by the intersection of the supply and demand curves.
d. All of the answers above are correct.
answer
D
question
Which of the following best explains the determination of the equilibrium price of a product?
a. production costs
b. the supply of a good
c. the interaction of supply and demand
d. the decisions of government
a. production costs
b. the supply of a good
c. the interaction of supply and demand
d. the decisions of government
answer
C
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When the price of a good in a market is above equilibrium:
a. the quantity supplied exceeds the quantity demanded.
b. a surplus of a good.
c. the price will fall in the near future.
d. All of the answers above are correct.
a. the quantity supplied exceeds the quantity demanded.
b. a surplus of a good.
c. the price will fall in the near future.
d. All of the answers above are correct.
answer
C
question
In the market shown in Exhibit 2, the equilibrium price and quantity of good X are:
a. $0.50, 250.
b. $2.00, 300.
c. $2.00, 100.
d. $1.00, 200.
a. $0.50, 250.
b. $2.00, 300.
c. $2.00, 100.
d. $1.00, 200.
answer
D
question
In Exhibit 2, at a price of $.50 the market for good X will experience a: a. shortage of 100 units.
b. surplus of 100 units.
c. shortage of 300 units.
d. surplus of 200 units.
b. surplus of 100 units.
c. shortage of 300 units.
d. surplus of 200 units.
answer
A
question
In Exhibit 2, if the price moves from $2.00 to $1.00, inventories will:
a. remain unchanged.
b. fall.
c. rise.
d. fall and then rise.
a. remain unchanged.
b. fall.
c. rise.
d. fall and then rise.
answer
B
question
In Exhibit 2, if the market price of good X is initially $.50, a movement toward equilibrium requires:
a. no change, because an equilibrium already exists.
b. the price to fall below $.50 and both the quantity supplied and the quantity demanded
to rise.
c. the price to remain the same, but the supply curve to shift to the left.
d. the price to rise above $.50, the quantity supplied to rise, and the quantity demanded
to fall.
a. no change, because an equilibrium already exists.
b. the price to fall below $.50 and both the quantity supplied and the quantity demanded
to rise.
c. the price to remain the same, but the supply curve to shift to the left.
d. the price to rise above $.50, the quantity supplied to rise, and the quantity demanded
to fall.
answer
D
question
In Exhibit 2, if the market price of good X is initially $1.50, a movement toward equilibrium requires:
a. no change, because an equilibrium already exists.
b. the price to fall below $1.50 and both the quantity supplied and the quantity
demanded to fall.
c. the price to remain the same, but the supply curve to shift to the left.
d. the price to fall below $1.50, the quantity supplied to fall, and the quantity demanded
to rise.
a. no change, because an equilibrium already exists.
b. the price to fall below $1.50 and both the quantity supplied and the quantity
demanded to fall.
c. the price to remain the same, but the supply curve to shift to the left.
d. the price to fall below $1.50, the quantity supplied to fall, and the quantity demanded
to rise.
answer
D
question
Three of the four events described below might reasonably be expected to shift the demand curve for beef to a new position. One would not shift the demand curve. The single exception is a (an):
a. change in people's tastes with respect to beef.
b. increase in the money income of beef consumers.
c. fall in the price of beef.
d. widespread advertising campaign undertaken by the producers of a product
competitive with beef (e.g., pork).
a. change in people's tastes with respect to beef.
b. increase in the money income of beef consumers.
c. fall in the price of beef.
d. widespread advertising campaign undertaken by the producers of a product
competitive with beef (e.g., pork).
answer
C
question
Yesterday Seller A supplied 400 units of a good X at $10 per unit. Today Seller A supplies the same quantity of units at $5 per unit. Based on this evidence, Seller A has experienced a (an):
a. decrease in supply.
b. increase in supply.
c. increase in the quantity supplied.
d. decrease in the quantity supplied. e. increase in demand.
a. decrease in supply.
b. increase in supply.
c. increase in the quantity supplied.
d. decrease in the quantity supplied. e. increase in demand.
answer
B
question
Assuming that wheat and corn can both be grown on the same type of land, a decrease in the price of corn, other factors held constant, will cause a (an):
a. downward movement along the supply curve for wheat.
b. upward movement along the supply curve for wheat.
c. rightward shift in the supply curve for wheat.
d. leftward shift in the supply curve for wheat.
a. downward movement along the supply curve for wheat.
b. upward movement along the supply curve for wheat.
c. rightward shift in the supply curve for wheat.
d. leftward shift in the supply curve for wheat.
answer
C29
question
According to the law of demand, if the price of a good increases, other things being equal, the quantity demanded will decrease.
answer
T
question
Other things being equal, an increase in the price of aspirin will decrease the demand for aspirin.
answer
F
question
If a vacation in Paris is a normal good, other things being equal, an increase in consumer income will increase the demand for travel to Paris.
answer
T
question
If people buy more of a generic brand when consumer income falls, it is an inferior good.
answer
T
question
If pork and beans is an inferior good, other things being equal, an increase in consumer income will decrease the demand for pork and beans.
answer
T
question
Suppose A and B are substitute goods. Other things being equal, the demand curve for A will shift to the right when the price of B goes down.
answer
F
question
Suppose A and B are complementary goods. Other things being equal, the demand curve for A will shift to the right when the price of B goes up.
answer
F
question
If input prices increase, the supply curve for cheese will shift to the right.
answer
F
question
Suppose the market price of good X is below the equilibrium price. The result is a shortage, and sellers can be expected to decrease the quantity of good X supplied.
answer
F
question
Excess quantity demanded for a good creates pressure to push the price of that good down toward the equilibrium price.
answer
F
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