If demand increases and supply decreases, equilibrium price will fallA. If supply increases and demand decreases, equilibrium price will fall.. If demand decreases and supply increases,
Trang 1CHAPTER 2: THE MARKET FORCES OF SUPPLY AND DEMAND
1 Which of the following statements is correct?
A If demand increases and supply decreases, equilibrium price will fall
B B If supply increases and demand decreases, equilibrium price will fall
C If demand decreases and supply increases, equilibrium price will rise
D If supply declines and demand remains constant, equilibrium price will fall
2 If an increase in the price of blue jeans leads to an increase in the demand for tennis shoes, then blue jeans and tennis shoes are
A complements
B substitutes
C inferior goods
D normal goods
3 The law of demand states that an increase in the price of a good
A increases the supply of that good
B decreases the quantity demanded for that good
C decreases the demand for that good
D increases the quantity supplied of that good
4 The law of supply states that an increase in the price of a good A increases the
quantity supplied for that good
B increases the supply of that good
C decreases the demand for that good
D decreases the quantity demanded for that good
5 If an increase in consumer income leads to a decrease in the demand for camping equipment, then camping equipment is A a normal good
B an inferior good
C a substitute good
D a complementary good
6 Which of the following shifts the demand for watches to the right?
A an increase in the price of watches
B a decrease in the price of watch batteries if watch batteries and watches are
complements
Trang 2C a decrease in consumer incomes if watches are a normal good
D a decrease in the price of watches
7 Which of the following will cause the demand curve for product A to shift to the left?
A population growth that causes an expansion in the number of persons consuming A
B an increase in money income if A is a normal good
C a decrease in the price of complementary product C
D an increase in money income if A is an inferior good
8 All of the following shift the supply of watches to the right except A an advance in
the technology used to manufacture watches
B an increase in the price of watches
C a decrease in the wage of workers employed to manufacture watches
D manufacturers' expectation of lower watch prices in the future
9 If the price of a good is above the equilibrium price, A there is a surplus and the price
will rise
B there is a shortage and the price will fall
C there is a shortage and the price will rise
D there is a surplus and the price will fall
10 If the price of a good is below the equilibrium price, A there is a shortage and the
price will rise
B the quantity demanded is equal to the quantity supplied and the price remains
unchanged
C there is a shortage and the price will fall
D there is a surplus and the price will rise
11 If the price of a good is equal to the equilibrium price,
A the quantity demanded is equal to the quantity supplied and the price remains
unchanged
B there is a shortage and the price will fall
C there is a surplus and the price will rise
D there is a shortage and the price will rise
12 An increase (rightward shift) in the demand for a good will tend to cause A an
increase in the equilibrium price and quantity
Trang 3B an increase in the equilibrium price and a decrease in the equilibrium quantity
C a decrease in the equilibrium price and an increase in the equilibrium quantity
D a decrease in the equilibrium price and quantity
13 A decrease (leftward shift) in the supply for a good will tend to cause A an increase
in the equilibrium price and quantity
B a decrease in the equilibrium price and an increase in the equilibrium quantity
C a decrease in the equilibrium price and quantity
D an increase in the equilibrium price and a decrease in the equilibrium quantity
14 Suppose there is an increase in both the supply and demand for personal computers.
In the market for personal computers, we would expect
A the equilibrium quantity to rise and the equilibrium price to rise
B the equilibrium quantity to rise and the equilibrium price to fall
C the change in the equilibrium quantity to be ambiguous and the equilibrium price to rise
D the equilibrium quantity to rise and the change in the equilibrium price to be
ambiguous
15 Suppose there is an increase in both the supply and demand for personal computers Further, suppose the supply of personal computers increases more than demand for personal computers In the market for personal computers, we would expect
A the change in the equilibrium quantity to be ambiguous and the equilibrium price to fall
B the equilibrium quantity to rise and the equilibrium price to rise
C the equilibrium quantity to rise and the change in the equilibrium price to be
ambiguous
D the equilibrium quantity to rise and the equilibrium price to fall
16 Suppose a frost destroys much of the Florida orange crop At the same time, suppose consumer tastes shift toward orange juice What would we expect to happen to the equilibrium price and quantity in the market for orange juice? A Price will
decrease; quantity is ambiguous
B Price will increase; quantity will increase
C Price will increase; quantity will decrease
D Price will increase; quantity is ambiguous
Trang 417 Suppose consumer tastes shift toward the consumption of apples Which of the following statements is an accurate description of the impact of this event on the market for apples?
A There is an increase in the quantity demanded of apples and in the supply for apples
B There is an increase in the demand and supply of apples
C There is an increase in the demand for apples and a decrease in the supply of apples
D There is an increase in the demand for apples and an increase in the quantity supplied
of apples
18 Suppose both buyers and sellers of wheat expect the price of wheat to rise in the near future What would we expect to happen to the equilibrium price and quantity
in the market for wheat today?
A The impact on both price and quantity is ambiguous
B Price will decrease; quantity is ambiguous
C Price will increase; quantity is ambiguous
D Price will increase; quantity will increase
19 Which of the following statements is true about the impact of an increase in the price of lettuce?
A Both the demand for lettuce will decrease and the equilibrium price and quantity of salad dressing will fall
B The supply of lettuce will decrease
C The demand for lettuce will decrease
D The equilibrium price and quantity of salad dressing will fall
E The equilibrium price and quantity of salad dressing will rise
20 When the demand and supply curves both shift leftward, which of the following happens?
A The equilibrium quantity increases and any change in the equilibrium price cannot be determined
B The equilibrium price falls and any change in the equilibrium quantity cannot be determined
Trang 5C The equilibrium quantity decreases and any change in the equilibrium price cannot be determined
D The equilibrium price increases and any change in the equilibrium quantity cannot be determined
21 An inferior good is one for which an increase in income causes a(n) A decrease in
supply
B increase in demand
C increase in supply
D decrease in demand
22 An increase in demand means that
A when price falls consumers are willing to purchase greater quantities of the good
B consumers are willing to purchase greater quantities of the good at any given price
C when the price rises, consumers are willing to purchase greater quantities of the good
D consumers cause the price drop by buying greater quantities of the good
23 If products C and D are close substitutes, an increase in the price of C will A tend to
cause the price of D to fall
B shift the demand curve of C to the left and the demand curve of D to the right
C shift the demand curve of D to the right
D shift the demand curves of both products to the right
24 If good B is a substitute for good A, and the price of good B increases
A the quantity demanded of good A will decrease
B the demand for good A will increase
C the price of good A will decrease
D the quantity demanded of good B will increase
25 When the price of good X increases
A the quantity supplied of good X will increase
B the quantity supplied of good X will decrease
C the supply curve for good X will shift to the right
D the supply curve for good X will shift to the left
26 A new technology that helps firms reduce production costs will cause a A movement
down and left along the supply curve
Trang 6B movement up and right along the supply curve
C shift to the right of the supply curve
D shift to the left of the supply curve
27 Suppose that a scientific study just published demonstrates that eating apples makes people much healthier How will this affect the equilibrium price and quantity in the market?
A The equilibrium price will increase and the equilibrium quantity will decrease
B The equilibrium price will decrease and the equilibrium quantity will increase
C Both the equilibrium quantity and price will increase
D Both the equilibrium quantity and price will decrease
28 If the price in a market happens to be below equilibrium, there will be a in the market, and the price will tend to
A The equilibrium price will increase and the equilibrium quantity will decrease
B The equilibrium price will decrease and the equilibrium quantity will increase
C Both the equilibrium quantity and price will increase
D Both the equilibrium quantity and price will decrease
31 If price is above the equilibrium level, competition among sellers will result in
A surplus will increase quantity demanded and decrease quantity supplied
Trang 7B shortage will decrease quantity demanded and increase quantity supplied
C surplus will decrease quantity demanded and increase quantity supplied
D shortage will increase quantity demanded and decrease quantity supplied
32 An increase in demand will increase equilibrium price to a greater extent A if the
product is a normal good
B if the product is an inferior good
C the less elastic the supply curve
D the more elastic the supply curve
33 At the current price there is a shortage of a product We would expect price to A.
increase, quantity demanded to increase, and quantity supplied to decrease
B increase, quantity demanded to decrease, and quantity supplied to increase
C increase, quantity demanded to increase, and quantity supplied to increase
D decrease, quantity demanded to increase, and quantity supplied to decrease
34 For a price ceiling to be binding on the market, the government must set it A above
the equilibrium price
B below the equilibrium price
C precisely at the equilibrium price
D at any price because all price ceilings are binding constraints
35 If a price ceiling is in place and it is binding, the market will A remain in
equilibrium, unaffected by the price floor
B experience a shortage
C experience a surplus
D adjust the equilibrium price until it is equal to the price ceiling
36 A price floor
A always determines the price at which a good must be sold
B sets a legal maximum on the price at which a good can be sold
C is not a binding constraint if it is set above the equilibrium price
D sets a legal minimum on the price at which a good can be sold
37 If a price floor is in place and it is not binding, the market will A remain in
equilibrium, unaffected by the price floor
B experience a shortage
Trang 8C experience a surplus
D adjust the equilibrium price until it is equal to the price floor
38 If a price floor is in place and it is binding, the market will A remain in equilibrium,
unaffected by the price floor
B experience a shortage
C experience a surplus
D adjust the equilibrium price until it is equal to the price floor
39 Suppose that a regulation is in place that does not allow the price of a good to exceed
$5 If this price is above the equilibrium point in the market, this is an example of a
A binding price ceiling
B non-binding price ceiling
C binding price floor
D non-binding price floor
40 Suppose the equilibrium price for apartments is €500 per month and the government imposes rent controls of €250 Which of the following is unlikely to occur as a result of the rent controls?
A There may be long lines of buyers waiting for apartments
B Landlords may discriminate among apartment renters
C There will be a shortage of housing
D The quality of apartments will improve
41 Which of the following workers would be most likely to find it more difficult to get a job after a rise in the minimum wage rate?
A A teenage worker with few qualifications
B A manual worker with fifteen years of work experience
C A professional worker with a university degree
D All three are equally likely to find it difficult to get a job
42 Which side of the market is more likely to lobby government for a price floor?
A The buyers
B The sellers
C Both buyers and sellers desire a price floor
D Neither buyers nor sellers desire a price floor
Trang 943 Within the supply-demand model, a tax imposed on the sellers of a good shifts the A.
demand curve downward by the size of the tax per unit
B supply curve downward by the size of the tax per unit
C demand curve upward by the size of the tax per unit
D supply curve upward by the size of the tax per unit
44 Within the supply-demand model, a tax imposed on the buyers of a good shifts the
A
demand curve downward by the size of the tax per unit
B supply curve downward by the size of the tax per unit
C demand curve upward by the size of the tax per unit
D supply curve upward by the size of the tax per unit
45 Which of the following takes place when a tax is placed a good?
A a decrease in the price buyers pay, an increase in the price sellers receive, and a
decrease in the quantity sold
B an increase in the price buyers pay, a decrease in the price sellers receive, and an increase in the quantity sold
C a decrease in the price buyers pay, an increase in the price sellers receive, and an increase in the quantity sold
D an increase in the price buyers pay, a decrease in the price sellers receive, and a
decrease in the quantity sold
46 A tax of €1.00 per litre on petrol
A places a tax wedge of €1.00 between the price the buyers pay and the price the sellers receive
B decreases the price the sellers receive by €1.00 per litre
C increases the price the buyers pay by €1.00 per litre
D increases the price the buyers pay by precisely €0.50 and reduces the price received bysellers by precisely €0.50
47 Suppose that demand function of good X is Q Dx = n.P X + m.P Y + k If X and Y are subtitutes then
A n.m = 0
Trang 10B n.m > 0
C n.m < 0
D Not enough information to conclude
48 If A and B are complementary goods, what will happen to price of good B when price of good A increases?
A Price of good B will increase
B Price of good B will decrease
C Price of good B will stay the same
D Cannot conclude about price of good B
49 Which of the following would not shift the demand curve for beef?
A a widely publicized study that indicates beef increases one's cholesterol
B a reduction in the price of cattle feed
C an effective advertising campaign by pork producers
D a change in the incomes of beef consumers
50 Setting a binding price floor will
A increase consumer surplus and increase producer surplus
B increase consumer surplus and decrease producer surplus
C decrease consumer surplus and decrease producer surplus
D decrease consumer surplus and increase producer surplus
51 Setting a binding price ceiling will
A increase consumer surplus and increase producer surplus
B increase consumer surplus and decrease producer surplus
C decrease consumer surplus and decrease producer surplus
D decrease consumer surplus and increase producer surplus
CHAPTER 3: ELASTICITIES
1 The price elasticity of demand is defined as
A the percentage change in the quantity demanded divided by the percentage change in income
B the percentage change in income divided by the percentage change in the quantity demanded
Trang 11C the percentage change in the quantity demanded of a good divided by the percentage change in the price of that good
D the percentage change in price of a good divided by the percentage change in the quantity demanded of that good
2 If a small percentage increase in the price of a good greatly reduces the quantity demanded for that good, the demand for that good is
A income inelastic C price elastic
B price inelastic D unit price elastic
3 In general, a flat demand curve is more likely to be
A price elastic C price inelastic
B unit price elastic D none of the above
4 Which of the following would cause a demand curve for a good to be price inelastic?
A The good is a luxury
B There are a great number of substitutes for the good
C The good is a necessity
D The good is an inferior good
5 The demand for which of the following is likely to be the most price inelastic?
A Transportation C bus tickets
B taxi rides D airline tickets
6 If demand curve is linear (a straight line), then price elasticity of demand is A elastic
in the upper portion and inelastic in the lower portion
B inelastic in the upper portion and elastic in the lower portion
C inelastic throughout
D constant along the demand curve
7 If the slope of a demand curve is constant, then the price elasticity of demand for the good will
A be constant
B become more elastic as price increases
C become more elastic as price decreases
D There is not enough information to conclude