MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

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1 Exam Name Ch3 MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) A factor market is 1) A) where goods are exchanged. B) where goods are made. C) organized by government. D) where resources are exchanged. 2) In an output market, 2) A) land, labor and capital may be exchanged. B) consumers purchase products. C) households earn income. D) firms purchase resources. 3) Which of the following will NOT cause a shift in the demand curve for compact discs? 3) A) a change in income B) a change in the price of compact discs C) a change in the price of downloadable online music D) a change in wealth 4) The "law of demand" implies that 4) A) as prices rise, demand increases. B) as prices fall, quantity demanded increases. C) as prices rise, quantity demanded increases. D) as prices fall, demand increases. Refer to the information provided in Figure 3.1 below to answer the questions that follow. Figure 3.1 5) Refer to Figure 3.1. Which of the following would be most likely to cause the demand for Dr. Pepper to shift from D0 to D1? A) an increase in the price of 7-UP, assuming 7-UP is a substitute for Dr. Pepper B) a decrease in income, assuming that Dr. Pepper is a normal good C) a decrease in the price of Dr. Pepper D) a reduction in the price of sugar used to make Dr. Pepper 5) 1

2 Refer to the information provided in Figure 3.3 below to answer the questions that follow. Figure 3.3 6) Refer to Figure 3.3. As your income increased, the demand for X shifted from D1 to D2. Good X is 6) A) an income-neutral good. B) a normal good. C) an inferior good. D) a luxury good. 7) If the demand for coffee decreases as income decreases, coffee is a(n) 7) A) inferior good. B) complementary good. C) normal good. D) substitute good. 8) In response to news reports that taking aspirin daily can reduce an individual's risk of a heart attack, there will most likely be a(n) A) decrease in the supply of aspirin. B) increase in the supply of aspirin. C) increase in the quantity demanded of aspirin. D) increase in the demand for aspirin. 8) 9) A change in the price of a good or service leads to a that leads to a. 9) A) change in demand; shift in the demand curve B) change in quantity demanded; shift of the demand curve C) change in quantity demanded; movement along the demand curve D) change in demand; movement along the demand curve 10) A change in income, preferences, or prices of other goods or services leads to a that causes a. A) change in quantity demanded; movement along the demand curve B) change in quantity demanded; shift of the demand curve C) change in demand; movement along the demand curve D) change in demand; shift of the demand curve 10) 2

3 Refer to the information provided in Figure 3.7 below to answer the following questions. Figure ) Refer to Figure 3.7. Assume the market is initially at Point B and that pizza is a normal good. A decrease in income would cause the market to move from Point B on demand curve D2 to A) demand curve D3. B) demand curve D1. C) Point A on demand curve D2. D) Point C on demand curve D2. 11) 12) Refer to Figure 3.7. If pizza and beer are complementary goods, a decrease in the price of beer will cause a movement from Point B on demand curve D2 to A) demand curve D3. B) Point A on demand curve D2. C) Point C on demand curve D2. D) demand curve D1. 12) 13) Refer to Figure 3.7. If pizza and hamburgers are substitutes, an increase in the price of hamburgers will cause a movement from Point B on demand curve D2 to A) demand curve D1. B) Point A on demand curve D2. C) demand curve D3. D) Point C on demand curve D2. 13) 3

4 Refer to the information provided in Figure 3.14 below to answer the following questions. Figure ) Refer to Figure A decrease in the wage rate of pizza makers will cause a movement from Point B on supply curve S2 to A) Point B on supply curve S2. B) supply curve S3. C) Point A on supply curve S2. D) supply curve S1. 14) 15) Refer to Figure An increase in the price of pizza sauce will cause a movement from Point B on supply curve S2 to A) Point A on supply curve S2. B) Point C on supply curve S2. C) supply curve S1. D) supply curve S3. 15) TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false. 16) An increase in the wage rate of steel workers will reduce the supply of steel. 16) 17) Quantity supplied is determined by how much producers are willing and able to produce. 17) MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. Refer to the information provided in Table 3.1 below to answer the questions that follow. Price per Pizza Table 3.1 Quantity Demanded (Pizzas per Month) Quantity Supplied (Pizzas per Month) $3 1, , ,000 18) Refer to Table 3.1. This market will be in equilibrium if the price per pizza is 18) A) $6. B) $9. C) $12. D) $15. 4

5 19) Refer to Table 3.1. If the price per pizza is $12, the price will 19) A) increase because there is an excess demand in the market. B) decrease because there is an excess demand in the market. C) remain constant because the market is in equilibrium. D) decrease because there is an excess supply in the market. 20) Refer to Table 3.1. If the price per pizza is $6, there is an excess 20) A) supply of 700 pizzas. B) supply of 1,000 pizzas. C) demand of 300 pizzas. D) demand of 600 pizzas. Refer to the information provided in Figure 3.17 below to answer the questions that follow. Figure ) Refer to Figure The market for sunglasses is in equilibrium at a price of and a quantity of sunglasses. A) $30; 600 B) $90; 300 C) $60; 450 D) $30; ) 22) Refer to Figure At a price of $30, there is an excess 22) A) supply of 300 sunglasses. B) demand of 450 sunglasses. C) demand of 750 sunglasses. D) demand of 300 sunglasses. 23) Refer to Figure If this market is unregulated and the price is currently $90, you would expect that the price of sunglasses would A) fall to $60, where quantity demanded equals quantity supplied. B) fall to $30, so the firm could sell its excess supply. C) fall, but the new price is indeterminate from the information provided. D) remain at $90, because firms would not want to reduce the price. 23) 24) Refer to Figure At a price of $90, there is an excess 24) A) demand of 150 sunglasses. B) demand of 600 sunglasses. C) supply of 600 sunglasses. D) supply of 450 sunglasses. 5

6 25) DVDs and DVD players are complements. An increase in the price of DVD players would cause which of the following in the market for DVDs? A) The equilibrium price and quantity of DVDs would decrease. B) The equilibrium price of DVDs would decrease, and the equilibrium quantity would increase. C) The equilibrium price and quantity of DVDs would increase. D) The equilibrium price of DVDs would increase, and the equilibrium quantity would decrease. 25) 26) Which of the following will definitely occur when there is a simultaneous decrease in demand and a decrease in supply? A) an increase in equilibrium quantity B) an increase in equilibrium price C) a decrease in equilibrium quantity D) a decrease in equilibrium price 26) 27) Papayas and grapefruit are substitute goods. A drought in California destroyed a good portion of the grapefruit crop. Ceteris paribus, A) the price of grapefruit will increase, and the price of papayas will fall. B) the price of both papayas and grapefruit will increase. C) the price of grapefruit will fall, and the price of papayas will increase. D) the price of both papayas and grapefruit will fall. 27) 6

7 Answer Key Testname: EXERCISES CH3 1) D 2) B 3) B 4) B 5) B 6) C 7) C 8) D 9) C 10) D 11) B 12) A 13) C 14) B 15) C 16) TRUE 17) TRUE 18) B 19) D 20) C 21) C 22) B 23) A 24) D 25) A 26) C 27) B 7