Multiple Choice Identify the letter of the choice that best completes the statement or answers the question.

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Rosanna Phillips
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1 Final day 2 Multiple Choice Identify the letter of the choice that best completes the statement or answers the question. 1. What determines how a change in prices will affect total revenue for a company? a. elasticity of demand c. values of elasticity b. the company s pricing policy d. the consumers incomes 2. What does it mean when the demand for a product is inelastic? a. People will not buy any of the product when the price goes up. b. A price increase does not have a significant impact on buying habits. c. Customers are sensitive to the price of the product. d. There are very few satisfactory substitutes for the product. 3. Which of the following goods would be likely to be bought in the same quantity even if it doubled in price? a. shoes c. pencils b. telephones d. computers 4. What determines the price and the quantity produced of most goods? a. the consumer s perception of necessity b. the interaction of supply and demand c. the availability of substitutes for the goods d. the quality of the goods that are produced 5. Which of the following events could cause the demand curve for sports magazines to shift to the right? a. The publisher cuts the price of an issue from $3.95 to $2.50. b. The price of an issue of a popular computer game magazine rises from $2.95 to $3.95. c. A star basketball player interests thousands of people in professional sports for the first time. d. A local library buys a subscription to the sports magazine for its reading room. 6. What kind of table lists the quantity of a good that a person will buy at different prices? a. demand schedule c. market demand schedule b. demand curve d. market demand curve 7. Demand for movie rentals is highly elastic. A video store that raises the price of a rental will a. lose revenue. c. possibly gain or lose revenue. b. gain revenue. d. see no change in revenue. 8. What shows the quantities of products demanded at each price by all consumers in a market? a. an elasticity and consumption list c. a market pricing list b. a schedule of consumer prices d. a market demand schedule 9. When movie rentals were $2.95, Sara rented ten movies a month. The price of a rental increased by fifty cents and Sara decided to rent two fewer movies a month. When the price increased by one more dollar, Sarah decided to cut the number of movies she rented in half. What is her quantity demanded by month at the current price? a. five c. four b. one d. two 10. What are inferior goods? a. goods that are not well produced b. goods that no one wants to buy c. goods for which the demand rises when income falls d. goods for which the demand falls when income rises

11. Which of these events could permanently shift a individual s demand curve for umbrellas to the right? a. He buys a car so he no longer needs to walk to and wait at a bus stop every morning to get to work.

2 11. Which of these events could permanently shift a individual s demand curve for umbrellas to the right? a. He buys a car so he no longer needs to walk to and wait at a bus stop every morning to get to work. b. He moves from a desert community to a rainy city by the ocean. c. The price of umbrellas decreases significantly as inexpensive umbrellas are imported from China. d. Weather forecasters predict that a major hurricane will hit his city the following week. 12. When a consumer is able and willing to buy a good or service, he or she creates which of the following? a. consumption c. elasticity b. demand d. allocation 13. According to Figure 4.4, what is Ashley s elasticity of demand as the price of a slice of pizza decreases from $2.00 to $1.00? a. 5.0 c. 2.0 b. 1.0 d According to Figure 4.4, at what price will Ashley s quantity demanded of pizza be three slices? a. $.50 c. $1.50 b. $1.00 d. $ The price of a slice of pizza has just increased by $1 from an earlier, low price. Based on Ashley s demand curve in Figure 4.4, which of the following statements is true? a. Ashley will buy two fewer slices of pizza. b. Ashley will buy four slices of pizza. c. Ashley s quantity demanded is unchanged. d. Ashley will not buy any pizza. 16. A new restaurant has opened. Ashley s demand for pizza has decreased and her demand curve has shifted. Based on Figure 4.4, which combination of price and quantity demanded would you expect to find on her new demand curve? a. $1.50, three slices c. $2.00, one slice b. $2.00, three slices d. $1.00, five slices 17. According to Figure 4.4, how many slices of pizza will Ashley buy if the price is $1.00 per slice? a. one c. three b. two d. four

3 18. A slice of pizza costs $4.00. Based on Ashley s demand curve in Figure 4.4, what is her quantity demanded of pizza at this price? a. one b. zero c. five d. There is not enough information to answer the question. Matching Identifying Key Terms Match each term with the correct statement below. a. elasticity of demand f. total revenue b. substitution effect g. normal good c. law of demand h. inferior good d. complement i. demand curve e. substitute j. ceteris paribus 19. a good that replaces another demanded good 20. a good that is always used with another good 21. a measure of how people change their buying patterns when prices change 22. what happens when consumers react to an increase in a good s price by consuming less of that good and more of other goods 23. the way that a change in price determines whether or not consumers buy goods 24. a good that consumers will demand more of when their incomes increase 25. the amount of money a company receives by selling goods or services 26. a graphic representation of a demand schedule. Multiple Choice Identify the letter of the choice that best completes the statement or answers the question. 1. An entrepreneur knits sweaters for sale. The entrepreneur has fixed costs of $100. When he makes 10 sweaters in one month, he must spend $15 on wool. To make eleven sweaters in one month, he must spend $17 on wool. If he has no other costs, what is the marginal cost of the eleventh sweater? a. $1 c. $17 b. $2 d. $ Which of the following is the best example of the law of supply? a. A sandwich shop increases the number of sandwiches they supply every day when the price is increased. b. A food producer increases the number of acres of wheat he grows to supply a milling company. c. A catering company buys a new dishwasher to make their work easier. d. A milling company builds a new factory to process flour to export. 3. What is an example of a variable cost in a major league baseball franchise? a. stadium rent c. stadium maintenance b. manager s salary d. ticket-takers salaries

4 4. Which of the following is a fixed cost for a store? a. short-term workers c. advertising b. rent d. inventory 5. If the market price for pizza is $2.00 a slice, how many slices will be supplied by all producers in the market, according to Figure 5.4? a. 200 c. 250 b. 2,000 d. 2, A shortage of tomato sauce and mozzarella cheese causes the market supply curve for pizza slices to shift. Based on Figure 5.4 Supply Curves, which of the following combinations of quantity supplied and price would you expect to find on the new curve? a. 2,500 slices at $2.50 each c. 3,500 slices at $2.50 each b. 1,500 slices at $1.00 each d. 3,000 slices at $1.50 each 7. According to Figure 5.4, how many slices of pizza will one pizzeria be willing to supply at a market price of $1.50 a slice? a. 100 c. 300 b. 200 d. 1, According to Figure 5.4, what is the elasticity of supply as the price decreases from $3.00 to $1.50 a slice? a. 0 c..86 b..43 d According to Figure 5.4, what term describes elasticity of supply in this market as the price increases from $1.00 to $2.00 a slice? a. Elastic c. Unitary elastic b. Inelastic d. Extremely elastic 10. The market price of a slice of pizza has risen from $1.50 to $2.00. Based on Figure 5.4, the average pizzeria will respond by a. making 50 fewer slices a day. c. making 500 fewer slices a day. b. making 50 more slices a day. d. making 500 more slices a day. 11. Complete the following sentence: At the most profitable level of production, a firm s marginal cost will be the market price. a. equal to c. less than b. set by d. greater than

5 Matching Identifying Key Terms Match each term with the correct statement below. a. subsidy h. increasing marginal returns b. supply schedule i. diminishing marginal returns c. supply curve j. marginal revenue d. elasticity of supply k. marginal product of labor e. excise tax l. marginal cost f. law of supply m. market supply schedule g. variable cost 12. a government payment that supports a business or market 13. a chart that lists how much of a good a supplier will offer at various prices 14. a measure of the way a quantity supplied reacts to a change in price 15. a payment to the government on the production or sale of a good 16. the cost of producing one more unit of a good 17. the additional income from selling one more unit of a good 18. a level of production in which the marginal production decreases with new investment 19. the tendency of suppliers to offer more of a good at a higher price 20. a chart that lists how much of a good all suppliers will offer at different prices 21. the change in output from hiring one additional unit of labor Multiple Choice Identify the letter of the choice that best completes the statement or answers the question. 1. When buyers will purchase exactly as much as sellers are willing to sell, what is the condition that has been reached? a. supply and demand c. equilibrium b. excess demand d. price floor 2. Which of the following is an example of a good whose price goes down because of improvements in technology? a. computer printers c. hard-bound books b. running shoes d. typewriters 3. Why did Communist governments use a command economic system for many years? a. as a way to avoid the expense and difficulties of a free market b. in an attempt to create a society in which everyone was equal c. to limit the costs of production of many goods d. as a method of keeping the consumer from getting what he or she wanted 4. Why did the U.S. government use rationing for some foods and consumer goods during World War II? a. to guarantee each civilian a minimum standard of living in wartime b. to keep sellers from raising prices on necessary goods c. because the English government had also decided on rationing d. to earn more money to support the military

6 5. What happens to a market in equilibrium when there is an increase in supply? a. Excess supply means that producers will make less of the good. b. Quantity demanded will exceed quantity supplied, so the price will drop. c. Quantity supplied will exceed quantity demanded, so the price will drop. d. Undersupply means that the good will become very expensive. 6. What is the name of the smallest amount that can legally be paid to most workers for an hour of work? a. equilibrium price c. price floor b. supply cost d. minimum wage 7. Which of these is most likely to lead directly to a black market? a. a supply shock c. rationing b. a price floor d. equilibrium 8. What happens when wages are set above the equilibrium level by law? a. Firms tend to try to break the law and hire people at the equilibrium level. b. Firms employ more workers than they would at the equilibrium wage. c. Firms employ fewer workers than they would at the equilibrium wage. d. Firms hire more workers but for fewer hours than they would at the equilibrium wage. 9. The price ceiling that was used to control the price of housing in New York City and other cities was called which of the following? a. rent control c. housing control b. rent abatement d. equilibrium price 10. Which of the following is a situation that makes the market behave inefficiently? a. when consumers do not have enough information to make good choices b. when producers have the power to find out exactly what to produce c. when both consumers and producers are fully informed about a product d. when the market is in perfect competition and prices are high 11. What happens when the supply of a nonperishable good is greater than the consumer wants to buy? a. the good is discarded b. the good becomes a luxury and the price rises c. either the good remains unsold or the price drops d. either the good is saved for later sale or the price is raised 12. Rent control is a type of a. price ceiling. c. rationing. b. price floor. d. surplus. 13. In a free market, prices lead to an efficient allocation of resources. In other words, a. consumers can buy unlimited amounts of any good they like at a price of their choice. b. resources are used in the most valuable and productive way according to the needs of consumers and producers. c. the government decides who controls natural resources. d. people who own resources are unable to bargain with people who wish to buy resources. 14. Why do fads often lead to shortages, at least in the short term? a. Buyers and sellers are unable to agree on a price for the good. b. Laws prevent stores from responding to excess demand in time to prevent a shortage. c. Manufacturers charge extremely high prices for the goods that stores are unwilling to pay. d. Demand increases so quickly and unexpectedly that time is needed for the quantity supplied and price to increase to reach a new equilibrium point.

15. On which kinds of goods do governments generally place price ceilings? a. those that are cheap but could become more expensive without the ceiling b.

7 15. On which kinds of goods do governments generally place price ceilings? a. those that are cheap but could become more expensive without the ceiling b. those that are not necessary but have become customary c. those that are essential and cheap d. those that are essential but too expensive for some consumers 16. Technological process has reduced the cost of manufacturing MP3 players. If demand is unchanged, a. more MP3 players will be sold at a higher price. b. fewer MP3 players will be sold at a higher price. c. more MP3 players will be sold at a lower price. d. fewer MP3 players will be sold at a higher price. 17. According to Figure 6.2, in this market, a price of $1.00 would be a. the equilibrium price. c. a price ceiling. b. a price floor. d. a subsidy. 18. According to Figure 6.2, in this market, a price of $1.50 would be a. the equilibrium price. c. a price ceiling. b. a price floor. d. a subsidy. 19. According to Figure 6.2, at the equilibrium price, how many slices of pizza will be sold? a. 150 c. 250 b. 200 d If the government set a price of $2.00 a slice, how many slices of pizza will be sold each day, according to Figure 6.2? a. none c. 200 b. 150 d The price of a slice of pizza is $2.50. At the end of the day, how many unsold slices of pizza will be left, according to Figure 6.2? a. none c. 100 b. 50 d A new office building has opened and the demand for pizza has increased. The new demand curve states that consumers will buy 200 slices at $2.50 each and 300 slices at $1.50 each. Based on Figure 6.2, if the slope of the curve has not changed, what is the new equilibrium price and quantity supplied? a. $1.00, 300 slices c. $2.00, 250 slices b. $1.50, 200 slices d. $2.00, 150 slices

8 23. Based on Figure 6.2, what is a possible equilibrium point in this market after it has been affected by a supply shock? a. $1.00, 100 slices c. $1.50, 200 slices b. $1.50, 100 slices d. $2.00, 150 slices 24. A shortage will develop when a. the quantity supplied of a good is greater than the quantity demanded of that good. b. the equilibrium quantity supplied is lower than the actual quantity supplied. c. the government provides subsidies to producers. d. the market price is below the equilibrium price.

1. Explain 2. Describe 3. Create 4. Interpret

1. Explain 2. Describe 3. Create 4. Interpret Law of Demand Section:- B Objectives 1. Explain the law of demand. 2. Describe how the substitution effect and the income effect influence decisions. 3. Create a demand schedule for an individual and a