Practice Problems. Name: Class: Date: Multiple Choice Identify the choice that best completes the statement or answers the question.

Transcription

1 Class: Date: Practice Problems Multiple Choice Identify the choice that best completes the statement or answers the question. 1. The demand for a good or service is determined by a. those who buy the good or service. b. the government. c. those who sell the good or service. d. both those who buy and those who sell the good or service. 2. The supply of a good or service is determined by a. those who buy the good or service. b. the government. c. those who sell the good or service. d. both those who buy and those who sell the good or service. 3. An increase in the price of a good will a. increase demand. b. decrease demand. c. increase quantity demanded. d. decrease quantity demanded. Figure Refer to Figure 4-1. The movement from point A to point B on the graph shows a. a decrease in demand. b. an increase in demand. c. a decrease in quantity demanded. d. an increase in quantity demanded. 1

2 5. A demand schedule is a table that shows the relationship between a. quantity demanded and quantity supplied. b. income and quantity demanded. c. price and quantity demanded. d. price and income. Figure Refer to Figure 4-6. The shift from D to D is called a. an increase in demand. b. a decrease in demand. c. a decrease in quantity demanded. d. an increase in quantity demanded. 7. A decrease in demand is represented by a a. movement downward and to the right along a demand curve. b. movement upward and to the left along a demand curve. c. rightward shift of a demand curve. d. leftward shift of a demand curve. 8. Which of the following is not a determinant of the demand for a particular good? a. the prices of related goods b. income c. tastes d. the prices of the inputs used to produce the good 9. Each of the following is a determinant of demand except a. tastes. b. production technology. c. expectations. d. the prices of related goods. 2

3 10. If Max experiences a decrease in his income, then we would expect Max s demand for a. each good he purchases to remain unchanged. b. normal goods to decrease. c. luxury goods to increase. d. inferior goods to decrease. 11. If a good is inferior, then an increase in income will result in a. an increase in the demand for the good. b. a decrease in the demand for the good. c. a movement down and to the right along the demand curve for the good. d. a movement up and to the left along the demand curve for the good. 12. A likely example of substitute goods for most people would be a. peanut butter and jelly. b. tennis balls and tennis rackets. c. televisions and subscriptions to cable television services. d. pencils and pens. 13. If goods A and B are complements, then an increase in the price of good A will result in a. more of good A being sold. b. more of good B being sold. c. less of good B being sold. d. no difference in the quantity sold of either good. 14. A leftward shift of a supply curve is called a(n) a. increase in supply. b. decrease in supply. c. decrease in quantity supplied. d. increase in quantity supplied. 15. Suppose roses are currently selling for $20 per dozen, but the equilibrium price of roses is $30 per dozen. We would expect a a. shortage to exist and the market price of roses to increase. b. shortage to exist and the market price of roses to decrease. c. surplus to exist and the market price of roses to increase. d. surplus to exist and the market price of roses to decrease. 3

4 Figure Refer to Figure Equilibrium price and quantity are, respectively, a. $15 and 200 units. b. $25 and 600 units. c. $25 and 400 units. d. $35 and 200 units. 17. Refer to Figure At the equilibrium price, a. 200 units would be supplied and demanded. b. 400 units would be supplied and demanded. c. 600 units would be supplied and demanded. d. 600 units would be supplied, but only 200 would be demanded. 18. Refer to Figure At a price of $35, there would be a a. shortage of 400 units. b. surplus of 200 units. c. surplus of 400 units. d. surplus of 600 units. 19. You have been asked by your economics professor to graph the market for lumber and then to analyze the change that would occur in equilibrium price as a result of recent forest fires in the west. Your first step would be to a. decide which direction to shift the curve. b. decide whether the fires affected demand or supply. c. graph the shift to see the effect on equilibrium. d. None of the above is correct. 20. Which of the following events must result in a higher price in the market for Snickers? a. Demand for Snickers increases, and supply of Snickers decreases. b. Demand for Snickers and supply of Snickers both decrease. c. Demand for Snickers decreases, and supply of Snickers increases. d. Demand for Snickers and supply of Snickers both increase 4

5 21. Suppose buyers of computers and printers regard the two goods as complements. Then an increase in the price of computers will cause a(n) a. decrease in the demand for printers and a decrease in the quantity supplied of printers. b. decrease in the supply of printers and a decrease in the quantity demanded of printers. c. decrease in the equilibrium price of printers and an increase in the equilibrium quantity of printers. d. increase in the equilibrium price of printers and a decrease in the equilibrium quantity of printers. 22. Which of the following would increase in response to a decrease in the price of ironing boards? a. the quantity of irons demanded at each possible price of irons b. the equilibrium quantity of irons c. the equilibrium price of irons d. All of the above are correct. 23. An early frost in the vineyards of Napa Valley would cause a(n) a. increase in the demand for wine, increasing price. b. increase in the supply of wine, decreasing price. c. decrease in the demand for wine, decreasing price. d. decrease in the supply of wine, increasing price. 24. Suppose the number of buyers in a market increases and a technological advancement occurs also. What would we expect to happen in the market? a. Equilibrium price would decrease, but the impact on equilibrium quantity would be ambiguous. b. Equilibrium price would increase, but the impact on equilibrium quantity would be ambiguous. c. Equilibrium quantity would decrease, but the impact on equilibrium price would be ambiguous. d. Equilibrium quantity would increase, but the impact on equilibrium price would be ambiguous. 25. What would happen to the equilibrium price and quantity of coffee if the wages of coffee-bean pickers fell and the price of tea fell? a. Price would fall, and the effect on quantity would be ambiguous. b. Price would rise, and the effect on quantity would be ambiguous. c. Quantity would fall, and the effect on price would be ambiguous. d. Quantity would rise, and the effect on price would be ambiguous. 26. Beef is a normal good. You observe that both the equilibrium price and quantity of beef have fallen over time. Which of the following explanations would be most consistent with this observation? a. Consumers have experienced an increase in income, and beef-production technology has improved. b. The price of chicken has risen, and the price of steak sauce has fallen. c. New medical evidence has been released that indicates a negative correlation between a person s beef consumption and life expectancy. d. The demand curve for beef must be positively sloped. 5

6 27. Which of the following events would cause the price of oranges to fall? a. There is a shortage of oranges. b. The FDA announces that bananas cause strokes, and oranges and bananas are substitutes. c. The price of land throughout Florida decreases, and Florida produces a significant proportion of the nation s oranges. d. All of the above are correct. 6

7 Practice Problems Answer Section MULTIPLE CHOICE 1. ANS: A PTS: 1 DIF: 1 REF: 4-1 NAT: Analytic LOC: Supply and demand TOP: Demand MSC: Definitional 2. ANS: C PTS: 1 DIF: 1 REF: 4-1 NAT: Analytic LOC: Supply and demand TOP: Supply MSC: Definitional 3. ANS: D PTS: 1 DIF: 2 REF: 4-2 NAT: Analytic LOC: Supply and demand TOP: Quantity demanded 4. ANS: D PTS: 1 DIF: 2 REF: 4-2 NAT: Analytic LOC: Supply and demand TOP: Quantity demanded 5. ANS: C PTS: 1 DIF: 1 REF: 4-2 NAT: Analytic LOC: Supply and demand TOP: Demand schedule MSC: Definitional 6. ANS: B PTS: 1 DIF: 2 REF: 4-2 NAT: Analytic LOC: Supply and demand TOP: Demand curve 7. ANS: D PTS: 1 DIF: 2 REF: 4-2 NAT: Analytic LOC: Supply and demand TOP: Demand curve 8. ANS: D PTS: 1 DIF: 2 REF: 4-2 NAT: Analytic LOC: Supply and demand TOP: Determinants of demand 9. ANS: B PTS: 1 DIF: 2 REF: 4-2 NAT: Analytic LOC: Supply and demand TOP: Determinants of demand 10. ANS: B PTS: 1 DIF: 2 REF: 4-2 NAT: Analytic LOC: Supply and demand TOP: Normal goods 11. ANS: B PTS: 1 DIF: 2 REF: 4-2 NAT: Analytic LOC: Supply and demand TOP: Inferior goods 12. ANS: D PTS: 1 DIF: 2 REF: 4-2 NAT: Analytic LOC: Supply and demand TOP: Substitutes 13. ANS: C PTS: 1 DIF: 2 REF: 4-2 NAT: Analytic LOC: Supply and demand TOP: Complements 14. ANS: B PTS: 1 DIF: 2 REF: 4-3 NAT: Analytic LOC: Supply and demand TOP: Supply curve 1

8 15. ANS: A PTS: 1 DIF: 2 REF: 4-4 NAT: Analytic LOC: Supply and demand TOP: Shortages 16. ANS: C PTS: 1 DIF: 2 REF: 4-4 NAT: Analytic LOC: Supply and demand TOP: Equilibrium 17. ANS: B PTS: 1 DIF: 2 REF: 4-4 NAT: Analytic LOC: Supply and demand TOP: Equilibrium 18. ANS: C PTS: 1 DIF: 2 REF: 4-4 NAT: Analytic LOC: Supply and demand TOP: Surpluses 19. ANS: B PTS: 1 DIF: 2 REF: 4-4 NAT: Analytic LOC: Supply and demand TOP: Equilibrium 20. ANS: A PTS: 1 DIF: 2 REF: 4-4 NAT: Analytic LOC: Supply and demand TOP: Equilibrium 21. ANS: A PTS: 1 DIF: 2 REF: 4-4 NAT: Analytic LOC: Supply and demand TOP: Equilibrium Complements 22. ANS: D PTS: 1 DIF: 2 REF: 4-4 NAT: Analytic LOC: Supply and demand TOP: Equilibrium Complements 23. ANS: D PTS: 1 DIF: 2 REF: 4-4 NAT: Analytic LOC: Supply and demand TOP: Equilibrium Input prices 24. ANS: D PTS: 1 DIF: 2 REF: 4-4 NAT: Analytic LOC: Supply and demand TOP: Equilibrium Number of buyers Technology 25. ANS: A PTS: 1 DIF: 2 REF: 4-4 NAT: Analytic LOC: Supply and demand TOP: Equilibrium Substitutes Input prices 26. ANS: C PTS: 1 DIF: 2 REF: 4-4 NAT: Analytic LOC: Supply and demand TOP: Equilibrium Tastes 27. ANS: C PTS: 1 DIF: 2 REF: 4-4 NAT: Analytic LOC: Supply and demand TOP: Equilibrium Input prices 2