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1 | |
Which of the following is not true of the concept of demand? |
| | A) | It involves the buyer's side of the Market |
| | B) | It is expressed in terms of units of time |
| | C) | If the consumer has a want for the product, there will be a demand for it |
| | D) | It illustrates the quantities of a product the consumer will purchase at various prices, ceteris paribus |
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2 | |
According to the law of demand, as the price of hockey sticks decreases, ceteris paribus |
| | A) | The demand for hockey sticks will fall |
| | B) | The demand for hockey sticks will increase |
| | C) | The quantity of hockey sticks demanded will increase |
| | D) | The quantity of hockey sticks demanded will decrease |
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3 | |
Larry, Curly and Moe each have a demand for cream pies. At a price of $3.00 per pie, their quantity demanded will be three, seven, and four pies, respectively. Which of the following will be a point on the market demand curve, if these people make up the market? |
| | A) | P=3, Q=7 |
| | B) | P=3, Q=14 |
| | C) | P=14, Q=3 |
| | D) | None of the other choices |
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4 | |
If the price of Canadian back bacon increases, all else equal, which of the following describes what would likely happen in the Canadian egg market? |
| | A) | The demand for eggs would fall, causing the equilibrium price and quantity of eggs to fall as well |
| | B) | The demand for eggs would fall, causing the equilibrium price and quantity of eggs to rise |
| | C) | The demand for eggs would rise causing the equilibrium price and quantity of eggs to rise as well |
| | D) | The demand for eggs would fall, causing the equilibrium price to fall, and the equilibrium price to rise |
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5 | |
A good is said to be inferior if... |
| | A) | An increase in price causes a decrease in Qd |
| | B) | An increase in income causes a decrease in demand for the good |
| | C) | Tastes and preferences of the good decrease for much of the population |
| | D) | The price of the good is expected to fall |
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6 | |
A Canadian diary farmer produces only two types of milk – Holstein and Jersey. If the price of jersey milk increases, all else equal, then... |
| | A) | The supply curve for Holstein Milk would shift leftward |
| | B) | There would be an upward movement along the supply curve for Jersey Milk |
| | C) | Farmers would substitute Jersey Milk for Holstein Milk in production |
| | D) | All choices are correct |
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7 | |
The term "Ceteris Paribus" means |
| | A) | Holding everything constant |
| | B) | All thing considered |
| | C) | Other things being equal |
| | D) | All variables change except one |
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8 | |
Which of the following will shift the demand curve for potato chips to the left? |
| | A) | An increase in the price of potato chips |
| | B) | A decrease in the price of tortillas, a substitute for potato chips |
| | C) | An increase in income, if potato chips are a normal good |
| | D) | A decrease in the price of cola, a complement of potato chips |
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9 | |
If the quantity supplied = quantity demanded, then... |
| | A) | There is a shortage of the good |
| | B) | There is surplus of the good |
| | C) | The price will be greater than the equilibrium price |
| | D) | There is neither a shortage nor a surplus of the good |
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10 | |
When moving along a demand curve for apples, which of the following factors will change? |
| | A) | Consumer income |
| | B) | Tastes and preferences for apples |
| | C) | The price of apples |
| | D) | The price of oranges, a substitute for apples |
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11 | |
If the price of a good is artificially set below the equilibrium price, then... |
| | A) | There will be a surplus of the good and its price will rise back to equilibrium |
| | B) | There will be a shortage of the good and its price will fall back to equilibrium |
| | C) | There will be a surplus of the good and its price will fall back to equilibrium |
| | D) | There will be a shortage of the good and its price will rise back to equilibrium |
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12 | |
If Bob and Doug McKenzie give the employees of their beer factory a wage increase (all else equal) then... |
| | A) | The cost of production would rise and the supply of beer would increase |
| | B) | The cost of production would rise and the supply of beer would decrease. |
| | C) | The cost of production would fall and the supply of beer would increase |
| | D) | None of the other choices is correct |
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13 | |
Last winter, OPEC decided to increase its output (supply) of oil. At the same time, North America demand for heating oil rose due to a cold winter. Therefore... |
| | A) | The equilibrium price will increase while the equilibrium quantity will decrease. |
| | B) | The equilibrium price will increase, while the equilibrium quantity will be undetermined |
| | C) | The equilibrium price will be undetermined while the equilibrium quantity will increase |
| | D) | Both the equilibrium price and quantity will increase |
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14 | |
Which of the following is an assumption of demand/supply model? |
| | A) | All factors can change at the same time |
| | B) | There is only one buyer and one seller |
| | C) | There are many buyers and sellers in a market |
| | D) | Factors such as income and tastes and preferences will always remain constant |
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15 | |
The following demand/supply schedules are provided for the rental housing market in a small city. They represent rents for two-bedroom apartments:Rent
Per
Month | Qd | Qs | | 600 | 10 | 2 | | 650 | 9 | 3 | | 700 | 8 | 4 | | 750 | 7 | 5 | | 800 | 6 | 6 | | 850 | 5 | 7 | | 900 | 4 | 8 | | 950 | 3 | 9 | | 1000 | 2 | 10 |
What is the equilibrium price and equilibrium quantity in this rental market? |
| | A) | P = $700, Q = 8 |
| | B) | P = $800, Q = 6 |
| | C) | P = $900, Q = 4 |
| | D) | P = $1,000, Q =10 |
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16 | |
Use the data in the previous question. Suppose that rental prices were initially set at P = $700/month. What is the condition of the rental market at this price level? |
| | A) | There is a shortage of rental housing |
| | B) | There is a surplus of rental housing |
| | C) | The rental market is in equilibrium |
| | D) | None of the other choices |
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17 | |
Referring to the previous question, how will the market adjust? |
| | A) | The monthly rent will fall back to equilibrium |
| | B) | The monthly rent will remain unchanged |
| | C) | The monthly rent will rise back to equilibrium |
| | D) | The quantity of rental housing demanded will increase |
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18 | |
Refer once again to the data from the rental market. Suppose there is a fall in housing (real estate) prices, and that houses are a substitute for rental housing. Which of the following would occur? |
| | A) | The demand curve for rental housing would shift to the right, causing equilibrium P and Q to increase |
| | B) | The supply curve for rental housing would shift to the left, increasing the equilibrium rent (P) and decreasing the equilibrium (Q) |
| | C) | The supply curve for rental housing would shift rightward, increasing the equilibrium rent (P) and quantity (Q) |
| | D) | The demand curve for rental housing would shift left, causing equilibrium P and Q to decrease |
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19 | |
Thinking of the rental market, above, which of the following changes would cause an increase in equilibrium rent (P), but a decrease in equilibrium quantity |
| | A) | There is a large increase in income in the economy (rental housing is an inferior good) |
| | B) | There is an increase in the number of landlords wishing to provide rental housing |
| | C) | Due to higher oil/gas prices, landlords face higher heating costs in providing rental housing |
| | D) | The population of this city continues to grow due to higher rates of immigration |
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20 | |
Which of the following is an example of complements? |
| | A) | Golf and Tennis |
| | B) | Pancakes and maple syrup |
| | C) | Tea and coffee |
| | D) | VCRs and DVD players |
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21 | |
Red Green is a Canadian lumberjack who likes a hearty breakfast of pancakes and maple syrup. He earns a constant income of $300.00 per week. If the price of pancake mix falls by $1.00 a box, Red will purchase five more boxes per week because his purchasing power has increased. This is an example of... |
| | A) | Diminishing marginal utility |
| | B) | The substitution effect |
| | C) | The income effect |
| | D) | None of the other choices |
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22 | |
An economist is observing the relationship between goods A and B. She notices that an increase in the price of good B tends to be associated with an increase in the demand for good A. Goods A and B are likely... |
| | A) | Substitutes |
| | B) | Complements |
| | C) | Normal goods |
| | D) | Inferior goods |
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23 | |
The inverse relationship between P and Qd, as suggested by the law of demand, occurs because of... |
| | A) | The income effect |
| | B) | The substitution effect |
| | C) | Diminishing marginal utility |
| | D) | All of the other choices |
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24 | |
Which of the following determinants would affect both the demand and supply side of the market? |
| | A) | Tastes and preferences |
| | B) | Expected future price |
| | C) | Resource price |
| | D) | Consumer income |
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2002 McGraw-Hill Higher Education