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1 | |
The law of demand states that an increase in price, other things constant, |
| | A) | will decrease demand. |
| | B) | will decrease quantity demanded. |
| | C) | will increase demand. |
| | D) | will increase quantity demanded. |
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2 | |
When the price of his cable TV increased, Michael switched to satellite TV. This illustrates |
| | A) | the satellite company is maximizing profits but the cable company is not. |
| | B) | the law of diminishing returns. |
| | C) | how an individual's tendency to substitute between goods can explain the law of demand. |
| | D) | how competition between businesses explains the law of supply. |
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3 | |
Assume movies are normal good. Therefore, in the market for movies, an increase in income will lead to |
| | A) | an increase in demand. |
| | B) | an increase in quantity demanded. |
| | C) | a decrease in demand. |
| | D) | a decrease in quantity demanded. |
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4 | |
Which of the following would economists expect to shift the demand curve for bacon to the left? |
| | A) | an increase in the price of bacon. |
| | B) | a decrease in the price of bacon. |
| | C) | an increase in the price of a complement like eggs. |
| | D) | a decrease in the price of a complement like eggs. |
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5 | |
Which of the following tables best illustrates the law of supply? | | | Table C | | Demand | Supply | | 1 | 1 | | 2 | 2 | | 3 | 3 |
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| | A) | Table A |
| | B) | Table B |
| | C) | Table C |
| | D) | Table D |
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6 | |
Which of the following would cause the supply of MP3 players to shift to the right? |
| | A) | An increase in the price of MP3 players. |
| | B) | A decrease in the price of MP3 players. |
| | C) | A change in copyright laws allowing all MP3s to freely and legally be downloaded from the internet. |
| | D) | A technological advance that decreases the cost of electronic memory. |
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7 | |
There is a shortage of parking spaces on campus. If campus administrators let the free market work, it could eliminate this shortage by creating |
| | A) | higher prices which would increase supply |
| | B) | higher prices which would increase quantity supplied and decrease quantity demanded. |
| | C) | lower prices which would increase supply. |
| | D) | lower prices which would increase quantity supplied and decrease quantity demanded. |
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8 | |
Other things constant, if the price of timber increases, we would expect to see |
| | A) | an increase in the equilibrium price and quantity of housing. |
| | B) | a decrease in the equilibrium price and quantity of housing. |
| | C) | an increase in the price of housing and a decrease in the number of homes sold. |
| | D) | a decrease in the price of housing and an increase in the number of homes sold. |
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9 | |
If scientists discovered that eating too much macaroni and cheese can cause your hair to fall out, then, ceteris paribus, we would expect to see |
| | A) | an increase in the equilibrium price and quantity of macaroni and cheese. |
| | B) | a decrease in the equilibrium price and quantity of macaroni and cheese. |
| | C) | an increase in the price of macaroni and cheese and a decrease in its sales. |
| | D) | a decrease in the price of macaroni and cheese and an increase in its sales. |
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10 | |
Which of the following is an example of the fallacy of composition? |
| | A) | The belief that, since an individual with a larger salary can buy more goods, if everybody had higher salaries they could all buy more goods. |
| | B) | College students who put off their freshman composition course until their senior year. |
| | C) | Mistaking an increase in demand for an increase in quantity demanded. |
| | D) | The belief that, since ice cream sales and crime are positively correlated, eating ice cream causes crime. |
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