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| 1 | |
A simultaneous increase in demand and supply will unambiguously |
| | A) | raise the equilibrium price. |
| | B) | lower the equilibrium price. |
| | C) | lower the equilibrium quantity. |
| | D) | raise the equilibrium quantity. |
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| 2 | |
An ad valorem tax placed on the sales of an item will |
| | A) | shift the supply curve to the left. |
| | B) | shift the supply curve to the right. |
| | C) | make the supply curve steeper by rotating counterclockwise. |
| | D) | make the supply curve flatter by rotating clockwise. |
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| 3 | |
When government imposes a price ceiling above the market price, the result will be that |
| | A) | surpluses occur. |
| | B) | shortages become a problem. |
| | C) | supply and demand will shift up to the new equilibrium. |
| | D) | A price ceiling set above the equilibrium price will have no effect on the market equilibrium. |
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| 4 | |
In a competitive market, the market demand is Qd = 48 - 5P and the market supply is Qs = 7P. A price floor of $6 will result in |
| | A) | a surplus of 42 units. |
| | B) | a surplus of 24 units. |
| | C) | a surplus of 18 units. |
| | D) | None of the above. |
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| 5 | |
The law of supply indicates that as the price of a good decreases, |
| | A) | the quantity buyers desire increases. |
| | B) | the quantity buyers desire decreases. |
| | C) | the quantity producers offer to the market decreases. |
| | D) | the quantity producers offer to the market increases. |
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| 6 | |
When an economist refers to a product as an "inferior good," it implies that |
| | A) | when incomes rise, demand for that product will fall. |
| | B) | when incomes decline, demand for that product will fall. |
| | C) | there are no good substitutes for the product. |
| | D) | the product is of poor quality. |
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| 7 | |
Complement goods are ones in which |
| | A) | an increase in the price of one good leads to an increase in the demand for the other good. |
| | B) | an increase in the price of one good leads to a decrease in the demand for the other good. |
| | C) | an increase in the income of consumers leads to an increase in the demand of both goods. |
| | D) | an increase in the income of consumers leads to a decrease in the demand of both goods. |
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| 8 | |
Graphically, a hurricane that destroys 30 percent of the orange trees in Florida will cause the supply curve for oranges to |
| | A) | shift rightward. |
| | B) | shift leftward. |
| | C) | become flatter. |
| | D) | become steeper. |
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| 9 | |
Producer surplus is the difference between |
| | A) | the market price and the minimum price required to induce production. |
| | B) | the market price and the maximum willingness to pay of consumers. |
| | C) | the quantity demanded and the quantity supplied at the market price. |
| | D) | the full economic price and the market price. |
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| 10 | |
Suppose the demand for good X is given by Qdx= 50 - 7Px + 2Py + M. The price of good X is $6, the price of good Y is $9, and income is $120. Given these prices and income, how much of good X will be purchased? |
| | A) | 96. |
| | B) | 119. |
| | C) | 146. |
| | D) | None of the above. |
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| 11 | |
For a chemical manufacturer that emits some air pollutants, if the government increased the restrictions on allowable emission levels, it would cause the supply curve of chemicals to |
| | A) | become flatter. |
| | B) | become steeper. |
| | C) | shift to the right. |
| | D) | shift to the left. |
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| 12 | |
Which of the following is most likely to shift the demand curve for electricity to the left? |
| | A) | Consumers becoming more energy conscious. |
| | B) | An increase in income. |
| | C) | A decrease in the price of electricity. |
| | D) | An increase in the price of natural gas, a substitute source of energy. |
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| 13 | |
If a decrease in the price of hot tea increases the demand for honey, this indicates that |
| | A) | the two goods are substitutes. |
| | B) | the two goods are complements. |
| | C) | hot tea is an inferior good. |
| | D) | honey is an inferior good. |
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| 14 | |
Consumer surplus is measured as the area |
| | A) | below the demand curve and above the market price. |
| | B) | above the demand curve and below the market price. |
| | C) | above the supply curve and below the market price. |
| | D) | below the supply curve and above the market price. |
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| 15 | |
Holding all else constant, as additional firms leave an industry |
| | A) | more output is available at each given price. |
| | B) | less output is available at each given price. |
| | C) | the same output is available at each given price. |
| | D) | Unable to tell. |
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