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| 1 | |
A demand curve: |
| | A) | shows the quantity of a good that buyers will purchase at each price. |
| | B) | shows that there is an inverse relationship between price and quantity purchased. |
| | C) | slopes downward. |
| | D) | all of the above. |
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| 2 | |
The income effect that results from a price change is given by: |
| | A) | the change in the quantity demanded of a good that results from a change in price making substitute goods more or less attractive. |
| | B) | the change in the quantity demanded of a good that results from a change in price making a person's utility change. |
| | C) | the change in quantity demanded of a good that results from the effect of a change in price on inflation. |
| | D) | the change in quantity demanded of a good that results from the effect of a change in price on a buyer's purchasing power. |
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| 3 | |
Use the following demand and supply table to answer the following question. | | | | | Price | Qdemanded | Qsupplied | | $0.25 | 500 | 200 | | $0.50 | 400 | 400 | | $0.75 | 200 | 600 | | $1.00 | 100 | 800 |
The table above shows the quantities demanded and quantities supplied for a good at various prices. The equilibrium price and quantity for the good above respectively equal: |
| | A) | $0.25; 500. |
| | B) | $0.50; 400. |
| | C) | $0.75; 400. |
| | D) | $1.00; 600. |
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| 4 | |
When price is below the market equilibrium price: |
| | A) | there will be an excess supply. |
| | B) | the quantity demanded will exceed the quantity supplied. |
| | C) | demand will shift in and supply will shift out. |
| | D) | none of the above. |
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| 5 | |
A change in "demand" of a good is caused by ______________; a change in "quantity demanded" of a good is caused by ______________: |
| | A) | a change in the price of the good; a change in the price of a complement. |
| | B) | a price ceiling; a change in the price of the good. |
| | C) | a change in the price of a substitute; a change in the price of the good. |
| | D) | a change in the price of a complement; a change in the price of a substitute. |
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| 6 | |
Use the following diagram, representing two demand curves, to answer the following question.
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Which of the following best explains the change depicted above? |
| | A) | A decrease the price of the product. |
| | B) | An improvement in technology. |
| | C) | A decrease in income for a normal good. |
| | D) | A decrease in the price of a complement. |
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| 7 | |
The increased popularity of screw off caps on wine bottles has led to a decrease in the demand for cork. As a result, we can expect that: |
| | A) | The equilibrium quantity and price of cork will both increase. |
| | B) | The equilibrium quantity of cork will increase and price of cork will decrease. |
| | C) | The equilibrium quantity of cork will decrease and price of cork will increase. |
| | D) | The equilibrium quantity and price of cork will both decrease. |
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| 8 | |
If supply shifts in (leftward) and simultaneously demand shifts out (rightward), what can we expect to happen to the equilibrium price and quantity? |
| | A) | Price and quantity will both definitely increase. |
| | B) | Price will definitely increase, quantity may increase, decrease, or stay the same. |
| | C) | Price may increase, decrease, or stay the same, quantity will definitely decrease. |
| | D) | Price will definitely decrease, quantity may increase, decrease, or stay the same. |
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| 9 | |
| Price | Buyer's Reservation Price | Seller's Reservation Price | | $2.00 | $3.00 | $1.50 |
The buyer's and seller's surplus associated with the good shown above respectively equal: |
| | A) | $1.00 and $0.50 |
| | B) | $2.00 and $2.00 |
| | C) | $1.50 and $1.50 |
| | D) | $0.50 and $1.50 |
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| 10 | |
If all costs of producing a good are borne directly by sellers, and if all benefits from the good accrue directly to buyers, then: |
| | A) | the market equilibrium leaves no unexploited opportunities for individuals. |
| | B) | the market equilibrium is efficient. |
| | C) | the market equilibrium maximizes seller's surplus but not buyer's surplus. |
| | D) | Both a. and b. |
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