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1. The demand for a product is the amount that
a.
buyers purchase in the market
b.
buyers are willing to purchase at a given price
c.
sellers are willing to sell at a particular price
d.
buyers are willing and able to purchase at alternative prices
e.
buyers are able to purchase at a specific price
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d |
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2. The law of demand says that the lower the price of a good, other things constant,
a.
the smaller the demand for that good
b.
the larger the demand for that good
c.
the smaller the quantity demanded of that good
d.
the larger the quantity demanded of that good
e.
the smaller the real income of consumers and the lower the quantity demanded of that good |
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d |
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3. The law of demand assumes that as the price of a good increases,
a.
people recognize that its price may be even higher in the future, so they buy now rather than later
b.
consumers tend to shift their purchases to relatively cheaper substitutes
c.
people will buy less of it in the hope that the good will be cheaper in the future
d.
the consumer’s money income increases, and he or she is less able to buy all goods, including the good whose price has increased
e.
the consumer’s money income decreases, and if the product is a normal good, more will be purchased |
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b |
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. In what way is consumer demand different from consumer wants?
a.
Demand is only for necessities.
b.
Demand is only for luxuries.
c.
Demand takes into account the ability to pay.
d.
Consumer wants are only for luxuries.
e.
Consumer wants are only for necessities. |
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c |
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5. Movements along a demand curve are called changes in
a.
demand
b.
opportunity costs
c.
quantity demanded
d.
the substitution effect
e.
preferences |
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c |
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6. Suppose you drink more tea because the price of coffee has increased. Which of the following best explains your action?
a.
the law of supply
b.
tea and coffee are complements
c.
the substitution effect
d.
the income effect
e.
your nominal income has increased |
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c |
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7. The law of demand is illustrated by a demand curve that is
a.
Horizontal
b.
Vertical
c.
upward sloping
d.
Constant
e.
downward sloping |
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e |
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8. For which of the following would the income effect of a price change be greatest?
a.
ballpoint pens
b.
air travel to Australia
c.
chewing gum
d.
Haircuts
e.
college textbooks |
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b |
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9. The income effect of a decrease in the price of legal services (a normal good) is a(n)
a.
decrease in the demand for legal services
b.
decrease in the quantity demanded of legal services
c.
increase in the demand for legal services
d.
increase in the quantity demanded of legal services
e.
new demand curve because everything else is no longer constant
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d |
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10. Which of the following statements about demand is true?
a.
Since most college students want a Mercedes sports coupe, their demand for it is high.
b.
If price increases, the demand curve shifts to the right.
c.
The demand curve for bacon will not shift when the price of bacon changes.
d.
If a supply curve shifts, thereby changing the price, the demand curve will shift as well.
e.
If a demand curve shifts, the supply curve will shift as well, whether or not the price changes.
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c |
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11 If we say that demand has increased, we mean that there has been
a.
a leftward movement along the demand curve
b.
a rightward movement along the demand curve
c.
a leftward shift of the demand curve
d.
a rightward shift of the demand curve
e.
an increase in the slope of the demand curve |
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d |
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12 A change in income will
a.
affect the demand for candy through the income effect of a price change
b.
affect the quantity demanded of candy through the income effect of a price change
c.
shift the demand curve for candy
d.
have no effect on the demand for candy, because income is assumed constant along a demand curve
e.
affect quantity demanded only if candy is a normal good
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c |
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13. Which of the following is most likely to be an inferior good?
a.
airline travel
b.
restaurant meals
c.
a subscription to the Wall Street Journal
d.
soft drinks
e.
used clothing
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e |
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14. If demand for personal computers increases as a result of an increase in income,
a.
personal computers must be a normal good
b.
personal computers must be an inferior good
c.
personal computers must be a complement
d.
the substitutes for personal computers must be inferior goods
e.
the substitution effect is larger than the income effect |
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a |
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15. The difference between normal and inferior goods is that
a.
normal goods are of better quality than inferior goods
b.
an increase in price will shift the demand curve for a normal good rightward and the demand curve for an inferior good leftward
c.
if the price of a normal good increases, individuals who buy it are poorer; for inferior goods, the opposite is true
d.
an inferior good is something that will not be demanded until quantities of the normal good have been exhausted
e.
an increase in income will shift the demand curve for a normal good rightward and the demand curve for an inferior good leftward |
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e |
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16. Which of the following is the best example of substitutes?
a.
coffee and cream
b.
videotapes and VCRs
c.
money and biscuits
d.
tortillas and salsa
e.
hiking boots and athletic shoes |
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e |
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17. Two goods are considered substitutes only if a(n)
a.
decrease in the demand for one leads to a decrease in the supply of the other
b.
increase in the demand for one leads to a decrease in the supply of the other
c.
increase in the price of one leads to an increase in the demand for the other
d.
decrease in the price of one leads to an increase in the demand for the other
e.
decrease in the supply of one leads producers to switch to production of the other |
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c |
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18. Which of the following is the best example of complements?
a.
milk and cheese
b.
coffee and tea
c.
CDs and DVDs
d.
hiking boots and athletic shoes
e.
film and film processing (developing) |
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e |
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19. If the price of potato chips increases, other things constant, demand for potato-chip dip will
a.
not change; only quantity demanded will change
b.
increase because the goods are substitutes
c.
decrease because the goods are substitutes
d.
decrease because the goods are complements
e.
increase because the goods are complements
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d |
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20. If a certain type of clothing becomes more fashionable, we would expect that its price
a.
will decrease and quantity will remain constant
b.
and quantity will both decrease
c.
will increase and quantity will decrease
d.
will decrease and quantity will increase
e.
and quantity will both increase
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e |
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21. Which of the following best defines supply?
a.
the amount of a good that producers want to sell at a particular price
b.
the amount of a good that consumers will buy
c.
the amount of a good that producers are willing and able to sell at each possible price, other things constant
d.
the amount of a good that producers are willing to sell at each possible price, other things constant
e.
the amount of a good that producers are willing and able to buy at each possible price, other things constant
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c |
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22. Which of the following is true of an increase in quantity supplied of a given good?
a.
It is represented by a rightward shift in the supply curve.
b.
It could result from a technological improvement.
c.
The price of a key resource used to produce the good may have decreased.
d.
It is caused by an increase in the price of the good.
e.
The price of an alternative good has increased.
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d |
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23. The market supply curve of a particular product indicates the total quantities
a.
that are actually sold during a given time period
b.
that buyers are willing to purchase at alternative prices
c.
that sellers are willing and able to offer at alternative prices
d.
that sellers are willing to offer for sale
e.
of complements offered for sale |
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c |
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24. Larger quantities of any good will be supplied at higher prices because
a.
consumers will be more satisfied
b.
higher prices attract resources from other uses
c.
people are naturally lazy and have to be bribed to give up their leisure
d.
price and quantity supplied are inversely related
e.
of the law of decreasing opportunity cost |
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b |
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25. Supply and demand curves both
a.
have negative slopes
b.
have positive slopes
c.
relate quantities to prices
d.
reflect the actions of producers
e.
reflect the actions of consumers |
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c |
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26. As the price of milk increases, producers are normally willing to supply greater quantities. This is known as the law of
a.
Demand
b.
Gravity
c.
variable proportions
d.
Profitability
e.
Supply |
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e |
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27. Which of the following would shift the supply curve for a product to the right?
a.
an increase in the price of a resource used in the good's production
b.
the expectation of a higher price in the near future
c.
an increase in the price of the product
d.
an increase in the price of an alternative good
e.
an improvement in the technology for producing the good
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e |
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28. An improvement in technology would shift
a.
the demand curve leftward
b.
the demand curve rightward
c.
the supply curve leftward
d.
neither the supply nor the demand curve; instead, there is movement along both of them
e.
the supply curve rightward |
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e |
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29. Which of the following would shift the supply curve for a good to the left?
a.
an increase in the price of that good
b.
a decrease in the price of an alternative good
c.
an improvement in technology for producing that good
d.
an increase in the cost of an important resource used to make that good
e.
an increase in the number of producers |
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d |
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30. An increase in the price of a good normally increases the
a.
demand for its substitutes
b.
supply of complements for the good
c.
purchasing power of consumers’ dollar incomes
d.
money income of the consumer
e.
quantity demanded of all goods that are unrelated to the good in question |
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a |
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31. Which of the following will not shift the market supply curve for corn?
a.
a change in the price of corn
b.
a change in the price of soybeans
c.
a change in the price of herbicides and pesticides
d.
a change in storage technology
e.
a change in the number of acres planted in corn |
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a |
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32. Markets reduce transactions costs
a.
by decreasing the time spent searching for information about goods and services
b.
only when they have a highly structured set of rules like the New York Stock Exchange
c.
because each market uses the same set of rules for buying and selling goods and services
d.
only when the government can coordinate the plans of many buyers and sellers
e.
when prices are set by the sellers and are not determined by negotiation between the buyers and the sellers |
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a |
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33. When quantity demanded of a good is less than the quantity supplied at the prevailing market price,
a.
the market is in equilibrium
b.
the price of the good tends to rise
c.
the price of the good tends to fall
d.
the demand curve shifts rightward until the surplus is eliminated
e.
the supply curve shifts leftward until the shortage is eliminated |
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c |
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34. A surplus of shoes will cause
a.
a decrease in the supply of shoes
b.
a decrease in the demand for shoes
c.
both a decrease in the supply of shoes and an increase in the demand for shoes
d.
a decrease in the price of shoes, through a shift of either the supply curve or the demand curve
e.
a decrease in the price of shoes |
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e |
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35. Suppliers recognize there is a shortage in the market for their product when they notice that
a.
the quantity supplied exceeds the quantity demanded
b.
the quantity demanded is falling
c.
inventories are falling
d.
production exceeds new orders for the product
e.
government economists announce a shortage exists |
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c |
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36. A shortage of textbooks will cause
a.
a decrease in the supply of textbooks
b.
a decrease in the demand for textbooks
c.
both an increase in the supply of textbooks and a decrease in the demand for textbooks
d.
an increase in the price of textbooks, caused by a shift of either the supply curve or the demand curve
e.
an increase in the price of textbooks |
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e |
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Exhibit 4-1
Price
Quantity
demanded
Quantity
supplied
$1.00
100
10
1.20
90
30
1.40
80
50
1.50
70
70
1.60
60
90
37. If the price of the good described in Exhibit 4-1 is $1.20, then there is a
a.
shortage of 30 units
b.
surplus of 30 units
c.
shortage of 60 units
d.
surplus of 60 units
e.
surplus of 20 units |
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c |
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Exhibit 4-1
Price
Quantity
demanded
Quantity
supplied
$1.00
100
10
1.20
90
30
1.40
80
50
1.50
70
70
1.60
60
90
37. If the price of the good described in Exhibit 4-1 is $1.20, then there is a
a.
shortage of 30 units
b.
surplus of 30 units
c.
shortage of 60 units
d.
surplus of 60 units
e.
surplus of 20 units |
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a |
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39. The most important characteristic of the equilibrium price is that it
a.
guarantees that producers earn profit
b.
clears the market, leaving neither a surplus nor a shortage
c.
maximizes the quantity demanded
d.
minimizes the quantity demanded
e.
guarantees that all buyers who desire the product will get it |
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b |
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40. An increase in demand will cause a(n)
a.
increase in supply
b.
decrease in supply
c.
decrease in quantity supplied
d.
increase in quantity supplied
e.
decrease in equilibrium price |
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d |
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