Multiple Choice
Identify the
letter of the choice that best completes the statement or answers the question.
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| 1. | One
result of a drought in the midwest could be an increase in a. | farm machinery
prices. | b. | the price of diesel fuel used in
farming. | c. | migrant farm workers' wages. | d. | the price of
frosted shredded wheat. | | |
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| 2. | Which
of the following would be an example of a monopoly? a. | a bakery in a
large city | b. | local cement companies | c. | a local cable
television company | d. | a potato farmer | | |
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| 3. | Which
of the following would be an example of an oligopolistic market? a. | the air travel
industry | b. | the domestic wheat market | c. | the software
industry | d. | electrical power for residential
consumers | | |
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| 4. | The
behavior of buyers is represented by a. | demand. | b. | supply. | c. | a market. | d. | competition. | | |
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| 5. | Each
of the following are determinants of demand EXCEPT a. | tastes. | b. | technology. | c. | income. | d. | the price of related goods. | | |
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| 6. | The
amount of the good buyers are willing and able to purchase is the a. | demand. | b. | quantity supplied. | c. | quantity
demanded. | d. | supply. | | |
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| 7. | For
economists, people's tastes and demand are a. | beyond the realm of economics. | b. | negatively
related. | c. | not related. | d. | positively
related. | | |
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| 8. | When
it comes to people's tastes, economists generally believe that a. | tastes are based
on forces beyond the realm of economics. | b. | tastes are based on historical and psychological
forces. | c. | tastes can only be studied through well-constructed, real-life
models. | d. | since tastes do not directly affect demand, there is little
need to explain people's tastes. | | |
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| 9. | Which
of the following is NOT a determinant of demand? a. | the price of a resource | b. | the price of a
complementary good | c. | the price of the good next month | d. | the price of a
substitute good | | |
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| 10. | A
demand curve is a. | the
downward-sloping line relating the price of the good to the quantity
demanded. | b. | the upward-sloping line relating price to quantity
supplied. | c. | the curve that relates income to quantity
demanded. | d. | showing the same relationship between two goods as a production
possibilities frontier. | | |
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Figure 4-1
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| 11. | Refer
to Figure 4-1. The movement from point A to point B on the graph shows a. | a decrease in
demand. | b. | an increase in demand. | c. | a decrease in
quantity demanded. | d. | an increase in quantity demanded. | | |
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| 12. | If,
at the current price, there is a shortage of a good, a. | sellers are
producing more than buyers wish to buy. | b. | the market must be in equilibrium. | c. | the price is
below the equilibrium price. | d. | quantity demanded equals quantity
supplied. | | |
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Figure 4-7
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| 13. | Refer
to Figure 4-7. Equilibrium price and quantity are a. | $35,200. | b. | $35,600. | c. | $25,400. | d. | $15,200. | | |
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Figure 4-9
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| 14. | Refer
to Figure 4-9. In this market, equilibrium price and quantity would be a. | $15,400. | b. | $20,600. | c. | $25,500. | d. | $25,800. | | |
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| 15. | Refer
to Figure 4-9. If the price is $10, there would be a a. | shortage of 200
and price would rise. | b. | surplus of 200 and price would fall. | c. | shortage of 600
and price would rise. | d. | surplus of 600 and price would fall. | | |
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| 16. | When
there is a shortage in a market, a. | there is downward pressure on price. | b. | there is upward
pressure on price. | c. | the market could still be in
equilibrium. | d. | the price must be above equilibrium. | | |
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Figure 4-10
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| 17. | Refer
to Figure 4-10. Graph A shows which of the following? a. | an increase in
demand | b. | an increase in quantity demanded | c. | an increase in
quantity supplied | d. | All of the above are correct. | e. | Both a and c are
correct. | | |
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| 18. | Which
chain of events occurs in the correct order? a. | Quantity supplied increases, price increases, demand
increases. | b. | Price increases, demand increases, quantity supplied
increases. | c. | Demand increases, price increases, quantity supplied
increases. | d. | Any of the above could be correct. | | |
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| 19. | Suppose that the number of buyers in a market increases and a technological
advancement occurs also. What would we expect to happen in the market? a. | The equilibrium
price would increase, but the impact on the amount sold in the market would be
ambiguous. | b. | The equilibrium price would decrease, but the impact on the
amount sold in the market would be ambiguous. | c. | Equilibrium
quantity would increase, but the impact on equilibrium price would be
ambiguous. | d. | Both equilibrium price and equilibrium quantity would
increase. | | |
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| 20. | If
there is a shortage of farm laborers, we would expect a. | the wages of
farm laborers to increase. | b. | the wages of farm laborers to
decrease. | c. | the prices of farm commodities to
decrease. | d. | a decrease in the demand for substitutes for farm
labor. | | |
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True/False
Indicate whether the sentence or statement is true
or false.
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| 21. | A
market is a group of buyers and sellers of a particular product.
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| 22. | A
local cable TV company might be a monopolist.
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Short Answer
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| | 23. |
A. | What is the difference between a "change in
demand" and a "change in quantity demanded"? Graph your
answer. | B. | For each of the
following changes, determine whether there will be a movement along the demand curve (a change in
quantity demanded) or a shift in the demand curve (a change in demand). | | a. | a change in the
price of a related good | | b. | a change in
tastes | | c. | a change in the number of buyers | | d. | a change in
price | | e. | a change in expectations | | f. | a change in
income | | | |
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| | 24. | Fill
in the accompanying table, showing whether equilibrium price and equilibrium quantity go up, down or
stay the same.
| | No Change in
Supply | An Increase in Supply | A Decrease in
Supply | No Change in Demand |
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| An Increase in
Demand |
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| A Decrease in
Demand |
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| | 25. | Suppose we are analyzing the market for hot chocolate. Graphically illustrate the
impact each of the following would have on demand or supply. Also show how equilibrium price and
quantity have changed.
a. | Winter starts and the weather turns sharply
colder. | b. | The price of
tea, a substitute for hot chocolate, falls. | c. | The price of cocoa beans decreases. | d. | The price of whipped cream falls. | e. | A better method of harvesting cocoa beans is
introduced. | f. | The Surgeon General of the U.S. announces that hot chocolate
cures acne. | g. | Protesting farmers dump millions of gallons of milk, causing
the price of milk to rise. | h. | Consumer income falls because of a recession and hot chocolate
is considered a normal good. | i. | Producers expect the price of hot chocolate to increase next
month. | j. | Currently, the
price of hot chocolate is $0.50 per cup above equilibrium. | | |
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