econ910 chapter 3

52 terms by suqiyuan12

Create a new folder

Advertisement Upgrade to remove ads

1. A market:
A. reflects up-sloping demand and down-sloping supply curves.
B. entails the exchange of goods, but not services.
C. is an institution that brings together buyers and sellers.
D. always entails face-to-face contact between buyer and seller.

C

2. The law of demand states that:
A. price and quantity demanded are inversely related.
B. the larger the number of buyers in a market, the lower the product price.
C. price and quantity demanded are directly related.
D. consumers will buy more of a given product at high prices than they will at low prices.

A

3. Represented graphically, the market demand curve is:
A. steeper than any individual demand curve that comprises it.
B. greater than the sum of the individual demand curves.
C. the horizontal sum of individual demand curves.
D. the vertical sum of individual demand curves.

C

4. Economists use the term 'demand' to refer to:
A. a particular price-quantity combination on a stable demand curve.
B. the total amount spent on a particular commodity over a stipulated time period.
C. an up-sloping line on a graph that relates consumer purchases and product price.
D. a schedule of various combinations of market prices and quantities demanded.

D

5. When the price of a product increases, a consumer is able to buy less of it with a given money income. This
describes:
A. the cost effect.
B. the inflationary effect.
C. the income effect.
D. the substitution effect.

C

6. An increase in the price of a product will reduce the amount purchased because:
A. supply curves are up-sloping.
B. the higher price means that real incomes have risen.
C. consumers will substitute other products for the one whose price has risen.
D. consumers substitute relatively high-priced products for relatively low-priced products.

C

7. The construction of demand and supply curves assumes that the primary variable that influences decisions
to produce and purchase goods is:
A. price.
B. expectations.
C. preferences.
D. incomes.

A

8. Alyssa rents 5 movies per month when the price is $3.00 each and 7 movies per month when the price is
$2.50. Alyssa has demonstrated the:
A. law of price.
B. law of supply.
C. actions of an irrational consumer.
D. law of demand.

D

9. 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.

A

10. If the number of buyers in the market decreases, the:
A. demand in the market will increase.
B. demand in the market will decrease.
C. supply in the market will increase.
D. supply in the market will decrease.

B

11. A market demand is:
A. a vertical summation of individual demand curves.
B. a horizontal summation of individual demand curves.
C. not responsive to change in tastes and preferences.
D. determined solely by the number of buyers and sellers in the market.

B

12. A higher price for batteries would tend to:
A. increase the demand for flashlights.
B. increase the demand for electricity.
C. decrease the demand for electricity.
D. D: increase the demand for batteries.

B

13. Which of the following will not cause the demand for product K to change?
A. A change in the price of close-substitute product J.
B. An increase in consumer incomes.
C. A change in the price of K.
D. A change in consumer tastes.

C

14. Which of the following would not shift the demand curve for beef?
A. A widely publicised study that indicates beef increases one's cholesterol.
B. A reduction in the price of cattle feed.
C. An effective advertising campaign by pork producers.
D. A change in the incomes of beef consumers.

B

15. If the price of product L increases, the demand curve for close-substitute product J will:
A. shift downward toward the horizontal axis.
B. shift to the left.
C. shift to the right.
D. remain unchanged.

C

16. Two goods are complements if a decrease in the price of one good:
A. increases the quantity demanded of the other good.
B. reduces the demand for the other good.
C. reduces the quantity demanded of the other good.
D. raises the demand for the other good.

D

17. If goods A and B are complements, an increase in the price of A will result in:
A. more of good A sold.
B. more of good B sold.
C. less of good B sold.
D. no difference in the quantity sold of either good.

C

18. If the price of K declines, the demand curve for the complementary product J will:
A. shift to the left.
B. decrease.
C. shift to the right.
D. remain unchanged.

C

19. Which of the following is most likely to be an inferior good?
A. Fur coats.
B. Used clothing.
C. Steak.
D. Butter.

B

20. If X is a normal good, a rise in money income will shift the:
A. supply curve for X to the left.
B. supply curve for X to the right.
C. demand curve for X to the left.
D. demand curve for X to the right.

D

21. If consumer incomes increase, the demand for product X:
A. will necessarily remain unchanged.
B. may shift either to the right or left.
C. will necessarily shift to the right.
D. will necessarily shift to the left.

B

22. You love peanut butter. You hear on the news that 50% of the peanut crop in the South has been wiped out,
which will cause the price to double by the end of the year. As a result:
A. your demand for peanut butter will increase by the end of the year.
B. your demand for peanut butter increases today.
C. your demand for peanut butter falls as you look for a substitute good.
D. you decide to give up peanut butter completely.

B

23. The term 'quantity demanded' refers to:
A. the entire series of prices and quantities that comprise the demand schedule.
B. a situation where the income and substitution effects do not apply.
C. the amount of a product that will be purchased at some specific price.
D. none of the above.

C

24. The law of supply indicates that:
A. producers will offer more of a product at high prices than they will at low prices.
B. the product supply curve is down-sloping.
C. consumers will purchase less of a good at high prices than they will at low prices.
D. producers will offer more of a product at low prices than they will at high prices.

A

25. The supply of a good is negatively related to the:
A. price of inputs used to make the good.
B. demand for the good by consumers.
C. price of the good itself.
D. amount of profit a firm can expect to receive from sale of the good.

A

26. A leftward shift of a product supply curve might be caused by:
A. an improvement in the relevant technique of production.
B. a decline in the prices of needed inputs.
C. an increase in consumer incomes.
D. some firms leaving an industry.

D

27. If the number of sellers in a market increases, the:
A; demand in that market will increase.
B. supply in that market will increase.
C. supply in that market will decrease.
D. demand in that market will decrease.

Answer: B

28. Lead is an important input in the production of crystal. If the price of lead decreases, all else equal, we
would expect the supply of:
A. crystal to be unaffected.
B. crystal to decrease.
C. crystal to increase.
D. lead to increase.

C

29. An improvement in production technology will:
A. tend to increase equilibrium price.
B. shift the supply curve to the left.
C. shift the supply curve to the right.
D. shift the demand curve to the left.

C

30. 'Because of unseasonably cold weather, the supply of oranges has substantially decreased.' This statement
indicates that:
A. consumers will be willing and able to buy fewer oranges at each possible price.
B. the equilibrium quantity of oranges will rise.
C. the amount of oranges that will be available at various prices has declined.
D. the price of oranges will fall.

C

31. An increase in the price of oranges would lead to:
A. an increased supply of oranges.
B. a reduction in the prices of inputs used in orange production.
C. an increased demand for oranges.
D. a movement up the supply curve for oranges.

D

32. At the equilibrium price:
A. buyers have an incentive to buy more.
B. it is possible for there to be a shortage.
C. firms have an incentive to increase production.
D. the plans of buyers and sellers in the market are mutually consistent

D

33. Which of the following statements is incorrect?
A. If demand increases and supply decreases, equilibrium price will rise.
B. If supply increases and demand decreases, equilibrium price will fall.
C. If demand decreases and supply increases, equilibrium price will rise.
D. If supply declines and demand remains constant, equilibrium price will rise.

C

34. In which of the following instances will the effect upon equilibrium price be indeterminate; that is,
dependent on the magnitude of the given shifts in supply and demand?
A. Demand rises and supply rises.
B. Supply falls and demand remains constant.
C. Demand rises and supply falls.
D. Supply rises and demand falls.

A

35. The data below shows supply and demand data for wheat:
P($)QdQs
5 45 77
4 50 73
3 56 68
2 61 61
1 67 57
Refer to the above information. Equilibrium price will be:
A. $4.
B. $3.
C. $2.
D. $1.

C

36. If a product is in surplus supply, we can conclude that its price:
A. is below the equilibrium level.
B. is above the equilibrium level.
C. will rise in the near future.
D. is in equilibrium.

B

37. If the supply of a product decreases and the demand for that product simultaneously increases, we can
conclude that:
A. equilibrium price must rise, but equilibrium quantity may either rise, fall, or remain unchanged.
B. equilibrium price must rise and equilibrium quantity must fall.
C. equilibrium price and equilibrium quantity must both increase.
D. equilibrium price and equilibrium quantity must both decline.

A

38. The rationing function of prices refers to the:
A. tendency of supply and demand to shift in opposite directions.
B. fact that ration coupons are needed to alleviate wartime shortages of goods.
C. capacity of a competitive market to equate the quantity demanded and the quantity supplied.
D. ability of the market system to generate an equitable distribution of income.

C

39. If there is a shortage of product X, we can predict that:
A. fewer resources will be allocated to the production of this good.
B. the price of the product will rise.
C. the price of the product will decline.
D. the supply curve will shift to the left and the demand curve to the right, thereby eliminating the shortage.

B

40. In the following question, you are asked to determine, other things being equal, the effects of a given change in a determinant of demand or supply for product X upon: (i) the demand (D) for, or supply (S) of, X,
(ii) the equilibrium price (P) of X and (iii) the equilibrium quantity (Q) of X. An increase in income, if X is a normal good, will:
A. increase D, increase P, and increase Q.
B. increase D, increase P, and decrease Q.
C. increase S, increase P, and increase Q.
D. decrease D, increase P, and increase Q.

A

41. In the following question you are asked to determine, other things being equal, the effects of a given change in a determinant of demand or supply for product X upon: (i) the demand (D) for, or supply (S) of, X,
(ii) the equilibrium price (P) of X and (iii) the equilibrium quantity (Q) of X.
An increase in the tastes and preferences for X will:
A. increase S, decrease P, and increase Q.
B. decrease S, decrease P, and decrease Q.
C. increase D, increase P, and increase Q.
D. decrease D, decrease P, and decrease Q.

C

42. Given a down-sloping demand curve and an up-sloping supply curve for a product, a decrease in resource
prices will:
A. increase equilibrium price and quantity.
B. decrease equilibrium price and quantity.
C. decrease equilibrium price and increase equilibrium quantity.
D. increase equilibrium price and decrease equilibrium quantity.

C

43. If an Australian importer can purchase GBP10 000 for AUD20 000, then the rate of exchange:
A. in Australia will be AUD1 equals GBP2.
B. in Australia will be AUD2 equals GBP1.
C. in Great Britain will be AUD1 equals GBP2.
D. in Great Britain will be AUD0.5 equals GBP1.

B

44. The Australian supply of British pounds is:
A. down-sloping, because a lower dollar price of pounds means that Australian goods are cheaper to the British.
B. up-sloping, because a higher dollar price of pounds means that Australian goods are cheaper to the British.
C. up-sloping, because a lower dollar price of pounds means that Australian goods are cheaper to the British.
D. down-sloping, because a higher dollar price of pounds means that Australian goods are cheaper to the British.

B

45. A depreciation of the Australian dollar will tend to:
A. decrease the prices of both Australian imports and exports.
B. increase the prices of both Australian imports and exports.
C.decrease the prices of the goods that Australians import, but increase the prices to foreigners of the goods that Australians export.
D.increase the prices of the goods that Australians import, but decrease the prices to foreigners of the goods that Australians export.

D

46. Assume that France and Britain have floating exchange rates. Other things being unchanged, if economic growth is more rapid in France than in Britain:
A. gold bullion will flow out of France.
B. the franc will depreciate.
C. the pound will depreciate.
D. the franc will appreciate.

B

47. Assume that France and Britain have floating exchange rates. Other things being unchanged, if the price level is stable in Britain but France experiences rapid inflation:
A. gold bullion will flow into France.
B. the franc will depreciate.
C. the pound will depreciate.
D. the franc will appreciate.

B

48. Surpluses drive competitive prices up; shortages drive them down.
A. True
B. False

B

49. If demand increases and supply simultaneously decreases, equilibrium price will rise.
A. True
B. False

B

50. The rationing function of prices refers to the fact that the government must distribute any surplus goods that
may be left in a competitive market.
A. True
B. False

B

51. Consumers buy more of normal goods as incomes rise.
A. True
B. False

B

52. Toothpaste and toothbrushes are substitute goods.
A. True
B. False

B

Please allow access to your computer’s microphone to use Voice Recording.

Having trouble? Click here for help.

We can’t access your microphone!

Click the icon above to update your browser permissions above and try again

Example:

Reload the page to try again!

Reload

Press Cmd-0 to reset your zoom

Press Ctrl-0 to reset your zoom

It looks like your browser might be zoomed in or out. Your browser needs to be zoomed to a normal size to record audio.

Please upgrade Flash or install Chrome
to use Voice Recording.

For more help, see our troubleshooting page.

Your microphone is muted

For help fixing this issue, see this FAQ.

Star this term

You can study starred terms together

NEW! Voice Recording

Create Set