ecapmicro.weebly.com · Web viewSupply and Demand Practice Questions 1. The law of demand states that, other things remaining the same, the higher the price of a good, the A) smaller

Supply and Demand Practice Questions

1. The law of demand states that, other things remaining the same, the higher the price of a good, the

A) smaller is the demand for the goodB) smaller is the quantity of the good demandedC) larger is the quantity of the good demandedD) larger is the demand for the good

2. A drop in the price of compact discs shifts the demand curve for prerecorded tapes leftward. From that you compact discs and prerecorded tapes are

A) normal goodsB) substitutesC) inferior goodsD) complements

3. The demand for a good increases when the price of a substitute _______ and also increases when the price of a complement ________.

(A) falls; fallsB) rises; fallsC) rises; risesD) falls; rises

4. As the opportunity cost of a good decreases, people buyA) more of that good but less of its complementsB) less of that good and also less of its complementsC) less of that good but more of its complementsD) more of that good and also more of its complements

5. People come to expect that the price of a gallon of gasoline will rise next week. As a result,A) next week’s supply of gasoline decreasesB) the price of a gallon of gasoline falls todayC) today’s supply of gasoline increasesD) today’s demand for gasoline increases

6. Normal goods are those for which demand decrease asA) the price of a substitute fallsB) the price of a complement fallsC) the good’s own price risesD) income decreases

7. By definition, an inferior good is aA) normal substitute goodB) good for which demand decreases when its price risesC) want that is not expressed by demandD) good for which demand decreases when income increases

8. Which of the following would NOT shift the demand curve for turkey?A) a change in tastes for turkeyB) a decrease in the price of hamC) a change in the price of a turkeyD) an increase in income

9. An increase in the number of fast food restaurantsA) increases the demand for substitutes for fast food mealsB) raises the price of fast food mealsC) increases the supply of fast food mealsD) increases the demand for fast food meals

10. Which of the following will shift the supply curve for good X leftward?A) a situation in which quantity demanded exceeds quantity suppliedB) an increase in the cost of the machinery used to produce XC) a decrease in the wages of workers employed to produce XD) a technological improvement in the production of X

11. A decrease in the quantity supplied is represented by a A) rightward shift in the supply curveB) movement down the supply curveC) leftward shift in the supply curveD) movement up the supply curve

12. The figure above represents the market for candy. People become concerned that eating candy causes them to gain weight, which they do not like. As a result, the

A) demand curve will not shift, and the supply curve shifts from S1 to S2

B) demand curve shifts from D1 to D2 and the supply curve shifts from S1 to S2

C) demand curve shifts from D2 to D1 and the supply curve shifts from S2 to S1

D) demand curve shifts from D2 to D1 and the supply curve will not shift

13. The above figure represents the market for French fries at fast food joints. If the price of potatoes rises and simultaneously people become concerned that French fries can cause heart attacks,

A) the demand curve shifts from D2 to D1 and the supply curve shifts from S2 to S1

B) the demand curve shifts from D2 to D1 and the supply curve will not shiftC) the demand curve will not shift, and the supply curve shifts from S1 to S2

CD demand curve shifts from D2 to D1 and the supply curve shifts from S1 to S2

14. When the price is below the equilibrium price, the quantity demandedA) is less than the equilibrium quantity. The quantity supplied exceeds the equilibrium

quantity.B) exceeds the equilibrium quantity. The quantity supplied is less than the equilibrium

quantity.C) exceeds the equilibrium quantity. So does the quantity supplied.D) is less than the equilibrium quantity. So is the quantity supplied.

15. Which of the following correctly describes how price adjustments eliminate a shortage?A) As the price falls, the quantity demanded increases while the quantity supplied

decreases.B) As the price rises, the quantity demanded decreases while the quantity supplied

increases.C) As the price falls, the quantity demanded decreases while the quantity supplied

increases.D) As the price rises, the quantity demanded increases while the quantity supplied

decreases.

16. A surplus occurs when the price isA) equal to the equilibrium priceB) greater than the equilibrium priceC) less than the equilibrium priceD) None of the above because the existence of a surplus is independent of the price of

the good.

17. At a price of $10 in the above figure, there is A) a surplus of 400 unitsB) a shortage of 200 unitsC) a surplus of 200 unitsD) a shortage of 200 units

18. The initial supply and demand curves for a good are illustrated in the above figure. If there is a rise in the price of the resources used to produce the good, then the new price

A) is less than 6B) is more than $6C) could be less than, equal to, or more than $6D) is $6

19. Beef and leather belts are complements in production. If people’s concern about health shifts the demand curve for beef leftward, the result in the market for leather belts will be a

A) lower equilibrium price for a leather belt because there is an increase in the supply of leather

B) higher equilibrium price for a leather belt because there is a decrease in the supply of leather

C) lower equilibrium price for a leather belt because there is a decrease in the supply of leather

D) higher equilibrium price for a leather belt because there is an increase in the supply of leather

20. If both demand and supply increase, the equilibrium quantity A) decreases and the price risesB) increases and the effect on price is indeterminateC) decreases and the effect on price is indeterminateD) increases and the price falls

21. In the above figure, if D2 is the demand curve, then a price of P3 would result inA) a surplus of Q4 to Q0

B) a surplus of Q3 to Q1

C) a shortage of Q4 to Q3

D) a shortage of Q3 to Q1

22. In the above figure, if D2 is the original demand curve and the population falls, which of the following may result?

A) point d, which price P1 and quantity Q3

B) point c, which price P3 and quantity Q3

C) point b, which price P1 and quantity Q1

D) point a, which price P2 and quantity Q2

23. The price elasticity of demand measuresA) the slope of a budget curveB) how often the price of a good changesC) the responsiveness of the quantity demanded to changes in priceD) how sensitive the quantity demanded is to changes in demand

24. If a rightward shift of the supply curve leads to a 6 percent decrease in the price and a 5 percent increase in the quantity demanded, the price elasticity of demand is

A) 0.83B) 0.30C) 0.60D) 1.20

25. A 10 percent increase in the quantity of spinach demanded results from a 20 percent decline in price. The price elasticity of demand for spinach is

A) 0.5B) 20.0C) 2.0D) 10.0

26. The table above gives the demand schedule for snow peas. If the price of snow peas falls from $4 to $3 a bushel, total revenue will

A) increase because demand is elastic in this rangeB) increase because demand is inelastic in this rangeC) decrease because demand is inelastic in this rangeD) decrease because demand is elastic in this range

27. If demand is price elastic, A) a 1 percent decrease in the price leads to an increase in the quantity demanded that

exceeds 1 percentB) a 1 percent increase in the price leads to an increase in the quantity demanded that

exceeds 1 percentC) the price is very sensitive to any shift of the supply curveD) a 1 percent decrease in the price leads to a increase in the quantity demanded that is

less than 1 percent

28. Demand is perfectly inelastic whenA) the good in question has perfect substitutes B) shifts in the supply curve result in no change in priceC) shifts in the supply curve result in no change in quantity demandedD) shifts in the supply curve result in no change in the total revenue from sales

29. A good with a horizontal demand curve has a demand withA) infinite elasticityB) unit elasticityC) zero elasticityD) varying elasticity

30. If a price decrease results in your expenditure on a good decreasing, your demand must beA) unitB) inelasticC) linearD) elastic

31. The elasticity of demand for Dell computers is probablyA) elastic and smaller than the elasticity of demand for computers overallB. inelastic and smaller than the elasticity of demand for computers overallC) inelastic but larger than the elasticity of demand for computers overallD) elastic and larger than the elasticity of demand for computers overall

32. If goods are complements, definitely theirA) income elasticities are negativeB) income elasticities are positiveC) cross elasticities are positiveD) cross elasticities are negative

33. The cross elasticity of demand between apples and oranges is defined asA) the price elasticity of demand for apples divided by the price elasticity of demand for

orangesB) the change in the quantity of apples demanded divided by the change in the quantity

of oranges demandedC) the percent change in the quantity of apples demanded divided by the percent change

in the price of orangesD) the percent change in the quantity of apples demanded divided by the percent change

in the quantity of oranges demanded

34. The income elasticity of demand is the percent change in A) income divided by the percent change in priceB) the percent change in quantity demanded divided by the percentage change in

incomeC) the percent change in price divided by the percent change in incomeD) the percent change in income divided by the percent change in quantity demanded

35. To say that turnips are inferior goods means that the income elasticityA) is definitely greater than 1B) is negativeC) is positive but could be greater than or less than (or equal to) 1D) is definitely between 0 and 1

36. On most days the price of a rose is $1 and 80 roses are purchased. On Valentine’s Day the demand increases so that the price of a rose rises to $2 and 320 roses are purchased. Therefore, the price elasticity of

A) demand for roses is about 1.8B) supply of roses is about 1.8C) demand for roses is about 0.55D) supply of roses is about 0.55

37. If a 1 percent decrease in the price of a pound of oranges results in a smaller percentage decrease in the quantity supplied,

A) supply is inelasticB) demand is inelasticC) supply is elasticD) supply is unit elastic

38. A rent ceiling set above the equilibrium priceA) restricts both the quantity demanded and the quantity suppliedB) restricts the quantity demanded but not the quantity suppliedC) restricts the quantity supplied but not the quantity demandedD) has no effect

39. A rent ceiling below the equilibrium price will encourageA) a larger number of apartments rentedB) a more efficient allocation of housingC) no change in the number of apartments rentedD) increased search time and black markets

40. In the absence of a minimum wage, a leftward shift of the supply curveA) increases demandB) lowers the equilibrium wageC) raises the equilibrium wageD) None of the above answers is correct.

41. An effective minimum wage is a priceA) ceiling that results in a surplus of low-skilled laborB) floor that results in a shortage of low-skilled laborC) ceiling that results in a shortage of low-skilled laborD) floor that results in a surplus of low-skilled labor

42. A binding minimum wage createsA) inefficiency because it causes too much job searchB) efficiency because few workers lose their jobsC) efficiency because it increases most workers’ wagesD) inefficiency because it decreases productive unemployment

43. In general, how a sales tax is divided between buyers and sellers is determined by A) elasticity of supply onlyB) elasticity of demand onlyC) both the elasticity of demand and the elasticity of supplyD) neither the elasticity of demand nor the elasticity of supply

44. In the figure above, if a tax of $2 per widget is imposed, then the price of widgets paid by the buyer will be

A) between $6 and $8B) less than $6C) $6D) more than or equal to $8

45. In the figure above, if a tax of $2 per widget is imposed, then the after-tax amount per widget received by the seller will be

A) $6B) between $8 and $6C) less than $6D) more than equal to $8

46. In the above figure, the amount of the tax per unit isA) $1.50B) $1C) $0.50D) $2.00

47. In the above figure, the amount of tax revenue isA) $8000B) $4000C) $2000D) $6000

48. In the above figure, the tax is divided A) so that most of it is paid by the buyersB) so that neither the buyers nor the sellers pay itC) equally so that the buyers and sellers pay the same amountD) so that most of it is paid by the sellers

49. In the above figure, the deadweight loss due to the tax isA) $8000B) $1000C) $2000D) $4000

50. Nick can purchase a milkshake for $2. For the first milkshake Nick is willing to pay $4, for the second milkshake $3, for the third milkshake $2, and for the fourth milkshake $1. What is the value of Nick’s consumer surplus?

A) $3B) $9C) $10D) $2

51. The figure above shows Clara’s demand for CDs. If the market price for a CD is $10, then Clara

A) receives a total of $10 of consumer surplusB) receives a total of $80 of consumer surplusC) will buy no CDsD) receives no consumer surplus on the 8th CD she buys

52. In the above figure, if the price is $2, then the total consumer surplus will be

A) triangle cefB) trapezoid adecC) triangle abcD) trapezoid bdfc

53. In the above figure, if the market price is $100 per ton, then the firm’s producer surplus on the second ton of wheat is

A) $100B) $50C) $75D) $25

54. In the above figure, the producer surplus would be zero if the price per ton of wheat was A) $75B) $100C) $50D) $25

55. When a market is in equilibrium, the total amount of consumer surplus must be ________ the total amount of producer surplus.

A) less thanB) larger thanC) equal toD) None of the above answers are correct.

1. B2. B3. B4. D

5. D6. D7. D8. C9. C10. B11. B12. D13. A14. B15. B16. B17. A18. B19. B20. B21. B22. C23. C24. A25. A26. C27. A28. C29. A30. B31. D32. D33. C34. B35. B36. B37. A38. D39. D40. C41. D42. A43. C44. A45. C46. D47. B48. C49. B50. A51. D52. C53. D

54. D55. D