In economics, the term demand refers to the quantity of a good that people
A) would like to consume on a given date.
B) are willing and able to buy at a particular price on a given date.
C) are willing and able to buy at all possible prices.
D) would like to have available during a given time period.
E) none of the above
2.
In economics, the term supply refers to
A) the quantity of a good or service a producer must sell to earn a profit.
B) the quantity of a product that people want to buy.
C) the quantity of an item offered for sale at a particular price.
D) the quantity of a good or service producers will sell at all possible prices.
E) none of the above
3.
When buyers will purchase exactly as much as sellers are willing to sell, what is the condition that has been reached?
A) supply and demand
B) excess demand
C) equilibrium price
D) price floor
E) none of the above
4.
When there is an increase in supply, what is the probable result in the market?
A) equilibrium would settle at a higher price and a lower quantity
B) equilibrium would settle at a lower price and a higher quantity
C) equilibrium would settle at a lower price and a lower quantity
D) equilibrium would not change
E) none of the above
5.
In a market economy, who is it that ultimately determines the demand for a product or service?
A) the producers who create the product or service
B) the government
C) those who buy the product or service
D) those who supply the raw materials used in the production of the good or service
E) all of the above
6.
When there is a decrease in demand, what happens in the market?
A) equilibrium would settle at a higher price and a higher quantity
B) equilibrium would settle at a lower price and a higher quantity
C) equilibrium would settle at a higher price and a lower quantity
D) equilibrium would settle at a lower price and a lower quantity
E) none of the above
7.
What happens to a market when producers set their prices above the equilibrium price?
A) quantity supplied will exceed quantity demanded, so there will be a surplus
B) quantity demanded will exceed quantity supplied, so there will be a shortage
C) excess supply means that price will continue to rise
D) competition among sellers will cause prices to fall
E) A and D
8.
A change in any of the following can cause a change in demand EXCEPT
A) income
B) tastes and preferences
C) the price of substitute goods
D) increases in production technology
E) the availability of a complimentary good
9.
A change in any of the following can cause a change in supply EXCEPT
A) taxes
B) price of inputs
C) price of the product
D) number of suppliers
E) productivity
10.
Which of these is the most likely effect of an increase in the cost of production?
A) a decrease in supply
B) a decrease in demand
C) an increase in demand
D) an increase in supply
E) all of the above
11.
Demand for a product tends to be inelastic when the product
A) has few, if any, substitutes.
B) is expensive.
C) is a luxury item.
D) has many substitutes.
E) all of the above
12.
Demand for milk tends to be inelastic because milk is considered
A) a necessity.
B) a substitute.
C) good on Cap’n Crunch.
D) a luxury.
E) all of the above
13.
The price elasticity of demand measures how responsive
A) buyers are to a change in income
B) sellers are to a change in price
C) buyers are to a change in price
D) sellers are to a change in production costs.
E) none of the above
14.
Demand is said to be elastic if
A) the price of the good responds substantially to changes in quantity demand.
B) the quantity demanded responds substantially to changes in the price of the good.
C) the price of the good responds only slightly to changes in quantity demand.
D) the quantity demanded responds only slightly to changes in the price of the good.
E) none of the above
15.
When the price of bubble gum is $0.50, the quantity demanded is 400 packs per day. When the price falls to $0.40, the quantity demanded increases to 600. Given this information and using the total revenue method, you know that the demand for bubble gum is
A) inelastic.
B) elastic.
C) unit elastic.
D) perfectly inelastic.
E) none of the above
16.
Figure 1 (Questions 16-19)
Combined Supply and Demand Schedule
Price of a
slice of pizza Quantity
demanded Quantity
supplied
$.50 300 100
$1.00 250 150
$1.50 200 200
$2.00 150 250
$2.50 100 300
$3.00 50 350
In Figure 1, when the price of a slice of pizza is $2.50, how many slices are sold?
A) 250
B) 200
C) 150
D) 100
E) 50
17.
In Figure 1, what is the equilibrium price?
A) $3.00
B) $2.00
C) $1.50
D) $1.00
E) not enough information
18.
In Figure 1, when the price of a slice of pizza is $.50, which choice explains what is occuring the market?
A) quantity demanded equals 200
B) there is a shortage of pizza
C) the market is in equilibrium
D) there is a surplus of pizza
E) not enough information
19.
In Figure 1, when the price of a slice of pizza is $2.50, what happens to the market?
A) there is a shortage of pizza
B) there is a price floor on pizza
C) the quantity demanded equals 250
D) there is a surplus of pizza
E) not enough information
20.
Use Figure 2 for Questions 20-22
Refer to Figure 2. At a price of $15,
A) there would be a shortage of 400 units.
B) there would be a surplus of 400 units.
C) there would be a shortage of 200 units.
D) the market would be in equilibrium.
E) none of the above
21.
Refer to Figure 2. At the equilibrium price,
A) 200 units would be supplied and demanded.
B) 400 units would be supplied and demanded.
C) 600 units would be supplied and demanded.
D) 600 units would be supplied, but only 200 would be demanded.
E) none of the above
22.
Refer to Figure 2. At a price of $35,
A) there would be a shortage of 400 units.
B) there would be a surplus of 200 units.
C) there would be a surplus of 400 units.
D) the market would be in equilibrium.
E) none of the above
23.
Figure 3 (Questions 23-29)

Refer to Figure 3. Graph A shows which of the following?
A) an increase in demand
B) an increase in supply
C) an increase in quantity supplied
D) all of the above are correct
E) both A and C are correct.
24.
Refer to Figure 3. Which of the four graphs represents the market for XBOX 360’s when the price of Playstation 3’s goes down?
A) A
B) B
C) C
D) D
25.
Refer to Figure 3. Which of the four graphs represents the market for pizzas delivered in a college town when students return to campus in September?
A) A
B) B
C) C
D) D
26.
Refer to Figure 3. Which of the four graphs represents the market for peanut butter after a major hurricane hits the peanut-growing south?
A) A
B) B
C) C
D) D
27.
Refer to Figure 3. Which of the four graphs represents the market for automobiles after steel becomes cheaper? A. A
A) A.
B) B
C) C
D) D
28.
Refer to Figure 3. Which of the four graphs represents the market for cars after a new restrictive government regulation is introduced?
A) A
B) B
C) C
D) D
29.
Refer to Figure 3. Which of the four graphs shows the market for gasoline immediately before a holiday weekend when people plan to travel?
A) A
B) B
C) C
D) D
30.
A technological advancement
A) will shift the demand curve to the right.
B) will shift the demand curve to the left.
C) will shift the supply curve to the right.
D) will shift the supply curve to the left.
31.
A new health kick has swept the nation making everyone want to exercise and be healthy. How does this affect the market for Pilates Workout DVDs?
A) increase equilibrium quantity, increase equilibrium price.
B) decrease equilibrium quantity, decrease equilibrium price.
C) increase equilibrium quantity, decrease equilibrium price.
D) decrease equilibrium quantity, increase equilibrium price.
32.
Coca-Cola has gone on sale. You can buy a case for only a dollar. What happens to the market for Pepsi?
A) increase equilibrium quantity, increase equilibrium price.
B) decrease equilibrium quantity, decrease equilibrium price.
C) increase equilibrium quantity, decrease equilibrium price.
D) decrease equilibrium quantity, increase equilibrium price.
33.
OPEC dramatically reduces the availability of crude oil. How does this affect the market for gasoline?
A) increase equilibrium quantity, increase equilibrium price.
B) decrease equilibrium quantity, decrease equilibrium price.
C) increase equilibrium quantity, decrease equilibrium price.
D) decrease equilibrium quantity, increase equilibrium price.
34.
The government decides to subsidize agriculture (support it with money). How does this affect the market for corn?
A) increase equilibrium quantity, increase equilibrium price.
B) decrease equilibrium quantity, decrease equilibrium price.
C) increase equilibrium quantity, decrease equilibrium price.
D) decrease equilibrium quantity, increase equilibrium price.
35.
A person who lives to be on the sea in a boat would tend to have what type of demand for boats?
A) elastic
B) inelastic
C) unit elastic
D) weak
36.
Demand for a good would tend to be more elastic,
A) the greater the availability of complements.
B) the longer the period of time considered.
C) the broader the definition of the market.
D) the fewer substitutes there are.
37.
Chocolate Chip ice cream would tend to have very elastic demand because
A) other flavors of ice cream are almost perfect substitutes.
B) the market is broadly defined.
C) there are few substitutes.
D) it must be eaten quickly.
38.
Holding all other forces constant, when the price of gasoline rises, the number of gallons of gasoline demanded would fall substantially over a ten year period because
A) buyers tend to be much less sensitive to a change in price when given more time to react.
B) buyers will have substantially more income over a ten year period.
C) buyers tend to be much more sensitive to a change in price when given more time to react.
D) None of these answers are correct.
39.
Demand is unit elastic if
A) elasticity is less than 1.
B) elasticity is equal to 1.
C) elasticity is greater than 1.
D) elasticity is equal to 0.
40.
If hot dogs are an inferior good, an increase in income will result in
A) An increase in the quantity demanded for hot dogs.
B) An increase in the demand for hot dogs.
C) A decrease in the quantity demanded for hot dogs.
D) A decrease in the demand for hot dogs.
E) No change in the quantity demanded for hot dogs.
41.
Which of the following statements best reflects the law of diminishing marginal utility?
A) “I have to have a scoop of ice cream on my pie.”
B) “I’ll never get tired of your cooking.”
C) “The last bite tastes just as good as the first.”
D) “I couldn’t eat another doughnut if you paid me.”
E) “I prefer to eat several small meals a day, rather than three large ones.”
42.
Brooke is spending all of her income consuming products X and Y. If MUX / PX = 10 and MUy / Py = 6, what should Brooke do to maximize her satisfaction?
A) Buy more X and more Y.
B) Buy more X and less Y.
C) Buy less X and less Y.
D) Buy less X and more Y.
E) Make no changes
43.
While eating at Alex’s “Pizza by the Slice” restaurant, Kara experiences diminishing marginal utility. She gained 10 units of satisfaction from her first slice of pizza consumed, and would only receive 5 units of satisfaction from consuming a second slice. Based on this information we can conclude that:
A) Alex may have to lower the price to convince Kara to buy a second slice
B) Kara will not eat a second slice, even if it is given to her at no charge.
C) Kara will definitely want to buy a second slice of pizza.
D) even if Kara buys a second slice, she will not buy a third slice.