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Sample Test

 Chapter 03

Exam
Name___________________________________
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
1) The market supply curve for wooden shipping crates would shift to the right 1)
A) if the prices of inputs fall.
B) if a government subsidy for shipping crates is withdrawn.
C) if suppliers leave the industry.
D) if technological conditions for the production of crates deteriorates.
E) if a tax is applied to shipping crates.
Answer: A
Explanation: A)
B)
C)
D)
E)
2) A demand curve is a representation of the relationship, ceteris paribus, between quantity
demanded and
2)
A) income.
B) preferences.
C) wealth.
D) price.
E) supply.
Answer: D
Explanation: A)
B)
C)
D)
E)
1
FIGURE 3-3
3) Refer to Figure 3-3. At a price of P3 there is excess ________ in the market for X and pressure for
the price to ________.
3)
A) supply; fall B) demand; fall C) supply; rise D) demand; rise
Answer: D
Explanation: A)
B)
C)
D)
2
FIGURE 3-1
4) Refer to Figure 3-1. A shift of the demand curve for energy-efficient light bulbs from D to D1
could be caused by
4)
A) a news bulletin stating that energy-efficient light bulbs emit a harmful gas.
B) an expectation that government regulation will soon prohibit the use of ordinary light bulbs.
C) a decrease in the price of energy-efficient light bulbs.
D) a change in preferences toward ordinary light bulbs.
E) a decrease in the price of ordinary light bulbs.
Answer: B
Explanation: A)
B)
C)
D)
E)
3
The table below displays hypothetical demand and supply schedules for the market for overnight parcel deliveries in Canada.
Quantity
Demanded
(millions)
Quantity
Supplied
(millions)
Price ($) Year 1 Year 2 Year 1 Year 2
30 80 95 140 125
26 90 105 135 120
22 100 115 130 115
18 110 125 125 110
14 120 135 120 105
10 130 145 115 100
TABLE 3-3
5) Refer to Table 3-3. If the price of overnight parcel delivery in Year 2 is $10, how many parcels will
actually be delivered?
5)
A) 100 B) 130 C) 145 D) 115
Answer: A
Explanation: A)
B)
C)
D)
4
FIGURE 3-4
6) Refer to Figure 3-4. The market for 1-bedroom apartments in Collegetown will be in equilibrium at
a price and quantity combination of
6)
A) $400; 300 apartments.
B) $300; 250 apartments.
C) $500; 350 apartments.
D) $700; 450 apartments.
E) $500; 300 apartments.
Answer: A
Explanation: A)
B)
C)
D)
E)
5
FIGURE 3-5
7) Refer to Figure 3-5. Ceteris paribus, if supply were to increase, this would lead to 7)
A) an increase in equilibrium price and a decrease in equilibrium quantity.
B) no change in equilibrium price or quantity.
C) an increase in both equilibrium price and quantity.
D) a decrease in both equilibrium price and quantity.
E) a decrease in equilibrium price and an increase in equilibrium quantity.
Answer: E
Explanation: A)
B)
C)
D)
E)
8) Consider a negatively sloped demand curve for natural gas. If the supply of natural gas increases,
the new equilibrium will have
8)
A) a lower price and a greater quantity.
B) the same price and larger quantity.
C) a higher price and a smaller quantity.
D) a lower price and a smaller quantity.
E) a higher price and a larger quantity.
Answer: A
Explanation: A)
B)
C)
D)
E)
6
9) Consider the global market for some mineral, X. In January, 2011, the equilibrium price and
quantity were P = $27 per unit and Q = 140 million units. In January, 2013, the equilibrium price
and quantity were P = $27 per unit and Q = 175 million units. Which of the following is the best
possible explanation for this change in market equilibrium?
9)
A) There has been an increase in supply of mineral X.
B) There has been an increase in quantity supplied of mineral X.
C) There has been an increase in quantity demanded for mineral X.
D) There has been an increase in demand for mineral X.
E) There has been a simultaneous increase in demand for, and increase in supply of, mineral X.
Answer: E
Explanation: A)
B)
C)
D)
E)
FIGURE 3-4
10) Refer to Figure 3-4. If the price of 1-bedroom apartments in Collegetown were $700, there would
be a ________ of ________ apartments.
10)
A) surplus; 300
B) surplus; 150
C) surplus; 100
D) shortage; 300
E) shortage; 150
Answer: A
Explanation: A)
B)
C)
D)
E)
7
11) Goods X and Y are defined to be substitutes in consumption if 11)
A) the two goods are virtually the same.
B) the demand for Y varies directly with the price of X.
C) the supply of Y varies directly with the price of X.
D) the demand for Y varies inversely with the price of X.
E) the supply of Y varies inversely with the price of X.
Answer: B
Explanation: A)
B)
C)
D)
E)
12) Suppose that a newer way to produce a good is discovered, which reduces production costs for the
good. This will cause
12)
A) a movement down the supply curve.
B) a decrease in supply (a leftward shift of the supply curve).
C) no change in the supply curve, only a change in price.
D) an increase in supply (a rightward shift of the supply curve).
E) a movement up the supply curve.
Answer: D
Explanation: A)
B)
C)
D)
E)
8
FIGURE 3-3
13) Refer to Figure 3-3. At a price of P1 there is excess ________ in the market for X and pressure for
the price to ________.
13)
A) demand; fall B) demand; rise C) supply; rise D) supply; fall
Answer: D
Explanation: A)
B)
C)
D)
14) Aeronautical engineers are a factor of production for airplanes. What will happen in the world
market for airplanes when there is a worldwide shortage of aeronautical engineers?
14)
A) price will decrease, quantity exchanged will decrease
B) price will decrease, quantity exchanged will increase
C) price will increase, quantity exchanged will decrease
D) price will increase, quantity exchanged will increase
E) there will be no change in price or quantity exchanged
Answer: C
Explanation: A)
B)
C)
D)
E)
9
15) Suppose we observe that movie theatre prices are less during the daytime than in the evening. If
the supply of movies does not change between daytime and evening, then the most likely
explanation for this difference in price is
15)
A) the evening supply curve is to the right of the daytime supply curve.
B) the evening demand curve is to the right of the daytime demand curve.
C) the evening supply curve is to the left of the daytime supply curve.
D) the evening demand curve is to the left of the daytime demand curve.
Answer: B
Explanation: A)
B)
C)
D)
16) The “law of demand” describes 16)
A) a positive relationship between the price of a good and the quantity of the good demanded
per unit of time, ceteris paribus.
B) a direct relationship between the price of a good and the demand for the good.
C) any relationship between quantity demanded and demand for a good.
D) an inverse relationship between the price of a good and the quantity of the good demanded
per unit of time, other things being equal.
E) an inverse relationship between the price of a good and the demand for the good, per unit of
time.
Answer: D
Explanation: A)
B)
C)
D)
E)
10
FIGURE 3-5
17) Refer to Figure 3-5. A price at which there would be a surplus in this market is 17)
A) both P1 and P2.
B) P3.
C) P2.
D) both P1 and P3.
E) P1.
Answer: E
Explanation: A)
B)
C)
D)
E)
18) If a change in tastes has raised the price of tomatoes by 5% when the general price level increased
by 2%, the price of tomatoes
18)
A) ultimately increased by 7%.
B) increased by 3% relative to the average of all prices.
C) is not affected by inflation as much.
D) is not of interest anymore because it is rendered meaningless by the inflation.
E) in fact increased by 3%.
Answer: B
Explanation: A)
B)
C)
D)
E)
11
19) Which statement best describes a “demand schedule”? 19)
A) an abstract concept underlying the graph of a demand curve
B) a graph showing the inverse relationship between quantity demanded and price
C) a timetable showing the quantity demanded at different time periods
D) a numerical tabulation showing the quantities demanded at various prices
E) a functional statement of the demand relationship
Answer: D
Explanation: A)
B)
C)
D)
E)
The table below displays hypothetical demand and supply schedules for the market for overnight parcel deliveries in Canada.
Quantity
Demanded
(millions)
Quantity
Supplied
(millions)
Price ($) Year 1 Year 2 Year 1 Year 2
30 80 95 140 125
26 90 105 135 120
22 100 115 130 115
18 110 125 125 110
14 120 135 120 105
10 130 145 115 100
TABLE 3-3
20) Refer to Table 3-3. Which of the following events could explain the change in the market for
overnight parcel delivery between Year 1 And Year 2?
20)
A) the government introduced a subsidy for overnight parcel delivery
B) there was a decrease in the price of jet fuel
C) the price of regular parcel delivery decreased
D) the number of suppliers of overnight parcel delivery service increased
E) consumer preferences changed toward a desire for overnight delivery
Answer: E
Explanation: A)
B)
C)
D)
E)
12
The supply and demand schedules for the umbrella market are given below:
Price Quantity Supplied Quantity Demanded
$10 400 700
$15 500 650
$20 600 600
$25 700 550
$30 800 500
TABLE 3-2
21) Refer to Table 3-2. The equilibrium price for umbrellas is 21)
A) $30. B) $10. C) $25. D) $15. E) $20.
Answer: E
Explanation: A)
B)
C)
D)
E)
FIGURE 3-3
22) Refer to Figure 3-3. At a price of P1 there would be excess supply equal to 22)
A) Q1 Q2. B) Q1 Q5. C) Q4 Q5. D) Q2 Q4. E) 0.
Answer: D
Explanation: A)
B)
C)
D)
E)
13
23) Suppose that supply for some good increases and that simultaneously the demand for the same
good decreases. The result would be
23)
A) an increase in Q and an increase in P.
B) a decrease in P and an indeterminate change in Q.
C) a decrease in Q and an indeterminate change in P.
D) an increase in Q and a decrease in P.
E) no change in either P or Q.
Answer: B
Explanation: A)
B)
C)
D)
E)
The table below displays hypothetical demand and supply schedules for the market for overnight parcel deliveries in Canada.
Quantity
Demanded
(millions)
Quantity
Supplied
(millions)
Price ($) Year 1 Year 2 Year 1 Year 2
30 80 95 140 125
26 90 105 135 120
22 100 115 130 115
18 110 125 125 110
14 120 135 120 105
10 130 145 115 100
TABLE 3-3
24) Refer to Table 3-3. Which of the following statements describes a likely event in the market for
overnight parcel delivery? From Year 1 to Year 2,
24)
A) the number of suppliers of overnight parcel delivery service increased.
B) there was an improvement in technology for tracking overnight parcels.
C) the price of regular parcel delivery decreased.
D) there was a rise in the price of jet fuel.
E) there was a decrease in consumers’ income.
Answer: D
Explanation: A)
B)
C)
D)
E)
14
25) Ceteris paribus, the position of the demand curve for apples will remain unchanged if there is a
change in the
25)
A) knowledge regarding the health benefits of eating fresh fruit.
B) income of apple eaters.
C) hourly wage rate of most workers.
D) price of pears.
E) price of apples.
Answer: E
Explanation: A)
B)
C)
D)
E)
The table below displays hypothetical demand and supply schedules for the market for overnight parcel deliveries in Canada.
Quantity
Demanded
(millions)
Quantity
Supplied
(millions)
Price ($) Year 1 Year 2 Year 1 Year 2
30 80 95 140 125
26 90 105 135 120
22 100 115 130 115
18 110 125 125 110
14 120 135 120 105
10 130 145 115 100
TABLE 3-3
26) Refer to Table 3-3. The equilibrium price and quantity for overnight parcel delivery in Year 2 is
________ and ________ million parcels.
26)
A) $18; 110 B) $22; 115 C) $18; 125 D) $10; 100 E) $14; 120
Answer: B
Explanation: A)
B)
C)
D)
E)
15
27) Choose the best description of an “equilibrium price.” 27)
A) The price that consumers are willing to pay.
B) The price at which demand for the commodity is equal to supply.
C) The price at which quantity demanded of the commodity is equal to the quantity supplied.
D) The price in the middle of supply and demand.
E) The price that producers want to charge.
Answer: C
Explanation: A)
B)
C)
D)
E)
28) Suppose that the price of wheat has fallen from $3 to $2 per bushel and that the price of newsprint
has fallen from $200 to $100 per tonne. The relative price of wheat in terms of newsprint
28)
A) is completely unrelated.
B) has fallen.
C) has risen.
D) cannot be determined from the above data.
E) remained constant.
Answer: C
Explanation: A)
B)
C)
D)
E)
29) Quantity demanded is a flow variable, which means that it must be expressed 29)
A) in units of the good per week.
B) in units of the good per day.
C) in units of the good per year.
D) in units of the good per period of time.
E) as so much at a specific moment in time.
Answer: D
Explanation: A)
B)
C)
D)
E)
16
The table below displays hypothetical demand and supply schedules for the market for overnight parcel deliveries in Canada.
Quantity
Demanded
(millions)
Quantity
Supplied
(millions)
Price ($) Year 1 Year 2 Year 1 Year 2
30 80 95 140 125
26 90 105 135 120
22 100 115 130 115
18 110 125 125 110
14 120 135 120 105
10 130 145 115 100
TABLE 3-3
30) Refer to Table 3-3. Which of the following statements best describes the change in equilibrium
price and quantity in this market between Year 1 and Year 2?
30)
A) The demand curve has shifted to the right, the supply curve has shifted to the left; as a result
equilibrium price is higher and equilibrium quantity is lower.
B) The demand curve has shifted to the left, the supply curve has shifted to the right; as a result
equilibrium price is higher and equilibrium quantity is lower.
C) The demand curve has shifted to the left, the supply curve has shifted to the left; as a result
equilibrium price is higher and equilibrium quantity is lower.
D) There is no change in equilibrium price or quantity from Year 1 to Year 2.
E) The demand curve has shifted to the left, the supply curve has shifted to the right; as a result
equilibrium price is lower and equilibrium quantity is higher.
Answer: A
Explanation: A)
B)
C)
D)
E)
31) Suppose new medical research suggests that consuming 200 grams of tofu everyday helps to
prevent heart disease. Widespread knowledge of this research, other things being equal, is likely to
have what impact on the market for tofu?
31)
A) shift the whole demand curve to the right
B) there would likely be no effect.
C) movement along the demand curve to the right
D) shift the whole demand curve to the left
E) movement along the demand curve to the left
Answer: A
Explanation: A)
B)
C)
D)
E)
17
FIGURE 3-5
32) Refer to Figure 3-5. The price at which there would be a shortage in this market is 32)
A) both P2 and P3.
B) P1.
C) P3.
D) both P1 and P3.
E) P2.
Answer: C
Explanation: A)
B)
C)
D)
E)
33) Consider the global market for some mineral, X. In January, 2011, the equilibrium price and
quantity were P = $27 per unit and Q = 140 million units. In January, 2013, the equilibrium price
and quantity were P = $45 per unit and Q = 175 million units. Which of the following is the best
possible explanation for this change in market equilibrium?
33)
A) There has been a decrease in demand for mineral X.
B) There has been an increase in supply of mineral X.
C) There has been an increase in demand for mineral X.
D) There has been a simultaneous decrease in demand for, and increase in supply of, mineral X.
E) There has been a decrease in supply of mineral X.
Answer: C
Explanation: A)
B)
C)
D)
E)
18
34) Which of the following pairs of goods are likely to be complements for a large group of consumers? 34)
A) e-readers and e-books
B) tents and tent-trailers
C) televisions and radios
D) cars and trucks
E) tea and coffee
Answer: A
Explanation: A)
B)
C)
D)
E)
35) A demand curve represents graphically 35)
A) a functional statement of the income-quantity relationship.
B) quantity demanded.
C) the available quantities at all possible prices for the product.
D) the quantity demanded per unit of time at various prices.
E) the timeless relationship between quantity demanded and price.
Answer: D
Explanation: A)
B)
C)
D)
E)
19
FIGURE 3-5
36) Refer to Figure 3-5. If supply and demand were to increase simultaneously, this would lead to 36)
A) an increase in equilibrium price and an indeterminate change in equilibrium quantity.
B) a decrease in both equilibrium price and quantity.
C) an increase in both equilibrium price and quantity.
D) no change in equilibrium price or quantity.
E) an increase in equilibrium quantity and an indeterminate change in price.
Answer: E
Explanation: A)
B)
C)
D)
E)
37) Suppose that the demand curves for goods A, B, and C have the following functional forms:, where
Q denotes quantity demanded and P denotes price:
QA = 120 – 3.5 PA – 6PB
QB = 100 – 2PB + 3PC
QC = 1500 – 0.5PC.
Based on these demand curves, which of the following pairs of goods are known to be
complements?
37)
A) B and C
B) A and B
C) A and C
D) A and C, and B and C
E) none of the pairs are complements
Answer: B
Explanation: A)
B)
C)
D)
E)
20
38) With a given upward-sloping supply curve for sirloin steak (a normal good), a rise in household
income will cause the
38)
A) equilibrium price to increase and equilibrium quantity to decrease.
B) equilibrium price and equilibrium quantity to both decrease.
C) equilibrium price to increase and equilibrium quantity to remain constant.
D) equilibrium price to decrease and equilibrium quantity to increase.
E) equilibrium price and equilibrium quantity to both increase.
Answer: E
Explanation: A)
B)
C)
D)
E)
39) Weekend train travel costs less than weekday train travel. If the supply of train service remains the
same between weekdays and weekends, then the most likely explanation for this difference in price
is that the weekend
39)
A) supply curve is to the right of the weekday supply curve.
B) demand curve is to the left of the weekday demand curve.
C) demand curve is to the right of the weekday demand curve.
D) demand curve is random.
E) supply curve is to the left of the weekday supply curve.
Answer: B
Explanation: A)
B)
C)
D)
E)
40) Suppose that some resource X is necessary to produce some good Y. If the price of X falls 40)
A) the supply curve of good Y shifts to the right.
B) the supply curve of resource X shifts to the left.
C) the demand curve for X shifts to the right.
D) there is a movement along the supply curve of good Y.
E) the supply curve of good Y is unaffected.
Answer: A
Explanation: A)
B)
C)
D)
E)
21
41) Which statement best describes a demand curve? 41)
A) a numerical table showing the inverse relationship between quantity demanded and price,
other things being equal
B) a graph showing the relationship between quantity demanded and the price of a commodity,
other things being equal
C) an abstract concept underlying the graph of a demand curve
D) a timetable showing the quantity demanded at different time periods
E) a functional statement of the demand relationship
Answer: B
Explanation: A)
B)
C)
D)
E)
42) The supply for some good or service will decrease if 42)
A) the prices of inputs fall.
B) technology improves.
C) the prices of inputs increase.
D) more suppliers enter the industry.
E) technology improves and the price of inputs falls.
Answer: C
Explanation: A)
B)
C)
D)
E)
43) What is an inferior good? 43)
A) a good for which demand varies directly with household income
B) a good that everyone normally consumes
C) a good for which demand varies inversely with household income
D) a good for which demand does not vary with household income
E) a good that inferior people consume
Answer: C
Explanation: A)
B)
C)
D)
E)
22
FIGURE 3-6
44) Refer to Figure 3-6. If the initial demand and supply curves are D1 and S1, equilibrium price and
quantity are represented by point
44)
A) A.
B) D.
C) C.
D) B.
E) Not shown in the figure.
Answer: A
Explanation: A)
B)
C)
D)
E)
45) Which of the following events would result in a change in the quantity demanded for some
commodity but NOT a change in the demand for that commodity?
45)
A) a change in population
B) a change in tastes in favour of the commodity
C) a change in the price of the commodit
D) a change in the distribution of income
E) a change in average household income
Answer: C
Explanation: A)
B)
C)
D)
E)
23
The supply and demand schedules for dozens of roses are given below:
Price
Quantity Supplied
per period
Quantity Demanded
per period
$10 200 500
$20 300 450
$30 400 400
$40 500 350
$50 600 300
TABLE 3-1
46) Refer to Table 3-1. The equilibrium price for a dozen roses is 46)
A) $50. B) $30. C) $10. D) $20. E) $40.
Answer: B
Explanation: A)
B)
C)
D)
E)
24
FIGURE 3-2
47) Refer to Figure 3-2. The movement along the supply curve, S, from point a to point c, could be
caused by
47)
A) an increase in the number of suppliers of energy-efficient light bulbs.
B) a decrease in the price of ordinary light bulbs.
C) an increase in the price of energy-efficient light bulbs.
D) a decrease in the price of glass, a major input in the production of energy-efficient light bulbs.
E) a decrease in the price of energy-efficient light bulbs.
Answer: C
Explanation: A)
B)
C)
D)
E)
48) If a demand curve and a supply curve can be stated functionally as Qd = 100 – 5P; and Qs = 90 +
5P, respectively, then the equilibrium quantity and price (Q, P) would be
48)
A) 95; 1. B) 1; 95. C) 190; 10. D) 95; 10. E) 190; 1.
Answer: A
Explanation: A)
B)
C)
D)
E)
25
49) An important assumption underlying a demand schedule is that 49)
A) quantity demanded and demand mean the same thing.
B) income has little significance to household demand.
C) everything else except the product’s price is being held constant.
D) household tastes rarely change.
E) the numbers are not important; the general relationship between the variables is.
Answer: C
Explanation: A)
B)
C)
D)
E)
50) An equilibrium price can be described as 50)
A) an aggregate price.
B) the final price.
C) a regulated price
D) one at which there is neither excess demand nor excess supply.
E) the price at which excess demand equals excess supply.
Answer: D
Explanation: A)
B)
C)
D)
E)
The supply and demand schedules for dozens of roses are given below:
Price
Quantity Supplied
per period
Quantity Demanded
per period
$10 200 500
$20 300 450
$30 400 400
$40 500 350
$50 600 300
TABLE 3-1
51) Refer to Table 3-1. At a price of ________ there would be an excess ________ of 300 dozen roses. 51)
A) $30; supply
B) $50; demand
C) $10; demand
D) $30; demand
E) $10; supply
Answer: C
Explanation: A)
B)
C)
D)
E)
26
52) Which of the following statements is correct for a market with an upward-sloping supply curve
and a downward-sloping demand curve?
52)
A) If the demand curve shifts right and the supply curve shifts left, equilibrium price will rise.
B) If the supply curve shifts left and demand remains constant, equilibrium quantity will rise.
C) If the demand curve shifts left and the supply curve shifts left, equilibrium price will fall.
D) If the supply curve shifts right and the demand curve remains constant, equilibrium price will
rise.
E) If the demand curve shifts left and the supply curve shifts right, equilibrium price will rise.
Answer: A
Explanation: A)
B)
C)
D)
E)
FIGURE 3-4
53) Refer to Figure 3-4. If the price of 1-bedroom apartments in Collegetown were $300, there would
be a ________ of ________ apartments.
53)
A) shortage; 100
B) surplus; 150
C) surplus; 50
D) surplus; 100
E) shortage; 50
Answer: A
Explanation: A)
B)
C)
D)
E)
27
FIGURE 3-3
54) Refer to Figure 3-3. At a price of P1 there would be excess demand equal to 54)
A) Q1Q5.
B) Q1Q2.
C) Q2Q4.
D) Q4Q5.
E) There is no excess demand at P1.
Answer: E
Explanation: A)
B)
C)
D)
E)
55) If the price of tea falls and as a consequence the demand for sugar rises, then tea and sugar are 55)
A) independent goods.
B) substitute goods.
C) neutral goods.
D) complementary goods.
E) luxury goods.
Answer: D
Explanation: A)
B)
C)
D)
E)
28
56) The price of one good divided by the price of another good is called a 56)
A) ceteris paribus price.
B) absolute price.
C) marginal price.
D) relative price.
E) money price.
Answer: D
Explanation: A)
B)
C)
D)
E)
57) A variable that is assumed to be constant along an individual’s demand curve for good X is the 57)
A) quantity of X demanded per unit of time.
B) amount of X the individual wishes to purchase.
C) price of good X.
D) price of a substitute good, Y.
E) consumer’s real purchasing power.
Answer: D
Explanation: A)
B)
C)
D)
E)
58) A fall in the price of potatoes, which are used in the production of french fries, will 58)
A) have no effect on the supply of french fries but cause a movement along the supply curve of
french fries.
B) lead to a decrease in the demand for french fries.
C) lead to a decrease in the supply of french fries, causing the supply curve of french fries to shift
to the left.
D) have no effect on the supply of french fries.
E) lead to an increase in the supply of french fries, causing the supply curve of french fries to
shift to the right.
Answer: E
Explanation: A)
B)
C)
D)
E)
29
59) If there is no change in the money price of steel during a period of 6% inflation, then the 59)
A) absolute price of steel has decreased.
B) relative price of steel has decreased.
C) relative price of steel is equal to the absolute price of steel.
D) absolute price of steel has increased.
E) relative price of steel has increased.
Answer: B
Explanation: A)
B)
C)
D)
E)
60) When deriving the market demand curve for a commodity, the only variable(s) that can change is
(are) the
60)
A) price of a related commodity.
B) income of consumers.
C) quantity of the commodity demanded.
D) price of the commodity.
E) both C and D.
Answer: E
Explanation: A)
B)
C)
D)
E)
61) A change in demand is said to take place when there is a 61)
A) shift of the supply curve.
B) quantity change.
C) shift of the demand curve.
D) price change.
E) movement along the demand curve.
Answer: C
Explanation: A)
B)
C)
D)
E)
30
FIGURE 3-6
62) Refer to Figure 3-6. A shift in the supply curve from S2 to S1 might be caused by 62)
A) additional suppliers entering the industry.
B) an improvement in the technology of producing good X.
C) a decrease in the price of X.
D) a decrease in demand for X.
E) a rise in the costs of producing good X.
Answer: E
Explanation: A)
B)
C)
D)
E)
63) Suppose that many coal mines are shut for environmental reasons. This will cause 63)
A) no change in the supply curve, only a change in price.
B) an increase in the supply of coal (a rightward shift of the supply curve).
C) a movement down the supply curve.
D) a decrease in the supply of coal (a leftward shift of the supply curve).
E) a movement up the supply curve.
Answer: D
Explanation: A)
B)
C)
D)
E)
31
64) A fall in the price of raw milk (which is used in the production of ice cream) will 64)
A) have no effect on the supply curve of ice cream but cause a downward movement along the
supply curve of ice cream.
B) decrease the supply of ice cream, causing the supply curve of ice cream to shift to the left.
C) increase the supply of ice cream, causing the supply curve to shift to the left.
D) increase the supply of ice cream, causing the supply curve of ice cream to shift to the right.
E) decrease the supply of ice cream, causing the supply curve to shift to the right.
Answer: D
Explanation: A)
B)
C)
D)
E)
The supply and demand schedules for the umbrella market are given below:
Price Quantity Supplied Quantity Demanded
$10 400 700
$15 500 650
$20 600 600
$25 700 550
$30 800 500
TABLE 3-2
65) Refer to Table 3-2. What number of umbrellas would actually be purchased if the price in this
market were $10?
65)
A) 500 B) 650 C) 400 D) 700 E) 550
Answer: C
Explanation: A)
B)
C)
D)
E)
66) Suppose that the demand and supply curves in the market for apples have the following functional
form: QD = 250 – 4p and QS = 10 + p. If the prevailing price on the market is 50, then
66)
A) the market exhibits an excess supply of 240 units.
B) the market exhibits an excess demand of 10 units.
C) the market exhibits an excess supply of 10 units.
D) the market is clearing.
E) the market exhibits an excess demand of 240 units.
Answer: C
Explanation: A)
B)
C)
D)
E)
32
67) Suppose there is a decrease in the quantity supplied of copper at each price. This change would
imply
67)
A) a shift to the right of the supply curve. B) a movement down the supply curve.
C) a movement up the supply curve. D) a shift to the left of the supply curve.
Answer: D
Explanation: A)
B)
C)
D)
68) An increase in the number of firms wanting to provide accounting services will cause a ________
for accounting services.
68)
A) simultaneous shift of both the demand and supply curves
B) rightward shift in the demand curve
C) leftward shift in the demand curve
D) rightward shift in the supply curve
E) leftward shift in the supply curve
Answer: D
Explanation: A)
B)
C)
D)
E)
69) A variable that is a “stock” 69)
A) is used only in accounting.
B) has only to do with products where inventory is kept.
C) is measured per unit of time.
D) has the same units as a flow variable.
E) has meaning only at a point in time.
Answer: E
Explanation: A)
B)
C)
D)
E)
70) In a market for a good or service, the quantities demanded and supplied are 70)
A) both stock variables.
B) a flow variable and a stock variable, respectively.
C) both flow variables.
D) neither stock nor flow variables.
E) a stock variable and a flow variable, respectively.
Answer: C
Explanation: A)
B)
C)
D)
E)
33
71) To say that the supply curve is positively sloped means that 71)
A) households will want to buy less at higher prices.
B) as price goes up, quantity supplied will remain constant.
C) as price goes up, quantity supplied will increase.
D) if the costs of production increase, the quantity supplied will have to increase also.
E) as price goes up, quantity supplied will decrease.
Answer: C
Explanation: A)
B)
C)
D)
E)
72) Suppose we observe an increase in the price of good A and an increase in the quantity of good A
exchanged. Which of the following is a likely explanation?
72)
A) The supply of good A has increased.
B) The “law of supply” is violated.
C) The “law of demand” is violated.
D) The demand for good A has increased.
E) There is an excess supply of good A.
Answer: D
Explanation: A)
B)
C)
D)
E)
34
FIGURE 3-1
73) Refer to Figure 3-1. The movement along the demand curve, D, from point v to point x, could be
caused by
73)
A) a change in preferences away from ordinary light bulbs to energy-efficient light bulbs.
B) a change in the price of energy-efficient light bulbs.
C) an expectation that new, government regulations will require the use of energy-efficient light
bulbs only.
D) a change in the price of ordinary light bulbs.
E) an increase in household income, which allows consumers to purchase more light bulbs.
Answer: B
Explanation: A)
B)
C)
D)
E)
74) Ceteris paribus means 74)
A) and so forth.
B) other things being equal.
C) in a historical context.
D) knowledge gained before the study of evidence is made.
E) among other things.
Answer: B
Explanation: A)
B)
C)
D)
E)
35
75) If goods X and Y are complements and the price of X falls, all other things being equal, the demand
curve for Y will
75)
A) not shift at all. B) shift to the left.
C) shift to the right. D) unable to determine.
Answer: C
Explanation: A)
B)
C)
D)
76) Consider the following two statements. (1) An increase in the price of eggs will cause a decrease in
the demand for eggs. (2) An increase in the price of eggs will cause a decrease in the demand for
bacon. In which of these two statements is the term “demand” used correctly?
76)
A) neither statement
B) both statements
C) the first statement only
D) the second statement only
E) more information is needed
Answer: D
Explanation: A)
B)
C)
D)
E)
36
FIGURE 3-2
77) Refer to Figure 3-2. If the supply curve is given by S, the ________ energy-efficient light bulbs is
175 000 when the price is $9.
77)
A) supply schedule for
B) quantity supplied of
C) quantity sold of
D) quantity purchased of
E) supply of
Answer: B
Explanation: A)
B)
C)
D)
E)
78) A rise in the quantity demanded of lemons can be attributed to a 78)
A) cold spell which makes people want less lemonade.
B) decrease in the price of artificial lemon flavouring.
C) leftward shift in the supply curve of lemons.
D) rightward shift in the supply curve of lemons.
E) decline in the number of people drinking lemonade.
Answer: D
Explanation: A)
B)
C)
D)
E)
37
79) Consider a local market for 4-litre containers of windshield-wiper fluid. In January 2012, 100 000
containers were sold at a price of $3 each. In March 2012, 120 000 containers are sold at a price of $8
each. Does this change in equilibrium price and quantity violate the “law of demand”?
79)
A) Not necessarily, because the demand curve could have shifted to the right, leading to an
increase in equilibrium price and quantity.
B) Not necessarily, because the supply curve could have shifted to the right, leading to an
increase in equilibrium price and quantity.
C) Not necessarily, because the supply curve could have shifted to the left, leading to an increase
in equilibrium price and quantity.
D) Not necessarily, because the demand curve could have shifted to the left, leading to an
increase in equilibrium price and quantity.
E) No, because the “law of demand” is not valid.
Answer: A
Explanation: A)
B)
C)
D)
E)
80) Given a positively sloped supply curve, a rise in the demand for that commodity causes 80)
A) a fall in sales of that commodity.
B) a shortage of other goods.
C) a decrease in both the equilibrium price and the equilibrium quantity exchanged.
D) an increase in both the equilibrium price and the equilibrium quantity exchanged.
E) a decrease in the equilibrium price and an increase in the equilibrium quantity exchanged.
Answer: D
Explanation: A)
B)
C)
D)
E)
81) Suppose an index of average food prices in Canada indicates a decrease in price of 1.7% over a
12-month period. Over the same period, the Consumer Price Index indicates an increase in the
general price level of 1.6%. What is the change in food prices relative to the change in the overall
price level?
81)
A) an increase of 3.3%
B) a decrease of 3.3%
C) a decrease of 0.1%
D) an increase of 0.1%
E) a decrease of 1.7%
Answer: B
Explanation: A)
B)
C)
D)
E)
38
82) Suppose the world price of oil rises by 25% over a 12-month period; over the same period the
average price level in Canada rises by 1.6% What is the change in the price of oil relative to the
change in the average price level?
82)
A) an increase of 25%
B) a decrease of 23.4%
C) a decrease of 26.6%
D) an increase of 26.6%
E) an increase of 23.4%
Answer: E
Explanation: A)
B)
C)
D)
E)
83) If a demand curve and a supply curve can be stated functionally as Qd = 500 – 0.1P and Qs = 440 +
0.4P, respectively, then the equilibrium quantity and price (Q, P) would be
83)
A) 50; 176. B) 150; 485. C) 488; 120. D) 150; 150. E) 940; 0.4.
Answer: C
Explanation: A)
B)
C)
D)
E)
84) The term “comparative statics” describes the 84)
A) analysis of the path from one equilibrium to another.
B) comparison of one equilibrium point with another.
C) comparison of a demand curve with a supply curve.
D) analysis of excess demand and excess supply.
E) analysis of the process of price and quantity adjustments that leads to an equilibrium.
Answer: B
Explanation: A)
B)
C)
D)
E)
39
FIGURE 3-1
85) Refer to Figure 3-1. A shift of the demand curve for energy-efficient light bulbs from D to D2 could
be caused by
85)
A) a news bulletin stating that energy-efficient light bulbs emit a harmful gas.
B) an expectation that new government regulation will require the use of energy-efficient light
bulbs only.
C) an increase in the price of ordinary light bulbs.
D) a change in preferences away from ordinary bulbs to energy-efficient bulbs.
E) a decrease in the price of energy-efficient light bulbs.
Answer: A
Explanation: A)
B)
C)
D)
E)
86) The relative price of a good 86)
A) is its price in terms of money.
B) reflects its price in terms of units of other goods.
C) is a measure of the relative share of the consumer’s income devoted to its purchase.
D) is equal to the average price of the good over the last 5 years.
E) is always measured in current dollars.
Answer: B
Explanation: A)
B)
C)
D)
E)
40
The supply and demand schedules for the umbrella market are given below:
Price Quantity Supplied Quantity Demanded
$10 400 700
$15 500 650
$20 600 600
$25 700 550
$30 800 500
TABLE 3-2
87) Refer to Table 3-2. At a price of ________ there would be an excess ________ of umbrellas. 87)
A) $20; supply
B) $20; demand
C) $10; demand
D) $30; demand
E) $10; supply
Answer: C
Explanation: A)
B)
C)
D)
E)
88) Suppose that in Montreal in December, 2012, 10 000 ski helmets were sold at a price of $60 each.
And in Montreal in December, 2013, 20 000 ski helmets were sold at a price of $80 each. One
possible explanation for the change is that from 2012 to 2013 the ________ curve for ski helmets
shifted to the ________.
88)
A) supply; left
B) demand; left
C) supply; right
D) supply or demand; right
E) demand; right
Answer: E
Explanation: A)
B)
C)
D)
E)
41
89) Cars and gasoline are likely to be 89)
A) complementary goods.
B) inferior goods.
C) independent goods.
D) substitute goods.
E) luxury goods.
Answer: A
Explanation: A)
B)
C)
D)
E)
FIGURE 3-2
90) Refer to Figure 3-2. A shift of the supply curve from S to S1 could be caused by 90)
A) a decrease in the price of glass, a major input in the production of energy-efficient light bulbs.
B) an expectation that new government regulations will ban the use of energy-efficient light
bulbs.
C) an increase in the price of energy-efficient light bulbs.
D) a change in consumers’ preferences away from ordinary light bulbs toward energy-efficient
light bulbs.
E) a decrease in the price of energy-efficient light bulbs.
Answer: A
Explanation: A)
B)
C)
D)
E)
42
The supply and demand schedules for dozens of roses are given below:
Price
Quantity Supplied
per period
Quantity Demanded
per period
$10 200 500
$20 300 450
$30 400 400
$40 500 350
$50 600 300
TABLE 3-1
91) Refer to Table 3-1. How many dozens of roses would actually be purchased if the price in this
market were $10?
91)
A) 300 B) 500 C) 350 D) 200 E) 400
Answer: D
Explanation: A)
B)
C)
D)
E)
92) A rightward shift in the supply curve indicates 92)
A) that an increase in income results in an increase in the quantity demanded at each price.
B) an increase in the quantity supplied at each price.
C) a shift in the demand curve also (because demand must equal supply).
D) a decrease in the quantity supplied at each price.
E) that more is demanded at each price.
Answer: B
Explanation: A)
B)
C)
D)
E)
93) A “decrease in supply” refers to which of the following? 93)
A) a leftward shift in the supply curve
B) a drop in the quantity actually exchanged
C) a decrease in quantity supplied
D) a downward movement along a supply curve
E) the likely result from a decrease in the price of a factor of production
Answer: A
Explanation: A)
B)
C)
D)
E)
43
94) The term “quantity demanded” refers to the 94)
A) total amount of a good that purchasers wish to purchase at a given price during a given
period of time.
B) total amount of a good that people wish to buy, regardless of price.
C) total amount of a good that is actually purchased during a given period of time.
D) entire relationship between desired purchases and possible prices.
E) product of advertising, and is unrelated to price.
Answer: A
Explanation: A)
B)
C)
D)
E)
95) A leftward shift in the supply curve indicates 95)
A) that more suppliers have entered the industry.
B) an increase in the quantity supplied at each price.
C) a decrease in the quantity supplied at each price.
D) that an increase in income results in an increase in the quantity demanded at each price.
E) that more is demanded at each price.
Answer: C
Explanation: A)
B)
C)
D)
E)
96) Given a positively sloped supply curve, when market demand increases 96)
A) the new equilibrium will have a lower price and a greater quantity.
B) the new equilibrium will have a lower price and a smaller quantity.
C) the new equilibrium will have a higher price and a larger quantity.
D) the new equilibrium will have a higher price and a smaller quantity.
E) the new equilibrium will have the same price and larger quantity.
Answer: C
Explanation: A)
B)
C)
D)
E)
44
97) Consider the global market for some mineral, X. In January, 2011, the equilibrium price and
quantity were P = $27 per unit and Q = 140 million units. In January, 2013, the equilibrium price
and quantity were P = $35 per unit and Q = 110 million units. Which of the following is the best
possible explanation for this change in market equilibrium?
97)
A) There has been a simultaneous increase in demand and increase in supply for mineral X.
B) there has been a simultaneous increase in supply and decrease in demand for mineral X.
C) There has been a decrease in supply of mineral X.
D) There has been an increase in demand for mineral X.
E) There has been a decrease in global demand for mineral X.
Answer: C
Explanation: A)
B)
C)
D)
E)
98) If goods X and Y are substitutes and the price of X falls, all other things being equal, the demand
curve for Y will
98)
A) shift to the left. B) shift to the right.
C) be indeterminate. D) not shift at all.
Answer: A
Explanation: A)
B)
C)
D)
99) Consider butter and margarine, which are substitutes. When the price of butter falls, the demand
curve for margarine is likely to
99)
A) shift to the left.
B) remain stationary, although its price will rise.
C) remain stationary.
D) shift to the right.
E) remain stationary, although its price will fall.
Answer: A
Explanation: A)
B)
C)
D)
E)
45
FIGURE 3-6
100) Refer to Figure 3-6. If the demand curve shifts from D1 to D2, while supply remains at S1, one
could say that
100)
A) the price of a good which is a substitute for X must have fallen.
B) there is now an excess demand at the new price of P1.
C) there has been an increase in demand for X.
D) the price increase has caused an increase in quantity demanded.
E) the quantity demanded has decreased to Q1 and price has fallen to P2.
Answer: C
Explanation: A)
B)
C)
D)
E)
101) To say that the demand curve for movies is negatively sloped means that 101)
A) more quantity will be demanded as consumers’ income increases.
B) less quantity will be demanded at lower prices.
C) less quantity will be demanded at higher prices.
D) less quantity will be demanded as preferences change.
E) less quantity will be demanded at the same price.
Answer: C
Explanation: A)
B)
C)
D)
E)
46
102) Which statement best describes the “law of demand”? Other things being equal, the quantity of
tennis rackets demanded will be greater if the
102)
A) price of tennis rackets is lower.
B) incomes of tennis players are higher.
C) number of tennis players is higher.
D) price of badminton rackets is higher.
E) demand for tennis rackets rises.
Answer: A
Explanation: A)
B)
C)
D)
E)
103) Suppose an index of average prices of imported goods in Canada indicates an increase in price of
2.3% over a 12-month period. Over the same period the Consumer Price Index indicates an
increase in the general price level of 2.3%. What is the change in the price of imports relative to the
change in the overall price level?
103)
A) no change
B) an increase of 4.6%
C) an increase of 2.3%
D) a decrease of 4.6%
E) a decrease of 2.3%
Answer: A