Saturday, February 20, 2010

Demand and Supply

1) Which of the following is held constant along the demand curve?

A) price of the good

B) quantity

C) income

D) both A and B



Answer:C



2) Which of the following will NOT cause a shift in the demand curve for compact discs?

A) a change in income

B) a change in wealth

C) a change in the price of downloadable online music

D) a change in the price of compact discs



Answer:D



3) The "law of demand" implies that

A) as prices fall, demand increases.

B) as prices rise, demand increases.

C) as prices fall, quantity demanded increases.

D) as prices rise, quantity demanded increases.



Answer:C



4) According to the law of demand, as prices rise, ceteris paribus

A) demand increases.

B) demand decreases.

C) quantity demanded decreases.

D) quantity demanded increases.



Answer:C



5) According to the law of demand there is ________ relationship between price and quantity demanded.

A) a positive

B) a negative

C) either a positive or negative

D) a constantly changing



Answer:B



Refer to the information provided in the Figure below to answer the questions that follow.

Figure 3.1



Figure 3.1



6) Refer to Figure 3.1. Which of the following would be most likely to cause the demand for Dr. Pepper to shift from D0 to D1?

A) a decrease in income, assuming that Dr. Pepper is a normal good

B) an increase in the price of 7-UP, assuming 7-UP is a substitute for Dr. Pepper

C) a decrease in the price of Dr. Pepper

D) a reduction in the price of sugar used to make Dr. Pepper



Answer: A





Figure 3.2





7) Refer to Figure 3.2. Which of the following would be most likely to cause the demand for macaroni and cheese to shift from D1 to D0?

A) an increase in the price of macaroni and cheese

B) an increase in the price of flour used to make macaroni and cheese

C) an increase in income, assuming macaroni and cheese is a normal good

D) an increase in the quantity demanded for macaroni and cheese



Answer: C



8) If the demand for coffee decreases as income decreases, coffee is a(n)

A) normal good.

B) inferior good.

C) substitute good.

D) complementary good.



Answer: A



9) If the demand for sardines increases as income decreases, sardines are a(n)

A) normal good.

B) inferior good.

C) substitute good.

D) complementary good.



Answer: B





Figure 3.6



10) Refer to Figure 3.6. The number of DVDs Isabel rents per week increases from 4 to 7. This is caused by

A) an increase in income if DVDs are a normal good.

B) a decrease in the price of popcorn which is a complement to DVDs.

C) a decrease in the rental price of DVDs.

D) either A or B



Answer: C









Figure 3.7



11) Refer to Figure 3.7. Assume the market is initially at Point B and that pizza is a normal good. A decrease in income would cause the market to move from Point B on demand curve D2 to

A) demand curve D1.

B) demand curve D3.

C) Point A on demand curve D2.

D) Point C on demand curve D2.



Answer: A





Refer to the information provided in Figure 3.14 below to answer the following questions.



Figure 3.14





5) Refer to Figure 3.14. A decrease in the wage rate of pizza makers will cause a movement from Point B on supply curve S2 to

A) Point A on supply curve S2.

B) Point B on supply curve S2.

C) supply curve S3.

D) supply curve S1.



Answer: C



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