EC.11 Practice Quiz   CH.3
The Market System:
 Demand & Supply
1. The impact of a $200 increase in income on quantity demanded would be called the income effect.
     a. True
     b. False

2. If the price of gloves increases, the substitution effect says that

a. demand for gloves will decrease
b. demand for scarves will decrease
c. demand for gloves will increase
d. quantity demanded of gloves will increase
e. quantity demanded of gloves will decrease
3. A demand curve usually has a a. negative slope because price and quantity demanded are inversely related
b. negative slope because as price rises, demand falls
c. positive slope because price and quantity demanded are positively related
d. positive slope because price and quantity demanded are inversely related
e. slope of zero because there is no change along a demand curve when everything else is held constant


4. If a decrease in the price of a good causes a rightward shift in the demand curve for that good, then it is an inferior good.

a. True
b. False


5. If the price of gasoline (a normal good) decreases, other things constant,

a. the demand for gasoline increases
b. the demand for gasoline decreases
c. the quantity demanded of gasoline increases
d. the quantity demanded of gasoline decreases
e. neither the demand for gasoline nor the quantity demanded of gasoline changes because everything is held constant along a demand curve
6. If the price of vanilla ice cream decreases, it is likely that a. demand for vanilla ice cream will increase
b. demand for vanilla ice cream will decrease
c. demand for chocolate ice cream will increase
d. demand for chocolate ice cream will decrease
e. the quantity demanded of vanilla ice cream will decrease


7. Jennifer learns that the price of CDs will be going up 10 percent next week. She usually buys three CDs per week. What happens to Jennifer's demand for CDs this week?

a. It does not change because only quantity demanded changes when price changes.
b. It increases because the price will be lower next week.
c. It decreases because the price will be higher next week.
d. It increases because the price will be higher next week.
e. It decreases because the price will be lower next week.


8. Which of the following events is likely to reduce the demand for on-campus student housing?

a. a rise in rents for off-campus housing
b. more students enrolling at the university
c. it becomes less fashionable to live "on campus"
d. a rise in dorm fees
e. a rise in the incomes of students


9. Supply curves generally slope upward because of all of the following except one. Which is the exception?

a. Producers are willing to offer more of a good at higher prices.
b. A higher price attracts resources from less-valued uses.
c. Producers must be compensated for the rising opportunity cost of additional output.
d. Producers have a greater incentive to sell more as the price increases.
e. The price of a good usually must fall to induce an increase in quantity supplied.


10. An improvement in technology shifts the supply curve inward.

a. True
b. False


11. Which of the following will increase the supply of vanilla ice cream?

a. an increase in the price of vanilla beans (an ingredient in ice cream)
b. a decrease in the sales tax on restaurant bills
c. an increase in the price of chocolate ice cream
d. a decrease in the price of milk (an ingredient in ice cream)
e. an increase in the price of hot fudge
12. Studies show that the supply curve for oranges has shifted. Which of the following could not explain the shift in the supply curve? a. Weather conditions have changed.
b. The price of fertilizer has changed.
c. The wage paid to orange pickers has changed.
d. The price of oranges has changed.
e. The demand for grapefruit has changed.


13. If a surplus exists in the market for swimwear, an economist would predict that

a. the price of swimwear will rise
b. producers will increase the production of swimwear
c. the supply of swimwear will increase
d. the price of swimwear at retail outlets will begin to fall
e. buyers will react to the surplus by increasing their demand for swimwear
<<<GRAPHIC>>> 14. If the price of the good described in Exhibit 0023 is $1.40, then we would expect the a. price to increase to $1.60
b. price to decrease to $1.20
c. quantity supplied to increase to 70 units
d. quantity demanded to decrease to 60 units
e. quantity demanded to increase to 90 units
15. A decrease in demand will result in a(n) a. increase in equilibrium price and quantity
b. decrease in equilibrium price and quantity
c. decrease in equilibrium price and an increase in equilibrium quantity
d. increase in equilibrium price and a decrease in equilibrium quantity
e. change in equilibrium price and quantity only if supply changes too


16. The market for bubble gum is competitive with a current price of 50 cents and quantity of 100,000 units. Which of the following events would lead to a new equilibrium price of 75 cents and a new equilibrium quantity of 125,000?

a. an increase in the price of other kinds of gum and candy
b. an increase in the price of the ingredients used to make bubble gum
c. an agreement by workers in the bubble gum industry to work for lower wages
d. a decrease in the number of young people in the population
e. a decrease in income
17. An increase in supply will cause a(n) a. increase in demand
b. decrease in demand
c. increase in quantity demanded
d. decrease in equilibrium quantity demanded
e. increase in equilibrium price


18. If both supply and demand increase, then the change in equilibrium quantity is indeterminate.

a. True
b. False
<<<GRAPHIC>>> 19. Consider Exhibit 0024. Which of the following statements is most likely correct regarding the market for corn? a. In 1997 the quantity purchased exceeded the quantity sold.
b. In 1996 the corn market was not in equilibrium.
c. The weather for corn production was probably better in 1997 than in 1998.
d. Between 1998 and 1999 both the supply and demand for corn must have increased.
e. Between 1997 and 1998 the demand for corn decreased.
20. Many people argue against increasing the minimum wage because they believe the result would be increased unemployment. Which of the following best summarizes this argument? A higher minimum wage would a. increase the supply of labor while decreasing the demand for labor
b. decrease the supply of labor while increasing the demand for labor
c. increase the quantity supplied of labor while decreasing the quantity demanded of labor
d. decrease the quantity supplied of labor while increasing the quantity demanded of labor
e. increase the supply of labor while decreasing the quantity demanded of labor